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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required) for
the fiscal year ended December 31, 1996
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or
/ / Transition report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 (No Fee Required) for the
transition period from to
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Commission file number 0-20625
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DUKE REALTY LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Indiana 35-1898425
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8888 Keystone Crossing, Suite 1200
Indianapolis, Indiana 46240
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(Address of principal executive offices) (Zip Code)
(317) 846-4700
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class: Name of each exchange on which registered:
None N/A
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
LIMITED PARTNER UNITS
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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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. ( X )
The aggregate market value of the Limited Partner Units held by
non-affiliates of Registrant is $43,648,729 based on the last
reported sale price of the common shares of Duke Realty
Investments, Inc., into which Limited Partner Units are
exchangeable, on March 7, 1997.
The number of Limited Partnership Units outstanding as of March
7, 1997 was 3,309,758.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference the Proxy Statement of Duke
Realty Investments, Inc. related to the Annual Meeting of
Shareholders to be held April 24, 1997.
TABLE OF CONTENTS
FORM 10-K
Item No. Page(s)
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PART I
1. Business..............................................1 -4
2. Properties............................................4 -13
3. Legal Proceedings.....................................13
4. Submission of Matters to a Vote of Security Holders...13
PART II
5. Market for the Registrant's Equity and Related
Security Holder Matters...............................13
6. Selected Financial Data...............................14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................14- 22
8. Financial Statements and Supplementary Data...........22
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................22
PART III
10. Directors and Executive Officers of the Registrant....23-25
11. Executive Compensation................................25
12. Security Ownership of Certain Beneficial Owners and
Management............................................25
13. Certain Relationships and Related Transactions........25
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K...........................................26-52
Signatures.................................................53-54
Exhibits
When used in this Form 10-K Report, the words "believes," "expects,"
"estimates" and similar expressions are intended to identify forward-
looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially.
In particular, among the factors that could cause actual results to
differ materially are continued qualification as a real estate
investment trust, general business and economic conditions,
competition, increases in real estate construction costs, interest
rates, accessibility of debt and equity capital markets and other
risks inherent in the real estate business including tenant defaults,
potential liability relating to environmental matters and illiquidity
of real estate investments. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of
the date hereof. The Partnership undertakes no obligation to publicly
release the results of any revisions to these forward-looking
statements which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
Readers are also advised to refer to Duke Realty Investments, Inc.'s
Form 8-K Report as filed with the U.S. Securities and Exchange
Commission on March 29, 1996 for additional information concerning
these risks.
PART I
ITEM 1. BUSINESS
Duke Realty Limited Partnership (the "Partnership") was formed on
October 4, 1993, when Duke Realty Investments, Inc. (the "Predecessor
Company" 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
through an offering (the "1993 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 under provisions of the Internal Revenue Code.
The General Partner is the sole general partner of the Partnership
currently owning 88.9% of the partnership interest ("General Partner
Units"). The remaining 11.1% of the Partnership is owned by limited
partners ("Limited Partner Units" and, together with the General
Partner Units, the "Common Units").
The Partnership's primary business segment is the ownership and rental
of industrial, office and retail properties throughout the Midwest. As
of December 31, 1996, it owned interests in a diversified portfolio of
266 rental properties comprising 31.2 million square feet (including 17
properties and one expansion comprising 3.8 million square feet under
development). Substantially all of these properties are located in the
Partnership's primary markets of Indianapolis, Indiana; Cincinnati,
Cleveland, and Columbus, Ohio; Detroit, Michigan; St. Louis, Missouri
and Nashville, Tennessee. In addition to its Rental Operations, the
Partnership through its Service Operations provides, on a fee basis,
leasing, management, construction, development and other real estate
services for approximately 8.7 million square feet of properties owned
by third parties. 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 of these
industry segments. The Partnership conducts its Service Operations
through Duke Realty Services Limited Partnership and Duke Construction
Limited Partnership, in which the Partnership has an 89% profits
interest (after certain preferred returns on partners' capital
accounts) and effective control of their operations. All references to
the "Partnership" in this Form 10-K Report include the Partnership and
those entities owned or controlled by the Partnership, unless the
context indicates otherwise. The Partnership has the largest commercial
real estate operations in Indianapolis and Cincinnati and is one of the
largest real estate companies in the Midwest.
-1-
The Partnership's headquarters and executive offices are located in
Indianapolis, Indiana. In addition, the Partnership has seven regional
offices located in Cincinnati, Ohio; Columbus, Ohio; Cleveland, Ohio;
Decatur, Illinois; Detroit, Michigan; Nashville, Tennessee and St.
Louis, Missouri. The Partnership had 480 employees as of December 31,
1996.
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
debt restructuring and sales of property plus depreciation and
amortization, and after adjustments for minority interest,
unconsolidated partnerships and joint ventures (adjustments for
minority interests, unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis). While management believes
that FFO 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 and real estate partnerships,
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
within the Midwest. The Partnership also expects to utilize its
approximately 1,200 acres of unencumbered land and its many business
relationships with more than 2,800 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 and elsewhere in the Midwest. 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 development of
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.
-2-
Consistent with its business strategy of expanding in attractive
Midwestern markets, the Partnership carefully analyzed the real estate
investment potential of several major Midwestern metropolitan areas.
Based on this analysis, management concluded that the St. Louis and
Cleveland markets offer attractive real estate investment returns in
the industrial and suburban office markets based on the following
factors: (i) fragmented competition; (ii) strong real estate
fundamentals; and (iii) favorable economic conditions.
In 1995, the Partnership established a regional office in St. Louis and
acquired 463,000 square feet of suburban office properties and 153
acres of land for the future development of industrial properties. In
February 1996, the Partnership acquired a 782,000 gross square foot
suburban office portfolio and the operating personnel of an independent
real estate developer and operator in Cleveland. The Partnership
intends to aggressively pursue the development and acquisition of
additional rental properties in both the St. Louis and Cleveland
markets.
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 markets. The supply and demand of similar
available rental properties may affect the rental rates the Partnership
will receive on its properties. Based upon the current occupancy rates
in the Partnership and competitive properties, the Partnership believes
there will not be significant competitive pressure to lower rental
rates in the near future.
FINANCING STRATEGY
The Partnership seeks to maintain a well-balanced, conservative and
flexible capital structure by: (i) currently targeting a ratio of long-
term debt to total market capitalization in the range of 25% to 40%;
(ii) extending and sequencing the maturity dates of its debt; (iii)
borrowing primarily at fixed rates; (iv) generally pursuing current and
future long-term debt financings and refinancings on an unsecured
basis; and (v) 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 the debt and equity capital markets for their long-term
requirements such as debt refinancings and financing development and
acquisitions of additional rental properties. The General Partner and
the Partnership have raised approximately $626 million through public
debt and equity offerings during the three years ended December 31,
1996. Based on these offerings, the General Partner and the Partnership
have demonstrated their abilities to access the public markets as a
source of capital to fund future growth. In addition, as discussed
under Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Partnership has a $150
million line of credit available for short-term fundings of development
and acquisition of additional rental properties. The Partnership's debt
to total market capitalization ratio (total market capitalization is
defined as the total market value of all Common and Preferred Units
outstanding plus outstanding indebtedness) at March 7, 1997 was 25.3%.
The market value of the Common and Preferred Units is assumed to be
equal to the General Partner's market value of Common and Preferred
Shares. The Partnership's ratio of earnings to debt service and ratio
of earnings to fixed charges for the year ended December 31, 1996 were
2.62x and 2.20x, respectively. In computing the ratio of earnings to
debt service, earnings have been calculated by adding debt service to
income before gains or losses on property sales. Debt service consists
of interest expense and recurring principal amortization (excluding
maturities) and excludes amortization of debt issuance costs. In
computing the
-3-
ratio of earnings to fixed charges, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to income before
gains or losses on property sales. Fixed charges consist of interest
costs, whether expensed or capitalized, the interest component of
rental expense, amortization of debt issuance costs and preferred stock
dividend requirements. Management believes these measures to be
consistent with its financing strategy.
OTHER
The Partnership's operations are not dependent on a single or few
customers as no single customer accounts for more than 2% 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."
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership owns an interest in a
diversified portfolio of 266 commercial properties encompassing
approximately 31.2 million net rentable square feet (including 17
properties and one expansion comprising 3.8 million square feet under
development) located primarily in five states and approximately 1,200
acres of land for future development. The properties are described on
the following pages.
