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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 2001
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 000-21731
HIGHWOODS REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
North Carolina 56-1869557
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Smoketree Court, Suite 600
Raleigh, N.C. 27604
(Address of principal executive offices) (Zip Code)
919-872-4924
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
6 3/4% Notes due December 1, 2003 New York Stock Exchange
7% Notes due December 1, 2006 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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. Yes [X] 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 Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [_]
The aggregate value of the Common Units held by nonaffiliates of the
registrant (based on the closing price on the New York Stock Exchange of a share
of Common Stock of Highwoods Properties, Inc., the general partner of the
registrant) on December 31, 2001 was $156,831,316.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Highwoods Properties, Inc. in
connection with its Annual Meeting of Shareholders to be held May 20, 2002 are
incorporated by reference in Part III, Items 10, 11 and 13 of this Form 10-K.
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HIGHWOODS REALTY LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item No. Page No.
- -------- --------
PART I
1. Business............................................................ 3
2. Properties.......................................................... 11
3. Legal Proceedings................................................... 16
4. Submission of Matters to a Vote of Security Holders................. 16
X. Executive Officers of the Registrant................................ 17
PART II
5. Market for Registrant's Equity and Related Security Holder Matters.. 18
6. Selected Financial Data............................................. 19
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 20
7A. Quantitative and Qualitative Disclosures About Market Risk.......... 31
8. Financial Statements and Supplementary Data......................... 31
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 31
PART III
10. Directors and Executive Officers of the Registrant.................. 32
11. Executive Compensation.............................................. 32
12. Security Ownership of Certain Beneficial Owners and Management...... 32
13. Certain Relationships and Related Transactions...................... 32
PART IV
14. Exhibits, Financial Statement Schedule and Reports on Form 8-K...... 33
2
PART I
We refer to (1) Highwoods Properties, Inc. as the "Company," (2) Highwoods
Realty Limited Partnership as the "Operating Partnership," (3) the Company's
common stock as "Common Stock" and (4) the Operating Partnership's common
partnership interests as "Common Units."
ITEM 1. BUSINESS
General
The Operating Partnership is managed by its general partner, the Company,
a self-administered and self-managed equity REIT that began operations through a
predecessor in 1978. Since the Company's initial public offering in 1994, we
have evolved into one of the largest owners and operators of suburban office,
industrial and retail properties in the southeastern and midwestern United
States. At December 31, 2001, we:
. owned 498 in-service office, industrial and retail properties,
encompassing approximately 37.2 million rentable square feet and 213
apartment units;
. owned an interest (50% or less) in 74 in-service office and
industrial properties, encompassing approximately 7.2 million
rentable square feet and 418 apartment units;
. owned 1,327 acres of undeveloped land suitable for future
development; and
. were developing an additional 25 properties, which will encompass
approximately 2.8 million rentable square feet (including three
properties encompassing 347,000 rentable square feet that we are
developing with our joint venture partners).
The following summarizes our capital recycling program during the past
three years ended December 31, 2001:
2001 2000 1999 Total
-------- -------- -------- --------
Office, Industrial and Retail Properties
(rentable square feet in thousands)
Dispositions (1) .................. (268) (4,743) (7,595) (12,606)
Contributions to Joint Ventures (1) (118) (2,199) (1,198) (3,515)
Developments Placed In-Service .... 1,351 3,480 2,167 6,998
Acquisitions ...................... 72 669 960 1,701
-------- -------- -------- --------
Net Change in Wholly-owned
In-Service Properties ........... 1,037 (2,793) (5,666) (7,422)
======== ======== ======== ========
Apartment Properties
(in units)
Dispositions ...................... (1,672) -- -- (1,672)
======== ======== ======== ========
- ----------
(1) Excludes wholly-owned development properties sold or contributed to joint
ventures.
In addition to the above property activity, the Company repurchased $147.4
million, $100.2 million and $25.5 million of Common Stock and Common Units
during 2001, 2000 and 1999, respectively, and $18.5 million of Preferred Stock
during 2001.
The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At December 31, 2001, the Company owned
87.7% of the Common Units in the Operating Partnership. Limited partners
(including certain officers and directors of the Company) own the remaining
Common Units. Holders of Common Units may redeem them for the cash value of one
share of the Company's Common Stock or, at the Company's option, one share
(subject to certain adjustments) of Common Stock.
The Company was incorporated in Maryland in 1994. The Operating
Partnership was formed in North Carolina in 1994. Our executive offices are
located at 3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604, and
our telephone number is (919) 872-4924. We maintain offices in each of our
primary markets.
3
Operating Strategy
Diversification. Since our formation in 1994, we have significantly
reduced our dependence on any particular market, property type or tenant. We
initially owned only a limited number of office properties in North Carolina,
most of which were in the Research Triangle. Today, with our various joint
venture partners, our portfolio includes office, industrial and retail
properties, development projects and development land throughout the Southeast
and Midwest.
Development and Acquisition Opportunities. We generally seek to engage in
the development of office and industrial projects in our existing geographic
markets, primarily in suburban business parks. We intend to focus our
development efforts on build-to-suit projects and projects where we have
identified sufficient demand. In build-to-suit development, the building is
significantly pre-leased to one or more tenants prior to construction.
Build-to-suit projects often foster strong long-term relationships with tenants,
creating future development opportunities as the facility needs of tenants
increase. We believe our commercially zoned and unencumbered development land in
existing business parks is an advantage we have over many of our competitors in
pursuing development opportunities.
We also seek to acquire selective suburban office and industrial
properties in our existing geographic markets at prices below replacement cost
that offer attractive returns. These would include acquisitions of
underperforming, high-quality properties in our existing markets that offer us
opportunities to improve such properties' operating performance.
Managed Growth Strategy. Our strategy has been to focus our real estate
activities in markets where we believe our extensive local knowledge gives us a
competitive advantage over other real estate developers and operators. As we
expanded into new markets, we have continued to maintain this localized approach
by combining with local real estate operators with many years of development and
management experience in their respective markets. Our capital recycling
activities also benefit from our local market presence and knowledge. Our
property-level officers have significant real estate experience in their
respective markets. Because of this experience, we are in a better position to
evaluate capital recycling opportunities. In addition, our relationships with
our tenants and those tenants at properties for which we conduct third-party
fee-based services may lead to development projects when these tenants seek new
space.
Efficient, Customer Service-Oriented Organization. We provide a complete
line of real estate services to our tenants and third parties. We believe that
our in-house development, acquisition, construction management, leasing and
management services allow us to respond to the many demands of our existing and
potential tenant base. We provide our tenants cost-effective services such as
build-to-suit construction and space modification, including tenant improvements
and expansions. In addition, the breadth of our capabilities and resources
provides us with market information not generally available. We believe that the
operating efficiencies achieved through our fully integrated organization also
provide a competitive advantage in setting our lease rates and pricing other
services.
Flexible Capital Structure. We are committed to maintaining a flexible
capital structure that: (1) allows growth through development and acquisition
opportunities; (2) promotes future earnings growth; and (3) provides access to
the private and public equity and debt markets on favorable terms. Accordingly,
we expect to meet our long-term liquidity requirements, including funding our
existing and future development activity, through a combination of any one or
more of:
. borrowings under our unsecured and secured revolving credit
facilities;
. the issuance of unsecured debt;
. the issuance of secured debt;
. the issuance of equity securities by both the Company and the
Operating Partnership;
. the selective disposition of non-core assets; and
. the sale or contribution of our wholly-owned properties, development
projects and development land to strategic joint ventures formed
with unrelated investors.
4
Capital Recycling Program
The following table summarizes our capital recycling program during 2001
($ in thousands):
Acquisition Activity
Building Date Rentable Initial
Property Market Type (1) Acquired Square Feet Cost
-------- ------ -------- -------- ----------- --------
University Center Charlotte O 1/17/01 72,000 $ 1,513
---------- --------
Total 72,000 $ 1,513
========== ========
Disposition Activity
Building Date Rentable Sales
Property Market Type (1) Sold Square Feet Price
-------- ------ -------- ---------- ----------- ----------
Regency House Kansas City M 2/13/01 N/A $ 12,000
Sulgrave Kansas City M 2/13/01 N/A 25,900
Lakefront Plaza One Norfolk O 3/2/01 76,000 8,400
Coach House North Kansas City M 5/31/01 N/A 10,200
Coach House South Kansas City M 5/31/01 N/A 27,900
Coach Lamp Kansas City M 5/31/01 N/A 6,800
Corinth Place Kansas City M 5/31/01 N/A 5,400
5100 Indiana Avenue Piedmont Triad I 6/27/01 88,000 2,200
Expo Building Tampa O 8/15/01 26,000 1,300
Kirby Centre Memphis O 9/27/01 32,000 2,800
Corinth Gardens Kansas City M 9/28/01 N/A 2,200
Corinth Paddock Kansas City M 9/28/01 N/A 7,800
Kenilworth Kansas City M 9/28/01 N/A 17,100
Mission Valley Kansas City M 9/28/01 N/A 4,300
Clearwater Pointe Tampa O 9/28/01 26,000 1,700
Robinhood Piedmont Triad O 11/29/01 20,000 1,800
---------- ----------
Total 268,000 $ 137,800
========== ==========
Joint Venture Activity
Building Date Rentable Sales
Property Market Type (1) Contributed Square Feet Price
-------- ------ -------- ----------- ----------- ---------
Situs III Research Triangle O 7/30/01 39,000 $ 5,100
ECPI/Concourse Center
One Piedmont Triad O 12/19/01 118,000 14,280
---------- ---------
Total 157,000 $ 19,380
========== =========
- ----------
(1) O = Office
I = Industrial
M = Multifamily
5
Development Activity
The following wholly-owned development projects were placed in service
during 2001 ($ in thousands):
Placed In-Service
Month
Building Placed Number of Rentable Cost
Name Market Type (1) In-Service Properties Square Feet to Date
- ---- ------ -------- ---------- ---------- ----------- ----------
Centre Green One Research Triangle O 02/01 1 97,000 $ 11,082
Valencia Place Kansas City O 02/01 1 250,000 39,685
Maplewood Research Triangle O 04/01 1 36,000 3,978
Tradeport Place III Atlanta I 05/01 1 122,000 4,787
ParkWest Two Research Triangle O 05/01 1 48,000 3,856
Highwoods Preserve V Tampa O 07/01 1 185,000 24,400
Romac Tampa O 09/01 1 128,000 14,078
Highwoods Center III
at Tradeport Atlanta O 11/01 1 43,000 3,533
Shadow Creek Memphis O 12/01 1 80,000 8,628
Tradeport Place IV Atlanta I 12/01 1 122,000 3,964
Deerfield III Atlanta O 12/01 1 54,000 4,306
Enterprise Center I Piedmont Triad I 12/01 1 120,000 3,695
Highwoods Plaza Tampa O 12/01 1 66,000 6,866
-- --------- ----------
Total 13 1,351,000 $ 132,858
== ========= ===========
- ----------
(1) O = Office
I = Industrial
As of December 31, 2001, we were developing 19 suburban office properties,
two industrial properties, and one retail property totaling 2.4 million rentable
square feet of office, industrial and retail space. The following table
summarizes these development projects. In addition to the properties described
in this table, we are developing with our joint venture partners (and therefore,
are not included in the following table) three additional properties totaling
347,000 rentable square feet. At December 31, 2001, these three development
projects had an aggregate budgeted cost of $45.8 million and were 58.0%
pre-leased.
In-Process
Rentable Estimated Cost at Pre-Leasing Estimated Estimated
Name Market Square Feet Cost 12/31/01 Percentage (1) Completion Stabilization (2)
- ---- ------ ----------- ---------- -------- -------------- ---------- -----------------
($ in thousands)
Office:
Verizon Wireless Greenville 193,000 $ 16,356 $ 16,124 100% 1Q02 1Q02
International Place 3 Memphis 214,000 34,272 26,761 100 2Q02 2Q02
1825 Century Center (3) Atlanta 101,000 16,254 2,560 100 3Q02 3Q02
Seven Springs I Nashville 131,000 15,556 11,719 4 1Q02 1Q03
801 Raleigh Corporate
Center (3) Research Triangle 100,000 12,016 1,396 40 4Q02 2Q04
------- -------- -------- ---
Total or Weighted
Average of all
In-Process
Development Projects 739,000 $ 94,454 $ 58,560 75%
======= ======== ======== ===
- ----------
(1) Letters of intent comprise 5.0% of the total pre-leasing percentage.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95.0% occupied or one
year from the date of completion.
(3) We are developing these properties for a third party and own an option to
purchase each property.
6
Completed-Not Stabilized
Percent
Rentable Estimated Cost at Leased/ Estimated Estimated
Name Market Square Feet Cost 12/31/01 Pre-leased (1) Completion Stabilization (2)
- ---- ------ ----------- --------- -------- -------------- ---------- -----------------
($ in thousands)
Office:
380 Park Place Tampa 82,000 $ 9,697 $ 9,591 93% 1Q01 1Q02
Innslake Richmond 65,000 7,192 7,102 100 4Q01 2Q02
Met Life Building at
Brookfield Greenville 117,000 13,220 12,502 84 3Q01 2Q02
Cool Springs II Nashville 205,000 22,718 19,280 70 2Q01 2Q02
Highwoods Tower II Research Triangle 167,000 25,134 22,065 94 1Q01 2Q02
Hickory Trace Nashville 52,000 5,933 5,578 53 3Q01 3Q02
ParkWest One Research Triangle 46,000 4,364 4,036 74 2Q01 3Q02
North Shore Commons A Richmond 115,000 13,084 12,479 79 2Q01 3Q02
Stony Point III Richmond 107,000 11,425 11,040 73 2Q01 3Q02
Shadow Creek II Memphis 81,000 8,750 6,919 19 4Q01 4Q02
Highwoods Park
at Jefferson Village Piedmond Triad 98,000 11,290 9,370 4 4Q01 4Q02
Centre Green Two Research Triangle 97,000 11,596 9,872 31 2Q01 1Q03
Centre Green Four Research Triangle 100,000 11,764 9,186 50 4Q01 2Q03
GlenLake I Research Triangle 158,000 22,417 17,801 -- 4Q01 2Q03
---------- -------- -------- ---
Completed-Not
Stabilized Office
Total or Weighted
Average 1,490,000 $178,584 $156,821 58%
========== ======== ======== ===
Industrial:
Holden Road Piedmont Triad 64,000 $ 2,014 $ 1,872 60% 1Q01 2Q02
Newpoint IV Atlanta 136,000 5,288 4,182 29 4Q01 4Q02
---------- -------- -------- ---
Completed-Not
Stabilized
Industrial Total or
Weighted Average 200,000 $ 7,302 $ 6,054 39%
========== ======== ======== ===
Retail:
Granada Shops Kansas City 20,000 $ 4,680 $ 4,131 90% 4Q01 4Q02
---------- -------- -------- ---
Completed-Not
Stabilized Retail
Total or Weighted
Average 20,000 $ 4,680 $ 4,131 90%
========== ======== ======== ===
Total or Weighted
Average of all
Completed-Not Stabilized
Development Projects 1,710,000 $190,566 $167,006 57%
========== ======== ======== ===
Total or Weighted
Average of all
Development Projects 2,449,000 $285,020 $225,566 62%
========== ======== ======== ===
- ----------
(1) Letters of intent comprise 5.0% of the total pre-leasing percentage.
(2) We generally consider a development project to be stabilized upon the
earlier of the first date such project is at least 95.0% occupied or one
year from the date of completion.
7
Development Analysis
Rentable Estimated Pre-Leasing
Square Feet Cost Percentage (1)
----------- --------- --------------
($ in thousands)
Summary By Estimated Stabilization Date
First Quarter 2002 .............. 275,000 $ 26,053 98%
Second Quarter 2002 ............. 832,000 104,550 86
Third Quarter 2002 .............. 421,000 51,060 79
Fourth Quarter 2002 ............. 335,000 30,008 23
First Quarter 2003 .............. 228,000 27,152 15
Second Quarter 2003 ............. 258,000 34,181 19
Second Quarter 2004 ............. 100,000 12,016 40
--------- --------- ---
Total or Weighted Average ....... 2,449,000 $ 285,020 62%
========= ========= ===
Summary by Market:
Atlanta ......................... 237,000 $ 21,542 59%
Greenville ...................... 310,000 29,576 94
Kansas City ..................... 20,000 4,680 90
Memphis ......................... 295,000 43,022 78
Nashville ....................... 388,000 44,207 45
Piedmont Triad .................. 162,000 13,304 26
Research Triangle ............... 668,000 87,291 47
Richmond ........................ 287,000 31,701 82
Tampa ........................... 82,000 9,697 93
--------- --------- ---
Total or Weighted Average ....... 2,449,000 $ 285,020 62%
========= ========= ===
Build-to-Suit ................... 508,000 $ 66,882 100%
Multi-tenant .................... 1,941,000 218,138 52
--------- --------- ---
Total or Weighted Average ....... 2,449,000 $ 285,020 62%
========= ========= ===
Average
Rentable Average
Square Estimated Average
Feet Cost Pre-Leasing (1)
------- --------- --------------
($ in thousands)
Average Per Property By Type:
Office .......................... 117,316 $ 14,370 64%
Industrial ...................... 100,000 3,651 39
Retail .......................... 20,000 4,680 90
------- --------- ---
Weighted Average ................ 111,318 $ 12,955 62%
======= ========= ===
- ----------
(1) Letters of intent comprise 5.0% of the total pre-leasing percentage.
Competition
Our properties compete for tenants with similar properties located in our
markets primarily on the basis of location, rent, services provided and the
design and condition of the facilities. We also compete with other REITs,
financial institutions, pension funds, partnerships, individual investors and
others when attempting to acquire and develop properties.
Employees
As of December 31, 2001, the Operating Partnership employed 534 persons.
Risk Factors
An investment in our securities involves various risks. All investors
should carefully consider the following risk factors in conjunction with the
other information contained in this annual report before purchasing our
securities. If any of these risks actually occur, our business, operating
results, prospects and financial condition could be harmed.
8
Adverse conditions in the real estate market may impair our ability to
make distributions to you. Events or conditions which are beyond our control may
adversely affect our ability to generate revenues in excess of operating
expenses, including debt service and capital expenditures. Such events or
conditions could include:
. general and regional economic conditions, particularly in the
southeastern region of the United States;
. changes in interest rate levels and the availability of financing;
. increases in operating costs, including real estate taxes and
insurance premiums, due to inflation and other factors, which may
not necessarily be offset by increased rents; and
. inability of a significant number of tenants to pay rent.
Future acquisitions may fail to perform in accordance with our
expectations and may require development and renovation costs exceeding our
estimates. In the normal course of business, we typically evaluate potential
acquisitions, enter into non-binding letters of intent, and may, at any time,
enter into contracts to acquire and may acquire additional properties. However,
changing market conditions, including competition from others, may diminish our
opportunities for making attractive acquisitions. Once made, our investments may
fail to perform in accordance with our expectations. In addition, the renovation
and improvement costs we incur in bringing an acquired property up to market
standards may exceed our estimates. Although we anticipate financing future
acquisitions and renovations through a combination of advances under our
revolving loans and other forms of secured or unsecured financing, no assurance
can be given that we will have the financial resources to make suitable
acquisitions or renovations. If new developments are financed through
construction loans, there is a risk that, upon completion of construction,
permanent financing for newly developed properties may not be available or may
be available only on disadvantageous terms.
In addition to acquisitions, we periodically consider developing and
constructing properties. Risks associated with development and construction
activities include:
. the unavailability of favorable financing;
. construction costs exceeding original estimates;
. construction and lease-up delays resulting in increased debt service
expense and construction costs; and
. insufficient occupancy rates and rents at a newly completed property
causing a property to be unprofitable.
Development activities are also subject to risks relating to our inability
to obtain, or delays in obtaining, all necessary zoning, land-use, building,
occupancy and other required governmental and utility company authorizations.
The success of our joint venture activity depends upon our ability to work
effectively with financially sound partners. Instead of owning properties
directly, we have invested, and may continue to invest, as a partner or a
co-venturer. Under certain circumstances, this type of investment may involve
risks not otherwise present, including the possibility that a partner or
co-venturer might become bankrupt or that a partner or co-venturer might have
business interests or goals inconsistent with ours. Also, such a partner or
co-venturer may take action contrary to our instructions or requests or contrary
to provisions in our joint venture agreements that could harm us, including
jeopardize the Company's qualification as a REIT. We may also risk an impasse on
decisions because neither the partner nor the co-venturer would have full
control over the partnership or joint venture.
Our insurance coverage on our properties may be inadequate. We currently
carry comprehensive insurance on all of our properties, including insurance for
liability, fire and flood. Our existing insurance policies expire in July 2002.
In addition, insurance companies may no longer offer coverage against certain
types of losses, such as losses due to terrorist acts and toxic mold, or, if
offered, these types of insurance may be prohibitively expensive. If any or all
of the foregoing should occur, we may not have insurance coverage against
certain types of losses and/or there may be decreases in the limits of insurance
available. Should an uninsured loss or a loss in excess of our insured limits
occur, we could lose all or a portion of the capital we have invested in a
property or properties, as well as the anticipated future revenue from the
property or properties. If any of our properties were to experience a
9
catastrophic loss, it could seriously disrupt our operations, delay revenue and
result in large expenses to repair or rebuild the property. Such events could
adversely affect our ability to make distributions to our stockholders.
We may be unable to repay or refinance our existing indebtedness. We are
subject to risks normally associated with debt financing, such as the
insufficiency of cash flow to meet required payment obligations and the
inability to refinance existing indebtedness. A portion of our existing
indebtedness will become due in the next several years. If our debt cannot be
paid, refinanced or extended at maturity, in addition to our failure to repay
our debt, we may not be able to make distributions to stockholders at expected
levels or at all. Furthermore, if any refinancing is done at higher interest
rates, the increased interest expense could adversely affect our cash flow and
ability to make distributions to stockholders. If we do not meet our mortgage
financing obligations, any properties securing such indebtedness could be
foreclosed on, which would have a material adverse effect our cash flow and
ability to make distributions and, depending on the number of properties
foreclosed on, could threaten our continued viability.
We may need to borrow money or sell assets in order to make required
distributions. In order for the Company to make the distributions required to
maintain its REIT status, we may need to borrow funds. To obtain the favorable
tax treatment associated with REIT qualification, the Company generally will be
required to distribute to stockholders at least 90% of its annual REIT taxable
income, excluding net capital gain. The Company intends to make distributions to
stockholders to comply with the distribution provisions of the Internal Revenue
Code and to avoid income and other taxes. Differences in timing between the
receipt of income and the payment of expenses in arriving at taxable income and
the effect of required debt amortization payments could require us to borrow
funds on a short-term basis or liquidate funds on adverse terms to meet the REIT
qualification distribution requirements.
10
ITEM 2. PROPERTIES
General
As of December 31, 2001, we owned 498 in-service office, industrial and
retail properties, encompassing approximately 37.2 million rentable square feet,
and 213 apartment units. The following table sets forth information about our
wholly-owned in-service properties at December 31, 2001:
Percentage of December 2001 Rental Revenue
Rentable --------------------------------------------------
Square Feet (1) Occupancy Office Industrial Retail Total
--------------- --------- ------ ---------- ------ -------
Piedmont Triad............... 8,233,000 92.3% 6.5% 4.4% -- 10.9%
Atlanta...................... 6,484,000 89.9 9.9 3.3 -- 13.2
Tampa........................ 4,383,000 93.5 15.3 0.3 -- 15.6
Research Triangle............ 3,923,000 91.9 12.6 0.2 -- 12.8
Kansas City.................. 2,857,000 94.7 4.7 -- 7.8% 12.5
Nashville.................... 2,787,000 90.3 10.4 -- -- 10.4
Richmond..................... 2,703,000 98.4 8.4 0.4 -- 8.8
Charlotte.................... 2,229,000 89.1 4.5 0.6 -- 5.1
Greenville................... 1,216,000 86.5 3.3 0.2 -- 3.5
Memphis...................... 1,134,000 91.1 4.1 -- -- 4.1
Orlando...................... 664,000 90.5 1.3 -- -- 1.3
Columbia..................... 426,000 77.6 1.2 -- -- 1.2
Other........................ 182,000 99.4 0.6 -- -- 0.6
---------- ---- ---- -- ---- -----
Total........................ 37,221,000 91.9% 82.8% 9.4% 7.8% 100.0%
========== ==== ==== === === =====
- ----------
(1) Excludes Kansas City's basement space.
11
The following table sets forth information about our wholly-owned
in-service and development properties as of December 31, 2001 and 2000:
December 31, 2001 December 31, 2000
--------------------------- ----------------------------
Percent Percent
Rentable Leased/ Rentable Leased/
Square Feet Pre-Leased Square Feet Pre-Leased
---------- ---------- ----------- ----------
In-Service
Office........................................ 24,945,000 91.9% 24,177,000 94.0%
Industrial.................................... 10,640,000 91.9 10,357,000 95.0
Retail (1).................................... 1,636,000 96.0 1,649,000 94.4
---------- ---- ---------- ----
Total or Weighted Average................... 37,221,000 91.9% 36,183,000 94.1%
========== ==== ========== ====
Development
Completed -- Not Stabilized
Office........................................ 1,490,000 58.4% 547,000 84.0%
Industrial.................................... 200,000 39.2 122,000 90.0
Retail........................................ 20,000 90.0 -- --
---------- ---- ---------- ----
Total or Weighted Average................... 1,710,000 56.5% 669,000 85.0%
========== ==== ========== ====
In-Process
Office........................................ 739,000 74.9% 1,998,000 56.0%
Industrial.................................... -- -- 186,000 14.0
Retail........................................ -- -- -- --
---------- ---- ---------- ----
Total or Weighted Average................... 739,000 74.9% 2,184,000 53.0%
========== ==== ========== ====
Total
Office........................................ 27,174,000 26,722,000
Industrial.................................... 10,840,000 10,665,000
Retail (1).................................... 1,656,000 1,649,000
---------- ----------
Total....................................... 39,670,000 39,036,000
========== ==========
- ----------
(1) Excludes Kansas City's basement space.
Tenants
The following table sets forth information concerning the 20 largest
tenants of our wholly-owned properties as of December 31, 2001:
Percent of Total
Number Annualized Annualized
Tenant of Leases Rental Revenue (1) Rental Revenue
- ------ --------- ------------------ --------------
($ in thousands)
AT&T......................................... 12 $ 14,432 3.0%
Intermedia Communications (2)................ 5 14,329 2.9
Federal Government........................... 56 11,761 2.4
Capital One Services......................... 9 10,150 2.1
Caterpillar Financial Services............... 1 7,677 1.6
IBM.......................................... 7 7,513 1.5
State of Georgia............................. 10 6,888 1.4
PricewaterhouseCoopers....................... 7 6,841 1.4
US Air....................................... 9 6,621 1.4
Northern Telecom, Inc........................ 3 5,331 1.1
WorldCom..................................... 17 4,711 1.0
Bell South................................... 13 4,652 1.0
Sara Lee..................................... 8 4,384 0.9
DST Realty, Inc.............................. 12 3,223 0.7
BB&T......................................... 9 3,160 0.6
Lockton Companies, Inc....................... 1 3,060 0.6
Volvo........................................ 5 2,946 0.6
International Paper Co....................... 10 2,886 0.6
Romac........................................ 1 2,867 0.6
Business Telecom, Inc........................ 4 2,775 0.6
--- ---------- ----
Total........................................ 199 $ 126,207 26.0%
=== ========== ====
- ----------
(1) Annualized Rental Revenue is December 2001 rental revenue (base rent plus
operating expense pass-throughs) multiplied by 12.
(2) A wholly-owned subsidiary of WorldCom.
12
The following tables set forth information about leasing activities at our
wholly-owned in-service properties (excluding apartment units) for the years
ended December 31, 2001, 2000 and 1999.
2001 2000
-------------------------------------- -------------------------------------
Office Industrial Retail Office Industrial Retail
----------- ---------- ---------- ----------- ---------- ----------
Net Effective Rents Related to Re-Leased Space:
Number of lease transactions (signed leases) ... 538 107 44 801 174 71
Rentable square footage leased ................. 2,782,331 1,524,276 125,992 4,166,054 2,373,244 162,866
Average per rentable square foot over the
lease term:
Base rent ................................... $ 17.24 $ 4.99 $ 21.06 $ 17.05 $ 4.64 $ 21.99
Tenant improvements ......................... (1.10) (0.27) (1.16) (1.20) (0.24) (1.41)
Leasing commissions ......................... (0.70) (0.11) (0.61) (0.50) (0.12) (0.60)
Rent concessions ............................ (0.06) -- (0.06) (0.03) -- --
----------- ---------- ---------- ----------- ---------- ----------
Effective rent .............................. $ 15.38 $ 4.61 $ 19.23 $ 15.32 $ 4.28 $ 19.98
Expense stop (1) ............................ (3.84) (0.43) -- (4.76) (0.23) (0.03)
----------- ---------- ---------- ----------- ---------- ----------
Equivalent effective net rent ............... $ 11.54 $ 4.18 $ 19.23 $ 10.56 $ 4.05 $ 19.95
=========== ========== ========== =========== ========== ==========
Average term in years .......................... 4.8 2.6 7.5 4.6 4.1 7.0
=========== ========== ========== =========== ========== ==========
Rental Rate Trends:
Average final rate with expense
pass-throughs ............................... $ 15.66 $ 4.76 $ 14.08 $ 15.56 $ 4.16 $ 15.71
Average first year cash rental rate ............ $ 16.34 $ 4.73 $ 18.06 $ 16.33 $ 4.46 $ 19.89
----------- ---------- ---------- ----------- ---------- ----------
Percentage increase ............................ 4.34% (0.80%) 28.26% 4.90% 7.20% 26.60%
=========== ========== ========== =========== ========== ==========
Capital Expenditures Related to Re-leased Space:
Tenant Improvements:
Total dollars committed under
signed leases ............................... $17,234,770 $1,535,052 $1,526,553 $24,215,684 $2,279,129 $2,252,002
Rentable square feet ........................ 2,782,331 1,524,276 125,992 4,166,054 2,373,244 162,866
----------- ---------- ---------- ----------- ---------- ----------
Per rentable square foot .................... $ 6.19 $ 1.01 $ 12.12 $ 5.81 $ 0.96 $ 13.83
=========== ========== ========== =========== ========== ==========
Leasing Commissions:
Total dollars committed under
signed leases ............................... $ 7,648,567 $ 468,962 $ 424,192 $ 9,398,696 $1,203,586 $ 530,437
Rentable square feet ........................ 2,782,331 1,524,276 125,992 4,166,054 2,373,244 162,866
----------- ---------- ---------- ----------- ---------- ----------
Per rentable square foot .................... $ 2.75 $ 0.31 $ 3.37 $ 2.26 $ 0.51 $ 3.26
=========== ========== ========== =========== ========== ==========
Total:
Total dollars committed under
signed leases ............................... $24,883,337 $2,004,013 $1,950,745 $33,614,380 $3,482,715 $2,782,439
Rentable square feet ........................ 2,782,331 1,524,276 125,992 4,166,054 2,373,244 162,866
----------- ---------- ---------- ----------- ---------- ----------
Per rentable square foot .................... $ 8.94 $ 1.31 $ 15.48 $ 8.07 $ 1.47 $ 17.08
=========== ========== ========== =========== ========== ==========
1999
--------------------------------------
Office Industrial Retail
----------- ---------- ----------
Net Effective Rents Related to Re-Leased Space:
Number of lease transactions (signed leases) ... 1,051 249 101
Rentable square footage leased ................. 5,086,408 2,786,017 378,304
Average per rentable square foot over the
lease term:
Base rent ................................... $ 15.58 $ 5.35 $ 17.24
Tenant improvements ......................... (0.82) (0.28) (1.02)
Leasing commissions ......................... (0.39) (0.13) (0.44)
Rent concessions ............................ (0.03) (0.01) (0.01)
----------- ---------- ----------
Effective rent .............................. $ 14.34 $ 4.93 $ 15.77
Expense stop (1) ............................ (4.19) (0.28) (0.07)
----------- ---------- ----------
Equivalent effective net rent ............... $ 10.15 $ 4.65 $ 15.70
=========== ========== ==========
Average term in years .......................... 4.6 3.7 6.4
=========== ========== ==========
Rental Rate Trends:
Average final rate with expense
pass-throughs ............................... $ 15.13 $ 5.05 $ 12.21
Average first year cash rental rate ............ $ 15.68 $ 5.24 $ 16.28
----------- ---------- ----------
Percentage increase ............................ 3.64% 3.76% 33.33%
=========== ========== ==========
Capital Expenditures Related to Re-leased Space:
Tenant Improvements:
Total dollars committed under
signed leases ............................... $21,748,441 $3,621,621 $4,589,543
Rentable square feet ........................ 5,086,408 2,786,017 378,304
----------- ---------- ----------
Per rentable square foot .................... $ 4.28 $ 1.30 $ 12.13
=========== ========== ==========
Leasing Commissions:
Total dollars committed under
signed leases ............................... $ 8,990,333 $1,336,828 $1,069,227
Rentable square feet ........................ 5,086,408 2,786,017 378,304
----------- ---------- ----------
Per rentable square foot .................... $ 1.77 $ 0.48 $ 2.83
=========== ========== ==========
Total:
Total dollars committed under
signed leases ............................... $30,738,774 $4,958,449 $5,658,770
Rentable square feet ........................ 5,086,408 2,786,017 378,304
----------- ---------- ----------
Per rentable square foot .................... $ 6.04 $ 1.78 $ 14.96
=========== ========== ==========
- ----------
(1) "Expense stop" represents operating expenses (generally including taxes,
utilities, routine building expense and common area maintenance) for which
we will not be reimbursed by our tenants.
13
The following tables set forth scheduled lease expirations for executed
leases at our wholly-owned properties (excluding apartment units) as of December
31, 2001, assuming no tenant exercises renewal options.
