Back to GetFilings.com
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, 1997
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
----- -----
Commission file number 0-20625
--------------------------------------------------
DUKE REALTY LIMITED PARTNERSHIP
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1898425
------------------------------ -----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
8888 Keystone Crossing, Suite 1200
Indianapolis, Indiana 46240
---------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(317) 846-4700
----------------------------------------------------
(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
------------------------------- ------------------------------------
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
--- ---
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 $68,003,695 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 11, 1998.
The number of Limited Partnership Units outstanding as of March
11, 1998 was 10,988,468.
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 23, 1998.
TABLE OF CONTENTS
FORM 10-K
Item No. Page(s)
------- -------
PART I
1. Business 1 - 4
2. Properties 5 - 13
3. Legal Proceedings 14
4. Submission of Matters to a Vote
of Security Holders 14
PART II
5. Market for the Registrant's Equity and
Related Security Holder Matters 15
6. Selected Financial Data 15
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16 - 24
8. Financial Statements and Supplementary Data 24
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 24
PART III
10. Directors and Executive Officers of the
Registrant 24 - 25
11. Executive Compensation 25
12. Security Ownership of Certain Beneficial
Owners and Management 25
13. Certain Relationships and Related Transactions 26
PART IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. 26 - 53
Signatures 54 - 55
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 26, 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"
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 87.4% of the partnership interest ("General Partner
Units"). The remaining 12.6% 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, 1997, the Partnership owned interests in a diversified
portfolio of 380 rental properties comprising 45.9 million square feet
(including 25 properties and three expansions comprising 5.2 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; St. Louis,
Missouri; Minneapolis, Minnesota 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 8.3
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 has rental operations that are self-administered. In
addition, the Partnership conducts its service operations through Duke
Realty Services Limited Partnership and Duke Construction Limited
Partnership, in which the Partnership's controlled subsidiary, Duke
Services, Inc., is the sole general partner. 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; Chicago, Illinois; Nashville, Tennessee; St. Louis,
Missouri and Minneapolis, Minnesota. The Partnership had 620
employees as of December 31, 1997.
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, 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 1,700 acres of unencumbered land and its
many business relationships with more than 3,300 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
Minneapolis and Chicago 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 October 1997, the Partnership acquired a 3.2 million gross square
foot industrial and suburban office portfolio and the operating
personnel of an independent real estate developer and operator in
Minneapolis. Also in 1997, the Partnership established a regional
office in Chicago and acquired 995,000 square feet of suburban office
properties and 160 acres of land for the future development of office
and industrial properties. In addition to these major transactions,
the Partnership significantly expanded its presence in St. Louis
through the acquisition of a 982,000 gross square foot primarily
suburban office portfolio and the operating personnel of an
independent real estate developer and operator.
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 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 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 Partnership has
raised approximately $1.1 billion through public debt and equity
offerings during the three years ended December 31, 1997. Based on
these offerings, the Partnership has demonstrated its 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 $200 million unsecured 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 outstanding Common and
Preferred Shares and units of limited partnership interest ("Units")
in the Operating Partnership plus outstanding indebtedness) at March
11, 1998 was 25.79%. The Partnership's ratio of earnings to debt
service and ratio of earnings to fixed charges for the year ended
December 31, 1997 were 2.60x and 2.11x, 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 and minority interest in earnings of the Operating Partnership.
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 and minority interest in
earnings of the Operating Partnership. 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, 1997, the Partnership owns an interest in a
diversified portfolio of 380 commercial properties encompassing
approximately 45.9 million net rentable square feet (including 25
properties and three expansions comprising 5.2 million square feet
under development) located primarily in five states and approximately
1,700 acres of land for future development. The properties are
described on the following pages.
- 4 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- ------------- --------- ---------- -------- ------- --------- ------------
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 85%
Building 56 Fee 50% [1] 1984 15.94 300,000 0%
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 85%
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 48%
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 35%
Building 84 Fee 100% 1989 5.34 96,000 73%
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 85%
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% 1994/1997 [3] 27.69 737,850 100%
Building 97 Fee 100% 1994 13.38 280,800 94%
Building 98 Fee 100% 1968/1995 37.34 508,306 100%
Building 99 Fee 50% [4] 1994 18.00 364,800 100%
Building 100 Fee 100% 1995 7.00 117,500 100%
Building 101 Fee 50% [1] 1983 4.37 45,000 100%
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 45%
Building 108 Fee 50% [1] 1983 6.36 60,300 100%
Building 109 Fee 100% 1985 4.80 46,000 94%
Building 113 Fee 50% [1] 1987 6.20 72,000 82%
Building 114 Fee 50% [1] 1987 6.20 56,700 100%
Building 117 Fee 10%-50% [2] 1988 13.36 135,600 90%
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 16.00 320,000 100%
Building 130 Fee 100% 1996 9.70 152,000 92%
Building 131 Fee 100% 1997 21.00 415,680 100%
Building 133 Fee 100% 1997 1.30 20,530 100%
Georgetown
Cent.Bldg. 1 Fee 100% 1987 5.85 111,883 56%
Georgetown
Cent.Bldg. 2 Fee 100% 1987 5.81 72,120 95%
Georgetown
Cent.Bldg. 3 Fee 100% 1987 5.10 45,536 57%
- 5 -
NET PERCENT
PARTNER YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 31, 1997
- ------------- ---------- --------- --------- ------- --------- ---------
PARK FLETCHER
Building 2 Fee 50% [1] 1970 1.31 20,160 100%
Building 4 Fee 50% [1] 1974 1.73 23,000 0%
Building 6 Fee 50% [1] 1971 3.13 36,180 100%
Building 7 Fee 50% [1] 1974 3.00 41,900 100%
Building 8 Fee 50% [1] 1974 2.11 18,000 100%
Building 14 Fee 100% 1978 1.39 19,480 100%
Building 15 Fee 50% [1] 1979 5.74 72,800 100%
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 79%
Building 22 Fee 50% [1] 1983 2.96 48,635 58%
Building 26 Fee 50% [1] 1983 2.91 28,340 100%
Building 27 Fee 25% [1] 1985 3.01 39,178 75%
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 33,029 100%
Building 32 Fee 50% [1] 1990 5.43 67,297 100%
Building 33 Fee 50% [1] 1997 7.50 112,710 100%
Building 34 Fee 50% [1] 1997 13.00 230,400 100%
SHADELAND STATION
Bldgs. 204 & 205 Fee 100% 1984 4.09 48,600 100%
HUNTER CREEK BUS. PARK
Building 1 Fee 10%-50% [2] 1989 5.97 86,500 100%
Building 2 Fee 10%-50% [2] 1989 8.86 202,560 83%
HILLSDALE TECHNECENTER
Building 1 Fee 50% [1] 1986 9.16 73,436 91%
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 Rd. 1962,1971,
Bus.Ctr. Fee 100% 1974 [5] 18.65 338,925 82%
Palomar Bus.