-4-
Partner- Net Percent
ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest ship Expanded (Acres) (sq.ft.) 12/31/96
- --------- ---------- ------- ----------- ------ ------ --------
IN-SERVICE
- ----------
INDUSTRIAL
- ----------
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 38 Fee 100% 1978 1.11 6,000 100%
Building 48 Fee 50% [1] 1984 8.63 127,410 100%
Building 49 Fee 50% [1] 1982 4.55 89,600 100%
Building 50 Fee 50% [1] 1982 4.09 51,200 100%
Building 52 Fee 50% [1] 1983 2.70 34,800 100%
Building 53 Fee 50% [1] 1984 4.23 76,800 100%
Building 54 Fee 50% [1] 1984 4.42 76,800 100%
Building 55 Fee 50% [1] 1984 3.83 43,200 100%
Building 56 Fee 50% [1] 1984 15.94 300,000 100%
Building 57 Fee 50% [1] 1984 7.70 128,800 100%
Building 58 Fee 50% [1] 1984 8.03 128,800 100%
Building 59 Fee 50% [1] 1985 5.14 83,200 100%
Building 60 Fee 50% [1] 1985 4.78 83,200 62%
Building 62 Fee 50% [1] 1986 7.70 128,800 100%
Building 67 Fee 50% [1] 1987 4.23 72,350 100%
Building 68 Fee 50% [1] 1987 4.23 72,360 100%
Building 71 Fee 50% [1] 1987 9.06 193,400 100%
Building 74 Fee 10%-50% [2] 1988 12.41 257,400 100%
Building 76 Fee 10%-50% [2] 1988 5.10 81,695 100%
Building 78 Fee 10%-50% [2] 1988 21.80 512,777 100%
Building 79 Fee 100% 1988 4.47 66,000 100%
Building 80 Fee 100% 1988 4.47 66,000 100%
Building 83 Fee 100% 1989 5.34 96,000 100%
Building 84 Fee 100% 1989 5.34 96,000 100%
Building 85 Fee 10%-50% [2] 1989 9.70 180,100 100%
Building 89 Fee 10%-50% [2] 1990 11.28 311,600 100%
Building 91 Fee 10%-50% [2]1990/1996 7.53 196,800 100%
Building 92 Fee 10%-50% [2] 1991 4.38 45,917 100%
Building 95 Fee 100% 1993 15.23 336,000 100%
Building 96 Fee 100% 1994 27.69 553,900 100%
Building 97 Fee 100% 1994 13.38 280,800 80%
Building 98 Fee 100% 1968/1995 37.34 508,306 100%
Building 99 Fee 50% [3] 1994 18.00 364,800 100%
Building 100 Fee 100% 1995 7.00 117,500 100%
Building 101 Fee 50% [1] 1983 4.37 45,000 92%
Building 105 Fee 50% [1] 1983 4.64 41,400 100%
Building 106 Fee 50% [1] 1978 4.64 41,400 100%
Building 107 Fee 100% 1984 3.56 58,783 40%
Building 108 Fee 50% [1] 1983 6.36 60,300 86%
Building 109 Fee 100% 1985 4.80 46,000 77%
Building 113 Fee 50% [1] 1987 6.20 72,000 100%
Building 114 Fee 50% [1] 1987 6.20 56,700 98%
Building 117 Fee 10%-50% [2] 1988 13.36 135,600 99%
Building 120 Fee 10%-50% [2] 1989 4.54 54,982 86%
Building 122 Fee 100% 1990 6.17 73,274 100%
Building 125 Fee 100% 1994/1996 13.81 195,080 100%
Building 126 Fee 100% 1984 4.04 60,100 100%
Building 127 Fee 100% 1995 6.50 93,600 100%
Building 128 Fee 100% 1996 14.40 322,000 100%
Building 129 Fee 100% 1996 16.00 320,000 54%
Building 130 Fee 100% 1996 9.70 152,000 73%
G'town Centre Bldg 1 Fee 100% 1987 5.85 111,883 51%
G'town Centre Bldg 2 Fee 100% 1987 5.81 72,120 95%
G'town Centre Bldg 3 Fee 100% 1987 5.10 45,536 56%
PARK FLETCHER
Building 2 Fee 50% [1] 1970 1.31 20,160 100%
Building 4 Fee 50% [1] 1974 1.73 23,000 100%
Building 6 Fee 50% [1] 1971 3.13 36,180 75%
Building 7 Fee 50% [1] 1974 3.00 41,900 80%
Building 8 Fee 50% [1] 1974 2.11 18,000 100%
-5-
Partner- Net Percent
ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest ship Expanded (Acres) (sq.ft.) 12/31/96
- --------- -------- ------ ----------- ------ ------- --------
Building 14 Fee 100% 1978 1.39 19,480 100%
Building 15 Fee 50% [1] 1979 5.74 72,800 93%
Building 16 Fee 50% [1] 1979 3.17 35,200 100%
Building 18 Fee 50% [1] 1980 5.52 43,950 100%
Building 21 Fee 50% [1] 1983 2.95 37,224 100%
Building 22 Fee 50% [1] 1983 2.96 48,635 100%
Building 26 Fee 50% [1] 1983 2.91 28,340 53%
Building 27 Fee 25% [1] 1985 3.01 39,178 100%
Building 28 Fee 25% [1] 1985 7.22 93,880 100%
Building 29 Fee 50% [1] 1987 7.16 92,044 100%
Building 30 Fee 50% [1] 1989 5.93 78,568 100%
Building 31 Fee 50% [1] 1990 2.62 33,029 85%
Building 32 Fee 50% [1] 1990 5.43 67,297 100%
SHADELAND STATION
Buildings 204 & 205 Fee 100% 1984 4.09 48,600 100%
HUNTER CREEK BUSINESS PARK
Building 1 Fee 10%-50% [2] 1989 5.97 86,500 100%
Building 2 Fee 10%-50% [2] 1989 8.86 202,560 100%
HILLSDALE TECHNECENTER
Building 1 Fee 50% [1] 1986 9.16 73,436 100%
Building 2 Fee 50% [1] 1986 5.50 83,600 100%
Building 3 Fee 50% [1] 1987 5.50 84,050 100%
Building 4 Fee 100% 1987 7.85 73,874 100%
Building 5 Fee 100% 1987 5.44 67,500 93%
Building 6 Fee 100% 1987 4.25 64,000 100%
Franklin Road Fee 100% 1962,1971, 28.00 338,925 96%
Business Center 1974 [4]
Palomar Business Fee 100% 1973 4.50 99,350 100%
Center
Nampac Fee 100% 1974 6.20 83,200 100%
NORTH AIRPORT PARK
Thomson Consumer Fee 50% [5] 1996 52.00 599,040 100%
Electronics
6060 Guion Road Fee 100% 1968/1974 14.05 175,840 100%
/1977
4750 Kentucky Ave. Fee 100% 1974 11.01 125,000 100%
4316 West Minnesota Fee 100% 1970 10.40 121,465 100%
CARMEL, INDIANA
HAMILTON CROSSING
Building 1 Fee 100% 1989 4.70 51,825 100%
GREENWOOD, INDIANA
SOUTH PARK BUSINESS CENTER
Building 2 Fee 100% 1990 7.10 86,806 90%
LEBANON, INDIANA
LEBANON BUSINESS PARK
American Air Filter Fee 100% 1996 10.40 153,600 100%
Little, Brown and Fee 50% [5] 1996 31.60 500,455 100%
Company
CINCINNATI, OHIO
PARK 50 TECHNECENTER
Building 20 Fee 100% 1987 8.37 96,000 100%
Building 25 Fee 100% 1989 12.20 78,328 91%
GOVERNOR'S POINTE
4700 Building Fee 100% 1987 5.51 76,400 96%
4800 Building Fee 100% 1989 7.07 80,000 100%
4900 Building Fee 100% 1987 9.41 77,652 100%
-6-
Partner- Net Percent
Ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest Ship Expanded (Acres) (sq.ft.) 12/31/96
- --------- ---------- ------- --------- ------ ------ -------
WORLD PARK
Building 5 Fee 100% 1987 5.00 59,700 100%
Building 6 Fee 100% 1987 7.26 92,400 100%
Building 7 Fee 100% 1987 8.63 96,000 100%
Building 8 Fee 100% 1989 14.60 192,000 78%
Building 9 Fee 100% 1989 4.47 58,800 91%
Building 11 Fee 100% 1989 8.98 96,000 100%
Building 14 Fee 100% 1989 8.91 166,400 100%
Building 15 Fee 100% 1990 6.50 93,600 100%
Building 16 Fee 100% 1989 7.00 93,600 100%
MicroAge Fee 50% [1] 1994 15.10 304,000 100%
ENTERPRISE BUSINESS PARK
Building 1 Fee 100% 1990 7.52 87,400 91%
Building 2 Fee 100% 1990 7.52 84,940 100%
Building A Fee 100% 1987 2.65 20,888 100%
Building B Fee 100% 1988 2.65 34,940 95%
Building D Fee 100% 1989 5.40 60,322 71%
TRI-COUNTY BUSINESS PARK
Xetron Fee 10% [6] 1994 29.00 100,193 100%
FAIRFIELD BUSINESS CENTER
Building D Fee 100% 1990 3.23 40,223 100%
Building E Fee 100% 1990 6.07 75,600 100%
OTHER INDUSTRIAL - CINCINNATI
U.S. Post Office Fee 40% [7] 1992 2.60 57,886 100%
Building
University Moving Fee 100% 1991 4.95 70,000 100%