Office Properties:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expirations Leases
- -------- -------- --------------- --------------- --------------- ----------- -------------
($ in thousands)
2002 697 3,246,295 13.9% $ 54,591 $ 16.82 13.6%
2003 563 3,659,444 15.8 62,603 17.11 15.6
2004 468 2,798,023 12.0 48,934 17.49 12.2
2005 451 3,131,115 13.4 54,953 17.55 13.6
2006 419 2,783,494 12.0 48,503 17.43 12.0
2007 66 942,377 4.0 14,936 15.85 3.7
2008 86 1,859,431 8.0 28,101 15.11 7.0
2009 26 1,136,417 4.9 18,990 16.71 4.7
2010 41 1,419,478 6.1 26,317 18.54 6.5
2011 38 882,132 3.8 18,044 20.45 4.5
Thereafter 84 1,428,058 6.1 26,665 18.67 6.6
----- ---------- ----- ---------- ------- -----
2,939 23,286,264 100.0% $ 402,637 $ 17.29 100.0%
===== ========== ===== ========== ======= =====
Industrial Properties:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expirations Leases
- -------- -------- --------------- --------------- --------------- ----------- -------------
($ in thousands)
2002 133 2,104,382 21.9% $ 9,337 $ 4.44 20.5%
2003 117 1,284,888 13.3 6,701 5.22 14.6
2004 89 2,544,294 26.5 10,254 4.03 22.5
2005 42 725,542 7.5 4,253 5.86 9.3
2006 39 757,279 7.9 4,585 6.05 10.0
2007 16 1,177,306 12.2 4,903 4.16 10.7
2008 8 252,274 2.6 1,611 6.39 3.5
2009 6 268,813 2.8 1,890 7.03 4.1
2010 4 182,746 1.9 1,063 5.82 2.3
2011 1 33,555 0.3 159 4.74 0.3
Thereafter 11 297,519 3.1 986 3.31 2.2
--- ---------- ----- --------- ------- -----
466 9,628,598 100.0% $ 45,742 $ 4.75 100.0%
=== ========== ===== ========= ======= =====
- ----------
(1) Annual Rents Under Expiring Leases are December 2001 rental revenue (base
rent plus operating expense pass-throughs) multiplied by 12.
14
Retail Properties:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expirations Leases
- -------- -------- --------------- --------------- --------------- ----------- -------------
($ in thousands)
2002 40 106,061 6.8% $ 1,631 $ 15.38 4.3%
2003 48 128,732 8.2 2,973 23.09 7.9
2004 35 154,003 9.8 2,202 14.30 5.8
2005 51 161,312 10.3 3,119 19.34 8.3
2006 34 106,658 6.8 2,658 24.92 7.0
2007 25 85,895 5.5 1,891 22.02 5.0
2008 24 108,038 6.9 3,764 34.84 10.0
2009 17 138,661 8.9 2,813 20.29 7.4
2010 20 125,470 8.0 3,195 25.46 8.5
2011 15 82,880 5.3 1,798 21.69 4.8
Thereafter 29 366,356 23.5 11,720 31.99 31.0
--- --------- ----- --------- ------- -----
338 1,564,066 100.0% $ 37,764 $ 24.14 100.0%
=== ========= ===== ========= ======= =====
Total:
Average Percentage of
Percentage of Annual Leased Rents
Rentable Leased Annual Rents Rental Rate Represented
Number of Square Feet Square Footage Under Per Square by
Lease Leases Subject to Represented by Expiring Foot for Expiring
Expiring Expiring Expiring Leases Expiring Leases Leases (1) Expirations Leases
- -------- -------- --------------- --------------- --------------- ----------- -------------
($ in thousands)
2002 870 5,456,738 15.8% $ 65,559 $ 12.01 13.5%
2003 728 5,073,064 14.7 72,277 14.25 14.8
2004 592 5,496,320 15.9 61,390 11.17 12.6
2005 544 4,017,969 11.7 62,325 15.51 12.8
2006 492 3,647,431 10.6 55,746 15.28 11.5
2007 107 2,205,578 6.4 21,730 9.85 4.5
2008 118 2,219,743 6.4 33,476 15.08 6.9
2009 49 1,543,891 4.5 23,693 15.35 4.9
2010 65 1,727,694 5.0 30,575 17.70 6.3
2011 54 998,567 2.9 20,001 20.03 4.1
Thereafter 124 2,091,933 6.1 39,371 18.82 8.1
----- ---------- ----- ---------- ------- -----
3,743 34,478,928 100.0% $ 486,143 $ 14.10 100.0%
===== ========== ===== ========== ======= =====
- ----------
(1) Annual Rents Under Expiring Leases are December 2001 rental revenue (base
rent plus operating expense pass-throughs) multiplied by 12.
15
Development Land
We estimate that we can develop approximately 13.7 million square feet of
office, industrial and retail space on our wholly-owned development land. All of
this development land is zoned and available for office, industrial or retail
development, substantially all of which has utility infrastructure already in
place. We believe that our commercially zoned and unencumbered land in existing
business parks gives us a development advantage over other commercial real
estate development companies in many of our markets. Any future development,
however, is dependent on the demand for industrial or office space in the area,
the availability of favorable financing and other factors, and no assurance can
be given that any construction will take place on the development land. In
addition, if construction is undertaken on the development land, we will be
subject to the risks associated with construction activities, including the risk
that occupancy rates and rents at a newly completed property may not be
sufficient to make the property profitable, construction costs may exceed
original estimates and construction and lease-up may not be completed on
schedule, resulting in increased debt service expense and construction expense.
ITEM 3. LEGAL PROCEEDINGS
We are a party to a variety of legal proceedings arising in the ordinary
course of our business. We believe that we are adequately covered by insurance
and indemnification agreements. Accordingly, none of such proceedings are
expected to have a material adverse effect on our business, financial condition
and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
16
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is the sole general partner of the Operating Partnership. The
following table sets forth information with respect to the Company's executive
officers:
Name Age Position and Background
- ---- --- -----------------------
Ronald P. Gibson 57 Director, President and Chief Executive Officer.
Mr. Gibson is one of our founders and has served
as president or managing partner of our
predecessor since its formation in 1978.
Edward J. Fritsch 43 Director, Executive Vice President, Chief
Operating Officer and Secretary.
Mr. Fritsch joined us in 1982 and was a partner
of our predecessor.
Gene H. Anderson 56 Director and Senior Vice President.
Mr. Anderson manages the operations of our
Georgia properties and the Piedmont Triad
division of North Carolina. Mr. Anderson was the
founder and president of Anderson Properties,
Inc. prior to its merger with the Company.
Michael F. Beale 48 Senior Vice President.
Mr. Beale is responsible for our operations in
Florida. Prior to joining us in 2000, Mr. Beale
was vice president of Koger Equity, Inc.
Michael E. Harris 52 Senior Vice President.
Mr. Harris is responsible for our operations in
Tennessee, Missouri, Kansas and Charlotte. Mr.
Harris was executive vice president of Crocker
Realty Trust prior to its merger with us. Before
joining Crocker Realty Trust, Mr. Harris served
as senior vice president, general counsel and
chief financial officer of Towermarc
Corporation, a privately owned real estate
development firm.
Marcus H. Jackson 45 Senior Vice President.
Mr. Jackson is responsible for our operations in
Virginia and the Research Triangle division of
North Carolina. Prior to joining us in 1998, Mr.
Jackson was senior vice president of Compass
Development and Construction Services.
Carman J. Liuzzo 41 Vice President, Chief Financial Officer and
Treasurer.
Prior to joining us in 1994, Mr. Liuzzo was vice
president and chief accounting officer for
Boddie-Noell Enterprises, Inc. and Boddie-Noell
Restaurant Properties, Inc. Mr. Liuzzo is a
certified public accountant.
Mack D. Pridgen III 52 Vice President and General Counsel.
Prior to joining us in 1997, Mr. Pridgen was a
partner with Smith Helms Mulliss & Moore, L.L.P.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Information and Distributions
There is no established public trading market for the Common Units. The
following table sets forth the cash distributions paid per Common Unit during
each quarter. Comparable cash distributions are expected in the future. As of
March 18, 2002, there were 171 record holders of Common Units (other than the
Company).
Quarter 2001 2000
Ended: Distributions Distributions
------ ------------- -------------
March 31 ............. $ .57 $ .555
June 30 .............. .57 .555
September 30 ......... .585 .57
December 31 .......... .585 .57
Sales of Unregistered Securities
In connection with the acquisition of real estate, the Operating
Partnership frequently issues Common Units to sellers of real estate in reliance
on exemptions from registration under the Securities Act of 1933. In connection
with acquisitions in 2001, the Operating Partnership issued 87,185 Common Units
in offerings exempt from the registration requirements of the Securities Act. We
exercised reasonable care to assure that each of the offerees of Common Units in
2001 was an "accredited investor" under Rule 501 of the Securities Act and that
the investors were not purchasing the Common Units with a view to their
distribution. Specifically, we relied on the exemptions provided by Section 4(2)
of the Securities Act or Rule 506 under the Securities Act.
18
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating
information for the Operating Partnership as of and for the years ended December
31, 2001, 2000, 1999, 1998 and 1997 ($ in thousands, except per unit amounts):
2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------
Operating Data:
Total revenue .................................. $ 535,871 $ 561,925 $ 579,874 $ 509,762 $ 273,165
Rental property operating expenses ............. 154,539 157,170 173,676 154,211 76,743
General and administrative ..................... 21,100 23,092 22,345 20,630 10,216
Interest expense ............................... 104,473 108,795 111,385 93,959 47,394
Depreciation and amortization .................. 120,989 119,088 112,039 91,397 47,260
------------ ------------ ------------ ------------ ------------
Income before cost of unsuccessful transactions,
gain on disposition of land and depreciable
assets and extraordinary item ............... 134,770 153,780 160,429 149,565 91,552
Cost of unsuccessful transactions .............. -- -- (1,500) (146) --
Gain on disposition of land and depreciable
assets ...................................... 16,197 4,657 7,997 1,716 --
------------ ------------ ------------ ------------ ------------
Income before extraordinary item ............... 150,967 158,437 166,926 151,135 91,552
Extraordinary item-loss on early
extinguishment of debt ...................... (714) (4,732) (7,341) (387) (6,945)
------------ ------------ ------------ ------------ ------------
Net income ..................................... 150,253 153,705 159,585 150,748 84,607
Distributions on preferred units ............... (31,500) (32,580) (32,580) (30,092) (13,117)
------------ ------------ ------------ ------------ ------------
Net income available for Class A
common units ................................ $ 118,753 $ 121,125 $ 127,005 $ 120,656 $ 71,490
============ ============ ============ ============ ============
Net income per common unit - basic ............. $ 1.93 $ 1.81 $ 1.81 $ 1.86 $ 1.54
============ ============ ============ ============ ============
Net income per common unit - diluted ........... $ 1.92 $ 1.80 $ 1.81 $ 1.85 $ 1.53
============ ============ ============ ============ ============
Balance Sheet Data
(at end of period):
Net real estate assets ......................... $ 3,255,908 $ 3,104,494 $ 3,649,059 $ 3,891,883 $ 2,601,211
Total assets ................................... 3,588,555 3,661,037 3,972,079 4,247,700 2,707,240
Total mortgages and notes payable .............. 1,672,230 1,568,019 1,719,117 1,906,216 978,558
Other Data:
Number of in-service properties ................ 498 493 563 658 481
Total rentable square feet ..................... 37,221,000 36,183,000 38,976,000 44,642,000 30,721,000
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
the accompanying consolidated financial statements and related notes contained
elsewhere in this Annual Report on Form 10-K.
Disclosure Regarding Forward-looking Statements
Some of the information in this Annual Report on Form 10-K may contain
forward-looking statements. Such statements include, in particular, statements
about our plans, strategies and prospects under this section and under the
heading "Business". You can identify forward-looking statements by our use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. Although we believe that our
plans, intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, we cannot assure you that our plans,
intentions or expectations will be achieved. When considering such
forward-looking statements, you should keep in mind the following important
factors that could cause our actual results to differ materially from those
contained in any forward-looking statement:
. speculative development activity by our competitors in our existing
markets could result in an excessive supply of office, industrial
and retail properties relative to tenant demand;
. the financial condition of our tenants could deteriorate;
. the costs of our development projects could exceed our original
estimates;
. we may not be able to complete development, acquisition,
reinvestment, disposition or joint venture projects as quickly or on
as favorable terms as anticipated;
. we may not be able to lease or release space quickly or on as
favorable terms as old leases;
. we may have incorrectly assessed the environmental condition of our
properties;
. an unexpected increase in interest rates would increase our debt
service costs;
. we may not be able to continue to meet our long-term liquidity
requirements on favorable terms;
. we could lose key executive officers; and
. our southeastern and midwestern markets may suffer additional
declines in economic growth.
This list of risks and uncertainties, however, is not intended to be
exhaustive. You should also review the other cautionary statements we make in
"Business - Risk Factors" set forth elsewhere in this Annual Report.
Given these uncertainties, we caution you not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances or to reflect the occurrence of
unanticipated events.
Overview
The Operating Partnership is managed by its general partner, the Company,
a self-administered and self-managed equity REIT that began operations through a
predecessor in 1978. Since our formation in 1994, we have evolved into one of
the largest owners and operators of suburban office, industrial and retail
properties in the southeastern and Midwestern United States. The Company
conducts substantially all of its activities through, and substantially all of
its interests in the properties are held directly or indirectly by, the
Operating Partnership. At December 31, 2001, we:
. owned 498 in-service office, industrial and retail properties,
encompassing approximately 37.2 million rentable square feet and 213
apartment units;
20
. owned an interest (50% or less) in 74 in-service office and
industrial properties, encompassing approximately 7.2 million
rentable square feet and 418 apartment units;
. owned 1,327 acres (and have agreed to purchase an additional eight
acres over the next year) of undeveloped land suitable for future
development; and
. were developing an additional 25 properties, which will encompass
approximately 2.8 million rentable square feet (including three
properties encompassing 347,000 rentable square feet that we are
developing with our joint venture partners).
The following summarizes our capital recycling program during the past
three years ending December 31, 2001:
2001 2000 1999 Total
-------- -------- -------- --------
Office, Industrial and Retail Properties
(rentable square feet in thousands)
Dispositions (1) .................. (268) (4,743) (7,595) (12,606)
Contributions to Joint Ventures (1) (118) (2,199) (1,198) (3,515)
Developments Placed In-Service .... 1,351 3,480 2,167 6,998
Acquisitions ...................... 72 669 960 1,701
-------- -------- -------- --------
Net Change in Wholly-owned
In-Service Properties ........... 1,037 (2,793) (5,666) (7,422)
======== ======== ======== ========
Apartment Properties
(in units)
Dispositions ...................... (1,672) -- -- (1,672)
======== ======== ======== ========
- ----------
(1) Excludes wholly-owned development properties sold or contributed to joint
ventures.
In addition to the above property activity, the Company repurchased $147.4
million, $100.2 million and $25.5 million of Common Stock and Common Units
during 2001, 2000 and 1999, respectively, and $18.5 million of Preferred Units
during 2001.
The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At December 31, 2001, the Company owned
87.7% of the Common Units in the Operating Partnership.
21
Results of Operations
The following table sets forth information regarding our results of
operations for the years ended December 31, 2001, 2000 and 1999 ($ in millions):
Year Ended December 31, 2001 2000
-------------------------------- to 2000 to 1999
2001 2000 1999 $ Change $ Change
-------- -------- -------- -------- --------
Revenue:
Rental property ............................... $ 505.3 $ 541.8 $ 565.2 $ (36.5) $ (23.4)
Equity in earnings of unconsolidated affiliates 8.3 3.1 0.6 5.2 2.5
Interest and other income ..................... 22.3 17.0 14.0 5.3 3.0
-------- -------- -------- -------- --------
Total revenue .................................... 535.9 561.9 579.8 (26.0) (17.9)
Operating expenses:
Rental property ............................... 154.5 157.2 173.7 (2.7) (16.5)
Depreciation and amortization ................. 121.0 119.1 112.0 1.9 7.1
Interest expense:
Contractual ................................ 102.5 106.3 108.6 (3.8) (2.3)
Amortization of deferred financing costs ... 2.0 2.5 2.8 (0.5) (0.3)
-------- -------- -------- -------- --------
104.5 108.8 111.4 (4.3) (2.6)
General and administrative .................... 21.1 23.1 22.3 (2.0) 0.8
-------- -------- -------- -------- --------
Income before gain on disposition of land
and depreciable assets and
extraordinary item ....................... 134.8 153.7 160.4 (18.9) (6.7)
Cost of unsuccessful transactions .......... -- -- (1.5) -- 1.5
Gain on disposition of land and
depreciable assets ........................ 16.2 4.7 8.0 11.5 (3.3)
-------- -------- -------- -------- --------
Income before extraordinary item ........... 151.0 158.4 166.9 (7.4) (10.0)
Extraordinary item -- loss on early extinguishment
of debt ....................................... (0.7) (4.7) (7.3) 4.0 2.6
-------- -------- -------- -------- --------
Net income ................................. 150.3 153.7 159.6 (3.4) (5.9)
Distributions on preferred units ................. (31.5) (32.6) (32.6) 1.1 --
-------- -------- -------- -------- --------
Net income available for Class A
common units ............................... $ 118.8 $ 121.1 $ 127.0 $ (2.3) $ (5.9)
======== ======== ======== ======== ========
Comparison of 2001 to 2000. Revenues from rental operations decreased
$36.5 million, or 6.7%, from $541.8 million for the year ended December 31, 2000
to $505.3 million for the year ended December 31, 2001. The decrease was
primarily a result of the changes in our property portfolio as a result of our
capital recycling program and a decrease in the average occupancy rates from
93.8% in 2000 to 92.9% in 2001, offset in part by an increase in rental rates on
new leases and rollovers. Additionally, due to lower expected economic growth
and increasing market vacancy rates in our core markets, we expect a slight
decline in occupancy during 2002. Our in-service wholly-owned portfolio
increased from 36.2 million square feet at December 31, 2000 to 37.2 million
square feet at December 31, 2001.
Same property rental revenues, which are the revenues of the 449
in-service properties wholly-owned on January 1, 2000, increased $6.7 million,
or 1.7%, for the year ended December 31, 2001, compared to the year ended
December 31, 2000. This increase was primarily a result of scheduled increases
in rental rates on existing leases, an overall increase in rental rates on new
leases and rollovers and an increase in recoveries from tenants. Partially
offsetting the increase in rental revenue was a decrease in termination fees
from $4.0 million in 2000 to $2.5 million in 2001. In addition, same store
straight-line rent declined from $6.3 million in 2000 to $4.4 million in 2001.
Same store average occupancy declined from 94.2% in 2000 to 93.2% in 2001.
During the year ended December 31, 2001, 689 second generation leases
representing 4.4 million square feet of office, industrial and retail space were
executed at an average rate per square foot which was 4.7% higher than the
average rate per square foot on the previous leases.
Rental revenue is comprised of base rent, including termination fees,
recoveries from tenants and parking and other income. Base rental revenue is
recognized on a straight-line basis over the terms of the respective leases.
Accrued straight-line rents receivable represents the amount by which
straight-line rental revenue exceeds rents currently billed in accordance with
lease agreements. Recoveries from tenants represent reimbursements for certain
costs as provided in the lease agreements. These costs generally include real
estate taxes, utilities, insurance, common area maintenance and other
recoverable costs.
22
Equity in earnings of unconsolidated affiliates increased $5.2 million
from $3.1 million for the year ended December 31, 2000 to $8.3 million for the
year ended December 31, 2001. The increase was primarily a result of the
inclusion of a full year of earnings in 2001 for two joint ventures that were
formed with unrelated investors during May and December of 2000. We account for
our investments in unconsolidated joint ventures using the equity method of
accounting because we do not control these joint venture entities. These
investments are initially recorded at cost, as investments in unconsolidated
affiliates, and are subsequently adjusted for equity in earnings and cash
contributions and distributions. Any difference between the carrying amount of
these investments on our balance sheet and the underlying equity in net assets
is amortized as an adjustment to equity in earnings of unconsolidated affiliates
over 40 years.
Interest and other income increased $5.3 million, or 31.2%, from $17.0
million for the year ended December 31, 2000 to $22.3 million for the year ended
December 31, 2001. The increase resulted from additional interest income and
leasing and management fees earned from our joint ventures during 2001, partly
offset by an adjustment related to the adoption of SFAS 133 (see Consolidated
Financial Statements Note #8) along with other income generated from our
apartments which were sold during 2001.
Rental operating expenses (real estate taxes, utilities, insurance,
repairs and maintenance and other property-related expenses) decreased $2.7
million, or 1.7%, from $157.2 million for the year ended December 31, 2000 to
$154.5 million for the year ended December 31, 2001. The decrease was primarily
a result of the net decrease in our property portfolio as a result of our
capital recycling program along with a decrease in variable expenses related to
lower average occupancy. Rental operating expenses as a percentage of related
revenues increased from 29.0% for the year ended December 31, 2000 to 30.6% for
the year ended December 31, 2001.
Same property rental property expenses, which are the expenses of the 449
in-service properties wholly-owned on January 1, 2000, increased $5.3 million,
or 4.4 %, for the year ended December 31, 2001, compared to the year ended
December 31, 2000. This increase was primarily a result of increases in real
estate taxes, utilities and small increases in various other rental expense
accounts. The increase in real estate taxes is primarily due to higher property
tax assessments.
Depreciation and amortization for the years ended December 31, 2001 and
2000 totaled $121.0 million and $119.1 million, respectively. The increase of
$1.9 million, or 1.6%, was due to an increase in the amortization of leasing
commissions and tenant improvements, partly offset by a decrease in the
depreciation on buildings that resulted from owning fewer properties as a result
of our capital recycling program during 2001 and 2000.
Interest expense decreased $4.3 million, or 4.0 %, from $108.8 million for
the year ended December 31, 2000 to $104.5 million for the year ended December
31, 2001. The decrease was primarily attributable to the decrease in the
weighted average interest rates for the entire year of 2001, partly offset by an
increase in the average outstanding debt in 2001. Interest expense for the years
ended December 31, 2001 and 2000 included $2.0 million and $2.5 million,
respectively, of amortization of deferred financing costs and the costs related
to our interest rate hedge contracts.
General and administrative expenses as a percentage of total revenues was
3.9% in 2001 and 4.1% in 2000.
Costs directly related to the development of rental properties are
capitalized. Capitalized development costs include interest, wages, property
taxes, insurance and other project costs incurred during the period of
development. Capitalized interest for the years ended December 31, 2001 and 2000
was $16.9 million and $23.7 million, respectively.
Gain on dispositions of land and depreciable assets increased $11.5
million from $4.7 million for the year ended December 31, 2000 to $16.2 million
for the year ended December 31, 2001. During 2001, the primary source of the
gain was the disposition of 1,672 apartment units. During 2000, the Jacksonville
portfolio was sold at a loss, which was offset by gains recognized on joint
venture transactions along with dispositions of land and office, industrial, and
retail properties.
Income before extraordinary item equaled $151.0 million and $158.4 million
for the years ended December 31, 2001 and 2000, respectively. The Operating
Partnership recorded $31.5 million and $32.6 million in preferred unit
23
distributions for each of the years ended December 31, 2001 and 2000,
respectively. The decrease was a result of the $18.5 million repurchase by the
Company of its preferred units during 2001.
Comparison of 2000 to 1999. Revenues from rental operations decreased
$23.4 million, or 4.1%, from $565.2 million for the year ended December 31, 1999
to $541.8 million for the year ended December 31, 2000. The decrease was
primarily a result of the changes in our portfolio as a result of our capital
recycling program, which was partially offset by an increase in rental rates on
new leases and rollovers and a slight increase in average occupancy from 93.2%
in 1999 to 93.8% in 2000. Our in-service wholly-owned portfolio decreased from
39.0 million square feet at December 31, 1999 to 36.2 million square feet at
December 31, 2000.
Same property rental property revenues, which are the revenues of the 443
in-service properties wholly-owned on January 1, 1999, increased $6.3 million,
or 1.7 %, for the year ended December 31, 2000, compared to the year ended
December 31, 1999. This increase was primarily a result of scheduled increases
in rental rates on existing leases, an overall increase in rental rates on new
leases and rollovers and an increase in termination fees from $3.0 million in
1999 to $4.0 million in 2000. Partially offsetting the increase in rental
revenues was a decrease in same property straight-line rent from $7.0 million in
1999 to $6.3 million in 2000. Same store average occupancy remained flat at
93.2% for 2000 and 1999.
During the year ended December 31, 2000, 1,046 second generation leases
representing 6.3 million square feet of office, industrial and retail space were
executed at an average rate per square foot which was 5.9% higher than the
average rate per square foot on the expired leases.
Equity in earnings of unconsolidated affiliates increased $2.5 million
from $0.6 million for the year ended December 31, 1999 to $3.1 million for the
year ended December 31, 2000. The increase was primarily a result of the
inclusion of a full year of earnings for a joint venture that was formed with
unrelated investors during 1999 and a partial year of earnings for a joint
venture formed with unrelated investors during 2000.
Interest and other income increased $3.0 million, or 21.4%, from $14.0
million for the year ended December 31, 1999 to $17.0 million for the year ended
December 31, 2000. The increase resulted from additional interest income related
to a $30.0 million note receivable that was recorded as a result of certain
property dispositions in June 1999 and an increase in development fee income in
2000 related to a joint venture.
Rental operating expenses decreased $16.5 million, or 9.5%, from $173.7
million for the year ended December 31, 1999 to $157.2 million for the year
ended December 31, 2000. The decrease was primarily a result of the net decrease
in our property portfolio as a result of our capital recycling program. Rental
operating expenses as a percentage of related revenues decreased from 30.7% for
the year ended December 31, 1999 to 29.0% for the year ended December 31, 2000.
Same property rental property expenses, which are the expenses of the 443
in-service properties wholly-owned on January 1, 1999, increased $1.6 million,
or 1.4 %, for the year ended December 31, 2000, compared to the year ended
December 31, 1999. This increase was primarily a result of small increases in
various rental expense accounts.
Depreciation and amortization for the years ended December 31, 2000 and
1999 totaled $119.1 million and $112.0 million, respectively. The increase of
$7.1 million, or 6.3%, was due to an increase in amortization of leasing
commissions and tenant improvements, partly offset by a decrease in depreciation
on buildings that resulted from owning fewer buildings as a result of our
capital recycling program during 1999 and 2000.
Interest expense decreased $2.6 million, or 2.3%, from $111.4 million for
the year ended December 31, 1999 to $108.8 million for the year ended December
31, 2000. The decrease was primarily attributable to the decrease in the
outstanding debt for the entire year of 2000. Interest expense for the years
ended December 31, 2000 and 1999 included $2.5 million and $2.8 million,
respectively, of amortization of deferred financing costs and the costs related
to our interest rate hedge contracts. Capitalized interest for the years ended
December 31, 2000 and 1999 was $23.7 million and $29.1 million, respectively.
General and administrative expenses as a percentage of total revenues was
3.8% in 1999 and 4.1% in 2000.
24
Gain on dispositions of land and depreciable assets decreased $3.3 million
from $8.0 million for the year ended December 31, 1999 to $4.7 million for the
year ended December 31, 2000. During 2000, the Jacksonville portfolio was sold
at a loss, which was offset by gains on joint venture transactions along with
dispositions of land and office, industrial, and retail properties. During 1999,
the sale of the Baltimore portfolio along with other office, industrial and
retail properties generated a gain, which was offset by a slight loss on the
disposition of the South Florida portfolio.
Income before extraordinary item equaled $158.4 million and $166.9 million
for the years ended December 31, 2000 and 1999, respectively. The Operating
Partnership recorded $32.6 million in preferred unit distributions for each of
the years ended December 31, 2000 and 1999.
Liquidity and Capital Resources
Statement of Cash Flows. The following table sets forth the changes in the
Operating Partnership's cash flows from 2000 to 2001 ($ in thousands):
Year Ended December 31,
------------------------
2001 2000 Change
---------- ---------- ----------
Cash Provided By Operating Activities ......... $ 247,515 $ 257,979 $ (10,464)
Cash (Used in)/Provided By Investing Activities (110,801) 251,599 (362,400)
Cash Used in Financing Activities ............. (238,406) (441,007) 202,601
The decrease in cash provided by operating activities was primarily the
result of our capital recycling program and a decrease in average occupancy
rates for our wholly-owned portfolio. Real estate taxes were higher in 2001
primarily due to higher property assessments. The level of net cash provided by
operating activities is also affected by the timing of receipt of revenues and
payment of expenses.
The increase in cash used for investing activities was primarily a result
of a decrease of $568.6 million in the proceeds from the disposition of real
estate assets in 2001, partly offset by the collection of advances from
subsidiaries of $27.6 million in 2001, the collection of notes receivables in
the amount of $58.3 million in 2001 and the reduction in additions to real
estate assets of $68.8 million in 2001.
The decrease in cash used in financing activities was primarily a result
of a decrease of $251.4 million in net repayments on the unsecured revolving
loan, mortgages and notes payable in 2001 and a $10.1 million decrease in the
payment of distributions on Common Units and Preferred Units, partly offset by
an increase of $48.7 million related to the repurchase of Common Units and an
increase of $18.5 million related to the repurchase of Preferred Units during
2001.
Capitalization. Our total indebtedness at December 31, 2001 was $1.67
billion and was comprised of $521.1 million of secured indebtedness with a
weighted average interest rate of 7.9% and $1.2 billion of unsecured
indebtedness with a weighted average interest rate of 6.5%. We do not intend to
reserve funds to retire existing secured or unsecured debt upon maturity. For a
more complete discussion of our long-term liquidity needs, see "Current and
Future Cash Needs."
25
The following table sets forth the maturity schedule of our long-term debt
as of December 31, 2001 ($ in thousands):
------------------------------------------------------
2-3 4-5 6 or more
Total 1 Year Years Years Years
---------- -------- -------- -------- --------
Fixed Rate Debt:
Unsecured:
MOPPRS (1) ................ $ 125,000 $ -- $ -- $ -- $125,000
Put Option Notes (2) ...... 100,000 -- -- -- 100,000
Notes ..................... 706,500 -- 246,500 110,000 350,000
Term Loan ................. 19,165 19,165 -- -- --
Secured:
Mortgages and loans payable 517,143 27,664 23,853 91,901 373,725
---------- -------- -------- -------- --------
Total Fixed Rate Debt .......... 1,467,808 46,829 270,353 201,901 948,725
---------- -------- -------- -------- --------
Variable Rate Debt:
Unsecured:
Revolving Loan ............ 200,500 -- 200,500 -- --
Secured:
Revolving Loan ............ 3,922 -- 3,922 -- --
---------- -------- -------- -------- --------
Total Variable Rate Debt ....... 204,422 -- 204,422 -- --
---------- -------- -------- -------- --------
Total Long Term Debt ................. $1,672,230 $ 46,829 $474,775 $201,901 $948,725
========== ======== ======== ======== ========
- ----------
(1) On February 2, 1998, the Operating Partnership sold $125.0 million of
MandatOry Par Put Remarketed Securities ("MOPPRS") due February 1, 2013.
The MOPPRS bear an interest rate of 6.835% from the date of issuance
through January 31, 2003. After January 31, 2003, the interest rate to
maturity on such MOPPRS will be 5.715% plus the applicable spread
determined as of January 31, 2003. In connection with the initial issuance
of the MOPPRS, a counter party was granted a remarketing option to
purchase the MOPPRS from the holders thereof on January 31, 2003 at 100.0%
of the principal amount. If the counter party elects not to exercise this
option, the Operating Partnership would be required to repurchase the
MOPPRS from the holders on January 31, 2003 at 100.0% of the principal
amount plus accrued and unpaid interest.
(2) On June 24, 1997, a trust formed by the Operating Partnership sold $100.0
million of Exercisable Put Option Securities due June 15, 2004 ("X-POS"),
which represent fractional undivided beneficial interest in the trust. The
assets of the trust consist of, among other things, $100.0 million of
Exercisable Put Option Notes due June 15, 2011 (the "Put Option Notes"),
issued by the Operating Partnership. The Put Option Notes bear an interest
rate of 7.19% from the date of issuance through June 15, 2004. After June
15, 2004, the interest rate to maturity on such Put Option Notes will be
6.39% plus the applicable spread determined as of June 15, 2004. In
connection with the initial issuance of the Put Option Notes, a counter
party was granted an option to purchase the Put Option Notes from the
trust on June 15, 2004 at 100.0% of the principal amount. If the counter
party elects not to exercise this option, the Operating Partnership would
be required to repurchase the Put Option Notes from the Trust on June 15,
2004 at 100.0% of the principal amount plus accrued and unpaid interest.
We currently have a $300.0 million unsecured revolving loan (with $200.5
million outstanding at December 31, 2001) that matures in December 2003 and a
$55.2 million secured revolving loan (with $3.9 million outstanding at December
31, 2001) that matures in March 2003. Our unsecured revolving loan also includes
a $150.0 million competitive sub-facility. Depending upon the corporate credit
ratings assigned to us from time to time by the various rating agencies, our
unsecured revolving loan bears variable rate interest at a spread above LIBOR
ranging from 0.70% to 1.55% and our secured revolving loan bears variable rate
interest at a spread above LIBOR ranging from 0.55% to 1.50%. We currently have
a credit rating of BBB- assigned by Standard & Poor's, a credit rating of BBB
assigned by Fitch Inc. and a credit rating of Baa2 assigned by Moody's Investor
Service. As a result, interest currently accrues on borrowings under our
unsecured revolving loan at an average rate of LIBOR plus 85 basis points and
under our secured revolving loan at an average rate of LIBOR plus 75 basis
points. In addition, we are currently required to pay an annual facility fee
equal to .20% of the total commitment under the unsecured revolving loan.
The terms of each of our revolving loans and the indenture that governs
our outstanding notes require us to comply with various operating and financial
covenants and performance ratios. We are currently in compliance with
26
all such requirements. In addition, based on our current expectation of future
operating performance, we expect to remain in compliance for the foreseeable
future.
Joint Ventures. During the past several years, we have formed various
joint ventures with unrelated investors. We have retained minority equity
interests ranging from 22.81% to 50.00% in these joint ventures. As required by
GAAP, we have accounted for our joint venture activity using the equity method
of accounting, as we do not control these joint ventures. As a result, the
assets and liabilities of our joint ventures are not included on our balance
sheet. Our joint ventures have approximately $569.6 million of outstanding debt.