Ctr. Fee 100% 1973 4.50 99,350 100%
Nampac Fee 100% 1974 6.20 83,200 100%
NORTH AIRPORT PARK
Thomson Consumer
Electronics Fee 50% [6] 1996 52.00 599,040 100%
Building 2 Fee 100% 1997 22.50 377,280 100%
6060 Guion Rd. Fee 100% 1968/1974
1977 14.05 179,203 0%
4750 Kentucky Ave.
Fee 100% 1974 11.01 125,000 100%
4316 W. Minnesota Fee 100% 1970 10.40 121,465 100%
CARMEL, INDIANA
HAMILTON CROSSING
Building 1 Fee 100% 1989 4.70 51,825 91%
GREENWOOD, INDIANA
SOUTH PARK BUS.CTR.
Building 2 Fee 100% 1990 7.10 86,806 74%
LEBANON, INDIANA
LEBANON BUS. PARK
American Air
Filter Fee 100% 1996 10.40 153,600 100%
Little, Brown
and Company Fee 50% [6] 1996 31.60 500,455 100%
Purity Wholesale Fee 100% 1997 32.60 556,248 100%
Pamida Fee 100% 1997 14.90 200,000 100%
- 6 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- ------------ -------- --------- -------- ------- --------- ------------
CINCINNATI, OHIO
PARK 50 TECHNECENTER
Building 20 Fee 100% 1987 8.37 96,000 100%
Building 25 Fee 100% 1989 12.20 78,328 81%
GOVERNOR'S POINTE
4700 Building Fee 100% 1987 5.51 76,400 100%
4800 Building Fee 100% 1989 7.07 80,000 71%
4900 Building Fee 100% 1987 9.41 77,652 100%
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 97%
Building 9 Fee 100% 1989 4.47 58,800 100%
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%
Building 18 Fee 100% 1997 16.90 252,000 100%
ENTERPRISE BUS.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 94%
Building D Fee 100% 1989 5.40 60,322 93%
FAIRFIELD BUS.CTR.
Building D Fee 100% 1990 3.23 40,223 88%
Building E Fee 100% 1990 6.07 75,600 100%
KENTUCKY DRIVE
7910 Kentucky
Dr. Fee 100% 1980 3.78 38,329 100%
7920 Kentucky
Dr. Fee 100% 1974 9.33 93,945 100%
OTHER INDUSTRIAL - CINCINNATI
U.S. Post
Office Bldg. Fee 40% [7] 1992 2.60 57,886 100%
University
Moving Fee 100% 1991 4.95 70,000 100%
Creek Rd.
Bldg. I Fee 100% 1971 2.05 38,715 100%
Creek Rd.
Bldg. II Fee 100% 1971 2.63 53,210 100%
Cornell
Commerce Ctr. Fee 100% 1989 9.91 167,695 94%
Mosteller
Dist.Ctr. Fee 100% 1957 [8] 25.80 357,796 100%
Mosteller Dist.
Ctr. II Fee 100% 1997 12.20 261,440 45%
Perimeter Park
Bldg. A Fee 100% 1991 2.92 28,100 100%
Perimeter Park
Bldg. B Fee 100% 1991 3.84 30,000 60%
COLUMBUS, OHIO
Pet Foods Bldg. Fee 100% 1993/1995 16.22 276,000 100%
MBM Building Fee 100% 1978 3.98 83,000 100%
Sun TV Fee 100% 1995 33.42 793,807 100%
SOUTH POINTE BUS.CTR.
South Pointe A Fee 50% 1995 14.06 293,824 100%
South Pointe B Fee 50% 1996 13.16 307,200 100%
South Pointe C Fee 50% 1996 12.57 322,000 78%
SouthPointe
Bldg. D Fee 100% 1997 6.55 116,520 35%
SouthPointe
Bldg. E Fee 100% 1997 6.55 82,520 0%
HEBRON, KENTUCKY
SOUTHPARK BUS.CTR.
Building 1 Fee 100% 1990 7.90 96,000 100%
Building 3 Fee 100% 1991 10.79 192,000 100%
CR Services Fee 100% 1994 22.50 214,840 100%
Redken Labs Fee 100% 1994 28.79 166,400 100%
Skyport Bldg.I Fee 100% 1997 15.10 316,800 100%
- 7 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- -------------- ---------- ---------- -------- ------- -------- ------------
LOUISVILLE, KENTUCKY
Dayco Fee 50% [1] 1995 30.00 282,539 100%
FLORENCE, KENTUCKY
Empire Commerce
Ctr. Fee 100% 1973/1980 11.62 148,445 100%
DECATUR, ILLINOIS
PARK 101
BUSINESS CENTER
Building 3 Fee 100% 1979 5.76 75,600 82%
Building 8 Fee 100% 1980 3.16 50,400 77%
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 46,800 100%
Building 5 Fee 100% 1988 5.23 61,171 100%
Building 6 Fee 100% 1989 10.53 113,400 100%
Building 7 Fee 100% 1995 8.24 66,873 100%
Building 8 Fee 100% 1997 15.44 71,615 100%
Greenbriar Bus.
Park Fee 100% 1986 10.73 134,759 98%
Keebler Building Fee 100% 1985 4.39 36,150 100%
MILWAUKEE, WISCONSIN
S.F. Music
Box Bldg. Fee 33.33% [9] 1993 8.90 153,600 100%
ST. LOUIS, MISSOURI
I-70 Center Fee 100% 1986 4.57 76,240 100%
1920 Beltway Fee 100% 1986 4.44 70,000 100%
Alfa Laval Fee 100% 1996 12.76 129,500 100%
EARTH CITY
Dukeport I Fee 100% 1996 21.24 403,200 100%
Dukeport II Fee 100% 1997 14.70 244,800 65%
RIVERPORT
Scripts Building Fee 100% 1992 10.81 119,000 100%
Riverport Dist. Fee 100% 1990 5.96 100,000 100%
Shultz Building Fee 100% 1989 3.36 45,200 100%
Southport I Fee 100% 1977 1.36 20,810 100%
Southport II Fee 100% 1978 1.53 22,400 100%
Southport Commerce
Ctr. Fee 100% 1978 2.65 34,873 99%
CLEVELAND, OHIO
Johnson Controls Fee 100% 1972 14.56 85,410 100%
Dyment Fee 100% 1988 12.00 246,140 100%
Mr. Coffee Fee 100% 1997 35.00 458,000 100%
SOLON INDUST.PARK
30600 Carter Fee 100% 1971 11.30 190,188 90%
6230 Cochran Fee 100% 1977 7.20 100,365 84%
31900 Solon-Front Fee 100% 1974 8.30 85,000 100%
5821 Solon Fee 100% 1970 5.80 66,638 100%
6161 Cochran Fee 100% 1978 6.10 62,400 85%
5901 Harper Fee 100% 1970 4.10 54,719 70%
29125 Solon Fee 100% 1980 5.90 47,329 100%
6661 Cochran Fee 100% 1979 4.70 39,000 100%
6521 Davis Fee 100% 1979 3.20 21,600 100%
31900 Solon - Rear Fee 100% 1982 5.30 7,193 100%
MINNEAPOLIS, MINNESOTA
Enterprise
Indust. C Fee 100% 1979 10.88 165,755 76%
Apollo Dist.Ctr. Fee 100% 1997 11.05 168,480 0%
Sibley Indust.Ctr. Fee 100% 1973 2.88 54,612 100%
Sibley Indust.Ctr. Fee 100% 1972 2.58 37,800 100%
Sibley Indust.Ctr. Fee 100% 1968 4.10 32,810 39%
Yankee Place Fee 100% 1986 19.03 221,075 90%
- 8 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- -------------- -------- --------- -------- ------- -------- ------------
Larc Indust.
