-----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, KcrWupHSDuWBLKp48Cho+P8fsaIRq8UdZi5Mxq5wyUQoOqtBAupE6e4lvV+LrmYw zdaa2mJVk3RR0uY0bpAt6A== 0000912057-96-004950.txt : 19960325 0000912057-96-004950.hdr.sgml : 19960325 ACCESSION NUMBER: 0000912057-96-004950 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960322 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE REALTY LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0001003410 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-20625 FILM NUMBER: 96537334 BUSINESS ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: SUITE 1200 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 BUSINESS PHONE: 3175743631 MAIL ADDRESS: STREET 2: 8888 KEYSTONE CROSSING SUITE 1200 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 10-K405/A 1 10-K405/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (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, 1995 ----------------- 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 of (I.R.S. Employer Identification No.) incorporation or organization) 8888 Keystone Crossing, Suite 1200 Indianapolis, Indiana 46240 - ---------------------------------- --------------------------------- (Address of principal (Zip Code) executive offices) (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 $55,313,052 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, 1996. The number of Limited Partnership Units outstanding as of March 11, 1996 was 4,558,457. 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 25, 1996. TABLE OF CONTENTS FORM 10-K Item No. Page(s) - -------- ------- PART I 1. Business ................................................. 1 - 3 2. Properties ............................................... 3 - 10 3. Legal Proceedings ........................................ 11 4. Submission of Matters to a Vote of Security Holders ...... 11 PART II 5. Market for the Registrant's Equity and Related Security Holder Matters ........................ 11 6. Selected Financial Data .................................. 12 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .......... 13 - 20 8. Financial Statements and Supplementary Data .............. 20 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................. 20 PART III 10. Directors and Executive Officers of the Registrant ............................................. 21 - 23 11. Executive Compensation ................................... 23 12. Security Ownership of Certain Beneficial Owners and Management ......................................... 23 13. Certain Relationships and Related Transactions ........................................... 23 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .................................... 23 - 48 Signatures ......................................................... 49 - 50 Exhibits PART I ITEM 1. BUSINESS Duke Realty Limited Partnership (the "Partnership") was formed on October 4, 1993, when Duke Realty Investments, Inc. (the "Predecessor Company" or the "General Partner") contributed all of its properties and related assets and liabilities along with the net proceeds of $309.3 million from the issuance of an additional 14,000,833 shares through an offering (the "1993 Offering") to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a full-service commercial real estate firm operating in the Midwest. The General Partner was formed in 1985 and qualifies as a real estate investment trust under provisions of the Internal Revenue Code. The General Partner is the sole general partner of the Partnership currently owning 84.1% of the partnership interest ("Units"). The remaining 15.9% of the Partnership is owned by limited partners ("Limited Partner 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, 1995, it owned interests in a diversified portfolio of 215 rental properties comprising 23.5 million square feet (including 13 properties and two expansions comprising 3.4 million square feet under development). Substantially all of these properties are located in the Partnership's primary markets of Indianapolis, Indiana; Cincinnati, and Columbus, Ohio; Detroit, Michigan; St. Louis, Missouri and Nashville, Tennessee. In addition to its Rental Operations, the Partnership through its Service Operations provides, on a fee basis, leasing, management, construction, development and other real estate services for approximately 9.7 million square feet of properties owned by third-parties. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8 "Financial Statements and Supplementary Data" for financial information of these industry segments. The Partnership conducts its Service Operations through Duke Realty Services Limited Partnership and Duke Construction Limited Partnership, in which the Partnership has an 89% profits interest (after certain preferred returns on partners' capital accounts) and effective control of their operations. 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. The Partnership's corporate headquarters and executive offices are located in Indianapolis, Indiana. In addition, the Partnership has six regional offices located in Cincinnati, Ohio; Columbus, Ohio; Decatur, Illinois; Detroit, Michigan; Nashville, Tennessee and St. Louis, Missouri. The Partnership had 425 employees as of December 31, 1995. 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 interest, unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis). While management believes that FFO is a relevant measure of the Partnership's operating performance because it is widely used by industry analysts to measure the operating performance of equity REITs and real estate partnerships, such amount does not represent cash flow from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Partnership's operating performance, and is not indicative of cash available to fund all cash flow needs. As a fully integrated commercial real estate firm, the Partnership believes that its in-house leasing, management, development and construction services and the Partnership's significant base of commercially zoned and unencumbered land in existing business parks should give the Partnership a competitive advantage in its future development activities. - 1 - 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 1,150 acres of unencumbered land and its many business relationships with more than 2,600 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. Consistent with its business strategy of expanding in attractive Midwestern markets, the Partnership carefully analyzed the real estate investment potential of several major Midwestern metropolitan areas. Based on this analysis, management concluded that the St. Louis and Cleveland markets offer attractive real estate investment returns in the industrial and suburban office markets based on the following factors: (i) fragmented competition; (ii) strong real estate fundamentals; and (iii) favorable economic conditions. In 1995, the Partnership established a regional office in St. Louis and acquired 463,000 square feet of suburban office properties and 153 acres of land for the future development of industrial properties. In February 1996, the Partnership acquired a 782,000 square foot suburban office portfolio and the operating personnel of an independent real estate developer and operator in Cleveland. The Partnership intends to aggressively pursue the development and acquisition of additional rental properties in both the St. Louis and Cleveland markets. All of the Partnership's properties are located in areas that include competitive properties. Such properties are generally owned by institutional investors or other local real estate operators; however, no single competitor or small group of competitors is dominant in the Partnership's markets. The supply and demand of similar available rental properties may affect the rental rates the Partnership will receive on its properties. Based upon the current occupancy rates in