All of the joint venture debt is non-recourse to us except (1) in the case of
customary exceptions pertaining to such matters as misuse of funds,
environmental conditions and material misrepresentations and (2) with respect to
$8.7 million of construction debt related to the MG-HIW Rocky Point, LLC, which
has been initially guaranteed in part by us subject to a pro rata indemnity from
our joint venture partner. Our guarantee of the MG-HIW Rocky Point, LLC debt
represented 50.0% of the outstanding loan balance at December 31, 2001 and will
decrease to 15.0% in the first quarter of 2002.
Interest Rate Hedging Activities. To meet in part our long-term liquidity
requirements, we borrow funds at a combination of fixed and variable rates.
Borrowings under our two revolving loans bear interest at variable rates. Our
long-term debt, which consists of long-term financings and the unsecured
issuance of debt securities, typically bears interest at fixed rates. In
addition, we have assumed fixed rate and variable rate debt in connection with
acquiring properties. Our interest rate risk management objective is to limit
the impact of interest rate changes on earnings and cash flows and to lower our
overall borrowing costs. To achieve these objectives, from time to time we enter
into interest rate hedge contracts such as collars, swaps, caps and treasury
lock agreements in order to mitigate our interest rate risk with respect to
various debt instruments. We do not hold or issue these derivative contracts for
trading or speculative purposes.
The following table sets forth information regarding our interest rate
hedge contract as of December 31, 2001 ($ in thousands):
Notional Maturity Fixed Fair Market
Type of Hedge Amount Date Reference Rate Rate Value
- ------------- ------ -------- --------------------- ----- -----------
Swap $ 19,165 6/10/02 1-Month LIBOR + 0.75% 6.95% $ (411)
The interest rate on all of our variable rate debt is adjusted at one- and
three-month intervals, subject to settlements under these contracts. We also
enter into treasury lock agreements from time to time in order to limit our
exposure to an increase in interest rates with respect to future debt offerings.
Net payments to counterparties under interest rate hedge contracts were $1.0
million during 2001 and were recorded as additional interest expense.
Current and Future Cash Needs. Historically, rental revenue has been the
principal source of funds to meet our short-term liquidity requirements, which
primarily consist of operating expenses, debt service, stockholder distributions
and ordinary course capital expenditures. In addition, construction management,
maintenance, leasing and management fees have provided sources of cash flow. We
presently have no plans for major capital improvements to the existing
properties, other than normal recurring building improvements, tenant
improvements and lease commissions.
In addition to the requirements discussed above, our short-term (within
the next 12 months) liquidity requirements also include the funding of
approximately $55.0 million of our existing development activity. See "Business
- -- Development Activity." We expect to fund our short-term liquidity
requirements through a combination of working capital, cash flows from
operations and the following:
. borrowings under our unsecured revolving loan (up to $74.6 million
of availability, as of March 12, 2002);
. borrowings under our secured revolving loan (up to $46.4 million of
availability, as of March 12, 2002);
. the selective disposition of non-core assets;
. the sale or contribution of some of our wholly-owned properties,
development projects and development land to strategic joint
ventures to be formed with unrelated investors, which will have the
net effect of generating additional capital through such sale or
contributions; and
27
. the issuance of secured debt (at December 31, 2001, we had $2.7
billion of unencumbered real estate assets at cost).
Our long-term liquidity needs generally include the funding of existing
and future development activity, selective asset acquisitions and the retirement
of mortgage debt, amounts outstanding under the two revolving loans and
long-term unsecured debt. We remain committed to maintaining a flexible capital
structure. Accordingly, we expect to meet our long-term liquidity needs through
a combination of (1) the issuance by the Operating Partnership of additional
unsecured debt securities, (2) the issuance of additional equity securities by
the Company and the Operating Partnership as well as (3) the sources described
above with respect to our short-term liquidity. We expect to use such sources to
meet our long-term liquidity requirements either through direct payments or
repayment of borrowings under the unsecured revolving loan. We do not intend to
reserve funds to retire existing secured or unsecured indebtedness upon
maturity. Instead, we will seek to refinance such debt at maturity or retire
such debt through the issuance of equity or debt securities.
We anticipate that our available cash and cash equivalents and cash flows
from operating activities, with cash available from borrowings and other
sources, will be adequate to meet our capital and liquidity in both the short
and long term. However, if these sources of funds are insufficient or
unavailable, the Company's ability to make the expected distributions to
stockholders discussed below and satisfy other cash payments may be adversely
affected.
Common Unit Repurchase Program. On April 25, 2001, we announced that the
Company's Board of Directors authorized the repurchase of up to an additional
5.0 million shares of Common Stock and Common Units. As of February 19, 2002,
the Company had repurchased 1.4 million Common Units at a weighted average
purchase price of $24.49 per unit and a total purchase price of $33.1 million
under this new repurchase program. In determining whether or not to repurchase
additional capital stock, the Company will consider, among other factors, the
effect of repurchases on our liquidity and the price of its Common Stock.
Disposition Activity. As part of our ongoing capital recycling program,
since December 31, 2001 through February 19, 2002, we have sold 128,000 square
feet of office properties and 43.0 acres of development land for gross proceeds
of $22.1 million. In addition, at February 19, 2002, we had 396,000 square feet
of office properties and 165.0 acres of land under contract for sale in various
transactions totaling $96.2 million. These transactions are subject to customary
closing conditions, including due diligence and documentation, and are expected
to close during the first and second quarters of 2002. However, we can provide
no assurance that all or parts of these transactions will be consummated.
When properties are identified as held for sale, we discontinue
depreciation and estimate the net proceeds expected from the disposition of such
properties. If, in our opinion, the net sales price of the properties that have
been identified for sale is less than the net book value of the properties, a
valuation allowance is established. Additionally, on a periodic basis, we assess
whether there are any indicators that the value of our real estate properties
may be impaired. A property's value is impaired only if our estimate of the
aggregate future cash flows (undiscounted and without interest charges) to be
generated by the property are less than the carrying value of the property. To
the extent impairment has occurred, the loss is measured as the excess of the
carrying amount of the property over the fair value of the property. We do not
believe that the value of any of our rental properties is impaired.
Impact of Recently Issued Accounting Standards
On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations," and No. 142, "Goodwill and Other
Intangible Assets." The provisions of SFAS No. 141 apply to all business
combinations initiated after June 30, 2001. SFAS No. 142 becomes effective
beginning January 1, 2002. We do not anticipate that these standards will have a
material adverse effect on our liquidity, financial position or results of
operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment of disposal of long-lived assets.
This standard harmonizes the accounting for impaired assets and resolves some of
the implementation issues as originally described in SFAS No. 121. The new
standard becomes effective for the year ending December 31, 2002. We do not
expect this pronouncement to have a material impact on our liquidity, financial
position or results of operations.
28
Funds From Operations and Cash Available for Distributions
We consider funds from operations ("FFO") to be a useful financial
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt and
to fund acquisitions and other capital expenditures. FFO does not represent net
income or cash flows from operating, investing or financing activities as
defined by GAAP. It should not be considered as an alternative to net income as
an indicator of our operating performance or to cash flows as a measure of
liquidity. FFO does not measure whether cash flow is sufficient to fund all cash
needs, including principal amortization, capital improvements and distributions
to stockholders. Further, FFO as disclosed by other REITs may not be comparable
to our calculation of FFO, as described below. FFO and cash available for
distributions should not be considered as alternatives to net income as an
indication of our performance or to cash flows as a measure of liquidity.
FFO equals net income (computed in accordance with GAAP) excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Amortization of deferred financing costs and depreciation of non-real
estate assets are not added back to net income in arriving at FFO. In addition,
FFO includes both recurring and non-recurring operating results. As a result,
non-recurring items that are not defined as "extraordinary" under GAAP are
reflected in the calculation of FFO. Gains and losses from the sale of
depreciable operating property are excluded from the calculation of FFO.
Cash available for distribution is defined as funds from operations
reduced by non-revenue enhancing capital expenditures for building improvements
and tenant improvements and lease commissions related to second generation
space.
29
FFO and cash available for distribution for the years ended December 31,
2001, 2000 and 1999 are summarized in the following table ($ in thousands):
Year Ended December 31
----------------------------------------
2001 2000 1999
---------- ---------- ----------
Funds from Operations:
Income before extraordinary item ................................. $ 150,967 $ 158,437 $ 166,926
Add/(Deduct):
Distributions to preferred unitholders ..................... (31,500) (32,580) (32,580)
Transition loss upon adoption of FAS 133 ................... 556 -- --
Cost of unsuccessful transactions .......................... -- -- 1,500
Severance costs and other division closing expenses ........ -- -- 1,813
Gain on disposition of land and depreciable assets ......... (16,197) (4,657) (7,997)
Gain on disposition of land ................................ 4,702 6,449 --
Depreciation and amortization .............................. 120,989 119,088 112,039
Depreciation on unconsolidated subsidiaries ................ 8,144 5,192 3,215
---------- ---------- ----------
Funds from Operations ................................. 237,661 251,929 244,916
Cash Available for Distribution:
Add/(Deduct):
Rental income from straight-line rents ..................... (11,257) (14,892) (14,983)
Amortization of deferred financing costs ................... 2,005 2,512 2,823
Non-incremental revenue generating capital expenditures (1):
Building improvements paid ............................... (8,345) (10,566) (10,056)
Second generation tenant improvements paid ............... (19,704) (22,287) (25,043)
Second generation lease commissions paid ................. (15,697) (13,033) (13,653)
---------- ---------- ----------
Cash available for distribution ....................... $ 184,663 $ 193,663 $ 184,004
========== ========== ==========
Weighted average common
units outstanding -- basic ................................. 61,430 67,054 70,182
========== ========== ==========
Weighted average common
units outstanding -- diluted ............................... 61,773 67,225 70,268
========== ========== ==========
Dividend payout ratios:
Funds from Operations ...................................... 60.0% 60.0% 62.8%
========== ========== ==========
Cash available for distribution ............................ 77.3% 78.1% 83.6%
========== ========== ==========
- ----------
(1) Amounts represent cash expenditures.
Inflation
In the last five years, inflation has not had a significant impact on us
because of the relatively low inflation rate in our geographic areas of
operation. Most of the leases require the tenants to pay their share of
increases in operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing our exposure to inflation.
30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The effects of potential changes in interest rates are discussed below.
Our market risk discussion includes "forward-looking statements" and represents
an estimate of possible changes in fair value or future earnings that would
occur assuming hypothetical future movements in interest rates. These
disclosures are not precise indicators of expected future losses, but only
indicators of reasonably possible losses. As a result, actual future results may
differ materially from those presented. See "Management's Discussion and
Analysis of Results of Operations -- Liquidity and Capital Resources" and the
notes to the consolidated financial statements for a description of our
accounting policies and other information related to these financial
instruments.
To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under our two revolving
loans bear interest at variable rates. Our long-term debt, which consists of
long-term financings and the unsecured issuance of debt securities, typically
bears interest at fixed rates. In addition, we have assumed fixed rate and
variable rate debt in connection with acquiring properties. Our interest rate
risk management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower our overall borrowing costs. To achieve
these objectives, from time to time we enter into interest rate hedge contracts
such as collars, swaps, caps and treasury lock agreements in order to mitigate
our interest rate risk with respect to various debt instruments. We do not hold
or issue these derivative contracts for trading or speculative purposes.
Variable Rate Debt. As of December 31, 2001, the Operating Partnership had
approximately $204.4 million of variable rate debt outstanding that was not
protected by interest rate hedge contracts. If the weighted average interest
rate on this variable rate debt is 100 basis points higher or lower during the
12 months ended December 31, 2002, our interest expense would be increased or
decreased by approximately $2.0 million.
Interest Rate Hedge Contract. For a discussion of our interest rate hedge
contract in effect at December 31, 2001, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Capitalization." If interest rates increase by 100 basis
points, the aggregate fair market value of this interest rate hedge contract as
of December 31, 2001 would increase by approximately $83,668. If interest rates
decrease by 100 basis points, the aggregate fair market value of this interest
rate hedge contract as of December 31, 2001 would decrease by approximately
$83,804.
In addition, we are exposed to certain losses in the event of
nonperformance by the counterparty under the hedge contract. We expect the
counterparty, which is a major financial institution, to perform fully under
this contract. However, if the counterparty was to default on its obligation
under the interest rate hedge contract, we could be required to pay the full
rates on our debt, even if such rates were in excess of the rate in the
contract.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See page F-1 of the financial report included herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is the sole general partner of the Operating Partnership. The
section under the heading "Election of Directors" of the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held May 20, 2002 is
incorporated herein by reference for information on directors of the Company.
See ITEM X in Part I hereof for information regarding executive officers of the
Company.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled
"Compensation of Directors" of the Proxy Statement and the section titled
"Executive Compensation" of the Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Operating Partnership has no executive officers or directors. As of
December 31, 2001, the only person or group known by us to be holding more than
5.0% of the Common Units was the Company, which owned 52,483,013 Common Units,
or approximately 87.7% of the outstanding Common Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section under the heading "Related Party Transactions" of the Proxy
Statement is incorporated herein by reference.
32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents Filed as a Part of this Report
1. Consolidated Financial Statements and Report of Independent Auditors
See Index on Page F-1
2. Financial Statement Schedules See Index on Page F-1
3. Exhibits
Ex. FN Description
------- ------ ---------------------------------------------------------
2.1 (1) Operating Agreement of MG-HIW, LLC, entered into as of
December 1, 2000, by and among Miller Global HIW 20, LLC
and the Operating Partnership
3.1 (2) Amended and Restated Articles of Incorporation of the
Company
3.2 (3) Amended and Restated Bylaws of the Company
4.1 (3) Specimen of certificate representing shares of Common
Stock
4.2 (4) Indenture among the Operating Partnership, the Company
and First Union National Bank of North Carolina dated as
of December 1, 1996
4.3 (5) Specimen of certificate representing 8 5/8% Series A
Cumulative Redeemable Preferred Shares
4.4 (6) Specimen of certificate representing 8% Series B
Cumulative Redeemable Preferred Shares
4.5 (7) Specimen of certificate representing 8% Series D
Cumulative Redeemable Preferred Shares
4.6 (7) Specimen of Depositary Receipt evidencing the Depositary
Shares each representing 1/10 of an 8% Series D
Cumulative Redeemable Preferred Share
4.7 (7) Deposit Agreement, dated April 23, 1998, between the
Company and First Union National Bank, as preferred
share depositary
4.8 (8) Rights Agreement, dated as of October 6, 1997, between
the Company and First Union National Bank, as rights
agent
4.9 (9) Agreement to furnish certain instruments defining the
rights of long-term debt holders
10.1 (3) Amended and Restated Agreement of Limited Partnership of
the Operating Partnership
10.2 (5) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to
Series A Preferred Units
10.3 (6) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to
Series B Preferred Units
10.4 (7) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to
Series D Preferred Units
10.5 (10) Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership with respect to
certain rights of limited partners upon a change of
control
10.6 (11) Form of Registration Rights and Lockup Agreement among
the Company and the Holders named therein, which
agreement is signed by all Common Unit holders
10.7 (12) Amended and Restated 1994 Stock Option Plan
10.8 (9) 1997 Performance Award Plan
10.9 (13) Form of Executive Supplemental Employment Agreement
between the Company and Named Executive Officers
33
Ex. FN Description
------- ------ ---------------------------------------------------------
10.10 (14) Form of warrants to purchase Common Stock of the Company
issued to John L. Turner, William T. Wilson III and John
E. Reece II
10.11 (15) Form of warrants to purchase Common Stock of the Company
issued to W. Brian Reames, John W. Eakin and Thomas S.
Smith
10.12 (16) 1999 Shareholder Value Plan
10.13 (1) Credit Agreement among Highwoods Realty Limited
Partnership, Highwoods Properties, Inc., the
Subsidiaries named therein and the Lenders named
therein, dated as of December 13, 2000
21 (13) Schedule of subsidiaries of the Company
23 Consent of Ernst & Young LLP
- ----------
(1) Filed as part of the Company's Current Report on Form 8-K dated December
14, 2000 and incorporated herein by reference.
(2) Filed as part of the Company's Current Report on Form 8-K dated September
25, 1997 and amended by articles supplementary filed as part of the
Company's Current Report on Form 8-K dated October 4, 1997 and articles
supplementary filed as part of the Company's Current Report on Form 8-K
dated April 20, 1998, each of which is incorporated herein by reference.
(3) Filed as part of Registration Statement 33-76952 with the SEC and
incorporated herein by reference.
(4) Filed as part of the Operating Partnership's Current Report on Form 8-K
dated December 2, 1996 and incorporated herein by reference.
(5) Filed as part of the Company's Current Report on Form 8-K dated February
12, 1997 and incorporated herein by reference.
(6) Filed as part of the Company's Current Report on Form 8-K dated September
25, 1997 and incorporated herein by reference.
(7) Filed as part of the Company's Current Report on Form 8-K dated April 20,
1998 and incorporated herein by reference.
(8) Filed as part of the Company's Current Report on Form 8-K dated October 4,
1997 and incorporated herein by reference.
(9) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference.
(10) Filed as part of the Operating Partnership's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 and incorporated herein by reference.
(11) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference.
(12) Filed as part of the Company's proxy statement on Schedule 14A relating to
the 1997 Annual Meeting of Stockholders.
(13) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by reference.
(14) Filed as part of Registration Statement 33-88364 with the SEC and
incorporated herein by reference.
(15) Filed as part of the Company's Current Report on Form 8-K dated April 1,
1996 and incorporated herein by reference.
(16) Filed as part of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 and incorporated herein by reference.
The Operating Partnership will provide copies of any exhibit, upon written
request, at a cost of $.05 per page.
(b) Reports on Form 8-K - None
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Raleigh, State of North Carolina, on March 28, 2002.
HIGHWOODS REALTY LIMITED PARTNERSHIP
By: Highwoods Properties, Inc., in its
capacity as general partner (the
"General Partner")
By: /s/ RONALD P. GIBSON
------------------------------------
Ronald P. Gibson, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ O. Temple Sloan, Jr. Chairman of the Board of March 28, 2002
- ------------------------------ Directors of the General
O. Temple Sloan, Jr. Partner
/s/ Ronald P. Gibson President, Chief Executive March 28, 2002
- ------------------------------ Officer and Director of the
Ronald P. Gibson General Partner
/s/ Edward J. Fritsch Executive Vice President, March 28, 2002
- ------------------------------ Chief Operating Officer,
Edward J. Fritsch Secretary and Director of
the General Partner
/s/ John L. Turner Vice Chairman of the Board March 28, 2002
- ------------------------------ and Director of the General
John L. Turner Partner
/s/ Gene H. Anderson Senior Vice President and March 28, 2002
- ------------------------------ Director of the General
Gene H. Anderson Partner
/s/ Thomas W. Adler Director of the General March 28, 2002
- ------------------------------ Partner
Thomas W. Adler
/s/ Kay N. Callison Director of the General March 28, 2002
- ------------------------------ Partner
Kay N. Callison
/s/ William E. Graham, Jr. Director of the General March 28, 2002
- ------------------------------ Partner
William E. Graham, Jr.
/s/ Lawrence S. Kaplan Director of the General March 28, 2002
- ------------------------------ Partner
Lawrence S. Kaplan
/s/ L. Glenn Orr, Jr. Director of the General March 28, 2002
- ------------------------------ Partner
L. Glenn Orr, Jr.
/s/ Willard H. Smith, Jr. Director of the General March 28, 2002
- ------------------------------ Partner
Willard H. Smith, Jr.
/s/ Carman J. Liuzzo Vice President and Chief March 28, 2002
- ------------------------------ Financial Officer (Principal
Carman J. Liuzzo Financial Officer and
Principal Accounting Officer)
and Treasurer of the General
Partner
35
INDEX TO FINANCIAL STATEMENTS
Page
----
Highwoods Realty Limited Partnership
Report of Independent Auditors.......................................... F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000............ F-3
Consolidated Statements of Income for the Years Ended December 31,
2001, 2000 and 1999.................................................. F-4
Consolidated Statements of Partners' Capital for the Years Ended
December 31, 2001, 2000 and 1999..................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December
31, 2001, 2000 and 1999.............................................. F-6
Notes to Consolidated Financial Statements.............................. F-8
Schedule III -- Real Estate and Accumulated Depreciation................ F-30
All other schedules are omitted because they are not applicable, or
because the required information is included in the financial statements or
notes thereto.
F-1
REPORT OF INDEPENDENT AUDITORS
TO THE OWNERS
HIGHWOODS REALTY LIMITED PARTNERSHIP
We have audited the accompanying consolidated balance sheets of Highwoods
Realty Limited Partnership (a majority-owned subsidiary of Highwoods Properties,
Inc.) as of December 31, 2001 and 2000, and the related consolidated statements
of income, partners' capital, and cash flows for each of the three years in the
period ended December 31, 2001. 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 the Operating 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 Highwoods
Realty Limited Partnership at December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2001 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.
/S/ ERNST & YOUNG LLP
Raleigh, North Carolina
February 19, 2002
F-2
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Balance Sheets
($ in thousands, except per unit amounts)
December 31,
----------------------------
2001 2000
------------ ------------
Assets
Real estate assets, at cost:
Land & improvements .......................................................... $ 420,141 $ 398,944
Buildings and tenant improvements ............................................ 2,941,118 2,742,377
Development in process ....................................................... 108,118 87,622
Land held for development .................................................... 152,597 144,727
Furniture, fixtures and equipment ............................................ 19,392 11,433
------------ ------------
3,641,366 3,385,103
Less -- accumulated depreciation ............................................. (385,458) (280,609)
------------ ------------
Net real estate assets ....................................................... 3,255,908 3,104,494
Property held for sale ....................................................... 82,031 127,824
Cash and cash equivalents ....................................................... 794 102,486
Restricted cash ................................................................. 5,685 2,192
Accounts receivable, net of allowance of $1,087 and $825 at December 31, 2001
and 2000, respectively ....................................................... 23,301 23,043
Advances to related parties ..................................................... 788 28,358
Notes receivable ................................................................ 13,726 72,047
Accrued straight-line rents receivable .......................................... 49,078 39,295
Investment in unconsolidated affiliates ......................................... 78,084 72,951
Other assets:
Deferred leasing costs ....................................................... 102,502 83,269
Deferred financing costs ..................................................... 26,121 43,110
Prepaid expenses and other ................................................... 10,441 11,857
------------ ------------
139,064 138,236
Less -- accumulated amortization ............................................. (59,904) (49,889)
------------ ------------
Other assets, net ......................................................... 79,160 88,347
------------ ------------
Total assets .................................................................... $ 3,588,555 $ 3,661,037
============ ============
Liabilities and Partners' capital
Mortgages and notes payable ..................................................... $ 1,672,230 $ 1,568,019
Accounts payable, accrued expenses and other liabilities ........................ 114,920 104,342
------------ ------------
Total liabilities ............................................................ 1,787,150 1,672,361
Minority interest ............................................................... 318 --
Redeemable operating partnership units:
Class A Common Units, 7,143,747 and 7,630,088 outstanding at December 31, 2001
and 2000, respectively .................................................... 185,380 189,798
Class B Common Units, 196,492 outstanding at December 31, 2001 and 2000 ...... 5,099 4,888
Series A Preferred Units, 104,945 and 125,000 outstanding at December 31, 2001
and 2000, respectively .................................................... 103,308 121,809
Series B Preferred Units, 6,900,000 outstanding at December 31, 2001 and 2000 166,346 166,346
Series D Preferred Units, 400,000 outstanding at December 31, 2001 and 2000 .. 96,842 96,842
Partners' capital:
Class A Common Units:
General partner Common Units, 596,268 and 652,649, outstanding at
December 31, 2001 and 2000, respectively .................................. 12,569 14,114
Limited partner Common Units, 51,886,745 and 56,982,135 outstanding at
December 31, 2001 and 2000, respectively .................................. 1,244,545 1,397,367
Deferred compensation -- restricted units ....................................... (3,561) (2,488)
Accumulated other comprehensive loss ............................................ (9,441) --
------------ ------------
Total Partners' capital ...................................................... 1,244,112 1,408,993
------------ ------------
Total Liabilities and Partners' capital ......................................... $ 3,588,555 $ 3,661,037
============ ============
See accompanying notes to consolidated financial statements.
F-3
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Income
($ in thousands, except per unit amounts)
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---------- ---------- ----------
Revenue:
Rental property .................................................. $ 505,278 $ 541,813 $ 565,239
Equity in net earnings of unconsolidated affiliates .............. 8,276 3,112 633
Interest and other income ........................................ 22,317 17,000 14,002
---------- ---------- ----------
Total Revenue .................................................... 535,871 561,925 579,874
Operating expenses:
Rental property .................................................. 154,539 157,170 173,676
Depreciation and amortization .................................... 120,989 119,088 112,039
Interest expense:
Contractual ................................................... 102,468 106,283 108,562
Amortization of deferred financing costs ...................... 2,005 2,512 2,823
---------- ---------- ----------
104,473 108,795 111,385
General and administrative ....................................... 21,100 23,092 22,345
---------- ---------- ----------
Income before cost of unsuccessful transactions, gain on
disposition of land and depreciable assets and extraordinary
item ........................................................ 134,770 153,780 160,429
Costs of unsuccessful transactions ............................ -- -- (1,500)
Gain on disposition of land and depreciable assets ............ 16,197 4,657 7,997
---------- ---------- ----------
Income before extraordinary item .............................. 150,967 158,437 166,926
Extraordinary item -- loss on early extinguishment of debt .......... (714) (4,732) (7,341)
---------- ---------- ----------
Net income .................................................... 150,253 153,705 159,585
Distributions on preferred units .................................... (31,500) (32,580) (32,580)
---------- ---------- ----------
Net income available for Class A Common Units .................... $ 118,753 $ 121,125 $ 127,005
========== ========== ==========
Net income per Common Unit -- Basic:
Income before extraordinary item ................................. $ 1.94 $ 1.88 $ 1.91
Extraordinary item -- loss on early extinguishment of debt ....... (0.01) (0.07) (0.10)
---------- ---------- ----------
Net income ....................................................... $ 1.93 $ 1.81 $ 1.81
========== ========== ==========
Net income per Common Unit -- Diluted:
Income before extraordinary item ................................. $ 1.93 $ 1.87 $ 1.91
Extraordinary item -- loss on early extinguishment of debt ....... (0.01) (0.07) (0.10)
---------- ---------- ----------
Net income ....................................................... $ 1.92 $ 1.80 $ 1.81
========== ========== ==========
Weighted average Common Units outstanding -- Basic:
Class A Common Units:
General Partner ............................................... 612 669 700
Limited Partners .............................................. 60,622 66,189 69,285
Class B Common Units:
Limited Partners .............................................. 196 196 197
---------- ---------- ----------
Total ............................................................ 61,430 67,054 70,182
========== ========== ==========
Weighted average Common Units outstanding -- Diluted:
Class A Common Units:
General Partner ............................................... 616 670 701
Limited Partners .............................................. 60,961 66,359 69,371
Class B Common Units:
Limited Partners .............................................. 196 196 196
---------- ---------- ----------
Total ............................................................ 61,773 67,225 70,268
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-4
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Partners' Capital
($ in thousands)
For the Years Ended December 31, 2001, 2000 and 1999
Class A Common Unit
----------------------------
General Limited Total
Partner's Partners' Partners'
Capital Capital Capital
------------ ------------ ------------
Balance at December 31, 1998 ....................... $ 15,634 $ 1,547,789 $ 1,563,423
Offering proceeds .................................. -- 22,053 22,053
Purchase of Common Units ........................... (255) (25,220) (25,475)
Distributions paid ................................. (1,541) (152,547) (154,088)
Preferred distributions paid ....................... (326) (32,254) (32,580)
Net income ......................................... 1,596 157,989 159,585
Adjustments of redeemable Common Units to fair value (219) (21,680) (21,899)
Conversion of redeemable Common Units to Common
Shares .......................................... 376 37,186 37,562
Transfer of limited partners' interest ............. 220 (220) --
------------ ------------ ------------
Balance at December 31, 1999 ....................... 15,485 1,533,096 1,548,581
Offering proceeds .................................. -- 6,101 6,101
Purchase of Common Units ........................... (987) (97,756) (98,743)
Distributions paid ................................. (1,519) (150,371) (151,890)
Preferred distributions paid ....................... (326) (32,254) (32,580)
Net income ......................................... 1,537 152,168 153,705
Adjustments of redeemable Common Units to fair value (136) (13,557) (13,693)
Transfer of limited partners' interest ............. 61 (61) --
Issuance of restricted stock ....................... (31) (3,018) (3,049)
Amortization of deferred compensation .............. 5 556 561
------------ ------------ ------------
Balance at December 31, 2000 ....................... 14,089 1,394,904 1,408,993
Offering proceeds .................................. -- 5,803 5,803
Purchase of Common Units ........................... (1,475) (145,951) (147,426)
Distributions paid ................................. (1,429) (141,460) (142,889)
Preferred distributions paid ....................... (315) (31,185) (31,500)
Net income ......................................... 1,503 148,750 150,253
Adjustments of redeemable Common Units to fair value 114 11,278 11,392
Transfer of limited partners' interest ............. 58 (58) --
Accumulated other comprehensive loss ............... (94) (9,347) (9,441)
Issuance of restricted stock ....................... (21) (2,088) (2,109)
Amortization of deferred compensation .............. 10 1,026 1,036
------------ ------------ ------------
Balance at December 31, 2001 ....................... $ 12,440 $ 1,231,672 $ 1,244,112
============ ============ ============
See accompanying notes to consolidated financial statements.
F-5
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
($ in thousands)
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---------- ---------- ----------
Operating activities:
Net income ................................................ $ 150,253 $ 153,705 $ 159,585
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ........................................... 107,101 107,764 101,230
Amortization ........................................... 15,893 13,836 13,632
Amortization of deferred compensation .................. 1,036 561 --
Equity in earnings of unconsolidated affiliates ........ (8,276) (3,112) (633)
Loss on early extinguishment of debt ................... 714 4,732 7,341
Gain on disposition of land and depreciable assets ..... (16,197) (4,657) (7,997)
Transition loss upon adoption of SFAS 133 .............. 556 -- --
Loss on ineffective portion of derivative instruments .. 554 -- --
Changes in operating assets and liabilities:
Accounts receivable .................................... (1,295) (1,116) 5,521
Prepaid expenses and other assets ...................... (2,077) 3,417 336
Accrued straight-line rents receivable ................. (11,257) (14,892) (14,983)
Accounts payable, accrued expenses and other liabilities 10,510 (2,259) (29,305)
---------- ---------- ----------
Net cash provided by operating activities ........... 247,515 257,979 234,727
---------- ---------- ----------
Investing activities:
Proceeds from disposition of real estate assets ........... 161,389 729,945 696,379
Additions to real estate assets ........................... (351,726) (420,494) (514,270)
Repayments from/(Advances to) subsidiaries ................ 27,570 (13,062) (4,742)
Distributions from unconsolidated affiliates .............. 8,940 2,400 785
Repayments/(Advances) of notes receivable ................. 58,321 (20,035) (32,027)
Other investing activities ................................ (15,295) (27,155) 7,577
---------- ---------- ----------
Net cash (used in)/provided by investing activities . (110,801) 251,599 153,702
---------- ---------- ----------
Financing activities:
Distributions paid on Common Units ........................ (142,889) (151,890) (154,088)
Distributions paid on Preferred Units ..................... (31,500) (32,580) (32,580)
Net proceeds from contributed capital - Common Units ...... 1,780 1,021 23,089
Repurchase of Common Units ................................ (147,426) (98,743) (25,475)
Repurchase of Preferred Units ............................. (18,501) -- --
Payment of prepayment penalties ........................... (714) (4,732) (7,341)
Borrowings on revolving loans ............................. 482,900 522,000 536,500
Repayment of revolving loans .............................. (282,400) (723,000) (676,500)
Proceeds from mortgages and notes payable ................. 76,707 218,162 324,693
Repayment of mortgages and notes payable .................. (176,918) (168,260) (371,792)
Net change in deferred financing costs .................... 555 (2,985) (1,716)
---------- ---------- ----------
Net cash used in financing activities ............... (238,406) (441,007) (385,210)
---------- ---------- ----------
Net (decrease)/increase in cash and cash equivalents ...... (101,692) 68,571 3,219
Cash and cash equivalents at beginning of the period ...... 102,486 33,915 30,696
---------- ---------- ----------
Cash and cash equivalents at end of the period ............ $ 794 $ 102,486 $ 33,915
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest..................................... $ 121,568 $ 131,034 $ 143,836
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-6
HIGHWOODS REALTY LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows -- Continued
($ in thousands)
For the Years Ended December 31, 2001, 2000 and 1999
Supplemental disclosure of non-cash investing and financing activities:
The following summarizes the net assets contributed by the Common Unit
holders of the Operating Partnership (other than the Company) or acquired/(sold)
subject to mortgage notes payable or notes receivable.
2001 2000 1999
-------- -------- --------
Assets:
Net real estate assets ................................. $ 6,516 $(56,055) $(78,012)
Cash and cash equivalents .............................. 40 -- (4,719)
Accounts receivable and other .......................... -- -- (2,975)
Investment in unconsolidated affiliates ................ -- 48,054 13,830
Notes receivable ....................................... -- 6,372 32,695
-------- -------- --------
Total Assets ....................................... $ 6,556 $ (1,629) $(39,181)
======== ======== ========
Liabilities:
Mortgages and notes payable ............................ 3,922 -- (58,531)
Accounts payable, accrued expenses and other liabilities 73 -- 7,604
-------- -------- --------
Total Liabilities .................................. 3,995 -- (50,927)
-------- -------- --------
Net Assets ..................................... $ 2,561 $ (1,629) $ 11,746
======== ======== ========
See accompanying notes to consolidated financial statements.
