UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-K

 

(Mark One)
ý		Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
		For the fiscal year ended December 31, 2002
OR
o		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   0-20625

 

DUKE REALTY LIMITED PARTNERSHIP

 

 

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    ý     No    o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 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 to this Form 10-K.   ý

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act).  Yes  o No  ý

 

The aggregate market value of the Limited Partner Units held by non-affiliates of Registrant is $321.5 million based on the last reported sale price of the common shares of Duke Realty Corporation into which Limited Partner Units are exchangeable, on February 18, 2003.

 

The number of Limited Partnership Units outstanding as of February 18, 2003, was 149,963,048.

 

 

TABLE OF CONTENTS

 

Form 10-K

 

PART I
	1.	Business
	2.	Properties
	3.	Legal Proceedings
	4.	Submission of Matters to a Vote of Security Holders
		Executive Officers of the General Partner
PART II
	5.	Market for the Registrant’s Common Equity and Related Stockholder Matters
	6.	Selected Consolidated Financial Data
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	7A.	Quantitative and Qualitative Disclosures about Market Risk
	8.	Financial Statements and Supplementary Data
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	10.	Directors and Executive Officers of the Registrant
	11.	Executive Compensation
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholders Matters
	13.	Certain Relationships and Related Transactions
	14.	Disclosure Controls and Procedures
PART IV
	15	Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures

 

 

PART I

 

Item 1.  Business

 

Risk Factors

 

There are certain risk factors associated with an investment of securities issued by Duke Realty Corporation (the “General Partner”) and Duke Realty Limited Partnership (the “Partnership”). Discussion of these risk factors can be found in the General Partner’s Report on Form 8K filed with the Securities and Exchange Commission (“SEC”) on December 6, 2001.

 

Background

 

The Partnership was formed on October 4, 1993, when Duke Realty Corporation (the “Predecessor” or the “General Partner”) contributed all of its properties and related assets and liabilities, along with the net proceeds of $309.3 million from the issuance of an additional 14,000,833 shares of the General Partner through an offering, to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest. The General Partner was formed in 1985 and qualifies as a Real Estate Investment Trust (“REIT”) under provisions of the Internal Revenue Code. The General Partner is the sole general partner of the Partnership, owning 90.1% of the partnership interest as of December 31, 2002 (“General Partner Units”). The remaining 9.9% of the Partnership is owned by limited partners (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”). As of December 31, 2002, the Partnership’s diversified portfolio of 927 rental properties (including 17 properties totaling 3.1 million square feet under development) encompass over 108 million rentable square feet and are leased by a diverse and stable base of approximately 4,500 tenants whose businesses include manufacturing, retailing, wholesale trade, distribution and professional services. The Partnership also owns or controls more than 3,800 acres of unencumbered land ready for development.

 

The Partnership, through its Service Operations, also provides, on a fee basis, leasing, property and asset management, development, construction, build-to-suit, and other tenant-related services for approximately 400 tenants in over 8 million square feet of space at properties owned by third-party clients. With 13 primary operating platforms, the Partnership concentrates its activities in the Midwest and Southeast United States. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data” for financial information. The Partnership conducts its Service Operations through Duke Realty Services Limited Partnership (“DRSLP”) and Duke Construction Limited Partnership (“DCLP”). All references to the “Partnership” in this Annual Report Form 10-K include the Partnership and those entities owned or controlled by the Partnership, unless the context indicates otherwise.

 

The Partnership’s headquarters and executive offices are located in Indianapolis, Indiana. In addition, the Partnership has twelve regional offices located in Atlanta, Georgia; Cincinnati, Ohio; Columbus, Ohio; Cleveland, Ohio; Chicago, Illinois; Dallas, Texas; Minneapolis, Minnesota; Nashville, Tennessee; Orlando, Florida; Raleigh, North Carolina; St. Louis, Missouri and Tampa, Florida. The Partnership had 1,001 employees as of December 31, 2002.

 

Business Strategy

 

The Partnership’s business objective is to increase its Funds From Operations (“FFO”) by (i) maintaining and increasing property occupancy and rental rates through the aggressive management of its portfolio of existing properties; (ii) expanding existing properties; (iii) developing and acquiring new properties; and (iv) providing a full line of real estate services to the Partnership’s tenants and to third-parties. FFO is defined by the National Association of Real Estate Investment Trusts as net income or loss, excluding gains or losses from sales of depreciated operating property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. While management believes that FFO

 

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is a relevant measure of the Partnership’s operating performance because it is widely used by industry analysts to measure the operating performance of equity REITs, such amount does not represent cash flow from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Partnership’s operating performance, and is not indicative of cash available to fund all cash flow needs. As a fully integrated commercial real estate firm, the Partnership believes that its in-house leasing, management, development and construction services and the Partnership’s significant base of commercially zoned and unencumbered land in existing business parks should give the Partnership a competitive advantage in its future development activities.

 

The Partnership believes that the analysis of real estate opportunities and risks can be done most effectively at regional or local levels. As a result, the Partnership intends to continue its emphasis on increasing its market share and effective rents in its primary markets where it owns properties. The Partnership also expects to utilize its more than 3,800 acres of unencumbered land and its many business relationships with nearly 4,500 commercial tenants to expand its build-to-suit business (development projects substantially pre-leased to a single tenant) and to pursue other development and acquisition opportunities in its primary markets. The Partnership believes that this regional focus will allow it to assess market supply and demand for real estate more effectively as well as to capitalize on its strong relationships with its tenant base.

 

The Partnership’s policy is to seek to develop and acquire Class A commercial properties located in markets with high growth potential for Fortune 500 companies and other quality regional and local firms. The Partnership’s industrial and suburban office development focuses on business parks and mixed-use developments suitable for multiple projects on a single site where the Partnership can create and control the business environment. These business parks and mixed-use developments generally include restaurants and other amenities which the Partnership believes will create an atmosphere that is particularly efficient and desirable. The Partnership’s retail development focuses on community, power and neighborhood centers in its existing markets. As a fully integrated real estate company, the Partnership is able to arrange for or provide to its industrial, office and retail tenants not only well located and well maintained facilities, but also additional services such as build-to-suit construction, tenant finish construction, expansion flexibility and advertising and marketing services.

 

All of the Partnership’s properties are located in areas that include competitive properties. Such properties are generally owned by institutional investors, other REITs or local real estate operators; however, no single competitor or small group of competitors is dominant in the Partnership’s current markets. The supply and demand of similar available rental properties may affect the rental rates the Partnership will receive on its properties.

 

Financing Strategy

 

The Partnership seeks to maintain a well-balanced, conservative and flexible capital structure by: (i) extending and sequencing the maturity dates of its debt; (ii) borrowing primarily at fixed rates; (iii) generally pursuing current and future long-term debt financings and refinancings on an unsecured basis; and (iv) maintaining conservative debt service and fixed charge coverage ratios. Management believes that these strategies have enabled and should continue to enable the General Partner and the Partnership to access capital markets for their long-term requirements such as debt refinancings and financing development and acquisitions of additional rental properties. In addition, as discussed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Partnership has a $500 million unsecured line of credit and a $50 million secured line of credit available for short-term fundings of development and acquisition of additional rental properties. In addition, the Partnership pursues favorable opportunities to dispose of assets that no longer meet the Partnership’s long-term investment criteria and re-deploy the proceeds into new investments that the Partnership believes have excellent long-term growth prospects. See additional discussion under Item 7,

 

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Partnership’s debt to total market capitalization ratio (total market capitalization is defined as the total market value of all outstanding Common Units and Preferred equity plus outstanding indebtedness) at December 31, 2002 was 32.7%. The Partnership’s ratio of earnings to debt service and ratio of earnings to fixed charges for the year ended December 31, 2002, were 2.40x and 1.88x, respectively. In computing the ratio of earnings to debt service, earnings have been calculated by adding debt service to income from continuing operations before earnings or losses from the sale of land and depreciable property dispositions, net of impairment adjustments. Debt service consists of interest expense and recurring principal amortization (excluding maturities) and excludes amortization of debt issuance costs. In computing the ratio of earnings to fixed charges, earnings have been calculated by adding fixed charges, excluding capitalized interest, to income from continuing operations before earnings or losses from the sale of land and depreciable property dispositions, net of impairment adjustments. Fixed charges consist of interest costs, whether expensed or capitalized, the interest component of rental expense, amortization of debt issuance costs and preferred equity dividend requirements.

 

Other

 

The Partnership’s operations are not dependent on a single or few customers as no single customer accounts for more than 1.6% of the Partnership’s total revenue. The Partnership’s operations are not subject to any significant seasonal fluctuations. The Partnership believes it is in compliance with environmental regulations and does not anticipate material effects of continued compliance.

 

For additional information regarding the Partnership’s investments and operations, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data.” For additional information about the Partnership’s business segments, see Item 8, “Financial Statements and Supplementary Data.”

 

In addition to this Annual Report, the General Partner and the Partnership file quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document that is filed at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 25049.  Please call the SEC at (800) SEC-0330 for further information about the public reference facilities. These documents also may be accessed through the SEC’s electronic data gathering, analysis and retrieval system (“EDGAR”) via electronic means, including the SEC’s home page on the Internet (http://www.sec.gov). In addition, since some of our securities are listed on the New York Stock Exchange, you can read SEC filings at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

 

Item 2.  Properties

 

Product Review

 

As of December 31, 2002, the Partnership owns an interest in a diversified portfolio of 927 commercial properties encompassing over 108 million net rentable square feet (including  17 properties comprising 3.1 million square feet under development) and more than 3,800 acres of land for future development.

 

Industrial Properties: The Partnership owns interests in 668 industrial properties encompassing approximately 81.7 million square feet (75% of total square feet) more specifically described as follows:

•                             Bulk Warehouses – Industrial warehouse/distribution buildings with clear ceiling heights of 20 feet or more. The Partnership owns 439 buildings totaling 67.9 million square feet of such properties.

•                             Service Centers – Also known as flex buildings or light industrial, this product type has 12-18 foot clear ceiling heights and a combination of drive-up and dock-height loading access. The Partnership owns 229 buildings totaling 13.8 million square feet of such properties.

 

 

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Office Properties:  The Partnership owns interests in 246 office buildings totaling approximately 25.6 million square feet (24% of total square feet) more specifically described as follows:

 

•                       Suburban Office – The Partnership owns 242 suburban office buildings totaling 24.7 million square feet.

•                       CBD Office – The Partnership owns four downtown office projects totaling approximately 861,000 square feet.

 

Retail Properties:  The Partnership owns interests in 13 retail projects totaling approximately 1.0 million square feet (1% of total square feet). These properties encompass both power and neighborhood shopping centers.

 

Land:  The Partnership owns or controls more than 3,800 acres of land located primarily in its existing business parks. The land is ready for immediate use and is unencumbered by debt. Over 59 million square feet of additional space can be developed on these sites and all of the land is zoned for either office, industrial or retail development.

 

Service Operations:  The Partnership provides property and asset management, development, leasing and construction services to third party owners in addition to its own properties. The Partnership’s current property management base for third parties includes over 8.0 million square feet of properties serving approximately 400 tenants.

 

Property Descriptions

 

The following schedule represents the geographic highlights of the Partnership’s in-service properties in its primary markets as of December 31, 2002:

 

 

		Square Feet(1)																	Percent of Annual Net Effective Rent
										Retail		Overall		Percent of Overall		Annual Net Effective Rent(2)
		Industrial				Office
		Service Center		Bulk		Suburban		CBD
Primary Market
Atlanta		3,300,785		9,137,762		1,996,336		—		19,115		14,453,998		13.74	%	78,288,523			13.78	%
Cincinnati		1,240,393		8,398,090		3,226,604		699,402		718,165		14,282,654		13.58	%	74,008,465			13.01	%
Indianapolis		1,608,384		16,602,443		2,433,524		161,984		102,090		20,908,425		19.88	%	66,060,906			11.62	%
St. Louis		1,368,761		2,890,585		3,313,179		—		—		7,572,525		7.20	%	65,449,116			11.51	%
Columbus		82,520		4,731,652		3,102,150		—		—		7,916,322		7.53	%	48,772,149			8.58	%
Minneapolis		2,553,377		4,245,231		1,156,912		—		—		7,955,520		7.56	%	48,022,224			8.44	%
Cleveland		60,600		3,359,967		2,018,449		—		—		5,439,016		5.17	%	40,916,417			7.20	%
Nashville		1,285,437		3,335,961		787,496		—		—		5,408,894		5.14	%	38,316,926			6.74	%
Raleigh		1,159,838		1,487,910		2,098,549		—		—		4,746,297		4.51	%	37,311,823			6.56	%
Chicago		276,344		3,352,629		1,619,021		—		—		5,247,994		4.99	%	28,790,456			5.06	%
Central Florida		350,493		2,096,277		1,136,439		—		—		3,583,209		3.41	%	22,105,509			3.89	%
Dallas		470,754		5,407,053		152,000		—		—		6,029,807		5.73	%	13,849,405			2.44	%
South Florida		—		539,336		675,581		—		—		1,214,917		1.15	%	6,207,622			1.09	%
Other(3)		—		436,139		—		—		—		436,139		0.41	%	557,914			0.10	%
Total		13,757,686		66,021,035		23,716,240		861,386		839,370		105,195,717		100.00	%	$	568,657,457		100.00	%
		13.08	%	62.77	%	22.54	%	0.82	%	0.80	%	100.00	%

 

		Occupancy %
		Industrial				Office
		Service Center		Bulk		Suburban		CBD		Retail		Overall
Primary   Market
Atlanta		89.18	%	80.06	%	87.05	%	—		100.00	%	83.13	%
Cincinnati		82.84	%	91.85	%	89.80	%	91.51	%	99.40	%	90.97	%
Indianapolis		93.94	%	89.45	%	85.86	%	95.34	%	91.62	%	89.43	%
St.Louis		82.91	%	86.32	%	94.05	%	—		—		89.09	%
Columbus		100.00	%	81.79	%	92.29	%	—		—		86.09	%
Minneapolis		87.75	%	87.64	%	87.03	%	—		—		87.59	%
Cleveland		100.00	%	86.49	%	87.26	%	—		—		86.93	%
Nashville		83.90	%	90.43	%	81.34	%	—		—		87.55	%
Raleigh		89.37	%	72.96	%	74.44	%	—		—		77.63	%
Chicago		68.03	%	81.36	%	81.15	%	—		—		80.59	%
Central Florida		86.15	%	76.97	%	77.09	%	—		—		77.91	%
Dallas		89.61	%	95.82	%	100.00	%	—		—		95.44	%
South Florida		—		100.00	%	65.17	%	—		—		80.63	%
Other(3)		—		100.00	%	—		—		—		100.00	%
Total		87.42	%	87.05	%	86.26	%	92.23		98.46		87.05	%

 

(1)          Includes all wholly owned and joint venture projects shown at 100% as of report date.

 

(2)          Represents the average annual rental property revenue due from tenants in occupancy as of the date of this report, excluding additional rent due as operating expense reimbursements, landlord allowances for operating expenses and percentage rents.  Joint Venture properties are shown at the Company’s ownership percentage.

 

(3)          Represents properties not located in the Company’s primary markets.  These properties are located in similar midwest or southeast markets.

 

4

 

Item 3.  Legal Proceedings

 

The General Partner and the Partnership are subject to various legal proceedings and claims that arise in the ordinary course of business.  In the opinion of management, the amount of any ultimate liability with respect to these actions will not materially affect the Partnership’s consolidated financial statements or results of operations.

 

Item 4.  Submission of Matters to a Vote of Security Holders

 

No matters were submitted to a vote of security holders of the Partnership during the fourth quarter of the year ended December 31, 2002.

 

Executive Officers of the General Partner

 

Gary A. Burk, age 51.  Mr. Burk has served as Vice Chairman and Executive Vice President of Construction of the General Partner since January 2003.  Mr. Burk served as Co-Chief Operating Officer of the General Partner from March 2002 until January 2003.  Prior to that time and since 1993, Mr. Burk served as the General Partner’s Executive Vice President, Construction.

 

Robert M. Chapman, age 49.  Mr. Chapman has served as the General Partner’s Executive Vice President, Southern Region, since 2000. He is responsible for the Partnership’s Atlanta, Orlando, Tampa, Raleigh, Nashville and Dallas property portfolios.  Mr. Chapman was previously the General Partner’s Executive Vice President of the Atlanta/Texas region from 1999 to 2000, and its Executive Vice President of Acquisitions and Dispositions from 1997 to 1999. Before joining the General Partner in 1997, he served as Senior Vice President and Portfolio Manager for The RREEF Funds. Prior to that, Gerald Hines Interests and Lincoln Property employed Mr. Chapman.

 

Howard L. Feinsand, age 55.  Mr. Feinsand has served as the General Partner’s Executive Vice President, and General Counsel since 1999. Mr. Feinsand served on the General Partner’s Board of Directors from  1988 to January 2003. From 1996 until 1999, Mr. Feinsand was the founder and principal of Choir Capital Ltd. From 1995 until 1996, he was Managing Director of Citicorp North America, Inc.  He was the Senior Vice President and Manager-Capital Markets, Pricing and Investor Programs of GE Capital Aviation Services, Inc., an aircraft leasing company, from 1989 to 1995.

 

Thomas L. Hefner, age 56.  Mr. Hefner has served as Chairman of the Board since 1998 and Chief Executive Officer of the General Partner since 1993. Mr. Hefner has served as a Director of the General Partner since 1993 and also serves as a member of the board of directors of the National Association of Real Estate Investment Trusts, the Central Indiana Corporate Partnership and the Nature Conservancy of Indiana. In addition, he serves on the Dean’s Advisory Council of Purdue University’s Krannert School of Business.

 

William E. Linville, III, age 48.  Mr. Linville has been Executive Vice President, Midwest Region, for the General Partner since March 2001. In this role, he has responsibility for the Partnership’s Indiana, Chicago, Minneapolis and St. Louis operations.  From 1994 until March 2001, Mr. Linville led the Partnership’s Midwest Industrial Group. He originally joined the Partnership in 1987 as head of its Indiana Industrial Group.

 

Dennis D. Oklak, age 49.  Mr. Oklak has served as the President and Chief Operating Officer of the General Partner since January 2003. Prior to that, Mr. Oklak served as Co-Chief Operating Officer and Executive Vice President of the General Partner. He was also the Chief Administrative Officer of the General Partner since 1997. From 1993 to 1997, he served as the General Partner’s Vice-President and Treasurer.

 

5

 

Darell E. Zink, Jr., age 56.  Mr. Zink has served as the General Partner’s Vice Chairman, Executive Vice President and Chief Financial Officer since January 2003.  Prior to that time he served as the General Partner’s Executive Vice President and Chief Financial Officer since 1993.  He has been with the Partnership since 1982 and has served as a Director since 1993.  Mr. Zink also serves as a member of the board of directors of Citizens Gas & Coke Utility, Fifth Third Bank of Indiana, the CICOA Foundation, the Indianapolis Chamber of Commerce, VEI/IMM (a subsidiary of Community Hospitals), Vanderbilt University Alumni Board and Educational Choice.  He also serves as chairman of the Inroads Advisory Board.

 

PART II

 

Item 5.  Market for the Registrant’s Common Equity and Related Stockholder Matters

 

There is no established public trading market for the Common Units. The following table sets forth the cash distributions paid during each quarter. As of February 18, 2003, there were 181 record holders of Common Units.

 

Quarter Ended		2002 Distributions per Common Unit			2001 Distributions per Common Unit
December 31		$	.455		$	.45
September 30		.455			.45
June 30		.450			.43
March 31		.450			.43

 

On January 29, 2003, the Partnership declared a quarterly cash distribution of $0.455 per Common Unit payable on February 28, 2003, to Common Unitholders of record on February 14, 2003.

 

Item 6.  Selected Consolidated Financial Data

 

The following sets forth selected consolidated financial and operating information on a historical basis for the Partnership for each of the years in the five-year period ended December 31, 2002. The following information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data” included in this Form 10-K (in thousands, except per unit amounts):

 

 

(1)          Funds From Operations is defined by the National Association of Real Estate Investment Trusts as net income or loss, excluding gains or losses from sales of depreciated property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. Funds From Operations does not represent cash flow from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Partnership’s operating performance, and is not indicative of cash available to fund all cash flow needs.

 

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Cautionary Statement Regarding Forward Looking Statements

 

Certain statements in this Annual Report, including those related to the Partnership’s future operations, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Partnership, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this report. Some of the risks, uncertainties and other important factors that may affect future results include, among others:

 

•    General economic and business conditions;

•    The General Partner’s continued qualification as a real estate investment trust;

•    Competition for tenants and a decrease in property occupancy;

•    Potential increases in real estate construction costs;

•    Potential changes in interest rates;

•    Continuing ability to favorably raise debt and equity in the capital markets; and

•    Other risks inherent in the real estate business including tenant defaults, potential liability relating to environmental matters and liquidity of real estate investments.

 

This list of risks and uncertainties, however, is not intended to be exhaustive. The General Partner has on file with the SEC a Report on Form 8K dated December 6, 2001, with additional risk factor information.

 

The words “believe,” “estimate,” “expect” and similar expressions or statements regarding future periods are intended to identify forward-looking statements. Although we believe that the plans, expectations and results expressed in or suggested by our forward-looking statements are reasonable, all forward-looking statements are inherently uncertain as they involve substantial risks and uncertainties beyond the Partnership’s control. New factors emerge from time to time, and it is not possible for us to predict the nature or assess the potential impact of each new factor on the Partnership’s business. Given these uncertainties, we caution you not to place undue reliance on these forward-looking statements. The Partnership undertakes no obligation to update or revise any of its forward-looking statements for events or circumstances that arise after the statement is made.

 

Business Overview

 

As of December 31, 2002, the Partnership:

 

•                 Owned or controlled 927 industrial, office and retail properties (including properties under development), consisting of over 108 million square feet located in 12 states; and

•                 Owned or controlled approximately 3,800 acres of land with an estimated future development potential of approximately 59 million square feet of industrial, office and retail properties.

 

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The Partnership provides the following services for its properties and for certain properties owned by third parties:

 

•                 leasing;

•                 management;

•                 construction;

•                 development; and

•                 other tenant-related services.

 

The Partnership’s operating results depend primarily upon income from the Rental Operations of its properties. This rental income is substantially influenced by the supply and demand for the Partnership’s rental space. The Partnership’s continued growth is dependent upon its ability to maintain occupancy rates and increase rental rates of its in-service portfolio. The Partnership’s strategy for growth also includes developing and acquiring additional rental properties.

 

Rental Operations revenues decreased from $714.7 million in 2001 to $711.5 million in 2002, as the effects of a weakened economy lingered in the Partnership’s markets for 2001 and 2002. The occupancy level of the Partnership’s in-service portfolio decreased from 88.6% at December 31, 2001, to 87.1% at December 31, 2002 due to the following factors:

 

•    The low occupancy levels of new developments placed in-service over the last twelve to eighteen months as a result of slow lease-up activity;

•    The slowdown in demand in many of the Partnership’s markets from the weakened economy; and

•    The effects of the Partnership’s disposition activities in 2000 and 2001 during which the Partnership sold over $1 billion of assets in an effort to de-leverage the Partnership’s balance sheet and dispose of unwanted properties

 

While these events have affected growth and related rental income, the Partnership believes that is has strong liquidity and financial flexibility (See additional discussion under Liquidity and Capital Resources). With a debt to market capitalization ratio of 32.7% and $219 million available on its unsecured line of credit as of December 31, 2002, the Partnership believes that it is positioned to fund its operational expenses and shareholder distributions and to make future opportunistic real estate investments.

 

The following highlights the areas of Rental Operations that the Partnership considers critical for future revenue growth (all square footage totals and occupancy percentages reflect 100% of both wholly-owned properties and properties in joint ventures):

 

Same Property Performance: The Partnership tracks same property performance, which measures the performance of properties that were in-service for all reported portions of a two-year period by comparing the results of the second year with the results of the first year. In 2002, net operating income from the same property portfolio increased just .3% over 2001, compared to 4.4% growth in 2001 over 2000. The lower growth in same property performance resulted from lower occupancies in the properties that rolled into the same property population in 2002, coupled with the fact that a majority of the properties sold over the past two years were from the same property population and were over 90% leased. The lower occupancy on our same property population was slightly offset by an increase in net effective rents; however, rental rate growth has decreased significantly from 2000 and 2001.

 

Occupancy Analysis: As discussed above, the ability to maintain occupancy rates is a principal driver of the Partnership’s results of operations. The following table sets forth information regarding the Partnership’s in-service portfolio of rental properties as of December 31, 2002 and 2001 (square feet in thousands):

 

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		Total Square Feet				Percent of Total Square Feet				Percent Occupied
Type		2002		2001		2002		2001		2002		2001
Industrial
Service Centers		13,758		13,833		13.0	%	13.4	%	87.4	%	88.7	%
Bulk		66,021		64,786		62.8	%	63.0	%	87.1	%	89.4	%
Office		24,578		23,528		23.4	%	22.9	%	86.5	%	86.0	%
Retail		839		745		0.8	%	0.7	%	98.5	%	96.8	%
Total		105,196		102,892		100.0	%	100.0	%	87.1	%	88.6	%

 

The Partnership’s lower occupancy percentage in 2002 as compared to 2001 was primarily caused by slower lease-up of new developments placed in-service during 2002 and 2001 and reduced demand for existing space. While the decline in occupancy appears to be slowing, and the Partnership is focused on leasing existing space, management cannot predict when the occupancy of these properties will increase.

 

Lease Expiration: The Partnership’s ability to maintain and grow its occupancy rates primarily depends upon its continuing ability to re-lease expiring space. The following table reflects the Partnership’s in-service lease expiration schedule as of December 31, 2002, by product type. The table indicates square footage and annualized net effective rents (based on December 2002 rental revenue) under expiring leases (in thousands):

 

		Total Portfolio							Industrial					Office					Retail
Year of Expiration		Square Feet		Dollars			%		Square Feet		Dollars			Square Feet		Dollars			Square Feet		Dollars
2003		10,194		$	64,266		10	%	8,200		$	40,074		1,994		$	24,192		—		$	—
2004		10,963		77,778			12	%	8,248		39,784			2,692		37,587			23		407
2005		13,727		96,060			15	%	10,828		54,391			2,861		41,165			38		504
2006		11,045		76,865			12	%	8,725		45,491			2,315		31,296			5		78
2007		10,771		75,862			12	%	8,199		41,209			2,514		33,934			58		719
2008		8,491		52,229			8	%	6,912		30,958			1,555		20,901			24		370
2009		7,135		43,927			7	%	5,776		25,112			1,340		18,446			19		369
2010		6,312		49,314			8	%	4,511		21,403			1,785		27,647			16		264
2011		3,600		31,389			5	%	2,325		11,193			1,259		19,951			16		245
2012		4,303		26,920			4	%	3,267		12,526			1,018		13,896			18		498
2013 and Thereafter		5,037		46,849			7	%	2,508		12,310			1,920		29,788			609		4,751
		91,578		$	641,459		100	%	69,499		$	334,451		21,253		$	298,803		826		$	8,205
Total Portfolio Square Feet		105,196							79,779					24,578					839
Percent Occupied		87.05	%						87.12	%				86.47	%				98.46	%

 

Lease Renewals:  The Partnership renewed 72.1% of leases up for renewal in 2002, totaling 8.7 million square feet on which it attained a 3.3% growth in net effective rents. Slower demand for rental space reduced rental rates during 2002.

 

The Partnership does not currently expect its renewal percentage or its growth in net effective rents on new leases in 2003 to significantly differ from the re-leasing activity in 2002.

 

Future Development: The Partnership also expects to realize growth in earnings from Rental Operations through the development and acquisition of additional rental properties. Specifically, the Partnership has approximately 3.1 million square feet of properties under development at December 31, 2002. These properties under development should provide future earnings through Service Operations income upon sale or from Rental Operations growth as they are placed in service as follows (in thousands, except percent leased and stabilized returns):

 

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Anticipated In-Service Date			Square Feet		Percent Leased		Project Costs			Anticipated Stabilized Return
Held for Rental:
1st Quarter 2003			638		100	%	$	22,385		9.7	%
2nd Quarter 2003			427		81	%	42,232			10.8	%
3rd Quarter 2003			38		69	%	3,373			11.9	%
Thereafter			1,462		68	%	73,899			10.3	%
			2,565		78	%	$	141,889		10.4	%
Held for Sale:
1st Quarter 2003			17		82	%	$	2,335		13.5	%
2nd Quarter 2003			61		77	%	6,887			10.9	%
3rd Quarter 2003			159		70	%	15,204			12.0	%
Thereafter			256		100	%	28,707			8.9	%
			493		87	%	$	53,133		10.2	%
Total			3,058		80	%	$	195,022		10.3	%

 

Results of Operations

 

A summary of the Partnership’s operating results and property statistics for each of the years in the three-year period ended December 31, 2002, is as follows (in thousands, except number of properties and per unit amounts):

 

		2002			2001			2000
Rental Operations revenues		$	711,526		$	714,739		$	706,747
Service Operations revenues		67,620			80,459			82,799
Earnings from Rental Operations		219,114			254,103			225,183
Earnings from Service Operations		29,520			35,115			32,760
Operating income		223,899			273,665			236,806
Net income available for common units		179,746			262,430			245,029
Weighted average common units outstanding		149,423			147,961			145,906
Weighted average common and dilutive potential common units		150,839			151,710			147,441
Basic income per common unit:
Continuing operations		$	1.16		$	1.75		$	1.67
Discontinued operations		$	.04		$	.02		$	.01
Diluted income per common unit:
Continuing operations		$	1.15		$	1.73		$	1.65
Discontinued operations		.04			.02			.01
Number of in-service properties at end of year		910			888			913
In-service square footage at end of year		105,196			102,892			100,962
Under development square footage at end of year		3,058			4,701			8,056

 

Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001

 

Rental Operations

 

Rental Operations are comprised of net income from rental properties (“Rental Net Income”) and equity in earnings from unconsolidated companies (“Equity in Earnings”). Rental Net Income is defined as rental income less rental expenses and real estate taxes. Overall, Rental Net Income decreased from $492.1 million in 2001 to $483.9 million in 2002. The decrease is primarily attributable to an overall decrease in occupancy of the Partnership’s in-service portfolio from 88.6% at December 31, 2001, to 87.1% at December 31, 2002. This decrease is the result of the weakened economy and its effect on business in the Partnership’s markets. These markets are experiencing a shortage of demand compared to the supply of office and industrial space resulting from downsizing of leased space for existing tenants, the lack of new business growth, and the tendency of existing businesses to hold off on growth plans until the economy improves. These effects were somewhat mitigated by the Partnership recognizing $27.4 million and $18.3 million of lease termination fees in 2002 and 2001, respectively.