the Partnership and competitive properties, the Partnership believes there will not be significant competitive pressure to lower rental rates in the near future. - 2 - 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. In October 1993, the General Partner received $309.3 million of the net proceeds from the issuance of common stock (the "1993 Offering"), in September 1994, the General Partner received $92.1 million of net proceeds from the issuance of common stock (the "1994 Offering"), in May 1995, the General Partner received $96.3 million of net proceeds from the issuance of common stock (the "1995 Offering") and in September 1995, the Partnership issued $150.0 million of unsecured debt (the "1995 Debt Offering"). All of the proceeds from the equity offerings were contributed to the Partnership by the General Partner. Based on these offerings, the General Partner and the Partnership have demonstrated their abilities to access the public markets as a source of capital to fund future growth. In addition, as discussed under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Partnership has a $150.0 million line of credit available for short-term fundings of development and acquisition of additional rental properties. The Partnership's debt to total market capitalization ratio (total market capitalization is defined as the total market value of all Units outstanding plus outstanding indebtedness) at March 8, 1996 was 38.3%. The Partnership's ratio of earnings to debt service and ratio of earnings to fixed charges for the year ended December 31,1995 were 2.79x and 2.38x, respectively. In computing the ratio of earnings to debt service, earnings have been calculated by adding debt service to income before gains or losses on property sales. Debt service consists of interest and recurring principal amortization (excluding maturities) and excludes amortization of debt issuance costs. In computing the ratio of earnings to fixed charges, earnings have been calculated by adding fixed charges, excluding capitalized interest, to income before gains or losses on property sales. Fixed charges consist (if applicable) of interest costs, whether expensed or capitalized, the interest component of rental expense, amortization of debt issuance costs and preferred stock distributions. 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 3% 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 The Partnership owns an interest in a diversified portfolio of 215 commercial properties encompassing approximately 23.5 million net rentable square feet located primarily in five states and approximately 1,150 acres of land for future development. (See Notes 4 and 5 to Financial Statements, Item 8 hereof.) The properties are described on the following pages. - 3 -
PERCENT OCCUPIED AT NAME/ OWNERSHIP PARTNERSHIP'S YEAR LAND AREA NET RENTABLE DECEMBER 31, LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995 - -------- --------- ------------- ----------- --------- ------------- ------------ INDUSTRIAL INDIANAPOLIS, INDIANA PARK 100 BUSINESS PARK Building 38 Fee 100% 1978 1.11 6,000 100% Building 48 Fee 50% (1) 1984 8.63 127,410 100% Building 49 Fee 50% (1) 1982 4.55 89,600 100% Building 50 Fee 50% (1) 1982 4.09 51,200 100% Building 52 Fee 50% (1) 1983 2.70 34,800 100% Building 53 Fee 50% (1) 1984 4.23 76,800 100% Building 54 Fee 50% (1) 1984 4.42 76,800 100% Building 55 Fee 50% (1) 1984 3.83 43,200 100% Building 56 Fee 50% (1) 1984 15.94 300,000 100% Building 57 Fee 50% (1) 1984 7.70 128,800 100% Building 58 Fee 50% (1) 1984 8.03 128,800 100% Building 59 Fee 50% (1) 1985 5.14 83,200 100% Building 60 Fee 50% (1) 1985 4.78 83,200 100% Building 62 Fee 50% (1) 1986 7.70 128,800 100% Building 67 Fee 50% (1) 1987 4.23 72,350 100% Building 68 Fee 50% (1) 1987 4.23 72,360 100% Building 71 Fee 50% (1) 1987 9.06 193,400 100% Building 74 Fee 10%-50% (2) 1988 12.41 257,400 100% Building 76 Fee 10%-50% (2) 1988 5.10 81,695 100% Building 78 Fee 10%-50% (2) 