Park I Fee 100% 1977 4.59 67,200 85%
Larc Indust.
Park II Fee 100% 1976 3.70 54,000 99%
Larc Indust.
Park III Fee 100% 1980 2.38 30,800 100%
Larc Indust.
Park IV Fee 100% 1980 1.06 13,800 41%
Larc Indust.
Park V Fee 100% 1980 1.54 22,880 100%
Larc Indust.
Park VI Fee 100% 1975 3.91 63,600 81%
Larc Indust.
Park VII Fee 100% 1973 2.65 41,088 100%
Hampshire
Dist.Ctr. Fee 100% 1979 9.26 159,200 100%
Hampshire
Dist.Ctrs. Fee 100% 1979 9.40 157,000 100%
Penn Corp.Bldg. Fee 100% 1977 2.08 40,844 100%
Bloomington
Indust. Fee 100% 1963 7.40 100,852 78%
Edina Interchange
I Fee 100% 1995 4.73 73,809 95%
Edina Interchange
II Fee 100% 1980 3.46 55,006 100%
Edina Interchange
III Fee 100% 1981 6.39 62,784 100%
Edina Interchange
IV Fee 100% 1974 1.99 22,440 75%
Edina Interchange
V Fee 100% 1974 4.92 139,101 100%
Pakwa Bus. Park
I Fee 100% 1979 1.67 38,196 100%
Pakwa Bus. Park
II Fee 100% 1979 1.41 21,254 100%
Pakwa Bus. Park
III Fee 100% 1979 1.32 19,978 89%
7540 Bush Lake Rd. Fee 100% 1967 4.74 72,300 100%
Cahill Bus. Center Fee 100% 1980 3.90 60,082 100%
Encore Park Fee 100% 1977 14.50 126,858 100%
Johnson Bldg. Fee 100% 1974 2.09 62,718 97%
Cornerstone Bus. Fee 100% 1996 13.49 222,494 100%
Westside Bus.Park Fee 100% 1987 9.10 114,800 100%
Oxford Indust. Fee 100% 1971 1.23 16,736 0%
Cedar Lake
Bus.Ctr. Fee 100% 1976 3.05 50,400 100%
Medicine Lake
Indust. Fee 100% 1970 16.37 222,893 100%
801 Zane Ave. N. Fee 100% 1989 4.93 84,219 100%
Decatur Bus.Ctr. Fee 100% 1982 3.96 44,279 100%
Sandburg
Indust.Ctr. Fee 100% 1973 5.68 94,612 100%
Crystal
Indust.Ctr. Fee 100% 1974 3.23 72,000 96%
Bass Lake Bus.Ctr. Fee 100% 1981 5.33 47,368 100%
OFFICE
- -------
INDIANAPOLIS,
INDIANA
PARK 100
BUSINESS PARK
Building 34 Fee 100% 1979 2.00 22,272 97%
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% [4] 1992 3.88 48,000 100%
Building 132 Fee 100% 1997 4.40 27,600 43%
WOODFIELD AT
THE CROSSING
Two Woodfield
Crsg. Fee 100% 1987 7.50 117,818 84%
Three Woodfield
Crsg. Fee 100% 1989 13.30 259,777 98%
PARKWOOD CROSSING
One Parkwood Fee 100% 1989 5.93 108,281 100%
Two Parkwood Fee 100% 1996 5.96 93,950 100%
Three Parkwood Fee 100% 1997 6.24 121,246 89%
SHADELAND STATION
7240 Shadeland
Sta. Fee 66.67% [10] 1985 2.14 45,585 82%
7330 Shadeland
Sta. Fee 100% 1988 4.50 42,619 87%
7340 Shadeland
Sta. Fee 100% 1989 2.50 32,235 77%
7351 Shadeland
Sta. Fee 100% 1983 2.14 27,740 92%
7369 Shadeland
Sta. Fee 100% 1989 2.20 15,551 100%
7400 Shadeland
Sta. Fee 100% 1990 2.80 49,544 100%
KEYSTONE AT THE CROSSING
F.C. Tucker Bldg. Fee/Ground
Lease [11] 100% 1978 N/A 4,840 100%
3520 Commerce Ground/Bldg.
Crsg. Lease [12] 100% 1976 2.69 30,000 0%
8465 Keystone Fee 100% 1983 1.31 28,298 99%
8555 Keystone Fee/Ground
Lease [11] 100% 1985 N/A 75,545 94%
Community MOB Fee 100% 1995 4.00 39,205 100%
- 9 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- --------------- --------- --------- -------- ------- ---------- ------------
HAMILTON CROSSING
Hamilton Crsg.
Bldg. 2 Fee 100% 1997 5.10 32,800 77%
GREENWOOD,
INDIANA
SOUTH PARK
BUSINESS CENTER
Building 1 Fee 100% 1989 5.40 39,715 96%
Building 3 Fee 100% 1990 3.25 35,900 100%
St. Francis Fee/ Ground
Medical Bldg. Lease [13] 100% 1995 N/A 95,579 95%
CINCINNATI, OHIO
GOVERNOR'S HILL
8600 Governor's
Hill Fee 100% 1986 10.79 200,584 97%
8700 Governor's
Hill Fee 100% 1985 4.98 58,617 100%
8790 Governor's
Hill Fee 100% 1985 5.00 58,177 95%
8800 Governor's
Hill Fee 100% 1985 2.13 28,700 100%
GOVERNOR'S POINTE
4605 Governor's
Pte. Fee 100% 1990 8.00 178,306 100%
4705 Governor's
Pte. Fee 100% 1988 7.50 140,984 100%
4770 Governor's
Pte. Fee 100% 1986 4.50 76,037 72%
Anthem Prescrip.
Mgmt. Fee 100% 1997 5.00 78,240 100%
Gov. Pte.