F-7
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of the Operating Partnership
Highwoods Realty Limited Partnership (the "Operating Partnership") is
managed by its general partner, Highwoods Properties, Inc. (the "Company"), a
self-administered and self-managed real estate investment trust ("REIT") which
operates in the southeastern and midwestern United States. The Operating
Partnership's wholly-owned assets include: 498 in-service office, industrial and
retail properties; 213 apartment units; 1,327 acres of undeveloped land suitable
for future development; and an additional 25 properties under development.
The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At December 31, 2001, the Company owned
87.7 % of the common partnership interests ("Common Units") in the Operating
Partnership. Limited partners (including certain officers and directors of the
Company) own the remaining Common Units. Holders of Common Units may redeem them
for the cash value of one share of the Company's common stock, $.01 par value
(the "Common Stock"), or, at the Company's option, one share (subject to certain
adjustments) of Common Stock.
Generally one year after issuance, the Operating Partnership is obligated
to redeem each Common Unit at the request of the holder thereof for cash equal
to the fair market value of one share of the Company's Common Stock at the time
of such redemption, provided that the Company at its option may elect to acquire
any such Common Unit presented for redemption for cash or one share of Common
Stock. When a Common Unit holder redeems a Common Unit for a share of Common
Stock or cash, the Company's minority interest in the Operating Partnership will
be reduced and its share in the Operating Partnership will be increased. The
Common Units owned by the Company are not redeemable for cash.
Basis of Presentation
The consolidated financial statements include the accounts of the
Operating Partnership and its majority-owned affiliates. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
The extraordinary loss represents the payment of prepayment penalties and
the write-off of loan origination fees related to the early extinguishment of
debt.
Real Estate Assets
All capitalizable costs related to the improvement or replacement of
commercial real estate properties are capitalized. Depreciation is computed by
the straight-line method over the estimated useful life of 40 years for
buildings and improvements and five to seven years for furniture, fixtures and
equipment. Tenant improvements are amortized over the life of the respective
leases, using the straight-line method. Real estate assets are stated at the
lower of cost or fair value, if impaired.
The Operating Partnership evaluates its real estate assets upon the
occurrence of significant adverse changes in their operations to assess whether
any impairment indicators are present that affect the recovery of the recorded
value. If any real estate assets are considered impaired, a loss is provided to
reduce the carrying value of the property to its estimated fair value. As of
December 31, 2001, none of the Operating Partnership's assets were considered
impaired.
F-8
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
As of December 31, 2001, the Operating Partnership had 524,000 square feet
of office properties and 208 acres of land under contract for sale in various
transactions totaling $118.3 million. These real estate assets have a carrying
value of $82.0 million and have been classified as assets held for sale in the
accompanying financial statements.
Cash Equivalents
The Operating Partnership considers highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash includes security deposits for the Operating Partnership's
commercial properties and construction-related escrows. In addition, the
Operating Partnership maintains escrow and reserve funds for debt service, real
estate taxes and property insurance established pursuant to certain mortgage
financing arrangements.
Investments in Unconsolidated Affiliates
As required by GAAP, investments in unconsolidated affiliates are
accounted for using the equity method of accounting because the Operating
Partnership does not control these joint venture entities. These investments are
initially recorded at cost, as investments in unconsolidated affiliates, and are
subsequently adjusted for equity in earnings and cash contributions and
distributions. Any difference between the carrying amount of these investments
on the Operating Partnership's balance sheet and the underlying equity in net
assets is amortized as an adjustment to equity in earnings of unconsolidated
affiliates over 40 years.
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the term
of the lease. Unpaid rents are included in accounts receivable. Certain lease
agreements provide for the reimbursement of real estate taxes, insurance,
advertising and certain common area maintenance costs. These additional rents
are recorded on the accrual basis. All rent and other receivables from tenants
are due from commercial building tenants located in the properties.
Deferred Lease Fees and Loan Costs
Lease fees, concessions and loan costs are capitalized at cost and
amortized over the life of the related lease or loan term, respectively.
Redeemable Common Units
Holders of redeemable Common Units may redeem each of their Common Units
for cash equal to the fair market value of one share of the Company's Common
Stock at any time after expiration of the applicable "lock-up" period. The
Company, the general partner of the Operating Partnership, may at its option
choose to satisfy the redemption requirement by issuing Common Stock on a
one-for-one basis for the number of Common Units submitted for redemption. In
accordance with ASR 268 issued by the Securities and Exchange Commission, these
Common Units are classified outside of permanent partners' capital in the
accompanying balance sheet. The recorded value of the Common Units is based on
fair value at the balance sheet date as measured by the closing price of the
Company's common stock on that date multiplied by the total number of Common
Units outstanding.
F-9
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Income Taxes
No provision has been made for income taxes because such taxes, if any,
are the responsibility of the individual partners.
Concentration of Credit Risk
Management of the Operating Partnership performs ongoing credit
evaluations of its tenants. As of December 31, 2001, the wholly-owned properties
(excluding apartment units) were leased to 2,974 tenants in 14 geographic
locations. The Operating Partnership's tenants engage in a wide variety of
businesses. There is no dependence upon any single tenant.
Common Unit and Stock Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. With each issuance by the Company of a share of Common Stock, the
Operating Partnership will issue to the Company one Common Unit upon payment of
the exercise price to the Operating Partnership; therefore, the Operating
Partnership accounts for the Company's stock options as if issued by the
Operating Partnership. In addition, the Operating Partnership grants options for
a fixed number of Common Units to employees with an exercise price equal to the
fair value of the shares of Common Stock at the date of grant. As described in
Note 11, the Operating Partnership has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations in accounting for stock and Common Unit options.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Impact of Recently Issued Accounting Standards
On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations," and No. 142, "Goodwill and Other
Intangible Assets." The provisions of SFAS No. 141 apply to all business
combinations initiated after June 30, 2001. SFAS No. 142 becomes effective
beginning January 1, 2002. Adoption of these standards is not expected to have a
material adverse effect on the Operating Partnership's liquidity, financial
position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment of disposal of long-lived assets.
This standard harmonizes the accounting for impaired assets and resolves some of
the implementation issues as originally described in SFAS No. 121. The new
standard becomes effective for the year ending December 31, 2002. Adoption of
this pronouncement is not expected to have a material impact on the Operating
Partnership's liquidity, financial position or results of operations.
Reclassifications
Certain amounts in the December 31, 2000 and 1999 Financial Statements
have been reclassified to conform to the December 31, 2001 presentation. These
reclassifications had no material effect on net income or partners' capital as
previously reported.
F-10
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Minority Interest
Minority Interest represents the limited partnership interest in a
partnership which was formed to develop real estate properties, owned by holders
other than the Operating Partnership.
2. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
During the past several years, the Operating Partnership has formed
various joint ventures with unrelated investors. The Operating Partnership has
retained minority equity interests ranging from 22.81% to 50.00% in these joint
ventures. In accordance with GAAP, the Operating Partnership has accounted for
its joint venture activity using the equity method of accounting, as the
Operating Partnership does not control these joint ventures. As a result, the
assets and liabilities of the Operating Partnership's joint ventures are not
included on its balance sheet. The Operating Partnership's joint ventures have
approximately $569.6 million of outstanding debt. All of the joint venture debt
is non-recourse to the Operating Partnership except (1) in the case of customary
exceptions pertaining to such matters as misuse of funds, environmental
conditions and material misrepresentations and (2) with respect to $8.7 million
of construction debt related to the MG-HIW Rocky Point, LLC, which has been
initially guaranteed in part by the Operating Partnership subject to a pro rata
indemnity from the Operating Partnership's joint venture partner. The Operating
Partnership's guarantee of the MG-HIW Rocky Point, LLC debt represented 50.0% of
the outstanding loan balance at December 31, 2001 and will decrease to 15.0% in
the first quarter of 2002.
The following is a summary of the various joint ventures in which the
Operating Partnership has a minority equity interest, including the names of the
unrelated investors, the value of the property contributed to the joint venture,
the debt obtained by the joint venture, the cash proceeds received by the
Operating Partnership and the ownership percentage of the Operating Partnership
in each joint venture.
In connection with the Company's merger with J.C. Nichols in July of 1998,
the Operating Partnership acquired a 49.0% interest in Board of Trade Investment
Company. The Operating Partnership is the sole and exclusive property manager of
the Board of Trade Investment Company joint venture, for which it received
$117,891, $0 and $145,944 in fees in 2001, 2000 and 1999, respectively. The
Operating Partnership has adopted the equity method of accounting for this
joint venture. In addition, in connection with its merger with J.C. Nichols
Company in July 1998, the Company succeeded to the interests of J.C. Nichols in
a strategic alliance with R&R Investors, Ltd. pursuant to which R&R Investors
manages and leases certain co-venture properties located in the Des Moines area.
As a result of the merger, the Operating Partnership acquired an ownership
interest of 50.0% or more in a series of nine joint ventures with R&R Investors
(the "Des Moines Joint Ventures"). Certain of these properties were previously
included in the Operating Partnership's consolidated financial statements. On
June 2, 1999, the Operating Partnership agreed with R&R Investors to reorganize
its respective ownership interests in the Des Moines Joint Ventures such that
each would own a 50.0% interest. Accordingly, the Operating Partnership has
adopted the equity method of accounting for its investment in each of the Des
Moines Joint Ventures as a result of such reorganization. The impact of the
reorganization was immaterial to the consolidated financial statements of the
Operating Partnership.
On March 15, 1999, the Operating Partnership closed a transaction with
Schweiz-Deutschland-USA Dreilander Beteiligung Objekt DLF 98/29-Walker Fink-KG
("DLF"), pursuant to which the Operating Partnership sold or contributed certain
office properties valued at approximately $142.0 million to a newly created
limited partnership (the "DLF I Joint Venture"). DLF contributed approximately
$56.0 million for a 77.19% interest in the DLF I Joint Venture, and the DLF I
Joint Venture borrowed approximately $71.0 million from third-party lenders. The
Operating Partnership retained the remaining 22.81% interest in the DLF I Joint
Venture, received net cash proceeds of approximately $124.0 million and is the
sole and exclusive property manager and leasing agent of the DLF I Joint
Venture's properties, for which the Operating Partnership received fees of
$808,926, $762,670 and $607,000 in 2001, 2000 and 1999, respectively. The
Operating Partnership has adopted the equity method of accounting for its
investment in this joint venture.
F-11
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. INVESTMENTS IN UNCONSOLIDATED AFFILIATES - (Continued)
On May 9, 2000, the Operating Partnership closed a transaction with
Dreilander-Fonds 97/26 and 99/32 ("DLF II") pursuant to which the Operating
Partnership contributed five in-service office properties encompassing 570,000
rentable square feet and a 246,000-square-foot development project valued at
approximately $110.0 million to a newly created limited partnership (the "DLF II
Joint Venture"). DLF II contributed $24.0 million in cash for a 40.0% ownership
interest in the DLF II Joint Venture and the DLF II Joint Venture borrowed
approximately $50.0 million from a third-party lender. The Operating Partnership
initially retained the remaining 60.0% interest in the DLF II Joint Venture and
received net cash proceeds of approximately $73.0 million. During 2001 and 2000,
DLF II contributed an additional $10.7 million in cash to the DLF II Joint
Venture. As a result, the Operating Partnership decreased its ownership
percentage to 42.93% as of December 31, 2001. The Operating Partnership is the
sole and exclusive property manager and leasing agent of the DLF II Joint
Venture properties, for which the Operating Partnership received fees of
$491,200 and $208,600 in 2001 and 2000, respectively. The Operating Partnership
has adopted the equity method of accounting for this joint venture.
On December 19, 2000, the Operating Partnership formed various joint
ventures with Denver-based Miller Global Properties, LLC ("Miller Global"). In
the first joint venture, the Operating Partnership sold or contributed 19
in-service office properties encompassing approximately 2.5 million rentable
square feet valued at approximately $335.0 million to a newly created limited
liability Operating Partnership. As part of the formation of the first joint
venture, Miller Global contributed approximately $85.0 million in cash for an
80.0% ownership interest and the joint venture borrowed approximately $238.8
million from a third-party lender. The Operating Partnership retained a 20.0%
ownership interest and received net cash proceeds of approximately $307.0
million. During 2001, the Operating Partnership contributed a 39,000 square feet
development project to the first joint venture for $5.1 million. The Operating
Partnership retained a 20.0% interest and the joint venture borrowed an
additional $3.7 million under its existing debt agreement with a third party. In
the remaining joint ventures, the Operating Partnership contributed
approximately $7.5 million of development land to various newly created limited
liability companies. These joint ventures expect to develop four properties
encompassing 435,000 rentable square feet with a budgeted cost of approximately
$61.0 million. The Operating Partnership and Miller Global each own 50.0% of
these joint ventures. The Operating Partnership is the sole and exclusive
developer of these properties, and received $553,270 and $263,549 in development
fees in 2001 and 2000, respectively. In addition, the Operating Partnership is
the sole and exclusive property manager and leasing agent for the properties in
all of these joint ventures and received fees of $1.5 million and $73,793 in
2001 and 2000, respectively. The Operating Partnership has adopted the equity
method of accounting for all of the joint ventures with Miller Global.
In connection with one of the joint ventures with Miller Global, the
Operating Partnership guaranteed Miller Global, which has an 80.0% interest in
the joint venture, a minimum internal rate of return on $50.0 million of Miller
Global's equity. If the minimum internal rate of return is not achieved upon the
sale of the assets or winding up of the joint venture, Miller Global would
receive a disproportionately greater interest of the cash proceeds related to
the assets subject to the internal rate of return guarantee. Based upon the
current operating performance of the assets and the Operating Partnership's
estimate of the residual value of the subject assets, the estimated internal
rate of return for Miller Global with respect to those assets exceeds the
minimum required return. As a result, the Operating Partnership does not
currently expect that its interest in the joint venture will be adjusted upon
the sale of the subject assets or the winding up of the joint venture as a
result of the internal rate of return guarantee.
Additionally, during 1999 and 2001, the Operating Partnership closed two
transactions with Highwoods-Markel Associates, LLC and Concourse Center
Associates, LLC pursuant to which the Operating Partnership sold or contributed
certain office properties to newly created limited partnerships. Unrelated
investors contributed cash for a 50.0% ownership interest in the joint ventures.
The Operating Partnership retained the remaining 50.0% interest, received net
cash proceeds and is the sole and exclusive property manager and leasing agent
of the joint venture's properties, for which the Operating Partnership received
fees of $53,636 and $31,152 in 2001 and 2000, respectively. The Operating
Partnership has adopted the equity method of accounting for both of these joint
ventures.
F-12
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. INVESTMENTS IN UNCONSOLIDATED AFFILIATES - (Continued)
The following tables set forth information regarding the Operating
Partnership's joint venture activity as recorded on the joint venture's books at
December 31, 2001 and 2000 ($ in thousands):
December 31, 2001 December 31, 2000
---------- ---------------------------------- ----------------------------------
Percent Total Total Total Total
Owned Assets Debt Liabilities Assets Debt Liabilities
---------- -------- -------- ------------ -------- -------- ------------
Balance Sheet Data:
Board of Trade
Investment Company ............ 49.00% $ 7,372 $ 1,076 $ 1,258 $ 7,634 $ 1,222 $ 1,479
Dallas County Partners (1) ...... 50.00% 44,786 35,495 40,967 44,041 34,568 40,055
Dallas County Partners II (1) ... 50.00% 19,891 24,601 25,778 17,881 25,517 26,747
Fountain Three (1) .............. 50.00% 37,218 26,049 33,200 30,159 22,630 26,485
Schweiz-Deutschland-USA
DreilanderBeteiligung
Objekt DLF 98/29-Walker Fink-KG 22.81% 143,960 69,113 70,979 144,737 69,958 71,506
Dreilander-Fonds 97/26 and 99/32 42.93% 122,820 60,000 62,422 119,129 56,485 58,000
RRHWoods, LLC (1) ............... 50.00% 82,740 66,038 69,098 82,704 67,539 70,965
Highwoods-Markel Associates, LLC 50.00% 16,436 11,625 12,563 16,977 11,625 12,525
MG-HIW, LLC ..................... 20.00% 353,531 242,240 247,950 347,358 238,567 240,956
MG-HIW Peachtree Corners III, LLC 50.00% 3,503 2,299 2,445 2,667 1,572 1,572
MG-HIW Rocky Point, LLC ......... 50.00% 28,212 17,322 19,695 4,595 -- 261
MG-HIW Metrowest I, LLC ......... 50.00% 1,600 -- -- 1,506 -- --
MG-HIW Metrowest II, LLC ........ 50.00% 8,683 3,763 4,034 3,764 -- 821
Concourse Center Associates, LLC 50.00% 14,551 10,000 10,016 -- -- --
-------- -------- ------------ -------- -------- ------------
Total ........................... $885,303 $569,621 $ 600,405 $823,152 $529,683 $ 551,372
======== ======== ============ ======== ======== ============
For the Year Ended December 31, 2001
--------------------------------------------------------
Operating Depr/ Net Income/
Revenue Expense Interest Amort (Loss)
-------- ----------- -------- ------- -----------
Income Statement Data:
Board of Trade
Investment Company ........ $ 2,524 $ 1,666 $ 90 $ 311 $ 457
Dallas County Partners (1) .. 11,148 4,905 2,715 1,883 1,645
Dallas County Partners II (1) 7,614 2,750 2,550 1,066 1,248
Fountain Three (1) .......... 6,747 2,912 2,109 1,676 50
Schweiz-Deutschland-USA
DreilanderBeteiligung
Objekt DLF 98/29-Walker
Fink-KG ................... 20,305 5,474 4,712 3,288 6,831
Dreilander-Fonds 97/26
and 99/32 ................. 17,691 4,159 4,589 3,239 5,704
RRHWoods, LLC (1) ........... 14,632 6,950 3,454 3,298 930
Highwoods-Markel
Associates, LLC ........... 3,215 1,811 965 668 (229)
MG-HIW, LLC ................. 50,457 17,584 15,418 8,701 8,754
MG-HIW Peachtree
Corners III, LLC .......... 1 38 -- -- (37)
MG-HIW Rocky Point, LLC ..... 18 -- -- -- 18
MG-HIW Metrowest I, LLC ..... -- 21 -- -- (21)
MG-HIW Metrowest II, LLC .... 52 67 -- 26 (41)
Concourse Center
Associates, LLC ........... 66 16 41 -- 9
-------- ----------- ------- ------- -----------
Total ....................... $134,470 $ 48,353 $36,643 $24,156 $ 25,318
======== =========== ======= ======= ===========
For the Year Ended December 31, 2000
-------------------------------------------------------
Operating Depr/ Net Income/
Revenue Expense Interest Amort (Loss)
------- ----------- -------- ------- -----------
Income Statement Data:
Board of Trade
Investment Company ........ $ 2,688 $ 1,708 $ 95 $ 274 $ 611
Dallas County Partners (1) .. 9,375 4,567 2,555 1,762 491
Dallas County Partners II (1) 5,752 2,329 2,640 1,062 (279)
Fountain Three (1) .......... 5,779 2,191 1,739 1,333 516
Schweiz-Deutschland-USA
DreilanderBeteiligung
Objekt DLF 98/29-Walker
Fink-KG ................... 19,889 5,074 4,768 3,156 6,891
Dreilander-Fonds 97/26
and 99/32 ................. 8,021 1,913 1,999 1,390 2,719
RRHWoods, LLC (1) ........... 12,422 6,367 4,034 3,243 (1,222)
Highwoods-Markel
Associates, LLC ........... 2,592 786 793 289 724
MG-HIW, LLC ................. 1,610 563 811 289 (53)
MG-HIW Peachtree
Corners III, LLC .......... -- -- -- -- --
MG-HIW Rocky Point, LLC ..... -- -- -- -- --
MG-HIW Metrowest I, LLC ..... -- -- -- -- --
MG-HIW Metrowest II, LLC .... -- -- -- -- --
Concourse Center
Associates, LLC ........... -- -- -- -- --
------- ----------- ------- ------- -----------
Total ....................... $68,128 $ 25,498 $19,434 $12,798 $ 10,398
======= =========== ======= ======= ===========
- ----------
(1) Des Moines Joint Ventures
(2) The Operating Partnership decreased its ownership percentage from 47.05%
at December 31, 2000 to 42.93% at December 31, 2001.
F-13
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. MORTGAGES AND NOTES PAYABLE
The Operating Partnership's mortgages and notes payable consisted of the
following at December 31, 2001 and 2000:
2001 2000
---------- ----------
($ in thousands)
Mortgage and loans payable:
9.0% mortgage loan due 2005 ............ $ 36,929 $ 37,697
8.1% mortgage loan due 2005 ............ 28,693 29,328
8.2% mortgage loan due 2007 ............ 69,868 71,183
7.8% mortgage loan due 2009 ............ 91,449 92,840
7.9% mortgage loan due 2009 ............ 91,491 92,861
7.8% mortgage loan due 2010 ............ 134,966 136,836
6.0% to 10.5% mortgage loans due between
2001 and 2022 ....................... 63,747 110,736
Industrial Revenue Bonds due 2015 ...... -- 37,000
Variable rate mortgage loan due 2001 ... -- 8,199
Secured Revolving Loan due 2003 ........ 3,922 --
---------- ----------
521,065 616,680
---------- ----------
Unsecured indebtedness:
6.75% notes due 2003 ................... $ 100,000 $ 100,000
8.0% notes due 2003 .................... 146,500 146,500
7.0% notes due 2006 .................... 110,000 110,000
7.125% notes due 2008 .................. 100,000 100,000
8.125% notes due 2009 .................. 50,000 50,000
Put Option Notes due 2011 (1) .......... 100,000 100,000
MOPPRS due 2013 (2) .................... 125,000 125,000
7.5% notes due 2018 .................... 200,000 200,000
Term loan due 2002 ..................... 19,165 19,839
Unsecured Revolving Loan due 2003 ...... 200,500 --
---------- ----------
1,151,165 951,339
---------- ----------
Total ............................. $1,672,230 $1,568,019
========== ==========
The aggregate maturities of the mortgages and notes payable at December
31, 2001 are as follows:
Year of Maturity Principal Amount
---------------- ----------------
($ in thousands)
2002................................ $ 46,829
2003................................ 462,044 (2)
2004................................ 12,731 (1)
2005................................ 79,605
2006................................ 122,296
Thereafter.......................... 948,725
----------
$1,672,230
==========
- ----------
(1) On June 24, 1997, a trust formed by the Operating Partnership sold $100.0
million of Exercisable Put Option Securities due June 15, 2004 ("X-POS"),
which represent fractional undivided beneficial interest in the trust. The
assets of the trust consist of, among other things, $100.0 million of
Exercisable Put Option Notes due June 15, 2011 (the "Put Option Notes"),
issued by the Operating Partnership. The Put Option Notes bear an interest
rate of 7.19% from the date of issuance through June 15, 2004. After June
15, 2004, the interest rate to maturity on such Put Option Notes will be
6.39% plus the applicable spread determined as of June 15, 2004. In
connection with the initial issuance of the Put Option Notes, a
counterparty was granted an option to purchase the Put Option Notes from
the trust on June 15, 2004 at 100.0% of the principal amount. If the
counterparty elects not to exercise this option, the Operating Partnership
would be required to repurchase the Put Option Notes from the trust on
June 15, 2004 at 100.0% of the principal amount plus accrued and unpaid
interest.
(2) On February 2, 1998, the Operating Partnership sold $125.0 million of
MandatOry Par Put Remarketed Securities
F-14
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. MORTGAGES AND NOTES PAYABLE - (Continued)
("MOPPRS") due February 1, 2013. The MOPPRS bear an interest rate of
6.835% from the date of issuance through January 31, 2003. After January
31, 2003, the interest rate to maturity on such MOPPRS will be 5.715% plus
the applicable spread determined as of January 31, 2003. In connection
with the initial issuance of the MOPPRS, a counterparty was granted a
remarketing option to purchase the MOPPRS from the holders thereof on
January 31, 2003 at 100.0% of the principal amount. If the counterparty
elects not to exercise this option, the Operating Partnership would be
required to repurchase the MOPPRS from the holders on January 31, 2003 at
100.0% of the principal amount plus accrued and unpaid interest.
Secured Indebtedness
The mortgage and loans payable and the secured revolving loan were secured
by real estate assets with an aggregate carrying value of $904.0 million at
December 31, 2001.
Unsecured Indebtedness
The Operating Partnership's unsecured notes of $931.5 million bear coupon
interest rates from 6.75% to 8.125% with interest payable semi-annually in
arrears. The premium and discount related to the issuance of the unsecured notes
is being amortized over the life of the respective notes as an adjustment to
interest expense. All of the unsecured notes, except for the MOPPRS and Put
Option Notes, are redeemable at any time at the option of the Company, subject
to certain conditions including the payment of make-whole amounts.
The Operating Partnership currently has a $300.0 million unsecured
revolving loan (with $200.5 million outstanding at December 31, 2001) that
matures in December 2003 and a $55.2 million secured revolving loan (with $3.9
million outstanding at December 31, 2001) that matures in March 2003. The
Operating Partnership's unsecured revolving loan also includes a $150.0 million
competitive sub-facility. Depending upon the corporate credit ratings assigned
to the Operating Partnership from time to time by the various rating agencies,
the Operating Partnership's unsecured revolving loan bears variable rate
interest at a spread above LIBOR ranging from 0.70% to 1.55% and the Operating
Partnership's secured revolving loan bears variable rate interest at a spread
above LIBOR ranging from 0.55% to 1.50%. The Operating Partnership currently has
a credit rating of BBB- assigned by Standard & Poor's, a credit rating of BBB
assigned by Fitch Inc. and a credit rating of Baa2 assigned by Moody's Investor
Service. As a result, interest currently accrues on borrowings under the
Operating Partnership's unsecured revolving loan at an average rate of LIBOR
plus 85 basis points and under the Operating Partnership's secured revolving
loan at an average rate of LIBOR plus 75 basis points. In addition, the
Operating Partnership is currently required to pay an annual facility fee equal
to .20% of the total commitment on the unsecured revolving loan.
The terms of each of the Operating Partnership's revolving loans and the
indenture that governs the Operating Partnership's outstanding unsecured notes
require the Operating Partnership to comply with various operating and financial
covenants and performance ratios. The Operating Partnership is currently in
compliance with all such requirements.
Interest Rate Hedge Contracts
To meet in part its long-term liquidity requirements, the Operating
Partnership borrows funds at a combination of fixed and variable rates.
Borrowings under the two revolving loans bear interest at variable rates. The
Operating Partnership's long-term debt, which consists of long-term financings
and the unsecured issuance of debt securities, typically bears interest at fixed
rates. In addition, the Operating Partnership has assumed fixed rate and
variable rate debt in connection with acquiring properties. The Operating
Partnership's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve these objectives, from time to time the Operating
Partnership enters into interest rate hedge contracts such as collars, swaps,
caps and treasury lock agreements in order to mitigate its interest rate risk
with respect to various debt instruments. The Operating Partnership does not
hold or issue these derivative contracts for trading or speculative purposes.
F-15
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. MORTGAGES AND NOTES PAYABLE - (Continued)
The following table sets forth information regarding the Operating
Partnership's interest rate hedge contract as of December 31, 2001 ($ in
thousands):
Notional Maturity Fixed Fair Market
Type of Hedge Amount Date Reference Rate Rate Value
- ------------- ------ -------- --------------------- ----- -----------
Swap $ 19,165 6/10/02 1-Month LIBOR + 0.75% 6.95% $ (411)
The interest rate on all of the Operating Partnership's variable rate debt
is adjusted at one- and three-month intervals, subject to settlements under
these contracts. Net (receipts)/payments made to counterparties under interest
rate hedge contracts were $1,003,159, ($206,894) and $304,720 in 2001, 2000 and
1999, respectively, and were recorded as increases/(decreases) to interest
expense.
In addition, the Operating Partnership is exposed to certain losses in the
event of non-performance by the counterparty under the interest rate hedge
contract. The Operating Partnership expects the counterparty, which is a major
financial institution, to perform fully under the contract. However, if the
counterparty was to default on its obligation under the interest rate hedge
contract, the Operating Partnership could be required to pay the full rates on
its debt, even if such rates were in excess of the rate in the contract.
Other Information
Total interest capitalized was approximately $16,947,000, $23,669,000 and
$29,147,000 in 2001, 2000 and 1999, respectively.
4. EMPLOYEE BENEFIT PLANS
Management Compensation Program
The executive officers of the Company, which is the general partner of the
Operating Partnership, participate in an annual cash incentive bonus program
whereby they are eligible for cash bonuses based on a percentage of their annual
base salary as of the prior December. Each executive's target level bonus is
determined by competitive analysis and the executive's ability to influence
overall performance of the Company and, assuming certain levels of the Company's
performance, ranges from 40.0% to 85.0% of base salary depending on position in
the Company. The eligible bonus percentage for each executive is determined by a
weighted average of the Company's actual performance versus its annual plan
using the following measures: return on invested capital; growth in funds from
operations ("FFO") per share; property level cash flow as a percentage of plan;
general and administrative expenses as a percentage of revenue; and growth in
same store net operating income. To the extent this weighted average is less
than or exceeds the Company's targeted performance level, the bonus percentage
paid is proportionally reduced or increased on a predetermined scale. Depending
on the Company's performance, annual incentive bonuses could range from zero to
200.0% of an executive's target level bonus. Bonuses are accrued in the year
earned and are included in accrued expenses in the Consolidated Balance Sheets.
Beginning on January 1, 1999, the Company established an executive
compensation program which allows executive officers to participate in a long
term incentive plan which includes annual grants of stock options, restricted
shares and grants of units in the Shareholder Value Plan. The stock options vest
ratably over four years. The restricted shares vest 50.0% after three years and
50.0% after five years. The restricted share awards are recorded at market value
on the date of grant as unearned compensation expense and amortized over the
restriction periods. Generally, recipients are eligible to receive dividends on
restricted stock issued. Restricted stock and annual expense information is as
follows:
F-16
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. EMPLOYEE BENEFIT PLANS -- (Continued)
2001
------------
Restricted shares outstanding at January 1, 2001 . 104,945
Number of restricted shares awarded .............. 89,910
Restricted shares repurchased or cancelled ....... (5,249)
------------
Restricted shares outstanding at December 31, 2001 189,606
============
Annual expense, net .............................. $ 1,036,000
============
Average fair value per share ..................... $ 24.82
============
The Shareholder Value Plan rewards the executive officers of the Company
when the total shareholder returns measured by increases in the market value of
the Common Stock plus the dividends on those shares exceeds a comparable index
of the Company's peers over a three year period. The payout for this program is
determined by the Company's percent change in shareholder return compared to the
composite index of its peer group. If the Company's performance is not at least
100.0% of the peer group index, no payout is made. To the extent performance
exceeds the peer group, the payout increases. A new three year plan cycle begins
each year under this program.
In September 2000, the Company established a deferred compensation plan
pursuant to which various executive officers could elect to defer a portion of
the compensation that would otherwise be paid to the executive officer for
investment in units of phantom stock. The maximum amount any executive officer
can elect to defer for investment in units of phantom stock in any year is 25.0%
each of his gross base salary and annual incentive bonus. At the end of each
calendar quarter, any executive officer that elects to defer compensation in
such a manner is credited with units of phantom stock at a 15.0% discount.
Payouts will generally be made five years after the end of the calendar year in
which units of phantom stock were credited. The units of phantom stock are
recorded at market value at the date of grant as unearned compensation and
amortized over the five year period.
The Company's obligations to its executive officers are reimbursed by the
Operating Partnership.
401(k) Savings Plan
The Company has a 401(k) savings plan covering substantially all employees
who meet certain age and employment criteria. The Company matches the first 6.0%
of compensation deferred at the rate of 75.0% of employee contributions. During
2001, 2000 and 1999, the Company contributed $648,509, $955,303 and $763,319,
respectively, to the 401(k) savings plan. Administrative expenses of the plan
are paid by the Company. The Company's obligations under and related to the
401(k) savings plan are reimbursed by the Operating Partnership.
Employee Stock Purchase Plan
In August 1997, the Company instituted an Employee Stock Purchase Plan for
all active employees. At the end of each three-month offering period, each
participant's account balance is applied to acquire shares of Common Stock at
85.0% of the market value of the Common Stock, calculated as the lower of the
average closing price on the New York Stock Exchange on the five consecutive
days preceding the first day of the quarter or the five days preceding the last
day of the quarter. A participant can contribute up to 25.0%. Employees
purchased 40,935 and 55,593 shares of Common Stock under the Employee Stock
Purchase Plan during the years ended December 31, 2001 and 2000, respectively.
With each share of Common Stock issued under the Employee Stock Purchase Plan,
the Operating Partnership issues one Common Unit to the Company in exchange for
the price paid by the employee for the share of Common Stock.
F-17
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. RENTAL INCOME
The Operating Partnership's real estate assets are leased to tenants under
operating leases, substantially all of which expire over the next ten years. The
minimum rental amounts under the leases are generally either subject to
scheduled fixed increases or adjustments based on the Consumer Price Index.
Generally, the leases also require that the tenants reimburse the Operating
Partnership for increases in certain costs above the base year costs.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 2001, are as
follows ($ in thousands):
2002........................... $ 428,611
2003........................... 377,999
2004........................... 321,962
2005........................... 264,185
2006........................... 209,805
Thereafter..................... 728,696
-----------
$ 2,331,258
===========
6. RELATED PARTY TRANSACTIONS
On December 8, 1998, the Operating Partnership purchased the Bluegrass
Valley office development project from a limited liability company controlled by
an executive officer and director of the Company for approximately $2.5 million.
On July 16, 1999, the Operating Partnership purchased development land and an
option to purchase other development land in the Bluegrass Valley office
development project from the same limited liability company controlled by the
same executive officer and director of the Company for approximately $4.6
million in Common Units.
During 2000, the Operating Partnership sold certain properties
encompassing 2.0 million square feet to an entity controlled by a former
executive officer and director for approximately $169.0 million, consisting of
cash, shares of Common Stock, Common Units and the waiver and/or termination of
certain outstanding obligations existing under various agreements between the
Operating Partnership and such former executive officer and director.
The Operating Partnership has advanced $788,000 to an officer and director
related to certain expenses paid on behalf of the officer and director.
