-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OqnIcqjq0k0SgHL1TLqhT8f1BTyA0rLN+/npV9jjKSsCn7ek/b/+VzVE2vdUlNc1 rgZooWqSR8yPPnaPIk8hyQ== /in/edgar/work/20000811/0000783280-00-000025/0000783280-00-000025.txt : 20000921 0000783280-00-000025.hdr.sgml : 20000921 ACCESSION NUMBER: 0000783280-00-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE WEEKS REALTY LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0001003410 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 351898425 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20625 FILM NUMBER: 695093 BUSINESS ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: SUITE 1100 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 BUSINESS PHONE: 3178086000 MAIL ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: STE 1100 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 FORMER COMPANY: FORMER CONFORMED NAME: DUKE REALTY LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19951114 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 --------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . ------ ------ --------------------------------------------------------------------- Commission File Number: 1-9044 ------ DUKE-WEEKS REALTY LIMITED PARTNERSHIP State of Incorporation: IRS Employer ID Number: Indiana 35-1740409 - ----------------------- ---------------------- Address of principal executive offices: 600 East 96th Street, Suite 100 ------------------------------ Indianapolis, Indiana 46260 ----------------------------- Telephone: (317) 808-6000 -------------------------- 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 --- --- The number of Common Units outstanding as of July 31, 2000 was 19,081,990 ($.01 par value). DUKE-WEEKS REALTY LIMITED PARTNERSHIP INDEX PART I - FINANCIAL INFORMATION PAGE - ------------------------------ ---- ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and December 31, 1999 2 Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2000 and 1999 3 Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2000 and 1999 4 Condensed Consolidated Statement of Partners' Equity (Unaudited) for the six months ended June 30, 2000 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6-11 Independent Accountants' Review Report 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13-21 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 21 Item 2. Changes in Securities 21 Item 3. Defaults Upon Senior Securities 21 Item 4. Submission of Matters to a Vote of Security Holders 21-22 Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DUKE-WEEKS REALTY LIMITED PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
June 30, December 31, ASSETS 2000 1999 - ----- -------- ---------- (Unaudited) Real estate investments: Land and improvements $ 634,454 $ 602,789 Buildings and tenant improvements 4,318,580 4,124,117 Construction in progress 264,302 327,944 Investments in unconsolidated companies 157,976 145,587 Land held for development 235,695 246,533 --------- --------- 5,611,007 5,446,970 Accumulated depreciation (308,841) (254,574) --------- --------- Net real estate investments 5,302,166 5,192,396 Cash and cash equivalents 41,403 18,514 Accounts receivable, net of allowance of $1,412 and $1,775 17,662 26,844 Straight-line rent receivable, net of allowance of $841 34,657 29,770 Receivables on construction contracts 40,307 29,537 Deferred financing costs, net of accumulated amortization of $10,761 and $9,082 15,530 16,571 Deferred leasing and other costs, net of accumulated amortization of $27,315 and $21,287 99,183 83,153 Escrow deposits and other assets 180,396 90,499 --------- --------- $5,731,304 $5,487,284 ========= ========= LIABILITIES AND PARTNERS' EQUITY - -------------------------------- Indebtedness: Secured debt $ 559,985 $ 528,665 Unsecured notes 1,326,711 1,326,811 Unsecured lines of credit 463,000 258,000 --------- --------- 2,349,696 2,113,476 Construction payables and amounts due subcontractors 63,868 89,985 Accounts payable 5,005 3,179 Accrued expenses: Real estate taxes 56,698 47,604 Interest 22,025 20,658 Other 42,271 41,836 Other liabilities 36,562 30,541 Tenant security deposits and prepaid rents 36,261 36,156 --------- --------- Total liabilities 2,612,386 2,383,435 --------- --------- Minority interest 1,856 1,860 --------- --------- Partners' equity: General Partner Common equity 2,096,259 2,082,720 Preferred equity (liquidation preference of $609,721) 587,108 587,385 --------- --------- 2,683,367 2,670,105 Limited partners' common equity 330,740 328,929 Limited partners' preferred equity 102,955 102,955 --------- --------- 3,117,062 3,101,989 --------- --------- $5,731,304 $5,487,284 ========= =========
See accompanying Notes to Condensed Consolidated Financial Statements - 2 - DUKE-WEEKS REALTY LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS) (UNAUDITED)
Three Months Ended Six Months Ended --------------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- RENTAL OPERATIONS: Revenues: Rental income $174,182 $104,369 $346,092 $203,848 Equity in earnings of unconsolidated companies 4,226 2,779 7,050 5,287 ------- ------- ------- ------- 178,408 107,148 353,142 209,135 ------- ------- ------- ------- Operating expenses: Rental expenses 28,264 17,501 57,106 36,127 Real estate taxes 19,064 11,674 37,584 22,491 Interest expense 36,253 17,129 68,934 33,120 Depreciation and amortization 39,766 20,935 79,545 41,389 ------- ------- ------- ------- 123,347 67,239 243,169 133,127 ------- ------- ------- ------- Earnings from rental operations 55,061 39,909 109,973 76,008 ------- ------- ------- ------- SERVICE OPERATIONS: Revenues: Property management, maintenance and leasing fees 6,582 3,795 12,265 7,421 Construction and development activity income 18,399 4,812 25,947 13,159 Other income 60 286 894 580 ------- ------- ------- ------- 25,041 8,893 39,106 21,160 Operating expenses 14,088 5,311 22,777 12,542 ------- ------- ------- ------- Earnings from service operations 10,953 3,582 16,329 8,618 ------- ------- ------- ------- General and administrative expense (4,510) (3,496) (9,674) (7,111) ------- ------- ------- ------- Operating income 61,504 39,995 116,628 77,515 OTHER INCOME (EXPENSE): Interest income 2,283 546 3,903 1,145 Earnings from land and depreciated property sales 3,405 1,971 18,091 4,285 Other expense (128) (106) (250) (338) Other minority interest in earnings of subsidiaries (311) (450) (972) (880) ------- ------ ------- ------- Net income $ 66,753 $ 41,956 $137,400 $ 81,727 Dividends on preferred units (14,351) (9,254) (28,705) (18,096) ------- ------- ------- ------- Net income available for common unitholders $ 52,402 $ 32,702 $108,695 $ 63,631 ======= ======= ======= ======= Net income per common unit: Basic $ 0.36 $ 0.33 $ 0.75 $ 0.65 ======= ======= ======= ======= Diluted $ 0.36 $ 0.33 $ 0.74 $ 0.65 ======= ======= ======= ======= Weighted average number of common units outstanding 145,719 97,894 145,422 97,548 ======= ======= ======= ======= Weighted average number of common and dilutive potential common units 147,181 98,855 146,754 98,477 ======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements - 3 - DUKE-WEEKS REALTY LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (IN THOUSANDS) (UNAUDITED)