Creek Road Bldg I Fee 100% 1971 2.05 38,715 100%
Creek Road Bldg II Fee 100% 1971 2.63 53,210 100%
Cornell Commerce Fee 100% 1989 9.91 167,695 93%
Center
Mosteller Dist. Fee 100% 1957 [8] 25.80 357,796 64%
Center
Perimeter Park Fee 100% 1991 2.92 28,100 100%
Building A
Perimeter Park Fee 100% 1991 3.84 30,000 100%
Building B
COLUMBUS, OHIO
Pet Foods Bldg Fee 100% 1993/1995 16.22 276,000 100%
MBM Building Fee 100% 1978 3.98 83,000 100%
SOUTH POINTE BUSINESS CENTER
South Pointe A Fee 100% 1995 14.06 293,824 100%
South Pointe B Fee 100% 1996 13.16 307,200 100%
HEBRON, KENTUCKY
SOUTHPARK BUSINESS CENTER
Building 1 Fee 100% 1990 7.90 96,000 43%
Building 3 Fee 100% 1991 10.79 192,000 100%
CR Services Fee 100% 1994 22.50 214,840 100%
Redken Fee 100% 1994 28.79 166,400 100%
Laboratories
LOUISVILLE, KENTUCKY
Dayco Fee 50% [1] 1995 30.00 282,539 100%
FLORENCE, KENTUCKY
Empire Commerce Fee 100% 1973/1980 11.62 148,445 100%
Center
DECATUR, ILLINOIS
PARK 101 BUSINESS CENTER
Building 3 Fee 100% 1979 5.76 75,600 79%
Building 8 Fee 100% 1980 3.16 50,400 84%
-7-
[CAPTION]
Partner- Net Percent
ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest ship Expanded (Acres) (sq.ft.) 12/31/96
- --------- ---------- ------ ----------- ------ ------ --------
NASHVILLE, TENNESSEE
HAYWOOD OAKS TECHNECENTER
Building 2 Fee 100% 1988 2.94 50,400 100%
Building 3 Fee 100% 1988 2.94 52,800 100%
Building 4 Fee 100% 1988 5.23 46,800 94%
Building 5 Fee 100% 1988 5.23 61,171 94%
Building 6 Fee 100% 1989 10.53 113,400 100%
Building 7 Fee 100% 1995 8.24 66,873 100%
Greenbriar Fee 100% 1986 10.73 134,759 98%
Business Park
Keebler Building Fee 100% 1985 4.39 36,150 100%
MILWAUKEE, WISCONSIN
S.F. Music Box Fee 33.33% [9] 1993 8.90 153,600 100%
Building
ST. LOUIS, MISSOURI
I-70 Center Fee 100% 1986 4.57 76,240 85%
1920 Beltway Fee 100% 1986 4.44 70,000 100%
Interamerican Fee 100% 1996 21.24 403,200 71%
Alfa Laval Fee 100% 1996 12.76 129,500 100%
OFFICE
- ------
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 34 Fee 100% 1979 2.00 22,272 89%
Building 116 Fee 100% 1988 5.28 35,700 84%
Building 118 Fee 100% 1988 6.50 35,700 100%
Building 119 Fee 100% 1989 6.50 53,300 100%
CopyRite Bldg Fee 50% [3] 1992 3.88 48,000 100%
WOODFIELD AT THE CROSSING
Two Woodfield Fee 100% 1987 7.50 17,818 78%
Crossing
Three Woodfield Fee 100% 1989 13.30 259,777 94%
Crossing
PARKWOOD CROSSING
One Parkwood Fee 100% 1989 5.93 108,281 100%
Two Parkwood Fee 100% 1996 5.96 93,300 100%
SHADELAND STATION
7240 Shadeland Fee 66.67% [10] 1985 2.14 45,585 99%
Station
7330 Shadeland Fee 100% 1988 4.50 42,619 100%
Station
7340 Shadeland Fee 100% 1989 2.50 32,235 100%
Station
7351 Shadeland Fee 100% 1983 2.14 27,740 100%
Station
7369 Shadeland Fee 100% 1989 2.20 15,551 100%
Station
7400 Shadeland Fee 100% 1990 2.80 49,544 100%
Station
KEYSTONE AT THE CROSSING
F.C. Tucker Fee/Ground 100% 1978 N/A 4,840 100%
Building Lease [11]
3520 Commerce Ground/Bldg. 100% 1976 N/A 30,000 100%
Crossing Lease [12]
8465 Keystone Fee 100% 1983 1.31 28,298 93%
Community MOB Fee 100% 1995 4.00 39,205 100%
CARMEL, INDIANA
CARMEL MEDICAL CENTER
Building I Fee/Ground 100% 1985 N/A 40,060 77%
Lease [13]
Building II Fee/Ground 100% 1989 N/A 39,973 94%
Lease [13]
-8-
[CAPTION]
Partner- Net Percent
ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest ship Expanded (Acres) (sq.ft.) 12/31/96
- --------- ---------- ------ ----------- ------ ----- --------
GREENWOOD, INDIANA
SOUTH PARK BUSINESS CENTER
Building 1 Fee 100% 1989 5.40 39,715 97%
Building 3 Fee 100% 1990 3.25 35,900 100%
St. Francis Fee/Ground 100% 1995 N/A 95,579 85%
Medical Building Lease [14]
CINCINNATI, OHIO
GOVERNOR'S HILL
8600 Governor's Fee 100% 1986 10.79 200,584 97%
Hill
8700 Governor's Fee 100% 1985 4.98 58,617 100%
Hill
8790 Governor's Fee 100% 1985 5.00 58,177 95%
Hill
8800 Governor's Fee 100% 1985 2.13 28,700 100%
Hill
GOVERNOR'S POINTE
4605 Governor's Fee 100% 1990 8.00 175,485 100%
Pointe
4705 Governor's Fee 100% 1988 7.50 140,984 100%
Pointe
4770 Governor's Fee 100% 1986 4.50 76,037 94%
Pointe
PARK 50 TECHNECENTER
SDRC Building Fee 100% 1991 13.00 221,215 100%
Building 17 Fee 100% 1985 8.19 70,644 97%
DOWNTOWN CINCINNATI
311 Elm Street Ground/Bldg. 100% 1902/1986 N/A 90,127 100%
Lease [15] [16]
312 Plum Street Fee 100% 1987 0.69 230,489 66%
312 Elm Street Fee 100% 1992 1.10 378,786 97%
KENWOOD
Kenwood Commons Fee 50% [17] 1986 2.09 46,145 100%
Building I
Kenwood Commons Fee 50% [17] 1986 2.09 46,434 96%
Building II
Ohio National Fee 100% 1996 9.00 212,125 98%
TRI-COUNTY
Triangle Office Fee 100% 1965/1985 15.64 172,650 82%
Park [18]
Tri-County Fee 100% 1971,1973, 11.27 102,166 82%
Office Park 1982 [19]
Executive Plaza I Fee 100% 1980 5.83 87,912 99%
Executive Plaza II Fee 100% 1981 5.02 88,885 100%
BLUE ASH
West Lake Center Fee 100% 1981 11.76 179,974 90%
Lake Forest Place Fee 100% 1985 13.50 217,264 94%
Huntington Bank Fee 100% 1986 0.94 3,235 100%
Building
OTHER OFFICE - CINCINNATI
Fidelity Drive Fee 100% 1972 8.34 38,000 100%
Building
Franciscan Fee/Ground 100% 1996 N/A 36,634 100%
Health System Lease[20]
COLUMBUS, OHIO
TUTTLE CROSSING
4600 Lakehurst Fee 100% 1990 7.66 106,300 100%
(Sterling 1)
4650 Lakehurst Fee 100% 1990 13.00 164,639 100%
(Litel)
5555 Parkcenter Fee 100% 1992 6.09 83,971 100%
(Xerox)
4700 Lakehurst Fee 100% 1994 3.86 49,600 100%
(Indiana Insurance)
Sterling 2 Fee 100% 1995 3.33 57,660 100%
John Alden Fee 100% 1995 6.51 101,112 100%
Cardinal Health Fee 100% 1995 10.95 132,854 100%
Nationwide Fee 100% 1996 17.90 315,102 100%
Sterling 3 Fee 100% 1996 3.56 64,500 100%
Metrocenter III Fee 100% 1983 5.91 73,757 100%
Veterans Fee 100% 1994 4.98 118,000 100%
Administration
Clinic
Scioto Corporate Fee 100% 1987 7.58 57,251 98%
Center
-9-
[CAPTION]
Partner- Net Percent
ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest ship Expanded (Acres) (sq.ft.) 12/31/96
- --------- ---------- ------ ----------- ------ ------ --------
CLEVELAND, OHIO
Rock Run - North Fee 100% 1984 5.00 60,272 100%
Rock Run - Center Fee 100% 1985 5.00 61,174 100%
Rock Run - South Fee 100% 1986 5.00 63,107 100%
Freedom Square I Fee 100% 1980 2.59 39,622 100%
Freedom Square II Fee 100% 1987 7.41 115,156 100%
Corporate Plaza I Fee 100% 1989 6.10 112,951 100%
Corporate Plaza II Fee 100% 1991 4.90 103,638 100%
One Corporate Fee 100% 1989 5.30 87,739 95%
Exchange
Corporate Center I Fee 100% 1985 5.33 104,402 77%
Corporate Center II Fee 100% 1987 5.32 99,260 83%
Corporate Place Fee 100% 1988 4.50 84,768 90%
Corporate Circle Fee 100% 1983 6.65 120,444 98%