During the years ended December 31, 2001 and 2000, the Company paid $4.2
million and $3.0 million of general and administrative expenses on behalf of the
Operating Partnership. These amounts are reflected in the Consolidated
Statements of Income and the Consolidated Balance Sheets of the Operating
Partnership.
7. PARTNERS' CAPITAL
Distributions
Distributions paid on Common Units (including Redeemable Class A and Class
B Common Units) were $2.31, $2.25 and $2.19 per Common Unit for the years ended
December 31, 2001, 2000 and 1999, respectively.
On January 29, 2002, the Board of Directors declared a Common Unit
distribution of $.585 per Common Unit payable on February 21, 2002, to Common
Unitholders of record on February 8, 2002.
Preferred Units
On February 12, 1997, the Operating Partnership issued 125,000 Series A
Preferred Units to the Company. The Series A Preferred Units are non-voting and
have a liquidation preference of $1,000 per unit for an aggregate
F-18
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. PARTNERS' CAPITAL -- (Continued)
liquidation preference of $125.0 million plus accrued and unpaid distributions.
The net proceeds of the Series A Preferred Units issued were $121.8 million. The
Company is entitled to receive cumulative preferential cash distributions at a
rate of 8 5/8% of the liquidation preference per annum (equivalent to $86.25 per
unit). On or after February 12, 2027, the Series A Preferred Units may be
redeemed for cash upon the redemption of the corresponding Series A Preferred
Stock issued by the Company. The redemption price (other than the portion
thereof consisting of accrued and unpaid distributions) is payable solely out of
the sale proceeds of other units, which may include other preferred units. On
June 19, 2001, the Company repurchased, in a privately negotiated transaction,
20,055 of these units at $922.50 per unit, for a total purchase price of $18.5
million. For each Series A Preferred Share repurchased by the Company, one
equivalent Series A Preferred Unit was retired.
On September 25, 1997, the Operating Partnership issued 6,900,000 Series B
Preferred Units to the Company. The Series B Preferred Units are non-voting and
have a liquidation preference of $25 per unit for an aggregate liquidation
preference of $172.5 million plus accrued and unpaid distributions. The net
proceeds of the Series B Preferred Units issued were $166.3 million. The Company
is entitled to receive cumulative preferential cash distributions at a rate of
8.0% of the liquidation preference per annum (equivalent to $2.00 per unit). On
or after September 25, 2002, the Series B Preferred Units may be redeemed for
cash upon the redemption of the corresponding Series B Preferred Stock issued by
the Company. The redemption price (other than the portion thereof consisting of
accrued and unpaid distributions) is payable solely out of the sale proceeds of
other units, which may include other preferred units.
On April 23, 1998, the Operating Partnership issued 400,000 Series D
Preferred Units to the Company. The Series D Preferred Units are non-voting and
have a liquidation preference of $250 per unit for an aggregate liquidation
preference of $100 million plus accrued and unpaid distributions. The net
proceeds (after underwriting and commission and other offering costs) of the
Series D Preferred Units issued were $96.8 million. The Company is entitled to
receive cumulative preferential cash distributions at a rate of 8.0% of the
liquidation preference per annum (equivalent to $20.00 per unit). On or after
April 23, 2003, the Series D Preferred Units may be redeemed for cash upon the
redemption of the corresponding Series D Preferred Stock issued by the Company.
The redemption price (other than the portion thereof consisting of accrued and
unpaid distributions) is payable solely out of the sale proceeds of other units,
which may include other preferred units.
8. DERIVATIVE FINANCIAL INSTRUMENTS
On January 1, 2001, the Operating Partnership adopted Financial Accounting
Standards Board Statement (SFAS) No. 133/138, "Accounting for Derivative
Instruments and Hedging Activities", as amended. This statement requires the
Operating Partnership to recognize all derivatives on the balance sheet 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 the derivative will either be offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings, or recognized in Accumulated Other Comprehensive Loss ("AOCL")
until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value is recognized in earnings. In connection with
the adoption of SFAS 133/138 in January 2001, the Operating Partnership recorded
a net transition adjustment of $555,962 of unrealized loss in interest and other
income and a net transition adjustment of $125,000 in AOCL. Adoption of the
standard also resulted in the Operating Partnership recognizing $127,000 of
derivative instrument liabilities and a reclassification of approximately $10.6
million of deferred financing costs from past cashflow hedging relationships
from other assets to AOCL.
The Operating Partnership's interest rate risk management objective is to
limit the impact of interest rate changes on earnings and cashflows and to lower
overall borrowing costs. To achieve these objectives, the Operating Partnership
enters into interest rate hedge contracts such as collars, swaps, caps and
treasury lock agreements in order to mitigate the Operating Partnership's
interest rate risk with respect to various debt instruments. The Operating
Partnership does not hold these derivatives for trading or speculative purposes.
F-19
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
8. DERIVATIVE FINANCIAL INSTRUMENTS -- Continued
On the date that the Operating Partnership enters into a derivative
contract, it designates the derivative as (1) a hedge of the variability of cash
flows that are to be received or paid in connection with a recognized liability
(a "cash flow" hedge), or (2) an instrument that is held as a non-hedge
derivative. Changes in the fair value of highly effective cash flow hedges, to
the extent that the hedge is effective, are recorded in accumulated other
comprehensive loss, until earnings are affected by the hedged transaction (i.e.
until periodic settlements of a variable-rate liability are recorded in
earnings). Any hedge ineffectiveness (which represents the amount by which the
changes in the fair value of the derivative exceed the variability in the cash
flows of the transaction) is recorded in current-period earnings. Changes in the
fair value of non-hedging instruments are reported in current-period earnings.
The Operating Partnership formally documents all relationships between
hedging instruments and hedged items, as well as its risk-management objective
and strategy for undertaking various hedge transactions. This process includes
linking all derivatives that are designated as cash flow hedges to (1) specific
assets and liabilities on the balance sheet or (2) forecasted transactions. The
Operating Partnership also assesses and documents, both at the hedging
instrument's inception and on an ongoing basis, whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in cash
flows associated with the hedged items. When it is determined that a derivative
is not (or has ceased to be) highly effective as a hedge, the Operating
Partnership discontinues hedge accounting prospectively.
All of the Operating Partnership's derivatives are designated as cashflow
hedges at December 31, 2001. The effective portion of the cumulative loss on the
derivative instruments was $9.4 million at December 31, 2001 and was reported as
a component of AOCL in partners' capital and recognized into earnings in the
same period or periods during which the hedged transaction affects earnings (as
the underlying debt is paid down). The Operating Partnership expects that the
portion of the cumulative loss recorded in AOCL at December 31, 2001 associated
with the derivative instruments which will be recognized within the next 12
months will be approximately $1.6 million. The ineffective portion of the
Operating Partnership's derivatives' changes in fair value has resulted in a
loss of $554,000 for the year ended December 31, 2001 which is included in
interest and other income on the Consolidated Statements of Income.
Derivative liabilities totaling approximately $411,000 related to the
Operating Partnership's interest rate swap agreement, with a notional amount of
$19.2 million, are recorded in accounts payable, accrued expenses and other
liabilities in the Consolidated Balance Sheets at December 31, 2001. The fair
value of our interest rate swap agreement was $(411,000) at December 31, 2001.
For the majority of financial instruments including most derivatives, long-term
investments and long-term debt, standard market conventions and techniques such
as discounted cash flow analysis, option pricing models, replacement cost and
termination cost are used to determine fair value. All methods of assessing fair
value result in a general approximation of value, and such value may never
actually be realized.
9. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss represents net income plus the
results of certain non-partners' capital changes not reflected in the
Consolidated Statements of Income. The components of accumulated other
comprehensive loss are as follows ($ in thousands):
December 31, December 31,
2001 2000
------------ ------------
Net Income ........................................... $ 150,253 $ 153,705
Accumulated other comprehensive loss:
Unrealized derivative losses on cashflow hedges ... (411) --
Reclassification of past hedging relationships .... (10,597) --
Amortization of past hedging relationships ........ 1,567 --
------------ ------------
Total accumulated comprehensive loss ........... (9,441) --
------------ ------------
Total comprehensive income ..................... $ 140,812 $ 153,705
============ ============
F-20
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. EARNINGS PER COMMON UNIT
FASB Statement No. 128 replaced the calculation of primary and fully
diluted earnings per Common Unit with basic and diluted earnings per Common
Unit. Unlike primary earnings per Common Unit, basic earnings per Common Unit
excludes any dilutive effects of options, warrants and convertible securities.
Diluted earnings per Common Unit is computed using the weighted average number
of Common Units and the dilutive effect of options, warrants and convertible
securities outstanding, using the "treasury stock" method. Earnings per Common
Unit data are required for all periods for which an income statement or summary
of earnings is presented, including summaries outside the basic financial
statements. All earnings per Common Unit amounts for all periods presented have,
where appropriate, been restated to conform to the FASB Statement 128
requirements.
The following table sets forth the computation of basic and diluted
earnings per Common Unit:
2001 2000 1999
---------- ---------- ----------
($ in thousands, except per unit amounts)
Numerator:
Income before extraordinary item .................................... $ 150,967 $ 158,437 $ 166,926
Distributions on preferred units .................................... (31,500) (32,580) (32,580)
Extraordinary item -- loss on early extinguishment of debt .......... (714) (4,732) (7,341)
---------- ---------- ----------
Numerator for basic earnings per Common Unit -- net
income available for Class A Common Unit holders .................... $ 118,753 $ 121,125 $ 127,005
Numerator for diluted earnings per share -- net income
available for Class A Common Unit holders - after assumed conversions $ 118,753 $ 121,125 $ 127,005
Denominator:
Denominator for basic earnings per Common
Unit -- weighted-average shares ..................................... 61,430 67,054 70,182
Effect of dilutive securities:
Employee stock options ......................................... 337 161 78
Warrants ....................................................... 6 10 8
---------- ---------- ----------
Dilutive potential Common Units ..................................... 343 171 86
Denominator for diluted earnings per Common
Unit -- adjusted weighted average Common Units and
assumed conversions ................................................. 61,773 67,225 70,268
Basic earnings per Common Unit ............................................ $ 1.93 $ 1.81 $ 1.81
========== ========== ==========
Diluted earnings per Common Unit .......................................... $ 1.92 $ 1.80 $ 1.81
========== ========== ==========
11. STOCK OPTIONS AND WARRANTS
As of December 31, 2001, 6,000,000 shares of the Company's authorized
Common Stock were reserved for issuance upon the exercise of options under the
Amended and Restated 1994 Stock Option Plan. Options generally vest over a four-
or five-year period beginning with the date of grant.
In 1995, the Financial Accounting Standards Board issued a Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123"). SFAS 123 recommends the use of a fair value based
method of accounting for an employee stock option whereby compensation cost is
measured at the grant date on the fair value of the award and is recognized over
the service period (generally the vesting period of the award). However, SFAS
123 specifically allows an entity to continue to measure compensation cost under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") so long as pro forma disclosures of net income and
earnings per share are made as if SFAS 123 had been adopted. The Operating
Partnership has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because the Operating Partnership
believes that the models available to estimate the fair value of employee stock
options do not provide a reliable single measure of the fair value of employee
stock options. Moreover, such models required the input of highly subjective
assumptions, which can materially affect the fair value estimates. APB 25
F-21
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
11. STOCK OPTIONS AND WARRANTS -- (Continued)
requires the recognition of compensation expense at the date of grant equal to
the difference between the option price and the value of the underlying stock.
Because the exercise price of the employee stock options equals the market price
of the underlying stock on the date of grant, the Operating Partnership records
no compensation expense for the award of employee stock options.
Under SFAS 123, a public entity must estimate the fair value of a stock
option by using an option-pricing model that takes into account as of the grant
date the exercise price and expected life of the options, the current price of
the underlying stock and its expected volatility, expected dividends on the
stock, and the risk-free interest rate for the expected term of the option. SFAS
123 provides examples of possible pricing models and includes the Black-Scholes
pricing model, which the Operating Partnership used to develop its pro forma
disclosures. However, as previously noted, the Operating Partnership does not
believe that such models provide a reliable single measure of the fair value of
employee stock options. Furthermore, the Black-Scholes model was developed for
use in estimating the fair value of traded options that have no vesting
restrictions and are fully transferable, rather than for use in estimating the
fair value of employee stock options subject to vesting and transferability
restrictions.
Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, only options granted subsequent to that date were valued
using this Black-Scholes model. The fair value of the options granted in 2001
was estimated at the dates of grant using the following weighted average
assumptions: risk-free interest rates ranging between 5.76% and 6.11%, dividend
yield of 9.00%, expected volatility of 17.2% and a weighted average expected
life of the options of four years. The fair value of the options granted in 2000
was estimated at the dates of grant using the following weighted average
assumptions: risk-free interest rates ranging between 5.78% and 6.67%, dividend
yield of 10.91%, expected volatility of 21.5% and a weighted average expected
life of the options of five years. The fair value of the options granted in 1999
was estimated at the dates of grant using the following weighted average
assumptions: risk-free interest rates ranging between 4.21% and 6.81%, dividend
yield of 10.65%, expected volatility of 22.0% and a weighted average expected
life of the options of five years. Had the compensation cost for the stock
option plans been determined based on the fair value at the dates of grant for
awards in 2001, 2000 and 1999 consistent with the provisions of SFAS 123, the
Operating Partnership's net income and net income per unit would have decreased
to the pro forma amounts indicated below:
Year ended
December 31
------------------------------------------
2001 2000 1999
------------ ------------ ------------
($ in thousands, except per unit amounts)
Net income available for common unitholders -- as reported $ 118,753 $ 121,125 $ 127,005
Net income available for common unitholders -- pro forma . $ 116,438 $ 118,686 $ 124,673
Net income per common unit -- basic (as reported) ........ $ 1.93 $ 1.81 $ 1.81
Net income per common unit -- diluted (as reported) ...... $ 1.92 $ 1.80 $ 1.81
Net income per common unit -- basic (pro forma) .......... $ 1.90 $ 1.77 $ 1.78
Net income per common unit -- diluted (pro forma) ........ $ 1.88 $ 1.77 $ 1.77
F-22
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
11. STOCK OPTIONS AND WARRANTS -- (Continued)
The following table summarizes information about stock options outstanding
at December 31, 2001, 2000 and 1999:
Options Outstanding
-------------------------
Weighted
Average
Number Exercise
of Shares Price
---------- ----------
Balances at December 31, 1998 ..................... 4,023,551 $ 29.83
Options granted ................................... 1,091,051 22.24
Options canceled .................................. (614,328) 30.82
Options exercised ................................. (100,840) 19.91
---------- ----------
Balances at December 31, 1999 ..................... 4,399,434 28.01
Options granted ................................... 1,050,204 20.96
Options canceled .................................. (2,072,453) 32.17
Options exercised ................................. (103,527) 16.87
---------- ----------
Balances at December 31, 2000 ..................... 3,273,658 23.06
Options granted ................................... 741,883 25.02
Options canceled .................................. (119,123) 26.98
Options exercised ................................. (41,794) 18.27
---------- ----------
Balances at December 31, 2001 ..................... 3,854,624 $ 23.38
========== ==========
Options Exercisable
-------------------------
Weighted
Average
Number Exercise
of Shares Price
---------- ----------
December 31, 1999 ................................. 1,227,004 $ 26.47
December 31, 2000 ................................. 1,242,629 $ 24.45
December 31, 2001 ................................. 1,712,626 $ 23.76
Exercise prices for options outstanding as of December 31, 2001 ranged
from $9.54 to $30.70. The weighted average remaining contractual life of those
options is 7.1 years. Using the Black-Scholes options valuation model, the
weighted average fair value of options granted during 2001, 2000 and 1999 was
$1.11, $0.90 and $0.68, respectively.
Warrants
In connection with various acquisitions in 1997, 1996 and 1995, the
Company issued warrants to purchase shares of Common Stock. The following table
sets forth information regarding warrants outstanding as of December 31, 2001:
Number of
Warrants Exercise
Date of Issuance Outstanding Price
---------------- ----------- --------
February 1995 .................................... 35,000 $ 21.00
April 1996 ....................................... 150,000 $ 28.00
October 1997 ..................................... 538,035 $ 32.50
December 1997 .................................... 120,000 $ 34.13
--------
Total ............................................ 843,035
========
F-23
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
11. STOCK OPTIONS AND WARRANTS -- (Continued)
The warrants granted in February 1995, April 1996 and December 1997 expire
10 years from the respective dates of issuance. All warrants are exercisable
from the date of issuance. The warrants granted in October 1997 do not have an
expiration date. Upon exercise of a warrant, the Company will contribute the
exercise price to the Operating Partnership in exchange for Common Units;
therefore, the Operating Partnership accounts for such warrants as if issued by
the Operating Partnership.
12. COMMITMENTS AND CONTINGENCIES
Land Leases
Certain properties in the Operating Partnership's wholly-owned portfolio
are subject to land leases expiring through 2082. Rental payments on these
leases are adjusted annually based on either the consumer price index or on a
predetermined schedule.
For three properties, the Operating Partnership has the option to purchase
the leased land during the lease term at the greater of 85.0% of appraised value
or $35,000 per acre.
For one property, the Operating Partnership has the option to purchase the
leased land at any time during the lease term. The purchase price ranges from
$1,800,000 to $2,200,000 depending on the exercise date.
The obligation for future minimum lease payments is as follows ($ in
thousands):
2002........................... $ 1,221
2003........................... 1,203
2004........................... 1,204
2005........................... 1,206
2006........................... 1,183
Thereafter..................... 47,639
--------
$ 53,656
========
Litigation
The Operating Partnership is a party to a variety of legal proceedings
arising in the ordinary course of its business. The Operating Partnership
believes that it is adequately covered by insurance and indemnification
agreements. Accordingly, none of such proceedings are expected to have a
material adverse effect on the Operating Partnership's business, financial
condition and results of operations.
Contracts
The Operating Partnership has entered into construction contracts totaling
$101.7 million at December 31, 2001. The amounts remaining to be paid under
these contracts as of December 31, 2001 totaled $30.5 million.
The Operating Partnership has entered into various contracts under which
it is committed to acquire eight acres of land over a three year period for an
aggregate purchase price of approximately $628,000.
Capital Expenditures
The Operating Partnership presently has no plans for major capital
improvements to the existing properties, other than normal recurring building
improvements, tenant improvements and lease commissions.
F-24
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
12. Commitments and Contingencies -- (Continued)
Environmental Matters
Substantially all of the Operating Partnership's in-service properties
have been subjected to Phase I environmental assessments (and, in certain
instances, Phase II environmental assessments). Such assessments and/or updates
have not revealed, nor is management aware of, any environmental liability that
management believes would have a material adverse effect on the accompanying
consolidated financial statements.
13. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair values were determined by
management using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data and
develop estimated fair values. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts that the Operating Partnership could
realize upon disposition of the financial instruments. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair values. The carrying amounts and estimated fair values of the
Operating Partnership's financial instruments at December 31, 2001 were as
follows:
Carrying Fair
Amount Value
------------ ------------
($ in thousands)
Cash and cash equivalents .......... $ 794 $ 794
Accounts and notes receivable....... $ 37,027 $ 37,027
Mortgages and notes payable ........ $ (1,672,230) $ (1,693,629)
Interest rate hedge contract ....... $ (411) $ (411)
The fair values for the Operating Partnership's fixed rate mortgages and
notes payable were estimated using discounted cash flow analysis, based on the
Operating Partnership's estimated incremental borrowing rate at December 31,
2001, for similar types of borrowing arrangements. The carrying amounts of the
Operating Partnership's variable rate borrowings approximate fair value.
The fair values of the Operating Partnership's interest rate hedge
contracts represent the estimated amount the Operating Partnership would receive
or pay to terminate or replace the financial instruments at current market
rates.
Disclosures about the fair value of financial instruments are based on
relevant information available to the Operating Partnership at December 31,
2001. Although management is not aware of any factors that would have a material
effect on the fair value amounts reported herein, such amounts have not been
revalued since that date and current estimates of fair value may significantly
differ from the amounts presented herein.
14. ACQUISITIONS AND DISPOSITIONS
During 1999, the Operating Partnership sold approximately 3.3 million
rentable square feet of office and industrial properties, 49 acres of
development land in the South Florida area and 36 in-service central Florida
office properties encompassing 2.1 million rentable square feet for gross
proceeds of approximately $488.3 million. In addition, the Operating Partnership
sold approximately 2.9 million rentable square feet of office and industrial
properties for gross proceeds of $208.1 million. The Operating Partnership
recorded a gain of $8.0 million related to these dispositions.
During 2000, the Operating Partnership contributed to joint ventures or
sold approximately 8.2 million rentable square feet of office, industrial and
retail properties and 272 acres of development land for gross proceeds of $801.1
million. The Operating Partnership recorded a gain of $4.7 million related to
these dispositions.
F-25
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
14. ACQUISITIONS AND DISPOSITIONS - (Continued)
During 2001, the Operating Partnership contributed to joint ventures or
sold approximately 425,000 rentable square feet of office and industrial
properties, 215.7 acres of development land and 1,672 apartment units for gross
proceeds of $180.3 million. The Operating Partnership recorded a gain of $16.2
million related to these dispositions. Since December 31, 2001 through February
19, 2002, the Operating Partnership has sold 128,000 square feet of office
properties and 43.0 acres of development land for gross proceeds of $22.1
million.
15. SEGMENT INFORMATION
The sole business of the Operating Partnership is the acquisition,
development and operation of rental real estate properties. The Operating
Partnership operates office, industrial and retail properties and apartment
units. There are no material inter-segment transactions.
The Operating Partnership's chief operating decision maker ("CDM")
assesses and measures operating results based upon property level net operating
income. The operating results for the individual assets within each property
type have been aggregated since the CDM evaluates operating results and
allocates resources on a property-by-property basis within the various property
types.
F-26
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
15. SEGMENT INFORMATION -- (Continued)
The accounting policies of the segments are the same as those described in
Note 1. Further, all operations are within the United States and no tenant
comprises more than 10% of consolidated revenues. The following table summarizes
the rental income, net operating income and assets for each reportable segment
for the years ended December 31, 2001, 2000 and 1999:
2001 2000 1999
------------ ------------ ------------
($ in thousands)
Rental Income:
Office segment .................................... $ 411,967 $ 442,454 $ 464,450
Industrial segment ................................ 47,046 45,758 51,168
Retail segment .................................... 37,734 36,127 32,799
Apartment segment ................................. 8,531 17,474 16,822
------------ ------------ ------------
Total Rental Income ............................... $ 505,278 $ 541,813 $ 565,239
============ ============ ============
Net Operating Income:
Office segment .................................... $ 281,565 $ 311,130 $ 318,031
Industrial segment ................................ 38,940 38,269 42,361
Retail segment .................................... 25,319 25,054 21,685
Apartment segment ................................. 4,915 10,190 9,486
------------ ------------ ------------
Total Net Operating Income ........................ $ 350,739 $ 384,643 $ 391,563
Reconciliation to income before extraordinary item:
Equity in income of unconsolidated affiliates ..... 8,276 3,112 633
Cost of unsuccessful transactions ................. -- -- (1,500)
Gain on disposition of assets ..................... 16,197 4,657 7,997
Interest and other income ......................... 22,317 17,000 14,002
Interest expense .................................. (104,473) (108,795) (111,385)
General and administrative expenses ............... (21,100) (23,092) (22,345)
Depreciation and amortization ..................... (120,989) (119,088) (112,039)
------------ ------------ ------------
Income before extraordinary item .................. $ 150,967 $ 158,437 $ 166,926
============ ============ ============
At December 31
--------------------------------------------
2001 2000 1999
------------ ------------ ------------
Total Assets:
Office segment .................................... $ 2,766,572 $ 2,638,007 $ 2,995,360
Industrial segment ................................ 343,606 299,660 435,022
Retail segment .................................... 263,622 273,023 258,853
Apartment segment ................................. 10,397 118,144 118,549
Corporate and other ............................... 204,358 332,203 164,295
------------ ------------ ------------
Total Assets ...................................... $ 3,588,555 $ 3,661,037 $ 3,972,079
============ ============ ============
F-27
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
16. SELECTED QUARTERLY FINANCIAL DATA (Unaudited):
Selected quarterly financial data for the years ended December 31, 2001
and 2000 are as follows ($ in thousands):
For the year ended December 31, 2001
--------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Total
-------------- -------------- -------------- -------------- --------------
Total Revenue ........................ $ 135,724 $ 134,090 $ 133,138 $ 132,919 $ 535,871
-------------- -------------- -------------- -------------- --------------
Income before gain on disposition of
land and depreciable assets and
extraordinary item ................ 37,325 35,635 36,060 25,750 134,770
Gain on disposition of land
and depreciable assets ............ 7,071 5,695 3,357 74 16,197
-------------- -------------- -------------- -------------- --------------
Income before extraordinary item ..... 44,396 41,330 39,417 25,824 150,967
Extraordinary item -- loss on
early extinguishment of debt ...... (193) (325) -- (196) (714)
-------------- -------------- -------------- -------------- --------------
Net income ........................... 44,203 41,005 39,417 25,628 150,253
Distributions on preferred units ..... (8,145) (7,929) (7,713) (7,713) (31,500)
-------------- -------------- -------------- -------------- --------------
Net income available for Class A
common units ...................... $ 36,058 $ 33,076 $ 31,704 $ 17,915 $ 118,753
============== ============== ============== ============== ==============
Net income per common unit -- basic:
Income before extraordinary
item ............................. $ 0.57 $ 0.55 $ 0.52 $ 0.30 $ 1.94
Extraordinary item - loss on
early extinguishment of debt ..... -- (0.01) -- -- (0.01)
-------------- -------------- -------------- -------------- --------------
Net income ........................ $ 0.57 $ 0.54 $ 0.52 $ 0.30 $ 1.93
============== ============== ============== ============== ==============
Net income per common unit -- diluted:
Income before extraordinary
item ............................. $ 0.56 $ 0.55 $ 0.52 $ 0.30 $ 1.93
Extraordinary item - loss on
early extinguishment of debt ..... -- (0.01) -- -- (0.01)
-------------- -------------- -------------- -------------- --------------
Net income ........................ $ 0.56 $ 0.54 $ 0.52 $ 0.30 $ 1.92
============== ============== ============== ============== ==============
F-28
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
16. SELECTED QUARTERLY FINANCIAL DATA (Unaudited): -- Continued
For the year ended December 31, 2000
-------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Total
-------------- -------------- -------------- -------------- -------------
Total Revenue ............................. $ 140,282 $ 144,114 $ 137,664 $ 139,865 $ 561,925
-------------- -------------- -------------- -------------- -------------
Income before cost of unsuccessful
transactions, gain/(loss) on disposition
of assets and extraordinary item ....... 40,828 40,966 36,115 35,871 153,780
Gain/(loss) on disposition of assets ...... 6,946 (26,062) 10,557 13,216 4,657
-------------- -------------- -------------- -------------- -------------
Income before extraordinary item .......... 47,774 14,904 46,672 49,087 158,437
Extraordinary item -- loss on early
extinguishment of debt ................. (195) (839) (3,310) (388) (4,732)
-------------- -------------- -------------- -------------- -------------
Net income ................................ 47,579 14,065 43,362 48,699 153,705
Distributions on preferred units .......... (8,145) (8,145) (8,145) (8,145) (32,580)
-------------- -------------- -------------- -------------- -------------
Net income available for Class A
common units ........................... $ 39,434 $ 5,920 $ 35,217 $ 40,554 $ 121,125
============== ============== ============== ============== =============
Net income per common unit -- basic:
Income before extraordinary
item .................................. $ 0.57 $ 0.10 $ 0.58 $ 0.63 $ 1.88
Extraordinary item - loss on early
extinguishment of debt ................ -- (0.01) (0.05) (0.01) (0.07)
-------------- -------------- -------------- -------------- -------------
Net income ............................ $ 0.57 $ 0.09 $ 0.53 $ 0.62 $ 1.81
============== ============== ============== ============== =============
Net income per common unit -- diluted:
Income before extraordinary
item .................................. $ 0.57 $ 0.10 $ 0.58 $ 0.62 $ 1.87
Extraordinary item - loss on early
extinguishment of debt ................ -- (0.01) (0.05) (0.01) (0.07)
-------------- -------------- -------------- -------------- -------------
Net income ............................ $ 0.57 $ 0.09 $ 0.53 $ 0.61 $ 1.80
============== ============== ============== ============== =============
F-29
HIGHWOODS REALTY LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
12/31/2000
(In Thousands)
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Atlanta, GA
1035 Fred Drive 20410 Atlanta 270 1,239
1700 Century Center 20180 Atlanta 1,115 3,148
1700 Century Circle 28330 Atlanta -- 2,456
1800 Century Boulevard 20190 Atlanta 1,441 28,939
1875 Century Boulevard 20200 Atlanta -- 8,790
1900 Century Boulevard 20210 Atlanta -- 4,721
2200 Century Parkway 20220 Atlanta -- 14,274
2400 Century Center 20230 Atlanta -- 14,970
2600 Century Parkway 20240 Atlanta -- 10,254
2635 Century Parkway 20250 Atlanta -- 21,083
2800 Century Parkway 20260 Atlanta -- 19,963
400 North Business Park 20070 Atlanta 979 6,112
50 Glenlake 20080 Atlanta 2,500 20,000
5125 Fulton Industrial Drive 20430 Atlanta 578 3,116
6348 Northeast Expressway 20090 Atlanta 277 1,629
6438 Northeast Expressway 20100 Atlanta 181 2,225
Bluegrass Lakes I 20110 Atlanta 816 3,775
Bluegrass Land Site V10 20160 Atlanta 1,823 --
Bluegrass Land Site V14 20170 Atlanta 2,365 --
Bluegrass Place I 20130 Atlanta 491 2,016
Bluegrass Place II 20140 Atlanta 412 2,529
Bluegrass Valley 20150 Atlanta 1,363 --
Century Plaza I 20340 Atlanta 1,290 8,425
Century Plaza II 20350 Atlanta 1,380 7,589
Century Plaza III 20360 Atlanta 570 --
Chastain Place I 20280 Atlanta 472 3,011
Chastain Place II 20290 Atlanta 607 2,097
Chastain Place III 20300 Atlanta 539 1,662
Chattahoochee Avenue 20270 Atlanta 248 1,817
Corporate Lakes 20320 Atlanta 1,275 7,227
Cosmopolitan North 20330 Atlanta 2,855 4,155
EKA Chemical 20400 Atlanta 609 9,883
Gwinnett Distribution Center 20470 Atlanta 1,128 5,943
Highwoods Center I at Tradeport 20720 Atlanta 305 3,299
Highwoods Center II at Tradeport 20710 Atlanta 635 3,474
Highwoods Center III at Tradeport 28590 Atlanta 402 2,121
Kennestone Corporate Center 20480 Atlanta 518 4,874
La Vista Business Park 20490 Atlanta 821 5,244
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Atlanta, GA
1035 Fred Drive -- 38 270 1,277 1,547 159
1700 Century Center -- 567 1,115 3,715 4,830 732
1700 Century Circle -- -- -- 2,456 2,456 64
1800 Century Boulevard -- 857 1,441 29,796 31,237 3,829
1875 Century Boulevard -- 483 -- 9,273 9,273 1,222
1900 Century Boulevard -- 815 -- 5,536 5,536 932
2200 Century Parkway -- 1,667 -- 15,941 15,941 2,397
2400 Century Center -- 50 -- 15,020 15,020 2,588
2600 Century Parkway -- 1,162 -- 11,416 11,416 1,503
2635 Century Parkway -- 1,379 -- 22,462 22,462 3,048
2800 Century Parkway -- 670 -- 20,633 20,633 2,555
400 North Business Park -- 241 979 6,353 7,332 794
50 Glenlake -- 285 2,500 20,285 22,785 2,193
5125 Fulton Industrial Drive -- 92 578 3,208 3,786 423
6348 Northeast Expressway -- 107 277 1,736 2,013 217
6438 Northeast Expressway -- 122 181 2,347 2,528 295
Bluegrass Lakes I -- (11) 816 3,764 4,580 477
Bluegrass Land Site V10 -- -- 1,823 -- 1,823 --
Bluegrass Land Site V14 -- -- 2,365 -- 2,365 --
Bluegrass Place I -- 30 491 2,046 2,537 225
Bluegrass Place II -- 41 412 2,570 2,982 282
Bluegrass Valley -- 3,641 1,363 3,641 5,004 232
Century Plaza I -- 1,091 1,290 9,516 10,806 589
Century Plaza II -- 363 1,380 7,952 9,332 487
Century Plaza III 293 -- 863 -- 863 --
Chastain Place I -- 952 472 3,963 4,435 987
Chastain Place II -- 16 607 2,113 2,720 435
Chastain Place III -- (1) 539 1,661 2,200 284
Chattahoochee Avenue -- 285 248 2,102 2,350 415
Corporate Lakes -- 589 1,275 7,816 9,091 1,204
Cosmopolitan North -- 1,328 2,855 5,483 8,338 1,039
EKA Chemical -- 3 609 9,886 10,495 937
Gwinnett Distribution Center -- 415 1,128 6,358 7,486 876
Highwoods Center I at Tradeport -- 118 305 3,417 3,722 550
Highwoods Center II at Tradeport -- 757 635 4,231 4,866 503
Highwoods Center III at Tradeport 3 123 405 2,244 2,649 7
Kennestone Corporate Center -- 309 518 5,183 5,701 664
La Vista Business Park -- 673 821 5,917 6,738 882
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Atlanta, GA
1035 Fred Drive 1973 5-40 yrs.
1700 Century Center 1972 5-40 yrs.
1700 Century Circle 1983 5-40 yrs.
1800 Century Boulevard 1975 5-40 yrs.
1875 Century Boulevard 1976 5-40 yrs.
1900 Century Boulevard 1971 5-40 yrs.
2200 Century Parkway 1971 5-40 yrs.
2400 Century Center 1998 5-40 yrs.
2600 Century Parkway 1973 5-40 yrs.
2635 Century Parkway 1980 5-40 yrs.
2800 Century Parkway 1983 5-40 yrs.
400 North Business Park 1985 5-40 yrs.
50 Glenlake 1997 5-40 yrs.
5125 Fulton Industrial Drive 1973 5-40 yrs.
6348 Northeast Expressway 1978 5-40 yrs.
6438 Northeast Expressway 1981 5-40 yrs.
Bluegrass Lakes I 1999 5-40 yrs.