2000 1999 ---- ---- Cash flows from operating activities: Net income $137,400 $ 81,727 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of buildings and tenant improvements 71,378 37,049 Amortization of deferred financing costs 1,553 725 Amortization of deferred leasing and other costs 8,167 4,340 Minority interest in earnings 972 880 Straight-line rent adjustment (8,145) (3,748) Earnings from land and depreciated property sales (18,091) (4,286) Construction contracts, net (36,887) (40,417) Other accrued revenues and expenses, net 19,839 6,799 Equity in earnings in excess of operating distributions received from unconsolidated companies (1,621) (499) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 174,565 82,570 ------- ------- Cash flows from investing activities: Development of real estate investments (268,388) (161,843) Acquisition of real estate investments (5,932) (87,827) Acquisition of land held for development and infrastructure costs (32,140) (60,973) Recurring costs: Tenant improvements (16,204) (7,845) Leasing commissions (10,830) (4,993) Building improvements (3,275) (666) Other deferred leasing costs (21,735) (8,439) Other deferred costs and other assets (9,671) (10,298) Proceeds from land and depreciated property sales, net 214,299 24,695 Escrow for property exchanges, net (87,940) (8,572) Capital distributions from unconsolidated companies - 16,802 Net investment in and advances to unconsolidated companies (16,652) (13,017) ------- ------- NET CASH USED BY INVESTING ACTIVITIES (258,468) (322,976) ------- ------- Cash flows from financing activities: Contributions from General Partner 13,589 134,420 Proceeds from indebtedness - 300,000 Borrowings on lines of credit, net 245,227 61,000 Repayments on indebtedness including principal amortization (8,230) (3,947) Distributions to partners (113,378) (66,229) Distributions to preferred unitholders (28,705) (18,096) Distributions to minority interest (813) (930) Deferred financing costs (898) (4,342) ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 106,792 401,876 ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 22,889 161,470 Cash and cash equivalents at beginning of period 18,514 6,626 ------- ------- Cash and cash equivalents at end of period $ 41,403 $168,096 ======= ======= Other non-cash items: Assumption of debt for real estate acquisitions $ - $ 26,186 ======= ======= Conversion of Limited Partner Units to General Partner common shares $ 953 $ 45,498 ======= ======= Issuance of Limited Partner Units for real estate acquisitions $ 3,937 $ 2,017 ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements - 4 - DUKE-WEEKS REALTY LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS, EXCEPT PER UNIT DATA) (UNAUDITED)
General Partner Limited Limited ------------------------ Partners' Partners' Common Preferred Common Preferred Equity Equity Equity Equity Total ------- --------- -------- --------- ----- BALANCE AT DECEMBER 31, 1999 $2,082,720 $ 587,385 $328,929 $102,955 $3,101,989 Net income 94,383 24,501 14,312 4,204 137,400 Capital contribution from (repayments to) General Partner 15,143 (277) - - 14,866 Acquisition of partnership interest for common stock of General Partner 2,480 - (1,527) - 953 Acquisition of property in exchange for Limited Partner Units - - 3,937 - 3,937 Distributions to preferred unitholders - (24,501) - (4,204) (28,705) Distributions to partners ($.78 per Common Unit) (98,467) - (14,911) - (113,378) --------- ------- ------- ------- --------- BALANCE AT JUNE 30, 2000 $2,096,259 $587,108 $330,740 $102,955 $3,117,062 ========= ======= ======= ======= ========= COMMON UNITS OUTSTANDING AT JUNE 30, 2000 126,760 19,080 145,840 ========= ======= =========
See accompanying Notes to Condensed Consolidated Financial Statements - 5 - DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. FINANCIAL STATEMENTS The interim condensed consolidated financial statements included herein have been prepared by Duke-Weeks Realty Limited Partnership (the "Partnership") without audit. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's Annual Financial Statements. THE PARTNERSHIP The Partnership was formed on October 4, 1993, when the General Partner contributed all of its properties and related assets and liabilities along with the net proceeds from the issuance of an additional 14,000,833 units through a common stock 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 and owns 86.9% of the Partnership at June 30, 2000. The remaining limited partnership interest ("Limited Partner Units") (together with the units of general partner interests, the ("Common Units")) are mainly owned by the previous partners of Duke Associates. The Limited Partner Units are exchangeable for units of the General Partner's common stock on a one-for-one basis subject generally to a one-year holding period. The General Partner periodically acquires a portion of the minority interest in the Partnership through the issuance of units of common stock for a like number of Common Units. The acquisition of the minority interest is accounted for under the purchase method with assets acquired recorded at the fair market value of the General Partner's common stock on the date of acquisition. The service operations are conducted 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. The consolidated financial statements include the accounts of the Partnership and its majority-owned or controlled subsidiaries. The equity interests in these majority- owned or controlled subsidiaries not owned by the Partnership are reflected as minority interests in the consolidated financial statements. - 6 - 2. LINES OF CREDIT The Partnership has the following lines of credit available: Borrowing Outstanding Capacity Maturity Interest at June 30, 2000 Description (in 000's) Date Rate (in 000's) ------------------------ ---------- ---------- ----------- ---------------- Unsecured Line of Credit $450,000 April 2001 LIBOR + .70% $428,000 Unsecured Line of Credit $300,000 June 2001 LIBOR + .90% $ 35,000 Secured Line of Credit $150,000 January 2003 LIBOR + 1.05% $ 40,228 The lines of credit are used to fund development and acquisition of additional rental properties and to provide working capital. The $450 million line of credit allows the Partnership an option to obtain borrowings from the financial institutions that participate in the line of credit at rates lower than the stated interest rate, subject to certain restrictions. Amounts outstanding on the line of credit at June 30, 2000, are at LIBOR + .57 to .70%. 