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The Partnership analyzes the results of Rental Operations by office, industrial and retail portfolios. The following highlights the financial results for each of the Partnership’s Rental Operations portfolios.

 

Office

Rental Net Income for Office properties increased from $255.3 million in 2001, to $265.8 million in 2002 as a result of the following:

•             The Partnership experienced an increase in its in-service Office portfolio occupancy from 86.0% at December 31, 2001, to 86.5% at December 31, 2002.

•             The Partnership’s in-service Office portfolio has increased from 229 properties at December 31, 2001, to 239 properties at December 31, 2002.

•             The Partnership recognized $21.7 million in termination fees associated with this segment in 2002, compared to $14.5 million in 2001.

 

Industrial

Rental Net Income for Industrial properties decreased to $212.6 million in 2002, from $223.1 million in 2001 as a result of the following:

 

•             The Partnership experienced a decrease in its in-service Industrial portfolio occupancy from 89.3% at December 31, 2001, to 87.1% at December 31, 2002.

•             The Partnership’s in-service Industrial portfolio increased from 649 properties at December 31, 2001 to 661 properties at December 31, 2002.

•             The Partnership recognized $5.5 million of lease termination fees for the year ended December 31, 2002, compared to $3.6 million in 2001.

 

Retail

Rental Net Income for Retail properties decreased to $6.0 million in 2002, from $15.0 million in 2001 in connection with the following:

•             In August of 2001, the Partnership sold 21 properties or approximately 75% of its retail portfolio.  As a result of this sale, the Partnership had eight months of operations associated with these properties in 2001.

•             The Partnership’s Retail portfolio had an in-service occupancy percentage of 98.5% at December 31, 2002, compared to 96.8% at December 31, 2001.

 

Depreciation and amortization expense for the year ended December 31, 2002, increased over the prior year through an increase in the Partnership’s building asset basis, increased investments in tenant improvements and the expensing of undepreciated tenant improvements associated with the early terminations of tenants.

 

The $5.2 million increase in interest expense is attributable to the following:

 

•             Interest capitalized on development projects decreased from $25.9 million in 2001 to $13.5 million in 2002 because of decreased development activity by the Partnership over the past twelve to eighteen months in response to soft demand in most of the Partnership’s markets.

•             Interest expense on the Partnership’s unsecured debt increased from $98.7 million in 2001 to $100.8 million in 2002. The Partnership issued $150 million of ten-year unsecured debt in August 2002 at an effective interest rate of 5.88% and $50 million of ten-year unsecured debt in September 2002 at an effective interest rate of 5.45%. Also in 2002, the Partnership paid off $50 million of debt that matured in September, which had an effective rate of 7.31%.

•             Interest expense on the Partnership’s secured debt decreased from $30.8 million in 2001 to $22.9 million in 2002 as the Partnership paid off $13.5 million of secured debt throughout 2002 and experienced lower borrowings on its secured line of credit during 2002 compared to 2001.  Additionally, the Partnership paid off approximately $128.5 million of secured debt throughout 2001.

 

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•             Interest expense on the Partnership’s $500 million unsecured line of credit decreased by approximately $1.1 million in 2002 compared to 2001 as the Partnership maintained lower balances on the line throughout most of 2002.

 

As a result of the above-mentioned items, earnings from Rental Operations decreased $35.0 million from $254.1 million for the year ended December 31, 2001, to $219.1 million for the year ended December 31, 2002.

 

Service Operations

 

Service Operations primarily consist of leasing, management, construction and development services for joint venture properties and properties owned by third parties. Service Operations revenues decreased from $80.5 million for the year ended December 31, 2001, to $67.6 million for the year ended December 31, 2002. The prolonged effect of the slow economy has been the primary factor in the overall decrease in revenues. The Partnership experienced a decrease of $12.7 million in net general contractor revenues because of a decrease in the volume of construction in 2002, compared to 2001, as well as slightly lower profit margins.

 

Property management, maintenance and leasing fee revenues decreased from $22.8 million in 2001 to $14.3 million in 2002 primarily because of a decrease in landscaping maintenance revenue resulting from the sale of the landscaping operations in the third quarter of 2001.

 

Construction management and development activity income represents construction and development fees earned on projects where the Partnership acts as the construction manager along with profits from the Partnership’s held for sale program whereby the Partnership develops a property for sale upon completion. The increase in revenues of $10.3 million in 2002 is primarily due to an increase in volume of the sale of properties from the held for sale program.

 

Service Operations expenses decreased from $45.3 million in 2001 to $38.1 million in 2002.  The decrease is attributable to the decrease in construction and development activity and the reduced overhead costs as a result of the sale of the landscape business in 2001.

 

As a result of the above, earnings from Service Operations decreased from $35.1 million for the year ended December 31, 2001, to $29.5 million for the year ended December 31, 2002.

 

General and Administrative Expense

 

General and Administrative Expense increased from $15.6 million in 2001 to $24.7 million for the year ended December 31, 2002. The Partnership has been successful reducing total operating and administration costs; however, reduced construction and development activities have resulted in a greater amount of overhead being charged to general and administrative expense instead of being capitalized into development projects or charged to Service Operations.

 

Other Income and Expenses

 

Gain on sale of land and depreciable property dispositions, net of impairment adjustment, is comprised of the following amounts in 2002 and 2001:

 

		2002			2001
Gain on sales of depreciable properties		$	4,491		$	45,428
Gain on land sales		4,478			5,080
Impairment adjustment		(9,379		)	(4,800		)
Total		$	(410	)	$	45,708

 

Gain on sales of depreciable properties represent sales of previously held for investment rental properties. Beginning in 2000 and continuing into 2001, the Partnership pursued favorable opportunities to dispose of

 

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real estate assets that no longer met long-term investment objectives. In 2002, the Partnership significantly reduced this property sales program until the business climate improves and provides better investment opportunities for the sale proceeds.

 

Gain on land sales represents sales of undeveloped land owned by the Partnership. The Partnership pursues opportunities to dispose of land in markets with a high concentration of undeveloped land and those markets where the land no longer meets strategic development plans of the Partnership.

 

The Partnership recorded a $9.4 million adjustment in 2002 associated with six properties determined to have an impairment of book value. The Partnership has analyzed each of its in-service properties and has determined that there are no additional valuation adjustments that need to be made as of December 31, 2002. The Partnership recorded an adjustment of $4.8 million in 2001 for one property that the Partnership had contracted to sell for a price less than its book value.

 

Other revenue for the year ended December 31, 2002, includes $1.4 million of gain related to an interest rate swap that did not qualify for hedge accounting.

 

Discontinued Operations

 

The Partnership adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”), on January 1, 2002. SFAS 144 requires the Partnership to report in discontinued operations the results of operations of a property that has either been disposed or is classified as held for sale, unless certain conditions are met.

 

The Partnership classified the results of operations of seven buildings in its December 31, 2002, held for sale portfolio as discontinued operations in accordance with SFAS 144. In addition, two properties were sold during 2002 that were identified as held for sale post adoption of SFAS 144; therefore, the results of operations and gains on disposal for these two properties are also reported in discontinued operations. The results of operations and gains from disposal for all other properties sold during the year ended December 31, 2002, are classified in continuing operations as these properties were identified as held for sale prior to the adoption of SFAS 144. The effect of the adoption of SFAS 144 resulted in net income of $3.2 million and $3.6 million being classified as discontinued operations for the years ended December 31, 2002 and 2001, respectively.  Additionally, the gain of $2.7 million on the sale of the two properties sold in 2002 is classified as discontinued operations in accordance with SFAS 144.

 

Net Income Available for Common Unitholders

 

Net income available for common unitholders for the year ended December 31, 2002 was $179.7 million compared to $262.4 million for the year ended December 31, 2001. This decrease results primarily from operating result fluctuations in Rental Operations, Service Operations, General and Administrative Expenses and earnings from sales of depreciable property as discussed above.

 

Comparison of Year Ended December 31, 2001 to Year Ended December 31, 2000

 

Rental Operations

 

Rental Net Income decreased from $503.5 million in 2000 to $492.1 million in 2001. This decrease is the result of an overall decrease in occupancy of in-service properties from 93.6 % at December 31, 2000, to 88.6% at December 31, 2001. Also contributing to the decline in Rental Net Income is the effects of the Partnership’s property dispositions. During 2000 and 2001, the Partnership sold approximately $1 billion of held for investment rental properties from its in-service portfolio.  A majority of these properties were over 90% leased and the new developments placed in-service over the same time period were leased at lower percentages and therefore, the Partnership realized less rental income. These effects were somewhat mitigated by the Partnership recognizing $18.3 million and $7.0 million of lease termination fees in 2001 and 2000, respectively.

 

13

 

The Partnership analyzes the results of Rental Operations by office, industrial and retail portfolios.  The following highlights the financial results for each of the Partnership’s Rental Operations portfolios.

 

Office

Rental Net Income for Office properties increased from $225.5 million in 2000, to $255.3 million in 2001 as a result of the following:

•             The Partnership experienced a decrease in its in-service Office portfolio occupancy from 91.3% at December 31, 2000, to 86.1% at December 31, 2001.

•             The Partnership’s in-service Office portfolio increased from 232 properties at December 31, 2000 to 239 properties at December 31, 2001.

•             The Partnership recognized $14.5 million in lease termination fees associated with this segment in 2001, compared to only $3.8 million in 2000.

 

Industrial

Rental Net Income for Industrial properties decreased to $223.1 million in 2001, from $256.3 million in 2000 as a result of the following:

•             The Partnership experienced a decrease in its in-service Industrial portfolio occupancy from 94.2% at December 31, 2000, to 89.3% at December 31, 2001.

•             The Partnership’s in-service Industrial portfolio decreased from 695 properties at December 31, 2000 to 663 properties at December 31, 2001.

•             In 2001, the Partnership recognized $3.6 million of lease termination fees, compared to $2.9 million in 2000.

 

Retail

Rental Net Income for Retail properties decreased to $15.0 million in 2001, from $23.0 million in 2000 as a result of the following:

•             In August of 2001, the Partnership sold 21 properties or approximately 75% of its retail portfolio.  As a result of this sale, the Partnership had only eight months of operations associated with these properties in 2001, compared to twelve in 2000.

•             The Partnership’s retail portfolio had an in-service occupancy percentage of 96.7% at December 31, 2001, compared to 97.8% at December 31, 2000.

•             The Partnership recognized approximately $235,000 of lease termination fees in 2001 compared to $289,000 in 2000.

 

The $19.5 million decrease in interest expense is primarily attributable to lower outstanding balances on the Partnership’s lines of credit associated with the financing of the Partnership’s investment and operating activities. The Partnership has maintained a significantly lower balance on its lines of credit throughout 2001 compared to 2000, as a result of its property dispositions proceeds used to fund future development, combined with a lower development level as a result of the slower economy. Additionally, the Partnership paid off $128.5 million of secured mortgage loans throughout 2001, as well as an $85 million unsecured term loan. These decreases were partially offset by an increase in interest expense on unsecured debt as a result of the Partnership issuing $175.0 million of debt in February 2001, as well as a decrease in the amount of interest capitalized in 2001 versus 2000, because of the decrease in development activity by the Partnership.

 

As a result of the above-mentioned items, earnings from Rental Operations increased $28.9 million from $225.2 million for the year ended December 31, 2000, to $254.1 million for the year ended December 31, 2001.

 

Service Operations

 

Service Operations revenues decreased from $82.8 million for the year ended December 31, 2000, to $80.5 million for the year ended December 31, 2001. The Partnership experienced a decrease of $4.3

 

14

 

million in net general contractor revenues from third party jobs because of a decrease in the volume of construction in 2001, compared to 2000, as well as slightly lower profit margins. This decrease is the effect of businesses delaying or terminating plans to expand in the wake of the slowed economy.

 

Property management, maintenance and leasing fee revenues decreased approximately $2.7 million mainly because of a decrease in landscaping maintenance revenue associated with the sale of the landscape business in the third quarter of 2001 (see discussion below).

 

Construction management and development activity income represents construction and development fees earned on projects where the Partnership acts as the construction manager along with profits from the Partnership’s held for sale program whereby the Partnership develops a property for sale upon completion. The increase in revenues of $2.2 million in 2001 is primarily because of an increase in profits on the sale of properties from the held for sale program.

 

Other income increased approximately $2.4 million in 2001 over 2000; due to a $1.8 million gain the Partnership recognized on the sale of its landscape business in the third quarter of 2001. The sale of the landscape business resulted in a total net profit of over $9 million after deducting all related expenses. This gain will be recognized in varying amounts over the next seven years because the Partnership has an on-going contract to purchase future services from the buyer.

 

Service Operations expenses decreased by $4.7 million for the year ended December 31, 2001, compared to the same period in 2000, as the Partnership reduced total overhead costs throughout 2001 in an effort to minimize the effects of decreased construction and development activity. The primary savings were experienced in employee salary and related costs through personnel reductions and reduced overhead costs from the sale of the landscaping business.

 

As a result, earnings from Service Operations increased from $32.8 million for the year ended December 31, 2000, to $35.1 million for the year ended December 31, 2001.

 

General and Administrative Expense

 

General and Administrative Expense decreased from $21.1 million in 2000 to $15.6 million for the year ended December 31, 2001, through overhead cost reduction efforts. In late 2000 and continuing throughout 2001, the Partnership introduced several cost cutting measures to reduce the amount of overhead, including personnel reductions, centralization of responsibilities and reduction of employee costs such as travel and entertainment.

 

Other Income and Expenses

 

Gain on sale of land and depreciable property dispositions, net of impairment adjustment, was comprised of the following amounts in 2001 and 2000:

 

		2001			2000
Gain on sales of depreciable properties		$	45,428		$	52,067
Gain on land sales		5,080			9,165
Impairment adjustment		(4,800		)	(540		)
Total		$	45,708		$	60,692

 

Gain on sales of depreciable properties represent sales of previously held for investment rental properties. Beginning in 2000 and continuing into 2001, the Partnership pursued favorable opportunities to dispose of real estate assets that no longer meet long-term investment objectives.

 

Gain on land sales represents sales of undeveloped land owned by the Partnership. The Partnership pursues opportunities to dispose of land in markets with a high concentration of undeveloped land and those markets where the land no longer meets strategic development plans of the Partnership.

 

15

 

The Partnership recorded a $4.8 million asset impairment adjustment in 2001 on a single property that was sold in 2002.

 

Other expense for the year ended December 31, 2001, includes a $1.4 million expense related to an interest rate swap that does not qualify for hedge accounting.

 

Net Income Available for Common Unitholders

 

Net income available for common unitholders for the year ended December 31, 2001 was $262.4 million compared to $245.0 million for the year ended December 31, 2000. This increase results primarily from the operating result fluctuations in Rental and Service Operations and earnings from sales of real estate assets explained above.

 

Critical Accounting Policies

 

The preparation of the Partnership’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  The Partnership’s estimates, judgments and assumptions are continually evaluated based upon available information and experience.  Note 1 to the Consolidated Financial Statements includes further discussion of the Partnership’s significant accounting policies.

 

The Partnership has assessed the accounting policies used in the preparation of its financial statements.  The following accounting policies are considered critical based upon materiality to the financial statements, degree of judgment involved in estimating reported amounts and sensitivity to changes in industry and economic conditions:

 

Accounting for joint ventures: The Partnership has equity interests ranging from 10-95% in joint ventures that own and operate rental properties and hold land for development. The Partnership consolidates those joint ventures that it controls through majority ownership interests or substantial participating rights. Control is further demonstrated by the ability of the general partner to manage day-to-day operations, refinance debt and sell the assets of the joint venture without the consent of the limited partner and inability of the limited partner to replace the general partner. The Partnership uses the equity method of accounting for those joint ventures where the Partnership does not have control over operating and financial polices. Under the equity method of accounting, the assets and liabilities of joint ventures for which the Partnership uses the equity method are not included on the Partnership’s balance sheet.

 

Cost Capitalization:  Direct and certain indirect costs, including interest, clearly associated with the development, construction, leasing or expansion of real estate investments are capitalized as a cost of the property.  The following discusses the significant categories of costs incurred by the Partnership:

 

Within the Rental Operations of the Partnership, direct and indirect costs are capitalized under the guidelines of FASB 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects (“FASB 67”) and interest costs are capitalized under the guidelines of FASB 34, “Capitalization of Interest Cost” (“FASB 34”). The Partnership capitalizes these project costs associated with the initial construction of a property up to the time the property is substantially complete and ready for its intended use. The Partnership believes the completion of the building shell is the proper basis for determining substantial completion and that this basis is the most widely accepted standard in the real estate industry. The interest rate used to capitalize costs is based upon the Partnership’s average borrowing rate on existing debt.

 

In addition, the Partnership capitalizes costs, including interest costs, on vacant space during extended lease-up periods after construction of the building shell has been completed if costs are being incurred to ready the vacant space for its intended use.  If costs and activities incurred to ready the vacant space cease, then cost

 

16

 

capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space, project costs are no longer capitalized. The Partnership ceases capitalization of all project costs on extended lease-up periods after the shorter of a one-year period after the completion of the building shell or when the property attains a 90% occupancy. The Partnership follows guidelines in FASB 34 and FASB 67 in determining the capitalization of project costs during the lease-up period of a property and believes that this treatment is consistent with real estate industry standards for project cost capitalization.

 

A portion of the direct costs associated with the construction/development division and the leasing division, as well as a portion of indirect costs, are capitalized into the cost of specific construction/development and leasing projects. The capitalized portion of these costs is based upon standard charges determined by the Partnership. The standard charges were established based upon time estimates developed by the Partnership to cover the direct overhead costs of the construction/ development and leasing divisions and a portion of the remaining indirect overhead of the Partnership. The Partnership reviews these standards on a quarterly basis to ensure that the amounts capitalized are appropriate.

 

Impairment of Real Estate Investments: The Partnership evaluates its real estate investments upon occurrence of significant changes in the operations, but not less than annually, to assess whether any impairment indications are present that affect the recovery of the recorded value. If any real estate investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value. The Partnership utilizes the guidelines established under SFAS 144 to determine if impairment conditions exist. Under SFAS 144, the Partnership reviews the expected undiscounted cash flows of each property in its held for rental portfolio to determine if there are any indications of impairment of a property. The review of anticipated cash flows involves subjective assumptions of estimated occupancy and rental rates and ultimate residual value. In addition to reviewing anticipated cash flows, the Partnership assesses other factors such as changes in business climate and legal factors that may affect the ultimate value of the property. These assumptions are subjective and may not ultimately be achieved.

 

Real estate assets to be disposed of are reported at the lower of their carrying value amount or the fair value less cost to sell.

 

Valuation of Receivables:  The Partnership is subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables. In order to mitigate these risks, the Partnership performs in-house credit review and analysis on major existing tenants and all significant leases before they are executed. The Partnership has the following procedures and policies to evaluate the collectibility of outstanding receivables and record allowances:

 

•             A tenant “watch list” as well as a list of the 100 largest tenants based upon annual gross rent is maintained and monitored for tenants with potential risk; and

•             The Partnership has a defined accounting policy to reserve for the entire tenant receivable balance of any tenant with an amount outstanding over 90 days.

 

Revenue Recognition on Long-Term Construction Contracts:  The Partnership recognizes income on long-term construction contracts where the Partnership serves as a general contractor on the percentage of completion method. Using this method, profits are recorded on the basis of the Partnership’s estimates of the overall profit and percentage of completion of individual contracts. A portion of the estimated profits is accrued based upon the Partnership’s estimates of the percentage of completion of the construction contract. Cumulative revenues recognized may be less or greater than cumulative costs and profits billed at any point in time during a contract’s term. This revenue recognition method involves inherent risk relating to profit and cost estimates that is reduced through approval and monitoring processes.

 

 

17

With regards to critical accounting policies, management has discussed the following with the Audit Committee of the General Partner’s Board of Directors:

 

•             Criteria for identifying and selecting;

•             Methodology in applying; and

•             Impact to the financial statements.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

The Partnership expects to meet liquidity requirements over the next twelve months, including payments of dividends and distributions as well as recurring capital expenditures relating to maintaining the Partnership’s current real estate assets, primarily through the following:

 

•              working capital; and

•              net cash provided by operating activities.

 

The Partnership expects to meet long-term liquidity requirements, such as scheduled mortgage debt maturities, the retirement of unsecured notes and amounts outstanding under the unsecured credit facility, property acquisitions, financing of development activities and other non-recurring capital improvements, through the following:

 

•              issuance of additional unsecured notes;

•              undistributed cash available for distribution, if any; and

•              proceeds received from real estate dispositions.

 

Rental Operations

The Partnership believes that its principal source of liquidity, cash flows from Rental Operations, provides a stable source of cash to fund operational expenses. The Partnership believes that this cash based revenue stream is substantially aligned with revenue recognition (except for periodic straight-line rental income accruals) as cash receipts from the leasing of rental properties are generally received in advance of or in a short time following the actual revenue recognition. The Partnership is subject to risks of decreased occupancy through market conditions as well as tenant defaults and bankruptcies, which would result in reduced cash flow from operations. However, management believes that these risks are mitigated by the Partnership’s strong market presence in most of its locations and the fact that the Partnership performs in-house credit review and analysis on major tenants and all significant leases before they are executed.

 

Credit Facilities

The Partnership has the following lines of credit available (in thousands):

 

Description		Borrowing Capacity			Maturity Date		Interest Rate		Amount Outstanding at December 31, 2002
Unsecured Line of Credit		$	500,000		February 2004		LIBOR + .65	%	$	281,000
Secured Line of Credit		$	50,000		January 2006		LIBOR + .60	%	$	23,895

 

The lines of credit are used to fund development and acquisition of additional rental properties and to provide working capital.

 

In December 2002, the Partnership renewed its secured line of credit and reduced the amount available from $100 million to $50 million, reduced the interest rate from LIBOR + 1.05% to LIBOR + .60%, and extended the maturity date to January 2006.

 

Associated with the $500 million line of credit are financial covenants that require the Partnership to meet defined levels of performance. As of December 31, 2002, the Partnership is in compliance with all covenants pertaining to the $500 million line of credit.

 

Debt and Equity Securities

The Partnership currently has on file with the SEC an effective shelf registration statement that permits the Partnership to sell up to an additional $420 million of unsecured debt securities.  In addition, the General

 

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Partner has on file with the SEC an effective shelf registration statement that permits the General Partner to sell up to an additional $250.7 million of common and preferred stock. From time-to-time, the Partnership and General Partner expect to issue additional securities under these registration statements to fund development and acquisition of additional rental properties and to fund the repayment of the credit facilities and other long-term debt upon maturity.

 

The indenture governing the Partnership’s unsecured notes also requires the Partnership to comply with financial ratios and other covenants regarding the operations of the Partnership. The Partnership is currently in compliance with all such covenants and expects to remain in compliance in the foreseeable future.

 

In January 2003, the Partnership completed an issuance of unsecured debt totaling $175 million bearing interest at 5.25%, due 2010.

 

Sale of Real Estate Assets

The Partnership utilizes sales of real estate assets as an additional source of liquidity.  During 2000 and 2001, the Partnership engaged in a capital-recycling program that resulted in sales of over $1 billion of real estate assets during these two years. In 2002, this program was substantially reduced as capital needs were met through other sources and the slower business climate provided fewer opportunities to profitably reinvest sale proceeds. The Partnership continues to pursue opportunities to sell real estate assets when beneficial to the long-term strategy of the Partnership.

 

Uses of Liquidity

 

The Partnership’s principal uses of liquidity include the following:

 

•              Property investments and recurring leasing/capital costs;

•              Dividends and distributions to shareholders and unitholders;

•              Long-term debt maturities; and

•              The General Partner’s common stock repurchase program.

 

Property Investments and Other Capital Expenditures

One of the Partnership’s principal uses of its liquidity is for the development, acquisition and recurring leasing/capital expenditures of its real estate investments.

 

A summary of the Partnership’s recurring capital expenditures is as follows (in thousands):

 

		2002			2001			2000
Tenant improvements		$	28,011		$	18,416		$	31,955
Leasing costs		17,975			13,845			17,530
Building improvements		13,373			10,873			6,804
Totals		$	59,359		$	43,134		$	56,289

 

Dividends and Distributions

In order to qualify as a REIT for federal income tax purposes, the General Partner must currently distribute at least 90% of its taxable income to its shareholders. The Partnership paid distributions of $1.81, $1.76 and $1.64 for the years ended December 31, 2002, 2001 and 2000, respectively. The Partnership expects to continue to distribute taxable earnings at least to the extent necessary for the General Partner to maintain its REIT status. However, distributions are declared at the discretion of the General Partner’s Board of Directors and are subject to actual cash available for distribution, the Partnership’s financial condition, capital requirements and such other factors as the Board of Directors deems relevant.

 

Debt Maturities

Debt outstanding at December 31, 2002, totals $2.1 billion with a weighted average interest rate of 6.25% maturing at various dates through 2028. The Partnership had $1.8 billion of unsecured debt and $299.1 million of secured debt outstanding at December 31, 2002. Scheduled principal amortization of such debt totaled $10.9 million for the year ended December 31, 2002.

 

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Following is a summary of the scheduled future amortization and maturities of the Partnership’s indebtedness at December 31, 2002 (in thousands):

 

											Weighted Average Interest Rate of Future Repayments
Year		Future Repayments
		Scheduled Amortization			Maturities			Total
2003		$	10,309		$	249,437		$	259,746		7.61	%
2004		8,724			462,151			470,875			4.11	%
2005		8,192			205,980			214,172			7.17	%
2006		7,702			170,074			177,776			6.38	%
2007		5,932			114,615			120,547			7.07	%
2008		4,939			133,852			138,791			6.20	%
2009		4,802			275,000			279,802			7.31	%
2010		4,194			—			4,194			6.30	%
2011		3,462			175,000			178,462			6.93	%
2012		1,977			200,000			201,977			5.76	%
Thereafter		9,943			50,000			59,943			6.54	%
		$	70,176		$	2,036,109		$	2,106,285		6.25	%

 

Common Stock Repurchase Program

In January 2000, the General Partner’s Board of Directors authorized a common stock repurchase program pursuant to which the General Partner was authorized to purchase up to $100 million of currently issued and outstanding common stock. During 2001, the General Partner’s Board of Directors increased the size of this common stock repurchase program to $250 million. This authority may be exercised from time to time and in such amounts as market conditions warrant. As of December 31, 2002, the General Partner has purchased 20,000 shares of common stock valued at $437,000 under the repurchase program. The General Partner considers the price of its common stock and the effect of repurchases on its financial condition in determining whether to purchase common stock under its repurchase program.

 

Historical Cash Flows

 

Cash and cash equivalents were $17.1 million, $10.5 million and $39.2 million at December 31, 2002, 2001 and 2000, respectively.  The 2002 increase of $6.6 million and 2001 decrease of $28.7 million is the result of the following increases and decreases in cash flows (amounts in thousands):

 

		Years Ended December 31,
		2002			2001			2000
Net cash provided by Operating Activities		$	569.0		$	348.7		$	363.6
Net Cash Provided (Used) by Investing Activities		$	(337.2	)	$	93.5		$	(12.0	)
Net Cash Used for Financing Activities		$	(225.1	)	$	(470.9	)	$	(331.0	)

 

Operating Activities

The $220.3 million increase in net cash provided by operating activities in 2002 compared to 2001 resulted primarily from the following:

•              The Partnership received net proceeds of $168.2 million from its Build-to-Suit operations in 2002, compared to incurring net development costs of $79.9 million in 2001.  During 2002, the Partnership sold eight properties from its Build-to-Suit portfolio and at the same time reduced its development pipeline in favor of developing properties to be held as rental investments.

 

The Partnership’s net cash provided by operating activities decrease of $14.7 million from 2000 to 2001 was primarily the result of changes in cash provided by changes in operating and assets and liabilities.

 

 

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Investing Activities

The decrease from net cash provided by investing activities in 2001 to 2002 was attributable to the following:

 

•              During 2001, the Partnership’s capital recycling program provided $436.1 million in net proceeds from land and depreciated property sales, compared to $52.2 million in 2002, as the Partnership curtailed its recycling program.

•              Real estate development costs decreased from $251.4 million in 2001 to $158.1 million in 2002, due to a reduction in new development in 2002 in response to weakened demand in many of the Partnership’s markets.

•              The Partnership acquired $98.1 million of real estate assets in 2002 compared to $13.9 million in 2001.

•              The Partnership acquired $92.2 million of undeveloped land in 2001 compared to $27.2 million in 2002. The Partnership continually evaluates its inventory of undeveloped land and strives to keep only land that meets long-term development opportunities.