4660 Bldg. Fee 100% 1997 4.65 76,465 91%
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 St. Ground/ Bldg. 1902/
Lease [14] 100% 1986 [15] N/A 90,127 100%
312 Plum St. Fee 100% 1987 0.69 230,489 89%
312 Elm St. Fee 100% 1992 1.10 378,786 96%
KENWOOD
Kenwood Commons
Bldg. I Fee 50% [16] 1986 2.09 46,145 100%
Kenwood Commons
Bldg. II Fee 50% [16] 1986 2.09 46,434 96%
Ohio National Fee 100% 1996 9.00 212,125 100%
Kenwood Exec.Ctr. Fee 100% 1981 3.46 49,984 97%
TRI-COUNTY
Triangle Off. 1965/
Park Fee 100% 1985 [17] 15.64 172,650 92%
Tri-County Off. 1971,1973,
Park Fee 100% 1982 [18] 11.27 102,166 88%
Executive Plaza I Fee 100% 1980 5.83 87,912 97%
Executive Plaza II Fee 100% 1981 5.02 88,885 100%
BLUE ASH
West Lake Center Fee 100% 1981 11.76 179,850 98%
Lake Forest Place Fee 100% 1985 13.50 217,264 94%
Huntington Bank
Building Fee 100% 1986 0.94 3,235 100%
Blue Ash Office
Center VI Fee 100% 1989 2.96 35,603 90%
OTHER OFFICE -
CINCINNATI
Fidelity Dr. Bldg. Fee 100% 1972 8.34 38,000 100%
Franciscan
Health Sys. Fee/Ground
Lease[19] 100% 1996 N/ A 36,634 100%
One Ashview Pl. Fee 100% 1989 6.88 120,853 100%
Remington Park
Bldg. A Fee 100% 1982 3.20 38,236 100%
Remington Park
Bldg. B Fee 100% 1982 3.20 38,320 99%
COLUMBUS, OHIO
TUTTLE CROSSING
4600 Lakehurst
(Sterling 1) Fee 100% 1990 7.66 106,300 100%
4650 Lakehurst
(Litel) Fee 100% 1990 13.00 164,639 100%
5555 Parkcenter
(Xerox) Fee 100% 1992 6.09 83,971 94%
4700 Lakehurst
(Indiana Ins.) Fee 100% 1994 3.86 49,600 100%
Sterling 2 Fee 100% 1995 3.33 57,660 100%
John Alden Fee 100% 1995 6.51 101,112 76%
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%
- 10 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- -------------- --------- --------- -------- --------- --------- ------------
Parkwood Place Fee 100% 1997 9.08 156,000 100%
Metrocenter III Fee 100% 1983 5.91 73,757 100%
Veterans Admin.
Clinic Fee 100% 1994 4.98 118,000 100%
Scioto Corp.Ctr. Fee 100% 1987 7.58 57,251 98%
CompManagement Fee 100% 1997 5.60 68,700 100%
CLEVELAND, OHIO
Rock Run - N. Fee 100% 1984 5.00 62,565 99%
Rock Run - Ctr. Fee 100% 1985 5.00 61,099 93%
Rock Run - S. Fee 100% 1986 5.00 62,989 84%
Freedom Sq. I Fee 100% 1980 2.59 40,208 96%
Freedom Sq. II Fee 100% 1987 7.41 116,665 92%
Corporate Plaza I Fee 100% 1989 6.10 114,028 99%
Corporate Plaza II Fee 100% 1991 4.90 103,834 90%
One Corp.Exc. Fee 100% 1989 5.30 88,376 91%
Corporate Ctr. I Fee 100% 1985 5.33 99,260 99%
Corporate Ctr. II Fee 100% 1987 5.32 104,402 82%
Corporate Place Fee 100% 1988 4.50 84,768 98%
Corporate Circle Fee 100% 1983 6.65 120,444 99%
Freedom Sq. III Fee 100% 1997 2.00 71,025 87%
6111 Oak Tree Fee 100% 1979-1995 5.00 70,906 83%
Landerbrook Fee 100% 1997 8.00 110,148 72%
ST. LOUIS, MISSOURI
Laumeier I Fee 100% 1987 4.26 113,852 100%
Laumeier II Fee 100% 1988 4.64 112,477 100%
Westview Place Fee 100% 1988 2.69 114,722 97%
Westmark Fee 100% 1987 6.95 123,889 100%
EARTH CITY
3300 Pointe 70 Fee 100% 1989 6.61 103,549 99%
3322 NGIC Fee 100% 1987 6.61 112,000 100%
Riverport Tower Fee 100% 1991 22.03 317,891 100%
MARYVILLE CENTER
500 Maryville Ctr. Fee 100% 1984 9.27 165,544 100%
530 Maryville Ctr. Fee 100% 1990 5.31 107,957 98%
550 Maryville Ctr. Fee 100% 1988 4.55 97,109 96%
635 Maryville Ctr. Fee 100% 1987 8.78 148,307 97%
655 Maryville Ctr. Fee 100% 1994 6.26 90,499 100%
540 Maryville Ctr. Fee 100% 1990 5.23 107,973 98%
Twin Oaks Fee 100% 1980 5.91 85,066 98%
625 Maryville Ctr. Fee 50% 1994 6.26 101,576 100%
CHICAGO, ILLINOIS
Central Park
of Lisle Fee 50% [20] 1990 8.88 345,200 93%
Executive Towers
I Fee 100% 1983 6.33 203,302 96%
Executive Towers
II Fee 100% 1984 6.33 224,140 99%
Executive Towers
III Fee 100% 1987 6.33 222,400 100%
MINNEAPOLIS, MINNESOTA
10801 Red Circ.Dr. Fee 100% 1977 4.00 60,078 100%
Medicine Lake
Prof. Bldg. Fee 100% 1970 1.54 8,100 100%
RETAIL
- ------
INDIANAPOLIS,
INDIANA
PARK 100
BUSINESS PARK
Building 32 Fee 100% 1978 0.82 14,504 58%
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 60,136 100%
FORT WAYNE, INDIANA
Coldwater Crossing Fee 100% 1990 35.38 246,365 89%
- 11 -
NET PERCENT
PARTNER- YEAR LAND RENTABLE OCCUPIED AT
NAME/ OWNERSHIP SHIP'S CONSTD/ AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP EXPANDED (ACRES) (SQ.FT.) 1997
- -------------- --------- --------- ---------- ------ --------- ------------
GREENWOOD, INDIANA
GREENWOOD CORNER
First Indiana
Bank Branch Fee 100% 1988 1.00 2,400 100%
Greenwood Corner
Shoppes Fee 100% 1986 7.45 50,840 84%
DAYTON, OHIO
Sugarcreek Plaza Fee 100% 1988 17.46 77,940 97%
CINCINNATI, OHIO
Governor's Plaza Fee 100% 1990 35.00 181,493 99%
King's Mall Shp.
Ctr. I Fee 100% 1990 5.68 52,661 94%
King's Mall Shp.