LIVONIA, MICHIGAN
SEVEN MILE CROSSING
38705 Seven Mile Fee/Ground 100% 1988 N/A 113,066 96%
Lease [21]
38701 Seven Mile Fee/Ground 100% 1989 N/A 132,153 99%
Lease [21]
ST. LOUIS, MISSOURI
Laumeier I Fee 100% 1987 4.29 113,852 97%
Laumeier II Fee 100% 1988 4.64 110,541 100%
Westview Place Fee 100% 1988 2.69 114,722 99%
Westmark Fee 100% 1987 6.95 123,889 100%
RETAIL
- ------
INDIANAPOLIS, INDIANA
PARK 100 BUSINESS PARK
Building 32 Fee 100% 1978 0.82 14,504 79%
Building 121 Fee 100% 1989 2.27 19,716 76%
CASTLETON CORNER
Michael's Plaza Fee 100% 1984 4.50 46,374 100%
Cub Plaza Fee 100% 1986 6.83 60,136 95%
FORT WAYNE, INDIANA
Coldwater Crossing Fee 100% 1990 35.38 246,365 88%
GREENWOOD, INDIANA
GREENWOOD CORNER
First Indiana Fee 100% 1988 1.00 2,400 100%
Bank Branch
Greenwood Corner Fee 100% 1986 7.45 50,840 46%
Shoppes
DAYTON, OHIO
Sugarcreek Plaza Fee 100% 1988 17.46 77,940 93%
CINCINNATI, OHIO
Governor's Plaza Fee 100% 1990 35.00 181,493 100%
King's Mall Fee 100% 1990 5.68 52,661 98%
Shopping Center I
King's Mall Fee 100% 1988 8.90 67,725 93%
Shopping Center II
Steinberg's Fee 100% 1993 1.90 21,008 100%
Park 50 Plaza Fee 100% 1989 2.20 18,000 43%
Kohl's Fee 100% 1994 12.00 80,684 100%
Sports Unlimited Fee 100% 1994 7.00 67,148 100%
Eastgate Square Fee 100% 1990/1996 11.60 94,182 100%
Office Max Fee 100% 1995 2.25 23,484 100%
Sofa Express - Fee 100% 1995 1.13 15,000 100%
Governor's Plaza
Bigg's Fee 100% 1996 14.00 157,791 100%
Supercenter
-10-
Partner- Net Percent
ship's Year Land Rentable Occupied
Name/ Ownership Owner- Constructed/ Area Area at
Location Interest ship Expanded (Acres) (sq. ft.) 12/31/96
- --------- ---------- ------ ----------- ------ ------ --------
BLOOMINGTON, ILLINOIS
Lakewood Plaza Fee 100% 1987 11.23 87,010 92%
CHAMPAIGN, ILLINOIS
Market View Fee 100% 1985 8.50 86,553 90%
COLUMBUS, OHIO
Galyans Trading Fee 100% 1994 4.90 74,636 100%
Company
Tuttle Retail Fee 100% 1995/1996 13.44 144,244 100%
Center
UNDER CONSTRUCTION
- ------------------
Partner- Net Percent
ship's Expected Land Rentable Pre-leased
Ownership Owner- In-Service Area Area at
Interest ship Date (Acres) (sq.ft.) 12/31/96
----------- ------- ----------- ------ --------- --------
INDUSTRIAL
- ----------
INDIANAPOLIS, INDIANA
PARK FLETCHER BUSINESS PARK
Building 33 Fee 50% [1] Jan-97 7.50 112,000 36%
PARK 100 BUSINESS PARK
Building 131 Fee 100% May-97 21.00 404,900 100%
Building 96 Fee 100% Mar-97 8.40 183,950 100%
Expansion
NORTH AIRPORT PARK
Building 2 Fee 100% May-97 22.50 377,280 34%
LEBANON, INDIANA
LEBANON BUSINESS PARK
Purity Wholesale Fee 100% Jul-97 32.60 556,248 100%
Pamida Fee 100% May-97 14.90 200,000 100%
HEBRON, KENTUCKY
Skyport Building I Fee 100% May-97 15.10 316,800 0%
CLEVELAND, OHIO
Mr. Coffee Fee 100% Aug-97 35.00 458,000 100%
EARTH CITY, MISSOURI
Earth City Fee 100% Feb-97 14.70 244,800 0%
Building 52
NASHVILLE, TENNESSEE
HAYWOOD OAKS TECHNECENTER
Building 8 Fee 100% Sep-97 15.44 71,500 0%
OFFICE
- ------
INDIANAPOLIS, INDIANA
PARKWOOD CROSSING
Three Parkwood Fee 100% Jul-97 6.24 121,246 0%
RIVER ROAD
Software Fee 100% Jan-98 6.90 100,000 80%
Artistry
COLUMBUS, OHIO
TUTTLE CROSSING
Parkwood Place Fee 100% Jun-97 9.08 156,000 100%
CompManagement Fee 100% Oct-97 4.46 67,841 59%
CLEVELAND, OHIO
Freedom Square III Fee 100% Jul-97 2.00 71,025 0%
Landerbrook Fee 100% Nov-97 8.00 106,571 21%
-11-
Partner- Net Percent
ship's Expected Land Rentable Pre-leased
Ownership Owner- In-Service Area Area at
Interest ship Date (Acres) (sq.ft.) 12/31/96
---------- ------ ----------- ------ ------ --------
RETAIL
- ------
CINCINNATI, OHIO
Fountain Place Fee 25% [22] Sep-97 1.98 232,301 90%
FLORENCE, KENTUCKY
Sofa Express Fee 100% Jul-97 1.78 20,250 100%
-------- ----------
2,133.05 31,202,862
======== ==========
[1] These buildings are owned by a limited liability company in which
the Partnership is a 50.1% member. The Partnership shares in the profit
or loss from such buildings in accordance with the Partnership's ownership
interest. This limited liability company owns a 50% general partnership
interest in Park Fletcher Buildings 27 and 28 and shares in the profit or
loss from these buildings in accordance with the limited liability company's
interest.
[2] These buildings are owned by a partnership in which the Partnership is
a partner. The Partnership owns a 10% capital interest in the partnership
and receives a 50% interest in the residual cash flow after payment of a 9%
preferred return to the other partner on its capital interest.
[3] This building is owned in partnership with a tenant of the building.
The Partnership owns a 50% general partnership interest in the partnership.
The Partnership shares in the profit or loss from the building in accordance
with such ownership interest.
[4] This building was constructed in three phases; 1962, 1971 and 1974.
[5] This building was contributed to the limited liability company
referenced in footnote [1] in 1996.
[6] This building is owned by a partnership in which the Partnership owns
a 10% limited partnership interest. The Partnership shares in the cash flow
from the building in accordance with such ownership interest.
[7] This building is owned by a limited partnership in which the Partnership
has a 1% general partnership interest and a 39% limited partnership interest.
The Partnership shares in the profit or loss from such building in accordance
with the Partnership's ownership interest.
[8] This building was renovated in 1996.
[9] This building is owned by a partnership in which the Partnership owns
a 33.33% limited partnership interest. The Partnership shares in the profit
or loss from the building in accordance with such ownership interest.
[10] The Partnership owns a 66.67% general partnership interest in the
partnership owning this building. The Partnership shares in the profit or
loss of this building in accordance with such ownership interest.
[11] The Partnership owns the building and has a leasehold interest in the
land underlying this building with a lease term expiring October 31, 2067.
[12] The Partnership has a leasehold interest in this building with a lease
term expiring May 9, 2006.
[13] The Partnership owns these buildings and has a leasehold interest in the
land underlying these buildings, with the lease term expiring November 16,
2043.
[14] The Partnership owns this building and has a leasehold interest in the
land underlying this building with a lease term expiring August 2045, with
two 20-year options to renew.