•              In 2001, the Partnership received $50.0 million in distributions from unconsolidated companies associated with proceeds received from financing transactions on two joint ventures in which the Partnership has a 50% ownership interest.

 

The change from net cash used by investing activities in 2000 to net cash provided by investing activities in 2001 was the result of the following:

•              Real estate development costs decreased by $54.9 million.

•              Cash from tax deferred exchange escrow, net, increased by $43.5 million with the increased activity in the capital-recycling program.

•              In 2001, net proceeds from land and depreciated property sales increased by $22.4 million in connection with the capital recycling program.

•              Net decreases in recurring tenant improvements, leasing costs and deferred leasing costs of $45.6 million.

•              In 2000, the Partnership received $158.4 million in distributions from unconsolidated companies as a result of significant financing transactions with two joint ventures in which the Partnership has a 50% ownership interest (See discussion under Investments in Unconsolidated Companies).

 

Financing Activities

The $245.8 million decrease in net cash used for financing activities from 2001 to 2002 resulted from the following:

•                The Partnership had net borrowings of $157.3 million on its unsecured line of credit in 2002 compared to net repayments of $125.1 million in 2001. The change is primarily due to the Partnership’s increased use of its line of credit in the latter part of 2002.

•                During 2002, the General Partner redeemed its Series F Preferred Stock for $150.0 million and a portion of its Series B Preferred Stock for $17.7 million. In 2001, the General Partner redeemed its Series A Preferred Stock for $75.0 million and issued its Series I Preferred Stock for net proceeds of $72.2 million.

•                In 2002, the Partnership redeemed its Series G Preferred Units for $35.0 million.

•                In 2002, the Partnership issued $200.0 million of unsecured debt compared to $175.0 million in 2001.

•                The Partnership paid off $223.6 million of secured and unsecured debt in 2001 compared to $72.0 million in 2002. During 2001, the Partnership took advantage of excess liquidity to pay off a portion of its secured debt early.

•                Distributions to common unitholders increased from $262.2 million in 2001 to $271.7 million in 2002, which reflects the increase in common units outstanding and the quarterly per unit dividend increase from $.45 to $.455 in 2002.

 

The $139.9 million increase in net cash used for financing activities from 2000 to 2001 was attributable to the following:

•                The Partnership had net borrowings of $14.7 million in 2000 compared to net repayments of $125.1 million in 2001 as discussed above.

 

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•              The Partnership paid off $75.7 million of secured debt in 2000 compared to $223.6 million in 2001 as discussed above.

 

Credit Ratings

 

The General Partner and the Partnership are currently assigned investment grade corporate credit ratings on senior unsecured notes from Fitch Ratings, Moody’s Investor Service and Standard and Poor’s Ratings Group. Currently, Fitch and Standard and Poor’s have assigned a rating of BBB+ and Moody’s Investors has assigned a rating of Baa1 to the senior notes.These ratings could change based upon, among other things, the Partnership’s results of operations and financial condition.

 

The General Partner and the Partnership also receive credit ratings from the same rating agencies on preferred stock.  Fitch and Standard and Poor’s have assigned a rating of BBB and Moody’s Investors has assigned a rating of Baa2. These ratings could change based upon, among other things, the Partnership’s results of operations and financial condition.

 

Derivative Financial Instruments

 

The Partnership is exposed to capital market risk, such as changes in interest rates.  In order to manage the volatility relating to interest rate risk, the Partnership may enter into interest rate hedging arrangements from time to time. The Partnership does not utilize derivative financial instruments for trading or speculative purposes. On January 1, 2001, the Partnership adopted Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended (“SFAS 133”). SFAS 133 establishes accounting and reporting standards for derivative instruments and requires that entities recognize all derivatives as either assets or liabilities and measure those instruments at fair value. The cumulative effect of adopting SFAS 133 was not material to the Partnership’s financial statements.

 

During the years ended December 31, 2002 and 2001, the Partnership recorded a $1.4 million gain and a $1.4 million loss, respectively, associated with an interest rate contract that did not qualify for hedge accounting. The contract expired on December 30, 2002.

 

In December 2002, the Partnership simultaneously entered into two $50 million forward-starting interest rate swaps. The Partnership designated the aggregate $100 million swaps as a hedge to effectively fix the rate on financing expected in 2003. The Partnership expects and intends that the financing will be a ten-year fixed-rate semi-annual financing, pricing between May 1, 2003 and November 1, 2003. The fair value of the swaps was a liability of ($2.1) million as of December 31, 2002, and is recorded in other liabilities in the accompanying balance sheet. The swaps qualify for hedge accounting under SFAS 133, therefore, changes in fair value will be recorded in other comprehensive income.

 

In July 2001, the Partnership terminated three interest rate swaps that were tied to an $85 million unsecured term loan. The swaps qualified for hedge accounting under SFAS 133. The costs to terminate the swaps was $548,000, which was recorded as interest expense and reversed out of other comprehensive income.

 

Investments in Unconsolidated Companies

 

The Partnership has equity interests ranging from 10 – 64% in unconsolidated partnerships and joint ventures that own and operate rental properties and hold land for development. The equity method of accounting is used for these investments in which the Partnership has the ability to exercise significant influence, but not control, over operating and financial policies. As a result, the assets and liabilities of these joint ventures are not included on the Partnership’s balance sheet.

 

The Partnership’s investment in unconsolidated companies represents less than 6% of the Partnership’s total assets as of December 31, 2002. This investment provides several benefits to the Partnership including increased market share and an additional source of capital to fund real estate projects.

 

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The following tables presents summarized financial information for the Partnership’s investments in unconsolidated companies for the years ended December 31, 2002 and 2001 (in thousands, except percentages):

 

		Dugan Realty, LLC						Dugan Texas, LLC						Dugan Office, LLC						Other Industrial and Office Joint Ventures						Total
		2002			2001			2002			2001			2002			2001			2002			2001			2002			2001
Land, buildings and tenant improvements, net		$	739,372		$	748,318		$	214,796		$	204,339		$	94,718		$	97,855		$	183,140		$	210,978		$	1,232,026		$	1,261,490
Land held for development		18,763			18,572			9,148			12,453			4,294			4,293			6,643			6,644			38,848			41,962
Other Assets		26,372			23,443			17,427			9,484			4,654			4,383			19,137			24,707			67,590			62,017
		$	784,507		$	790,333		$	241,371		$	226,276		$	103,666		$	106,531		$	208,920		$	242,329		$	1,338,464		$	1,365,469
Property indebtedness		$	408,305		$	401,185		$	17,200		$	17,200		$	69,936		$	70,658		$	84,452		$	92,434		$	579,893		$	581,477
Other liabilities		17,533			19,086			7,851			8,172			3,790			3,308			22,883			30,043			52,057			60,609
		425,838			420,271			25,051			25,372			73,726			73,966			107,335			122,477			631,950			642,086
Owner’s equity		358,669			370,062			216,320			200,904			29,940			32,565			101,585			119,852			706,514			723,383
		$	784,507		$	790,333		$	241,371		$	226,276		$	103,666		$	106,531		$	208,920		$	242,329		$	1,338,464		$	1,365,469
Rental income		$	94,176		$	93,562		$	26,636		$	24,459		$	17,280		$	18,698		$	31,591		$	35,538		$	169,683		$	172,257
Net income		$	28,164		$	27,381		$	13,308		$	13,532		$	1,660		$	4,965		$	7,881		$	12,213		$	51,013		$	58,091
Total square feet		22,757			23,356			5,878			5,719			648			648			5,452			5,936			34,735			35,659
Percent leased		94.1		%	92.8		%	95.3		%	85.9		%	95.3		%	94.6		%	87.2		%	79.2		%	93.2		%	89.5		%
Partnership ownership percentage		50.0		%	50.0		%	50.0		%	50.0		%	50.0		%	50.0		%	10.0% -64.0		%	10.0% -64.0		%

 

In October 2000, the Partnership sold or contributed industrial properties and undeveloped land with a fair value of $487 million to a joint venture (Dugan Realty LLC) in which the Partnership has a 50% interest and recognized a net gain of $35.2 million. This transaction expanded an existing joint venture with an institutional real estate investor. As a result of the total transactions, the Partnership received $363.9 million of proceeds. The joint venture partially financed this transaction with $350 million of secured mortgage debt of which the Partnership has guaranteed $90 million and agreed to provide additional capital contributions to pay all sums due under the remaining $260 million. At December 31, 2002, this $350 million of debt is collateralized by rental properties with a net carrying value substantially in excess of the outstanding debt. If required to make additional capital contributions, the Partnership will receive proportionately increased ownership in the respective collateralized properties. The Partnership does not anticipate that it will be required to satisfy the guarantee or additional capital contribution obligations. In connection with this transaction, the joint venture partners were given an option to put up to a $50 million interest in the joint venture to the Partnership in exchange for common stock of the General Partner or cash, subject to timing and other restrictions. As a result of this put option, the Partnership deferred $10.2 million of gain on sale of depreciated property and recorded a $50 million liability. At December 31, 2002, the joint venture owns 130 buildings totaling approximately 23 million square feet with a value of approximately $760 million. The Partnership provides real estate related services to the venture through its Service Operations.

 

In December 2000, the Partnership contributed 14 industrial properties, including five under development, totaling approximately three million square feet to a joint venture (Dugan Texas LLC) in which the Partnership has a 50% interest. The Partnership also contributed 145 acres of undeveloped land. The Partnership received $33.1 million of proceeds and recorded a net gain of $686,000 as a result of the transaction. At December 31, 2002, the joint venture owns 32 buildings totaling approximately 6 million square feet with a value of approximately $224 million. The Partnership provides real estate related services to the venture through its Service Operations.

 

The Partnership does not have any relationships with unconsolidated entities or financial partnerships, such as “special purpose entities,” which were established for the purpose of facilitating off-balance sheet arrangements or other specific purposes.

 

Related Party Transactions

 

The Partnership provides property management, leasing, construction and other tenant related services to properties in which certain executives have ownership interests. The Partnership has an option to acquire

 

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these executive officers’ interests in these properties (the “Option Properties”). The Partnership received fees totaling $1.4 million, $1.7 million and $1.9 million in 2002, 2001 and 2000, respectively, for services provided to the Option Properties. The fees charged by the Partnership for such services are equivalent to those charged to third-party owners for similar services.

 

On June 27, 2001, A. Ray Weeks, Jr. resigned his position as a director and Vice Chairman of the General Partner. On August 17, 2001, the Partnership redeemed 620,156 common units beneficially owned by Mr. Weeks and certain members of his immediate and extended family (the “Weeks Affiliates”). The deemed value of the units redeemed was $15.7 million, which was based on the average closing stock price of the General Partner’s common stock for a certain period of days preceding the redemption date. As consideration for the redemption, the Weeks Affiliates received a distribution of seven industrial rental properties and one undeveloped tract of land located in the Atlanta, Georgia metropolitan area with a value of $31.7 million. The Weeks Affiliates also assumed a loan in the amount of $16 million from Wachovia Bank, N.A. to the Partnership. The value of the properties distributed to the Weeks Affiliates was based on negotiations between Mr. Weeks and members of the General Partner’s executive committee, and was approved by the unaffiliated members of the General Partner’s Board of Directors.

 

In 2002, the Partnership received lease termination fees totaling $7.7 million from a tenant that is a subsidiary of Progress Energy. William Cavanaugh III is President and Chief Executive Officer of Progress Energy and a member of the General Partner’s Board of Directors. The General Partner’s independent directors approved the transaction and management believes that the amount received approximates a value that would have been charged to tenants with similar lease terms and commitments.

 

The Partnership has other related party transactions that are insignificant and terms are considered to be at arm’s-length and equal to those negotiated with independent parties.

 

Commitments and Contingencies

 

The Partnership has the following commitments and contingencies in addition to those previously disclosed:

 

In 1998 and 1999, members of management and the General Partner’s Board of Directors purchased $69 million of common stock in connection with an Executive and Senior Officer Stock Purchase Plan. The purchases were financed by five-year personal loans at market interest rates from financial institutions. As of December 31, 2002, the outstanding balance on these loans is $33.5 million as some participants have exited the program and repaid their principal balance. These loans are secured by $41.0 million of the General Partner’s common shares (based on a price per share of $25.45 at December 31, 2002) purchased through this program and held at December 31, 2002, by the remaining plan participants. As a condition of the financing agreement with the financial institution, the Partnership has guaranteed repayment of principal, interest and other obligations for each participant, but is fully indemnified by the participants. In the opinion of management, it is not probable that the Partnership will be required to satisfy these guarantees.

 

The Partnership has entered into agreements, subject to the completion of due diligence requirements, resolution of certain contingencies and completion of customary closing conditions, for the future acquisition of land totaling $26.2 million. The acquisitions are scheduled to close periodically through 2003.

 

The Partnership renewed all major insurance programs for 2002-2003, including obtaining coverage for acts of terrorism for its properties. The Partnership believes that insurance is in place that provides adequate coverage to provide financial protection against normal insurance risks such that it believes that any loss experienced would not have a significant impact on the Partnership’s liquidity, financial position, or results of operations.

 

The Partnership is subject to various legal proceedings and claims that arise in the ordinary course of business. In the opinion of management, the amount of any ultimate liability with respect to these actions will not materially affect the Partnership’s consolidated financial statements or results of operations.

 

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Funds From Operations

 

Management believes that Funds From Operations (“FFO”) is the industry standard for reporting the operations of real estate investment trusts. FFO is defined by the National Association of Real Estate Investment Trusts as GAAP net income or loss, excluding gains or losses from sales of depreciated operating property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis.

 

The following table reflects the calculation of FFO for the years ended December 31 (in thousands):

 

		2002			2001			2000
Net income available for common units		$	179,746		$	262,430		$	245,029
Add back (deduct):
Depreciation and amortization		175,621			159,714			162,523
Share of adjustments for unconsolidated companies		17,657			14,177			9,104
Loss (Earnings) from depreciated property sales		3,430			(40,628		)	(51,527		)
Funds From Operations		$	376,454		$	395,693		$	365,129
Cash flow provided by (used by):
Operating activities		$	568,973		$	348,680		$	363,610
Investing activities		(337,247		)	93,488			(11,972		)
Financing activities		(225,050		)	(470,915		)	(330,952		)

 

While management believes that FFO is the most relevant and widely used measure of the Partnership’s operating performance, such amount does not represent cash flow from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Partnership’s operating performance, and is not indicative of cash available to fund all cash flow needs.

 

Accounting Changes

 

The Partnership elected to prospectively adopt Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock Based Compensation,”(“SFAS 123”) effective January 1, 2002. As a result, the Partnership expenses stock options over the vesting period based upon the estimated fair value of the options at the date of grant. Additionally, the Partnership expenses the discount given to employees under the employee stock purchase plan. The Partnership recorded expense of $405,000 for the year ended 2002 related to stock compensation from this accounting change.

 

In conjunction with the adoption of SFAS 123, the Partnership adopted SFAS No. 148, “Accounting for Stock Based Compensation- Transition and Disclosure,” which amends SFAS No. 123.  SFAS No. 148 provides for alternative methods of transition for a voluntary adoption of SFAS 123 and amends the disclosure requirements of SFAS 123 to require disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The adoption of this statement using the prospective method did not have a material impact on the financial position or results of operations of the Partnership.

 

The Partnership adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets,” (“SFAS 144”) on January 1, 2002.  SFAS 144 requires the Partnership to report in discontinued operations the results of operations of a property that has either been disposed of or is classified as held for sale, unless certain conditions are met. The effect of adoption of SFAS 144 resulted in net income of $3.2 million, $3.6 million and $1.2 million being classified as discontinued operations for the three years ended December 31, 2002, 2001 and 2000, respectively. SFAS 144 also requires that any gains or losses from the sale of a property be reported in discontinued operations, unless certain conditions are met. The Partnership also classified a gain on the sale of properties of $2.7 million as discontinued operations for the year ended December 31, 2002.

 

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Recent Accounting Pronouncements

 

In April 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 145, which rescinded SFAS No. 4, SFAS No. 44 and SFAS No. 64, as well as amending SFAS No. 13.  The adoption of this statement is not expected to have a material impact on the financial position or results of operations of the Partnership.

 

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which addresses financial accounting and reporting for costs associated with exit or disposal activities. The provisions of this statement are effective for exit and disposal activities that are initiated after December 31, 2002. The adoption of this statement is not expected to have a material impact on the financial position or results of operations of the Partnership.

 

In November 2002, FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“Interpretation 45”), which addresses the disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. These disclosure requirements are included in the footnotes to the consolidated financial statements. Interpretation 45 also requires the recognition of a liability by a guarantor at the inception of certain guarantees.

 

Interpretation 45 requires the guarantor to recognize a liability for the non-contingent component of the guarantee, which is the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. The Partnership has adopted the disclosure requirements of Interpretation 45 and will apply the recognition and measurement provisions for all guarantees entered into or modified after December 31, 2002.

 

In January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest Entities (“Interpretation 46”), which addresses consolidation of certain variable interest entities and is effective January 31, 2003. The Partnership will review its investments in unconsolidated companies based on this new accounting pronouncement, but does not anticipate that the adoption of Interpretation 46 will have a material impact on its financial statements.

 

Item 7A.  Quantitative and Qualitative Disclosure About Market Risks

 

The Partnership is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Partnership’s real estate investment portfolio and operations. The 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 its objectives the Partnership borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate its interest rate risk on a related financial instrument. The Partnership does not enter into derivative or interest rate transactions for speculative purposes.

 

The Partnership’s interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts (in thousands) of the expected annual maturities, weighted average interest rates for the average debt outstanding in the specified period, fair values and other terms required to evaluate the expected cash flows and sensitivity to interest rate changes. The fair values of the Partnership’s debt instruments are calculated as the present value of estimated future cash flows using a discount rate commensurate with the risks involved.

 

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		2003			2004			2005			2006			2007			Thereafter			Total			Fair Value
Fixed rate secured debt		$	83,809		$	38,900		$	13,204		$	52,860		$	19,580		$	51,023		$	259,376		$	278,820
Weighted average interest rate		8.32		%	7.68		%	7.19		%	7.17		%	7.63		%	5.63		%
Variable rate LIBOR based secured debt		$	—		$	—		$	—		$	23,895		$	—		$	—		$	23,895		$	23,895
Rate at December 31, 2002		N/A			N/A			N/A			1.98		%	NA			N/A
Variable rate Treasury based secured debt		$	686		$	711		$	741		$	781		$	811		$	12,146		$	15,876		$	15,875
Weighted average interest rate		1.39		%	1.39		%	1.39		%	1.38		%	1.38		%	1.29		%
Unsecured notes		$	175,251		$	150,264		$	200,227		$	100,240		$	100,156		$	800,000		$	1,526,138		$	1,666,557
Weighted average interest rate		7.30		%	7.01		%	7.19		%	7.05		%	7.00		%	6.78		%
Unsecured lines of credit		$	—		$	281,000		$	—		$	—		$	—		$	—		$	281,000		$	281,000
Weighted average interest rate		N/A			2.07		%	N/A			N/A			N/A			N/A

 

As the table incorporates only those exposures that exist as of December 31, 2002, it does not consider those exposures or positions that could arise after that date. As a result, the Partnership’s ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, the Partnership’s hedging strategies at that time, and interest rates.

 

In December 2002, the Partnership entered into two $50 million forward-starting interest rate swaps. The fair value of the swaps was a liability of ($2.1) million as of December 31, 2002. See footnote 12 to the Consolidated Financial Statements for further information.

 

Item 8.  Financial Statements and Supplementary Data

 

The financial statements and supplementary data are included under Item 15 of this Report.

 

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Part III

 

Item 10.  Directors and Executive Officers of the Registrant

 

The Partnership does not have any directors or officers. The information required by Item 10 for Directors and Certain Executive Officers is contained in a definitive proxy statement of the General Partner, which was filed on March 7, 2003, and herein is incorporated by reference.

 

Item 11.  Executive Compensation

 

The information required by Item 11 is contained in a definitive proxy statement for the General Partner that was filed on March 7, 2003, and herein is incorporated by reference.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters

 

The information required by Item 12 is contained in a definitive proxy statement for the General Partner that was filed on March 7, 2003, and herein is incorporated by reference.

 

Item 13.  Certain Relationships and Related Transactions

 

The information required by Item 13 is contained in a definitive proxy statement for the General Partner that was filed on March 7, 2003, and herein is incorporated by reference.

 

27

 

Item 14. Disclosure Controls and Procedures

 

The Partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our annual and periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures are further designed to ensure that such information is accumulated and communicated to management, including the General Partner’s chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

 

Based on the most recent evaluation, which was completed within 90 days of the filing of this report, the General Partner’s chief executive officer and chief financial officer believe that the Partnership’s disclosure controls and procedures are effective. There have been no significant changes in the internal controls or in other factors that could significantly affect the internal controls subsequent to the date of the completed evaluation.

 

Part IV

 

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

 

(a)             The following documents are filed as part of this Form 10-K:

 

1.       Consolidated Financial Statements

 

The following Consolidated Financial Statements of the Partnership, together with the Independent Auditors’ Report, are listed below:

 

Independent Auditors’ Report

Consolidated Balance Sheets, December 31, 2002 and 2001

Consolidated Statements of Operations, Years Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows, Years Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Partners’ Equity, Years Ended December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

 

2.       Consolidated Financial Statement Schedules

 

Schedule III – Real Estate and Accumulated Depreciation

 

3.       Exhibits

 

The following exhibits are filed with this Annual Report Form 10-K or incorporated herein by reference to the listed document previously filed with the SEC. Previously unfilled documents are noted with an asterisk (*).

 

Number		Description
4.1		Second Amended and Restated Agreement of Limited Partnership of the Partnership, incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report on Form 8-K filed on July 16, 2000.
4.2		First Amendment to Second Amended and Restated Agreement of Limited Partnership of the Partnership, incorporated by reference from Exhibit 10.2 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
4.3		Second Amendment to Second Amended and Restated Agreement of Limited Partnership of the Partnership, incorporated by reference to Exhibit 10.3 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

 

28

 

4.4		Third Amendment To Second Amended and Restated Agreement of Limited Partnership of the Partnership, incorporated by reference to Exhibit 10.4 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
4.5		Fourth Amendment to Second Amended and Restated Agreement of Limited Partnership of the Partnership, incorporated by reference to Exhibit 10.5 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
4.6		Indenture between the Partnership and The First National Bank of Chicago, Trustee, incorporated by reference to Exhibit 4.1 to the General Partner’s Current Report on Form 8-K filed September 22, 1995.
4.7		First Supplement to Indenture, incorporated by reference to Exhibit 4.2 to the General Partner’s Current Report on Form 8-K filed September 22, 1995.
4.8		Second Supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed July 12, 1996.
4.9		Third Supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed May 20, 1998.
4.10		Fourth Supplement to Indenture, incorporated by reference to Exhibit 4.8 to the General Partner’s Form S-4 Registration Statement No. 333-77645 dated May 4, 2000 (Merger Registration Statement).
4.11		Fifth Supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed June 1, 1999.
4.12		Sixth Supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed February 12, 2000.
4.13		Seventh Supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed June 29, 2000.
4.14		Eighth Supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed November 15, 2000.
4.15		Ninth supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed March 2, 2002.
4.16		Tenth supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed August 13, 2002.
4.17		Eleventh supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed August 26, 2002.
4.18		Twelfth supplement to Indenture, incorporated by reference to Exhibit 4 to the Partnership’s Current Report on Form 8-K filed January 16, 2003.
10.1		Second Amended and Restated Agreement of Limited Partnership of Duke Realty Services Limited Partnership (the “Services Partnership”) incorporated herein by reference to Exhibit 10.3 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1995.

 

29

 

10.2		First Amendment to Second Amended and Restated Agreement of Limited Partnership of the Services Partnership incorporated by reference to Exhibit 10.7 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
10.3		Second Amendment to Second Amended and Restated Agreement of Limited Partnership of the Services Partnership incorporated by reference to Exhibit 10.8 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
10.4		Third Amendment to Second Amended and Restated Agreement of Limited Partnership of the Services Partnership incorporated by reference to Exhibit 10.9 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
10.5		Promissory Note of the Services Partnership incorporated herein by reference to Exhibit 10.3 to the Partnership’s Form S-2 Registration Statement No 33-64038 filed June 8, 1993 (the “1993 Registration Statement”).
10.6		Services Partnership 1993 Stock Option Plan incorporated herein by reference to Exhibit 10.4 to the 1993 Registration Statement.#
10.7		Amendment One to Services Partnership 1993 Stock Option Plan incorporated by reference to Exhibit 10.12 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.8		Amendment Two to Services Partnership 1993 Stock Option Plan incorporated by reference to Exhibit 10.13 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.9		Amendment Three to Services Partnership 1993 Stock Option Plan incorporated by reference to Exhibit 10.14 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.10		Acquisition Option Agreement relating to certain properties not contributed to the Operating Partnership by Duke Associates (the “Excluded Properties”) incorporated herein by reference to Exhibit 10.5 to the 1993 Registration Statement.
10.11		Management Agreement relating to the Excluded Properties incorporated herein by reference to Exhibit 10.6 to the 1993 Registration Statement.
10.12		Indemnification Agreement incorporated herein by reference to Exhibit 10.11 to the 1993 Registration Statement.
10.13		1995 Key Employee Stock Option Plan of the Partnership incorporated herein by reference to Exhibit 10.13 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1995.#
10.14		Amendment One To The 1995 Key Employees’ Stock Option Plan of Duke Realty Investments, Inc. incorporated by reference to Exhibit 10.19 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.15		Amendment Two to the 1995 Key Employees’ Stock Option Plan of Duke Realty Investments, Inc. incorporated by reference to Exhibit 10.20 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#

 

30

 

10.16		Amendment Three to the 1995 Key Employees’ Stock Option Plan of Duke Realty Investments, Inc. incorporated by reference to Exhibit 10.21 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.17		Amendment Four to the 1995 Key Employees’ Stock Option Plan of Duke Realty Investments, Inc. incorporated by reference to Exhibit 10.22 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.18		Amendment Five to the 1995 Key Employees’ Stock Option Plan of Duke Realty Investments, Inc. incorporated by reference to Exhibit 10.23 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.19		Amendment Six to the 1995 Key Employees’ Stock Option Plan of Duke Realty Investments, Inc. incorporated by reference to Exhibit 10.24 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.20		Amended and Restated Dividend Increase Unit Plan of the Services Partnership. incorporated by reference to Exhibit 10.25 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.21		Amendment One to the Amended and Restated Dividend Increase Unit Plan of Services Partnership incorporated by reference to Exhibit 10.26 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.22		Amendment Two to the Amended and Restated Dividend Increase Unit Plan of Services Partnership incorporated by reference to Exhibit 10.27 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.23		1995 Shareholder Value Plan of the Services Partnership incorporated herein by reference to Exhibit 10.15 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995.#
10.24		Amendment One to the 1995 Shareholder Value Plan of Services Partnership incorporated by reference to Exhibit 10.29 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.25		Amendment Two to the 1995 Shareholder Value Plan of Services Partnership incorporated by reference to Exhibit 10.30 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.26		Amendment Three to the 1995 Shareholder Value Plan of Services Partnership incorporated by reference to Exhibit 10.31 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.#
10.27		1999 Duke Realty Severance Pay Plan incorporated herein by reference to Exhibit 10.18 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.#
10.28		2000 Directors’ Stock Option and Dividend Increase Unit Plan incorporated by reference to Annex F to the Prospectus in the Merger Registration Statement.#
10.29		2000 Salary Replacement Stock Option and Dividend Increase Unit Plan is incorporated by reference to Annex G to the Prospectus in the Merger Registration Statement.#

 

31

 

10.30		Third Amended and Restated Revolving Credit Agreement dated February 28, 2002, among the Partnership as borrower, the General Partner as General Partner and Guarantor and Bank One as Administrative Agent and Lender incorporated by reference to Exhibit 10.35 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
10.31		Revolving Credit Agreement dated July 9, 2002, among the Partnership as borrower, the General Partner as General Partner an Bank One as Administrative Agent and Lender incorporated by reference to Exhibit 10.23 to the General Partner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
11.1		Statement of Computation of Ratios of Earnings to Fixed Charges.*
11.2		Statement of Computation of Ratios of Earnings to Debt Service.*
21.		List of the Partnership’s Subsidiaries.*
23.		Consent of KPMG LLP.*
24.		Executed powers of attorney of certain directors.*
99.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
99.3		Selected Quarterly Financial Information.*

 

# Represents management contract or compensatory plan or arrangement.

 

The Partnership will furnish to any security holder, upon written request, copies of any exhibit incorporated by reference, for a fee of 15 cents per page, to cover the costs of furnishing the exhibits. Written request

 

should include a representation that the person making the request was the beneficial owner of securities entitled to vote at the Annual Meeting of Shareholders of the General Partner.

 

(b)                                  Reports on Form 8-K

 

None

 

(c)                                  Exhibits

 

The exhibits required to be filed with this Annual Report Form 10-K pursuant to Item 601 of Regulation S-K or listed under “Exhibits” in Part IV, Item 14(a)(3) of Form 10-K, which are incorporated herein by reference.

 

(d)           Financial Statement Schedule

 

The Financial Statement Schedule required to be filed with this Annual Report Form 10-K is listed under “Consolidated Financial Statement Schedules” in Part IV, Item 14(a)(2) of this Form 10-K, and is incorporated herein by reference.