3. RELATED PARTY TRANSACTIONS The Partnership provides management, maintenance, leasing, construction, and other tenant related services to properties in which certain executive officers have continuing ownership interests. The Partnership was paid fees totaling $993,000 and $1.4 million for such services for the six months ended June 30, 2000 and 1999, respectively. Management believes the terms for such services are equivalent to those available in the market. The Partnership has an option to purchase the executive officers' interest in each of these properties which expires October 2003. The option price of each property was established at the date the option was granted. At June 30, 2000, other assets included outstanding loan advances totaling $2.4 million due from a related party, under a $5.7 million demand loan agreement. The loan bears interest at LIBOR plus 2.10% and is secured by real estate assets held by the related entity, for which the Partnership has arrangements to acquire in future periods. Interest earned under the agreement and included in the accompanying condensed consolidated statements of operations totaled $121,764 in the six months ended June 30, 2000. 4. NET INCOME PER COMMON UNIT Basic net income per common unit is computed by dividing net income available for common unitholders by the weighted average number of common units outstanding for the period. Diluted net income per unit is computed by dividing net income available for common unitholders by the sum of the weighted average number of common units and dilutive potential common units outstanding for the period. The following table reconciles the components of basic and diluted net income per common unit for the three and six months ended June 30: - 7 -
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income available for common unitholders $ 52,402 $32,702 $108,695 $63,631 ======= ====== ======= ====== Weighted average number of common units outstanding 145,719 97,894 145,422 97,548 Dilutive units for long-term compensation plans 1,462 961 1,332 929 ======= ====== ======= ====== Weighted average number of common units and dilutive potential common units 147,181 98,855 146,754 98,477 ======= ====== ======= ======
The Preferred D Series Convertible equity and the Series G preferred limited partner units were anti-dilutive at June 30, 2000; therefore, no conversion to common units is included in weighted dilutive potential common units outstanding. 5. SEGMENT REPORTING The Partnership is engaged in four operating segments; the ownership and rental of office, industrial and retail real estate investments and the providing of various real estate services such as property management, maintenance, leasing, development and construction management to third-party property owners ("Service Operations"). The Partnership's reportable segments offer different products or services and are managed separately because each requires different operating strategies and management expertise. There are no material intersegment sales or transfers. Non-segment revenue to reconcile to total revenue consists mainly of equity in earnings of unconsolidated companies. Non-segment assets to reconcile to total assets consist of corporate assets including cash, deferred financing costs and investments in unconsolidated companies. The Partnership assesses and measures segment operating results based on industry performance measures referred to as Funds From Operations ("FFO"). The National Association of Real Estate Investment Trusts defines FFO as net income or loss, excluding gains or losses from debt restructuring and sales of depreciated operating property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. FFO is not a measure of operating results or cash flows from operating activities as measured by generally accepted accounting principles, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. Interest expense and other non-property specific revenues and expenses are not allocated to individual segments in determining the Partnership's performance measure. The revenues and FFO for each of the reportable segments for the three and six months ended June 30, 2000 and 1999, and the assets for each of the reportable segments as of June 30, 2000 and December 31, 1999, are summarized as follows: - 8 -
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Revenues - -------- Rental Operations: Office $ 82,964 $ 62,907 $163,974 $122,397 Industrial 84,582 35,354 168,519 68,390 Retail 7,658 6,146 14,891 12,078 Service Operations 25,041 8,893 39,106 21,160 ------- ------- ------- ------- Total Segment Revenues 200,245 113,300 386,490 224,025 Non-Segment Revenue 3,204 2,741 5,758 6,270 ------- ------- ------- -------- Consolidated Revenue $203,449 $116,041 $392,248 $230,295 ======= ======= ======= ======= Funds From Operations - --------------------- Rental Operations: Office $ 57,610 $ 43,298 $112,726 $ 83,783 Industrial 66,089 27,431 131,646 52,282 Retail 6,396 5,123 12,032 9,785 Services Operations 10,953 3,582 16,329 8,618 ------- ------- ------- ------- Total Segment FFO 141,048 79,434 272,733 154,468 Non-Segment FFO: Interest expense (36,253) (17,129) (68,934) (33,120) Interest income 2,283 546 3,903 1,145 General and administrative expense (4,510) (3,496) (9,674) (7,111) Gain on land sales 297 887 3,913 887 Other revenues and expenses, net (3,675) (801) (5,605) (994) Minority interest in earnings of subsidiaries (311) (450) (972) (880) Joint venture FFO 6,165 4,057 10,453 8,079 Dividends on preferred units (14,351) (9,254) (28,705) (18,096) ------- ------- ------- ------- Consolidated FFO 90,693 53,794 177,112 104,378 Depreciation and amortization (39,766) (20,935) (79,545) (41,389) Share of joint venture adjustments (1,633) (1,241) (3,050) (2,756) Earnings from depreciated property sales 3,108 1,084 14,178 3,398 ------- ------- ------- ------- Net Income Available for Common Unitholders $ 52,402 $ 32,702 $108,695 $ 63,631 ======= ======= ======= =======