Bluegrass Land Site V10 1999 5-40 yrs.
Bluegrass Land Site V14 1999 5-40 yrs.
Bluegrass Place I 1995 5-40 yrs.
Bluegrass Place II 1996 5-40 yrs.
Bluegrass Valley 2000 5-40 yrs.
Century Plaza I 1981 5-40 yrs.
Century Plaza II 1984 5-40 yrs.
Century Plaza III 1984 5-40 yrs.
Chastain Place I 1997 5-40 yrs.
Chastain Place II 1998 5-40 yrs.
Chastain Place III 1999 5-40 yrs.
Chattahoochee Avenue 1970 5-40 yrs.
Corporate Lakes 1988 5-40 yrs.
Cosmopolitan North 1980 5-40 yrs.
EKA Chemical 1998 5-40 yrs.
Gwinnett Distribution Center 1991 5-40 yrs.
Highwoods Center I at Tradeport 1999 5-40 yrs.
Highwoods Center II at Tradeport 1999 5-40 yrs.
Highwoods Center III at Tradeport 2001 5-40 yrs.
Kennestone Corporate Center 1985 5-40 yrs.
La Vista Business Park 1973 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Newpoint Place I 20520 Atlanta 825 3,799
Newpoint Place II 20530 Atlanta 1,436 3,321
Newpoint Place III 20540 Atlanta 661 1,866
Newpoint Place Land 20550 Atlanta 187 --
Norcross I & II 20500 Atlanta 326 1,979
Nortel 20510 Atlanta 3,342 32,109
Oakbrook I 20570 Atlanta (6) 873 4,948
Oakbrook II 20580 Atlanta (6) 1,579 8,388
Oakbrook III 20590 Atlanta (6) 1,480 8,388
Oakbrook IV 20600 Atlanta (6) 953 5,400
Oakbrook Summit 20620 Atlanta 950 6,572
Oakbrook V 20610 Atlanta (6) 2,206 12,501
Oxford Lake Business Center 20630 Atlanta 855 7,014
Peachtree Corners Land 20650 Atlanta 1,232 --
Southside Distribution Center 20690 Atlanta 810 1,219
Tradeport Land 20730 Atlanta 5,726 --
Tradeport Place I 20740 Atlanta 557 2,669
Tradeport Place II 20750 Atlanta 557 3,456
Tradeport Place III 20760 Atlanta -- --
Tradeport Place IV 28260 Atlanta 661 3,182
Two Point Royal 20060 Atlanta 1,793 14,951
Baltimore, MD
Sportsman Club Land 20770 Baltimore 24,700 --
Charlotte, NC
4101 Stuart Andrew Boulevard 20800 Charlotte 70 510
4105 Stuart Andrew Boulevard 20810 Charlotte 26 189
4109 Stuart Andrew Boulevard 20820 Charlotte 87 636
4201 Stuart Andrew Boulevard 20830 Charlotte 110 809
4205 Stuart Andrew Boulevard 20840 Charlotte 134 979
4209 Stuart Andrew Boulevard 20850 Charlotte 91 665
4215 Stuart Andrew Boulevard 20860 Charlotte 133 978
4301 Stuart Andrew Boulevard 20870 Charlotte 232 1,702
4321 Stuart Andrew Boulevard 20880 Charlotte 73 534
4601 Park Square 20890 Charlotte 2,601 7,802
Alston & Bird 20900 Charlotte 2,362 5,379
Eight Parkway Plaza Building 21130 Charlotte -- 4,698
Eleven Parkway Plaza Building 21150 Charlotte -- 2,328
First Citizens Building 20910 Charlotte 647 5,528
Fourteen Parkway Plaza Building 21170 Charlotte 483 6,077
Mallard Creek I 20930 Charlotte 1,248 4,142
Mallard Creek III 20940 Charlotte 845 4,762
Mallard Creek IV 20950 Charlotte 348 1,152
Mallard Creek V 20960 Charlotte 1,665 8,738
Mallard Creek VI 20970 Charlotte 839 --
Nine Parkway Plaza Building 21140 Charlotte -- 6,008
Oakhill Business Park English Oak 21000 Charlotte (6) 750 4,248
Oakhill Business Park Laurel Oak 21010 Charlotte (6) 471 2,671
Oakhill Business Park Live Oak 21020 Charlotte 1,403 5,611
Oakhill Business Park Scarlet Oak 21030 Charlotte (6) 1,073 6,078
Oakhill Business Park Twin Oak 21040 Charlotte (6) 1,243 7,044
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Newpoint Place I -- 20 825 3,819 4,644 1,006
Newpoint Place II 47 1,536 1,483 4,857 6,340 417
Newpoint Place III -- 705 661 2,571 3,232 456
Newpoint Place Land 1,935 10 2,122 10 2,132 --
Norcross I & II -- 103 326 2,082 2,408 262
Nortel -- 14 3,342 32,123 35,465 3,045
Oakbrook I -- 273 873 5,221 6,094 759
Oakbrook II -- 1,299 1,579 9,687 11,266 1,787
Oakbrook III -- 339 1,480 8,727 10,207 1,325
Oakbrook IV -- 401 953 5,801 6,754 831
Oakbrook Summit -- 706 950 7,278 8,228 1,048
Oakbrook V -- 898 2,206 13,399 15,605 2,114
Oxford Lake Business Center -- 259 855 7,273 8,128 858
Peachtree Corners Land -- 1,232 -- 1,232 --
Southside Distribution Center -- 3,391 810 4,610 5,420 571
Tradeport Land 23 5,726 23 5,749 1
Tradeport Place I -- 184 557 2,853 3,410 420
Tradeport Place II -- 59 557 3,515 4,072 581
Tradeport Place III 668 3,835 668 3,835 4,503 275
Tradeport Place IV -- (12) 661 3,170 3,831 --
Two Point Royal -- 373 1,793 15,324 17,117 1,634
Baltimore, MD
Sportsman Club Land -- -- 24,700 -- 24,700 --
Charlotte, NC --
4101 Stuart Andrew Boulevard -- 265 70 775 845 266
4105 Stuart Andrew Boulevard -- 34 26 223 249 52
4109 Stuart Andrew Boulevard -- 72 87 708 795 136
4201 Stuart Andrew Boulevard -- 88 110 897 1,007 174
4205 Stuart Andrew Boulevard -- 63 134 1,042 1,176 199
4209 Stuart Andrew Boulevard -- 106 91 771 862 168
4215 Stuart Andrew Boulevard -- 94 133 1,072 1,205 210
4301 Stuart Andrew Boulevard -- 171 232 1,873 2,105 359
4321 Stuart Andrew Boulevard -- 42 73 576 649 108
4601 Park Square -- 322 2,601 8,124 10,725 792
Alston & Bird 4 40 2,366 5,419 7,785 534
Eight Parkway Plaza Building -- 203 -- 4,901 4,901 747
Eleven Parkway Plaza Building 160 219 160 2,547 2,707 387
First Citizens Building -- 699 647 6,227 6,874 1,390
Fourteen Parkway Plaza Building -- 963 483 7,040 7,523 733
Mallard Creek I -- 605 1,248 4,747 5,995 501
Mallard Creek III -- 140 845 4,902 5,747 469
Mallard Creek IV -- 4 348 1,156 1,504 105
Mallard Creek V -- 2,145 1,665 10,883 12,548 1,023
Mallard Creek VI -- 839 -- 839 --
Nine Parkway Plaza Building -- 40 -- 6,048 6,048 918
Oakhill Business Park English Oak -- 300 750 4,548 5,298 644
Oakhill Business Park Laurel Oak -- 405 471 3,076 3,547 554
Oakhill Business Park Live Oak -- 1,152 1,403 6,763 8,166 1,211
Oakhill Business Park Scarlet Oak -- 545 1,073 6,623 7,696 1,051
Oakhill Business Park Twin Oak -- 653 1,243 7,697 8,940 1,191
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Newpoint Place I 1998 5-40 yrs.
Newpoint Place II 1999 5-40 yrs.
Newpoint Place III 1998 5-40 yrs.
Newpoint Place Land N/A N/A
Norcross I & II 1970 5-40 yrs.
Nortel 1998 5-40 yrs.
Oakbrook I 1981 5-40 yrs.
Oakbrook II 1983 5-40 yrs.
Oakbrook III 1984 5-40 yrs.
Oakbrook IV 1985 5-40 yrs.
Oakbrook Summit 1981 5-40 yrs.
Oakbrook V 1985 5-40 yrs.
Oxford Lake Business Center 1985 5-40 yrs.
Peachtree Corners Land N/A N/A
Southside Distribution Center 1988 5-40 yrs.
Tradeport Land N/A N/A
Tradeport Place I 1999 5-40 yrs.
Tradeport Place II 1999 5-40 yrs.
Tradeport Place III 1999 5-40 yrs.
Tradeport Place IV 2001 5-40 yrs.
Two Point Royal 1997 5-40 yrs.
Baltimore, MD
Sportsman Club Land N/A N/A
Charlotte, NC
4101 Stuart Andrew Boulevard 1984 5-40 yrs.
4105 Stuart Andrew Boulevard 1984 5-40 yrs.
4109 Stuart Andrew Boulevard 1984 5-40 yrs.
4201 Stuart Andrew Boulevard 1982 5-40 yrs.
4205 Stuart Andrew Boulevard 1982 5-40 yrs.
4209 Stuart Andrew Boulevard 1982 5-40 yrs.
4215 Stuart Andrew Boulevard 1982 5-40 yrs.
4301 Stuart Andrew Boulevard 1982 5-40 yrs.
4321 Stuart Andrew Boulevard 1982 5-40 yrs.
4601 Park Square 1972 5-40 yrs.
Alston & Bird 1965 5-40 yrs.
Eight Parkway Plaza Building 1986 5-40 yrs.
Eleven Parkway Plaza Building 1999 5-40 yrs.
First Citizens Building 1989 5-40 yrs.
Fourteen Parkway Plaza Building 1999 5-40 yrs.
Mallard Creek I 1986 5-40 yrs.
Mallard Creek III 1990 5-40 yrs.
Mallard Creek IV 1993 5-40 yrs.
Mallard Creek V 1999 5-40 yrs.
Mallard Creek VI N/A N/A
Nine Parkway Plaza Building 1984 5-40 yrs.
Oakhill Business Park English Oak 1984 5-40 yrs.
Oakhill Business Park Laurel Oak 1984 5-40 yrs.
Oakhill Business Park Live Oak 1989 5-40 yrs.
Oakhill Business Park Scarlet Oak 1982 5-40 yrs.
Oakhill Business Park Twin Oak 1985 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Oakhill Business Park Water Oak 21060 Charlotte (6) 1,623 9,196
Oakhill Business Park Willow Oak 21050 Charlotte (6) 442 2,505
Oakhill Land 20990 Charlotte 2,796 --
Oakhill Land 28700 Charlotte 1,148 --
One Parkway Plaza Building 21080 Charlotte 1,110 4,741
Pinebrook 21070 Charlotte 846 4,607
Ridgefield 20030 Charlotte 793 --
Seven Parkway Plaza Building 21120 Charlotte -- 4,648
Six Parkway Plaza Building 21110 Charlotte -- 2,438
Three Parkway Plaza Building 21100 Charlotte (3) 1,570 6,282
Twelve Parkway Plaza Building 21160 Charlotte 112 1,489
Twin Lakes Distribution Center 20920 Charlotte 2,816 6,570
Two Parkway Plaza Building 21090 Charlotte 1,694 6,777
University Center 28400 Charlotte 1,296 216
University Center - Land 28410 Charlotte 7,840 --
Columbia, SC
Centerpoint I 21270 Columbia 1,313 7,441
Centerpoint II 21280 Columbia 1,183 8,724
Centerpoint V 21290 Columbia 265 1,279
Centerpoint VI 21300 Columbia 276 --
Fontaine I 21310 Columbia 1,219 6,907
Fontaine II 21320 Columbia 941 5,335
Fontaine III 21330 Columbia 853 4,833
Fontaine V 21340 Columbia 395 2,237
Piedmont Triad, NC
101 Stratford 26290 Piedmont Triad 1,205 6,810
150 Stratford 26180 Piedmont Triad 2,777 11,459
160 Stratford-- Land 28370 Piedmont Triad 1,327 --
2606 Phoenix Drive-100 Series 21940 Piedmont Triad 63 466
2606 Phoenix Drive-200 Series 21950 Piedmont Triad 63 466
2606 Phoenix Drive-300 Series 21960 Piedmont Triad 31 229
2606 Phoenix Drive-400 Series 21970 Piedmont Triad 52 382
2606 Phoenix Drive-500 Series 21980 Piedmont Triad 64 471
2606 Phoenix Drive-600 Series 21990 Piedmont Triad 78 575
2606 Phoenix Drive-700 Series 22000 Piedmont Triad -- 533
2606 Phoenix Drive-800 Series 22010 Piedmont Triad 2,308
500 Northridge 26570 Piedmont Triad 1,789 4,174
500 Radar Road 22110 Piedmont Triad 202 1,484
502 Radar Road 22120 Piedmont Triad 39 285
504 Radar Road 22130 Piedmont Triad 39 285
506 Radar Road 22140 Piedmont Triad 39 285
5100 Indiana Avenue 26440 Piedmont Triad 490 1,143
520 Northridge 26580 Piedmont Triad 1,645 3,876
531 Northridge Office 26600 Piedmont Triad 766 1,788
531 Northridge Warehouse 26590 Piedmont Triad 4,992 11,648
540 Northridge 26610 Piedmont Triad 2,038 4,755
550 Northridge 26620 Piedmont Triad 472 1,102
6348 Burnt Poplar 21390 Piedmont Triad 721 2,883
6350 Burnt Poplar 21400 Piedmont Triad 339 1,365
710 Almondridge 26560 Piedmont Triad 1,809 4,221
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Oakhill Business Park Water Oak -- 933 1,623 10,129 11,752 1,794
Oakhill Business Park Willow Oak -- 890 442 3,395 3,837 813
Oakhill Land -- 2,796 -- 2,796 --
Oakhill Land -- -- 1,148 -- 1,148 --
One Parkway Plaza Building -- 884 1,110 5,625 6,735 997
Pinebrook -- 387 846 4,994 5,840 654
Ridgefield -- -- 793 -- 793 --
Seven Parkway Plaza Building -- 253 -- 4,901 4,901 757
Six Parkway Plaza Building -- 531 -- 2,969 2,969 746
Three Parkway Plaza Building -- 815 1,570 7,097 8,667 1,378
Twelve Parkway Plaza Building -- 302 112 1,791 1,903 203
Twin Lakes Distribution Center -- 1 2,816 6,571 9,387 588
Two Parkway Plaza Building -- 1,428 1,694 8,205 9,899 2,043
University Center (7) 1,296 209 1,505 4
University Center - Land -- -- 7,840 -- 7,840 --
Columbia, SC
Centerpoint I -- 437 1,313 7,878 9,191 1,118
Centerpoint II 1 12 1,184 8,736 9,920 1,530
Centerpoint V -- 341 265 1,620 1,885 356
Centerpoint VI -- 276 -- 276 --
Fontaine I -- 1,842 1,219 8,749 9,968 1,089
Fontaine II -- 792 941 6,127 7,068 1,416
Fontaine III -- 94 853 4,927 5,780 696
Fontaine V -- 19 395 2,256 2,651 298
Piedmont Triad, NC
101 Stratford -- 620 1,205 7,430 8,635 792
150 Stratford -- 536 2,777 11,995 14,772 2,199
160 Stratford-- Land -- -- 1,327 -- 1,327 --
2606 Phoenix Drive-100 Series -- 3 63 469 532 75
2606 Phoenix Drive-200 Series -- 89 63 555 618 100
2606 Phoenix Drive-300 Series -- 125 31 354 385 81
2606 Phoenix Drive-400 Series -- 23 52 405 457 72
2606 Phoenix Drive-500 Series -- 24 64 495 559 94
2606 Phoenix Drive-600 Series -- 31 78 606 684 115
2606 Phoenix Drive-700 Series -- 203 -- 736 736 132
2606 Phoenix Drive-800 Series 214 -- 2,522 2,522 65
500 Northridge -- 6 1,789 4,180 5,969 382
500 Radar Road -- 124 202 1,608 1,810 309
502 Radar Road -- 80 39 365 404 99
504 Radar Road -- 15 39 300 339 53
506 Radar Road -- 14 39 299 338 51
5100 Indiana Avenue (490) (1,143) -- -- -- --
520 Northridge -- 243 1,645 4,119 5,764 394
531 Northridge Office -- 1 766 1,789 2,555 162
531 Northridge Warehouse -- 174 4,992 11,822 16,814 1,055
540 Northridge -- 479 2,038 5,234 7,272 444
550 Northridge -- 154 472 1,256 1,728 185
6348 Burnt Poplar -- 26 721 2,909 3,630 501
6350 Burnt Poplar -- 64 339 1,429 1,768 250
710 Almondridge 523 5,284 2,332 9,505 11,837 538
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Oakhill Business Park Water Oak 1985 5-40 yrs.
Oakhill Business Park Willow Oak 1982 5-40 yrs.
Oakhill Land N/A N/A
Oakhill Land N/A N/A
One Parkway Plaza Building 1982 5-40 yrs.
Pinebrook 1986 5-40 yrs.
Ridgefield N/A N/A
Seven Parkway Plaza Building 1985 5-40 yrs.
Six Parkway Plaza Building 1996 5-40 yrs.
Three Parkway Plaza Building 1984 5-40 yrs.
Twelve Parkway Plaza Building 1999 5-40 yrs.
Twin Lakes Distribution Center 1991 5-40 yrs.
Two Parkway Plaza Building 1983 5-40 yrs.
University Center 2001 5-40 yrs.
University Center - Land N/A N/A
Columbia, SC
Centerpoint I 1988 5-40 yrs.
Centerpoint II 1996 5-40 yrs.
Centerpoint V 1997 5-40 yrs.
Centerpoint VI N/A N/A
Fontaine I 1985 5-40 yrs.
Fontaine II 1987 5-40 yrs.
Fontaine III 1988 5-40 yrs.
Fontaine V 1990 5-40 yrs.
Piedmont Triad, NC
101 Stratford 1986 5-40 yrs.
150 Stratford 1991 5-40 yrs.
160 Stratford-- Land N/A N/A
2606 Phoenix Drive-100 Series 1989 5-40 yrs.
2606 Phoenix Drive-200 Series 1989 5-40 yrs.
2606 Phoenix Drive-300 Series 1989 5-40 yrs.
2606 Phoenix Drive-400 Series 1989 5-40 yrs.
2606 Phoenix Drive-500 Series 1989 5-40 yrs.
2606 Phoenix Drive-600 Series 1989 5-40 yrs.
2606 Phoenix Drive-700 Series 1988 5-40 yrs.
2606 Phoenix Drive-800 Series 5-40 yrs.
500 Northridge 1988 5-40 yrs.
500 Radar Road 1981 5-40 yrs.
502 Radar Road 1986 5-40 yrs.
504 Radar Road 1986 5-40 yrs.
506 Radar Road 1986 5-40 yrs.
5100 Indiana Avenue 1982 5-40 yrs.
520 Northridge 1988 5-40 yrs.
531 Northridge Office 1989 5-40 yrs.
531 Northridge Warehouse 1989 5-40 yrs.
540 Northridge 1987 5-40 yrs.
550 Northridge 1989 5-40 yrs.
6348 Burnt Poplar 1990 5-40 yrs.
6350 Burnt Poplar 1992 5-40 yrs.
710 Almondridge 1989 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
711 Almondridge 26550 Piedmont Triad 301 702
7327 West Friendly Avenue 22320 Piedmont Triad 60 441
7339 West Friendly Avenue 22330 Piedmont Triad 63 465
7341 West Friendly Avenue 22340 Piedmont Triad 113 831
7343 West Friendly Avenue 22350 Piedmont Triad 72 531
7345 West Friendly Avenue 22360 Piedmont Triad 66 485
7347 West Friendly Avenue 22370 Piedmont Triad 97 709
7349 West Friendly Avenue 22380 Piedmont Triad 53 388
7351 West Friendly Avenue 22390 Piedmont Triad 106 778
7353 West Friendly Avenue 22400 Piedmont Triad 123 901
7355 West Friendly Avenue 22410 Piedmont Triad 72 525
7906 Industrial Village Road 21840 Piedmont Triad 62 455
7908 Industrial Village Road 21850 Piedmont Triad 62 455
7910 Industrial Village Road 21860 Piedmont Triad 62 455
Airpark East-Building 1 21490 Piedmont Triad (2) 377 1,510
Airpark East-Building 2 21500 Piedmont Triad (2) 461 1,842
Airpark East-Building 3 21510 Piedmont Triad (2) 321 1,283
Airpark East-Building A 21550 Piedmont Triad (2) 541 2,913
Airpark East-Building B 21560 Piedmont Triad (2) 779 3,200
Airpark East-Building C 21570 Piedmont Triad (2) 2,384 9,535
Airpark East-Building D 21580 Piedmont Triad (2) 271 3,213
Airpark East-Copier Consultants 21480 Piedmont Triad (2) 252 1,008
Airpark East-HewlettPackard 21520 Piedmont Triad (2) 149 727
Airpark East-Highland 21700 Piedmont Triad (2) 175 699
Airpark East-Inacom Building 21530 Piedmont Triad (2) 106 478
Airpark East-Service Center 1 21610 Piedmont Triad (2) 275 1,099
Airpark East-Service Center 2 21620 Piedmont Triad (2) 222 889
Airpark East-Service Center 3 21630 Piedmont Triad (2) 304 1,214
Airpark East-Service Center 4 21640 Piedmont Triad (2) 224 898
Airpark East-Service Court 21650 Piedmont Triad (2) 194 774
Airpark East-Simplex 21540 Piedmont Triad (2) 103 526
Airpark East-Warehouse 1 21660 Piedmont Triad (2) 384 1,535
Airpark East-Warehouse 2 21670 Piedmont Triad (2) 372 1,488
Airpark East-Warehouse 3 21680 Piedmont Triad (2) 370 1,480
Airpark East-Warehouse 4 21690 Piedmont Triad (2) 657 2,628
Airpark North Land 21920 Piedmont Triad 804 --
Airpark North-DC1 21880 Piedmont Triad (2) 723 2,891
Airpark North-DC2 21890 Piedmont Triad (2) 1,094 4,375
Airpark North-DC3 21900 Piedmont Triad (2) 378 1,511
Airpark North-DC4 21910 Piedmont Triad (2) 377 1,508
Airpark South Warehouse 2 22220 Piedmont Triad 733 2,548
Airpark South Warehouse 3 22230 Piedmont Triad 599 2,365
Airpark South Warehouse 4 22240 Piedmont Triad 489 2,175
Airpark South Warehouse 6 22250 Piedmont Triad 1,690 3,915
Airpark South Warehouse I 22210 Piedmont Triad 537 2,934
Airpark West 1 22270 Piedmont Triad (3) 954 3,817
Airpark West 2 22280 Piedmont Triad (3) 887 3,536
Airpark West 4 22290 Piedmont Triad (3) 226 903
Airpark West 5 22300 Piedmont Triad (3) 242 966
Airpark West 6 22310 Piedmont Triad (3) 326 1,308
ALO 26190 Piedmont Triad 177 986
Bissell Land 21380 Piedmont Triad 990 --
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
711 Almondridge -- 26 301 728 1,029 80
7327 West Friendly Avenue -- 22 60 463 523 75
7339 West Friendly Avenue -- 41 63 506 569 93
7341 West Friendly Avenue -- 134 113 965 1,078 195
7343 West Friendly Avenue -- 27 72 558 630 96
7345 West Friendly Avenue -- 25 66 510 576 88
7347 West Friendly Avenue -- 84 97 793 890 172
7349 West Friendly Avenue -- 17 53 405 458 73
7351 West Friendly Avenue -- 30 106 808 914 143
7353 West Friendly Avenue -- 16 123 917 1,040 149
7355 West Friendly Avenue -- 23 72 548 620 93
7906 Industrial Village Road -- 23 62 478 540 78
7908 Industrial Village Road -- 34 62 489 551 95
7910 Industrial Village Road -- 50 62 505 567 93
Airpark East-Building 1 -- 160 377 1,670 2,047 331
Airpark East-Building 2 -- 31 461 1,873 2,334 325
Airpark East-Building 3 -- 153 321 1,436 1,757 282
Airpark East-Building A (33) 676 508 3,589 4,097 833
Airpark East-Building B (43) 433 736 3,633 4,369 808
Airpark East-Building C -- 1,721 2,384 11,256 13,640 2,093
Airpark East-Building D 579 730 850 3,943 4,793 993
Airpark East-Copier Consultants (29) 124 223 1,132 1,355 212
Airpark East-HewlettPackard 315 337 464 1,064 1,528 280
Airpark East-Highland (30) 376 145 1,075 1,220 147
Airpark East-Inacom Building 159 294 265 772 1,037 252
Airpark East-Service Center 1 (39) 134 236 1,233 1,469 284
Airpark East-Service Center 2 (31) 119 191 1,008 1,199 199
Airpark East-Service Center 3 -- 65 304 1,279 1,583 263
Airpark East-Service Center 4 -- 186 224 1,084 1,308 219
Airpark East-Service Court (24) 57 170 831 1,001 169
Airpark East-Simplex 168 260 271 786 1,057 213
Airpark East-Warehouse 1 (29) 99 355 1,634 1,989 306
Airpark East-Warehouse 2 -- 99 372 1,587 1,959 314
Airpark East-Warehouse 3 (30) 55 340 1,535 1,875 276
Airpark East-Warehouse 4 -- 182 657 2,810 3,467 547
Airpark North Land (804) -- -- -- -- --
Airpark North-DC1 134 229 857 3,120 3,977 552
Airpark North-DC2 203 107 1,297 4,482 5,779 793
Airpark North-DC3 70 215 448 1,726 2,174 427
Airpark North-DC4 70 141 447 1,649 2,096 346
Airpark South Warehouse 2 11 (36) 744 2,512 3,256 160
Airpark South Warehouse 3 -- -- 599 2,365 2,964 115
Airpark South Warehouse 4 7 244 496 2,419 2,915 290
Airpark South Warehouse 6 26 6 1,716 3,921 5,637 275
Airpark South Warehouse I 8 (423) 545 2,511 3,056 385
Airpark West 1 -- 847 954 4,664 5,618 1,078
Airpark West 2 (3) 528 884 4,064 4,948 1,026
Airpark West 4 -- 186 226 1,089 1,315 255
Airpark West 5 -- 160 242 1,126 1,368 243
Airpark West 6 -- 163 326 1,471 1,797 329
ALO -- 8 177 994 1,171 38
Bissell Land (990) -- -- -- -- --
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
711 Almondridge 1988 5-40 yrs.
7327 West Friendly Avenue 1987 5-40 yrs.
7339 West Friendly Avenue 1989 5-40 yrs.
7341 West Friendly Avenue 1988 5-40 yrs.
7343 West Friendly Avenue 1988 5-40 yrs.
7345 West Friendly Avenue 1988 5-40 yrs.
7347 West Friendly Avenue 1988 5-40 yrs.
7349 West Friendly Avenue 1988 5-40 yrs.
7351 West Friendly Avenue 1988 5-40 yrs.
7353 West Friendly Avenue 1988 5-40 yrs.
7355 West Friendly Avenue 1988 5-40 yrs.
7906 Industrial Village Road 1985 5-40 yrs.
7908 Industrial Village Road 1985 5-40 yrs.
7910 Industrial Village Road 1985 5-40 yrs.
Airpark East-Building 1 1990 5-40 yrs.
Airpark East-Building 2 1986 5-40 yrs.
Airpark East-Building 3 1986 5-40 yrs.
Airpark East-Building A 1986 5-40 yrs.
Airpark East-Building B 1988 5-40 yrs.
Airpark East-Building C 1990 5-40 yrs.
Airpark East-Building D 1997 5-40 yrs.
Airpark East-Copier Consultants 1990 5-40 yrs.
Airpark East-HewlettPackard 1996 5-40 yrs.
Airpark East-Highland 1990 5-40 yrs.
Airpark East-Inacom Building 1996 5-40 yrs.
Airpark East-Service Center 1 1985 5-40 yrs.
Airpark East-Service Center 2 1985 5-40 yrs.
Airpark East-Service Center 3 1985 5-40 yrs.
Airpark East-Service Center 4 1985 5-40 yrs.
Airpark East-Service Court 1990 5-40 yrs.
Airpark East-Simplex 1997 5-40 yrs.
Airpark East-Warehouse 1 1985 5-40 yrs.
Airpark East-Warehouse 2 1985 5-40 yrs.
Airpark East-Warehouse 3 1986 5-40 yrs.
Airpark East-Warehouse 4 1988 5-40 yrs.
Airpark North Land N/A N/A
Airpark North-DC1 1986 5-40 yrs.
Airpark North-DC2 1987 5-40 yrs.
Airpark North-DC3 1988 5-40 yrs.
Airpark North-DC4 1988 5-40 yrs.
Airpark South Warehouse 2 1999 5-40 yrs.
Airpark South Warehouse 3 1999 5-40 yrs.
Airpark South Warehouse 4 1999 5-40 yrs.
Airpark South Warehouse 6 1999 5-40 yrs.
Airpark South Warehouse I 1998 5-40 yrs.
Airpark West 1 1984 5-40 yrs.
Airpark West 2 1985 5-40 yrs.
Airpark West 4 1985 5-40 yrs.
Airpark West 5 1985 5-40 yrs.
Airpark West 6 1985 5-40 yrs.
ALO 1998 5-40 yrs.
Bissell Land N/A N/A
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Brigham Road -- Land 28710 Piedmont Triad 7,249 --
Chesapeake 26200 Piedmont Triad (3) 1,236 4,944
Chimney Rock A/B 21410 Piedmont Triad 1,610 3,757
Chimney Rock C 21420 Piedmont Triad 604 1,408
Chimney Rock D 21430 Piedmont Triad 236 550
Chimney Rock E 21440 Piedmont Triad 1,692 3,948
Chimney Rock F 21450 Piedmont Triad 1,431 3,338
Chimney Rock G 21460 Piedmont Triad 1,044 2,435
Concourse Center 1 21360 Piedmont Triad 946 7,646
Consolidated Center/ Building I 26300 Piedmont Triad 625 2,126
Consolidated Center/ Building II 26310 Piedmont Triad 625 4,376
Consolidated Center/ Building III 26320 Piedmont Triad 680 3,522
Consolidated Center/ Building IV 26330 Piedmont Triad 376 1,624
Deep River Corporate Center 21470 Piedmont Triad 1,033 5,855
ECPI 21370 Piedmont Triad 431 2,522
Enterprise Warehouse I 28420 Piedmont Triad 487 2,960
Forsyth Corporate Center 26210 Piedmont Triad (6) 326 1,850
Highwoods Park Building I 28670 Piedmont Triad 1,980 7,273
Inman Road Land 21830 Piedmont Triad 2,363 --
Jefferson Pilot Land 21870 Piedmont Triad 11,199 --
Madison Park - Building 5610 26460 Piedmont Triad 211 493
Madison Park - Building 5620 26470 Piedmont Triad 941 2,196
Madison Park - Building 5630 26480 Piedmont Triad 1,486 3,468
Madison Park - Building 5635 26490 Piedmont Triad 893 2,083
Madison Park - Building 5640 26500 Piedmont Triad 3,632 8,476
Madison Park - Building 5650 26510 Piedmont Triad 1,081 2,522
Madison Park - Building 5655 26530 Piedmont Triad 5,891 13,753
Madison Park - Building 5660 26520 Piedmont Triad 1,910 4,456
Regency One-Piedmont Center 22150 Piedmont Triad 515 2,347
Regency Two-Piedmont Center 22160 Piedmont Triad 435 1,859
Robinhood 26280 Piedmont Triad 290 1,159
Sears Cenfact 22170 Piedmont Triad 861 3,446
The Knollwood-370 26230 Piedmont Triad (2) 1,819 7,451
The Knollwood-380 26240 Piedmont Triad (2) 2,977 11,912
The Knollwood-380 Retail 26260 Piedmont Triad (2) -- 1
University Commercial Center-Archer 4 26670 Piedmont Triad 514 2,058
University Commercial Center-Landmark 3 26660 Piedmont Triad 429 1,771
University Commercial Center-Service Center 1 26680 Piedmont Triad 276 1,155
University Commercial Center-Service Center 2 26690 Piedmont Triad 215 859
University Commercial Center-Service Center 3 26700 Piedmont Triad 167 668
University Commercial Center-Warehouse 1 26710 Piedmont Triad 203 812
University Commercial Center-Warehouse 2 26720 Piedmont Triad 196 786
US Airways 26630 Piedmont Triad (6) 2,625 14,824
Westpoint Business Park Land 26760 Piedmont Triad 1,861 --
Westpoint Business Park-3 & 4 26750 Piedmont Triad 120 480
Westpoint Business Park-BMF 26730 Piedmont Triad 795 3,181
Westpoint Business Park-Fairchild 26810 Piedmont Triad 640 2,577
Westpoint Business Park-Luwabahnson 26740 Piedmont Triad 346 1,384
Westpoint Business Park-Warehouse 5 26820 Piedmont Triad 178 590
Westpoint Business Park-Wp 11 26780 Piedmont Triad 393 1,570
Westpoint Business Park-Wp 12 26790 Piedmont Triad 382 1,531
Westpoint Business Park-Wp 13 26800 Piedmont Triad 297 1,192
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Brigham Road -- Land -- -- 7,249 -- 7,249 --
Chesapeake -- 7 1,236 4,951 6,187 853
Chimney Rock A/B 1 510 1,611 4,267 5,878 445
Chimney Rock C -- 6 604 1,414 2,018 136
Chimney Rock D -- 53 236 603 839 98
Chimney Rock E 1 55 1,693 4,003 5,696 384
Chimney Rock F 1 3 1,432 3,341 4,773 319
Chimney Rock G 1 12 1,045 2,447 3,492 232
Concourse Center 1 (946) (7,646) -- -- --
Consolidated Center/ Building I -- 89 625 2,215 2,840 236
Consolidated Center/ Building II -- 151 625 4,527 5,152 497
Consolidated Center/ Building III -- 55 680 3,577 4,257 369
Consolidated Center/ Building IV -- 216 376 1,840 2,216 282
Deep River Corporate Center -- 318 1,033 6,173 7,206 997
ECPI (431) (2,522) -- -- --
Enterprise Warehouse I -- 23 487 2,983 3,470 --
Forsyth Corporate Center -- 678 326 2,528 2,854 590
Highwoods Park Building I 12 237 1,992 7,510 9,502 23
Inman Road Land -- 2,363 -- 2,363 --
Jefferson Pilot Land -- -- 11,199 -- 11,199 --
Madison Park - Building 5610 -- -- 211 493 704 44
Madison Park - Building 5620 -- 1 941 2,197 3,138 196
Madison Park - Building 5630 -- 25 1,486 3,493 4,979 310
Madison Park - Building 5635 -- 441 893 2,524 3,417 372
Madison Park - Building 5640 -- 35 3,632 8,511 12,143 758
Madison Park - Building 5650 -- 1 1,081 2,523 3,604 226
Madison Park - Building 5655 -- 1 5,891 13,754 19,645 1,230
Madison Park - Building 5660 -- 10 1,910 4,466 6,376 398
Regency One-Piedmont Center -- 578 515 2,925 3,440 635
Regency Two-Piedmont Center -- 531 435 2,390 2,825 714
Robinhood (290) (1,159) -- -- -- --
Sears Cenfact (31) 348 830 3,794 4,624 637
The Knollwood-370 -- 513 1,819 7,964 9,783 1,535
The Knollwood-380 -- 903 2,977 12,815 15,792 2,481
The Knollwood-380 Retail -- 141 -- 142 142 70
University Commercial Center-Archer 4 -- 201 514 2,259 2,773 463
University Commercial Center-Landmark 3 -- 171 429 1,942 2,371 377
University Commercial Center-Service Center 1 -- 93 276 1,248 1,524 249
University Commercial Center-Service Center 2 -- 127 215 986 1,201 224
University Commercial Center-Service Center 3 -- 149 167 817 984 143
University Commercial Center-Warehouse 1 -- 9 203 821 1,024 141
University Commercial Center-Warehouse 2 -- 14 196 800 996 138
US Airways -- 209 2,625 15,033 17,658 1,554
Westpoint Business Park Land 1 1,861 1 1,862 --
Westpoint Business Park-3 & 4 -- 38 120 518 638 94
Westpoint Business Park-BMF -- 4 795 3,185 3,980 547
Westpoint Business Park-Fairchild -- 25 640 2,602 3,242 446
Westpoint Business Park-Luwabahnson -- 1 346 1,385 1,731 239
Westpoint Business Park-Warehouse 5 -- 529 178 1,119 1,297 348
Westpoint Business Park-Wp 11 -- 86 393 1,656 2,049 311
Westpoint Business Park-Wp 12 -- 72 382 1,603 1,985 280
Westpoint Business Park-Wp 13 -- 43 297 1,235 1,532 213
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Brigham Road -- Land N/A N/A
Chesapeake 1993 5-40 yrs.