Ctr. II Fee 100% 1988 8.90 67,725 92%
Steinberg's Fee 100% 1993 1.90 21,008 100%
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-
Governor's Plaza Fee 100% 1995 1.13 15,000 100%
Bigg's Supercenter Fee 100% 1996 14.00 170,791 100%
Fountain Place Fee 25% [21] 1997 1.98 207,170 95%
GOVERNOR'S POINTE
Lowe's Fee 100% 1997 15.00 128,747 100%
FLORENCE, KENTUCKY
Sofa Express Fee 100% 1997 1.78 20,250 100%
BLOOMINGTON, ILLINOIS
Lakewood Plaza Fee 100% 1987 11.23 87,010 94%
CHAMPAIGN, ILLINOIS
Market View Fee 100% 1985 8.50 86,553 88%
COLUMBUS, OHIO
Galyans Trading
Co. Fee 100% 1984 4.90 74,636 100%
Tuttle Retail Ctr. Fee 100% 1995/1996 13.44 144,340 100%
-------- ----------
IN-SERVICE TOTAL 2,706.39 40,668,043
-------- ----------
UNDER CONSTRUCTION
- ------------------
NET PERCENT
PARTNER- EXPECTED LAND RENTABLE PRE-LEASED AT
NAME/ OWNERSHIP SHIP'S IN-SERVICE AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP DATE (ACRES) (SQ.FT.) 1997
- -------------- --------- --------- ---------- ------ --------- -------------
INDUSTRIAL
- ----------
INDIANAPOLIS,
INDIANA
PARK 100
BUSINESS PARK
Building 134 Fee 100% May-98 8.70 110,400 41%
Franklin Rd.Exp. Fee 100% Mar-98 9.35 150,000 61%
PARK FLETCHER
BUSINESS PARK
Building 35 Fee 50% [1] Oct-97 8.10 96,000 67%
Building 36 Fee 50% [1] Feb-98 3.90 52,800 0%
LEBANON,
INDIANA
LEBANON BUSINESS
PARK
Prentice Hall Fee 100% Jan-98 38.90 577,340 100%
Lebanon
(General Cable) Fee 100% May-98 23.30 395,472 50%
Thomson Consumer
Exp. Fee 50% Jun-98 12.02 740,155 100%
CINCINNATI, OHIO
WORLD PARK
World Park Bldg 28 Fee 100% Jan-98 11.60 220,160 87%
World Park Bldg 29 Fee 100% Apr-98 21.40 452,000 100%
COLUMBUS, OHIO
Sun TV Exp. Fee 100% Jun-98 12.00 231,936 100%
- 12 -
NET PERCENT
PARTNER- EXPECTED LAND RENTABLE PRE-LEASED AT
NAME/ OWNERSHIP SHIP'S IN-SERVICE AREA AREA DECEMBER 31,
LOCATION INTEREST OWNERSHIP DATE (ACRES) (SQ.FT.) 1997
- -------------- --------- --------- ---------- ------ -------- -------------
CLEVELAND, OHIO
Fountain Pkwy.
Bldg 1 Fee 100% May-98 6.50 108,704 0%
CLEVELAND, OHIO
Strongsville
Bldg.1 Fee 100% May-98 4.50 72,000 0%
ST. LOUIS, MISSOURI
EARTH CITY
Dukeport 3 Fee 100% Dec-97 9.50 214,400 0%
Dukeport 4 Fee 100% Apr-98 12.70 153,600 0%
West Port Ctr.I Fee 100% May-98 11.90 177,600 0%
OFFICE
- ------
INDIANAPOLIS,
INDIANA
PARK 100
BUSINESS PARK
Building 135 Fee 100% Mar-98 6.00 77,125 74%
RIVER ROAD
Software Artistry Fee 100% Jan-98 6.90 108,273 75%
PARKWOOD CROSSING
Four Parkwood Fee 100% Sep-98 5.90 132,836 0%
CINCINNATI, OHIO
Gov. Pte.
4680 Bldg. Fee 100% Aug-98 9.80 126,102 0%
COLUMBUS, OHIO
TUTTLE CROSSING
Rings Road
Off.Bldg. Fee 100% Apr-98 11.01 145,000 29%
Sterling 4 Fee 100% Apr-98 3.10 94,219 100%
One Easton Oval Fee 100% May-98 7.69 127,080 0%
ST. LOUIS, MISSOURI
EARTH CITY
MCI Fee 100% May-98 11.90 97,356 100%
520 Maryville Ctr. Fee 100% Dec-98 5.30 113,659 0%
NASHVILLE, TENNESSEE
CREEKSIDE CROSSING
Creekside Crsg.One Fee 100% Jul-98 5.35 112,800 0%
CLEVELAND, OHIO
Park Center Bldg.1 Fee 100% Oct-98 6.68 133,550 0%
RETAIL
- ------
Cincinnati, Ohio
Tri-County Mktpl. Fee 100% Oct-98 10.38 74,174 100%
Western Hills
Mktpl. Fee 100% Sep-98 10.50 148,140 82%
-------- ----------
UNDER CONSTUCTIION TOTAL 294.88 5,242,881
-------- ----------
3,001.27 45,910,924
======== ==========
[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.
- 13 -
[3] This building was constructed in 1994 and expanded in 1997.
[4] 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.
[5] This building was constructed in three phases; 1962, 1971 and 1974.
[6] This building was contributed to the limited liability company referenced
in footnote [1] in 1996.
[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 the Partnership's 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 this building and has aleasehold interest in the
land underlying this building with a lease term expiring August 2045, with
two 20-year options to renew.
[14] The Partnership has a leasehold interest in the building and the
underlying land with a lease term expiring June 30, 2020. The Partnership
has an option to purchase the fee interest in the property throughout the
term of the lease.
[15] This building was renovated in 1986.
[16] 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.
[17] This building was renovated in 1985.
[18] Tri-County Office Park consists of four buildings. One was built in
1971, two were built in 1973, and one was built in 1982.
[19] The Partnership owns this building and has a leasehold interest in
the land underlying this building with a lease term expiring June 2095.
[20] This building is owned by a limited liability company in which the
Partnership is a 50% member. The Partnership shares in the profit or loss of
this building in accordance with the Partnership's ownership interest.
[21] This building is 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, 1997.
- 14 -
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. Comparable cash distributions are expected in the future. As
of March 1, 1998, there were 154 record holders of Common Units.
On January 29, 1998, the Partnership declared a quarterly cash
distribution of $0.30 per Common Unit payable on February 27, 1998 to
Common Unitholders of record on February 13, 1998.
1997 DISTRIBUTIONS (1) 1996 DISTRIBUTIONS (1)
QUARTER ENDED ---------------------- ----------------------
-------------
December 31 $.300 $.255
September 30 .295 .255
June 30 .255 .245
March 31 .255 .245
(1) All distribution amounts reflect the General Partner's two-for-one stock
split effected in August 1997.
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, 1997.