[15] The Partnership has a leasehold interest in the building and the
underlying land with a lease term expiring March 31, 2020. The Partnership has
an option to purchase the fee interest in the property throughout the term of
the lease.
[16] This building was renovated in 1986.
[17] These buildings are owned by a partnership in which the Partnership has
a 50% general partnership interest. The Partnership shares in the profit or
loss from such buildings in accordance with such ownership interest.
[18] This building was renovated in 1985.
-12-
[19] Tri-County Office Park consists of four buildings. One was built in
1971, two were built in 1973, and one was built in 1982.
[20] The Partnership owns this building and has a leasehold interest in the
land underlying this building with a lease term expiring June 2095.
[21] The Partnership owns these buildings and has a leasehold interest in
the land underlying these buildings with a lease term expiring May 31, 2057.
[22] These buildings are owned through a limited liability company in which
the partnership is a 25% member. The limited liability company will own a
57.5% interest in the Fountain Place retail project.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Partnership or any
subsidiary was a party or to which any of their property is subject
other than routine litigation incidental to the Partnership's business.
In the opinion of management, such litigation is not material to the
Partnership's business operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
There is no established public trading market for the Common Units. The
following table sets forth the cash distributions paid during each
quarter. Comparable cash distributions are expected in the future. As
of March 1, 1997, there were 159 record holders of Common Units.
On January 30, 1997, the Partnership declared a quarterly cash
distribution of $0.51 per Common Unit payable on February 28, 1997 to
Common Unitholders of record on February 14, 1997.
1996 DISTRIBUTIONS 1995 DISTRIBUTIONS
------------------- -------------------
QUARTER ENDED
-------------
December 31 $ .51 $ .49
September 30 .51 .49
June 30 .49 .47
March 31 .49 .47
-13-
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, 1996. The following
information should be read in conjunction with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" for the Partnership and Item 8, the "Financial Statements
and Supplementary Data" included in this Form 10-K. The historical
operating data for the years ended December 31, 1996, 1995, 1994 and
1993 has been derived from the historical financial statements of the
Partnership and the Predecessor Company. The historical operating data
for the year ended December 31, 1992 has been derived from the
historical financial statements of the Predecessor Company.
(in thousands, except per share amounts)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Results of Operations:
Revenues:
Rental Operations $ 162,160 $ 113,641 $ 89,299 $ 33,648 $ 17,675
Service Operations 19,929 17,777 18,473 5,654 -
-------- -------- ------- -------- -------
Total Revenues $ 182,089 $ 131,418 $107,772 $ 39,302 $ 17,675
======== ======== ======== ======== ========
Net Income (Loss)
Available to Common
Units $ 58,713 $ 41,600 $ 32,968 $ 6,670 $ (653)
======== ======== ======== ======== =========
Per Unit Data (1):
Net Income (Loss)
per Common Unit $ 1.84 $ 1.55 $ 1.54 $ 1.02 $ (.32)
Distributions per
Common Unit 2.00 1.92 1.84 1.68 1.68
Weighted Average
Common Units
Outstanding 31,980 26,791 21,467 6,540 2,045
Balance Sheet Data:
Total Assets $1,362,399 $1,046,532 $775,884 $633,885 $121,881
Total Debt $ 525,815 $ 454,820 $298,640 $248,433 $ 80,707
Total Preferred
Partners' Equity $ 72,856 - - - -
Total Partners'
Equity $ 769,269 $ 540,221 $447,298 $349,695 $ 36,129
Total Common Units
Outstanding at
end of year (1) 33,182 28,303 24,384 20,478 2,045
Other Data:
Funds From
Operations (2) $ 87,434 $ 64,846 $ 47,907 $ 13,474 $ 3,764
Cash Flow Provided
by (Used by):
Operating activities $ 95,470 $ 78,637 $ 51,856 $ 14,363 $ 5,453
Investing activities (277,009) (289,569) (116,227) (315,025) (710)
Financing activities 181,203 176,187 94,733 310,717 (4,952)
(1)Information for 1993 and 1992 has been adjusted for the 1 for 4.2
reverse stock split of the Predecessor Company effected prior
to the completion of the 1993 reorganization.
(2)Funds From Operations, is defined by the National Association of
Real Estate Investment Trusts as net income or loss excluding
gains or losses from debt restructuring and sales of property
plus depreciation and amortization, and after adjustments for
minority interest, unconsolidated partnerships and joint ventures
(adjustments for minority interests, unconsolidated partnerships
and joint ventures are calculated to reflect Funds From Operations
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. In March 1995, NAREIT issued a clarification of its
definition of FFO effective for years beginning after December
31, 1995. The clarification provides that amortization of deferred
financing costs and depreciation of non-rental real estate assets are
no longer to be added back to net income in arriving at FFO. The
Partnership adopted these changes effective January 1, 1996, and
the calculations of FFO for the years ended December 31, 1995,
1994, 1993 and 1992 have been revised accordingly.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
--------
The Partnership's operating results depend primarily upon income from
the rental operations of its industrial, office and retail properties
located in its primary
- 14 -
markets. This income from rental operations is substantially influenced
by the supply and demand for the Partnership's rental space in its
primary markets. In addition, the Partnership's continued growth is
dependent upon its ability to maintain occupancy rates and increase
rental rates on its in-service portfolio and to continue development and
acquisition of additional rental properties.
The Partnership's primary markets in the Midwest have continued to
offer strong and stable local economies and have provided attractive
new development opportunities because of their central location,
established manufacturing base, skilled work force and moderate labor
costs. Consequently, the Partnership's occupancy rate of its in-
service portfolio has exceeded 92.0% the last two years and was 95.0%
at December 31, 1996. The Partnership expects to maintain its
overall occupancy at comparable levels and also expects to increase
rental rates as leases are renewed or new leases are executed. This
stable occupancy as well as increasing rental rates should improve
the Partnership's results of operations from its in-service
properties. The Partnership's strategy for continued growth also
includes developing and acquiring additional rental properties in its
primary markets and expanding into other attractive Midwestern
markets.
A new statistic that the Partnership started tracking in 1996 is Same
Property Performance which compares those properties that were fully
in-service for all of 1995 and 1996. Because of the rapid growth of
the Partnership, this population of properties only represented about
42.2% of the in-service portfolio at year end. As a result of the
loss of a 90,000 square foot downtown Cincinnati office tenant in
1996, along with the effects of a property tax reassessment in
another downtown Cincinnati property, Same Property FFO increased
only 1.1%. Without the decrease in the downtown Cincinnati portfolio,
Same Property FFO increase for this portfolio would have been 2.7%.
The following table sets forth information regarding the
Partnership's in-service portfolio of rental properties as of
December 31, 1996 and 1995 (square feet in thousands):
Total Percent of
Square Feet Total Square Feet Percent Occupied
--------------- ------------------ ----------------
Type 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ----
INDUSTRIAL
Service
Centers 3,151 2,802 11.5% 14.0% 94.0% 94.7%
Bulk 15,173 10,890 55.4% 54.3% 95.1% 96.5%
OFFICE
Suburban 6,319 3,874 23.1% 19.3% 96.6% 94.7%
CBD 699 699 2.5% 3.5% 87.1% 92.3%
Medical 370 332 1.3% 1.6% 92.8% 90.3%
RETAIL 1,690 1,476 6.2% 7.3% 93.7% 93.8%
------ ------ ----- -----
Total 27,402 20,073 100.0% 100.0% 95.0% 95.4%
====== ====== ===== =====
Management expects occupancy of the in-service property portfolio to
remain stable because (i) only 10.7% and 12.3% of the Partnership's
occupied square footage is subject to leases expiring in 1997 and
1998, respectively, and (ii) the Partnership's renewal percentage
averaged 80%, 65% and 73% in 1996, 1995 and 1994, respectively.