June 30, December 31, 2000 1999 -------- ------------ Assets Rental Operations: Office $2,337,090 $2,252,795 Industrial 2,818,390 2,707,028 Retail 197,933 205,993 Service Operations 99,777 62,335 --------- --------- Total Segment Assets 5,454,190 5,228,151 Non-Segment Assets 277,114 259,133 --------- --------- Consolidated Assets $5,731,304 $5,487,284 ========= ========= 6. REAL ESTATE ASSETS HELD FOR SALE In order to redeploy capital, the Partnership has an active sales program through which it is continually pursuing favorable opportunities to dispose of real estate assets that no longer meet long-term investment objectives of the Partnership. At June 30, 2000, the Partnership had 36 industrial, 10 office and one retail property comprising approximately 6.6 million square feet held for sale. Of these properties, five build-to-suit office and three build-to-suit industrial properties were under development at June 30, 2000. Net operating income (defined as total property revenues, less property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses) of the properties held for sale for the six months ended June 30, 2000, was approximately $15.1 million. Net book value of the properties held for sale at June 30, 2000, is approximately $318.7 million. There can be no assurances that such properties will be sold. - 9 - 7. PARTNERS' EQUITY The following series of preferred equity are outstanding as of June 30, 2000 (in thousands, except percentages):
Shares Dividend Redemption Liquidation Description Outstdg Rate Date Preference Convertible - ------------------ -------- -------- ----------- ----------- ----------- Preferred A Series 300 9.100% 08/31/2001 $ 75,000 No Preferred B Series 300 7.990% 09/30/2007 150,000 No Preferred D Series 539 7.375% 12/31/2003 134,721 Yes Preferred E Series 400 8.250% 01/20/2004 100,000 No Preferred F Series 600 8.000% 10/10/2002 150,000 No
All series of preferred equity require cumulative distributions, have no stated maturity date, and the redemption price of each series may only be paid from the proceeds of other capital contributions from the General Partner, which may include other classes or series of preferred equity. The Preferred Series D equity is convertible at a conversion rate of 9.3677 common units for each preferred equity outstanding. The dividend rate on the Preferred B Series equity increases to 9.99% after September 12, 2012. 8. MERGER WITH WEEKS CORPORATION In July 1999, the General Partner and Weeks Corporation ("Weeks"), approved a merger transaction whereby Weeks, a self-administered, self-managed geographically focused Real Estate Investment Trust ("REIT") which operated primarily in the southeastern United States and its consolidated subsidiary, Weeks Realty L.P. ("Weeks Operating Partnership"), were merged with and into the General Partner and its consolidated subsidiary, Duke Realty Limited Partnership ("Duke Operating Partnership"). The total purchase price of Weeks and Weeks Operating Partnership aggregated approximately $1.9 billion, which included the assumption of the outstanding debt and liabilities of Weeks Operating Partnership of approximately $775 million. The following summarized pro forma unaudited information represents the combined historical operating results of Weeks Operating Partnership and Duke Operating Partnership with the appropriate purchase accounting adjustments, assuming the merger had occurred on January 1, 1999. The pro forma financial information presented is not necessarily indicative of what the Partnership's actual operating results would have been had Weeks Operating Partnership and Duke Operating Partnership constituted a single entity during such periods (in thousands, except per unit amounts): Three Months Ended Six Months Ended June 30, June 30, ------------------- ---------------- 2000 1999 2000 1999 ----- ---- ---- ---- (Actual) (Pro Forma) (Actual) (Pro Forma) Rental income $174,182 $150,657 $346,092 $294,931 ======= ======= ======= ======= Net income available for common unitholders $ 52,402 $ 44,023 $108,695 $ 88,618 ======= ======= ======= ======= Weighted average common units outstanding: Basic 145,719 135,423 145,422 134,979 ======= ======= ======= ======= Diluted 147,181 136,704 146,754 136,157 ======= ======= ======= ======= Net income per common unit: Basic $ 0.36 $ 0.33 $ 0.75 $ 0.66 ======= ====== ======= ======= Diluted $ 0.36 $ 0.32 $ 0.74 $ 0.65 ======= ====== ======= ======= - 10 - 9. OTHER MATTERS ACCOUNTING CHANGES In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and for Hedging Activities," effective for fiscal years beginning after June 15, 2000. The statement will require the Partnership to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, then depending on the nature of the hedge, changes in the fair value will either be offset through earnings, against the change in fair value of hedged assets, liabilities or firm commitments or recognized in other comprehensive income until the hedged item is recognized in income. The ineffective portion of a hedge's change in fair value will be immediately recognized in income. Based on the information available at this time, the adoption of this statement is not expected to have a material impact on the Partnership's financial statements. RECLASSIFICATIONS Certain 1999 balances have been reclassified to conform to 2000 presentation. 