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 share amounts):
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
RESULTS OF OPERATIONS:
Revenues:
Rental Operations $ 229,702 $ 162,160 $ 113,641 $ 89,299 $ 33,648
Service Operations 22,378 19,929 17,777 18,473 5,654
--------- --------- --------- -------- -------
TOTAL REVENUES $ 252,080 $ 182,089 $ 131,418 $ 107,772 $ 39,302
========= ========= ========= ======== =======
NET INCOME AVAILABLE
FOR COMMON UNITS $ 72,780 $ 58,713 $ 41,600 $ 32,968 $ 6,670
========= ========= ========= ======== =======
PER SHARE DATA (1):
Net Income per
Common Unit
Basic $ .98 $ .92 $ .78 $ .77 $ .51
Diluted .97 .91 .77 .77 .51
Dividends per
Common Unit 1.10 1.00 .96 .92 .84
Weighted Average
Common Units
Outstanding 74,142 63,960 53,582 42,934 13,080
Weighted Average
Common and Dilutive
Potential Common
Units 74,993 64,398 53,802 43,001 13,097
BALANCE SHEET DATA
(AT DECEMBER 31):
Total Assets $2,177,174 $1,362,399 $1,046,532 $775,884 $633,855
Total Debt 720,119 525,815 454,820 298,640 248,433
Total Preferred
Equity 218,906 72,856 - - -
Total Partners'
Equity 1,324,780 769,269 540,221 447,298 349,695
Total Common Units
Outstanding (1) 87,054 66,364 56,606 48,768 40,956
OTHER DATA:
Funds From $ 118,828 $ 87,434 $ 64,846 $ 47,907 $ 13,474
Operations (2)
Cash Flow Provided by
(Used by):
Operating activities $ 158,776 $ 95,470 $ 78,637 $ 51,856 $ 14,363
Investing activities (597,015) (277,009) (289,569) (116,227)(315,025)
Financing activities 443,265 181,203 176,187 94,733 310,717
(1) Information for 1993 has been adjusted for the General Partner's
1 for 4.2 reverse stock split effected in 1993. Information for
all five years reflects the General Partner's two-for-one stock
split effected in August 1997.
- 15 -
(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.
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 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 averaged 94.5% the last two years and was 94.1%
at December 31, 1997. 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 a two-year period. Because of the rapid growth
of the Partnership, this population of properties only represented
45.3% and 42.2% of the in-service portfolio at December 31, 1997 and
December 31, 1996, respectively. 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% from 1995 to 1996. In
1997, Same Property FFO improved significantly with a 4.7% increase
over 1996.
The following table sets forth information regarding the
Partnership's in-service portfolio of rental properties as of
December 31, 1997 and 1996 (square feet in thousands):
Total Percent of
Square Feet Total Square Feet Percent Occupied
------------- ------------------- -----------------
Type 1997 1996 1997 1996 1997 1996
---- ----- ----- ----- ----- ----- -----
INDUSTRIAL
Service Centers 3,707 3,151 9.1% 11.5% 91.9% 94.0%
Bulk 24,173 15,173 59.4% 55.4% 93.5% 95.1%
OFFICE
Suburban 9,758 6,319 24.0% 23.1% 95.9% 96.6%
CBD 699 699 1.7% 2.5% 93.9% 87.1%
Medical 290 370 .8% 1.3% 98.4% 92.8%
RETAIL 2,041 1,690 5.0% 6.2% 95.8% 93.7%
------ ------- ------- ------ ------- -------
Total 40,668 27,402 100.0% 100.0% 94.1% 95.0%
====== ======= ======= ====== ======= =======
- 16 -
Management expects occupancy of the in-service property portfolio to
remain stable because (i) only 10.2% and 12.2% of the Partnership's
occupied square footage is subject to leases expiring in 1998 and
1999, respectively, and (ii) the Partnership's renewal percentage
averaged 81%, 80% and 65% in 1997, 1996 and 1995, respectively.
The following table reflects the Partnership's in-service lease
expiration schedule as of December 31, 1997, 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 Sq Sq Sq Sq
Exp. Ft Rent Ft Rent Ft Rent Ft Rent
- ---- ------ ------ ----- ------- ------ ------- ------ -------
1998 2,951 $ 11,508 874 $ 9,738 81 $ 918 3,906 $ 22,164
1999 3,236 13,738 1,322 14,560 114 1,197 4,672 29,495
2000 2,739 11,696 1,052 13,675 126 1,525 3,917 26,896
2001 2,944 11,940 1,465 17,639 89 1,064 4,498 30,643
2002 3,821 15,234 1,443 16,597 157 1,747 5,421 33,578
2003 1,455 5,880 475 5,661 57 541 1,987 12,082
2004 775 3,465 298 3,659 17 178 1,090 7,302
2005 1,761 5,593 924 12,916 177 1,518 2,862 20,027
2006 2,052 7,212 625 9,606 5 67 2,682 16,885
2007 1,875 5,813 362 4,638 76 760 2,313 11,211
There-
after 2,394 8,995 1,461 20,190 1,055 8,513 4,910 37,698
------ ------- ------ ------- ----- ------ ------ ------
Total
Leased 26,003 $101,074 10,301 $128,879 1,954 $18,028 38,258 $247,981
====== ======= ====== ======= ===== ====== ====== =====
Total
Port. 27,880 10,747 2,041 40,668
====== ====== ===== ======
Annualized
Net effective
rent per sq.
ft. leased $ 3.89 $ 12.51 $ 9.23 $ 6.48
======= ======= ====== =======
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 5.2 million square feet of properties under
development at December 31, 1997 over the next five quarters. The 5.2
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 1998 1,496 71% $ 50,258 11.3%
2nd Quarter 1998 2,779 68% 96,427 11.1%
3rd Quarter 1998 387 31% 35,119 12.1%
4th Quarter 1998
and thereafter 581 13% 75,508 11.2%
------ -------
5,243 60% $257,312 11.3%
====== =======
- 17 -
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, 1997 is as follows (in thousands, except number of
properties and per share amounts):
1997 1996 1995
---- ---- ----
Rental Operations revenues $229,702 $162,160 $113,641
Service Operations revenues 22,378 19,929 17,777
Earnings from Rental Operations 83,740 54,332 37,237
Earnings from Service Operations 7,153 6,436 6,564
Operating income 83,575 56,715 40,557
Net income available for
common units $ 72,780 $ 58,713 $ 41,600
Weighted average common units
outstanding (1) 74,142 63,960 53,582
Weighted average common and
dilutive potential
common units (1) 74,993 364,398 53,802
Basic income per
common units (1) $ .98 $ .92 $ .78
Diluted income per
common units (1) $ .97 $ .91 $ .77
Number of in-service properties
at end of year 355 249 201
In-service square footage at
end of year 40,668 27,402 20,073
Under development square footage
at end of year 5,243 3,801 3,448
(1) As adjusted for the General Partner's two-for-one stock split
effected in August 1997.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------
Rental Operations
-----------------
The Partnership increased its in-service portfolio of rental
properties from 249 properties comprising 27.4 million square feet at
December 31, 1996 to 355 properties comprising 40.7 million square
feet at December 31, 1997 through the acquisition of 84 properties
totaling 8.4 million square feet and the placement in service of 28
properties and two building expansions totaling 5.4 million square
feet developed by the Partnership.
The Partnership also disposed of six properties totaling 443,000
square feet. These 106 net additional rental properties primarily
account for the $67.5 million increase in revenues from Rental
Operations from 1996 to 1997. The increase from 1996 to 1997 in
rental expenses, real estate taxes and depreciation and amortization
expense is also a result of the additional 106 in-service rental
properties.