1988 21.80 512,777 100% Building 79 Fee 100% 1988 4.47 66,000 100% Building 80 Fee 100% 1988 4.47 66,000 100% Building 83 Fee 100% 1989 5.34 96,000 100% Building 84 Fee 100% 1989 5.34 96,000 100% Building 85 Fee 10%-50% (2) 1989 9.70 180,100 100% Building 89 Fee 10%-50% (2) 1990 11.28 311,600 100% Building 91 Fee 10%-50% (2) 1990 7.53 144,000 80% Building 92 Fee 10%-50% (2) 1991 4.38 45,917 100% Building 95 Fee 100% 1993 15.23 336,000 100% Building 96 Fee 100% 1994 27.69 553,900 100% Building 97 Fee 100% 1994 13.38 280,800 100% Building 98 Fee 100% 1968 37.34 508,306 100% Building 99 Fee 50% (3) 1994 18.00 364,800 100% Building 100 Fee 100% 1995 7.00 117,500 100% Building 101 Fee 50% (1) 1983 4.37 45,000 86% Building 105 Fee 50% (1) 1983 4.64 41,400 100% Building 106 Fee 50% (1) 1978 4.64 41,400 94% Building 107 Fee 100% 1984 3.56 58,783 97% Building 108 Fee 50% (1) 1983 6.36 60,300 81% Building 109 Fee 100% 1985 4.80 46,000 100% Building 113 Fee 50% (1) 1987 6.20 72,000 100% Building 114 Fee 50% (1) 1987 6.20 56,700 98% Building 117 Fee 10%-50% (2) 1988 13.36 135,600 100% Building 120 Fee 10%-50% (2) 1989 4.54 54,982 100% Building 122 Fee 100% 1990 6.17 73,274 100% Building 125 Fee 100% (4) 1994 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% PARK FLETCHER Building 2 Fee 50% (1) 1970 1.31 20,160 0% Building 4 Fee 50% (1) 1974 1.73 23,000 100% Building 6 Fee 50% (1) 1971 3.13 36,180 85% 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 66% Building 22 Fee 50% (1) 1983 2.96 48,635 100% - 4 - PERCENT OCCUPIED AT NAME/ OWNERSHIP PARTNERSHIP'S YEAR LAND AREA NET RENTABLE DECEMBER 31, LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995 - -------- --------- ------------- ----------- --------- ------------- ------------ Building 26 Fee 50% (1) 1983 2.91 28,340 100% Building 27 Fee 25% (1) 1985 3.01 39,178 100% Building 28 Fee 25% (1) 1985 7.22 93,880 90% Building 29 Fee 50% (1) 1987 7.16 92,044 83% 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 64% SHADELAND STATION Buildings 204 & 205 Fee 100% 1984 4.09 48,600 100% HUNTER CREEK BUSINESS PARK Building 1 Fee 10%-50% (2) 1989 5.97 86,500 100% Building 2 Fee 10%-50% (2) 1989 8.86 202,560 87% HILLSDALE TECHNECENTER Building 1 Fee 50% (1) 1986 9.16 73,436 90% 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 98% Building 6 Fee 100% 1987 4.25 64,000 100% Franklin Road Business Center Fee 100% 1962, 1971, 1974 28.00 367,065 90% Palomar Business Center Fee 100% 1973 4.50 99,350 100% Nampac Fee 100% 1974 6.20 83,200 100% CARMEL, INDIANA HAMILTON CROSSING Building 1 Fee 100% 1989 4.70 51,825 93% GREENWOOD, INDIANA SOUTH PARK BUSINESS CENTER Building 2 Fee 100% 1990 7.10 86,806 92% CINCINNATI, OHIO PARK 50 TECHNECENTER Building 20 Fee 100% 1987 8.37 96,000 100% Building 25 Fee 100% 1989 12.20 78,328 89% GOVERNOR'S POINTE 4700 Building Fee 100% 1987 5.51 76,400 94% 4800 Building Fee 100% 1989 7.07 80,000 92% 4900 Building Fee 100% 1987 9.41 76,400 100% WORLD PARK Building 5 Fee 100% 1987 5.00 59,700 79% 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 14.60 192,000 100% Building 9 Fee 100% 1989 4.47 58,800 84% 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% - 5 - PERCENT OCCUPIED AT NAME/ OWNERSHIP PARTNERSHIP'S YEAR LAND AREA NET RENTABLE DECEMBER 31, LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995 - -------- --------- ------------- ----------- --------- ------------- ------------ ENTERPRISE BUSINESS PARK Building 1 Fee 100% 1990 7.52 87,400 85% Building 2 Fee 100% 1990 7.52 84,940 97% Building A Fee 100% 1987 2.65 20,888 100% Building B Fee 100% 1988 2.65 34,940 95% Building D Fee 100% 1989 5.40 60,322 100% TRI-COUNTY BUSINESS PARK Xetron Fee 10% (5) 1994 29.00 100,193 100% FAIRFIELD BUSINESS CENTER Building D Fee 100% 1990 3.23 40,223 89% Building E Fee 100% 1990 6.07 75,600 83% OTHER INDUSTRIAL-CINCINNATI U.S. Post Office Building Fee 40% (6) 1992 2.60 57,886 100% University Moving Fee 100% 1991 4.95 70,000 100% COLUMBUS, OHIO Pet Foods