- 15 -
The following table reflects the Partnership's in-service lease
expiration schedule as of December 31, 1996, by product type
indicating square footage and annualized net effective rents under
expiring leases (in thousands, except per square foot amounts):
Industrial Office Retail Total
Portfolio Portfolio Portfolio Portfolio
-------------- -------------- -------------- ---------------
Yr. of Square Square Square Square
Exp. Feet Rent Feet Rent Feet Rent Feet Rent
------ ------- ------ ------ ------ -------- ------ ------ ------
1997 2,003 $ 8,163 713 $ 7,357 73 $ 744 2,789 $ 16,264
1998 2,303 8,628 777 8,382 110 1,168 3,190 18,178
1999 2,254 9,798 919 9,936 116 1,180 3,289 20,914
2000 2,119 8,451 809 9,831 103 1,262 3,031 19,544
2001 2,496 9,869 855 9,393 115 1,299 3,466 20,561
2002 443 2,076 731 7,771 110 1,063 1,284 10,910
2003 292 1,766 243 2,773 39 364 574 4,903
2004 923 3,759 97 1,143 13 125 1,033 5,027
2005 1,440 4,552 540 6,356 177 1,505 2,157 12,413
2006 1,854 5,952 344 4,258 5 66 2,203 10,276
There-
after 1,263 4,141 1,030 13,439 722 6,120 3,015 23,700
------ ------ ------ ------ ----- ------ ------ -------
Total
Leased 17,390 $67,155 7,058 $80,639 1,583 $14,896 26,031 $162,690
====== ====== ===== ====== ===== ====== ====== =======
Total
Port-
folio 18,324 7,388 1,690 27,402
====== ===== ===== ======
Annualized net
effective rent
per square foot
leased $ 3.86 $ 11.43 $ 9.41 $ 6.25
======= ====== ===== ======
This stable occupancy, along with increasing rental rates in each of
the Partnership's markets, will allow the in-service portfolio to
continue to provide a comparable or increasing level of earnings from
rental operations. The Partnership also expects to realize growth in
earnings from rental operations through (i) the development and
acquisition of additional rental properties in its primary markets;
(ii) the expansion into other attractive Midwestern markets; and
(iii) the completion of the 3.8 million square feet of properties
under development at December 31, 1996 over the next five quarters.
The 3.8 million square feet of properties under development should
provide future earnings from rental operations growth for the
Partnership as they are placed in service as follows (in thousands,
except percentages):
Anticipated Estimated Anticipated
In-Service Square Percent Project Stabilized
Date Feet Pre-Leased Costs Return
---------------- ------- ---------- --------- -----------
1st Quarter 1997 762 58% $ 21,309 11.6%
2nd Quarter 1997 1,234 54% 39,976 11.6%
3rd Quarter 1997 1,531 81% 50,827 11.1%
4th Quarter 1997
and thereafter 274 52% 28,240 12.3%
----- -------
3,801 66% $140,352 11.6%
===== =======
-16-
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, 1996 is as follows (in thousands, except number of
properties and per Common Unit amounts):
1996 1995 1994
------ ------ ------
Rental Operations revenue $162,160 $113,641 $89,299
Service Operations revenue 19,929 17,777 18,473
Earnings from Rental Operations 54,158 37,206 26,929
Earnings from Service Operations 6,436 6,564 7,075
Operating income 56,541 40,526 30,743
Net income available for common
units $ 58,713 $ 41,600 $32,968
Weighted average common units
outstanding 31,980 26,791 21,467
Net income per common unit $ 1.84 $ 1.55 $ 1.54
Number of in-service properties
at end of year 249 201 127
In-service square footage at
end of year 27,402 20,073 12,896
Under development square footage
at end of year 3,801 3,448 2,362
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------
Rental Operations
-----------------
The Partnership increased its in-service portfolio of rental
properties from 201 properties comprising 20.1 million square feet at
December 31, 1995 to 249 properties comprising 27.4 million square
feet at December 31, 1996 through the acquisition of 34 properties
totaling 3.4 million square feet and the placement in service of 16
properties and four building expansions totaling 4.1 million square
feet developed by the Partnership.
The Partnership also disposed of two properties totaling 182,000
square feet. These 48 net additional rental properties primarily
account for the $48.5 million increase in revenues from Rental
Operations from 1995 to 1996. The increase from 1995 to 1996 in
rental expenses, real estate taxes and depreciation and amortization
expense is also a result of the additional 48 in-service rental
properties.
Interest expense increased by approximately $9.8 million. This
increase was primarily because of interest expense on the $150.0
million of unsecured notes which the Partnership issued in September
1995. These notes bear interest at an effective rate of 7.46% and
were outstanding a full year in 1996 as compared to approximately
three months in 1995. The Partnership also issued $90.0 million of
unsecured debt under its medium-term note program in 1996 which bears
interest at a weighted average rate of 7.20%. The proceeds from these
debt issuances were used to fund development and acquisition of
additional rental properties during 1995 and 1996.
As a result of the above mentioned items, earnings from rental
operations increased $17.0 million from $37.2 million for the year
ended December 31, 1995 to $54.2 million for the year ended December
31, 1996.
Service Operations
------------------
Service Operations revenues increased from $17.8 million to $19.9
million for the year ended December 31, 1996 as compared to the year
ended December 31, 1995 primarily as a result of increases in
construction management fee revenue because of an increase in
construction volume. Service Operations
-17-
expenses increased from $11.2 million to $13.5 million for the year
ended December 31, 1996 as compared to the year ended December 31,
1995 primarily as a result of an increase in operating expenses
resulting from the overall growth of the Partnership and the
additional regional offices opened in 1995 and 1996.
As a result of the above-mentioned items, earnings from Service
Operations decreased from $6.6 million to $6.4 million for the years
ended December 31, 1995 and 1996, respectively.
General and Administrative Expense
---------------------------------
General and administrative expense increased from $3.2 million for
the year ended December 31, 1995 to $4.1 million for the year ended
December 31, 1996 primarily as a result of increased state and local
taxes due to the growth in revenues and net income of the
Partnership. Property advertising expense as well as other
administrative expenses also increased as a result of the expanding
size of the Partnership.
Other Income (Expense)
---------------------
Interest income decreased from $1.7 million for the year ended
December 31, 1995 to $1.2 million for the year ended December 31,
1996 as a result of the temporary short-term investment of a greater
amount of excess proceeds from the 1995 debt and equity offerings
compared to excess proceeds invested from the 1996 debt and equity
offerings.
During the year ended December 31, 1996, the Partnership sold a
251,000 square foot corporate headquarters facility to John Alden
Life Insurance Company in Miami, Florida pursuant to a purchase
option contained in John Alden's original agreement to lease the
building. The project was sold for approximately $32.9 million and
the Partnership recognized a gain of approximately $1.6 million on
the sale. The Partnership also realized gains totaling $2.9 million
in 1996 related to the sale of a retail center and several parcels of
land.
Net Income Available for Common Units
------------------------------------
Net income available for common units for the year ended December 31,
1996 was $58.7 million compared to net income available for common
units of $41.6 million for the year ended December 31, 1995. This
increase results primarily from the changes in the operating results
of rental and service operations explained above.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------
Rental Operations
-----------------
The Partnership increased its in-service portfolio of rental
properties from 127 properties comprising 12.9 million square feet at
December 31, 1994 to 201 properties comprising 20.1 million square
feet at December 31, 1995 through the acquisition of 60 properties
totaling 4.6 million square feet and the placement in service of 17
properties and two building expansions totaling 3.2 million square
feet developed by the Partnership. The Partnership also disposed of
three properties totaling 570,000 square feet. These 74 net
additional rental properties primarily account for the $24.3 million
increase in revenues from Rental Operations from 1994 to 1995.
The increase from 1994 to 1995 in rental expenses, real estate taxes
and depreciation and amortization expense is also a result of the
additional 74 in-service rental properties.
-18-
Interest expense increased by approximately $2.6 million. This
increase was primarily because of interest expense on the $150.0
million of unsecured notes which the Partnership issued in September
1995. These notes bear interest at an effective rate of 7.46%. The
proceeds from these notes were used to (i) retire the outstanding
balance of $35.0 million on the Partnership's unsecured line of
credit; (ii) retire $39.5 million of mortgage debt which had a
weighted average interest rate of 6.08% and was scheduled to reset at
a market interest rate in the fourth quarter of 1995; and (iii) fund
development and acquisition of additional rental properties during
the fourth quarter of 1995.
As a result of the above mentioned items, earnings from rental
operations increased $10.3 million from $26.9 million for the year
ended December 31, 1994 to $37.2 million for the year ended December
31, 1995.
Service Operations
-----------------
Earnings from Service Operations decreased by approximately $500,000
in 1995 as compared to 1994. This decrease results primarily from a
decrease in construction fees even though total construction volume
remained consistent. This decrease in fees resulted from certain
contracts with above-market fees in 1994 which were not obtained in
1995. Property management, maintenance and leasing fees remained
consistent from 1994 to 1995. Payroll expense decreased from 1994 to
1995 as a result of the allocation of a greater portion of these
costs to the Partnership's Rental Operations segment. Other operating
expenses did not change materially.
Other Income (Expense)
---------------------
Interest income increased from $1.1 million for the year ended
December 31, 1994 to $1.7 million for the year ended December 31,
1995 as a result of the temporary short-term investment of excess
proceeds from the 1995 debt and equity offerings.
As part of its October 1993 acquisition of Duke Associates, the
Partnership acquired an option to purchase an interest in an entity
which provided telecommunication services to tenants in properties
owned and managed by the Partnership. At the time the option was
acquired, the option was not considered to have value because of
recurring net operating losses by such entity. Subsequent to the
acquisition of the option, the entity made changes in its operations,
principally entering into new contracts for the purchase of
telecommunication services and the provision of billing services,
which significantly improved its operating results. As a result of
these improvements in operating results, the entity entered into an
agreement to sell its telecommunications business to an unaffiliated
third party at an amount significantly in excess of the Partnership's
option price. The net proceeds from the sale were then loaned to a
subsidiary of the Partnership with a mortgage on certain property.