 

32

 

Independent Auditors’ Report

 

The Partners

Duke Realty Limited Partnership:

 

We have audited the consolidated balance sheets of Duke Realty Limited Partnership and Subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, cash flows and partners’ equity for each of the years in the three-year period ended December 31, 2002. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule III. These consolidated financial statements and the financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the consolidated financial statements and the financial statement schedule based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Duke Realty Limited Partnership and Subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

 

 

KPMG LLP

Indianapolis, Indiana

January 29, 2003

 

33

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

 

		December 31, 2002			December 31, 2001
ASSETS
Real estate investments:
Land and improvements		$	608,995		$	583,909
Buildings and tenant improvements		4,237,360			4,068,944
Construction in progress		85,756			154,086
Investments in unconsolidated companies		315,589			323,682
Land held for development		326,250			322,528
		5,573,950			5,453,149
Accumulated depreciation		(555,858		)	(425,721		)
Net real estate investments		5,018,092			5,027,428
Cash and cash equivalents		17,129			10,453
Accounts receivable, net of allowance of $2,008 and $2,820		15,415			23,142
Straight-line rent receivable, net of allowance of  $2,491 and $841		52,062			42,751
Receivables on construction contracts		23,181			30,077
Deferred financing costs, net of accumulated amortization of $15,390 and $17,459		11,431			12,489
Deferred leasing and other costs, net of accumulated amortization of $50,543 and $41,284		112,772			97,117
Escrow deposits and other assets		96,973			86,789
		$	5,347,055		$	5,330,246
LIABILITIES AND PARTNERS’ EQUITY
Indebtedness:
Secured debt		$	299,147		$	318,484
Unsecured notes		1,526,138			1,376,372
Unsecured lines of credit		281,000			120,000
		2,106,285			1,814,856
Construction payables and amounts due subcontractors		43,232			54,735
Accounts payable		548			2,274
Accrued expenses:
Real estate taxes		51,472			51,462
Interest		27,374			24,313
Other		52,485			48,678
Other liabilities		106,893			117,577
Tenant security deposits and prepaid rents		33,710			34,644
Total liabilities		2,421,999			2,148,539
Minority interest		5,213			5,475
Partners’ equity:
General Partner
Common equity		2,203,060			2,203,291
Preferred equity (liquidation preference of $440,889)		415,466			583,419
		2,618,526			2,786,710
Limited partners’ common equity		235,473			286,759
Limited partners’ preferred equity		67,955			102,955
Accumulated other comprehensive income		(2,111		)	(192		)
		2,919,843			3,176,232
		$	5,347,055		$	5,330,246

 

See accompanying Notes to Consolidated Financial Statements.

 

34

 

DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES

Consolidated Statements of Operations

For the Years Ended December 31

(in thousands, except per unit amounts)

 

		2002			2001			2000
RENTAL OPERATIONS:
Revenues:
Rental income		$	684,346		$	683,348		$	692,191
Equity in earnings of unconsolidated companies		27,180			31,391			14,556
		711,526			714,739			706,747
Operating expenses:
Rental expenses		127,045			120,839			117,798
Real estate taxes		73,392			70,415			70,894
Interest expense		117,073			111,880			131,418
Depreciation and amortization		174,902			157,502			161,454
		492,142			460,636			481,564
Earnings from rental operations		219,114			254,103			225,183
SERVICE OPERATIONS:
Revenues:
General contractor gross revenue		194,439			264,455			292,661
General contractor costs		(172,559		)	(229,845		)	(253,763		)
Net general contractor revenue		21,880			34,610			38,898
Property management, maintenance and leasing fees		14,301			22,824			25,477
Construction management and development activity income		29,428			19,142			16,965
Other income		2,011			3,883			1,459
Total revenue		67,620			80,459			82,799
Operating expenses		38,100			45,344			50,039
Earnings from service operations		29,520			35,115			32,760
General and administrative expense		(24,735		)	(15,553		)	(21,137		)
Operating income		223,899			273,665			236,806
OTHER INCOME (EXPENSE):
Interest income		3,849			5,308			6,866
Earnings from land and depreciated property dispositions, net of impairment adjustment		(410		)	45,708			60,692
Other expense		182			(2,582		)	(963		)
Minority interest in earnings of subsidiaries		(1,093		)	(2,411		)	(2,145		)
		226,427			319,688			301,256
Discontinued operations:
Net income from discontinued operations		3,199			3,592			1,162
Gain on sale of discontinued operations		2,733			—			—
Income from discontinued operations		5,932			3,592			1,162
Net income		232,359			323,280			302,418
Dividends on preferred units		(52,613		)	(60,850		)	(57,389		)
Net income available for common unitholders		$	179,746		$	262,430		$	245,029
Basic net income per common unit:
Continuing operations		$	1.16		$	1.75		$	1.67
Discontinued operations		.04			.02			.01
Total		$	1.20		$	1.77		$	1.68
Diluted net income per common unit:
Continuing operations		$	1.15		$	1.73		$	1.65
Discontinued operations		.04			.02			.01
Total		$	1.19		$	1.75		$	1.66
Discontinued operations
Weighted average number of common units outstanding		149,423			147,961			145,906
Weighted average number of common and dilutive potential common units		150,839			151,710			147,441

 

See accompanying Notes to Consolidated Financial Statements.

 

35

 

DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended December 31

(in thousands)

 

		2002			2001			2000
Cash flows from operating activities:
Net income		$	232,359		$	323,280		$	302,418
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements		154,565			138,723			143,800
Amortization of deferred leasing and other costs		21,056			20,991			18,723
Amortization of deferred financing costs		3,725			4,589			3,527
Minority interest in earnings		1,093			2,411			2,145
Straight-line rent adjustment		(12,500		)	(12, 593		)	(14,519		)
Earnings (loss) from land and depreciated property sales		(1,048		)	(45,708		)	(60,692		)
Build-to-suit operations, net		168,199			(79,912		)	(88,178		)
Construction contracts, net		(11,656		)	9,651			3,252
Other accrued revenues and expenses, net		8,605			(10,908		)	55,645
Operating distributions received in excess of equity and earnings from unconsolidated companies		4,575			(1,844		)	(2,511		)
Net cash provided by operating activities		568,973			348,680			363,610
Cash flows from investing activities:
Development of real estate investments		(158,131		)	(251,405		)	(306,347		)
Acquisition of real estate investments		(98,062		)	(13,927		)	(5,932		)
Acquisition of land held for development and infrastructure costs		(27,182		)	(92,203		)	(99,470		)
Recurring tenant improvements		(28,011		)	(18,416		)	(31,955		)
Recurring leasing costs		(17,975		)	(13,845		)	(17,530		)
Recurring building improvements		(13,373		)	(10,873		)	(6,804		)
Other deferred leasing costs		(18,219		)	(10,621		)	(39,018		)
Other deferred costs and other assets		(17,350		)	3,223			(12,042		)
Tax deferred exchange escrow, net		—			27,260			(16,207		)
Proceeds from land and depreciated property sales, net		52,186			436,113			413,752
Capital distributions from unconsolidated companies		—			59,249			158,351
Advances to unconsolidated companies		(11,130		)	(21,067		)	(48,770		)
Net cash provide by (used by) investing activities		(337,247		)	93,488			(11,972		)
Cash flows from financing activities:
Contribution from General Partner		22,651			108,693			29,966
Proceeds from indebtedness		200,000			175,000			—
Payment for redemption of preferred equity		(167,953		)	(75,018		)	—
Payments for redemption of preferred units		(35,000		)	—			—
Payments on indebtedness including principal amortization		(71,953		)	(223,578		)	(75,689		)
Borrowings (payments) on lines of credit, net		157,305			(125,067		)	14,658
Distributions to partners		(271,659		)	(262,236		)	(239,250		)
Distributions to preferred unitholders		(54,613		)	(61,418		)	(57,389		)
Distributions to minority interest		(565		)	(2,024		)	(1,888		)
Deferred financing costs		(3,263		)	(5,267		)	(1,360		)
Net cash provided by (used for)  financing activities		(225,050		)	(470,915		)	(330,952		)
Net increase (decrease) in cash and cash equivalents		6,676			(28,747		)	20,686
Cash and cash equivalents at beginning of year		10,453			39,200			18,514
Cash and cash equivalents at end of year		$	17,129		$	10,453		$	39,200
Other non-cash items:
Assumption of debt for real estate acquisitions		$	9,566		$	16,403		$	—
Contributions of property to unconsolidated companies		$	—		$	4,501		$	245,502
Conversion of Limited Partner Units to common shares of General Partner		$	13,226		$	4,259		$	1,317
Issuance of Limited Partner Units for real estate acquisitions		$	4,686		$	3,787		$	7,615
Transfer of debt in sale of depreciated property		$	2,432		$	16,000		$	72,650
Redemption of Limited Partner Units for sale of depreciated property		$	—		$	13,445		$	—
Impairment adjustments on depreciable property		$	9,400		$	4,800		$	540
Acquisition of partners’ interest in unconsolidated companies		$	12,149		$	18,049		$	—

 

See accompanying Notes to Consolidated Financial Statements.

 

36

 

DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES

Consolidated Statements of Partners’ Equity

(in thousands, except for per unit amounts)

 

								Limited Partners’ Common Equity			Limited Partners’ Preferred Equity			Accumulated Other Comprehensive Income (Loss)			Total
		General Partner
		Common Equity			Preferred Equity
Balance at December 31, 1999		2,082,720			587,385			328,929			102,955			—			3,101,989
Net income		212,958			48,981			32,071			8,408			—			302,418
Capital contribution from General Partner		32,022			(1,124		)	—			—			—			30,898
Acquisition of partnership interest for common stock of General Partner		8,347			—			(7,030		)	—			—			1,317
Acquisition of property in exchange for Limited Partner Units		—			—			7,615			—			—			7,615
Distributions to preferred unitholders		—			(48,981		)	—			(8,408		)	—			(57,389		)
Distributions to partners ($1.64 per Common Unit)		(207,909		)	—			(31,341		)	—			—			(239,250		)
Balance at December 31, 2000		2,128,138			586,261			330,244			102,955			—			3,147,598
Comprehensive income:
Net income		229,399			53,010			32,463			8,408			—			323,280
Distributions to preferred unitholders		—			(53,010		)	—			(8,408		)	—			(61,418		)
Transition adjustment resulting from adoption of FASB No. 133		—			—			—			—			398			398
Gains (losses) on derivative instruments		—			—			—			—			(1,138		)	(1,138		)
Settlement of derivative instrument		—			—			—			—			548			548
Comprehensive income available for common unitholders																	261,670
Capital contribution from General Partner		37,845			72,210			—			—			—			110,055
Acquisition of partnership interest for common stock of General Partner		36,351			—			(32,092		)	—			—			4,259
Acquisition of partnership interest for real estate investments		—			—			(13,445		)	—			—			(13,445		)
Acquisition of property in exchange for Limited Partner Units		—			—			3,787			—			—			3,787
General Partner’s redemption of Series A Preferred stock		—			(75,018		)	—			—			—			(75,018		)
Conversion of Series D Preferred equity to common units		34			(34		)	—			—			—			—
Retirement of common units		(437		)	—			—			—			—			(437		)
Distributions to partners ($1.76 per Common Unit)		(228,039		)	—			(34,198		)	—			—			(262,237		)
Balance at December 31, 2001		$	2,203,291		$	583,419		$	286,759		$	102,955		$	(192	)	$	3,176,232
Comprehensive income:
Net income		159,178			47,053			18,568			7,560			—			232,359
Distributions to preferred unitholders		—			(47,053		)	—			(7,560		)	—			(54,613		)
Gains (losses) on derivative instruments		—			—			—			—			(1,919		)	(1,919		)
Comprehensive income available for common unitholders																	175,827
Capital contribution from General Partner		22,651			—			—			—			—			22 651
Acquisition of partnership interest for common stock of General Partner		60,509			—			(47,283		)	—			—			13,226
Acquisition of property in exchange for Limited Partner Units		—			—			5,439			—			—			5,439
General Partner’s redemption of Series D Preferred stock		—			(25		)	—			—			—			(25		)
General Partner’s redemption of Series B Preferred stock		—			(17,928		)	—			—			—			(17,928		)
General Partner’s redemption of Series F Preferred stock		—			(150,000		)	—			—			—			(150,000		)
Redemption of Series G Preferred units		—			—			—			(35,000		)	—			(35,000		)
Tax benefits from Employee Stock Plans		856			—			—			—			—			856
FASB 123 Compensation Expense		224			—			—			—			—			224
Distributions to General Partner		(1,174		)	—			—			—			—			(1,174		)
Distributions to partners ($1.81 per Common Unit)		(242,475		)	—			(28,010		)	—			—			(270,485		)
Balance at December 31, 2002		$	2,203,060		$	415,466		$	235,473		$	67,955		$	(2,111	)	$	2,919,843
Common Units outstanding at December 31, 2002		135,007						14,900									149,907

 

See accompanying Notes to Consolidated Financial Statements.

 

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DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES

 

Notes to Consolidated Financial Statements

(1)             The Partnership

 

Duke Realty Limited Partnership (the “Partnership”) was formed on October 4, 1993, when Duke Realty Corporation (the “General Partner”) contributed all of its properties and related assets and liabilities, along with the net proceeds of $309.2 million from the issuance of an additional 14,000,833 shares of the General Partner through an offering, to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest. The General Partner was formed in 1985 and qualifies as a Real Estate Investment Trust (“REIT”) under provisions of the Internal Revenue Code.  The General Partner is the sole general partner of the Partnership, owning 90.1% of the partnership interest as of December 31, 2002 (“General Partner Units”). The remaining 9.9% of the Partnership is owned by limited partners (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”). The Limited Partner Units are exchangeable for shares of the General Partner’s common stock on a one-for-one basis subject generally to a one-year holding period.

 

The Partnership owns and operates a portfolio of industrial, office and retail properties in the midwestern and southeastern United States and provides real estate services to third-party owners. The Partnership conducts Service Operations through Duke Realty Services Limited Partnership (“DRSLP”) and Duke Construction Limited Partnership (“DCLP”). The consolidated financial statements include the accounts of the Partnership and its majority-owned or controlled subsidiaries.

 

(2)             Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Partnership and its majority-owned or controlled subsidiaries. The equity interests in these majority-owned or controlled subsidiaries not owned by the Partnership are reflected as minority interests in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Investments in entities that the Partnership does not control through majority voting interest or where the other owner has substantial participating rights are not consolidated and are reflected as investments in unconsolidated companies.

 

Reclassifications

 

Certain 2000 and 2001 balances have been reclassified to conform to 2002 presentation.

 

Real Estate Investments

 

Real estate investments to be held for rental are stated at the lower of cost less accumulated depreciation or fair value if impairment is identified. Real estate investments to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. Buildings and land improvements are depreciated on the straight-line method over their estimated life not to exceed 40 and 15 years, respectively, and tenant improvement costs are depreciated on the straight-line method over the term of the related lease.

 

Direct and indirect costs, including interest and real estate taxes associated with the development, construction, leasing or expansion of real estate investments are capitalized as a cost of the property.  Included in indirect costs is an estimate of internal costs associated with development and leasing of real estate investments. All external costs associated with the acquisition of real estate investments are capitalized as a cost of the property.

 

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Upon the acquisition of rental property, the Partnership evaluates all in-place tenant lease agreements to determine if the leases are at, below or above market rates. If a lease is determined to be above or below market, a corresponding asset or liability is recorded and amortized into income over the life of the lease. At the time of acquisition, a deferred lease commission asset is also recorded and amortized over the lease’s remaining life.

 

The Partnership evaluates its real estate investments to be held and used upon occurrence of significant changes in the operations, but not less than annually, to assess whether any impairment indications are present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of the recorded value. If any real estate investment is considered impaired, a loss is provided to reduce the carrying value of the property to its estimated fair value.

 

Acquisitions of the Partnership’s interests are recorded under the purchase method with assets acquired reflected at the fair market value of the General Partner’s common stock on the date of acquisition, net of the retirement of any minority interest liabilities. The acquisition amounts are allocated to Partnership assets based on their estimated fair values.

 

The Partnership has equity interests in unconsolidated partnerships and joint ventures which own and operate rental properties and hold land for development. The equity method of accounting is used for these investments in which the Partnership has the ability to exercise significant influence, but not control, over operating and financial policies. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized to equity in earnings of unconsolidated companies over the depreciable life of the property, generally 40 years.

 

Cash Equivalents

 

Highly liquid investments with a maturity of three months or less when purchased are classified as cash equivalents.

 

Deferred Costs

 

Costs incurred in connection with obtaining financing are amortized to interest expense on the straight-line method over the term of the related loan. All direct and indirect costs, including estimated internal costs, associated with the rental of real estate investments owned by the Partnership are capitalized and amortized over the term of the related lease. Unamortized costs are charged to expense upon the early termination of the lease or upon early payment of the financing.

 

Revenues

 

Rental Operations

 

Rental income from leases with scheduled rental increases during their terms is recognized on a straight-line basis.

 

Service Operations

 

Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Maintenance fees are based upon established hourly rates and are recognized as the services are performed. Construction management and development fees for third party contracts are recognized as earned based on the terms of the contract, which approximate the percentage of completion method.

 

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The Partnership recognizes income on long-term construction contracts where the Partnership serves as a general contractor on the percentage of completion method. Using this method, profits are recorded on the basis of the Partnership’s estimates of the percentage of completion of individual contracts, commencing when progress reaches a point where experience is sufficient to estimate final results with reasonable accuracy. That portion of the estimated earnings is accrued on the basis of the Partnership’s estimates of the percentage of completion based on contract expenditures incurred and work performed.

 

Property Sales

 

Gains from sales of depreciated property are recognized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 66, and are included in earnings from sales of land and depreciable property dispositions, net of impairment adjustment, in the Statement of Operations if identified as held for sale prior to adoption of SFAS 144 and in discontinued operations if identified as held for sale after adoption of SFAS 144.

 

Gains or losses from the sale of property which is considered held for sale in DCLP are recognized in accordance with SFAS 66 and are included in construction management and development activity income in the Statement of Operations.

 

Net Income Per Common Unit

 

Basic net income per common unit is computed by dividing net income available for common units by the weighted average number of common units outstanding for the period. Diluted net income per common unit is computed by dividing the sum of net income available for common units by the sum of the weighted average number of common units outstanding and dilutive potential common units for the period.

 

The following table reconciles the components of basic and diluted net income per unit (in thousands):

 

 

The Series D Convertible Preferred equity and the Series G Convertible Preferred limited partner units were anti-dilutive for the years ended December 31, 2002, 2001 and 2000; therefore, no conversion to common units is included in weighted dilutive potential common units. In September 2002, the Partnership redeemed the Series G Convertible Preferred units at their par value of $35.0 million.

 

A joint venture partner in one of the Partnership’s unconsolidated companies has the option to convert a portion of its ownership to the General Partner’s common shares (see discussion in Investments in Unconsolidated Companies section). The effect of the option on earnings per unit was dilutive for the year ended December 31, 2002; therefore, conversion to common units is included in weighted dilutive potential common units.

 

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Federal Income Taxes

 

As a partnership, the allocated share of income and loss for the year is included in the income tax returns of the partners; accordingly, no accounting for income taxes is required in the accompanying consolidated financial statements.

 

Stock Based Compensation

 

For all issuances prior to 2002, the Partnership applies the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for these plans. For stock options granted prior to 2002, no compensation expense is reflected in net income as all options granted had an exercise price equal to the market value of the underlying common stock of the General Partner’s on the date of the grant.

 

Effective January 1, 2002, the Partnership prospectively adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to all awards granted after January 1, 2002.

 

Fair Value Of Financial Instruments

 

The fair values of the Partnership’s financial instruments, other than derivative financial instruments, are generally calculated as the present value of estimated future cash flows using a discount rate commensurate with the risks involved. The fair value approximates the carrying value for all financial instruments except indebtedness, which is discussed in Footnote 6 to the Consolidated Financial Statements.

 

Derivative Financial Instruments

 

The Partnership adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS 133”), on January 1, 2001. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Partnership uses derivative financial instruments such as interest rate swaps to mitigate its interest rate risk on a related financial instrument. SFAS 133 requires that changes in fair value of derivatives that qualify as cash flow hedges be recognized in other comprehensive income while the ineffective portion of the derivative’s change in fair value be recognized immediately in earnings.

 

To determine the fair value of derivative instruments, the Partnership uses standard market conventions and techniques such as discounted cash flow analysis, option pricing models and termination cost at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

 

Use Of Estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

 

(3)             Related Party Transactions

 

The Partnership provides property management, leasing, construction and other tenant related services to properties in which certain executives have ownership interests. The Partnership has an option to acquire these executive officers’ interests in these properties (the “Option Properties”). The Partnership received

 

41

 

fees totaling $1.4 million, $1.7 million and $1.9 million in 2002, 2001 and 2000, respectively, for services provided to the Option Properties. The fees charged by the Partnership for such services are equivalent to those charged to third-party owners for similar services.

 

On June 27, 2001, A. Ray Weeks, Jr. resigned his position as a director and Vice Chairman of the General Partner. On August 17, 2001, the Partnership redeemed 620,156 common units beneficially owned by Mr. Weeks and certain members of his immediate and extended family (the “Weeks Affiliates”). The deemed value of the units redeemed was $15.7 million, which was based on the average closing stock price of the General Partner’s common stock for a certain period of days preceding the redemption date. As consideration for the redemption, the Weeks Affiliates received a distribution of seven industrial rental properties and one undeveloped tract of land located in the Atlanta, Georgia metropolitan area with a value of $31.7 million.  The Weeks Affiliates also assumed a loan in the amount of $16 million from Wachovia Bank, N.A. to the Partnership. The value of the properties distributed to the Weeks Affiliates was based on negotiations between Mr. Weeks and members of the General Partner’s executive committee, and was approved by the unaffiliated members of the General Partner’s Board of Directors.

 

In 2002, the Partnership received lease termination fees totaling $7.7 million from a tenant that is a subsidiary of Progress Energy. William Cavanaugh III is President and Chief Executive Officer of Progress Energy and a member of the General Partner’s Board of Directors. The General Partner’s independent directors approved the transaction and management believes that the amount received approximates a value that would have been charged to tenants with similar lease terms and commitments.

 

The Partnership has other related party transactions that are insignificant and terms are considered to be at arm’s-length and equal to those negotiated with independent parties.

 

(4)             Investments in Unconsolidated Companies

 

The Partnership has equity interests ranging from 10 – 64% in unconsolidated partnerships and joint ventures that own and operate rental properties and hold land for development. The equity method of accounting is used for these investments in which the Partnership has the ability to exercise significant influence, but not control, over operating and financial policies. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized to equity in earnings of unconsolidated companies over the depreciable life of the property, generally 40 years.

 

Combined summarized financial information for the investments in unconsolidated companies as of December 31, 2002 and 2001, and for the years ended December 31, 2002, 2001, and 2000, are as follows (in thousands):

 

		2002			2001			2000
Land, buildings and tenant improvements, net		$	1,232,026		$	1,261,490
Land held for development		38,848			41,962
Other assets		67,590			62,017
		$	1,338,464		$	1,365,469
Property indebtedness		$	579,893		$	581,477
Other liabilities		52,057			60,609
		631,950			642,086
Owners’ equity		706,514			723,383
		$	1,338,464		$	1,365,469
Rental income		$	169,683		$	172,257		$	92,082
Net income		$	51,013		$	58,091		$	32,054

 

42

 

The following significant transactions involving unconsolidated companies in which the Partnership has an equity interest have occurred over the past three years:

 

In 2002, the Partnership recognized a gain of $1.8 million on the sale of a “Build-to-Suit” building out of a joint venture in which the Partnership owned a 50% interest. The gain is recorded in equity in earnings in the Statement of Operations. In addition to this sale, the Partnership received approximately $29.2 million of earnings distributions from its various joint ventures.

 

Also in 2002, the Partnership bought out its other partners’ interest in six separate joint ventures. The Partnership had a 50% interest in each of these ventures prior to their acquisition.

 

In 2001, the Partnership received approximately $50.0 million in cash distributions resulting from secured debt financing within two joint ventures. The Partnership has a 50% interest in both ventures. The debt is entirely collateralized by rental properties within the ventures and the Partnership is not a guarantor on the debt.

 

Also in 2001, the Partnership recognized a gain of $2.9 million from the sale of a building out of a joint venture in which the Partnership owned a 50% interest. The gain is recorded in equity in earnings in the Statement of Operations.

 

In October 2000, the Partnership sold or contributed industrial properties and undeveloped land with a fair value of $487 million to a joint venture (Dugan Realty LLC) in which the Partnership has a 50% interest and recognized a net gain of $35.2 million. This transaction expanded an existing joint venture with an institutional real estate investor. As a result of the total transactions, the Partnership received $363.9 million of proceeds. The joint venture financed this transaction with $350 million of secured mortgage debt of which the Partnership has guaranteed $90 million and agreed to provide additional capital contributions to pay all sums due under the remaining $260 million. At December 31, 2002, this $350 million of debt is collateralized by rental properties with net carrying value substantially in excess of the outstanding debt. If required to make additional capital contributions, the Partnership will receive proportionately increased ownership in the respective collateralized properties. The Partnership does not anticipate that it will be required to satisfy the guarantee or additional capital contribution obligations. In connection with this transaction, the joint venture partners were given an option to put up to $50 million interest in the joint venture to the Partnership in exchange for common stock of the General Partner or cash, subject to timing and other restrictions. As a result of this put option, the Partnership deferred $10.2 million of gain on sale of depreciated property and recorded a $50 million liability. At December 31, 2002, the joint venture owns 130 buildings totaling approximately 23 million square feet with a net book value of approximately $760 million. The Partnership provides real estate related services to the venture through its Service Operations.

 

In December 2000, the Partnership contributed 14 industrial properties, including five under development, totaling approximately three million square feet to a joint venture (Dugan Texas LLC) in which the Partnership has a 50% interest. The Partnership also contributed 145 acres of undeveloped land. The Partnership received $33.1 million of proceeds and recorded a net gain of $686,000 as a result of the transaction. At December 31, 2002, the joint venture owns 32 buildings totaling approximately 6 million square feet with a value of approximately $224 million. The Partnership provides real estate related services to the venture through its Service Operations.

 

(5)             Real Estate Investments

 

The Partnership adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets”(“SFAS 144”), on January 1, 2002. SFAS 144 requires the

 

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Partnership to report in discontinued operations the results of operations of a property which has either been disposed or is classified as held for sale, unless certain conditions are met.

The Partnership has classified operations of nine buildings as discontinued operations in accordance with SFAS 144. As a result, the Partnership classified net income of $3.1 million, $3.6 million and $1.2 million as net income from discontinued operations for the year ended December 31, 2002, 2001 and 2000. In addition, two of the properties were sold during 2002 that were identified as held for sale post adoption of SFAS 144; therefore, the gains on disposal for these two properties of $2.7 million are also reported in discontinued operations.

 

At December 31, 2002, the Partnership had 3 industrial, 6 office and 6 retail properties comprising approximately 1.1 million square feet held for sale. Of these properties, 3 build-to-suit office and 3 build-to-suit retail properties were under development. Net operating income (defined as total property revenues, less property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses) of the properties held for sale for the years ended December 31, 2002, 2001 and 2000 is approximately $4.3 million, $3.2 million, and $1.1 million, respectively. Net book value of the properties held for sale at December 31, 2002, is approximately $57.1 million. There can be no assurance that such properties held for sale will be sold.

 

In association with the Partnership’s assessment of its properties under SFAS 144, six of its 910 properties were identified as having impairment in 2002. The Partnership recorded a $9.4 million impairment adjustment associated with these properties in 2002. The Partnership has analyzed each of its in-service properties and has determined that there are no additional valuation adjustments that need to be made at December 31, 2002. In 2001, the Partnership recorded a $4.8 million impairment adjustment on a single property that was sold in 2002.

 

(6)             Indebtedness

 

Indebtedness at December 31, 2002 and 2002, consisted of the following (in thousands):

 

		2002			2001
Fixed rate secured debt, weighted average interest rate of 7.35% at December 31, 2002, and 7.79% at December 31, 2001, maturity dates ranging from 2003  to 2017		$	259,376		$	274,358
Variable rate secured debt, weighted average interest rate of 1.71% at December 31, 2002, and 2.46% at December 31, 2001, maturity dates ranging from 2006 to 2025		39,771			44,126
Fixed rate unsecured notes, weighted average interest rate of 6.95% at December 31, 2002, and 7.13% at December 31, 2001, maturity dates ranging from 2003 to 2028		1,526,138			1,376,372
Unsecured line of credit, interest rate of 2.07% at December 31, 2002, and 2.58% at December 31, 2001, maturity date of 2004		281,000			120,000
		$	2,106,285		$	1,814,856

 

The fair value of the Partnership’s indebtedness as of December 31, 2002, was $2.3 billion.

 

As of December 31, 2002, the $299.1 million of secured debt is collateralized by rental properties with a net carrying value of $561.3 million.

 

The Partnership has the following lines of credit available (in thousands):

 

Description		Borrowing Capacity			Maturity Date		Interest Rate		Outstanding at December 31, 2002
Unsecured Line of Credit		$	500,000		February 2004		LIBOR + .65	%	$	281,000
Secured Line of Credit		$	50,000		January 2006		LIBOR + .60	%	$	23,895

 

The lines of credit are used to fund development activities, to acquire additional rental properties and to provide working capital.

 

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In December 2002, the Partnership renewed its secured line of credit by which the capacity was reduced from $100 million to $50 million, the interest rate reduced from LIBOR + 1.05% to LIBOR + .60%, and the maturity date extended to January 2006.

 

The $500 million line of credit allows the Partnership an option to obtain borrowings from the financial institutions that participate in the line of credit at rates lower than the stated interest rate, subject to certain restrictions. Amounts outstanding on the line of credit at December 31, 2002 are at LIBOR + .65% (2.07% at December 31, 2002).