Chimney Rock A/B 1981 5-40 yrs.
Chimney Rock C 1983 5-40 yrs.
Chimney Rock D 1983 5-40 yrs.
Chimney Rock E 1985 5-40 yrs.
Chimney Rock F 1987 5-40 yrs.
Chimney Rock G 1987 5-40 yrs.
Concourse Center 1 1999 5-40 yrs.
Consolidated Center/ Building I 1983 5-40 yrs.
Consolidated Center/ Building II 1983 5-40 yrs.
Consolidated Center/ Building III 1989 5-40 yrs.
Consolidated Center/ Building IV 1989 5-40 yrs.
Deep River Corporate Center 1989 5-40 yrs.
ECPI 2000 5-40 yrs.
Enterprise Warehouse I 5-40 yrs.
Forsyth Corporate Center 1985 5-40 yrs.
Highwoods Park Building I 2001 5-40 yrs.
Inman Road Land N/A N/A
Jefferson Pilot Land N/A N/A
Madison Park - Building 5610 1988 5-40 yrs.
Madison Park - Building 5620 1983 5-40 yrs.
Madison Park - Building 5630 1983 5-40 yrs.
Madison Park - Building 5635 1986 5-40 yrs.
Madison Park - Building 5640 1985 5-40 yrs.
Madison Park - Building 5650 1984 5-40 yrs.
Madison Park - Building 5655 1987 5-40 yrs.
Madison Park - Building 5660 1984 5-40 yrs.
Regency One-Piedmont Center 1996 5-40 yrs.
Regency Two-Piedmont Center 1996 5-40 yrs.
Robinhood 1989 5-40 yrs.
Sears Cenfact 1989 5-40 yrs.
The Knollwood-370 1994 5-40 yrs.
The Knollwood-380 1990 5-40 yrs.
The Knollwood-380 Retail 1995 5-40 yrs.
University Commercial Center-Archer 4 1986 5-40 yrs.
University Commercial Center-Landmark 3 1985 5-40 yrs.
University Commercial Center-Service Center 1 1983 5-40 yrs.
University Commercial Center-Service Center 2 1983 5-40 yrs.
University Commercial Center-Service Center 3 1984 5-40 yrs.
University Commercial Center-Warehouse 1 1983 5-40 yrs.
University Commercial Center-Warehouse 2 1983 5-40 yrs.
US Airways 1970-1987 5-40 yrs.
Westpoint Business Park Land 5-40 yrs.
Westpoint Business Park-3 & 4 1988 5-40 yrs.
Westpoint Business Park-BMF 1986 5-40 yrs.
Westpoint Business Park-Fairchild 1990 5-40 yrs.
Westpoint Business Park-Luwabahnson 1990 5-40 yrs.
Westpoint Business Park-Warehouse 5 1995 5-40 yrs.
Westpoint Business Park-Wp 11 1988 5-40 yrs.
Westpoint Business Park-Wp 12 1988 5-40 yrs.
Westpoint Business Park-Wp 13 1988 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Greenville, SC
385 Land 22420 Greenville 1,800 --
770 Pelham Road 22540 Greenville 705 2,778
Bank of America Plaza 22430 Greenville 642 9,349
Brookfield Plaza 22440 Greenville (6) 1,489 8,437
Brookfield YMCA 22460 Greenville 33 189
Brookfield-Jacobs-Sirrine 22450 Greenville 3,022 17,125
IKON at Patewood 22470 Greenville 1,413 1,401
MetLife @ Brookfield 28490 Greenville 1,023 8,336
Patewood Business Center 22550 Greenville 1,312 7,436
Patewood I 22480 Greenville 942 5,016
Patewood II 22490 Greenville 942 5,018
Patewood III 22500 Greenville (6) 835 4,733
Patewood IV 22510 Greenville (6) 1,210 6,856
Patewood V 22520 Greenville (6) 1,677 9,503
Patewood VI 22530 Greenville 2,375 9,643
Highwood Services Inc. (HSI)
International Place 3 22880 Memphis -- 25,761
Romac 28140 Tampa 1,256 17,950
Jacksonville, FL
9A Land 22640 Jacksonville 4,446 --
Belfort Park VI - Land 22700 Jacksonville 594 --
Belfort Park VII - Land 22710 Jacksonville 1,941 --
Shawnee Mission, KS
Brymar Building 27470 Shawnee Mission 329 1,317
Corinth Executive Building 27490 Shawnee Mission 514 2,054
Corinth Office Building 27510 Shawnee Mission 774 529 2,116
Corinth Shops South 26910 Shawnee Mission (4) 1,043 4,172
Corinth Square North Shops 26900 Shawnee Mission (4) 2,693 10,772
Fairway North 27540 Shawnee Mission 753 3,013
Fairway Shops 26930 Shawnee Mission 2,533 673 2,694
Fairway West 27550 Shawnee Mission 2,775 851 3,402
Land - Kansas 27630 Shawnee Mission 14,893 --
Nichols Building 27670 Shawnee Mission 820 490 1,959
Prairie Village Office Center 27760 Shawnee Mission 749 2,997
Prairie Village Rest & Bank 27050 Shawnee Mission -- --
Prairie Village Shops 27060 Shawnee Mission 3,289 13,157
Shannon Valley Shopping Center 27120 Shawnee Mission 6,091 1,669 6,678
Kansas City, MO
4900 Main Building 27410 Kansas City 3,202 12,809
63rd & Brookside 27420 Kansas City 71 283
Brookside Shopping Center 26850 Kansas City 2,002 8,602
Coach House North 27230 Kansas City 1,604 9,092
Coach House South 27240 Kansas City 3,707 21,008
Coach Lamp 27250 Kansas City 870 4,929
Colonial Shops 26880 Kansas City 138 550
Corinth Gardens 27220 Kansas City 283 1,603
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Greenville, SC -- --
385 Land -- -- 1,800 -- 1,800 --
770 Pelham Road -- 52 705 2,830 3,535 274
Bank of America Plaza -- 2,042 642 11,391 12,033 1,709
Brookfield Plaza -- 1,024 1,489 9,461 10,950 1,614
Brookfield YMCA -- 19 33 208 241 39
Brookfield-Jacobs-Sirrine -- 24 3,022 17,149 20,171 2,278
IKON at Patewood -- 2,783 1,413 4,184 5,597 816
MetLife @ Brookfield 8 1,868 1,031 10,204 11,235 105
Patewood Business Center -- 332 1,312 7,768 9,080 1,140
Patewood I -- 72 942 5,088 6,030 627
Patewood II -- 285 942 5,303 6,245 731
Patewood III -- 158 835 4,891 5,726 777
Patewood IV -- 132 1,210 6,988 8,198 916
Patewood V -- 110 1,677 9,613 11,290 1,353
Patewood VI -- (25) 2,375 9,618 11,993 1,615
Highwood Services Inc. (HSI)
International Place 3 -- -- -- 25,761 25,761 --
Romac -- -- 1,256 17,950 19,206 --
Jacksonville, FL
9A Land -- -- 4,446 -- 4,446 --
Belfort Park VI - Land -- -- 594 -- 594 --
Belfort Park VII - Land -- -- 1,941 -- 1,941 --
Shawnee Mission, KS -- --
Brymar Building -- 23 329 1,340 1,669 128
Corinth Executive Building -- 675 514 2,729 3,243 308
Corinth Office Building -- 365 529 2,481 3,010 213
Corinth Shops South -- 125 1,043 4,297 5,340 384
Corinth Square North Shops -- 630 2,693 11,402 14,095 1,017
Fairway North -- 468 753 3,481 4,234 404
Fairway Shops -- 191 673 2,885 3,558 305
Fairway West -- 425 851 3,827 4,678 443
Land - Kansas -- -- 14,893 -- 14,893 --
Nichols Building -- 210 490 2,169 2,659 237
Prairie Village Office Center -- 364 749 3,361 4,110 350
Prairie Village Rest & Bank -- 1,372 -- 1,372 1,372 44
Prairie Village Shops -- 3,042 3,289 16,199 19,488 1,474
Shannon Valley Shopping Center -- 1,877 1,669 8,555 10,224 912
Kansas City, MO -- --
4900 Main Building -- 167 3,202 12,976 16,178 1,199
63rd & Brookside -- 29 71 312 383 31
Brookside Shopping Center 154 875 2,156 9,477 11,633 833
Coach House North (1,604) (9,092) -- -- -- --
Coach House South (3,707) (21,008) -- -- -- --
Coach Lamp (870) (4,929) -- -- -- --
Colonial Shops -- 78 138 628 766 64
Corinth Gardens (283) (1,603) -- -- -- --
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Greenville, SC
385 Land N/A N/A
770 Pelham Road 1989 5-40 yrs.
Bank of America Plaza 1973 5-40 yrs.
Brookfield Plaza 1987 5-40 yrs.
Brookfield YMCA 1990 5-40 yrs.
Brookfield-Jacobs-Sirrine 1990 5-40 yrs.
IKON at Patewood 1998 5-40 yrs.
MetLife @ Brookfield 2001 5-40 yrs.
Patewood Business Center 1983 5-40 yrs.
Patewood I 1985 5-40 yrs.
Patewood II 1987 5-40 yrs.
Patewood III 1989 5-40 yrs.
Patewood IV 1989 5-40 yrs.
Patewood V 1990 5-40 yrs.
Patewood VI 1999 5-40 yrs.
Highwood Services Inc. (HSI)
International Place 3 2001 5-40 yrs.
Romac 2001 5-40 yrs.
Jacksonville, FL
9A Land N/A N/A
Belfort Park VI - Land N/A N/A
Belfort Park VII - Land N/A N/A
Shawnee Mission, KS
Brymar Building 1968 5-40 yrs.
Corinth Executive Building 1973 5-40 yrs.
Corinth Office Building 1960 5-40 yrs.
Corinth Shops South 1953 5-40 yrs.
Corinth Square North Shops 1962 5-40 yrs.
Fairway North 1985 5-40 yrs.
Fairway Shops 1940 5-40 yrs.
Fairway West 1983 5-40 yrs.
Land - Kansas N/A N/A
Nichols Building 1978 5-40 yrs.
Prairie Village Office Center 1960 5-40 yrs.
Prairie Village Rest & Bank 1948 5-40 yrs.
Prairie Village Shops 1948 5-40 yrs.
Shannon Valley Shopping Center 1988 5-40 yrs.
Kansas City, MO
4900 Main Building 1986 5-40 yrs.
63rd & Brookside 1919 5-40 yrs.
Brookside Shopping Center 1919 5-40 yrs.
Coach House North 1986 5-40 yrs.
Coach House South 1984 5-40 yrs.
Coach Lamp 1961 5-40 yrs.
Colonial Shops 1907 5-40 yrs.
Corinth Gardens 1961 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Corinth Paddock 27260 Kansas City 1,050 5,949
Corinth Place 27270 Kansas City 639 3,623
Country Club Plaza - 48th & Penn 26830 Kansas City (5) 418 3,765
Country Club Plaza - Balcony Office 27440 Kansas City (5) 65 585
Country Club Plaza - Balcony Retail 26840 Kansas City (5) 889 8,002
Country Club Plaza - Court of the Penguins 26870 Kansas City (5) 566 5,091
Country Club Plaza - Esplanade Office 27530 Kansas City (5) 375 3,374
Country Club Plaza - Esplanade Retail 26920 Kansas City (5) 748 6,734
Country Club Plaza - Halls Block 26970 Kansas City (5) 275 2,478
Country Club Plaza - Macy Block 26990 Kansas City (5) 504 4,536
Country Club Plaza - Millcreek Office 27650 Kansas City (5) 79 717
Country Club Plaza - Millcreek Retail 27000 Kansas City (5) 602 5,422
Country Club Plaza - Nichols Block Office 27680 Kansas City (5) 74 668
Country Club Plaza - Nichols Retail 27010 Kansas City (5) 600 5,402
Country Club Plaza - Plaza Central 27030 Kansas City (5) 405 3,649
Country Club Plaza - Seville Shops West 27100 Kansas City (5) 300 2,696
Country Club Plaza - Seville Square 27110 Kansas City (5) -- 20,973
Country Club Plaza - Swanson Block 27130 Kansas City (5) 949 8,537
Country Club Plaza - Theatre Office 27950 Kansas City (5) 242 2,179
Country Club Plaza - Theatre Retail 27150 Kansas City (5) 1,197 10,769
Country Club Plaza - Time Office 27960 Kansas City (5) 199 1,792
Country Club Plaza - Time Retail 27160 Kansas City (5) 1,292 11,627
Country Club Plaza - Triangle Block 27170 Kansas City (5) 308 2,771
Country Club Plaza - Valencia Place Office 27970 Kansas City (5) 1,530 27,548
Country Club Plaza - Valencia Place Retail 27190 Kansas City (5) -- 2,245
Ground Leases Retail KH 26950 Kansas City 677 --
Kenilworth 27290 Kansas City 2,160 12,240
Land - Missouri 27660 Kansas City 3,794 190
Land Under Ground Leases Retail 26940 Kansas City 9,789 114
Mission Valley 27310 Kansas City 576 3,266
Neptune Apartments 27320 Kansas City 4,298 1,073 6,079
One Ward Parkway 27720 Kansas City 666 2,663
Park Plaza 27740 Kansas City (5) 1,352 5,409
Parklane 27330 Kansas City 273 1,548
Parkway Building 27770 Kansas City 395 1,578
Plaza Savings South 27040 Kansas City (5) 357 3,211
Red Bridge Shops 27080 Kansas City 1,091 4,364
Regency House 27350 Kansas City 1,853 10,500
Somerset 27920 Kansas City 30 122
Sulgrave 27370 Kansas City 2,621 14,855
Two Brush Creek 27940 Kansas City 961 3,845
Wornall Road Apartments 27400 Kansas City 30 171
Memphis, TN
3400 Players Club Parkway 22850 Memphis (6) 1,005 5,515
6000 Poplar Ave 28290 Memphis 2,340 11,385
6060 Poplar Ave 28300 Memphis 1,980 8,677
Atrium I & II 22810 Memphis 1,530 6,121
Centrum 22820 Memphis 1,013 5,488
Hickory Hill Medical Plaza 22840 Memphis 398 2,256
International Place 2 22860 Memphis 4,847 27,469
Kirby Centre 22870 Memphis 525 2,973
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Corinth Paddock (1,050) (5,949) -- -- -- --
Corinth Place (639) (3,623) -- -- -- --
Country Club Plaza - 48th & Penn -- 1,866 418 5,631 6,049 597
Country Club Plaza - Balcony Office -- 211 65 796 861 87
Country Club Plaza - Balcony Retail -- 4,756 889 12,758 13,647 1,081
Country Club Plaza - Court of the Penguins -- 2,464 566 7,555 8,121 677
Country Club Plaza - Esplanade Office -- 295 375 3,669 4,044 309
Country Club Plaza - Esplanade Retail -- 3,587 748 10,321 11,069 902
Country Club Plaza - Halls Block -- 2,647 275 5,125 5,400 280
Country Club Plaza - Macy Block -- 1,680 504 6,216 6,720 513
Country Club Plaza - Millcreek Office -- 234 79 951 1,030 97
Country Club Plaza - Millcreek Retail -- 2,310 602 7,732 8,334 865
Country Club Plaza - Nichols Block Office -- 83 74 751 825 95
Country Club Plaza - Nichols Retail -- 1,809 600 7,211 7,811 616
Country Club Plaza - Plaza Central -- (1,774) 405 1,875 2,280 653
Country Club Plaza - Seville Shops West -- 12,788 300 15,484 15,784 1,119
Country Club Plaza - Seville Square -- 2,048 -- 23,021 23,021 1,356
Country Club Plaza - Swanson Block -- 2,975 949 11,512 12,461 969
Country Club Plaza - Theatre Office -- 497 242 2,676 2,918 255
Country Club Plaza - Theatre Retail -- 6,136 1,197 16,905 18,102 1,572
Country Club Plaza - Time Office -- 676 199 2,468 2,667 226
Country Club Plaza - Time Retail -- 3,673 1,292 15,300 16,592 1,336
Country Club Plaza - Triangle Block -- (79) 308 2,692 3,000 387
Country Club Plaza - Valencia Place Office -- 8,552 1,530 36,100 37,630 1,750
Country Club Plaza - Valencia Place Retail 441 15,041 441 17,286 17,727 673
Ground Leases Retail KH -- -- 677 -- 677 --
Kenilworth (2,160) (12,240) -- -- -- --
Land - Missouri (434) -- 3,360 190 3,550 16
Land Under Ground Leases Retail (8,688) (114) 1,101 -- 1,101 --
Mission Valley (576) (3,266) -- -- -- --
Neptune Apartments -- 215 1,073 6,294 7,367 548
One Ward Parkway -- 651 666 3,314 3,980 444
Park Plaza 1,275 1,352 6,684 8,036 624
Parklane -- 135 273 1,683 1,956 143
Parkway Building -- 289 395 1,867 2,262 252
Plaza Savings South -- 2,690 357 5,901 6,258 492
Red Bridge Shops -- 642 1,091 5,006 6,097 492
Regency House (1,853) (10,500) -- -- -- --
Somerset -- -- 30 122 152 11
Sulgrave (2,621) (14,855) -- -- -- --
Two Brush Creek -- 285 961 4,130 5,091 428
Wornall Road Apartments -- 21 30 192 222 16
Memphis, TN -- --
3400 Players Club Parkway -- 10 1,005 5,525 6,530 1,204
6000 Poplar Ave -- (85) 2,340 11,300 13,640 301
6060 Poplar Ave -- 26 1,980 8,703 10,683 235
Atrium I & II 40 512 1,570 6,633 8,203 898
Centrum -- 354 1,013 5,842 6,855 726
Hickory Hill Medical Plaza -- 131 398 2,387 2,785 327
International Place 2 -- 1,301 4,847 28,770 33,617 4,423
Kirby Centre (525) (2,973) -- -- -- --
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Corinth Paddock 1973 5-40 yrs.
Corinth Place 1987 5-40 yrs.
Country Club Plaza - 48th & Penn 1948 5-40 yrs.
Country Club Plaza - Balcony Office 1928 5-40 yrs.
Country Club Plaza - Balcony Retail 1925 5-40 yrs.
Country Club Plaza - Court of the Penguins 1945 5-40 yrs.
Country Club Plaza - Esplanade Office 1945 5-40 yrs.
Country Club Plaza - Esplanade Retail 1928 5-40 yrs.
Country Club Plaza - Halls Block 1964 5-40 yrs.
Country Club Plaza - Macy Block 1926 5-40 yrs.
Country Club Plaza - Millcreek Office 1925 5-40 yrs.
Country Club Plaza - Millcreek Retail 1920 5-40 yrs.
Country Club Plaza - Nichols Block Office 1938 5-40 yrs.
Country Club Plaza - Nichols Retail 1930 5-40 yrs.
Country Club Plaza - Plaza Central 1958 5-40 yrs.
Country Club Plaza - Seville Shops West 1999 5-40 yrs.
Country Club Plaza - Seville Square 1999 5-40 yrs.
Country Club Plaza - Swanson Block 1967 5-40 yrs.
Country Club Plaza - Theatre Office 1928 5-40 yrs.
Country Club Plaza - Theatre Retail 1928 5-40 yrs.
Country Club Plaza - Time Office 1945 5-40 yrs.
Country Club Plaza - Time Retail 1929 5-40 yrs.
Country Club Plaza - Triangle Block 1925 5-40 yrs.
Country Club Plaza - Valencia Place Office 1999 5-40 yrs.
Country Club Plaza - Valencia Place Retail 1999 5-40 yrs.
Ground Leases Retail KH N/A N/A
Kenilworth 1965 5-40 yrs.
Land - Missouri N/A 5-40 yrs.
Land Under Ground Leases Retail N/A N/A
Mission Valley 1964 5-40 yrs.
Neptune Apartments 1988 5-40 yrs.
One Ward Parkway 1980 5-40 yrs.
Park Plaza 1983 5-40 yrs.
Parklane 1924 5-40 yrs.
Parkway Building 1906-1910 5-40 yrs.
Plaza Savings South 1948 5-40 yrs.
Red Bridge Shops 1959 5-40 yrs.
Regency House 1960 5-40 yrs.
Somerset 1998 5-40 yrs.
Sulgrave 1967 5-40 yrs.
Two Brush Creek 1983 5-40 yrs.
Wornall Road Apartments 1918 5-40 yrs.
Memphis, TN
3400 Players Club Parkway 1997 5-40 yrs.
6000 Poplar Ave 1985 5-40 yrs.
6060 Poplar Ave 1987 5-40 yrs.
Atrium I & II 1984 5-40 yrs.
Centrum 1979 5-40 yrs.
Hickory Hill Medical Plaza 1988 5-40 yrs.
International Place 2 1988 5-40 yrs.
Kirby Centre 1984 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Shadow Creek I 28310 Memphis 973 5,493
Shadow Creek II 28650 Memphis 723 6,041
Southwind Building A 22890 Memphis 996 5,643
Southwind Building B 22900 Memphis 1,356 7,684
Southwind Building C 22920 Memphis (6) 1,070 5,924
Southwind Building D 22910 Memphis 744 6,232
The Colonnade 22830 Memphis 1,300 7,994
Norfolk, VA
Greenbrier Business Center 22570 Norfolk 936 5,305
Hampton Center Two 22590 Norfolk 945 6,567
Riverside II 22580 Norfolk 2 9,148
Nashville, TN
3322 West End 22930 Nashville 3,021 27,266
3401 West End 22940 Nashville 6,103 23,343
5310 Maryland Way 22950 Nashville 1,923 7,360
BNA Corporate Center 22980 Nashville 10,814 -- 22,588
Caterpillar Financial Center 22990 Nashville 5,120 31,553
Century City Plaza I 23000 Nashville 903 3,612
Cool Springs I 23030 Nashville 2,285 15,535
Cool Springs II 23020 Nashville 3,137 11,842
Cool Springs Land 23010 Nashville 7,645 --
Eastpark I, II, & III 23040 Nashville 1,983 13,854
Harpeth on the Green II 23110 Nashville 1,419 5,677
Harpeth on the Green III 23120 Nashville 1,658 6,633
Harpeth on the Green IV 23130 Nashville 1,709 6,835
Harpeth on The Green V 23140 Nashville 662 5,771
Hickory Trace 22960 Nashville 1,164 4,321
Highwoods Plaza I 23090 Nashville 1,772 9,029
Highwoods Plaza II 23100 Nashville 1,448 6,948
Lakeview Ridge I 23150 Nashville 2,179 7,545
Lakeview Ridge II 23160 Nashville 605 5,883
Lakeview Ridge III 23170 Nashville 1,073 9,708
Seven Springs - Land II 28620 Nashville 1,778 --
Seven Springs - Land I 28500 Nashville 3,115 --
SouthPointe 22970 Nashville 1,655 9,059
Sparrow Building 23190 Nashville 1,262 5,047
The Ramparts at Brentwood 28320 Nashville 2,394 12,806
Westwood South 23220 Nashville 2,106 10,517
Winners Circle 23210 Nashville 1,495 7,072
Orlando, FL
Capital Plaza Land 23520 Orlando 3,075 --
In Charge Institute 23380 Orlando 501 2,085
Interlachen Village 23560 Orlando 1,995 1,100 2,689
Lake Mary Land 23340 Orlando 9,156 --
MetroWest Center Land 23390 Orlando 1,344 7,618
MetroWest Land 23470 Orlando 3,044 --
Oakridge Office Park 23240 Orlando 4,700 18,761
Sunport Center 23230 Orlando 1,505 9,777
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Shadow Creek I -- 1,537 973 7,030 8,003 380
Shadow Creek II 11 (247) 734 5,794 6,528 19
Southwind Building A -- 295 996 5,938 6,934 882
Southwind Building B -- 422 1,356 8,106 9,462 1,230
Southwind Building C -- -- 1,070 5,924 6,994 690
Southwind Building D -- (36) 744 6,196 6,940 746
The Colonnade -- 1 1,300 7,995 9,295 1,313
Norfolk, VA -- --
Greenbrier Business Center -- 177 936 5,482 6,418 744
Hampton Center Two (945) (6,567) -- -- --
Riverside II 964 (9,148) 966 -- 966 --
Nashville, TN -- --
3322 West End 4 507 3,025 27,773 30,798 1,546
3401 West End (1,147) (594) 4,956 22,749 27,705 3,845
5310 Maryland Way (368) (1,036) 1,555 6,324 7,879 898
BNA Corporate Center -- (1,554) -- 21,034 21,034 3,309
Caterpillar Financial Center -- 10,946 5,120 42,499 47,619 2,213
Century City Plaza I -- 642 903 4,254 5,157 801
Cool Springs I -- 837 2,285 16,372 18,657 306
Cool Springs II (766) (475) 2,371 11,367 13,738 1,953
Cool Springs Land -- -- 7,645 -- 7,645 --
Eastpark I, II, & III -- 1,345 1,983 15,199 17,182 2,052
Harpeth on the Green II 1 769 1,420 6,446 7,866 979
Harpeth on the Green III 2 500 1,660 7,133 8,793 1,054
Harpeth on the Green IV 5 904 1,714 7,739 9,453 1,282
Harpeth on The Green V -- 23 662 5,794 6,456 1,176
Hickory Trace -- 245 1,164 4,566 5,730 41
Highwoods Plaza I -- 241 1,772 9,270 11,042 2,199
Highwoods Plaza II -- 1,590 1,448 8,538 9,986 2,131
Lakeview Ridge I (411) (1,107) 1,768 6,438 8,206 928
Lakeview Ridge II -- (40) 605 5,843 6,448 1,288
Lakeview Ridge III -- 2,099 1,073 11,807 12,880 1,168
Seven Springs - Land II -- -- 1,778 -- 1,778 --
Seven Springs - Land I -- -- 3,115 -- 3,115 --
SouthPointe -- (1) 1,655 9,058 10,713 1,859
Sparrow Building -- 318 1,262 5,365 6,627 710
The Ramparts at Brentwood -- (516) 2,394 12,290 14,684 284
Westwood South -- 670 2,106 11,187 13,293 1,314
Winners Circle 2 645 1,497 7,717 9,214 848
Orlando, FL -- --
Capital Plaza Land -- -- 3,075 -- 3,075 --
In Charge Institute -- 708 501 2,793 3,294 164
Interlachen Village -- 143 1,100 2,832 3,932 327
Lake Mary Land 5 9,156 5 9,161 1
MetroWest Center Land -- 441 1,344 8,059 9,403 1,147
MetroWest Land -- -- 3,044 -- 3,044 --
Oakridge Office Park -- 853 4,700 19,614 24,314 2,201
Sunport Center -- 107 1,505 9,884 11,389 1,050
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Shadow Creek I 2000 5-40 yrs.
Shadow Creek II 2001 5-40 yrs.
Southwind Building A 1991 5-40 yrs.
Southwind Building B 1990 5-40 yrs.
Southwind Building C 1998 5-40 yrs.
Southwind Building D 1999 5-40 yrs.
The Colonnade 1998 5-40 yrs.
Norfolk, VA
Greenbrier Business Center 1984 5-40 yrs.
Hampton Center Two 1999 5-40 yrs.
Riverside II 1999 5-40 yrs.
Nashville, TN
3322 West End 1986 5-40 yrs.
3401 West End 1982 5-40 yrs.
5310 Maryland Way 1994 5-40 yrs.
BNA Corporate Center 1985 5-40 yrs.
Caterpillar Financial Center 1999 5-40 yrs.
Century City Plaza I 1987 5-40 yrs.
Cool Springs I N/A N/A
Cool Springs II 1978 5-40 yrs.
Cool Springs Land N/A N/A
Eastpark I, II, & III 1999 5-40 yrs.
Harpeth on the Green II 1984 5-40 yrs.
Harpeth on the Green III 1987 5-40 yrs.
Harpeth on the Green IV 1989 5-40 yrs.
Harpeth on The Green V 1998 5-40 yrs.
Hickory Trace N/A N/A
Highwoods Plaza I 1996 5-40 yrs.
Highwoods Plaza II 1997 5-40 yrs.
Lakeview Ridge I 1986 5-40 yrs.
Lakeview Ridge II 1998 5-40 yrs.
Lakeview Ridge III 1999 5-40 yrs.
Seven Springs - Land II N/A N/A
Seven Springs - Land I N/A N/A
SouthPointe 1998 5-40 yrs.
Sparrow Building 1982 5-40 yrs.
The Ramparts at Brentwood 1986 5-40 yrs.
Westwood South 1999 5-40 yrs.
Winners Circle 1987 5-40 yrs.
Orlando, FL
Capital Plaza Land N/A N/A
In Charge Institute 2000 5-40 yrs.
Interlachen Village 1987 5-40 yrs.
Lake Mary Land N/A N/A
MetroWest Center Land 1988 5-40 yrs.
MetroWest Land N/A N/A
Oakridge Office Park 1966-1992 5-40 yrs.