Interest expense increased by approximately $7.7 million. This
increase was primarily because of interest expense on the $90 million
of unsecured debt which the Partnership issued in 1996 under its
medium-term note program. These notes bear interest at a weighted
average rate of 7.20% and were outstanding a full year in 1997 as
compared to less than six months in 1996. The Partnership also issued
$100 million of unsecured debt in 1997 which bears interest at an
effective interest rate of 7.35%. The proceeds from these debt
issuances were used to fund development and acquisition of additional
rental properties.
As a result of the above mentioned items, earnings from Rental
Operations increased $29.4 million from $54.3 million for the year
ended December 31, 1996 to $83.7 million for the year ended December
31, 1997.
- 18 -
Service Operations
------------------
Service Operations revenues increased from $19.9 million to $22.4
million for the year ended December 31, 1997 as compared to the year
ended December 31, 1996 primarily as a result of increases in
construction management fee revenue because of an increase in third-
party construction volume. Service Operations expenses increased from
$13.5 million to $15.2 million for the year ended December 31, 1997
as compared to the year ended December 31, 1996 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 1996 and 1997.
As a result of the above-mentioned items, earnings from Service
Operations increased from $6.4 million to $7.2 million for the years
ended December 31, 1996 and 1997, respectively.
General and Administrative Expense
----------------------------------
General and administrative expense increased from $4.1 million for
the year ended December 31, 1996 to $7.3 million for the year ended
December 31, 1997 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 also increased as a result
of the expanding size of the Partnership.
Other Income (Expense)
----------------------
Interest income increased from $1.2 million for the year ended
December 31, 1996 to $2.2 million for the year ended December 31,
1997 as a result of the temporary short-term investment of a greater
amount of proceeds from the 1997 debt and equity offerings. Other
expense consists of costs incurred in pursuit of unsuccessful
development or acquisition opportunities.
During the year ended December 31, 1996, the Partnership sold a
251,000 square foot corporate headquarters facility pursuant to a
purchase option contained in the 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,
1997 was $72.8 million compared to $58.7 million for the year ended
December 31, 1996. This increase results primarily from the
increases in the operating results of rental and service operations
explained above.
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.
- 19 -
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 $9.9 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 $54.3 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 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 certain public
company 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 proceeds from the 1995 debt and equity offerings compared
to proceeds generated by the 1996 debt and equity offerings.
During the year ended December 31, 1996, the Partnership sold a
251,000 square foot corporate headquarters facility pursuant to a
purchase option contained in the 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.
- 20 -
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 $41.6 million for the year ended
December 31, 1995. This increase results primarily from the changes
in the operating result of rental and service operations explained
above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaling $158.8 million,
$95.5 million and $78.6 million for the years ended December 31,
1997, 1996 and 1995, 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 $597.0 million, $277.0
million and $289.6 million for the years ended December 31, 1997,
1996 and 1995, 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
1997, $620.5 million was invested in the development and acquisition
of additional rental properties and land held for development and
$14.3 million was used for recurring building and tenant improvements
and leasing costs.
Included in the $620.5 million of development and acquisition of
rental properties and land held for development for the year ended
December 31, 1997 is $1.3 million related to the acquisition of 41
industrial and suburban office buildings totaling 3.2 million gross
square feet in Minneapolis, Minnesota. The purchase price of these 41
buildings was approximately $144.7 million which included the
assumption of $93.1 million of mortgage debt, the issuance of $48.5
million of units of partnership interest in the Partnership's
operating partnership, and the assumption of approximately $1.8
million of accrued taxes and other liabilities.
Also included in $620.5 million of development and acquisition of
rental properties and land held for development for the year ended
December 31, 1997 is $27.9 million related to the acquisition of 8
suburban office buildings and 3 industrial buildings totaling 982,000
gross square feet and land held for development in St. Louis,
Missouri. The purchase price of these properties was approximately
$147.7 million which included the assumption of $77.8 million of
mortgage debt, the issuance of $40.8 million of units of partnership
interest in the Partnership's operating partnership and the
assumption of approximately $1.2 million of accrued taxes and other
liabilities.
Also in 1997, the Partnership sold six properties and several parcels
of land and received $32.6 million of net sales proceeds. These
proceeds were used to fund a portion of the 1997 development and
acquisition activity.
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. 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.
- 21 -
Net cash provided by financing activities totaling $443.3 million,
$181.2 million and $176.2 million for the years ended December 31,
1997, 1996 and 1995, respectively, is comprised of debt and equity
issuances, net of distributions to unitholders and minority interests
and repayments of outstanding indebtedness. In 1997, the Partnership
received $299.1 million of net proceeds from the General Partner's
common stock offerings which were used to pay down amounts
outstanding on the unsecured line of credit and to fund acquisition
and development of additional rental properties and land held for
development. During 1997, the Partnership also received $18.4 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 July 1997, the
Partnership received $146.1 million of net proceeds from the General
Partner's preferred stock offering. In August 1997, the Partnership
issued $100.0 million of unsecured debt. This unsecured debt matures
in July 2004 and bears interest at an effective interest rate of
7.35%. The Partnership used the net proceeds from the preferred stock
and the unsecured debt offerings to reduce amounts outstanding under
the Partnership's lines of credit and to fund the development and
acquisition of additional rental properties.
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 stock 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 in 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.
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):
1997 1996 1995
----- ------ ------
Tenant improvements $ 7,985 $6,048 $4,312
Leasing costs 5,057 3,032 3,519
Building improvements 1,211 780 757
------ ----- -----
Total $14,253 $9,860 $8,588
====== ===== =====
The Partnership has a $200.0 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 2001 and bears interest at the 30-day
London Interbank Offered Rate ("LIBOR") plus
- 22 -
.80%. Borrowings of $13.0 million under this line of credit as of
December 31, 1997 bear interest at an effective rate of 6.74%. The
Partnership also has a demand $7.0 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 .65%. Borrowings
of $7.0 million are outstanding on this line of credit at December 31,
1997 and bear interest at an effective rate of 6.59%. The current 30-day
LIBOR rate as of March 2, 1998 is 5.68%.
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, 1997 of $504.1 million to issue additional common stock,
preferred stock and 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, 1997 consists of notes
totaling $720.1 million with a weighted average interest rate of
7.58% maturing at various dates through 2017. The Partnership has
$353.0 million of unsecured debt and $367.1 million of secured debt
outstanding at December 31, 1997. Scheduled principal amortization of
such debt totaled $4.1 million for the year ended December 31, 1997.
A summary of the scheduled future amortization and maturities of the
Partnership's indebtedness is as follows (in thousands):
Repayments
------------------------------------------- Weighted
Average
Interest Rate
Scheduled of Future
Year Amortization Maturities Total Repayments
- ---- ------------- ---------- ------ -----------
1998 $ 6,795 $ 47,714 $ 54,509 7.07%
1999 5,880 30,450 36,330 6.71%
2000 6,262 64,850 71,112 7.14%
2001 5,926 87,560 93,486 7.65%
2002 6,433 50,000 56,433 7.40%
2003 4,415 68,216 72,631 8.46%
2004 3,398 177,035 180,433 7.41%
2005 3,681 100,000 103,681 7.49%
2006 3,989 - 3,989 7.68%
2007 3,516 14,939 18,455 7.77%
Thereafter 29,060 - 29,060 7.69%
------ ------- -------
Total $79,355 $640,764 $720,119 7.58%
====== ======= =======
The Partnership intends to pay regular quarterly dividends from net
cash provided by operating activities. A quarterly dividend of $.30
per common unit was declared on January 29, 1998 which represents an
annualized dividend of $1.20 per unit.