 

In January 2003, the Partnership completed an issuance of unsecured debt totaling $175 million, bearing interest at 5.25% and due 2010.

 

At December 31, 2002, scheduled amortization and maturities of all indebtedness for the next five years and thereafter are as follows  (in thousands):

 

 

Cash paid for interest in 2002, 2001, and 2000 was $125.9 million, $140.5 million and $156.5 million, respectively. Total interest capitalized in 2002, 2001 and 2000 was $13.5 million, $25.9 million and $33.0 million, respectively.

 

(7)             Segment Reporting

 

The Partnership is engaged in four operating segments, the ownership and rental of office, industrial, and retail real estate investments (“Rental Operations”) and the providing of various real estate services such as property management, maintenance, leasing, and construction management to third-party property owners (“Service Operations”). The Partnership’s reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers.

 

Non-segment revenue to reconcile to total revenue consists mainly of equity in earnings of joint ventures. Non- segment assets reconciliation to total assets consists of corporate assets including cash, deferred financing costs and investments in unconsolidated subsidiaries.

 

The accounting policies of the segments are the same as those described in Note 2.

 

The Partnership assesses and measures segment operating results based on a performance measure referred to as Funds From Operations (“FFO”). The National Association of Real Estate Investment Trusts defines FFO as GAAP net income or loss, excluding gains or losses from sales of depreciated property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. FFO is not a measure of operating results or cash flows from operating activities as measured by generally accepted accounting principles, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. Interest expense and other non-property specific revenues and expenses are not allocated to individual segments in determining the Partnership’s performance measure.

 

45

 

The revenues and FFO for each of the reportable segments are summarized as follows for the years ended December 31, 2002, 2001, and 2000, and the assets of each reportable segment as of December 31, 2002 and 2001 (in thousands):

 

		2002			2001			2000
Revenues
Rental Operations:
Office		$	398,169		$	379,272		$	332,265
Industrial		276,353			286,088			327,697
Retail		6,933			18,212			28,467
Service Operations		67,620			80,459			82,799
Total Segment Revenues		749,075			764,031			771,228
Non-Segment Revenue		30,071			31,167			18,318
Consolidated Revenue from continuing operations		779,146			795,198			789,546
Discontinued Operations		7,491			8,610			5,079
Consolidated Revenue		$	786,637		$	803,808		$	794,625
Funds From Operations
Rental Operations:
Office		$	265,811		$	255,308		$	225,496
Industrial		212,620			223,065			256,336
Retail		5,990			15,036			23,008
Services Operations		29,520			35,115			32,760
Total Segment FFO		513,941			528,524			537,600
Non-Segment FFO:
Interest expense		(117,073		)	(111,880		)	(131,418		)
Interest income		3,849			5,308			6,866
General and administrative expense		(24,735		)	(15,553		)	(21,137		)
Gain on land sales		4,478			5,080			9,165
Other expenses		(330		)	(3,899		)	(2,826		)
Minority interest in earnings of subsidiaries		(1,093		)	(2,411		)	(2,145		)
Joint Venture FFO		44,837			45,570			24,182
Dividends on preferred units		(52,613		)	(60,850		)	(57,389		)
Discontinued operations		5,193			5,804			2,231
Consolidated FFO		376,454			395,693			365,129
Depreciation and amortization on continuing operations		(174,902		)	(157,502		)	(161,454		)
Depreciation and amortization on discontinued operations		(719		)	(2,212		)	(1,069		)
Share of joint venture adjustments		(17,657		)	(14,177		)	(9,104		)
Earnings (loss) from depreciated property sales on continuing operations		(4,888		)	40,628			51,527
Earnings from depreciated property sales on discontinued operations		1,458			—			—
Net income available for common shareholders		$	179,746		$	262,430		$	245,029

 

		December 31, 2002			December 31, 2001
Assets
Rental Operations
Office		$	2,677,427		$	2,625,015
Industrial		2,144,686			2,184,234
Retail		71,072			64,946
Service Operations		91,399			99,554
Total Segment Assets		4,984,584			4,973,749
Non-Segment Assets		362,471			356,497
Consolidated Assets		$	5,347,055		$	5,330,246

 

(8)             Leasing Activity

 

Future minimum rents due to the Partnership under non-cancelable operating leases at December 31, 2002, are as follows (in thousands):

 

 

46

 

In addition to minimum rents, certain leases require reimbursements of specified operating expenses which amounted to $120.1 million, $115.7 million, and $114.2  million for the years ended December 31, 2002, 2001 and 2000, respectively.

 

(9)             Employee Benefit Plans

 

The Partnership maintains a 401(k) plan for the benefit of its full-time employees.  The Partnership matches the employees’ contributions up to three percent of the employees’ salary and may also make annual discretionary contributions. Total expense recognized by the Partnership was $1.7 million, $1.3 million and $3.2 million for the years ended 2002, 2001 and 2000, respectively.

 

The Partnership makes contributions to a contributory health and welfare plan as necessary to fund claims not covered by employee contributions. Total expense recognized by the Partnership related to this plan was $4.9 million, $5.6 million and $6.0 million for 2002, 2001 and 2000, respectively. Included in total expense is an estimate based on historical experience of the effect of claims incurred but not reported as of year-end.

 

(10)      Partners’ Equity

 

The General Partner periodically accesses the public equity markets to fund the development and acquisition of additional rental properties.

 

The following series of preferred equity are outstanding as of December 31, 2002 (in thousands, except percentages):

 

Description		Shares Outstanding		Dividend Rate		Redemption Date		Liquidation Preference			Convertible
Series B Preferred		265		7.990	%	September 30, 2007		$	132,250		No
Series D Preferred		535		7.375	%	December 31, 2003		133,639			Yes
Series E Preferred		400		8.250	%	January 20, 2004		100,000			No
Series I Preferred		300		8.450	%	February 6, 2006		75,000			No

 

All series of preferred equity require cumulative distributions and have no stated maturity date.

 

The Series D Preferred equity are convertible at a conversion rate of .93677 common units for each preferred unit outstanding.

 

The dividend rate on the Series B Preferred equity increases to 9.99% after September 12, 2012. The General Partner repurchased 355,000 shares of the Series B Preferred equity in September 2002. The repurchase transaction was initiated by a group of Series B Preferred unitholders who voluntarily approached the General Partner and the Partnership with an opportunity to buyback these shares before their earliest stated redemption date.

 

The General Partner and the Partnership redeemed its $150.0 million Series F Preferred equity in October 2002 at par value.

 

Effective August 31, 2002, the Partnership terminated a shareholder rights plan that had included the potential issuance of Series C Junior Preferred equity.

 

(11)      Stock Based Compensation

 

At December 31, 2002, the General Partner and the Partnership had nine stock-based employee compensation plans that are described more fully below.  The General Partner and the Partnership are authorized to issue up to 8,569,860 shares of the General Partner’s common stock under these Plans.

 

47

 

Awards under these plans generally vest over five years at 20% per year. Therefore, the expense related to stock-based employee compensation included in the determination of net income is less than that which would have been recognized if the fair value method had been applied to all awards since the original effective date of SFAS 123. The following table illustrates the effect on net income and earnings per unit if the fair value method had been applied to all outstanding and unvested awards in each period.

 

		2002			2001			2000
Net income, as reported		$	179,746		$	262,430		$	245,029
Add:  Stock-based employee compensation expense included in net income determined under fair value method		405			0			0
Deduct:  Total stock based compensation expense determined under fair value method for all awards		(1,334		)	(1,236		)	(593		)
Proforma Net Income		$	178,817		$	261,194		$	244,436
Basic net income per unit
As reported		$	1.20		$	1.77		$	1.68
Pro forma		$	1.20		$	1.76		$	1.67
Diluted net income per unit
As reported		$	1.19		$	1.75		$	1.66
Pro forma		$	1.19		$	1.74		$	1.66

 

The fair values of the options were determined using the Black-Scholes option-pricing model with the following assumptions:

 

 

Fixed Stock Option Plans

 

The General Partner and the Partnership had options outstanding under six fixed stock option plans as of December 31, 2002. Additional grants may be made under three of those plans.

 

A summary of the status of the fixed stock option plans as of December 31, 2002, 2001 and 2000 and changes during the years ended on those dates follows:

 

		2002						2001						2000
		Units			Weighted Average Exercise Price			Units			Weighted Average Exercise Price			Units			Weighted Average Exercise Price
Outstanding, beginning of year		4,691,659			$	21.12		5,235,464			$	19.52		5,043,965			$	19.00
Granted		676,038			23.37			718,320			24.98			958,786			20.04
Exercised		(1,203,534		)	18.82			(982,243		)	15.21			(440,924		)	13.66
Forfeited		(243,965		)	22.96			(279,882		)	21.84			(326,363		)	22.95
Outstanding, end of year		3,920,198			22.09			4,691,659			21.12			5,235,464			19.52
Options exercisable, end of year		2,297,500						2,965,930						3,112,706
Weighted-average fair value of options granted during the year		$	2.05					$	2.19					$	2.18

 

The options outstanding at December 31, 2002, under the fixed stock option plans have a range of exercise prices from $11.87 to $25.50 with a weighted average exercise price of $22.09 and a weighted average remaining contractual life of 6.41 years. The options exercisable at December 31, 2002 have a weighted average exercise price of $21.41.

 

Each option’s maximum term is ten years. With limited exceptions, options vest at 20% per year, or, if earlier, upon the death, retirement or disability of the optionee or a change in control of the Partnership.

 

48

 

Performance Based Stock Plans

 

Performance shares are granted under the 2000 Performance Share Plan, with each performance share economically equivalent to one share of the General Partner’s common stock. The performance shares vest over a 5-year period with the vesting percentage for a year dependent upon the Partnership’s attainment of certain predefined levels of earnings growth for such year. The value of vested performance shares are payable in cash upon the retirement or termination of employment of the participant.  At December 31, 2002, plan participants had the right to receive up to 61,922 performance shares, of which 30,423 were vested and 31,499 were contingent upon future earnings achievement.

 

For grants prior to 2002, compensation cost is based upon the value of the vested performance shares at the end of each applicable reporting period. No grants were made in 2002 under this plan. The compensation cost that has been charged against income for this plan was $96,000, $201,000  and $962,000 for 2002, 2001 and 2000, respectively.

 

In October 2002, the General Partner and the Partnership amended the Shareholder Value Plan (“SVP Plan”) and Dividend Increase Unit Plans (“DIU Plans”) by requiring that all payouts under these two plans to be in cash only. The SVP Plan is based on the General Partner’s cumulative shareholder return for a three-year period as compared to the cumulative total return of the S&P 500 and the NAREIT Equity REIT Total Return indices. The DIU Plans are based upon increases in the General Partner’s dividend. The total compensation cost that has been charged against income for these two plans was $4.6 million, $6.0 million and $6.7 million for 2002, 2001 and 2000, respectively.

 

Directors Stock Payment Plan

 

Under the General Partner’s 1999 Directors’ Stock Payment Plan, non-employee members of the General Partner’s Board of Directors are entitled to 1,200 shares of common stock per year as partial compensation for services as a board member. The shares are fully vested when issued and the value of the shares are recorded as an expense by the Partnership. The amount of that expense was $274,000, $260,000 and $230,000 for 2002, 2001 and 2000, respectively.

 

Employee Stock Purchase Plan

 

Under the General Partner and the Partnership’s Employee Stock Purchase Plan, employees are entitled to purchase common stock at a 15% discount through payroll deductions. Under SFAS 123, the Partnership is required to record the amount of the discount as compensation expense. The amount of that expense for 2002 was $181,496.

 

(12)      Derivative Instruments

 

The Partnership is exposed to capital market risk, such as changes in interest rates.  In order to manage the volatility relating to interest rate risk, the Partnership may enter into interest rate hedging arrangements from time to time. The Partnership does not utilize derivative financial instruments for trading or speculative purposes. On January 1, 2001, the Partnership adopted Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS 133”). SFAS 133 establishes accounting and reporting standards for derivative instruments and requires that entities recognize all derivatives as either assets or liabilities and measure those instruments at fair value. The cumulative effect of adopting SFAS 133 was not material to the Partnership’s financial statements.

 

During the years ended December 31, 2002 and 2001, the Partnership recorded a $1.4 million gain and a $1.4 million loss, respectively, associated with an interest rate contract that did not qualify for hedge accounting. The contract expired on December 30, 2002.

 

49

 

In December 2002, the Partnership simultaneously entered into two $50 million forward-starting interest rate swaps. The Partnership designated the aggregate $100 million swaps as a hedge to effectively fix the rate on financing expected in 2003. The Partnership expects and intends that the financing will be a ten-year fixed-rate semi-annual financing, pricing between May 1, 2003 and November 1, 2003. The fair value of the swaps was a liability of ($2.1) million as of December 31, 2002, and is recorded in other liabilities in the accompanying balance sheet. The swaps qualify for hedge accounting under SFAS 133, therefore, changes in fair value will be recorded in other comprehensive income.

 

In July 2001, the Partnership terminated three interest rate swaps that were tied to an $85 million unsecured term loan. The swaps qualified for hedge accounting under SFAS 133. The costs to terminate the swaps was $548,000, which was recorded as interest expense and reversed out of other comprehensive income.

 

(13)      Commitments and Contingencies

 

In 1998 and 1999, members of management and the Board of Directors of the General Partner purchased $69 million of the General Partner’s common stock in connection with an Executive and Senior Officer Stock Purchase Plan. The purchases were financed by five-year personal loans at market interest rates from financial institutions. As of December 31, 2002, the outstanding balance on these loans is $33.5 million as some participants have exited the program and repaid their principal balance. These loans are secured by $41.0 million of common shares purchased through this program and held at December 31, 2002, by the remaining plan participants. As a condition of the financing agreement with the financial institution, the Partnership has guaranteed repayment of principal, interest and other obligations for each participant, but is fully indemnified by the participants. In the opinion of management, it is not probable that the Partnership will be required to satisfy these guarantees.

 

The Partnership has entered into agreements, subject to the completion of due diligence requirements, resolution of certain contingencies and completion of customary closing conditions, for the future acquisition of land totaling $26.2 million. The acquisitions are scheduled to close periodically through 2003 and will be paid for through a combination of cash or common units.

 

The Partnership renewed all major insurance programs for 2002-2003, including obtaining coverage for acts of terrorism for its properties. The Partnership believes that insurance is in place that provides adequate coverage to provide financial protection against normal insurance risks such that it believes that any loss experienced would not have a significant impact on the Partnership’s liquidity, financial position, or results of operations.

 

The Partnership is subject to various legal proceedings and claims that arise in the ordinary course of business.  In the opinion of management, the amount of any ultimate liability with respect to these actions will not materially affect the Partnership’s consolidated financial statements or results of operations.

 

50

 

DUKE REALTY LIMITED PARTNERSHIP		Schedule 3
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002
(IN THOUSANDS)

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
ALPHARETTA, GEORGIA
Brookside Office Park		3925 Brookside Parkway		Office		—		1,269		14,705		7		1,269		14,711		15,980		1,294		1998		1999
Brookside Office Park		3625 Brookside Parkway		Office		—		1,625		10,984		2,690		1,625		13,675		15,300		1,931		1999		1999
Brookside Office Park		Radiant II		Office		—		831		7,265		115		831		7,380		8,211		332		2000		2000
Brookside Office Park		Brookside II		Office		—		1,381		12,250		—		1,381		12,250		13,632		512		2000		2001
Hembree Crest		11800 Wills Road		Industrial		—		304		2,146		336		304		2,482		2,786		299		1987		1999
Hembree Crest		11810 Wills Road		Industrial		—		296		2,254		228		296		2,482		2,778		305		1987		1999
Hembree Crest		11820 Wills Road		Industrial		—		488		2,277		860		488		3,137		3,625		271		1987		1999
Hembree Crest		11415 Old Roswell Road		Industrial		—		648		2,454		1,066		648		3,521		4,169		415		1991		1999
Hembree Park		1750 Founders		Industrial		—		1,936		7,731		1		1,936		7,732		9,668		1,077		1999		2000
Hembree Park		NMeadow SC II @ Founders		Industrial		—		1,369		3,591		216		1,369		3,807		5,176		126		2001		2001
North Meadow		1350 Northmeadow Parkway		Industrial		—		672		3,648		260		672		3,908		4,580		419		1994		1999
North Meadow		11835 Alpharetta Highway		Retail		—		524		2,861		5		524		2,866		3,390		249		1994		1999
Northwinds Pointe		2550 Northwinds Parkway		Office		—		2,271		20,017		250		2,271		20,267		22,538		1,849		1998		1999
Ridgeland		1320 Ridgeland Pkwy		Industrial		—		998		5,874		37		998		5,911		6,909		508		1999		1999
Ridgeland		Ridgeland Business Dist I		Industrial		—		488		2,937		1,332		488		4,268		4,757		1,016		1999		1999
Ridgeland		Ridgeland Business Dist. II		Industrial		—		579		2,529		28		579		2,557		3,136		310		1999		2000
ANTIOCH, TENNESSEE
Jackson Business Center		Keebler		Industrial		—		307		1,299		20		307		1,319		1,626		248		1985		1995
ARLINGTON HEIGHTS, ILLINOIS
Arlington Business Park		Atrium II		Office		—		776		7,209		1,128		776		8,337		9,113		1,221		1986		1998
ATLANTA, GEORGIA
Druid Chase		6 W. Druid Hills Drive		Office		—		473		6,758		555		473		7,313		7,786		629		1968		1999
Druid Chase		2801 Buford Highway		Office		—		794		9,905		1,400		794		11,305		12,099		1,086		1977		1999
Druid Chase		1190 W. Druid Hills Drive		Office		—		689		6,631		412		689		7,043		7,732		598		1980		1999
Druid Chase		2071 N. Druid Hills Drive		Retail		—		98		321		—		98		321		419		28		1968		1999
AURORA, ILLINOIS
Meridian Business Campus		535 Exchange		Industrial		—		386		920		—		386		920		1,306		82		1984		1999
Meridian Business Campus		515-525 North Enterprise		Industrial		—		342		1,678		90		342		1,768		2,110		198		1984		1999
Meridian Business Campus		615 Enterprise		Industrial		—		468		2,824		123		468		2,947		3,415		306		1984		1999
Meridian Business Campus		3615 Exchange		Industrial		—		410		1,603		50		410		1,653		2,063		157		1986		1999
Meridian Business Campus		4000 Sussex		Industrial		—		417		1,940		32		417		1,972		2,389		185		1990		1999
Meridian Business Campus		3737 East Exchange		Industrial		—		598		2,543		16		598		2,559		3,157		236		1985		1999
Meridian Business Campus		444 North Commerce		Industrial		—		722		5,411		411		722		5,823		6,545		583		1985		1999
Meridian Business Campus		Meridian I		Industrial		—		1,150		6,673		260		1,150		6,934		8,083		1,056		1999		2000
Meridian Business Campus		Meridian II		Industrial				567		164		—		567		164		731		43		2001		2001
Meridian Business Campus		Meridian II		Industrial		—		567		1,508		—		567		1,508		2,075		—		2001		2001
Meridian Business Campus		Meridian Outlot		Grounds		—		894		—		—		894		—		894		—				2000
BEACHWOOD, OHIO
Corporate Exchange		One Corporate Exchange		Office		5,048		1,287		8,726		961		1,287		9,687		10,974		1,665		1989		1996
Corporate Place		Corporate Place		Office		—		1,161		7,838		650		1,163		8,486		9,649		1,372		1988		1996
BLOOMINGTON, MINNESOTA
Alpha Buildings		Alpha Business Ctr I&II		Office		—		280		1,615		281		280		1,896		2,176		196		1980		1999
Alpha Buildings		Alpha Business Ctr III&IV		Industrial		—		341		1,965		174		341		2,138		2,479		216		1980		1999
Alpha Buildings		Alpha Business Ctr V		Industrial		—		537		3,089		149		538		3,237		3,775		302		1980		1999
Bloomington Industrial Center		Bloomington Industrial Center		Industrial		1,508		621		3,650		764		621		4,414		5,035		822		1963		1997
Hampshire Dist. Center		Hampshire Dist Center North		Industrial		2,224		779		4,500		56		779		4,556		5,334		582		1979		1997
Hampshire Dist. Center		Hampshire Dist Center South		Industrial		2,666		901		5,234		262		901		5,495		6,397		703		1979		1997

 

51

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Hampshire Tech Center		Hampshire Tech Center		Industrial		—		2,124		13,102		645		2,223		13,647		15,870		1,919		1998		1998
Lyndale Commons		Lyndale Commons I		Industrial		—		247		1,443		214		247		1,656		1,903		244		1981		1998
Lyndale Commons		Lyndale Commons II		Industrial		—		181		1,048		201		183		1,247		1,430		160		1985		1998
Norman Center		Norman Center 2		Office		—		782		4,489		141		807		4,605		5,412		522		1970		1998
Norman Center		Norman Center 4		Office		—		562		3,265		333		579		3,581		4,159		500		1967		1998
Norman Center Plaza		Norman Pointe I		Office		—		3,660		28,229		—		3,660		28,229		31,889		1,118		2000		2000
Penn Corporate Building		Penn Corporate Bldg		Industrial		—		312		1,801		68		312		1,869		2,181		235		1977		1997
BLUE ASH, OHIO
Alliance Woods		McAuley Place		Office				2,331		18,596		—		2,331		18,596		20,926		624		2000		2001
Cornell Commerce Center		Cornell Commerce Center		Industrial		—		495		4,787		187		495		4,974		5,469		884		1989		1996
Creek Road		Creek Road Bldg 1		Industrial		—		103		833		36		103		870		972		134		1971		1996
Creek Road		Creek Road Bldg 2		Industrial		—		132		1,149		62		132		1,211		1,343		186		1971		1996
Huntington Bank Building		Huntington Bank Building		Office		—		175		241		—		175		241		416		37		1986		1996
Lake Forest/Westlake		Lake Forest Place		Office		—		1,953		20,207		1,821		1,953		22,028		23,981		3,933		1985		1996
Lake Forest/Westlake		Westlake Center		Office		—		2,459		16,884		1,414		2,459		18,299		20,757		3,263		1981		1996
BOLINGBROOK, ILLINOIS
Bolingbrook (ComEd)		555 Joliet Road		Industrial				2,184		9,284		—		2,184		9,284		11,468		167		1967		2002
BRANDON, FLORIDA
Regency Park North		Regency I		Office		—		1,048		4,230		105		1,048		4,336		5,384		523		2000		2000
Regency Park North		Regency II		Office				1,411		3,797		—		1,411		3,797		5,208		178		2001		2002
BRASELTON, GEORGIA
Braselton		Braselton II		Industrial		—		1,365		9,505		—		1,365		9,505		10,871		250		2001		2001
BRENTOOD, TENNESSEE
Brentwood South Bus. Center		7104 Crossroads Blvd		Industrial		—		1,065		5,994		481		1,065		6,475		7,540		565		1987		1999
Brentwood South Bus. Center		7106 Crossroads Blvd		Industrial		—		1,065		2,836		940		1,065		3,775		4,840		344		1987		1999
Brentwood South Bus. Center		7108 Crossroads Blvd		Industrial		—		848		4,141		201		848		4,341		5,189		383		1989		1999
Creekside Crossing		Creekside Crossing One		Office		—		1,900		8,445		972		1,901		9,416		11,317		2,136		1997		1998
Creekside Crossing		Creekside Crossing Two		Office		—		2,087		9,642		522		2,087		10,164		12,251		1,345		1999		2000
BROOKLYN PARK, MINNESOTA
7300 Northland Drive		7300 Northland Drive		Industrial		—		700		6,635		53		703		6,686		7,389		1,121		1980		1998
Crosstown North		Crosstown North Bus. Ctr. 1		Industrial		—		835		5,459		828		1,091		6,031		7,122		725		1998		1999
Crosstown North		Crosstown North Bus. Ctr. 2		Industrial		—		449		2,961		294		525		3,179		3,704		387		1998		1999
Crosstown North		Crosstown North Bus. Ctr. 3		Industrial		—		758		2,741		77		784		2,791		3,575		576		1999		1999
Crosstown North		Crosstown North Bus. Ctr. 4		Industrial		—		2,079		8,138		777		2,206		8,788		10,994		1,230		1999		1999
Crosstown North		Crosstown North Bus. Ctr. 5		Industrial		—		1,079		5,595		120		1,191		5,602		6,794		751		1999		2000
Crosstown North		Crosstown North Bus. Ctr. 6		Industrial		—		788		3,651		45		788		3,696		4,484		398		2000		2000
BURNSVILLE, MINNESOTA
Cliff Road Industrial Center		Cliff Road Industrial Ctr		Industrial		—		256		1,493		66		256		1,559		1,816		191		1972		1998
Larc Industrial Park		Larc Industrial Park I		Industrial		—		280		1,644		131		280		1,776		2,055		252		1977		1997
Larc Industrial Park		Larc Industrial Park II		Industrial		—		224		1,327		144		224		1,470		1,695		209		1976		1997
Larc Industrial Park		Larc Industrial Park III		Industrial		—		135		800		48		135		848		983		109		1980		1997
Larc Industrial Park		Larc Industrial Park IV		Industrial		—		90		539		6		90		545		635		77		1980		1997
Larc Industrial Park		Larc Industrial Park V		Industrial		—		96		555		242		96		797		893		125		1980		1997
Larc Industrial Park		Larc Industrial Park VI		Industrial		—		373		2,149		277		373		2,426		2,799		309		1975		1997
Larc Industrial Park		Larc Industrial Park VII		Industrial		—		242		1,394		213		242		1,607		1,849		255		1973		1997
Professional Plaza		Professional Plaza III		Industrial		—		237		1,359		277		241		1,632		1,873		253		1985		1998
Professional Plaza		Professional Plaza II		Industrial		—		216		1,272		285		216		1,557		1,773		240		1984		1998
SE Submarket-Burnsville		Professional Plaza I		Office		—		467		2,731		285		467		3,016		3,483		421		1986		1998

 

52

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
CANAL WINCHESTER, OHIO
Nifco at Canal Winchester		Nifco at Canal Winchester		Industrial		—		400		3,386		6		400		3,392		3,792		197		2000		2000
CARMEL, INDIANA
Hamilton Crossing		Hamilton Crossing Bldg 1		Industrial		—		835		4,881		1,911		847		6,780		7,627		1,224		1989		1993
Hamilton Crossing		Hamilton Crossing Bldg 2		Office		—		313		1,410		833		384		2,172		2,556		488		1997		1997
Hamilton Crossing		Hamilton Crossing Bldg 3		Office		—		890		10,040		316		890		10,356		11,246		918		2000		2000
Hamilton Crossing		Hamilton Crossing Bldg 4		Office		—		515		6,491		26		598		6,434		7,032		1,338		1999		1999
Hamilton Crossing Retail		Hamilton Crossing Retail Bld 1		Retail		—		728		6,763		186		898		6,779		7,677		731		1999		1999
Hamilton Crossing Retail		Hampton Inn Land Lease		Grounds		—		137		—		72		209		—		209		—				1999
Hamilton Crossing Retail		Max & Ermas		Grounds		—		167		—		—		167		—		167		—				2000
Meridian Technology Center		Meridian Tech Center		Office				600		2,695		—		600		2,695		3,295		34		1986		2002
CARY, NORTH CAROLINA
Regency Forest		200 Regency Forest Dr.		Office		—		1,230		13,501		295		1,230		13,796		15,026		1,346		1999		1999
Regency Forest		100 Regency Forest Dr.		Office		—		1,538		10,756		1,664		1,618		12,339		13,958		1,703		1997		1999
Regency Forest		Regency Forest III		Office		—		1,134		9,604		117		1,134		9,721		10,855		388		2000		2001
Weston Parkway		6501 Weston Parkway		Office		7,317		1,775		10,668		56		1,775		10,724		12,499		943		1996		1999
CELEBRATION, FLORIDA
Celebration Business Center		Celebration Business Center I		Office		—		1,102		4,843		868		1,308		5,505		6,813		770		1997		1999
Celebration Business Center		Celebration Business Center II		Office		—		771		3,590		190		961		3,590		4,551		321		1997		1999
Celebration Business Center		Celebration Office Center I		Office				1,382		7,921		—		1,382		7,921		9,303		872		2000		2000
Celebration Business Center		Celebration Office Center II		Office		—		1,382		6,254		—		1,382		6,254		7,636		172		2001		2001
CHANHASSEN, MINNESOTA
Chanhassen Lakes		Chanhassen Lakes I		Industrial		—		357		2,078		667		370		2,733		3,103		406		1983		1998
Chanhassen Lakes		Chanhassen Lakes II		Industrial		—		438		2,542		165		453		2,693		3,145		319		1986		1998
CHAPEL HILL, NORTH CAROLINA
Governors Village		Governors Village		Office				515		5,664		—		515		5,664		6,178		159		2000		2001
CHICAGO, ILLINOIS
King’s Mall		Applebee’s Ground Lease		Grounds		—		338		—		—		338		—		338		—				1997
CINCINNATI, OHIO
312 Elm		312 Elm		Office		38,366		4,750		47,227		4,566		5,428		51,114		56,542		13,074		1992		1993
312 Plum		312 Plum		Office		—		2,539		24,796		2,075		2,590		26,821		29,411		6,428		1987		1993
Blue Ash Office Center		Blue Ash Office Ctr VI		Office		—		518		2,852		253		518		3,104		3,622		424		1989		1997
Executive Plaza		Executive Plaza I		Office		—		728		5,525		328		728		5,854		6,582		869		1980		1996
Executive Plaza		Executive Plaza II		Office		—		728		5,628		—		728		5,628		6,356		821		1981		1996
Executive Plaza		Executive Plaza III		Office		—		509		4,992		1,360		509		6,352		6,861		1,467		1998		1998
Governors Hill		8790 Governor’s Hill		Office		—		400		4,784		547		408		5,323		5,731		1,212		1985		1993
Governors Hill		8800 Governor’s Hill		Office		—		225		2,298		12		231		2,305		2,536		955		1985		1986
Governors Hill		8600 Governor’s Hill		Office		—		1,220		18,998		1,228		1,245		20,202		21,447		4,544		1986		1993
Iams Industrial Park		Cincinnati Bell Supply		Industrial		—		606		3,237		—		606		3,238		3,843		230		1999		2000
Kenwood Commons		8230 Kenwood Commons		Office		4,557		638		3,308		786		638		4,095		4,732		2,037		1986		1986
Kenwood Commons		8280 Kenwood Commons		Office		2,443		638		1,863		35		638		1,899		2,537		894		1986		1986
Kenwood Executive Center		Kenwood Executive Center		Office		—		606		4,037		441		606		4,479		5,084		597		1981		1997
Kenwood MOB		Kenwood MOB		Office						7,798		—		—		7,798		7,798		627		1994		1999
One Ashview Place		One Ashview Place		Office		—		1,204		12,659		449		1,204		13,108		14,312		1,756		1989		1997
Park 50		Dun & Bradstreet Bldg		Office		1,577		270		2,718		447		466		2,970		3,435		1,200		1972		1986
Pfeiffer Place		Pfeiffer Place		Office		—		3,608		14,945		—		3,608		14,945		18,553		358		2001		2001
Pfeiffer Woods		Pfeiffer Woods		Office		6,457		1,450		12,322		266		1,450		12,588		14,038		1,065		1998		1999