The Partnership subsequently exercised its option to acquire the
interest in this entity and recognized a gain of approximately $2.0
million based on the difference between its option price and the net
proceeds received from the sale to the unaffiliated third-party. Such
gain is included in earnings from property sales in 1994.
Net Income Available for Common Units
-------------------------------------
Net income available for common units for the year ended December 31,
1995 was $41.6 million compared to net income available for common
units of $33.0 million for the year ended December 31, 1994. This
increase results primarily from the changes in the operating results
of rental and service operations explained above.
-19-
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaling $95.5 million,
$78.6 million and $51.9 million for the years ended December 31,
1996, 1995 and 1994, respectively, represents the primary source of
liquidity to fund distributions to unitholders and minority interests
and to fund recurring costs associated with the renovation and re-
letting of the Partnership's properties. The primary reason for the
increases in net cash provided by operating activities is, as
discussed above under "Results of Operations," the increase in net
income each year resulting from the expansion of the in-service
portfolio through development and acquisitions of additional rental
properties.
Net cash used by investing activities totaling $277.0 million, $289.6
million and $116.2 million for the years ended December 31, 1996,
1995 and 1994, respectively, represents the investment of funds by
the Partnership to expand its portfolio of rental properties through
the development and acquisition of additional rental properties. In
1996, $328.4 million was invested in the development and acquisition
of additional rental properties and land held for development and
$9.9 million was used for recurring building and tenant improvements
and leasing costs. Included in the $328.4 million of development and
acquisition of rental properties and land held for development for
the year ended December 31, 1996 is $44.5 million related to the
acquisition of eight suburban office buildings totaling 782,000 gross
square feet in Cleveland, Ohio. The purchase price of these eight
buildings was approximately $76.0 million which included the
assumption of $23.1 million of mortgage debt and the issuance of $8.4
million of Common Units. Also in 1996, the Partnership sold two
properties and several parcels of land and received $50.8 million of
net sales proceeds. These proceeds were used to fund a portion of the
1996 development and acquisition activity. In 1995, $250.3 million
was invested in the development and acquisition of additional rental
properties and land held for development and $8.6 million was used
for recurring building and tenant improvements and leasing costs. In
1994, $106.9 million was invested in the development and acquisition
of additional rental properties and land held for development and
$5.9 million was used for recurring building and tenant improvements
and leasing costs.
Net cash provided by financing activities totaling $181.2 million,
$176.2 million and $94.7 million for the years ended December 31,
1996, 1995 and 1994, respectively, is comprised of debt and equity
issuances, net of distributions to unitholders and minority interests
and repayments of outstanding indebtedness. In March 1996, the
Partnership received $125.3 million of net proceeds from the General
Partner's common stock offering which was used to pay down amounts
outstanding on the unsecured line of credit. During 1996, the
Partnership also received $5.5 million of net proceeds from the
issuance of common stock under the General Partner's Direct Stock
Purchase and Dividend Reinvestment Plan. The Partnership used these
net proceeds to fund the development and acquisition of additional
rental properties. In August 1996, the Partnership received $72.3
million of net proceeds from the General Partner's preferred stock
offering. In July 1996, the Partnership issued $40.0 million of
unsecured debt under its medium-term note program. These notes mature
in July 2000 and bear interest at 7.28%. In November 1996, the
Partnership issued $50.0 million of unsecured debt under its medium-
term note program. These notes mature in November 2004 and bear
interest at 7.14%. The Partnership used the net proceeds from the
preferred offering and the two medium-term note offerings to pay off
approximately $82.5 million of existing secured debt which was
scheduled to mature in the fourth quarter of 1996 or early 1997 and
the remainder to fund the development and acquisition of additional
rental properties. In 1995, the Partnership received $96.3 million of
net proceeds from the General Partner's common stock offering and
used the proceeds to fund development and acquisition of additional
rental properties. In 1995, the Partnership also received $150.0
million from an unsecured debt offering and used the proceeds to
retire outstanding mortgage indebtedness and to fund acquisition and
development of additional rental properties. In 1994, the Partnership
received $92.1 million of net proceeds from the General Partner's
common stock offering and
-20-
$60.0 million from a seven-year mortgage loan. Of the $152.1 million
of these proceeds, the Partnership used $16.1 million to retire
outstanding mortgage indebtedness, and the remainder primarily to
fund development and acquisition of additional rental properties.
The recurring capital needs of the Partnership are funded primarily
through the undistributed net cash provided by operating activities.
An analysis of the Partnership's recurring capital expenditures is as
follows (in thousands):
1996 1995 1994
------ ------- ------
Tenant improvements $6,048 $4,312 $3,056
Leasing costs 3,032 3,519 2,407
Building improvements 780 757 474
----- ----- -----
Total $9,860 $8,588 $5,937
===== ===== =====
The Partnership has a $150.0 million unsecured line of credit
available to fund the development and acquisition of additional
rental properties and to provide working capital as needed. This line
of credit matures in April 1998 and bears interest at the 30-day
London Interbank Offered Rate ("LIBOR") plus 1.25%. Borrowings of
$24.0 million under this line of credit as of December 31, 1996 bear
interest at an effective rate of 6.9375%. The Partnership also has a
demand $10.0 million secured line of credit which is available to
provide working capital. This facility bears interest payable monthly
at the 30-day LIBOR rate plus .75%. Borrowings of $10.0 million are
outstanding on this line of credit at December 31, 1996 and bear
interest at an effective rate of 6.23%. The current 30-day LIBOR rate
as of March 3, 1997 is 5.4375%.
The General Partner and the Partnership currently have on file two
Form S-3 Registration Statements with the Securities and Exchange
Commission (the "Shelf Registrations") which have remaining
availability as of December 31, 1996 of $470.0 million to issue
additional common stock, preferred stock or unsecured debt
securities. The General Partner and the Partnership intend to issue
additional securities under such Shelf Registrations to fund the
development and acquisition of additional rental properties.
The total debt outstanding at December 31, 1996 consists of notes
totaling $525.8 million with a weighted average interest rate of
7.55% maturing at various dates through 2017. The Partnership has
$264.0 million of unsecured debt and $261.8 million of secured debt
outstanding at December 31, 1996. Scheduled principal amortization of
such debt totaled $2.1 million for the year ended December 31, 1996.
A summary of the scheduled future amortization and maturities of the
Partnership's indebtedness is as follows (in thousands):
Repayments
------------------------------------- Weighted Average
Scheduled Interest Rate of
Year Amortization Maturities Total Future Repayments
---- ------------ ---------- -------- -----------------
1997 $ 3,388 $ 10,000 $ 13,388 6.72%
1998 4,410 70,590 75,000 7.07%
1999 5,146 28,470 33,616 6.17%
2000 3,227 44,853 48,080 7.38%
2001 2,930 59,954 62,884 8.72%
2002 3,189 50,000 53,189 7.36%
2003 902 68,216 69,118 8.48%
2004 978 50,000 50,978 7.15%
2005 1,064 100,000 101,064 7.48%
2006 1,160 - 1,160 7.46%
Thereafter 17,338 - 17,338 7.61%
------- ------- -------
Total $43,732 $482,083 $525,815 7.55%
====== ======= =======
The $10.0 million of maturities in 1997 represents the outstanding
balance as of December 31, 1996 on the Partnership's demand secured
line of credit.
-21-
The Partnership intends to pay regular quarterly distributions from
net cash provided by operating activities. A quarterly distribution
of $.51 per common unit was declared on January 30, 1997 which
represents an annualized distribution of $2.04 per common unit.
FUNDS FROM OPERATIONS
Management believes that Funds From Operations ("FFO"), which is
defined by the National Association of Real Estate Investment Trusts
as net income or loss excluding gains or losses from debt
restructuring and sales of property plus depreciation and
amortization, and after adjustments for minority interest,
unconsolidated partnerships and joint ventures (adjustments for
minority interest, unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis), is the industry
standard for reporting the operations of real estate investment
trusts.
The following reflects the calculation of the Partnership's FFO for
the years ended December 31 (in thousands):
1996 1995 1994
------- -------- --------
Net income available for
common units $ 58,713 $ 41,600 $ 32,968
Add back:
Depreciation and
amortization 31,363 23,118 16,785
Share of joint venture
depreciation and amortization 1,890 411 352
Earnings from property sales (4,532) (283) (2,198)
------- ------- --------
FUNDS FROM OPERATIONS $ 87,434 $ 64,846 $ 47,907
======= ======= =======
CASH FLOW PROVIDED BY (USED BY):
Operating activities $ 95,470 $ 78,637 $ 51,856
Investing activities (277,009) (289,569) (116,227)
Financing activities 181,203 176,187 94,733
The increase in FFO for the three-year period results primarily from
the increased in-service rental property portfolio as discussed above
under "Results of Operations."