YEAR 2000
The Partnership has reviewed the impact of Year 2000 issues and has
determined that it is not expected to have a material impact on its
business, operations or its financial condition.
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.
- 23-
The following reflects the calculation of the Partnership's FFO for
the years ended December 31 (in thousands):
1997 1996 1995
---- ---- ----
Net income available for
common units $ 72,780 $58,713 $41,600
Add back:
Depreciation and amortization 44,806 31,363 23,118
Share of joint venture
depreciation and amortization 3,017 1,890 411
Earnings from property sales (1,775) (4,532) (283)
------- ------ ------
Funds From Operations $118,828 $87,434 $64,846
======= ====== ======
Cash flow provided by (used by):
Operating activities $158,776 $95,470 $78,637
Investing activities (597,015) (277,009) (289,569)
Financing activities 443,265 181,203 176,187
The increase in FFO during the three-year period results primarily
from the increased in-service rental property portfolio as discussed
above under "Results of Operations."
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 AND ON
ACCOUNTING 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 this Item for Directors and certain Executive
Officers will be contained in a definitive proxy statement which the
Registrant anticipates will be filed no later than March 23, 1998,
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 Partnership who do not serve as Directors of the
General Partner.
GARY A. BURK
Age 46, 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.
- 24 -
JOHN R. GASKIN
Age 36, 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.
RICHARD W. HORN
Age 40, Executive Vice President - Office - Mr. Horn joined the
Partnership in 1984. Mr. Horn is responsible for all office
activities of the Partnership and also oversees the Nashville
operations of the Partnership.
WILLIAM E. LINVILLE, III
Age 43, Executive Vice President - Industrial - 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 43, 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.
DENNIS D. OKLAK
Age 44, Executive Vice President and Chief Administrative Officer -
Mr. Oklak joined the Partnership in 1986 and has served as
Treasurer, 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.
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. Officers, directors and greater than 10% Limited Partner
Unitholders are required by Securities and Exchange Commission
regulation 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 23, 1998, 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 10,988,468 Limited Partner Units which were
outstanding as of the close of business on March 11, 1998.
The following table shows, as of March 11, 1998, the number and
percentage of Limited Partner Units held by each person known to the
Partnership 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.
- 25 -
Amount and Nature Percentage of
Beneficial Owner of Beneficial Ownership Limited Partner Units
- ---------------- ------------------------- ----------------------
Thomas L. Hefner 2,646,060 (1) 24.08%
Darell E. Zink, Jr. 2,628,068 (1) 23.92%
Daniel C. Staton 2,465,532 (1) 22.44%
John W. Wynne 2,277,240 (1) 20.72%
David R. Mennel 2,223,076 (2) 20.23%
Gary A. Burk 2,222,332 (3) 20.22%
Edward T. Baur 1,474,175 (4) 13.42%
Robert L. and Mary Johnson 1,422,458 12.95%
Birch Mullins 1,176,920 (5) 10.71%
James D. Eckhoff 1,104,496 (6) 10.05%
DMI Partnership 2,066,554 18.81%
Lindbergh-Warson
Properties, Inc. 1,095,321 9.97%
(1) Includes 2,066,554 Limited Partner Units owned by DMI Partnership,
a partnership in which each of these individuals owns a 20.71% beneficial
interest.
(2) Includes 2,066,554 Limited Partner Units owned by DMI Partnership,
a partnership in which Mr. Mennel owns a 7.50% beneficial interest.
(3) Includes 2,066,554 Limited Partner Units owned by DMI Partnership,
a partnership in which Mr. Burk owns a 7.51% beneficial interest.
(4) Includes 1,095,321 Limited Partner Units owned by Lindbergh-Warson
Properties, Inc., a partnership in which Mr. Baur owns a 60.395%
beneficial interest.
(5) Includes 1,095,321 Limited Partner Units owned by Lindbergh-Warson
Properties, Inc., a partnership in which Mr. Mullins owns a 34.094%
beneficial interest.
(6) Includes 1,095,321 Limited Partner Units owned by Lindbergh-Warson
Properties, Inc., a partnership in which Mr. Eckhoff owns a 5.512%
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 23, 1998, 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.
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, 1997 and 1996
Consolidated Statements of Operations, Years Ended December
31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows, Years Ended December
31, 1997, 1996 and 1995
Consolidated Statements of Partners' Equity, Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
- 26 -
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,
1997 (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.
- 27 -
INDEPENDENT AUDITORS' REPORT
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, 1997 and 1996, and the results of their operations and
their cash flows for each of the years in the three-year period
ended December 31, 1997, 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.
KPMG PEAT MARWICK LLP
Indianapolis, Indiana
January 28, 1998
- 28 -
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 31,
-----------------------------
1997 1996
-------- -------
ASSETS
- ------
Real estate investments:
Land and improvements $ 231,614 $ 140,391
Buildings and tenant improvements 1,591,604 1,041,040
Construction in progress 107,242 44,060
Investments in unconsolidated companies 106,450 79,362
Land held for development 139,817 65,185
--------- ---------
2,176,727 1,370,038
Accumulated depreciation (116,264) (82,207)
--------- ---------
Net real estate investments 2,060,463 1,287,831
========= =========
Cash 10,372 5,346
Accounts receivable, net of allowance
of $420 and $709 5,932 5,255
Accrued straight-line rent receivable,
net of allowance of $841 14,746 10,956
Receivables on construction contracts 22,700 12,859
Deferred financing costs, net of
accumulated amortization of $9,101
and $6,519 12,289 10,847
Deferred leasing and other costs, net of
accumulated amortization of
$9,251 and $5,249 34,369 21,573
Escrow deposits and other assets 16,303 7,732
--------- ---------
$2,177,174 $1,362,399
========= =========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Indebtedness:
Secured debt $ 367,119 $ 261,815
Unsecured notes 340,000 240,000
Unsecured line of credit 13,000 24,000
--------- ---------
720,119 525,815
Construction payables and amounts
due subcontractors 40,786 23,167
Accounts payable 1,342 1,585
Accrued expenses:
Accrued real estate taxes 25,203 14,888
Accrued interest 6,883 4,437
Other accrued expenses 13,851 6,935
Other liabilities 11,720 8,312
Tenant security deposits and prepaid rents 14,268 7,611
--------- ---------
Total liabilities 834,172 592,750
--------- ---------
Minority interest 222 380
--------- ---------
Partners' equity:
General partner
Common equity 1,016,733 683,710
Preferred equity (liquidation preference
of $225,000) 218,906 72,856
--------- ---