 

53

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Remington Office Park		Remington Park Bldg A		Office		—		560		1,469		164		560		1,633		2,193		247		1982		1997
Remington Office Park		Remington Park Bldg B		Office		—		560		1,543		180		560		1,723		2,283		222		1982		1997
Triangle Office Park		Triangle Office Park		Office		4,935		1,018		11,511		—		1,018		11,511		12,530		4,724		1965		1986
World Park		World Park Bldg 5		Industrial		1,698		270		3,398		24		276		3,416		3,691		1,221		1987		1988
World Park		World Park Bldg 6		Industrial		1,994		378		3,845		111		385		3,950		4,335		1,365		1987		1988
World Park		World Park Bldg 7		Industrial		2,387		525		4,522		144		537		4,653		5,190		1,600		1987		1988
Zussman Building		Zussman Bldg		Office		—		339		6,864		818		346		7,675		8,021		2,565		1986		1993
COLUMBUS, OHIO
Easton		Easton Way One		Office		—		1,874		10,338		180		1,874		10,518		12,392		1,074		2000		2000
Easton		Easton Way Two		Office				2,005		10,287		—		2,005		10,287		12,291		312		2001		2001
Easton Oval		One Easton Oval		Office		—		2,789		12,109		208		2,789		12,317		15,105		2,342		1998		1999
Easton Oval		Two Easton Oval		Office		—		2,489		16,828		310		2,489		17,138		19,627		1,985		1996		1998
Polaris		1000 Polaris Parkway		Office		—		1,200		6,636		1,425		1,293		7,968		9,261		808		1992		1999
Westbelt Drive		2190-2200 Westbelt Drive		Industrial		—		300		1,963		84		300		2,047		2,347		221		1986		1998
Westbelt West		Westbelt West #1		Industrial		—		432		4,165		872		432		5,037		5,469		736		1999		1999
Westbelt West		Westbelt West #2		Industrial		—		509		5,230		322		509		5,552		6,061		496		1999		2000
Zane Trace		3800 Zane Trace Drive		Industrial		—		170		2,097		411		170		2,508		2,678		550		1978		1994
Zane Trace		3635 Zane Trace Drive		Industrial		—		236		1,813		257		236		2,070		2,306		293		1980		1998
CREVE COUER, MISSOURI
Twin Oaks Office Ctr		Twin Oaks		Office		—		566		8,304		1,403		566		9,707		10,273		1,444		1995		1997
CRYSTAL, MINNESOTA
Crystal Industrial Center		Crystal Industrial Center		Industrial		—		456		2,621		528		480		3,125		3,605		534		1974		1997
DES PLAINES, ILLINOIS
105 East Oakton		105 East Oakton		Industrial		—		1,132		4,279		370		1,132		4,649		5,781		467		1974		1999
Deckbrand Building		Wolf Road Building		Industrial		—		179		1,632		232		179		1,864		2,043		217		1966		1998
DOWNERS GROVE, ILLINOIS
Executive Towers		Executive Towers I		Office		—		2,652		24,464		2,899		2,652		27,363		30,015		3,895		1983		1997
Executive Towers		Executive Towers II		Office		—		3,386		31,876		5,389		3,386		37,265		40,651		5,822		1984		1997
Executive Towers		Executive Towers III		Office		—		3,512		32,989		2,688		3,512		35,676		39,188		5,227		1987		1997
DUBLIN, OHIO
Scioto Corporate Center		Scioto Corporate Center		Office		—		1,100		3,350		771		1,100		4,121		5,221		670		1987		1996
Tuttle Crossing		Metrocenter III		Office		—		887		3,012		436		887		3,448		4,334		562		1983		1996
Tuttle Crossing		Qwest (LCI)		Office		—		2,618		18,942		931		2,670		19,821		22,491		4,559		1990		1993
Tuttle Crossing		Sterling 1		Office		—		1,494		12,858		331		1,524		13,159		14,683		2,983		1990		1993
Tuttle Crossing		4700 Lakehurst Ct.		Office		—		717		2,463		405		717		2,868		3,585		793		1994		1994
Tuttle Crossing		Sterling 2		Office		—		605		5,873		71		605		5,944		6,549		1,124		1995		1995
Tuttle Crossing		John Alden Life Ins.		Office		—		1,066		7,711		31		1,066		7,743		8,809		1,444		1995		1995
Tuttle Crossing		5555 Glendon Court		Office		—		1,600		10,864		1,093		1,773		11,783		13,557		4,256		1995		1995
Tuttle Crossing		Sterling 3		Office		—		1,601		8,725		71		1,601		8,796		10,397		2,229		1996		1996
Tuttle Crossing		Compmanagement		Office		—		867		4,408		545		867		4,953		5,820		848		1997		1997
Tuttle Crossing		Sterling 4		Office		—		483		9,349		892		483		10,242		10,725		1,661		1998		1998
Tuttle Crossing		Xerox Bldg-5555 Parkcenter Cir		Office		—		1,580		9,375		449		1,580		9,824		11,404		2,203		1992		1994
Tuttle Crossing		Parkwood Place		Office		—		1,690		11,570		847		1,690		12,417		14,106		2,390		1997		1997
Tuttle Crossing		Nationwide		Office		—		4,815		19,199		96		4,815		19,295		24,110		4,872		1996		1996
Tuttle Crossing		Emerald II		Office		—		495		3,399		17		495		3,416		3,911		832		1998		1998
Tuttle Crossing		Atrium II, Phase I		Office		—		1,649		11,523		1		1,649		11,524		13,173		2,890		1997		1998
Tuttle Crossing		Atrium II, Phase II		Office		—		1,597		10,292		904		1,597		11,196		12,793		2,680		1998		1999
Tuttle Crossing		Blazer I		Office		—		904		5,728		579		904		6,308		7,212		1,417		1999		1999
Tuttle Crossing		Parkwood II		Office		—		1,848		14,030		45		1,848		14,075		15,923		1,405		2000		2000

 

54

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Tuttle Crossing		Blazer II		Office		—		1,016		6,901		17		1,016		6,917		7,934		720		2000		2000
Tuttle Crossing		Emerald III		Office		—		1,685		9,862		—		1,685		9,862		11,547		427		2001		2001
DULUTH, GEORGIA
Breckinridge		2825 Breckinridge Blvd		Industrial		—		317		3,626		208		317		3,833		4,151		394		1986		1999
Breckinridge		2875 Breckinridge Blvd		Industrial		—		476		4,797		11		476		4,807		5,284		417		1986		1999
Breckinridge		2885 Breckinridge Blvd		Industrial		—		487		6,893		563		487		7,456		7,942		733		1997		1999
Business Park At Sugarloaf		2775 Premiere Parkway		Industrial		—		560		4,697		21		560		4,719		5,279		417		1997		1999
Business Park At Sugarloaf		3079 Premiere Parkway		Industrial		—		776		6,520		381		776		6,902		7,678		625		1998		1999
Business Park At Sugarloaf		Sugarloaf Office I		Industrial		—		1,042		8,685		275		1,042		8,960		10,002		797		1998		1999
Business Park At Sugarloaf		Sugarloaf Office II		Industrial				972		3,842		—		972		3,842		4,814		21		1999		2002
Business Park At Sugarloaf		Sugarloaf Office III		Industrial				696		3,896		—		696		3,896		4,591		20		1999		2002
Business Park At Sugarloaf		Sugarloaf Office IV		Industrial		—		623		4,182		10		623		4,192		4,816		824		2000		2000
Business Park At Sugarloaf		Sugarloaf Office V		Industrial				744		3,958		—		744		3,958		4,702		349		2001		2001
Business Park At Sugarloaf		2850 Premiere Parkway		Industrial				621		4,698		—		621		4,698		5,319		19		1997		2002
Business Park At Sugarloaf		2855 Premiere Parkway		Industrial		—		765		3,959		186		765		4,145		4,911		444		1999		1999
Business Park At Sugarloaf		6655 Sugarloaf		Industrial		—		1,651		6,449		4		1,651		6,453		8,104		175		1998		2001
Crestwood Pointe		3805 Crestwood Parkway		Office		—		877		15,158		244		877		15,403		16,279		1,356		1997		1999
Crestwood Pointe		3885 Crestwood Parkway		Office		—		878		14,153		958		878		15,110		15,988		1,777		1998		1999
Hampton Green		Hampton Green Off I		Office		—		1,388		12,361		—		1,388		12,361		13,748		772		2000		2000
Meadowbrook		2475 Meadowbrook Parkway		Industrial		—		529		3,477		78		529		3,555		4,084		307		1986		1999
Meadowbrook		2505 Meadowbrook Parkway		Industrial		—		606		1,555		4		606		1,559		2,165		209		1990		1999
River Green		3450 River Green Court		Industrial		—		194		2,191		195		194		2,386		2,580		260		1989		1999
EAGAN, MINNESOTA
Apollo Distribution Center		Apollo Industrial Ctr I		Industrial		—		866		4,976		737		882		5,698		6,579		745		1997		1997
Apollo Distribution Center		Apollo Industrial Ctr II		Industrial		—		474		3,142		—		474		3,142		3,616		407		2000		2000
Apollo Distribution Center		Apollo Industrial Ctr III		Industrial		—		1,432		6,905		—		1,432		6,905		8,337		509		2000		2000
Eagandale Crossing		Eagandale Crossing		Industrial		—		974		4,818		10		987		4,815		5,802		1,519		1998		1998
Eagandale Tech Center		Eagandale Tech Center		Industrial		—		987		5,709		1,023		997		6,721		7,719		1,193		1998		1998
Lunar Pointe		Lunar Pointe		Industrial				982		4,448		—		982		4,448		5,430		209		2001		2001
Sibley Industrial Center		Sibley Industrial Center I		Industrial		—		356		2,050		234		380		2,260		2,639		327		1973		1997
Sibley Industrial Center		Sibley Industrial Center II		Industrial		—		225		1,197		105		225		1,301		1,526		231		1972		1997
Sibley Industrial Center		Sibley Industrial Center III		Industrial		—		213		1,223		251		217		1,470		1,687		225		1968		1997
Silverbell Commons		Silverbell Commons		Industrial		—		1,807		6,804		256		1,807		7,060		8,867		907		1999		1999
Trapp Road		Trapp Road Commerce I		Industrial		—		671		3,893		367		700		4,231		4,931		619		1996		1998
Trapp Road		Trapp Road Commerce II		Industrial		—		1,250		7,022		490		1,266		7,496		8,762		1,096		1998		1998
EARTH CITY, MISSOURI
Earth City		3322 NGIC		Office		6,311		2,615		10,877		811		2,615		11,688		14,303		1,737		1987		1997
Earth City		Corporate Center, Earth City		Industrial		—		783		4,517		693		783		5,210		5,993		594		2000		2000
EAST POINTE, GEORGIA
Camp Creek		Camp Creek Bldg 1400		Industrial		—		561		3,398		—		561		3,398		3,959		167		1988		2001
Camp Creek		Camp Creek Bldg 1800		Industrial		—		462		3,022		—		462		3,022		3,484		232		1989		2001
Camp Creek		Camp Creek Bldg 2000		Industrial		—		395		2,292		—		395		2,292		2,688		114		1989		2001
Camp Creek		Camp Creek Bldg 2400		Industrial		—		296		1,840		—		296		1,840		2,135		114		1988		2001
Camp Creek		Camp Creek Bldg 2600		Industrial		—		364		2,346		—		364		2,346		2,710		127		1990		2001
EDEN PRAIRIE, MINNESOTA
Edenvale Executive Center		Edenvale Executive Center		Industrial		—		1,184		6,734		486		1,185		7,220		8,404		676		1987		1999
Golden Triangle Tech Center		Golden Triangle Tech Ctr		Industrial		—		1,446		8,284		268		1,458		8,540		9,998		974		1997		1998
Valley Gate/Green		Valley Gate North		Industrial		—		548		3,133		553		556		3,678		4,234		431		1986		1999
EDINA, MINNESOTA

 

55

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Cahill Business Center		Cahill Business Center		Industrial		—		507		2,963		361		507		3,324		3,831		557		1980		1997
Edina Interchange		Edina Interchange I		Industrial		1,630		630		3,660		411		630		4,071		4,701		606		1995		1997
Edina Interchange		Edina Interchange II		Industrial		1,044		432		2,512		65		432		2,577		3,010		325		1980		1997
Edina Interchange		Edina Interchange III		Industrial		1,176		487		2,833		71		487		2,904		3,391		370		1981		1997
Edina Interchange		Edina Interchange IV		Industrial		—		228		1,322		367		228		1,690		1,917		345		1974		1997
Edina Interchange		Edina Interchange V		Industrial		—		971		5,666		368		971		6,034		7,005		878		1974		1997
Edina Interchange		Edina Interchange VII		Industrial		—		180		1,060		241		180		1,300		1,480		220		1970		1998
Pakwa		Pakwa I		Industrial		—		347		2,029		359		347		2,388		2,735		428		1979		1997
Pakwa		Pakwa II		Industrial		—		215		1,241		182		215		1,423		1,637		200		1979		1997
Pakwa		Pakwa III		Office		—		248		1,433		117		248		1,549		1,798		216		1979		1997
FAIRFIELD, OHIO
Faifield Business Center		Fairfield Bus. Ctr. D		Industrial		—		135		1,744		134		135		1,878		2,012		348		1990		1995
Faifield Business Center		Fairfield Bus. Ctr. E		Industrial		—		398		2,594		88		398		2,682		3,080		514		1990		1995
University Moving		Thunderbird Bldg 1		Industrial		—		248		1,760		24		248		1,784		2,031		340		1991		1995
FENTON, MISSOURI
Fenton Interstate Buildings		Fenton Interstate Building C		Industrial		—		519		1,978		37		519		2,014		2,534		173		1986		1999
Fenton Interstate Buildings		Fenton Interstate Building D		Industrial		—		1,286		5,178		160		1,286		5,338		6,624		544		1987		1999
Fenton Interstate Buildings		Fenton Industrial Bldg A		Industrial		—		603		2,622		—		603		2,622		3,225		224		1987		2000
Fenton Interstate Buildings		Fenton Industrial Bldg B		Industrial		—		702		2,319		—		702		2,319		3,022		155		1986		2000
Southport		Southport I		Industrial		—		192		834		45		192		878		1,070		117		1977		1997
Southport		Southport II		Industrial		—		151		659		49		151		709		860		102		1978		1997
Southport		Southport Commerce Ctr		Industrial		—		233		1,016		173		233		1,189		1,422		197		1978		1997
FISHERS, INDIANA
Exit 5		Exit 5 Bldg I		Industrial		—		833		2,695		113		833		2,807		3,641		269		1999		1999
Exit 5		Exit 5 Bldg. II		Industrial		—		760		4,611		203		760		4,815		5,575		594		1999		2000
FLORENCE, KENTUCKY
Florence		Sofa Express - Florence		Retail		—		735		781		342		735		1,124		1,859		150		1997		1997
Florence		Turfway Crossing		Retail				4,664		4,725		—		4,664		4,725		9,389		—		2001		2002
FRANKLIN, TENNESSEE
Aspen Grove Business Center		277 Mallory Station		Industrial		—		936		6,539		69		936		6,608		7,544		581		1996		1999
Aspen Grove Business Center		320 Premier Court		Industrial		—		1,151		6,521		347		1,151		6,869		8,019		610		1996		1999
Aspen Grove Business Center		305 Seaboard Lane		Industrial		—		970		6,318		566		970		6,884		7,854		1,189		1998		1999
Aspen Grove Business Center		Aspen Grove 4		Industrial		—		492		2,416		—		492		2,416		2,908		32		2002		2002
Aspen Grove Business Center		416 Mary Lindsay Polk Dr		Industrial		—		943		5,288		699		943		5,987		6,930		604		1996		1999
Aspen Grove Business Center		318 Seaboard Lane Bldg 200		Industrial		—		240		1,385		555		240		1,940		2,180		336		1999		1999
Aspen Grove Business Center		341 Cool Springs Blvd		Office		—		950		7,468		1,600		950		9,069		10,018		1,105		1999		1999
Aspen Grove Business Center		318 Seaboard Lane Bldg 100		Industrial		—		301		1,684		755		301		2,439		2,740		522		1999		1999
Aspen Grove Business Center		Aspen Grove Flex Ctr III		Industrial				327		2,027		—		327		2,027		2,354		15		2001		2001
Aspen Grove Business Center		Aspen Grove Flex Ctr IV		Industrial				205		1,528		—		205		1,528		1,733		115		2001		2001
Brentwood South Bus. Center		119 Seaboard Lane		Industrial		—		569		2,435		22		569		2,457		3,027		213		1990		1999
Brentwood South Bus. Center		121 Seaboard Lane		Industrial		—		445		1,932		12		445		1,944		2,389		179		1990		1999
Brentwood South Bus. Center		123 Seaboard Lane		Industrial		—		489		1,243		407		489		1,651		2,139		156		1990		1999
FRIDLEY, MINNESOTA
River Road		River Road Business Ctr. S.		Industrial		3,510		1,083		6,379		427		1,112		6,777		7,889		815		1986		1999
University Center		University Center I&II		Industrial		—		220		1,273		354		226		1,620		1,847		164		1983		1999
FT. LAUDERDALE, FLORIDA
Sawgrass		Sawgrass - Building 1		Office		—		1,211		6,424		75		1,211		6,499		7,710		1,041		1999		2000

 

56

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
GLENWILLOW, OHIO
Emerald Valley		Emerald Valley Bldg 1		Industrial		—		555		6,398		132		556		6,529		7,085		497		1999		1999
Emerald Valley		Emerald Valley Bldg 2		Industrial				519		5,052		—		519		5,052		5,571		245		2001		2002
GOLDEN VALLEY, MINNESOTA
Edina Realty		Edina Realty		Office		—		330		1,282		186		349		1,449		1,798		231		1965		1998
Golden Hills		Golden Hills 1		Industrial		—		1,081		6,281		249		1,105		6,506		7,611		749		1996		1998
Golden Hills		Golden Hills 2		Industrial		—		1,741		4,315		388		1,742		4,703		6,444		1,068		1999		1999
Golden Hills		Golden Hills 3		Industrial		—		1,813		4,845		366		1,815		5,210		7,024		1,008		1999		1999
5075 Building		5075 Building		Office		—		506		2,389		356		539		2,711		3,251		390		1965		1998
Tyrol West		Tyrol West		Office		—		350		2,016		348		380		2,334		2,714		326		1968		1998
Sandburg Industrial Center		Sandburg Industrial Center		Industrial		—		451		2,629		415		451		3,044		3,495		357		1973		1997
GREENWOOD, INDIANA
South Park-Indiana		South Park Bldg 1		Office		—		287		2,577		325		292		2,897		3,189		656		1989		1993
South Park-Indiana		South Park Bldg 2		Industrial		—		334		3,424		708		341		4,125		4,465		1,118		1990		1993
South Park-Indiana		South Park Bldg 3		Office		—		208		2,378		319		212		2,693		2,905		709		1990		1993
South Park-Indiana		Brylane Parking Lot		Grounds		—		54		—		3		57		—		57		—				1994
GROVE CITY, OHIO
South Pointe		South Pointe Bldg D		Industrial		—		276		3,176		323		276		3,500		3,776		713		1997		1997
South Pointe		South Pointe Bldg E		Industrial		—		279		2,450		920		279		3,371		3,649		826		1997		1997
GROVEPORT, OHIO
6600 Port Road		6600 Port Road		Industrial		—		2,725		23,547		145		2,725		23,691		26,417		3,524		1995		1997
Groveport Commerce Ctr		Groveport Comm Ctr #2		Industrial		—		1,049		7,610		1,015		1,049		8,625		9,674		905		1999		1999
Groveport Commerce Ctr		Groveport Comm Ctr #3		Industrial		—		510		3,886		218		510		4,104		4,614		294		1999		2000
Groveport Commerce Ctr		Groveport Comm Ctr #4		Industrial		—		1,114		8,687		8		1,114		8,695		9,809		623		2000		2000
Groveport Commerce Ctr		Groveport Commerce Ctr. #345		Industrial		—		1,045		7,349		555		1,045		7,904		8,949		417		2000		2000
HEBRON, KENTUCKY
KY, Southpark		Ky. Southpark Bldg 4		Industrial		—		779		3,372		38		779		3,410		4,189		712		1994		1994
KY, Southpark		CR Services		Industrial		—		1,085		4,214		1,186		1,085		5,400		6,485		1,121		1994		1994
HIGHLAND HEIGHTS, OHIO
Avion Park		5335 Avion Park Drive		Industrial				606		2,534		—		606		2,534		3,140		43		1994		2002
HOPKINS, MINNESOTA
Cornerstone Business Center		Cornerstone Business Center		Industrial		5,949		1,469		8,455		239		1,543		8,620		10,163		1,096		1996		1997
Westside Business Park		Westside Business Park		Industrial		—		1,176		6,842		586		1,170		7,434		8,604		1,036		1987		1997
INDEPENDENCE, OHIO
6111 Oak Tree		Oak Tree Place		Office		—		703		4,667		469		703		5,136		5,839		832		1979		1997
Corporate Plaza		Corporate Plaza I		Office		7,842		2,116		14,224		710		2,116		14,934		17,049		2,700		1989		1996
Corporate Plaza		Corporate Plaza II		Office		6,887		1,841		12,387		746		1,841		13,133		14,974		2,435		1991		1996
Freedom Square		Freedom Square I		Office		—		595		3,994		345		595		4,339		4,934		800		1980		1996
Freedom Square		Freedom Square II		Office		6,580		1,746		11,774		787		1,746		12,560		14,306		2,313		1987		1996
Freedom Square		Freedom Square III		Office		—		701		6,536		78		701		6,613		7,315		1,581		1997		1997
Park Center		Park Center Bldg I		Office		—		2,193		13,968		125		2,193		14,092		16,285		2,800		1998		1998
Park Center		Park Center Bldg II		Office		—		2,190		13,722		201		2,190		13,922		16,112		2,144		1999		1999
Park Center		Park Center Bldg III		Office		—		2,190		12,812		396		2,190		13,208		15,398		1,213		2000		2000
INDIANAPOLIS, INDIANA
Franklin Road Business Park		Franklin Road Bus. Ctr.		Industrial		—		594		10,743		74		594		10,817		11,411		2,379		1962		1995
Hillsdale		Hillsdale Bldg 4		Industrial		—		366		5,122		232		366		5,354		5,720		1,207		1987		1993

 

57

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Hillsdale		Hillsdale Bldg 5		Industrial		—		251		3,250		631		251		3,882		4,133		925		1987		1993
Hillsdale		Hillsdale Bldg 6		Industrial		—		315		4,334		1,239		315		5,573		5,888		1,043		1987		1993
KATC - North		3520 Commerce Crossing		Office		—		950		2,063		36		950		2,099		3,049		444		1976		1993
KATC - South		8465 Keystone Crossing		Office		—		89		1,381		173		89		1,554		1,643		308		1983		1995
KATC - South		F.C. Tucker		Office		—		—		290		7		—		297		297		65		1978		1993
Keystone Crossing		8555 Keystone Crossing		Office		—		—		6,038		515		—		6,553		6,553		1,019		1985		1997
Nampac Building		6061 Guion Rd		Industrial		—		274		1,798		124		274		1,922		2,196		386		1974		1995
4750 Kentucky Avenue		4750 Kentucky Avenue		Industrial		—		246		2,383		220		246		2,604		2,849		400		1974		1996
Software Artistry		River Road Bldg I		Office		—		856		7,727		116		856		7,843		8,699		1,365		1997		1998
4316 West Minnesota		4316 West Minnesota		Industrial		—		287		2,283		294		287		2,577		2,864		396		1970		1996
One North Capital		One North Capital		Office				1,439		9,651		—		1,439		9,651		11,091		1,059		1980		1998
Park 100		6060 Guion Rd		Industrial		—		411		2,856		810		511		3,566		4,076		733		1968		1996
Park 100		Silver Burdett		Industrial		—		1,414		13,835		725		1,667		14,307		15,974		3,202		1994		1995
Park 100		Park 100 Bldg 98		Industrial		—		273		8,296		1,347		273		9,643		9,916		1,754		1968		1994
Park 100		Park 100 Bldg 100		Industrial		1,457		103		2,471		595		103		3,065		3,168		764		1995		1995
Park 100		Park 100 Bldg 107		Industrial		—		99		1,698		51		99		1,750		1,848		334		1984		1995
Park 100		Park 100 Bldg 109		Industrial		965		240		1,845		12		246		1,851		2,097		738		1985		1986
Park 100		Park 100 Bldg 116		Office		—		341		3,215		59		348		3,267		3,615		1,153		1988		1988
Park 100		Park 100 Bldg 118		Office		—		226		2,427		390		230		2,813		3,043		642		1988		1993
Park 100		Park 100 Bldg 119		Office		—		388		3,719		1,205		395		4,917		5,312		1,076		1989		1993
Park 100		Park 100 Bldg 121, Retail		Retail		—		592		1,074		128		604		1,190		1,794		247		1989		1993
Park 100		Park 100 Bldg 122		Industrial		—		284		3,744		225		290		3,963		4,253		932		1990		1993
Park 100		Park 100 Bldg 124		Office				227		2,852		—		227		2,852		3,079		67		1992		2002
Park 100		Park 100 Bldg 127		Industrial		—		96		1,934		298		96		2,232		2,328		540		1995		1995
Park 100		Park 100 Bldg 132		Office		—		446		1,217		456		446		1,673		2,119		497		1997		1997
Park 100		Norco Windows Parking Lot		Grounds		—		37		—		—		37		—		37		—				1999
Park 100		Ups Parking		Grounds		—		270		—		—		270		—		270		—				1997
Park 100		Norgate Ground Lease		Grounds		—		51		—		—		51		—		51		—				1995
Park 100		Zollman Ground Lease		Grounds		—		115		—		—		115		—		115		—				1994
Park 100		Becton Dickinson Lot		Grounds		—		—		—		13		13		—		13		—				1993
Park Fletcher		Park Fletcher Bldg 14		Industrial		—		76		740		65		76		805		881		135		1978		1996
Parkwood Crossing		One Parkwood		Office		—		1,018		10,212		217		1,028		10,419		11,446		1,805		1989		1995
Parkwood Crossing		Two Parkwood		Office		—		861		7,652		25		871		7,667		8,539		2,099		1996		1996
Parkwood Crossing		Three Parkwood		Office		—		1,377		9,777		355		1,387		10,122		11,509		2,136		1997		1997
Parkwood Crossing		Four Parkwood		Office		—		1,489		11,709		673		1,499		12,371		13,870		2,753		1998		1998
Parkwood Crossing		Five Parkwood		Office		—		1,485		13,641		516		1,528		14,113		15,641		2,314		1999		1999
Parkwood Crossing		Six Parkwood		Office		—		1,960		15,580		378		1,960		15,957		17,918		1,495		2000		2000
Parkwood Crossing		Duke Fitness Centers LLC		Grounds				—		61		—		—		61		61		—				2002
Woodfield		Two Woodfield Crossing		Office		—		719		9,480		1,236		733		10,702		11,435		2,572		1987		1993
Woodfield		Three Woodfield Crossing		Office		—		3,767		21,236		2,912		3,843		24,073		27,916		5,830		1989		1993
Woodland Corporate Park		Woodland Corporate Park I		Office		—		290		4,598		602		320		5,170		5,490		1,032		1998		1998
Woodland Corporate Park		Woodland Corporate Park II		Office		—		271		3,618		818		297		4,410		4,707		543		1999		1999
Woodland Corporate Park		Woodland Corporate Park III		Office		—		1,227		4,432		71		1,227		4,504		5,730		499		1999		2000
Woodland Corporate Park		Woodland Corporate Park IV		Office		—		715		7,245		144		715		7,389		8,104		558		2000		2000
JACKSONVILLE, FLORIDA
7011 A.C. Skinner Pkwy		7011 A.C. Skinner Pkwy		Office		—		1,007		4,200		—		1,007		4,200		5,207		485		1999		1999
KENNESAW, GEORGIA
Town Point		3391 Town Point Drive		Office		—		797		8,425		1,124		797		9,549		10,346		1,332		1999		1999
LAKE FOREST, ILLINOIS
Bradley Business Center		Ballard Drive Building		Industrial		—		186		1,751		89		186		1,840		2,026		235		1985		1998
Bradley Business Center		Laurel Drive Building		Industrial		—		98		913		53		98		965		1,064		116		1981		1998
Bradley Business Center		13825 W. Laurel Dr.		Industrial		—		750		1,874		816		750		2,690		3,440		294		1978		1999