10. SUBSEQUENT EVENTS The Board of Directors of the General Partner declared the following distributions on July 26, 2000: Quarterly Class Amount/Share Record Date Payment Date ----------- ------------ ------------ ------------ Common $0.43 August 16, 2000 August 31, 2000 Preferred (per depositary share): Series A $0.56875 August 17, 2000 August 31, 2000 Series B $0.99875 September 15, 2000 September 29, 2000 Series D $0.46094 September 15, 2000 September 29, 2000 Series E $0.51563 September 15, 2000 September 29, 2000 Series F $0.50000 October 17, 2000 October 31, 2000 - 11 - INDEPENDENT ACCOUNTANTS' REVIEW REPORT -------------------------------------- The Board of Directors Duke-Weeks Realty Limited Partnership: We have reviewed the condensed consolidated balance sheet of Duke- Weeks Realty Limited Partnership and subsidiaries as of June 30, 2000, the related condensed consolidated statements of operations for the three months and the six months ended June 30, 2000 and 1999, the related condensed consolidated statements of cash flows for the six months ended June 30, 2000 and 1999, and the related condensed consolidated statement of partners' equity for the six months ended June 30, 2000. These condensed consolidated financial statements are the responsibility of the Partnership's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Duke-Weeks Realty Limited Partnership and subsidiaries as of December 31, 1999, and the related consolidated statements of operations, partners' equity and cash flows for the year then ended (not presented herein); and in our report dated January 25, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1999 is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. KPMG LLP Indianapolis, Indiana July 26, 2000 - 12 - ITEM 2.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 of its in- service portfolio and to continue development and acquisition of additional rental properties. The Partnership's primary markets 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. The Partnership expects to continue to maintain or increase its overall occupancy levels and also expects to be able to maintain rental rates as leases are renewed or new leases are executed. This combination 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. The Partnership tracks Same Property performance which compares those properties that were in-service for all of a calendar two year period. The net operating income from the same property portfolio increased 6.13% for the six months ended June 30, 2000, compared to the six months ended June 30, 1999. The following table sets forth information regarding the Partnership's in-service portfolio of rental properties as of June 30, 2000 and 1999 (in thousands, except percentages):
Total Percent of Square Feet Total Square Feet Percent Occupied ---------------- ----------------- ---------------- Type 2000 1999 2000 1999 2000 1999 - ---- ---- ---- ---- ---- ---- ---- INDUSTRIAL Service Centers 12,962 6,672 13.52% 11.55% 93.04% 92.71% Bulk 60,433 34,121 63.06 59.05 92.41% 93.87% OFFICE Suburban 18,867 13,575 19.69 23.50 92.62% 94.84% CBD 861 861 .90 1.49 95.35% 93.76% RETAIL 2,708 2,548 2.83 4.41 96.52% 92.36% ------ ------ ------ ------ Total 95,831 57,777 100.00% 100.00% 92.68% 93.90% ====== ====== ====== ======
The following table reflects the Partnership's in-service portfolio lease expiration schedule as of June 30, 2000, by product type indicating square footage and annualized net effective rents under expiring leases (in thousands, except per square foot amounts):
Total Industrial Office Retail ----- ---------- ------ ------ Yr of Sq Sq Sq Sq Exp Feet Dollars Feet Dollars Feet Dollars Feet Dollars - ----- ---- ------- ---- ------- ----- ------- ----- ------- 2000 3,865 $ 22,766 3,174 $ 14,569 608 $ 7,450 83 $ 747 2001 9,305 60,429 7,224 34,584 1,984 24,617 97 1,228 2002 10,451 66,825 8,420 41,487 1,934 23,961 97 1,377 2003 10,053 69,556 7,879 40,811 2,012 26,696 162 2,049 2004 9,928 71,858 7,568 39,431 2,225 30,938 135 1,489 2005 11,458 79,358 8,710 41,486 2,430 34,729 318 3,143 2006 6,500 39,906 5,321 23,141 1,166 16,583 13 182 2007 4,851 32,566 3,998 20,654 781 11,200 72 712 2008 5,349 32,710 4,388 19,548 898 12,448 63 714 2009 6,657 43,240 5,275 23,498 1,251 18,095 131 1,647 2010 and There- after 10,398 86,730 5,951 28,658 3,004 44,773 1,443 13,299 ------ ------- ------ ------- ------ ------- ------ ------ Total Leased 88,815 $605,944 67,908 $327,867 18,293 $251,490 2,614 $26,587 ====== ======= ====== ======= ====== ======= ===== ====== Total Portfolio Sq Ft 95,831 73,395 19,728 2,708 ====== ====== ====== ===== Annualized net effective rent per square foot $6.82 $4.83 $13.75 $10.17 ==== ==== ===== =====
The Partnership also expects to realize growth in earnings from rental operations through the development and acquisition of additional rental properties in its primary markets and the completion of the 7.5 million square feet of properties under development by the Partnership at June 30, 2000, over the next three quarters and thereafter. These properties under development should provide future earnings through service operations income upon sale or from rental operations growth as they are placed in service as follows (in thousands, except percent leased and stabilized returns): Anticipated In-Service Square Percent Project Stabilized Date Feet Leased Costs Return ------------ ------ ------- ------- ---------- Held For Rental: 3rd Quarter 2000 2,884 41% $225,741 11.7% 4th Quarter 2000 2,046 33% 148,098 11.6% 1st Quarter 2001 870 10% 56,666 11.2% Thereafter 212 0% 24,463 11.6% ----- ------- 6,012 32% $454,968 11.6% ===== ======= Build-to-Suit for Sale: 3rd Quarter 2000 499 100% $ 15,072 4th Quarter 2000 - -% - 1st Quarter 2001 - -% - Thereafter 945 91% 81,438 ----- ------- 1,444 94% $ 96,510 ----- ------- Total 7,456 44% $551,478 ===== ======= MERGER WITH WEEKS CORPORATION In July 1999, the General Partner and Weeks Corporation ("Weeks"), approved a merger transaction whereby Weeks, a self-administered, self-managed geographically focused Real Estate Investment Trust ("REIT") which operated primarily in the southeastern United States and its consolidated subsidiary, Weeks Realty L.P. ("Weeks Operating Partnership"), were merged with and into the General Partner and its consolidated subsidiary, Duke Realty Limited Partnership ("Duke Operating Partnership"). The total purchase price of Weeks and Weeks Operating Partnership aggregated approximately $1.9 billion, which included the assumption of the outstanding debt and liabilities of Weeks Operating Partnership of approximately $775 million. - 14 - The following summarized pro forma unaudited information represents the combined historical operating results of Weeks Operating Partnership and Duke Operating Partnership with the appropriate purchase accounting adjustments, assuming the merger had occurred on January 1, 1999. The pro forma financial information presented is not necessarily indicative of what the Partnership's actual operating results would have been had Weeks Operating