In March 1995, NAREIT issued a clarification of its definition of FFO
effective for years beginning after December 31, 1995. The
clarification provides that amortization of deferred financing costs
and depreciation of non-rental real estate assets are no longer to be
added back to net income in arriving at FFO. The Partnership adopted
these changes effective January 1, 1996, and the calculations of FFO
for the years ended December 31, 1995 and 1994 have been revised
accordingly.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included under Item
14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-22-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership does not have any directors or officers. The
information required by this Item for Directors and certain Executive
Officers of the General Partner will be contained in a definitive proxy
statement of Duke Realty Investments, Inc. which the Registrant
anticipates will be filed no later than March 24, 1997, which proxy
statement is incorporated herein by reference, and thus this part has
been omitted in accordance with General Instruction G(3) to Form 10-K.
The following information is provided regarding the executive officers
of the General Partner who do not serve as Directors of the General
Partner:
GARY A. BURK
Age 45, President of Construction Services and Executive Vice
President of Duke Services, Inc. - Mr. Burk joined the Partnership in
1979, and has been responsible for the Partnership's construction
management operations since 1986.
WILLIAM J. DEBOER
Age 41, Vice President of Construction Services - Mr. DeBoer joined
the Partnership in 1983. Prior to that time, Mr. DeBoer was with
Tousley Bixler Construction, an Indianapolis general contractor.
ROSS C. FARRO
Age 53, Vice President, Cleveland Group - Mr. Farro joined the
Partnership in January 1996 and is responsible for the Cleveland
activities of the Partnership. Prior to joining the Partnership, Mr.
Farro was an independent real estate developer and operator.
ROBERT D. FESSLER
Age 39, Vice President, Ohio Industrial Group - Mr. Fessler joined the
Partnership in 1987 and is responsible for the Cincinnati industrial
activities of the Partnership. Prior to joining the Partnership, Mr.
Fessler was a leasing representative with Trammel Crow.
JOHN R. GASKIN
Age 35, Vice President, General Counsel and Secretary - Mr. Gaskin
joined the Partnership in 1990. Prior to joining the Partnership, Mr.
Gaskin worked as an associate attorney in a mid-size Indianapolis,
Indiana law firm.
JAMES W. GRAY
Age 36, Vice President, Cincinnati Office Group - Mr. Gray joined the
Partnership in 1989 and has been responsible for the Partnership's
Cincinnati office activities since 1994. Prior to that time, Mr. Gray
was Vice President and General Counsel of Brian Properties, Inc., a
Chicago area commercial real estate developer.
RICHARD W. HORN
Age 39, Vice President of Acquisitions - Mr. Horn joined the
Partnership in 1984. Mr. Horn is responsible for the acquisition
activities of the Partnership and oversees the Nashville and Michigan
operations of the Partnership.
-23-
DONALD J. HUNTER
Age 37, Vice President, Columbus Group - Mr. Hunter joined the
Partnership in 1989 and is responsible for the Columbus activities of
the Partnership. Prior to joining the Partnership, Mr. Hunter was with
Cushman and Wakefield, a national real estate firm.
STEVEN R. KENNEDY
Age 40, Vice President of Construction Services - Mr. Kennedy joined
the Partnership in 1986. Prior to that time, Mr. Kennedy was a Project
Manager for Charles Pankow Builders, Inc.
WAYNE H. LINGAFELTER
Age 37, Vice President, Indiana Office Group - Mr. Lingafelter joined
the Partnership in 1987 and is responsible for the Indiana office
activities of the Partnership. Prior to that time, Mr. Lingafelter was
with the management consulting firm of DRI, Inc.
WILLIAM E. LINVILLE, III
Age 42, Vice President, Industrial Group - Mr. Linville joined the
Partnership in 1987 and is responsible for all industrial activities
of the Partnership. Prior to that time, Mr. Linville was Vice
President and Regional Manager of the CB Commercial Brokerage Office
in Indianapolis.
DAVID R. MENNEL
Age 42, General Manager of Services Operations and President and
Treasurer of Duke Services, Inc.- Mr. Mennel was with the accounting
firm of Peat, Marwick, Mitchell & Co. and the property development
firm of Melvin Simon & Associates before joining the Partnership in
1978.
MICHAEL L. MYRVOLD
Age 41, Vice President, Retail Group - Mr. Myrvold joined the
Partnership in 1995 and is responsible for retail activities of the
Partnership. Prior to joining the Partnership, Mr. Myrvold was Vice
President of Real Estate of the Melville Realty Co., Inc.
JOHN M. NEMECEK
Age 41, President of Asset / Property Management - Mr. Nemecek joined
the Partnership in 1994. Prior to joining the Partnership, Mr. Nemecek
was the Senior Vice President/Florida Division of Compass Real Estate.
DENNIS D. OKLAK
Age 43, Vice President and Treasurer - Mr. Oklak joined the
Partnership in 1986 and has served as Tax Manager and Controller of
Development. Prior to joining the Partnership, Mr. Oklak was a Senior
Manager with the public accounting firm of Deloitte Haskins + Sells.
JEFFREY G. TULLOCH
Age 52, Vice President and General Manager, Cincinnati Group - Mr.
Tulloch joined the Partnership in 1995 and is responsible for all
Cincinnati activities of the Partnership. Mr. Tulloch was Senior Vice
President of the Galbreath Company before joining the Partnership.
-24-
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the officers and directors of the General Partner, and persons
who own more than 10% of the Limited Partner Units, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Such officers, directors and greater than 10% Limited
Partner Unitholders are required by Securities and Exchange Commission
regulations to furnish the Partnership with copies of all Section 16(a)
forms they file. To date, there have been no delinquencies in filing
such reports.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 with respect to officers and
directors of the General Partner will be contained in a definitive
proxy statement for Duke Realty Investments, Inc. which the Registrant
anticipates will be filed no later than March 24, 1997, which proxy
statement is incorporated herein by reference, and thus this part has
been omitted in accordance with General Instruction G(3) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Partnership had 3,309,758 Limited Partner Units which were
outstanding as of the close of business on March 7, 1997.
The following table shows, as of March 7, 1997, the number and
percentage of Limited Partner Units held by each person known to the
Company who beneficially owned more than five percent of outstanding
Limited Partner Units. Except as otherwise noted, all Limited Partner
Units are held with sole power to vote and sole power of disposition.
Amount and Nature Percentage of
Beneficial Owner of Beneficial Ownership Limited Partner Units
------------------ ----------------------- ---------------------
Thomas L. Hefner 1,350,811 (1) 40.81%
Darell E. Zink, Jr. 1,341,815 (1) 40.54%
Daniel C. Staton 1,260,547 (1) 38.09%
John W. Wynne 1,166,401 (1) 35.24%
David R. Mennel 1,139,319 (2) 34.42%
Gary A. Burk 1,138,947 (3) 34.41%
Ross C. Farro 170,784 5.16%
DMI Partnership 1,061,058 32.06%
(1) Includes 1,061,058 Limited Partner Units owned by DMI Partnership,
a partnership in which each of these individuals owns a 20.71% beneficial
interest.
(2) Includes 1,061,058 Limited Partner Units owned by DMI Partnership,
a partnership in which Mr. Mennel owns a 7.50% beneficial interest.
(3) Includes 1,061,058 Limited Partner Units owned by DMI Partnership,
a partnership in which Mr. Burk owns a 7.51% beneficial interest.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 with respect to officers and
directors of the General Partner will be contained in a definitive
proxy statement for Duke Realty Investments, Inc. which the Registrant
anticipates will be filed no later than March 24, 1997, which proxy
statement is incorporated herein by reference, and thus this part has
been omitted in accordance with General Instruction G(3) to Form 10-K.
-25-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT.
1. CONSOLIDATED FINANCIAL STATEMENTS:
Index
-----
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations, Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Partners' Equity,
Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Index
-----
Schedule III - Real Estate and Accumulated Depreciation
EDGAR Financial Data Schedule
-----------------------------
Exhibit 27 - Financial Data Schedule for year ended December 31,
1996 (EDGAR filing only)
Other schedules are omitted for the reasons that they are not
required, are not applicable, or the required information is set
forth in the financial statements or notes thereto.
-26-
INDEPENDENT AUDITORS' REPORT
To the Partners of
Duke Realty Limited Partnership:
We have audited the consolidated financial statements of Duke Realty
Limited Partnership and Subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule as
listed in the accompanying index. 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 generally accepted
auditing standards. 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, 1996 and 1995, and the results of their operations and
their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, 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.