Building Fee 100% 1993 16.22 276,000 100% MBM Building Fee 100% 1978 3.98 83,000 100% South Pointe A Fee 100% 1995 14.06 293,824 70% HEBRON, KENTUCKY SOUTHPARK BUSINESS CENTER Building 1 Fee 100% 1990 7.90 96,000 57% Building 3 Fee 100% 1991 10.79 192,000 87% CR Services Fee 100% 1994 22.50 214,840 100% Redken Laboratories Fee 100% 1994 28.79 166,400 100% LOUISVILLE, KENTUCKY Dayco Fee 50% (1) 1995 30.00 282,539 100% DECATUR, ILLINOIS PARK 101 BUSINESS CENTER Building 3 Fee 100% 1979 5.76 75,600 80% Building 8 Fee 100% 1980 3.16 50,400 95% NASHVILLE, TENNESSEE HAYWOOD OAKS TECHNECENTER Building 2 Fee 100% 1988 2.94 50,400 91% Building 3 Fee 100% 1988 2.94 52,800 100% Building 4 Fee 100% 1988 5.23 46,800 83% 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 57% Greenbriar Business Park Fee 100% 1986 10.73 134,759 96% Keebler Building Fee 100% 1985 4.39 36,150 100% MILWAUKEE, WISCONSIN S.F. Music Box Building Fee 33% (7) 1993 8.90 153,600 100% OFFICE INDIANAPOLIS, INDIANA PARK 100 BUSINESS PARK Building 34 Fee 100% 1979 2.00 22,272 93% Building 116 Fee 100% 1988 5.28 35,700 91% Building 118 Fee 100% 1988 6.50 35,700 100% Building 119 Fee 100% 1989 6.50 53,300 100% CopyRite Building Fee 50% (8) 1992 3.88 48,000 100% - 6 - PERCENT OCCUPIED AT NAME/ OWNERSHIP PARTNERSHIP'S YEAR LAND AREA NET RENTABLE DECEMBER 31, LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995 - -------- --------- ------------- ----------- --------- ------------- ------------ WOODFIELD AT THE CROSSING Two Woodfield Crossing Fee 100% 1987 7.50 117,818 94% Three Woodfield Crossing Fee 100% 1989 13.30 259,777 94% PARKWOOD CROSSING One Parkwood Fee 100% 1989 5.93 108,281 100% SHADELAND STATION 7240 Shadeland Station Fee 67% (9) 1985 2.14 45,585 95% 7330 Shadeland Station Fee 100% 1988 4.50 42,619 100% 7340 Shadeland Station Fee 100% 1989 2.50 32,235 100% 7351 Shadeland Station Fee 100% 1983 2.14 27,740 98% 7369 Shadeland Station Fee 100% 1989 2.20 15,551 100% 7400 Shadeland Station Fee 100% 1990 2.80 49,544 100% KEYSTONE AT THE CROSSING F.C. Tucker Building (10) Fee/Ground 100% 1978 N/A 4,840 100% Lease 3520 Commerce Crossing (11) Ground/Bldg. 100% 1976 N/A 30,000 100% Lease 8465 Keystone Fee 100% 1983 1.31 28,298 92% CARMEL, INDIANA CARMEL MEDICAL CENTER Building I (12) Fee/Ground 100% 1985 N/A 40,060 87% Lease Building II (12) Fee/Ground 100% 1989 N/A 39,973 91% Lease GREENWOOD, INDIANA SOUTH PARK BUSINESS CENTER Building 1 Fee 100% 1989 5.40 39,715 100% Building 3 Fee 100% 1990 3.25 35,900 95% St. Francis Medical Fee/Ground 100% 1995 N/A 95,579 75% Building(13) Lease Community MOB Fee 100% 1995 4.00 38,193 100% CINCINNATI, OHIO GOVERNOR'S HILL 8600 Governor's Hill Fee 100% 1986 10.79 200,584 93% 8700 Governor's Hill Fee 100% 1985 4.98 58,617 100% 8790 Governor's Hill Fee 100% 1985 5.00 58,177 72% 8800 Governor's Hill Fee 100% 1985 2.13 28,700 100% GOVERNOR'S POINTE 4605 Governor's Pointe Fee 100% 1990 8.00 175,485 100% 4705 Governor's Pointe Fee 100% 1988 7.50 140,984 98% 4770 Governor's Pointe Fee 100% 1986 4.50 76,037 88% PARK 50 TECHNECENTER SDRC Building Fee 100% 1991 13.00 221,215 100% Building 17 Fee 100% 1985 8.19 70,644 91% DOWNTOWN CINCINNATI 311 Elm Street (14) Ground/Bldg. 100% 1902/1986 (15) N/A 90,127 100% Lease 312 Plum Street Fee 100% 1987 .69 230,489 89% 312 Elm Street Fee 100% 1992 1.10 378,786 92% KENWOOD COMMONS Building I Fee 50% (16) 1986 2.09 46,470 99% Building II Fee 50% (16) 1986 2.09 46,434 90% OTHER OFFICE - CINCINNATI Triangle Office Park Fee 100% 1965/1985 (17) 15.64 172,650 61% Fidelity Drive Building Fee 100% 1972 8.34 38,000 100% Tri-County Office Park Fee 100% 1971, 1973,1982 (18) 11.27 102,166 81% - 7 - PERCENT OCCUPIED AT NAME/ OWNERSHIP PARTNERSHIP'S YEAR LAND AREA NET RENTABLE DECEMBER 31, LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995 - -------- --------- ------------- ----------- --------- ------------- ------------ 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 83,971 100% 4700 Lakehurst (Indiana Insurance) Fee 100% 1994 3.86 49,600 100% Sterling 2 Fee 100% 1995 3.33 57,660 100% John Alden Fee 100% 1995 6.51 101,200 100% Cardinal Health Fee 100% 1995 10.95 132,854 100% Veterans Administration Clinic Fee 100% 1994 4.98 118,000 100% LIVONIA, MICHIGAN SEVEN MILE CROSSING 38705 Seven Mile (19) Fee/Ground 100% 1988 N/A 113,066 95% Lease 38701 Seven Mile (19) Fee/Ground 100% 1989 N/A 132,153 85% Lease ST. LOUIS, MISSOURI Laumeier I Fee 100% 1987 4.29 113,852 99% Laumeier II Fee 100% 1988 4.64 110,541 100% Westview Place Fee 100% 1988 2.69 114,722 98% Westmark Fee 100% 1987 6.95 123,889 100% RETAIL INDIANAPOLIS, INDIANA PARK 100 BUSINESS PARK Building 121 Fee 100% 1989 2.27 19,716 76% Building 32 Fee 100% 1978 .82 14,504 89% CASTLETON CORNER Michael's Plaza Fee 100% 1984 4.50 46,374 98% Cub Plaza Fee 100% 1986 6.83 60,136 89% FORT WAYNE, INDIANA Coldwater Crossing Fee 100% 1990 35.38 246,365 95% 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 50% DAYTON, OHIO Sugarcreek Plaza Fee 100% 1988 17.46 77,940 92% CINCINNATI, OHIO Governor's Plaza Fee 100% 1990 35.00 181,493 100% King's Mall Shopping Center I Fee 100% 1990 5.68 52,661 100% King's Mall Shopping Center II Fee 100% 1988 8.90 67,725 85% Steinberg's Fee 100% 1993 1.90 21,008 100% Park 50 Plaza Fee 100% 1989 2.20 18,000 42% Kohl's Fee 100% 1994 12.00 80,684 100% Sports Unlimited Fee 100% 1994 7.00 67,148 100% Eastgate Square (20) Fee 100% 1990 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% ELLISVILLE, MISSOURI Ellisville Plaza (21) Fee 100% 1987 3.70 32,754 96% - 8 - PERCENT OCCUPIED AT NAME/ OWNERSHIP PARTNERSHIP'S YEAR LAND AREA NET RENTABLE DECEMBER 31, LOCATION INTEREST OWNERSHIP CONSTRUCTED (ACRES) AREA (SQ.FT.) 1995 - -------- --------- ------------- ----------- --------- ------------- ------------ BLOOMINGTON, ILLINOIS Lakewood Plaza Fee 100% 1987 11.23 87,010 98% CHAMPAIGN, ILLINOIS Market View Fee 100% 1985 8.50 86,553 100% LIVONIA, MICHIGAN Cooker Restaurant Ground 100% N/A N/A N/A 100% Lease (22) COLUMBUS, OHIO Galyans Trading Company Fee 100% 1994 4.90 74,636 100% Best Buy Fee 100% 1995 7.00 68,400 85% UNDER CONSTRUCTION EXPECTED IN-SERVICE PERCENT DATE PRE-LEASED ---------- ---------- INDUSTRIAL INDIANAPOLIS, INDIANA PARK 100 BUSINESS PARK Building 128 Fee 100% February 1996 14.40 322,000 100% Thomson Consumer Electronics Fee 100% (23) February 1996 52.00 599,040 100% LEBANON, INDIANA American Air Filter Fee 100% April 1996 10.40 153,600 100% Little, Brown and Company Fee 100% (23) September 1996 31.60 500,455 100% COLUMBUS, OHIO South Pointe B Fee 100% April 1996 13.16 307,200 0% OFFICE INDIANAPOLIS, INDIANA Two Parkwood Fee 100% February 1996 5.96 93,300 88% CINCINNATI, OHIO Ohio National Fee 100% September 1996 9.00 212,125 67% COLUMBUS, OHIO TUTTLE CROSSING Nationwide Fee 100% July 1996 17.90 315,102 100% Sterling 3 Fee 100% September 1996 3.56 64,500 100% MIAMI, FLORIDA John Alden Fee 100% January/March 1996 7.81 251,316 100% RETAIL CINCINNATI, OHIO Bigg's Supercenter Fee 100% August 1996 14.00 160,000 100% Fountain Place Fee 25% September 1997 1.98 209,585 79% COLUMBUS, OHIO TUTTLE CROSSING WalMart Fee 100% April 1996 13.00 149,429 100% -------- ---------- 1,632.23 23,520,898 -------- ---------- -------- ----------
- 9 - (1) These buildings are owned by a limited liability company in which the Partnership is a 50% partner. The Partnership shares in the profit or loss from such buildings in accordance with the Partnership's ownership interest. This limited liability company owns a 50% general partnership interest in Park Fletcher Buildings 27 and 28 and shares in the profit or loss from these buildings in accordance with the limited liability company's interest. (2) These buildings are owned by a partnership in which the Partnership is a partner. The Partnership owns a 10% capital interest in the partnership and receives a 50% interest in the residual cash flow after payment of a 9% preferred return to the other partner on its