Partnership and Duke Operating Partnership constituted a single entity during such periods (in thousands, except per unit amounts): Three Months Ended Six Months Ended June 30, June 30, ------------------- ---------------- 2000 1999 2000 1999 ----- ---- ---- ---- (Actual) (Pro Forma) (Actual) (Pro Forma) Rental income $174,182 $150,657 $346,092 $294,931 ======= ======= ======= ======= Net income available for common unitholders $ 52,402 $ 44,023 $108,695 $ 88,618 ======= ======= ======= ======= Weighted average common units outstanding: Basic 145,719 135,423 145,422 134,979 ======= ======= ======= ======= Diluted 147,181 136,704 146,754 136,157 ======= ======= ======= ======= Net income per common unit: Basic $ 0.36 $ 0.33 $ 0.75 $ 0.66 ======= ====== ======= ======= Diluted $ 0.36 $ 0.32 $ 0.74 $ 0.65 ======= ====== ======= ======= RESULTS OF OPERATIONS -------------------- Following is a summary of the Partnership's operating results and property statistics for the three and six months ended June 30, 2000 and 1999 (in thousands, except number of properties and per unit amounts):
Three Months Ended June 30, Six Months Ended June 30, -------------------------- ------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Rental Operations revenue $178,408 $107,148 $353,142 $209,135 Service Operations revenue 25,041 8,893 39,106 21,160 Earnings from Rental Operations 55,061 39,909 109,973 76,008 Earnings from Service Operations 10,953 3,582 16,329 8,618 Operating income 61,504 39,995 116,628 77,515 Net income available for common units $ 52,402 $ 32,702 $108,695 $ 63,631 Weighted average common units outstanding 145,719 97,894 145,422 97,548 Weighted average common and dilutive potential common units 147,181 98,855 146,754 98,477 Basic income per common unit $ 0.36 $ 0.33 $ 0.75 $ 0.65 Diluted income per common unit $ 0.36 $ 0.33 $ 0.74 $ 0.65 Number of in-service properties at end of period 886 486 886 486 In-service square footage at end of period 95,831 57,777 95,831 57,777 Under development square footage at end of period 7,456 7,303 7,456 7,303
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 TO THREE MONTHS ENDED JUNE 30, 1999 --------------------------------------------------------------------------- Rental Operations ----------------- Rental Operations revenue increased to $178.4 million from $107.1 million for the three months ended June 30, 2000, compared to the same period in 1999. This increase is primarily due to the increase in the number of in-service properties during the respective periods. As of June 30, 2000, the Partnership had 886 properties in service compared to 486 properties at June 30, 1999. The following summary of the Partnership's acquisition and development activity since January 1, 1999: - 15 - Square Buildings Feet --------- ------ Properties owned as of: January 1, 1999 453 52,028 Weeks merger 335 28,569 Acquisitions 30 2,867 Developments placed in service 68 10,903 Dispositions (21) (1,890) Building remeasurements - 25 --- ------ December 31, 1999 865 92,502 Acquisitions 2 169 Developments placed in service 38 6,587 Dispositions (19) (3,434) Building remeasurements - 7 --- ------ June 30, 2000 886 95,831 === ====== Rental property, real estate tax and depreciation and amortization expenses increased for the three months ended June 30, 2000, compared to the same period in 1999 due to the increase in the number of in-service properties during the respective periods. The $19.1 million increase in interest expense is primarily attributable to higher outstanding debt balances associated with the financing of the Partnership's investment activities. The increased balances include $450 million of unsecured debt issued in 1999, the assumption of $185 million of secured debt and $287 million of unsecured debt in the merger with Weeks Corporation in July 1999, and increased borrowings on the Partnership's lines of credit. These higher borrowing costs were partially offset by the capitalization of interest on increased property development activities. As a result of the above-mentioned items, earnings from Rental Operations increased $15.2 million from $39.9 million for the three months ended June 30, 1999, to $55.1 million for the three months ended June 30, 2000. Service Operations ------------------ Service Operations revenues increased by $16.1 million from $8.9 million for the three months ended June 30, 1999, to $25.0 million for the three months ended June 30, 2000, primarily as a result of increases in construction and development income from increased third party construction. Service Operations operating expenses increased from $5.3 million for the three months ended June 30, 1999, to $14.1 million for the three months ended June 30, 2000, primarily due to increases in payroll and maintenance expenses due to the overall growth of the Partnership and the increased portfolio of buildings associated with this growth. As a result, earnings from Service Operations increased from $3.6 million for the three months ended June 30, 1999, to $11.0 million for the three months ended June 30, 2000. - 16 - Other Income and Expenses ------------------------- Interest income increased from $546,000 for the three months ended June 30, 1999, to $2.3 million for the same period in 2000 primarily through earnings on funds deposited in tax deferred exchange escrows of $1.6 million. The Partnership has a disposition strategy to pursue favorable opportunities to dispose of real estate assets that no longer meet long-term investment objectives of the Partnership, which resulted in net sales proceeds of $50.5 million and a net gain of $3.4 million during the three months ended June 30, 2000. In conjunction with this disposition strategy, included in net real estate investments are 47 buildings with a net book value of $318.7 million which were classified as held for sale by the Partnership at June 30, 2000. The Partnership expects to complete these and other dispositions and use the proceeds to fund future investments in real estate assets. Net Income Available for Common Unitholders ------------------------------------------- Net income available for common unitholders for the three months ended June 30, 2000, was $52.4 million compared to net income available for common unitholders of $32.7 million for the three months ended June 30, 1999. This increase results primarily from the operating result fluctuations in rental and service operations explained above. COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999 --------------------------------------------------------------------------- Rental Operations ----------------- Rental Operations revenue increased to $353.1 million from $209.1 million for the six months ended June 30, 2000, compared to the same period in 1999. This increase is primarily due to the increase in the number of in-service properties during the respective periods. As of June 30, 2000, the Partnership had 886 properties in service compared to 486 properties at June 30, 1999. The following summary of the Partnership's acquisition and development activity since January 1, 1999: Square Buildings Feet --------- ------ Properties owned as of: January 1, 1999 453 52,028 Weeks merger 335 28,569 Acquisitions 30 2,867 Developments placed in service 68 10,903 Dispositions (21) (1,890) Building remeasurements - 25 --- ------ December 31, 1999 865 92,502 Acquisitions 2 169 Developments placed in service 38 6,587 Dispositions (19) (3,434) Building remeasurements - 7 --- ------ June 30, 2000 886 95,831 === ====== - 17 - Rental property, real estate tax and depreciation and amortization expenses increased for the six months ended June 30, 2000, compared to the same period in 1999 due to the increase in the number of in- service properties during the respective periods. The $35.8 million increase in interest expense is primarily attributable to higher outstanding debt balances associated with the financing of the Partnership's investment activities. The increased balances include $450 million of unsecured debt issued in 1999, the assumption of $185 million of secured debt and $287 million of unsecured debt in the merger with Weeks Corporation in July 1999, and increased borrowings on the Partnership's lines of credit. These higher borrowing costs were partially offset by the capitalization of interest on increased property development activities. As a result of the above-mentioned items, earnings from Rental Operations increased $34.0 million from $76.0 million for the six months ended June 30, 1999, to $110.0 million for the six months ended June 30, 2000. Service Operations ------------------ Service Operations revenues increased by $17.9 million from $21.2 million for the six months ended June 30, 1999, to $39.1 million for the six months ended June 30, 2000, primarily as a result of increases in construction and development income from increased third party construction. Service Operations operating expenses increased from $12.5 million for the six months ended June 30, 1999, to $22.8 million for the six months ended June 30, 2000, primarily due to increases in payroll and maintenance expenses due to the overall growth of the Partnership and the increased portfolio of buildings associated with this growth. As a result, earnings from Service Operations increased from $8.6 million for the six months ended June 30, 1999, to $16.3 million for the six months ended June 30, 2000. Other Income and Expenses ------------------------- Interest income increased from $1.1 million for the six months ended June 30, 1999, to $3.9 million for the same period in 2000 primarily through earnings on funds deposited in tax deferred exchange escrows of $2.5 million. The Partnership has a disposition strategy to pursue favorable opportunities to dispose of real estate assets that no longer meet long-term investment objectives of the Partnership, which resulted in net sales proceeds of $214.3 million and a net gain of $18.1 million during the six months ended June 30, 2000. - 18 - Net Income Available for Common Unitholders ------------------------------------------- Net income available for common unitholders for the six months ended June 30, 2000, was $108.7 million compared to net income available for common unitholders of $63.6 million for the six months ended June 30, 1999. This increase results primarily from the operating result fluctuations in rental and service operations explained above. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities totaling $174.6 million and $82.6 million for the six months ended June 30, 2000 and 1999, respectively, represents the primary source of liquidity to fund distributions to unitholders and the other minority interests and to fund recurring costs associated with the renovation and re- letting of the Partnership's properties. Net cash used by investing activities totaling $258.5 million and $323.0 million for the six months ended June 30, 2000 and 1999, 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 net of proceeds received from property sales. Net cash provided by financing activities totaling $106.8 million and $401.9 million for the six months ended June 30, 2000 and 1999, respectively, is comprised of debt and equity issuances, net of distributions to unitholders and minority interests and repayments of outstanding indebtedness. In the first six months of 2000, the Partnership received $13.9 million of net proceeds from the General Partner's issuance of common shares. The Partnership used the net proceeds to reduce amounts outstanding under the Partnership's lines of credit and to fund the development and acquisition of additional rental properties. In the first six months of 1999, the Partnership received $37.9 million of net proceeds from the General Partner's issuance of common shares and $96.5 million of net proceeds from the General Partner's preferred stock offering. The Partnership also issued $300.0 million of unsecured debt. The Partnership used the net proceeds to reduce amounts outstanding under the Partnership's lines of credit and to fund the development and acquisition of additional rental properties. The Partnership has the following lines of credit available: Borrowing Outstanding Capacity Maturity Interest at June 30, 2000 Description (in 000's) Date Rate (in 000's) ------------------------ ---------- ---------- ----------- --------------- Unsecured Line of Credit $450,000 April 2001 LIBOR + .70% $428,000 Unsecured Line of Credit $300,000 June 2001 LIBOR + .90% $ 35,000 Secured Line of Credit $150,000 January 2003 LIBOR + 1.05% $ 40,228 The lines of credit are used to fund development and acquisition of additional rental properties and to provide working capital. The $450 million line of credit allows the Partnership an option to obtain borrowings from the financial institutions that participate in the line of credit at rates lower than