 

58

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Conway Park		One Conway Park		Office		—		1,901		18,370		1,136		1,901		19,506		21,407		2,633		1989		1998
LAKE MARY, FLORIDA
Northpoint		Northpoint Center I		Office		—		1,087		11,546		155		1,087		11,701		12,788		1,912		1998		1999
Northpoint		Northpoint Center II		Office		—		1,202		10,891		103		1,202		10,994		12,196		1,237		1999		2000
Northpoint		Northpoint III		Office		—		1,552		10,987		—		1,552		10,987		12,539		411		2001		2001
Northpoint		Northpoint IV		Office				1,605		8,583		—		1,605		8,583		10,187		254		2002		2002
Technology Park		Technology Park I		Industrial		—		641		3,519		205		641		3,725		4,366		368		1986		1999
Technology Park		Technology Park II		Industrial		—		835		4,306		277		835		4,582		5,417		434		1998		1999
Technology Park		Technology Park III		Industrial		—		477		3,859		113		477		3,972		4,449		392		1998		1999
Technology Park		Technology Park IV		Industrial		—		669		2,905		285		669		3,190		3,859		331		1999		1999
Technology Park		Technology Park V		Industrial		—		547		2,878		244		547		3,121		3,669		289		1999		1999
LAKELAND, FLORIDA
Lakeland Interstate Park		Lakeland Interstate Park I		Industrial		—		864		4,263		—		864		4,263		5,127		131		2001		2001
LAWRENCEVILLE, GEORGIA
Hillside at Huntcrest		Huntcrest I		Office		—		1,193		9,897		—		1,193		9,897		11,089		543		2000		2001
Hillside at Huntcrest		Huntcrest II		Office		—		927		10,562		—		927		10,562		11,489		709		2000		2001
Hillside at Huntcrest		Huntcrest III		Office		—		1,358		9,535		—		1,358		9,535		10,893		—		2001		2002
LEBANON, INDIANA
Lebanon Bus. Park		Lebanon Building 4		Industrial		—		305		9,672		89		305		9,760		10,066		1,245		1997		1997
Lebanon Bus. Park		Lebanon Building 9		Industrial		—		554		6,891		644		554		7,535		8,089		617		1999		1999
LEWIS CENTER, OHIO
Orange Point Commerce Park		Orange Point #73		Industrial		—		551		3,274		—		551		3,274		3,825		155		2001		2001
Orange Point Commerce Park		Orange Point 144		Industrial		—		886		4,955		—		886		4,955		5,841		243		2001		2001
MARIETTA, GEORGIA
Franklin Forest		805 Franklin Court		Industrial		—		313		1,932		46		313		1,977		2,291		177		1983		1999
Franklin Forest		810 Franklin Court		Industrial		—		255		1,653		68		255		1,721		1,976		174		1983		1999
Franklin Forest		811 Livingston Court		Industrial		—		193		1,424		252		193		1,676		1,869		174		1983		1999
Franklin Forest		825 Franklin Court		Industrial		—		358		558		1,118		358		1,677		2,034		192		1983		1999
Franklin Forest		830 Franklin Court		Industrial		—		133		757		16		133		773		906		67		1983		1999
Franklin Forest		835 Franklin Court		Industrial		—		393		633		1,003		393		1,635		2,029		195		1983		1999
Franklin Forest		840 Franklin Court		Industrial		—		242		890		6		242		896		1,138		77		1983		1999
Franklin Forest		821 Livingston Court		Industrial		—		145		973		47		145		1,019		1,164		92		1983		1999
Franklin Forest		841 Livingston Court		Industrial		—		275		2,729		6		275		2,736		3,010		237		1983		1999
Northwest Business Center		1335 Capital Circle		Industrial		—		416		2,112		86		416		2,198		2,614		198		1985		1999
Northwest Business Center		1337-41-51 Capital Circle		Industrial		—		558		5,364		487		558		5,851		6,409		514		1985		1999
Northwest Business Center		2260 Northwest Parkway		Industrial		—		320		1,826		462		320		2,288		2,608		236		1982		1999
Northwest Business Center		2252 Northwest Parkway		Industrial		—		92		982		60		92		1,042		1,134		96		1982		1999
Northwest Business Center		2242 Northwest Parkway		Industrial		—		175		1,444		133		175		1,577		1,752		157		1982		1999
Northwest Business Center		2256 Northwest Parkway		Industrial		—		85		916		118		85		1,035		1,119		106		1982		1999
Northwest Business Center		2244 Northwest Parkway		Industrial		—		47		492		50		47		542		589		52		1982		1999
Northwest Business Center		2150 Northwest Parkway		Industrial		—		294		3,087		199		294		3,286		3,580		302		1982		1999
Northwest Business Center		2152 Northwest Parkway		Industrial		—		161		1,637		77		161		1,714		1,875		159		1982		1999
Northwest Business Center		2130 Northwest Parkway		Industrial		—		353		2,885		196		353		3,081		3,434		311		1982		1999
Northwest Business Center		2270 Northwest Parkway		Industrial		1,741		483		3,887		176		483		4,063		4,546		362		1988		1999
Northwest Business Center		2275 Northwest Parkway		Industrial		1,182		327		2,641		120		327		2,761		3,088		241		1988		1999
MARYLAND HEIGHTS, MISSOURI
Riverport Business Park		Riverport Tower		Office		—		3,549		30,135		2,017		3,929		31,772		35,701		4,198		1991		1997
Riverport Business Park		Riverport Distribution A		Industrial		—		242		2,244		110		242		2,354		2,596		305		1990		1997

 

59

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Riverport Business Park		Express Scripts HQ		Office		—		2,285		12,424		156		2,285		12,580		14,865		2,391		1999		1999
Riverport Business Park		Riverport 1		Industrial		—		900		4,399		106		900		4,506		5,405		1,116		1999		1999
Riverport Business Park		Riverport 2		Industrial		—		1,238		6,988		2		1,238		6,990		8,228		1,401		2000		2000
Riverport Business Park		Riverport 3		Industrial		—		1,269		4,514		—		1,269		4,514		5,783		166		2001		2001
Riverport Distribution		Express Scripts Service Center		Industrial		—		1,197		8,755		172		1,197		8,927		10,124		1,180		1992		1997
West Port Center		Westport Center I		Industrial		—		1,707		6,246		831		1,707		7,077		8,784		1,754		1998		1998
West Port Center		Westport Center II		Industrial		—		915		2,871		245		914		3,117		4,031		807		1998		1998
West Port Center		Westport Center III		Industrial		—		1,207		2,976		442		1,206		3,418		4,625		466		1998		1999
MASON, OHIO
Deerfield Crossing		Deerfield Crossing Bldg 1		Office		—		1,493		14,354		428		1,493		14,782		16,275		2,550		1999		1999
Deerfield Crossing		Deerfield Crossing Bldg 2		Office		—		1,069		14,119		—		1,069		14,119		15,188		942		2001		2001
Governor’s Pointe		Governor’s Pointe 4770		Office		3,950		586		7,980		21		596		7,991		8,587		2,765		1986		1988
Governor’s Pointe		Governor’s Pointe 4700		Industrial		3,055		584		5,833		225		595		6,048		6,642		2,195		1987		1988
Governor’s Pointe		Governor’s Pointe 4900		Industrial		2,410		654		4,349		235		673		4,565		5,239		1,449		1987		1989
Governor’s Pointe		Governor’s Pointe 4705		Office		—		719		7,876		2,331		987		9,939		10,925		2,807		1988		1993
Governor’s Pointe		Governor’s Pointe 4605		Office		—		630		17,668		1,156		909		18,545		19,454		4,503		1990		1993
Governor’s Pointe		Governor’s Pointe 8990		Office		—		594		6,134		436		594		6,570		7,164		1,678		1997		1997
Governor’s Pointe		Governor’s Pointe 4660		Office		—		385		4,807		24		529		4,687		5,216		899		1997		1997
Governor’s Pointe		Governor’s Pointe 4680		Office		—		1,115		8,614		997		1,115		9,611		10,726		2,330		1998		1998
Governor’s Pointe		Governor’s Pointe 4690		Office				907		3,469		—		907		3,469		4,375				2002		2002
Governors Pointe Retail		Bigg’s Supercenter		Retail		—		2,107		9,927		54		4,227		7,860		12,087		1,170		1996		1996
Governors Pointe Retail		Lowes		Retail		—		3,750		6,529		224		3,750		6,754		10,504		800		1997		1997
MAYFIELD HEIGHTS, OHIO
Landerbrook Corporate Ctr		Landerbrook Corp. Center One		Office		—		1,807		10,863		122		1,808		10,984		12,792		2,340		1997		1997
Landerbrook Corporate Ctr		Landerbrook Corp. Center Two		Office		—		1,382		10,130		940		1,382		11,070		12,452		1,820		1998		1998
Landerbrook Corporate Ctr		Landerbrook Corp. Center Three		Office		—		1,528		8,505		460		1,528		8,965		10,493		283		2000		2001
MCDONOUGH, GEORGIA
Liberty Dist. Center		120 Declaration Drive		Industrial		—		615		8,582		30		615		8,612		9,227		750		1997		1999
Liberty Dist. Center		Liberty III		Industrial				2,273		14,500		—		2,273		14,500		16,773		625		2001		2001
MENDOTA HEIGHTS, MINNESOTA
Enterprise Industrial Center		Enterprise Industrial Center		Industrial		2,126		864		5,039		636		864		5,674		6,538		790		1979		1997
MIDDLETOWN, OHIO
Monroe Business Center		Monroe Business Center 2		Industrial				767		11,546		—		767		11,546		12,313		392		2000		2001
MILFORD, OHIO
Park 50		Park 50 Bldg 17		Office		—		500		5,488		176		510		5,654		6,164		2,304		1985		1986
Park 50		Park 50 Bldg 20		Industrial		3,493		461		7,079		55		469		7,126		7,595		2,972		1987		1988
Park 50		Park 50 Bldg 25		Industrial		—		1,161		4,146		535		1,184		4,657		5,841		1,133		1989		1993
MINNEAPOLIS, MINNESOTA
Broadway Business Center		Broadway Business Ctr III		Industrial		—		140		813		77		144		886		1,030		108		1983		1998
Broadway Business Center		Broadway Business Ctr IV		Industrial		—		194		1,154		194		200		1,342		1,542		204		1983		1998
Broadway Business Center		Broadway Business Ctr VI		Industrial		—		433		2,518		239		447		2,742		3,190		353		1983		1998
Broadway Business Center		Broadway Business Ctr VII		Industrial		—		233		1,369		169		241		1,531		1,772		253		1983		1998
Minneapolis		Chilies Ground Lease		Grounds		—		921		—		69		990		—		990		—				1998
Minneapolis		Olive Garden Ground Lease		Grounds		—		921		—		—		921		—		921		—				1998
10801 Red Circle Drive		10801 Red Circle Dr.		Office		—		527		3,478		747		527		4,224		4,752		1,108		1977		1997
Encore Park		Encore Park		Industrial		—		947		5,668		426		974		6,067		7,041		839		1977		1997
MONROE, OHIO

 

60

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Monroe Business Center		Monroe Business Center Bldg. 1		Industrial		—		660		5,435		304		660		5,739		6,399		520		1992		1999
MORRISVILLE, NORTH CAROLINA
Perimeter Park		507 Airport Blvd		Industrial		5,274		1,327		8,442		378		1,351		8,796		10,147		918		1993		1999
Perimeter Park		5151 McCrimmon Pkwy		Industrial		—		1,318		8,219		412		1,342		8,607		9,949		892		1995		1999
Perimeter Park		2600 Perimeter Park Dr		Industrial		—		975		5,392		256		991		5,632		6,623		486		1997		1999
Perimeter Park		5150 McCrimmon Pkwy		Industrial		—		1,739		12,249		99		1,773		12,313		14,086		1,065		1998		1999
Perimeter Park		2400 Perimeter Park Dr.		Office		—		760		6,305		198		778		6,485		7,263		586		1999		1999
Perimeter Park		3000 Perimeter Park Dr		Industrial		1,895		482		3,156		595		491		3,742		4,233		389		1989		1999
Perimeter Park		2900 Perimeter Park Dr		Industrial		1,430		235		2,340		618		241		2,952		3,193		361		1990		1999
Perimeter Park		2800 Perimeter Park Dr		Industrial		2,624		777		4,927		157		791		5,070		5,861		474		1992		1999
Perimeter Park		100 Perimeter Park Drive		Industrial		—		477		3,239		188		477		3,427		3,904		302		1987		1999
Perimeter Park		200 Perimeter Park Drive		Industrial		—		567		3,149		70		567		3,219		3,786		296		1987		1999
Perimeter Park		300 Perimeter Park Drive		Industrial		—		567		3,148		129		567		3,278		3,845		296		1986		1999
Perimeter Park		400 Perimeter Park Drive		Industrial		3,857		486		4,455		104		486		4,560		5,046		415		1983		1999
Perimeter Park		500 Perimeter Park Drive		Industrial		—		522		4,421		113		522		4,534		5,056		417		1985		1999
Perimeter Park		800 Perimeter Park Drive		Industrial		2,852		405		3,309		378		405		3,687		4,092		318		1984		1999
Perimeter Park		900 Perimeter Park Drive		Industrial		—		629		1,908		842		629		2,750		3,379		254		1982		1999
Perimeter Park		1000 Perimeter Park Drive		Industrial		—		405		3,259		833		405		4,091		4,496		389		1982		1999
Perimeter Park		1100 Perimeter Park Drive		Industrial		—		777		6,037		486		794		6,506		7,301		650		1990		1999
Perimeter Park		1400 Perimeter Park Drive		Office		—		666		4,603		58		691		4,636		5,327		396		1991		1999
Perimeter Park		1500 Perimeter Park Drive		Office		—		1,148		10,397		373		1,177		10,741		11,918		1,095		1996		1999
Perimeter Park		1600 Perimeter Park Drive		Office		6,164		1,463		10,134		263		1,492		10,368		11,860		912		1994		1999
Perimeter Park		1800 Perimeter Park Drive		Office		3,540		907		5,751		152		955		5,855		6,810		498		1994		1999
Perimeter Park		2000 Perimeter Park Drive		Office		—		788		8,210		254		842		8,410		9,251		720		1997		1999
Perimeter Park		1700 Perimeter Center West		Office		—		1,230		10,780		25		1,260		10,775		12,035		951		1997		1999
Perimeter Park		3900 N. Paramount Parkway		Office		—		540		13,296		142		574		13,403		13,978		1,175		1998		1999
Perimeter Park		3900 S.Paramount Pkwy		Office		—		1,575		12,455		682		1,612		13,101		14,713		1,504		2000		1999
Perimeter Park		5200 East Paramount		Office		—		1,748		17,735		228		1,797		17,914		19,711		2,085		1999		1999
Perimeter Park		3500 Paramount Pkwy		Office		—		755		12,948		2		755		12,950		13,705		1,218		1999		2000
Perimeter Park		2700 Perimeter Park		Industrial		—		662		3,209		—		662		3,209		3,871		95		2001		2001
Perimeter Park		5200 West Paramount		Office		—		1,831		13,288		—		1,831		13,288		15,119		—		2000		2001
Perimeter Park		2450 Perimeter Park		Office				669		4,003		—		669		4,003		4,672		238		2001		2001
Research Triangle Ind. Ctr		409 Airport Blvd Bldg A		Industrial		801		296		1,286		2		300		1,284		1,584		115		1983		1999
Research Triangle Ind. Ctr		409 Airport Blvd Bldg B		Industrial		495		175		769		35		177		802		979		74		1986		1999
Research Triangle Ind. Ctr		409 Airport Blvd bldg C		Industrial		1,718		185		2,849		363		193		3,204		3,397		422		1982		1999
Woodlake Center		100 Innovation Avenue		Industrial		—		633		4,003		261		633		4,264		4,897		445		1994		1999
Woodlake Center		101 Innovation Ave		Industrial		—		615		4,095		98		615		4,193		4,808		379		1997		1999
Woodlake Center		200 Innovation Drive		Industrial		—		357		4,503		—		357		4,503		4,859		694		1999		1999
Woodlake Center		501 Innovation Ave.		Industrial		—		640		7,063		47		640		7,110		7,750		1,179		1999		1999
Woodlake Center		1000 Innovation		Industrial				514		2,927		—		514		2,927		3,441		61		1996		2002
Woodlake Center		1200 Innovation		Industrial				740		4,212		—		740		4,212		4,952		88		1996		2002
NASHVILLE, TENNESSEE
Airpark Business Center		1420 Donelson Pike		Industrial		570		1,331		5,401		612		1,357		5,987		7,344		562		1985		1999
Airpark Business Center		1410 Donelson Pike		Industrial		659		1,411		6,898		182		1,411		7,080		8,491		650		1986		1999
Airpark Business Center		1400 Donelson Pike		Industrial		511		1,276		5,042		269		1,276		5,312		6,588		530		1996		1999
Airpark Business Center		400 Airpark Center		Industrial		1,852		419		2,182		8		419		2,190		2,609		196		1989		1999
Airpark Business Center		500 Airpark Center Dr.		Industrial		3,011		923		2,456		862		923		3,318		4,241		361		1988		1999
Airpark Business Center		600 Airport Center Dr		Industrial		2,915		729		3,331		46		729		3,377		4,106		291		1990		1999
Airpark Business Center		700 Airpark Center Dr.		Industrial		2,837		801		2,840		356		801		3,197		3,997		280		1992		1999
Airpark Business Center		800 Airpark Center Dr.		Industrial		2,450		924		4,010		221		924		4,231		5,155		417		1995		1999
Airpark Business Center		900 Airpark Center Dr		Industrial		2,103		798		3,414		212		798		3,626		4,424		343		1995		1999
Airpark Business Center		1000 Airpark Center Dr.		Industrial		—		1,300		9,624		25		1,300		9,649		10,950		837		1997		1999
Airpark Business Center		5270 Harding place		Industrial		1,160		535		2,494		8		535		2,502		3,038		217		1996		1999

 

61

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Airpark Business Center		1415 Donelson Pike		Industrial		3,918		1,308		8,799		150		1,308		8,949		10,257		757		1996		1999
Airpark Business Center		1413 Donelson Pike		Industrial		1,271		549		2,743		37		549		2,780		3,329		242		1996		1999
Airpark Business Center		5233 Harding Place		Industrial		—		628		3,075		—		628		3,075		3,703		437		1998		1999
Airpark East		Airpark East-Eagle Bldg		Industrial				1,564		3,341		—		1,564		3,341		4,905		249		2001		2002
Cumberland Business Center		Cumberland Business Center I		Industrial		—		1,461		6,938		—		1,461		6,938		8,399		974		1999		1999
Four-Forty Business Center		700 Melrose Avenue		Industrial		3,519		938		6,464		1		938		6,464		7,403		562		1997		1999
Four-Forty Business Center		684 Melrose Ave		Industrial		—		1,812		7,583		390		1,812		7,974		9,786		801		1998		1999
Four-Forty Business Center		782 Melrose Avenue		Industrial		—		1,522		5,750		196		1,522		5,946		7,467		545		1997		1999
Four-Forty Business Center		784 Melrose Ave.		Industrial		—		471		3,321		256		471		3,577		4,048		464		1999		1999
Greenbriar		Greenbriar Business Park		Industrial		—		1,445		5,160		597		1,445		5,757		7,202		1,254		1986		1994
Haywood Oaks		Haywood Oaks Bldg 2		Industrial		—		395		1,928		50		395		1,978		2,373		446		1988		1993
Haywood Oaks		Haywood Oaks Bldg 3		Industrial		—		346		1,752		296		346		2,048		2,394		472		1988		1993
Haywood Oaks		Haywood Oaks Bldg 4		Industrial		—		435		2,104		303		435		2,407		2,842		672		1988		1993
Haywood Oaks		Haywood Oaks Bldg 5		Industrial		—		629		3,060		141		629		3,202		3,830		752		1988		1993
Haywood Oaks		Haywood Oaks Bldg 6		Industrial		—		924		6,371		425		946		6,774		7,720		1,522		1989		1993
Haywood Oaks		Haywood Oaks Bldg 7		Industrial		—		456		1,858		189		456		2,046		2,503		349		1995		1995
Haywood Oaks		Haywood Oaks Bldg 8		Industrial		—		617		3,514		419		751		3,800		4,550		1,041		1997		1997
Haywood Oaks East		Haywood Oaks East		Industrial		—		969		5,866		239		969		6,106		7,075		694		2000		2000
Lakeview Place		Three Lakeview		Office		—		2,126		13,915		1,602		2,126		15,518		17,644		1,711		1999		1999
Lakeview Place		One Lakeview Place		Office		—		2,046		11,828		1,222		2,123		12,973		15,096		1,441		1986		1998
Lakeview Place		Two Lakeview Place		Office		—		2,046		11,858		1,005		2,046		12,863		14,909		1,529		1988		1998
Metro Center		545 Mainstream Dr.		Office		—		847		6,310		464		847		6,774		7,621		636		1983		1999
Metro Center		566 Mainstream Dr.		Industrial		—		454		3,927		271		454		4,198		4,652		400		1982		1999
Metro Center		621 Mainstream Dr.		Industrial		—		428		2,860		63		428		2,924		3,352		249		1984		1999
Metro Center		Riverview Business Center I		Industrial		—		497		2,848		57		497		2,906		3,403		332		2000		2000
Metro Center		Riverview Business Center II		Industrial				685		2,710		—		685		2,710		3,395		134		2001		2001
Metropolitan Airport Center		Metro Airport Center Bldg 1		Industrial		—		1,180		4,808		52		1,190		4,850		6,040		978		1999		1999
Metropolitan Airport Center		Metro Airport Bus Ctr C		Industrial		—		1,053		6,582		—		1,053		6,582		7,635		148		2001		2001
Nashville Business Center		3300 Briley Park Blvd		Industrial		—		936		7,138		—		936		7,138		8,074		1,289		1997		1999
Royal Parkway Center		2515 Perimeter Park		Industrial		—		731		4,753		195		734		4,945		5,679		431		1990		1999
Royal Parkway Center		500 Royal Parkway		Industrial		—		599		4,636		—		603		4,632		5,235		403		1990		1999
NEW HOPE, MINNESOTA
Bass Lake Business Building		Bass Lake Business Bldg		Industrial		872		298		1,715		80		298		1,795		2,093		242		1981		1997
NORCROSS, GEORGIA
Gwinnett Park		1750 Beaver Ruin		Industrial		—		640		6,793		490		640		7,283		7,922		614		1997		1999
Gwinnett Park		4258 Communications Drive		Industrial		—		29		2,388		103		29		2,491		2,520		208		1981		1999
Gwinnett Park		4261 Communications Drive		Industrial		—		254		1,916		109		254		2,026		2,280		172		1981		1999
Gwinnett Park		4291 Communications Drive		Industrial		—		4		1,467		5		16		1,460		1,476		127		1981		1999
Gwinnett Park		1826 Doan Way		Industrial		—		51		3,065		122		51		3,187		3,238		299		1984		1999
Gwinnett Park		1857 Doan Way		Industrial		—		23		397		45		56		408		464		36		1970		1999
Gwinnett Park		1650 International Blvd		Industrial		—		69		2,211		34		69		2,246		2,314		195		1984		1999
Gwinnett Park		4245 International Blvd		Industrial		—		192		10,848		—		192		10,849		11,041		944		1985		1999
Gwinnett Park		4250 International Blvd		Industrial		—		193		3,042		37		216		3,056		3,272		265		1986		1999
Gwinnett Park		4295 International Blvd		Industrial		—		58		2,330		45		58		2,376		2,434		216		1984		1999
Gwinnett Park		4320 International Blvd		Industrial		—		44		2,058		180		44		2,237		2,282		182		1984		1999
Gwinnett Park		4350 International Blvd		Industrial		—		78		3,061		243		78		3,305		3,383		298		1982		1999
Gwinnett Park		4355 International Blvd		Industrial		—		233		2,969		262		233		3,232		3,465		332		1983		1999
Gwinnett Park		4405A International Blvd		Industrial		—		97		2,680		618		97		3,298		3,395		285		1984		1999
Gwinnett Park		4405B International Blvd		Industrial		—		118		3,900		190		118		4,091		4,208		362		1984		1999
Gwinnett Park		4405C International Blvd		Industrial		—		21		800		70		21		871		892		74		1984		1999
Gwinnett Park		1828 Meca Way		Industrial		—		16		2,621		22		16		2,643		2,659		230		1975		1999
Gwinnett Park		1858 Meca Way		Industrial		—		20		1,828		171		27		1,991		2,019		188		1975		1999
Gwinnett Park		4316 Park Drive		Industrial		—		262		1,420		275		262		1,695		1,957		195		1980		1999

 

62

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Gwinnett Park		4357 Park Drive		Industrial		—		12		2,251		292		12		2,544		2,555		256		1979		1999
Gwinnett Park		4366 Park Drive		Office		—		6		205		299		22		488		510		42		1981		1999
Gwinnett Park		4386 Park Drive		Industrial		—		17		986		411		17		1,397		1,415		146		1973		1999
Gwinnett Park		4436 Park Drive		Industrial		—		18		2,279		27		18		2,306		2,324		199		1968		1999
Gwinnett Park		4437 Park Drive		Industrial		—		21		2,644		177		21		2,821		2,842		251		1978		1999
Gwinnett Park		4467 Park Drive		Industrial		—		6		1,630		56		6		1,685		1,691		162		1978		1999
Gwinnett Park		4487 Park Drive		Industrial		—		6		3,407		359		6		3,767		3,773		366		1978		1999
Gwinnett Park		1835 Shackleford Court		Office		—		29		6,309		325		29		6,634		6,662		635		1990		1999
Gwinnett Park		1854 Shackleford Road		Office		—		52		10,387		918		52		11,305		11,357		1,069		1985		1999
Gwinnett Park		4274 Shackleford Road		Industrial		—		27		3,626		180		27		3,805		3,832		333		1974		1999
Gwinnett Park		4275 Shackleford Court		Office		430		8		2,125		312		12		2,433		2,445		224		1985		1999
Gwinnett Park		4344 Shackleford Road		Industrial		—		286		2,221		167		286		2,387		2,673		291		1975		1999
Gwinnett Park		4355 Shackleford Road		Industrial		—		7		1,904		67		70		1,909		1,979		597		1972		1999
Gwinnett Park		4364 Shackleford Road		Industrial		—		9		982		6		9		987		997		85		1973		1999
Gwinnett Park		4366 Shackleford Road		Industrial		—		20		2,567		315		26		2,875		2,901		314		1981		1999
Gwinnett Park		4388 Shackelford Road		Industrial		—		33		4,002		240		43		4,233		4,276		363		1981		1999
Gwinnett Park		4400 Shackleford Road		Industrial		—		14		1,567		1		18		1,563		1,582		127		1981		1999
Gwinnett Park		4444 Shackleford Road		Industrial		—		31		2,632		336		31		2,967		2,999		339		1979		1999
Gwinnett Pavilion		1505 Pavillion Place		Industrial		—		448		3,996		510		448		4,506		4,955		701		1988		1999
Gwinnett Pavilion		3883 Steve Reynolds Blvd.		Industrial		—		612		4,928		27		612		4,955		5,567		429		1990		1999
Gwinnett Pavilion		3890 Steve Reynolds Blvd		Industrial		—		519		3,028		1		519		3,028		3,548		267		1991		1999
Gwinnett Pavilion		3950 Steve Reynolds Blvd.		Industrial		—		684		2,825		21		684		2,846		3,530		251		1992		1999
Northeast I85		6525-27 Jimmy Carter Blvd		Industrial		—		509		2,324		376		509		2,700		3,209		447		1983		1999
Northeast I85		5755 Peachtree Industrial Blvd		Office		—		800		3,652		229		800		3,881		4,681		337		1997		1999
Northeast I85		5765 Peachtree Industrial Blvd		Industrial		—		521		4,671		—		521		4,671		5,192		407		1997		1999
Northeast I85		5775 Peachtree Industrial Blvd		Industrial		—		521		4,695		36		521		4,730		5,251		420		1997		1999
Northwoods		2915 Courtyards Drive		Industrial		—		268		1,961		32		268		1,994		2,262		172		1986		1999
Northwoods		2925 Courtyards Drive		Industrial		—		333		3,235		—		333		3,235		3,568		281		1986		1999
Northwoods		2975 Courtyards Drive		Industrial		—		144		1,264		104		144		1,368		1,512		126		1986		1999
Northwoods		2995 Courtyards Drive		Industrial		—		109		892		—		109		892		1,001		78		1986		1999
Northwoods		2725 Northwoods Pkwy		Industrial		—		440		2,568		552		440		3,120		3,560		320		1984		1999
Northwoods		2755 Northwoods Pkwy		Industrial		—		249		2,880		150		249		3,029		3,278		266		1986		1999
Northwoods		2775 Northwoods Pkwy		Industrial		—		322		2,425		—		322		2,425		2,747		211		1986		1999
Northwoods		2850 Colonnades Court		Industrial		—		562		5,280		—		562		5,280		5,842		459		1988		1999
Northwoods		3040 Northwoods Pkwy		Industrial		—		298		1,801		155		298		1,956		2,254		213		1984		1999
Northwoods		3044 Northwoods Circle		Industrial		—		167		718		34		167		752		919		66		1984		1999
Northwoods		3055 Northwoods Pkwy		Industrial		—		213		1,556		99		213		1,656		1,869		185		1985		1999
Northwoods		3075 Northwoods Pkwy		Industrial		—		374		2,865		97		374		2,962		3,335		285		1985		1999
Northwoods		3100 Northwoods Pkwy		Industrial		—		393		2,543		6		393		2,549		2,942		221		1985		1999
Northwoods		3155 Northwoods Pkwy		Industrial		—		331		2,504		12		331		2,516		2,847		218		1985		1999
Northwoods		3175 Northwoods Pkwy		Industrial		—		250		2,071		23		250		2,094		2,344		181		1985		1999
Peachtree Corners Tech Center		3170 Reps Miller Road		Industrial		—		500		3,662		18		500		3,680		4,180		320		1998		1999
Peachtree Corners Tech Center		3180 Reps Miller Road		Industrial		—		500		2,943		38		500		2,981		3,481		261		1998		1999
Peachtree Corners Tech Center		3190 Reps Miller Road		Industrial		—		525		2,363		215		525		2,579		3,104		238		1998		1999
NORTHLAKE, ILLINOIS
Northlake		Northlake I		Industrial				5,721		9,690		—		5,721		9,690		15,411				2002		2002
NORTH OLMSTED, OHIO
Great Northern Corp Center		Great Northern Corp Center I		Office		—		1,048		7,146		564		1,040		7,718		8,758		1,301		1985		1996
Great Northern Corp Center		Great Northern Corp Center II		Office		—		1,048		7,232		812		1,048		8,045		9,093		1,512		1987		1996
Great Northern Corp Center		Great Northern Corp Center III		Office		—		604		5,693		892		604		6,585		7,189		1,253		1999		1999
OLIVETTE, MISSOURI
I-170 Center		I-170 Center		Industrial		—		950		4,184		530		1,018		4,646		5,665		797		1986		1996