capital interest. (3) This building is owned in partnership with a tenant of the building. The Partnership owns a 50% general partnership interest in the partnership. The Partnership shares in the profit or loss from the building in accordance with such ownership interest. (4) The square footage of this building and the percent occupied includes a 100% pre-leased expansion of 97,080 square feet which is under construction as of December 31, 1995. (5) This building is owned by a partnership in which the Partnership owns a 10% limited partnership interest. The Partnership shares in the cash flow from the building in accordance with such ownership interest. (6) 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. (7) 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. (8) 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. (9) 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 partnership interest. (10) The Partnership owns the building and has a leasehold interest in the land underlying this building with a lease term expiring October 31, 2067. (11) The Partnership has a leasehold interest in this building with a lease term expiring May 9, 2006. (12) The Partnership owns these buildings and has a leasehold interest in the land underlying these buildings, with the lease term expiring November 16, 2043. (13) The Partnership owns this building and has a leasehold interest in the land underlying this building with a lease term expiring August 2045, with two 20-year options. (14) The Partnership has a leasehold interest in the building and the underlying land with a lease term expiring December 31, 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 the Partnership's 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 these buildings and has a leasehold interest in the land underlying these buildings, with a lease term expiring May 31, 2057. (20) The square footage of this building and the percent occupied includes a 100% pre-leased expansion of 13,500 square feet which is under construction as of December 31, 1995. (21) This building was sold in January 1996. (22) The Partnership has a leasehold interest in the land with the lease term expiring May 31, 2057 and subleases the land to the tenant with the sublease term expiring on August 31, 2009. (23) These two buildings will be contributed to the limited liability company referenced in footnote (1) upon completion. - 10 - 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, 1995. PART II ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED SECURITY HOLDER MATTERS There is no established public trading market for the Limited Partner Units. Set forth below are the cash distributions declared during each quarter. Comparable cash distributions are expected in the future. As of February 12, 1996, there were 88 record holders of Limited Partner Units. On February 1, 1996, the Partnership declared a quarterly cash distribution of $0.49 per Unit payable on February 29, 1996 to Unitholders of record on February 15, 1996.
1995 DISTRIBUTIONS 1994 DISTRIBUTIONS ------------------- ------------------- QUARTER ENDED - ------------- December 31 $ .49 $ .47 September 30 .49 .47 June 30 .47 .45 March 31 .47 .45
- 11 - ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following sets forth selected consolidated financial and operating information on a historical basis for the Partnership for the years ended December 31, 1995, 1994, 1993, 1992, and 1991. The following information should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the Partnership and Item 8, the "Financial Statements and Supplementary Data" included in this Form 10-K. The historical operating data for the years ended December 31, 1995, 1994 and 1993 has been derived from the historical financial statements of the Partnership and the Predecessor Company. The historical operating data for the years ended 1992 and 1991 has been derived from the historical financial statements of the Predecessor Company.