the stated interest rate, subject to certain restrictions. Amounts outstanding on the line of credit at June 30, 2000 are at LIBOR + .57% to .70%. - 19 - The General Partner and the Partnership currently have on file Form S-3 Registration Statements with the Securities and Exchange Commission ("Shelf Registrations") which had remaining availability as of June 30, 2000, of approximately $792.9 million to issue common stock, preferred stock or unsecured debt securities. The General Partner and the Partnership intend to issue additional equity or debt under these Shelf Registrations as capital needs arise to fund the development and acquisition of additional rental properties. The General Partner and the Partnership also plan to file additional shelf registrations as necessary. The total debt outstanding at June 30, 2000, consists of notes totaling approximately $2.4 billion with a weighted average interest rate of 7.33% maturing at various dates through 2028. The Partnership has $1.8 billion of unsecured debt and $560.0 million of secured debt outstanding at June 30, 2000. Scheduled principal amortization of such debt totaled $5.6 million for the six months ended June 30, 2000. Following is a summary of the scheduled future amortization and maturities of the Partnership's indebtedness at June 30, 2000 (in thousands):
Future Repayments --------------------------------------- Weighted Average Scheduled Interest Rate of Year Amortization Maturities Total Future Repayments - ---- ------------ ---------- ---------- ----------------- 2000 $ 6,827 $ 62,318 $ 69,145 7.33% 2001 13,733 642,381 656,114 7.34% 2002 14,130 55,037 69,167 7.36% 2003 13,979 321,535 335,514 7.71% 2004 12,590 176,146 188,736 7.41% 2005 11,612 213,662 225,274 7.25% 2006 10,856 146,178 157,034 7.13% 2007 9,172 116,576 125,748 7.14% 2008 8,386 100,000 108,386 6.79% 2009 9,010 150,000 159,010 7.73% Thereafter 32,455 223,113 255,568 7.00% ------- --------- --------- Total $142,750 $2,206,946 $2,349,696 7.33% ======= ========= =========
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 depreciated operating property, plus operating depreciation and amortization, and adjustments for minority interest and unconsolidated companies (adjustments for minority interest and unconsolidated companies are calculated to reflect FFO on the same basis), is the industry standard for reporting the operations of real estate investment trusts. The following table reflects the calculation of the Partnership's FFO for the three and six months ended June 30 as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income available for common units $52,402 $ 32,702 $108,695 $ 63,631 Add back: Depreciation and amortization 39,766 20,935 79,545 41,389 Share of joint venture adjustments 1,633 1,241 3,050 2,756 Earnings from depreciated operating property sales (3,108) (1,084) (14,178) (3,398) ------ ------- ------- ------- FUNDS FROM OPERATIONS $90,693 $ 53,794 $177,112 $104,378 ====== ======= ======= ======= CASH FLOW PROVIDED BY (USED BY): Operating activities $97,171 $ 50,502 $174,565 $ 82,570 Investing activities (98,142) (155,907) (258,468) (322,976) Financing activities 4,518 238,520 106,792 401,876
- 20 - The increase in FFO for the three and six months ended June 30, 2000, compared to the three and six months ended June 30, 1999, 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. PART II - OTHER INFORMATION Item 1. Legal Proceedings -------------------------- None Item 2. Changes in Securities ------------------------------ None Item 3. Defaults upon Senior Securities ---------------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ At the annual meeting of the shareholders of the General Partner held on April 26, 2000, there were 126,494,219 common shares outstanding and entitled to vote on the following matters received the following votes: 1. The election of the five (5) Directors named on the proxy card; and That the General Partner did canvass the votes cast, and that the result of the vote taken at such Meeting was as follows: FOR AGAINST --- ------- Howard L. Feinsand 101,427,208 1,641,486 William O. McCoy 101,617,210 1,451,484 James E. Rogers 100,292,530 2,776,164 Thomas A. Senkbeil 101,405,154 1,663,540 Jay J. Strauss 93,952,013 9,116,681 2. A proposal to approve the amendment to the 1995 Stock Option Plan to increase the number of units authorized for issuance by 5,000,000 units: FOR AGAINST ABSTAIN --- ------- ------- 96,812,723 5,874,126 381,845 - 21 - Item 5. Other Information -------------------------- When used in this Form 10-Q, 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 the Partnership's Form 8-K Report as filed with the U.S. Securities and Exchange Commission on March 28, 1996 for additional information concerning these risks. Item 6. Exhibits and Reports on Form 8-K ------------------------------------------- Exhibits -------- Exhibit 15. Letter regarding unaudited interim financial information Exhibit 27. Financial Data Schedule (EDGAR Filing Only) Reports on Form 8-K ------------------- None. - 22 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DUKE-WEEKS REALTY LIMITED PARTNERSHIP Registrant Date: August 11, 2000 /s/ Thomas L. Hefner ------------------ ------------------------ President and Chief Executive Officer /s/ Darell E. Zink, Jr. -------------------------- Executive Vice President and Chief Financial Officer /s/ Dennis D. Oklak --------------------------- Executive Vice President and Chief Administrative Officer (Chief Accounting Officer) EX-15 2 0002.txt AUDITORS' LETTER Exhibit 15 The Partners Duke-Weeks Realty Limited Partnership Gentlemen: RE: Registration Statements Nos. 333-04695, 333-26845, 333-49911, and 333-37920 With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 26, 2000 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not considered a part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act. KPMG LLP Indianapolis, Indiana August 11, 2000 EX-27 3 0003.txt 2000 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DUKE-WEEKS REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES JUNE 30, 2000 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIREITY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JUN-30-2000 41,403 0 94,879 (2,253) 0 279,768 5,611,007 (308,841) 5,731,304 262,690 2,349,696 0 0 0 3,117,062 5,731,304 0 414,242 0 206,936 29,677 0 68,934 108,695 0 108,695 0 0 0 108,695 $0.75 $0.74
-----END PRIVACY-ENHANCED MESSAGE-----