Sunport Center 1990 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Research Triangle, NC
3600 Glenwood Avenue 23640 Research Triangle -- 10,994
3645 Trust Drive - One North Commerce Center 23650 Research Triangle 520 2,949
3737 Glenwood Avenue 23660 Research Triangle -- 15,889
4300 Six Forks Road 23850 Research Triangle -- 15,504
4401 Research Commons 23720 Research Triangle 1,249 8,929
4800 North Park 23740 Research Triangle 2,678 17,673
4900 North Park 23750 Research Triangle 1,274 770 1,989
5000 North Park 23760 Research Triangle (6) 1,010 4,697
5200 Greens Dairy-One North Commerce Center 23770 Research Triangle 169 959
5220 Greens Dairy-One North Commerce Center 23780 Research Triangle 382 2,165
Amica 23810 Research Triangle 289 1,517
Arcadis 28580 Research Triangle 828 --
Arrowwood 23820 Research Triangle 955 3,406
Aspen Building 23830 Research Triangle 560 2,088
Blue Ridge I 23610 Research Triangle 722 4,538
Blue Ridge II 23600 Research Triangle 463 1,485
Cape Fear 23950 Research Triangle 131 --
Capital Center Land 23870 Research Triangle 851 --
Catawba 23980 Research Triangle 125 1,635
Cedar East 23880 Research Triangle 563 2,491
Cedar West 23890 Research Triangle 563 2,475
CentreGreen Five Land - Weston 28680 Research Triangle 3,402 --
CentreGreen One - Weston 28200 Research Triangle 1,677 7,133
CentreGreen Three Land - Weston 28690 Research Triangle 2,226 --
CentreGreen Two - Weston 28440 Research Triangle 1,763 7,478
Corporate Property 11000 Research Triangle 3,106 3,570
Cottonwood 23990 Research Triangle 609 3,253
Creekstone Crossings 23960 Research Triangle 728 3,841
Creekstone Park 24230 Research Triangle 796 --
Cypress 24000 Research Triangle 567 1,729
Dogwood 24010 Research Triangle 766 2,777
EPA Annex 24020 Research Triangle 2,601 10,920
GlenLake Land 28120 Research Triangle 3,860 --
Global Software 24040 Research Triangle (6) 465 7,471
Hawthorn 24050 Research Triangle 904 3,782
Healthsource 24090 Research Triangle 1,294 10,593
Highwoods Centre-Weston 24120 Research Triangle 532 7,902
Highwoods Office Center North Land 24170 Research Triangle 1,458 49
Highwoods Office Center South Land 24180 Research Triangle 4,917 --
Highwoods Tower One 24100 Research Triangle (6) 203 16,914
Highwoods Tower Two 24110 Research Triangle 365 20,164
Holiday Inn Reservations Center 24070 Research Triangle 867 2,735
Inveresk Land Parcel 2 23900 Research Triangle 657 --
Inveresk Land Parcel 3 23910 Research Triangle 548 --
Ironwood 24130 Research Triangle 319 1,276
Kaiser 24140 Research Triangle 133 3,625
Laurel 24150 Research Triangle 884 2,524
Leatherwood 24190 Research Triangle 213 851
Maplewood 24210 Research Triangle 149 2,928
Northpark-- Wake Forest 24240 Research Triangle 405 --
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Research Triangle, NC
3600 Glenwood Avenue -- -- -- 10,994 10,994 1,317
3645 Trust Drive - One North Commerce Center 268 460 788 3,409 4,197 461
3737 Glenwood Avenue -- 2,438 -- 18,327 18,327 1,344
4300 Six Forks Road -- 4,263 -- 19,767 19,767 1,859
4401 Research Commons -- 6,265 1,249 15,194 16,443 5,616
4800 North Park -- 1,454 2,678 19,127 21,805 3,699
4900 North Park -- 301 770 2,290 3,060 566
5000 North Park -- 1,752 1,010 6,449 7,459 1,700
5200 Greens Dairy-One North Commerce Center -- 168 169 1,127 1,296 172
5220 Greens Dairy-One North Commerce Center -- 292 382 2,457 2,839 409
Amica -- 91 289 1,608 1,897 369
Arcadis -- -- 828 -- 828 --
Arrowwood -- 665 955 4,071 5,026 1,048
Aspen Building -- 556 560 2,644 3,204 679
Blue Ridge I -- 1,096 722 5,634 6,356 1,398
Blue Ridge II -- (6) 463 1,479 1,942 570
Cape Fear -- 2,715 131 2,715 2,846 1,888
Capital Center Land 851 -- 851 --
Catawba -- 355 125 1,990 2,115 1,295
Cedar East -- 501 563 2,992 3,555 710
Cedar West -- 784 563 3,259 3,822 929
CentreGreen Five Land - Weston -- -- 3,402 -- 3,402 --
CentreGreen One - Weston 70 1,632 1,747 8,765 10,512 545
CentreGreen Three Land - Weston -- -- 2,226 -- 2,226 --
CentreGreen Two - Weston 42 467 1,805 7,945 9,750 180
Corporate Property 19,670 26,127 22,776 29,697 52,473 6,237
Cottonwood -- 33 609 3,286 3,895 631
Creekstone Crossings -- 274 728 4,115 4,843 703
Creekstone Park (647) -- 149 -- 149 --
Cypress -- 441 567 2,170 2,737 539
Dogwood -- 23 766 2,800 3,566 532
EPA Annex -- 183 2,601 11,103 13,704 1,917
GlenLake Land -- -- 3,860 -- 3,860 --
Global Software -- 93 465 7,564 8,029 2,073
Hawthorn -- 274 904 4,056 4,960 2,186
Healthsource 10 1,696 1,304 12,289 13,593 2,075
Highwoods Centre-Weston -- (128) 532 7,774 8,306 1,161
Highwoods Office Center North Land -- 1,458 49 1,507 17
Highwoods Office Center South Land -- 4,917 -- 4,917 --
Highwoods Tower One -- 890 203 17,804 18,007 4,989
Highwoods Tower Two -- 1,651 365 21,815 22,180 516
Holiday Inn Reservations Center -- 135 867 2,870 3,737 570
Inveresk Land Parcel 2 -- -- 657 -- 657 --
Inveresk Land Parcel 3 -- -- 548 -- 548 --
Ironwood -- 451 319 1,727 2,046 496
Kaiser -- 873 133 4,498 4,631 1,944
Laurel -- 689 884 3,213 4,097 690
Leatherwood -- 509 213 1,360 1,573 459
Maplewood -- 662 149 3,590 3,739 122
Northpark-- Wake Forest 93 3,982 498 3,982 4,480 734
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Research Triangle, NC
3600 Glenwood Avenue 1986 5-40 yrs.
3645 Trust Drive - One North Commerce Center 1984 5-40 yrs.
3737 Glenwood Avenue 1999 5-40 yrs.
4300 Six Forks Road 1995 5-40 yrs.
4401 Research Commons 1987 5-40 yrs.
4800 North Park 1985 5-40 yrs.
4900 North Park 1984 5-40 yrs.
5000 North Park 1980 5-40 yrs.
5200 Greens Dairy-One North Commerce Center 1984 5-40 yrs.
5220 Greens Dairy-One North Commerce Center 1984 5-40 yrs.
Amica 1983 5-40 yrs.
Arcadis N/A N/A
Arrowwood 1979 5-40 yrs.
Aspen Building 1980 5-40 yrs.
Blue Ridge I 1982 5-40 yrs.
Blue Ridge II 1988 5-40 yrs.
Cape Fear 1979 5-40 yrs.
Capital Center Land N/A N/A
Catawba 1980 5-40 yrs.
Cedar East 1981 5-40 yrs.
Cedar West 1981 5-40 yrs.
CentreGreen Five Land - Weston N/A N/A
CentreGreen One - Weston 2000 5-40 yrs.
CentreGreen Three Land - Weston N/A N/A
CentreGreen Two - Weston 2001 5-40 yrs.
Corporate Property -- 5-40 yrs.
Cottonwood 1983 5-40 yrs.
Creekstone Crossings 1990 5-40 yrs.
Creekstone Park N/A N/A
Cypress 1980 5-40 yrs.
Dogwood 1983 5-40 yrs.
EPA Annex 1966 5-40 yrs.
GlenLake Land N/A N/A
Global Software 1996 5-40 yrs.
Hawthorn 1987 5-40 yrs.
Healthsource 1996 5-40 yrs.
Highwoods Centre-Weston 1998 5-40 yrs.
Highwoods Office Center North Land N/A N/A
Highwoods Office Center South Land N/A N/A
Highwoods Tower One 1991 5-40 yrs.
Highwoods Tower Two 2001 5-40 yrs.
Holiday Inn Reservations Center 1984 5-40 yrs.
Inveresk Land Parcel 2 N/A N/A
Inveresk Land Parcel 3 N/A N/A
Ironwood 1978 5-40 yrs.
Kaiser 1988 5-40 yrs.
Laurel 1982 5-40 yrs.
Leatherwood 1979 5-40 yrs.
Maplewood N/A 5-40 yrs.
Northpark-- Wake Forest 1997 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Northpark Land - Wake Forest 24250 Research Triangle 1,586 --
Overlook 24280 Research Triangle 398 10,401
Pamlico 24290 Research Triangle 269 --
ParkWest One - Weston 28450 Research Triangle 374 2,938
ParkWest Three - Land - Weston 28470 Research Triangle 465 --
ParkWest Two - Weston 28460 Research Triangle 488 2,642
Phase I - One North Commerce Center 24260 Research Triangle 768 4,353
Pulse Athletic Club at Highwoods 24060 Research Triangle 142 524
Raleigh Corp Center Lot D 24320 Research Triangle 1,211 --
Red Oak 24330 Research Triangle 389 6,086
Rexwoods Center I 24350 Research Triangle (3) 775 --
Rexwoods Center II 24360 Research Triangle 355 --
Rexwoods Center III 24370 Research Triangle 886 --
Rexwoods Center IV 24380 Research Triangle (3) 586 --
Rexwoods Center V 24390 Research Triangle (6) 1,301 5,979
Riverbirch 24400 Research Triangle (6) 448 --
Six Forks Center I 24430 Research Triangle 666 2,663
Six Forks Center II 24440 Research Triangle 1,086 4,345
Six Forks Center III 24450 Research Triangle (6) 862 4,411
Smoketree Tower 24460 Research Triangle 2,353 11,802
South Square I 24470 Research Triangle 606 3,785
South Square II 24480 Research Triangle 525 4,710
Sycamore 24490 Research Triangle (6) 255 5,830
W Building - One North Commerce Center 24270 Research Triangle 1,163 6,592
Weston - Land 24540 Research Triangle 6,337 --
Willow Oak 24550 Research Triangle (6) 458 4,685
Richmond, VA
1309 E. Cary Street 24630 Richmond 171 685
4900 Cox Road 24640 Richmond 1,324 5,305
Airport Center I 24570 Richmond 708 4,374
Airport Center II 24580 Richmond 362 2,896
Capital One Building I 24590 Richmond 1,278 10,690
Capital One Building II 24600 Richmond 477 3,946
Capital One Building III 24610 Richmond 1,278 11,515
Capital One Parking Deck 24620 Richmond -- 2,288
Development Opportunity Strip 28340 Richmond 45 --
East Shore I 24660 Richmond -- 1,254
East Shore II 24670 Richmond 907 6,662
East Shore III 24680 Richmond -- 2,220
East Shore IV 28390 Richmond 2,345 --
Grove Park I 24690 Richmond 349 2,685
Grove Park II 24700 Richmond 983 --
Hamilton Beach 24890 Richmond 1,086 4,344
Highwoods Commons 24800 Richmond 547 4,342
Highwoods Distribution Center 24710 Richmond 517 5,714
Highwoods Five 24760 Richmond 806 4,948
Highwoods One 24720 Richmond (6) 1,846 8,613
Highwoods Plaza 24790 Richmond 907 4,937
Highwoods Two 24730 Richmond 785 5,170
Innsbrook Centre 24810 Richmond 914 6,768
Innslake Center 28560 Richmond 791 4,730
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Northpark Land - Wake Forest -- 1,586 -- 1,586 --
Overlook -- 668 398 11,069 11,467 1,371
Pamlico 20 11,087 289 11,087 11,376 3,890
ParkWest One - Weston 4 314 378 3,252 3,630 51
ParkWest Three - Land - Weston -- -- 465 -- 465 --
ParkWest Two - Weston 4 490 492 3,132 3,624 99
Phase I - One North Commerce Center -- 482 768 4,835 5,603 761
Pulse Athletic Club at Highwoods -- 2,516 142 3,040 3,182 521
Raleigh Corp Center Lot D -- 1,211 -- 1,211 --
Red Oak -- 436 389 6,522 6,911 825
Rexwoods Center I 103 3,917 878 3,917 4,795 1,257
Rexwoods Center II 7 1,905 362 1,905 2,267 418
Rexwoods Center III 34 2,923 920 2,923 3,843 794
Rexwoods Center IV -- 3,676 586 3,676 4,262 1,111
Rexwoods Center V -- 93 1,301 6,072 7,373 1,110
Riverbirch 21 4,565 469 4,565 5,034 1,678
Six Forks Center I -- 600 666 3,263 3,929 623
Six Forks Center II -- 929 1,086 5,274 6,360 923
Six Forks Center III -- 587 862 4,998 5,860 1,065
Smoketree Tower -- 2,275 2,353 14,077 16,430 3,351
South Square I -- 1,063 606 4,848 5,454 1,030
South Square II -- 427 525 5,137 5,662 1,069
Sycamore -- 73 255 5,903 6,158 1,333
W Building - One North Commerce Center -- 1,795 1,163 8,387 9,550 1,543
Weston - Land -- -- 6,337 -- 6,337 --
Willow Oak -- 1,875 458 6,560 7,018 2,161
Richmond, VA -- --
1309 E. Cary Street -- 100 171 785 956 139
4900 Cox Road -- 675 1,324 5,980 7,304 867
Airport Center I -- 1,016 708 5,390 6,098 949
Airport Center II -- 310 362 3,206 3,568 371
Capital One Building I -- 314 1,278 11,004 12,282 984
Capital One Building II -- 243 477 4,189 4,666 349
Capital One Building III -- (171) 1,278 11,344 12,622 913
Capital One Parking Deck -- 141 -- 2,429 2,429 139
Development Opportunity Strip -- -- 45 -- 45 --
East Shore I 953 5,301 953 6,555 7,508 327
East Shore II -- 114 907 6,776 7,683 902
East Shore III 1,319 4,520 1,319 6,740 8,059 380
East Shore IV 261 -- 2,606 -- 2,606 --
Grove Park I 364 3,159 713 5,844 6,557 1,104
Grove Park II -- 983 -- 983 --
Hamilton Beach -- 475 1,086 4,819 5,905 784
Highwoods Commons (26) (42) 521 4,300 4,821 435
Highwoods Distribution Center -- 545 517 6,259 6,776 563
Highwoods Five -- 947 806 5,895 6,701 888
Highwoods One -- 2,008 1,846 10,621 12,467 2,499
Highwoods Plaza -- 1,025 907 5,962 6,869 264
Highwoods Two -- 1,375 785 6,545 7,330 1,204
Innsbrook Centre -- 216 914 6,984 7,898 353
Innslake Center -- 587 791 5,317 6,108 15
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Northpark Land - Wake Forest N/A N/A
Overlook 1999 5-40 yrs.
Pamlico 1980 5-40 yrs.
ParkWest One - Weston 2001 5-40 yrs.
ParkWest Three - Land - Weston N/A N/A
ParkWest Two - Weston 2001 5-40 yrs.
Phase I - One North Commerce Center 1981 5-40 yrs.
Pulse Athletic Club at Highwoods 1998 5-40 yrs.
Raleigh Corp Center Lot D N/A N/A
Red Oak 1999 5-40 yrs.
Rexwoods Center I 1990 5-40 yrs.
Rexwoods Center II 1993 5-40 yrs.
Rexwoods Center III 1992 5-40 yrs.
Rexwoods Center IV 1995 5-40 yrs.
Rexwoods Center V 1998 5-40 yrs.
Riverbirch 1987 5-40 yrs.
Six Forks Center I 1982 5-40 yrs.
Six Forks Center II 1983 5-40 yrs.
Six Forks Center III 1987 5-40 yrs.
Smoketree Tower 1984 5-40 yrs.
South Square I 1988 5-40 yrs.
South Square II 1989 5-40 yrs.
Sycamore 1997 5-40 yrs.
W Building - One North Commerce Center 1983 5-40 yrs.
Weston - Land N/A N/A
Willow Oak 1995 5-40 yrs.
Richmond, VA
1309 E. Cary Street 1987 5-40 yrs.
4900 Cox Road 1991 5-40 yrs.
Airport Center I 1997 5-40 yrs.
Airport Center II 1998 5-40 yrs.
Capital One Building I 1999 5-40 yrs.
Capital One Building II 1999 5-40 yrs.
Capital One Building III 1999 5-40 yrs.
Capital One Parking Deck 1999 5-40 yrs.
Development Opportunity Strip N/A N/A
East Shore I N/A N/A
East Shore II 1999 5-40 yrs.
East Shore III 1999 5-40 yrs.
East Shore IV N/A N/A
Grove Park I 1997 5-40 yrs.
Grove Park II N/A N/A
Hamilton Beach 1986 5-40 yrs.
Highwoods Commons 1999 5-40 yrs.
Highwoods Distribution Center 1999 5-40 yrs.
Highwoods Five 1998 5-40 yrs.
Highwoods One 1996 5-40 yrs.
Highwoods Plaza 2000 5-40 yrs.
Highwoods Two 1997 5-40 yrs.
Innsbrook Centre 1989 5-40 yrs.
Innslake Center 2001 5-40 yrs.
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Liberty Mutual 24820 Richmond 3,067 1,205 4,819
Markel American 24840 Richmond 1,372 8,667
Mercer Plaza 24830 Richmond 1,556 12,350
North Park 24850 Richmond 2,163 8,659
North Shore Commons A 24860 Richmond 1,344 10,447
North Shore Commons B - Land 24870 Richmond 1,810 --
North Shore Commons C - Land 24880 Richmond 1,667 --
One Shockoe Plaza 24910 Richmond -- 19,324
Pavillion - Richmond 24900 Richmond 401 --
Pickles Land 28240 Richmond 1,276 --
Sadler & Cox Land 24770 Richmond 1,745 --
Stony Point F Land 24950 Richmond 2,589 --
Stony Point I 24930 Richmond 1,384 11,445
Stony Point II 24940 Richmond 1,561 10,949
Stony Point III 28430 Richmond 1,181 8,131
Technology Park 1 24650 Richmond 541 2,166
Technology Park 2 24960 Richmond 264 1,058
Vantage Place A 24980 Richmond 203 811
Vantage Place B 24990 Richmond 233 931
Vantage Place C 25000 Richmond 235 940
Vantage Place D 25010 Richmond 218 873
Vantage Pointe 25020 Richmond 1,089 4,354
Virginia Mutual 28250 Richmond 1,301 6,034
Waterfront Plaza 25030 Richmond 585 2,347
West Shore I 25040 Richmond 358 1,431
West Shore II 25050 Richmond 545 2,181
West Shore III 25060 Richmond 961 3,601
South Florida
The 1800 Eller Drive Building 25080 South Florida -- 9,724
Tampa, FL
380 Park Place 25770 Tampa 1,508 6,782
5400 Gray Street 25100 Tampa 350 295
Atrium 25120 Tampa 1,639 9,286
Bay View Commons Land 25200 Tampa 200 --
Bay View Office Centre 25210 Tampa 1,304 5,964
Bay Vista Gardens 25220 Tampa 447 4,777
Bay Vista Gardens II 25230 Tampa 1,328 6,981
Bay Vista Office Building 25250 Tampa 935 4,480
Bay Vista Retail 25260 Tampa 283 1,135
Brookwood Day Care Center 25370 Tampa 61 347
Clearwater Point 25280 Tampa 317 1,531
Countryside Place 25270 Tampa 843 3,731
Cypress Center I 25340 Tampa 3,171 12,635
Cypress Center III 25350 Tampa 1,190 7,690
Cypress Center Land 25320 Tampa 1,456 --
Cypress Commons 25330 Tampa 1,211 11,488
Cypress West 25360 Tampa 2,020 615 4,988
Expo Building 25380 Tampa 171 969
Feathersound Corporate Center II 25400 Tampa 2,191 800 7,282
Federated Land 25450 Tampa 6,028 --
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Liberty Mutual -- 680 1,205 5,499 6,704 966
Markel American -- 949 1,372 9,616 10,988 1,120
Mercer Plaza -- 1 1,556 12,351 13,907 637
North Park -- 655 2,163 9,314 11,477 1,437
North Shore Commons A -- 1,085 1,344 11,532 12,876 218
North Shore Commons B - Land -- -- 1,810 -- 1,810 --
North Shore Commons C - Land -- -- 1,667 -- 1,667 --
One Shockoe Plaza -- (3,954) -- 15,370 15,370 2,310
Pavillion - Richmond (401) -- -- -- -- --
Pickles Land -- -- 1,276 -- 1,276 --
Sadler & Cox Land -- 1,745 -- 1,745 --
Stony Point F Land -- -- 2,589 -- 2,589 --
Stony Point I -- 1,251 1,384 12,696 14,080 1,640
Stony Point II -- 1,773 1,561 12,722 14,283 1,306
Stony Point III -- 1,059 1,181 9,190 10,371 193
Technology Park 1 -- 391 541 2,557 3,098 476
Technology Park 2 -- 99 264 1,157 1,421 205
Vantage Place A -- 178 203 989 1,192 236
Vantage Place B -- 152 233 1,083 1,316 246
Vantage Place C -- 186 235 1,126 1,361 245
Vantage Place D -- 211 218 1,084 1,302 269
Vantage Pointe -- 599 1,089 4,953 6,042 904
Virginia Mutual -- (219) 1,301 5,815 7,116 196
Waterfront Plaza -- 750 585 3,097 3,682 706
West Shore I -- 69 358 1,500 1,858 234
West Shore II -- 57 545 2,238 2,783 328
West Shore III -- 1,370 961 4,971 5,932 1,039
South Florida -- --
The 1800 Eller Drive Building -- 491 -- 10,215 10,215 573
Tampa, FL -- --
380 Park Place -- 722 1,508 7,504 9,012 152
5400 Gray Street 5 350 300 650 32
Atrium (287) 2,230 1,352 11,516 12,868 1,463
Bay View Commons Land -- -- 200 -- 200 --
Bay View Office Centre -- 396 1,304 6,360 7,664 660
Bay Vista Gardens -- 26 447 4,803 5,250 471
Bay Vista Gardens II 134 396 1,462 7,377 8,839 960
Bay Vista Office Building -- 516 935 4,996 5,931 648
Bay Vista Retail -- 116 283 1,251 1,534 140
Brookwood Day Care Center -- 28 61 375 436 53
Clearwater Point (317) (1,531) -- -- -- --
Countryside Place -- 146 843 3,877 4,720 449
Cypress Center I -- 13 3,171 12,648 15,819 2,411
Cypress Center III -- 18 1,190 7,708 8,898 533
Cypress Center Land -- -- 1,456 -- 1,456 --
Cypress Commons -- 120 1,211 11,608 12,819 1,912
Cypress West -- 775 615 5,763 6,378 708
Expo Building (171) (969) -- -- -- --
Feathersound Corporate Center II -- 550 800 7,832 8,632 1,018
Federated Land (6,028) -- -- -- -- --
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Liberty Mutual 1990 5-40 yrs.
Markel American 1998 5-40 yrs.
Mercer Plaza 1984 5-40 yrs.
North Park 1989 5-40 yrs.
North Shore Commons A 5-40 yrs.
North Shore Commons B - Land N/A N/A
North Shore Commons C - Land N/A N/A
One Shockoe Plaza 1996 5-40 yrs.
Pavillion - Richmond N/A N/A
Pickles Land N/A N/A
Sadler & Cox Land N/A N/A
Stony Point F Land N/A N/A
Stony Point I 1990 5-40 yrs.
Stony Point II 1999 5-40 yrs.
Stony Point III 5-40 yrs.
Technology Park 1 1991 5-40 yrs.
Technology Park 2 1991 5-40 yrs.
Vantage Place A 1987 5-40 yrs.
Vantage Place B 1988 5-40 yrs.
Vantage Place C 1987 5-40 yrs.
Vantage Place D 1988 5-40 yrs.
Vantage Pointe 1990 5-40 yrs.
Virginia Mutual 1996 5-40 yrs.
Waterfront Plaza 1988 5-40 yrs.
West Shore I 1995 5-40 yrs.
West Shore II 1995 5-40 yrs.
West Shore III 1997 5-40 yrs.
South Florida
The 1800 Eller Drive Building 1983 5-40 yrs.
Tampa, FL
380 Park Place N/A N/A
5400 Gray Street 1973 5-40 yrs.
Atrium 1989 5-40 yrs.
Bay View Commons Land N/A N/A
Bay View Office Centre 1982 5-40 yrs.
Bay Vista Gardens 1982 5-40 yrs.
Bay Vista Gardens II 1997 5-40 yrs.
Bay Vista Office Building 1982 5-40 yrs.
Bay Vista Retail 1987 5-40 yrs.
Brookwood Day Care Center 1986 5-40 yrs.
Clearwater Point 1981 5-40 yrs.
Countryside Place 1988 5-40 yrs.
Cypress Center I 1982 5-40 yrs.
Cypress Center III 1983 5-40 yrs.
Cypress Center Land N/A N/A
Cypress Commons 1985 5-40 yrs.
Cypress West 1985 5-40 yrs.
Expo Building 1981 5-40 yrs.
Feathersound Corporate Center II 1986 5-40 yrs.
Federated Land N/A N/A
Initial Cost
----------------------
2001 Building &
Description JDE City Encumberance Land Improvements
- --------------------------------------------- ----- ------- ------------ ------- ------------
Firemans Fund Building 25410 Tampa 500 4,107
Fireman's Fund Land 25420 Tampa 1,002 --
Highwoods Plaza 25530 Tampa 545 4,650
Highwoods Preserve I 25470 Tampa -- 2,268
Highwoods Preserve II 25480 Tampa 42 274
Highwoods Preserve III 25490 Tampa -- 1,524
Highwoods Preserve IV 25500 Tampa 1,639 16,355
Highwoods Preserve Land 25540 Tampa 5,403 --
Highwoods Preserve V 25510 Tampa 1,440 21,189
Horizon 25460 Tampa (1) -- 6,114
LakePointe I 25660 Tampa (1) 2,100 31,390
LakePointe II 25640 Tampa (1) 2,000 20,376
Lakeside 25650 Tampa (1) -- 7,272
Northside Square Office 25720 Tampa 601 3,601
Northside Square Office/Retail 25730 Tampa 800 2,808
One Harbour Place 28180 Tampa (3) 2,015 25,252
Parkside 25740 Tampa (1) -- 9,193
Pavilion 25750 Tampa (1) -- 16,022
Pavilion Parking Garage 25760 Tampa -- 5,618
Registry I 25800 Tampa 744 4,216
Registry II 25810 Tampa 908 5,147
Registry Square 25820 Tampa 344 1,951
REO Building 25790 Tampa 795 4,484
Romac 28140 Tampa -- --
Sabal Business Center I 25840 Tampa 375 2,127
Sabal Business Center II 25850 Tampa 342 1,935
Sabal Business Center III 25860 Tampa 290 1,642
Sabal Business Center IV 25870 Tampa 819 4,638
Sabal Business Center V 25880 Tampa 1,026 5,813
Sabal Business Center VI 25890 Tampa 1,609 9,116
Sabal Business Center VII 25900 Tampa 1,519 8,605
Sabal Industrial Park Land 25920 Tampa 488 --
Sabal Lake Building 25910 Tampa 572 3,241
Sabal Park Plaza 25930 Tampa 611 3,460
Sabal Pavilion I 25970 Tampa 660 8,633
Sabal Pavilion II 25980 Tampa 533 --
Sabal Tech Center 25940 Tampa 548 3,107
Spectrum 25960 Tampa (1) 1,450 14,173
Summit Office Building 25950 Tampa 579 2,749
USF&G 26130 Tampa 1,366 7,742
Westshore Square 26140 Tampa 2,721 1,130 5,155
633,284 2,673,254
=======================================
Cost Capitalized Gross Amount at
subsequent to Which Carried at
Acquistion Close of Period
----------------------- ----------------------
Building & Building & Accumulated
Description Land Improvements Land Improvements Total Depreciation
- --------------------------------------------- ------ ------------ ------- ------------ --------- ------------
Firemans Fund Building -- 103 500 4,210 4,710 478
Fireman's Fund Land -- 1,002 -- 1,002 --
Highwoods Plaza -- 1,462 545 6,112 6,657 226
Highwoods Preserve I 1,618 23,368 1,618 25,636 27,254 1,439
Highwoods Preserve II 1,517 42 1,791 1,833 153
Highwoods Preserve III 1,488 21,140 1,488 22,664 24,152 1,027
Highwoods Preserve IV -- 8,576 1,639 24,931 26,570 764
Highwoods Preserve Land -- 5,403 -- 5,403 --
Highwoods Preserve V -- (68) 1,440 21,121 22,561 270
Horizon -- 554 -- 6,668 6,668 708
LakePointe I -- 552 2,100 31,942 34,042 3,431
LakePointe II -- 6,324 2,000 26,700 28,700 1,728
Lakeside -- 123 -- 7,395 7,395 776
Northside Square Office -- 220 601 3,821 4,422 439
Northside Square Office/Retail -- 86 800 2,894 3,694 317
One Harbour Place -- 531 2,015 25,783 27,798 977
Parkside -- 373 -- 9,566 9,566 1,007
Pavilion -- 516 -- 16,538 16,538 1,742
Pavilion Parking Garage -- -- -- 5,618 5,618 308
Registry I -- 648 744 4,864 5,608 718
Registry II -- 532 908 5,679 6,587 852
Registry Square -- 167 344 2,118 2,462 293
REO Building -- 292 795 4,776 5,571 529
Romac -- -- -- -- -- --
Sabal Business Center I -- 234 375 2,361 2,736 355
Sabal Business Center II -- 142 342 2,077 2,419 349
Sabal Business Center III -- 49 290 1,691 1,981 236
Sabal Business Center IV -- 222 819 4,860 5,679 655
Sabal Business Center V -- 242 1,026 6,055 7,081 826
Sabal Business Center VI -- 101 1,609 9,217 10,826 1,227
Sabal Business Center VII -- 81 1,519 8,686 10,205 1,153
Sabal Industrial Park Land -- 488 -- 488 --
Sabal Lake Building -- 152 572 3,393 3,965 529
Sabal Park Plaza -- 416 611 3,876 4,487 768
Sabal Pavilion I 304 2,686 964 11,319 12,283 921
Sabal Pavilion II -- 533 -- 533 --
Sabal Tech Center -- 97 548 3,204 3,752 425
Spectrum -- 298 1,450 14,471 15,921 1,625
Summit Office Building -- 13 579 2,762 3,341 269
USF&G -- 1,391 1,366 9,133 10,499 1,802
Westshore Square -- 224 1,130 5,379 6,509 535
(6,978) 297,621 626,306 2,970,875 3,597,181 377,103
==========================================================================
Life on
Which
Date of Depreciation
Description Construction is Computed
- --------------------------------------------- ------------ ------------
Firemans Fund Building 1982 5-40 yrs.
Fireman's Fund Land N/A N/A
Highwoods Plaza 1999 5-40 yrs.
Highwoods Preserve I 1999 5-40 yrs.
Highwoods Preserve II 2001 5-40 yrs.
Highwoods Preserve III 1999 5-40 yrs.
Highwoods Preserve IV 1999 5-40 yrs.
Highwoods Preserve Land N/A N/A
Highwoods Preserve V 2001 5-40 yrs.
Horizon 1980 5-40 yrs.
LakePointe I 1986 5-40 yrs.
LakePointe II 1999 5-40 yrs.
Lakeside 1978 5-40 yrs.
Northside Square Office 1986 5-40 yrs.
Northside Square Office/Retail 1986 5-40 yrs.
One Harbour Place 1985 5-40 yrs.
Parkside 1979 5-40 yrs.
Pavilion 1982 5-40 yrs.
Pavilion Parking Garage 1999 5-40 yrs.
Registry I 1985 5-40 yrs.
Registry II 1987 5-40 yrs.
Registry Square 1988 5-40 yrs.
REO Building 1983 5-40 yrs.
Romac N/A N/A
Sabal Business Center I 1982 5-40 yrs.
Sabal Business Center II 1984 5-40 yrs.
Sabal Business Center III 1984 5-40 yrs.
Sabal Business Center IV 1984 5-40 yrs.
Sabal Business Center V 1988 5-40 yrs.
Sabal Business Center VI 1988 5-40 yrs.
Sabal Business Center VII 1990 5-40 yrs.
Sabal Industrial Park Land N/A N/A
Sabal Lake Building 1986 5-40 yrs.
Sabal Park Plaza 1987 5-40 yrs.
Sabal Pavilion I 1998 5-40 yrs.
Sabal Pavilion II N/A N/A
Sabal Tech Center 1989 5-40 yrs.
Spectrum 1984 5-40 yrs.
Summit Office Building 1988 5-40 yrs.
USF&G 1988 5-40 yrs.
Westshore Square 1976 5-40 yrs.
(1) These assets are pledged as collateral for a $69,868,000 first mortgage
loan.
(2) These assets are pledged as collateral for an $44,479,000 first mortgage
loan.
(3) These assets are pledged as collateral for a $28,693,000 first mortgage
loan.
(4) These assets are pledged as collateral for a $7,504,000 first mortgage
loan.
(5) These assets are pledged as collateral for a $134,966,000 first mortgage
loan.
(6) These assets are pledged as collateral for a $182,939,000 first mortgage
loan.
HIGHWOODS REALTY LIMITED PARTNERSHIP
NOTE TO SCHEDULE III
(In Thousands)
As of December 31, 2001, 2000, and 1999
A summary of activity for Real estate and accumulated depreciation is as follows
December 31,
--------------------------------------
2001 2000 1999
---------- ---------- ----------
Real Estate:
Balance at beginning of year ............................................. 3,419,351 3,743,934 3,992,428
Additions
Acquisitions, Development and Improvments ............................. 336,105 403,546 515,946
Cost of real estate sold .............................................. (158,275) (728,129) (764,440)
---------- ---------- ----------
Balance at close of year (a) ............................................. 3,597,181 3,419,351 3,743,934
========== ========== ==========
Accumulated Depreciaition
Balance at beginning of year ............................................. 280,772 237,979 167,989
Depreciation expense .................................................. 104,691 103,435 99,386
Real estate sold ...................................................... (8,360) (60,642) (29,396)
---------- ---------- ----------
Balance at close of year (b) ............................................. 377,103 280,772 237,979
========== ========== ==========
(a) Reconciliation of total cost to balance sheet caption at December 31,
2001, 2000, and 1999 (in Thousands)
2001 2000 1999
---------- ---------- ----------
Total per schedule III ...................................................... 3,597,181 3,419,351 3,743,934
Development in process ...................................................... 108,118 87,622 186,925
Furniture, fixtures and equipment ........................................... 19,392 11,433 7,917
Property held for sale ...................................................... (83,325) (133,303) (51,602)
---------- ---------- ----------
Total real estate assets at cost ............................................ 3,641,366 3,385,103 3,887,174
========== ========== ==========
(b) Reconciliation of total Accumulated Depreciation to balance sheet caption
at December 31, 2001, 2000, and 1999 (in Thousands)
2001 2000 1999
---------- ---------- ----------
Total per Schedule III ...................................................... 377,103 280,772 237,979
Accumulated Depreciation - furniture, fixtures and equipment ................ 9,649 5,317 2,799
Property held for sale ...................................................... (1,294) (5,480) (2,643)
---------- ---------- ----------
Total accumulated depreciation .............................................. 385,458 280,609 238,135
========== ========== ==========