 

63

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Warson Commerce Center		Warson Commerce Center						749		5,405		340		749		5,745		6,494		736		1987		1998
ORLANDO, FLORIDA
Business Centre at Lee Vista		Lee Vista Distribution Ctr I						819		4,545		438		819		4,983		5,802		1,058		1998		1999
Business Centre at Lee Vista		Lee Vista Distribution Ctr II						740		3,914		95		740		4,009		4,749		577		1999		2000
Business Centre at Lee Vista		Lee Vista Service Center I						926		2,344		99		926		2,444		3,369		78		2000		2001
Business Centre at Lee Vista-Gen		Lee Vista Distrib. Center III						841		3,580		—		841		3,580		4,421		33		2001		2002
Parksouth Dist. Center		Parksouth Dist. Ctr-Bldg B						565		4,893		—		565		4,893		5,458		426		1996		1999
Parksouth Dist. Center		Parksouth Dist. Ctr-Bldg A						493		4,545		—		493		4,545		5,038		402		1997		1999
Parksouth Dist. Center		Parksouth Dist. Ctr-Bldg D		Industrial		—		593		4,131		—		593		4,131		4,724		375		1998		1999
Parksouth Dist. Center		Parksouth Dist. Ctr-Bldg E		Industrial		—		649		4,654		42		649		4,696		5,345		426		1997		1999
Parksouth Dist. Center		Parksouth Dist. Ctr-Bldg F		Industrial		—		1,030		5,525		895		1,030		6,420		7,450		715		1999		1999
Parksouth Dist. Center		Parksouth Dist. Ctr-Bldg H		Industrial				725		3,950		—		725		3,950		4,675		255		2000		2000
Parksouth Dist. Center		Chase BTS-Orlando		Industrial				598		2,032		—		598		2,032		2,629		69		2000		2001
PEPPER PIKE, OHIO
Corporate Circle		Corporate Circle		Office		—		1,696		11,429		1,379		1,698		12,807		14,504		2,083		1983		1996
PLAINFIELD, INDIANA
Plainfield Business Park		Plainfield Building 1		Industrial		6,254		1,104		11,151		10		1,104		11,161		12,265		751		2000		2000
Plainfield Business Park		Plainfield Building 2		Industrial				1,387		9,668		—		1,387		9,668		11,055		683		2000		2000
Plainfield Business Park		Plainfield Building 3		Industrial				2,016		10,491		—		2,016		10,491		12,507		197		2002		2002
PLANO, TEXAS
Legacy Business Park		Metasolv Building Phase I		Office		—		1,527		5,831		706		1,527		6,538		8,064		633		1997		1999
Legacy Business Park		Metasolv Building Phase II		Office		—		1,181		11,154		65		1,181		11,219		12,399		1,129		1999		1999
PLYMOUTH, MINNESOTA
Medicine Lake		Medicine Lake Indus. Center		Industrial		3,638		1,158		6,676		816		1,145		7,504		8,649		888		1970		1997
Plymouth Office/Tech Center		Plymouth Office/Tech Center		Industrial		—		428		2,442		300		431		2,738		3,170		395		1986		1998
Plymouth Service Center		Plymouth Service Center		Industrial		—		345		1,993		732		351		2,719		3,070		340		1978		1999
Westpoint Buildings		Westpoint Business Ctr		Office		—		98		569		157		114		710		825		69		1978		1999
Westpoint Buildings		Westpoint Bldg B&C		Industrial		—		370		2,135		414		370		2,549		2,919		303		1978		1999
Westpoint Buildings		Westpoint Bldg D&E		Industrial		—		362		2,095		588		362		2,682		3,045		363		1978		1999
RALEIGH, NORTH CAROLINA
Brook Forest		Brook Forest I		Office		—		1,242		6,181		—		1,242		6,181		7,423		448		2000		2000
Crabtree Overlook		Crabtree Overlook		Office		—		2,164		17,692		—		2,164		17,692		19,856		760		2000		2001
Interchange Plaza		6525 West Campus Oval		Office		5,143		842		3,796		1,909		881		5,666		6,547		172		1993		1999
Interchange Plaza		801 Jones Franklin Rd		Office		—		1,351		7,778		45		1,351		7,823		9,174		687		1995		1999
Interchange Plaza		5520 Capital Ctr. Dr		Office				842		4,395		—		842		4,395		5,237		400		1993		1999
Spring Forest Business Center		3200 Spring Forest Road		Industrial		—		561		5,240		109		561		5,350		5,911		500		1986		1999
Spring Forest Business Center		3100 Spring Forest Road		Industrial		—		616		4,220		113		616		4,333		4,949		408		1992		1999
Spring Forest Business Center		Spring Forest Bus Center III		Office				462		3,124		—		462		3,124		3,586		2002		2002
Walnut Creek		Walnut Creek Business Park #1		Industrial				419		3,100		—		419		3,100		3,519		176		2001		2001
Walnut Creek		Walnut Creek Business Park #2		Industrial				456		3,774		—		456		3,774		4,230		171		2001		2001
Walnut Creek		Walnut Creek Business Park #3		Industrial		—		679		4,345		—		679		4,345		5,025		252		2001		2001
ROMEOVILLE, ILLINOIS
Crossroads Business Park		Chapco Carton Company		Industrial				917		5,217		—		917		5,217		6,133		120		1999		2002
ROSWELL, GEORGIA
Hembree Crest		11545 Wills Road		Industrial		—		1,225		6,461		147		1,225		6,608		7,833		566		1998		1999
Hembree Park		105 Hembree Park Drive		Industrial		—		288		1,791		329		288		2,119		2,407		211		1988		1999
Hembree Park		150 Hembree Park Drive		Industrial		—		824		3,751		63		824		3,814		4,638		332		1985		1999

 

64

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Hembree Park		200 Hembree Park Drive						160		2,059		86		160		2,145		2,305		191		1985		1999
Hembree Park		645 Hembree Parkway						248		2,620		421		248		3,041		3,289		343		1986		1999
Hembree Park		655 Hembree Parkway						248		2,755		145		248		2,900		3,148		260		1986		1999
Hembree Park		250 Hembree Park Drive						686		5,255		322		686		5,578		6,263		461		1996		1999
Hembree Park		660 Hembree Park Drive						785		5,070		360		785		5,430		6,215		450		1998		1999
Hembree Park		245 Hembree Park Drive						616		6,375		645		616		7,020		7,636		1,057		1999		1999
Mansell Commons		993 Mansell Road						136		1,285		—		136		1,285		1,421		112		1987		1999
Mansell Commons		995 Mansell Road						80		915		56		80		971		1,051		106		1987		1999
Mansell Commons		997 Mansell Road		Industrial		—		72		664		44		72		708		780		71		1987		1999
Mansell Commons		999 Mansell Road		Industrial		—		104		953		5		104		958		1,062		83		1987		1999
Mansell Commons		1003 Mansell Road		Industrial		—		136		1,362		121		136		1,482		1,618		158		1987		1999
Mansell Commons		1005 Mansell Road		Industrial		—		72		946		3		72		950		1,022		88		1987		1999
Mansell Commons		1007 Mansell Road		Industrial		—		168		2,129		278		168		2,407		2,575		228		1987		1999
Mansell Commons		1009 Mansell Road		Industrial		—		264		2,539		295		264		2,834		3,098		282		1986		1999
Mansell Commons		1011 Mansell Road		Industrial		—		256		2,655		373		256		3,028		3,284		329		1984		1999
North Meadow		1100 Northmeadow Parkway		Industrial		—		552		3,955		332		552		4,287		4,839		453		1989		1999
North Meadow		1150 Northmeadow Parkway		Industrial		—		464		3,230		158		464		3,388		3,852		328		1988		1999
North Meadow		1125 Northmeadow Parkway		Industrial		—		320		3,638		327		320		3,965		4,285		381		1987		1999
North Meadow		1175 Northmeadow Parkway		Industrial		—		328		3,409		497		328		3,907		4,235		392		1987		1999
North Meadow		1250 Northmeadow Parkway		Industrial		—		312		4,359		293		312		4,652		4,964		473		1989		1999
North Meadow		1225 Northmeadow Parkway		Industrial		—		336		3,518		204		336		3,721		4,057		353		1989		1999
North Meadow		1325 Northmeadow Parkway		Industrial		—		472		6,432		314		472		6,746		7,218		730		1990		1999
North Meadow		1335 Northmeadow Parkway		Industrial		—		946		8,174		130		946		8,304		9,250		728		1996		1999
North Meadow		11390 Old Roswell Road		Industrial		—		530		3,595		—		530		3,595		4,126		316		1997		1999
North Meadow		1400 Hembree Road		Industrial		—		545		3,258		3		545		3,261		3,806		290		1998		1999
North Meadow		1357 Hembree Road		Office		—		471		4,560		426		471		4,985		5,457		1,388		1999		1999
North Meadow		Northmeadow BD IV		Industrial		—		694		5,693		1		694		5,693		6,388		466		1999		1999
North Meadow		Northmeadow Service Ctr V		Industrial		—		705		3,256		—		705		3,256		3,961		288		1999		1999
North Meadow		Northmeadow BD VI		Industrial		—		423		3,046		38		423		3,084		3,507		388		2000		2000
Northbrook		Northbrook Business Dist II		Industrial		—		267		2,223		301		267		2,525		2,791		139		2000		2000
Other North Central Prop.		10745 Westside Parkway		Office		—		925		7,177		292		925		7,469		8,394		699		1995		1999
SEVEN HILLS, OHIO
Rock Run		Rock Run - North		Office		3,122		837		5,637		314		837		5,950		6,787		1,048		1984		1996
Rock Run		Rock Run - Center		Office		4,160		1,046		6,991		1,007		1,046		7,998		9,044		1,771		1985		1996
Rock Run		Rock Run - South		Office		3,260		877		5,909		301		877		6,210		7,087		1,115		1986		1996
SHARONVILLE, OHIO
Enterprise Park		Enterprise Bldg 1		Industrial		—		1,030		6,035		288		1,051		6,302		7,353		1,470		1990		1993
Enterprise Park		Enterprise Bldg 2		Industrial		—		733		3,903		723		747		4,611		5,358		1,239		1990		1993
Enterprise Park		Enterprise Bldg A		Industrial		—		119		728		85		119		814		933		158		1987		1995
Enterprise Park		Enterprise Bldg B		Industrial		—		119		1,237		74		119		1,311		1,430		258		1988		1995
Enterprise Park		Enterprise Bldg D		Industrial		—		243		1,990		89		243		2,079		2,322		435		1989		1995
Mosteller Dist. Center		Mosteller Distribution Ctr I		Industrial		—		1,327		6,316		275		1,327		6,591		7,918		1,346		1957		1996
Mosteller Dist. Center		Mosteller Distribution Ctr II		Industrial		—		828		4,761		1,147		828		5,908		6,736		1,160		1997		1997
Perimeter Park		Perimeter Park Bldg A		Industrial		—		229		1,343		182		229		1,525		1,754		262		1991		1996
Perimeter Park		Perimeter Park Bldg B		Industrial		—		244		1,063		150		244		1,212		1,457		232		1991		1996
SOLON, OHIO
Fountain Parkway		Fountain Parkway Bldg 2		Industrial		—		1,138		8,725		37		1,138		8,762		9,900		870		1998		1999
Fountain Parkway		Fountain Parkway Bldg 1		Industrial		—		527		2,907		41		527		2,948		3,475		351		1997		1998
Solon		30600 Carter		Industrial		—		819		3,425		289		821		3,712		4,533		499		1971		1997
Solon		6230 Cochran		Industrial		—		600		2,496		714		602		3,209		3,810		658		1977		1997
Solon		5821 Harper		Industrial		—		554		2,301		286		555		2,586		3,141		410		1970		1997
Solon		6161 Cochran		Industrial		—		395		1,642		498		396		2,139		2,535		316		1978		1997

 

65

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
Solon		5901 Harper		Industrial		—		349		1,441		163		350		1,603		1,953		222		1970		1997
Solon		29125 Solon		Industrial		—		504		2,072		421		505		2,492		2,997		320		1980		1997
Solon		6661 Cochran		Industrial		—		244		1,012		136		245		1,147		1,392		164		1979		1997
Solon		6521 Davis		Industrial		—		128		529		71		128		600		728		78		1979		1997
Solon		30301 Carter Street		Industrial		—		650		4,974		231		650		5,204		5,855		821		1972		1999
ST. LOUIS PARK, MINNESOTA
Cedar Lake Business Center		Cedar Lake Business Center		Industrial		—		332		1,931		107		332		2,038		2,370		283		1976		1997
Minneapolis-West		1600 Tower		Office		—		2,321		31,868		1,705		2,321		33,574		35,894		2,736		2000		2000
North Plaza		North Plaza		Office		—		374		1,662		241		374		1,904		2,278		256		1966		1998
South Plaza		South Plaza		Office		—		397		1,730		95		397		1,826		2,222		281		1966		1998
Travelers Express Tower		Travelers Express Tower		Office		—		3,039		36,060		631		3,091		36,640		39,731		3,309		1987		1999
Novartis		Novartis Warehouse		Industrial		—		2,005		10,948		443		2,005		11,391		13,396		1,328		1960		1998
SW Submkt-Minneapolis West BC		5219 Building		Office		—		99		574		60		102		631		733		74		1965		1998
ST. LOUIS, MISSOURI
Clayton		Interco Corporate Tower		Office				6,150		43,371		—		6,150		43,371		49,521				1986		2002
Craig Park Center		Craig Park Center		Industrial		—		254		2,309		220		254		2,529		2,783		283		1984		1998
Earth City		3300 Pointe 70		Office		4,143		1,186		7,586		618		1,186		8,204		9,390		1,146		1989		1997
Hawthorn Office Park		Hawthorn Office#1		Office		—		2,600		15,239		—		2,600		15,239		17,839		247		1997		2002
Lakeside Crossing		Lakeside Crossing I		Industrial				574		2,272		—		574		2,272		2,846		207		2001		2002
Lakeside Crossing		Lakeside Crossing III		Industrial				1,851		4,881		—		1,851		4,881		6,733		429		2001		2002
Lakeside Crossing		Lakeside Crossing 6		Industrial				1,074		2,125		—		1,074		2,125		3,199		8		2002		2002
Laumeier Office Park		Laumeier I		Office		—		1,384		10,063		1,344		1,384		11,408		12,791		2,113		1987		1995
Laumeier Office Park		Laumeier II		Office		—		1,421		10,033		847		1,421		10,879		12,300		2,100		1988		1995
Laumeier Office Park		Laumeier IV		Office		—		1,029		7,393		820		1,029		8,212		9,241		1,023		1987		1998
Maryville Center		500-510 Maryville Centre		Office		—		3,402		24,779		592		3,402		25,372		28,774		3,360		1984		1997
Maryville Center		530 Maryville Centre		Office		7,176		2,219		15,733		1,509		2,219		17,243		19,461		2,512		1990		1997
Maryville Center		550 Maryville Centre		Office		9,580		1,996		12,532		28		1,996		12,560		14,556		1,636		1988		1997
Maryville Center		635-645 Maryville Centre		Office		11,133		3,048		18,452		424		3,048		18,876		21,924		2,822		1987		1997
Maryville Center		655 Maryville Centre		Office		7,651		1,860		13,258		15		1,860		13,273		15,133		1,722		1994		1997
Maryville Center		540 Maryville Centre		Office		—		2,219		14,933		357		2,219		15,290		17,509		2,090		1990		1997
Maryville Center		520 Maryville Centre		Office		—		2,404		16,010		98		2,404		16,108		18,512		2,628		1998		1999
Maryville Center		700 Maryville Centre		Office		—		4,556		28,599		24		4,556		28,624		33,179		2,673		1999		2000
Maryville Center		533 Maryville Centre		Office		—		3,230		17,921		12		3,230		17,932		21,162		1,128		2000		2000
Maryville Center		555 Maryville Centre		Office		—		3,226		15,799		—		3,226		15,799		19,025		221		2000		2001
Maryville Center		625 Maryville Centre		Office		6,779		2,509		12,260		—		2,509		12,260		14,768		311		1996		2002
Riverport		Duke Fitness Centers LLC-STL		Grounds				—		21		—		—		21		21		—				2002
St. Louis Business Center		St. Louis Business Center A		Industrial		—		194		1,768		298		194		2,066		2,260		239		1987		1998
St. Louis Business Center		St. Louis Business Center B		Industrial		—		250		2,274		1,073		250		3,347		3,597		544		1986		1998
St. Louis Business Center		St. Louis Business Center C		Industrial		—		166		1,511		406		166		1,918		2,084		290		1986		1998
St. Louis Business Center		St. Louis Business Center D		Industrial		—		168		1,532		346		168		1,878		2,046		238		1987		1998
Southridge		Southridge Business Center		Industrial				1,158		4,234		—		1,158		4,234		5,392		161		2002		2002
West Port Center		Westport Center IV		Industrial		—		1,440		5,526		—		1,440		5,526		6,966		653		2000		2000
West Port Center		Westport Center V		Industrial		—		493		1,591		—		493		1,591		2,085		200		1999		2000
West Port Center		Westport Place		Office		—		1,990		7,824		259		1,990		8,083		10,073		1,296		1999		2000
Westmark		Westmark		Office		—		1,497		10,874		2,220		1,488		13,102		14,590		2,530		1987		1995
Westview Place		Westview Place		Office		—		669		9,357		1,782		669		11,139		11,808		2,253		1988		1995
ST. PAUL, MINNESOTA
University Crossing		University Crossing		Industrial		—		874		5,047		772		911		5,782		6,693		767		1990		1998
ST. PETERS, MISSOURI
Horizon Business Ctr		Horizon Business Center		Industrial		—		344		2,483		165		344		2,649		2,993		310		1985		1998

 

66

 

Development		Name		Building Type		Encumbrances						Cost Capitalized Subsequent to Development to Acquisition								Accumulated Depreciation(1)		Year Constructed		Year Acquired
								Initial Cost						Gross Book Value 12/31/02
								Land		Buildings				Land/Land Imp		Bldgs/TI		Total
STRONGSVILLE, OHIO
Commerce Parkway		Commerce Parkway Bldg 1						594		3,754		—		594		3,754		4,348		23		2002		2002
Dymet		Dyment						816		5,368		39		816		5,406		6,223		754		1988		1997
Johnson Controls		Johnson Controls						364		2,401		75		364		2,476		2,840		346		1972		1997
Park 82		Park 82 Bldg 2						322		2,899		595		294		3,522		3,815		614		1998		1998
Park 82		Park 82 Bldg 1						243		1,968		280		215		2,276		2,491		346		1998		1998
Park 82		Park 82 Bldg 3						298		2,679		712		270		3,419		3,689		371		1999		1999
Park 82		Park 82 Bldg 4						360		5,466		95		357		5,564		5,921		453		2000		2000
Park 82		Park 82 Bldg 5		Industrial		—		351		4,424		150		349		4,577		4,925		188		2000		2000
Srague Rd. Industrial		Mohawk Dr. Bldg. 1		Industrial		—		564		4,456		—		564		4,456		5,020		221		2000		2000
SUNRISE, FLORIDA
Sawgrass		Sawgrass Commerce Ctr Phase II		Office		—		1,147		6,112		—		1,147		6,112		7,260		424		2000		2001
Sawgrass		Sawgrass Pointe		Office				3,484		21,827		—		3,484		21,827		25,311		461		2001		2002
SUWANEE, GEORGIA
TAMPA, FLORIDA
Fairfield Distribution Center		Fairfield Distribution Ctr I		Industrial		—		483		2,658		3		487		2,657		3,144		237		1998		1999
Fairfield Distribution Center		Fairfield Distribution Ctr II		Industrial		—		530		4,901		11		534		4,908		5,441		436		1998		1999
Fairfield Distribution Center		Fairfield Distribution Ctr III		Industrial		—		334		2,771		39		338		2,806		3,144		243		1999		1999
Fairfield Distribution Center		Fairfield Distribution Ctr IV		Industrial		—		600		2,543		874		604		3,413		4,017		568		1999		1999
Fairfield Distribution Center		Fairfield Distribution Ctr V		Industrial		—		488		3,538		—		488		3,538		4,026		208		2000		2000
Fairfield Distribution Center		Fairfield Distribution Ctr VI		Industrial		—		555		4,517		—		555		4,517		5,072		187		2001		2001
Fairfield Distribution Center		Fairfield Distribution Ctr VII		Industrial		—		394		4,027		—		394		4,027		4,420		244		2001		2001
Highland Oaks		Highland Oaks I		Office		—		1,525		14,176		450		1,525		14,625		16,150		2,020		1999		1999
Highland Oaks		Highland Oaks II		Office		—		1,605		11,820		—		1,605		11,820		13,425		747		1999		2000
TWINSBURG, OHIO
Enterprise Parkway		Enterprise Parkway #1		Industrial		—		198		1,585		190		198		1,774		1,972		195		1974		1998
Enterprise Parkway		Enterprise Parkway Bldg 2		Industrial		—		610		7,391		5		610		7,396		8,006		570		2000		2000
WEST CHESTER, OHIO
World Park Union Centre		World Park at Union Ctr 12		Industrial		—		306		3,461		—		306		3,461		3,767		397		2000		2000
WESTERVILLE, OHIO
Westerville Executive Campus		Liebert		Office		—		755		4,510		903		755		5,413		6,169		1,217		1999		1999
WESTMONT, ILLINOIS
Oakmont Corporate Center		Oakmont Tech Center		Industrial		—		1,501		8,712		152		1,501		8,864		10,365		921		1989		1998
Oakmont Corporate Center		Oakmont Circle Office		Office		—		3,177		14,187		1,060		3,492		14,932		18,424		1,664		1990		1998
WOODLAWN, OHIO
Glenwood Crossing		Glenwood Crossing		Retail		—		3,651		1,383		228		3,651		1,610		5,262		117		1999		2000
		McDonalds Ground Lease		Grounds		—		480		—		—		480		—		480		—				2000
		Eliminations						—		—		(23,751	)	(750	)	(23,002	)	(23,751	)	1,294
		MV Construction Loan Payable				23,895
						299,147		600,885		4,037,690		207,780		608,995		4,237,360		4,846,355		555,858

 

(1) Depreciation of real estate is computed using the straight-line method over 40 years for buildings, 15 years for land
improvements and shorter periods based on lease terms (generally 3 to 10 years) for tenant improvements.

 

67

 

Development		Name		Building Type			Encumbrances							Cost Capitalized Subsequent to Development to Acquisition										Accumulated Depreciation(1)			Year Constructed		Year Acquired
									Initial Cost								Gross Book Value 12/31/02
									Land			Buildings					Land/Land Imp		Bldgs/TI			Total
				Real Estate Assets															Accumulated Depreciation
				2002					2001					2000					2002					2001					2000
Balance at beginning of year				$	4,652,853				$	4,570,563				$	4,726,906				$	425,721				$	338,426				$	254,574
Acquisitions				137,706					13,927					6,104					—					—					—
Construction costs and tenant improvements				275,020					467,285					603,194					—					—					—
Depreciation expense				—					—					—					154,565					138,723					143,800
Acquisition of minority interest				13,163					4,259					1,317					—					—					—
				5,078,742					5,056,034					5,337,521					580,286					477,149					398,374
Deductions during year:
Cost of real estate sold or contributed				(204,248		)			(386,495		)			(745,554		)			(5,668		)			(39,542		)			(39,085			)
Impairment Allowance				(9,379		)			(4,800		)			(541		)
Write-off of fully amortized assets				(18,760		)			(11,886		)			(20,863		)			(18,760		)			(11,886		)			(20,863			)
Balance at end of year				$	4,846,355				$	4,652,853				$	4,570,563				$	555,858				$	425,721				$		338,426

 

68

 

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.

 

DUKE REALTY LIMITED PARTNERSHIP

By:

Duke Realty Corporation

Its General Partner

March 25, 2003

By:

/s/  Thomas L. Hefner

Thomas L. Hefner

Chairman of the Board,

President and Chief Executive Officer

By:

/s/ Darell E. Zink, Jr.

Darell E. Zink, Jr.

Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)

By:

/s/ Matthew A. Cohoat

Matthew A. Cohoat

Senior Vice President and

Corporate Controller

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature		Date		Title
/s/ Thomas L. Hefner*		3/25/03		Chairman of the Board,
Thomas L. Hefner				President and Chief Executive Officer and Director of the General Partner
/s/ Darell E. Zink, Jr.*		3/25/03		Executive Vice President and Chief
Darell E. Zink, Jr.				Financial Officer and Director of the General Partner
/s/ Matthew A. Cohoat*		3/25/03		Senior Vice President and
Matthew A. Cohoat				Corporate Controller of the General Partner

 

69

 

/s/ Barrington H. Branch*		3/25/03		Director of the General Partner
Barrington H. Branch
/s/ Gary A. Burk		3/25/03		Director of the General Partner
Gary A. Burk
/s/ Geoffrey Button*		3/25/03		Director of the General Partner
Geoffrey Button
/s/ William Cavanaugh, III*		3/25/03		Director of the General Partner
William Cavanaugh, III
/s/ Ngaire E. Cuneo*		3/25/03		Director of the General Partner
Ngaire E. Cuneo
/s/ Charles R. Eitel*		3/25/03		Director of the General Partner
Charles R. Eitel
/s/ L. Ben Lytle*		3/25/03		Director of the General Partner
L. Ben Lytle
/s/ William O. McCoy*		3/25/03		Director of the General Partner
William O. McCoy
/s/ John W. Nelley, Jr.*		3/25/03		Director of the General Partner
John W. Nelley, Jr.
/s/ James E. Rogers*		3/25/03		Director of the General Partner
James E. Rogers
/s/ Robert J. Woodward*		3/25/03		Director of the General Partner
Robert J. Woodward

 

* By Dennis D. Oklak, Attorney-in-Fact

/s/ Dennis D. Oklak

 

70

 

 

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS

FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS

WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12

OF THE ACT

 

 

No annual report or proxy statement has been sent to security holders of the Registrant. The General Partner of the Registrant has mailed its annual report and its proxy statement to holders of common stock of the General Partner. Portions of the General Partner’s proxy statement are incorporated by reference herein in Items 10-13 of Part III.

 

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Thomas L. Hefner, certify that:

 

1.             I have reviewed this annual report on Form 10-K of Duke Realty Limited Partnership;

 

2.                                       Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.                                       Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this annual report;

 

4.                                       The Partnership’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

 

(a)               designed such disclosure controls and procedures to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)              evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

(c)               presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.                                       The Partnership’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Partnership’s auditors and the audit committee of the General Partner’s board of directors (or persons performing the equivalent function):

 

(a)               all significant deficiencies in the design or operation of internal controls which could adversely affect the Partnership’s ability to record, process, summarize and report financial data and have identified for the Partnership’s auditors any material weaknesses in internal controls; and

(b)              any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership’s internal controls; and

 

6.                                       The Partnership’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  March 25, 2003
Thomas L. Hefner
President and Chief Executive Officer of the General Partner

 

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Darell E. Zink, Jr., certify that:

 

1.             I have reviewed this annual report on Form 10-K of Duke Realty Limited Partnership;

 

2.                                       Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

 

3.                                       Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this annual report;

 

4.                                       The Partnership’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Partnership and we have:

 

(a)               designed such disclosure controls and procedures to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)              evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

(c)               presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.                                       The Partnership’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Partnership’s auditors and the audit committee of the General Partner's board of directors (or persons performing the equivalent function):

 

(a)               all significant deficiencies in the design or operation of internal controls which could adversely affect the Partnership’s ability to record, process, summarize and report financial data and have identified for the Partnership’s auditors any material weaknesses in internal controls; and

(b)              any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership’s internal controls; and

 

6.                                       The Partnership’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

Date:  March 25, 2003
Darell E. Zink, Jr.
Executive Vice President and Chief Financial Officer of the General Partner