(in thousands, except per share amounts) 1995 1994 1993 1992 1991 ----------- --------- --------- ---------- ---------- RESULTS OF OPERATIONS: Revenues: Rental Operations $ 113,641 $ 89,299 $ 33,648 $ 17,675 $ 16,789 Service Operations 17,777 18,473 5,654 - - ----------- --------- --------- ---------- ---------- TOTAL REVENUES $ 131,418 $ 107,772 $ 39,302 $ 17,675 $ 16,789 ----------- --------- --------- ---------- ---------- ----------- --------- --------- ---------- ---------- NET INCOME (LOSS) $ 41,600 $ 32,968 $ 6,670 $ (653) $ (1,607) ----------- --------- --------- ---------- ---------- ----------- --------- --------- ---------- ---------- PER UNIT DATA (1): Net Income (Loss) per Unit $ 1.55 $ 1.54 $ 1.02 $ (.32) $ (.79) Distributions Declared per Unit 1.92 1.84 1.68 1.68 1.68 Weighted Average Units Outstanding 26,791 21,467 6,540 2,045 2,045 BALANCE SHEET DATA: Total Assets $ 1,046,532 $ 775,884 $ 633,885 $ 121,881 $ 126,917 Total Debt $ 454,820 $ 298,640 $ 248,433 $ 80,707 $ 80,808 Total Partners' Equity $ 540,221 $ 447,298 $ 349,695 $ 36,129 $ 40,220 Total Units Outstanding at end of year (1) 28,303 24,384 20,478 2,045 2,045 OTHER DATA: Funds From Operations (2) $ 66,764 $ 49,360 $ 13,615 $ 3,764 $ 2,420 Cash Flow Provided by (Used by): Operating activities $ 78,637 51,856 14,363 5,453 2,451 Investing activities (289,569) (116,227) (315,025) (710) (845) Financing activities 176,187 94,733 310,717 (4,952) (1,387)
(1) All such information has been adjusted for the 1 for 4.2 reverse stock split of the Predecessor Company effected prior to the completion of the 1993 Offering. (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. - 12 - 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 portfolios 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 compared to other regions of the United States 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 overall occupancy rate of its in-service portfolio has exceeded 93% the last two years and was at 95.4% at December 31, 1995. The Partnership expects to continue to maintain its overall occupancy levels at comparable levels and also expects to be able 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. The following table sets forth information regarding the Partnership's in- service portfolio of rental properties as of December 31, 1995 and 1994 (in thousands, except percentages):
Total Percent of Square Feet Total Square Feet Percent Occupied ----------------------- ---------------------- ----------------------- Type 1995 1994 1995 1994 1995 1994 ------ -------- ------- ------- ------- ------- ------- INDUSTRIAL Service Centers 2,802 2,051 14.0% 15.9% 94.7% 93.4% Bulk 10,890 5,573 54.3% 43.2% 96.5% 97.5% OFFICE Suburban 3,874 3,090 19.3% 24.0% 94.7% 90.5% CBD 699 699 3.5% 5.4% 92.3% 87.2% Medical 332 198 1.6% 1.5% 90.3% 100.0% RETAIL 1,476 1,285 7.3% 10.0% 93.8% 95.8% -------- ------- ------- ------- ------- ------- Total 20,073 12,896 100.0% 100.0% 95.4% 94.5% -------- ------- ------- ------- ------- ------- -------- ------- ------- ------- ------- -------
-13- RESULTS OF OPERATIONS Following is a summary of the Partnership's operating results and property statistics for each of the years in the three-year period ended December 31, 1995 (in thousands, except number of properties and per Unit amounts):
1995 1994 1993 ---- ---- ---- Rental Operations revenue $ 113,641 $ 89,299 $ 33,648 Service Operations revenue 17,777 18,473 5,654 Earnings from Rental Operations 36,662 26,580 5,483 Earnings from Service Operations 5,741 6,308 1,536 Operating income 40,526 30,743 6,282 Minority interest in earnings 911 1,088 293 Net income 41,600 32,968 6,670 Weighted average units outstanding 26,791 21,467 6,540 Net income per unit $ 1.55 $ 1.54 $ 1.02 Number of in-service properties at end of year 202 128 113 In-service square footage at end of year 20,073 12,896 10,850 Under development square footage at year end 3,448 2,362 1,270
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994 RENTAL OPERATIONS The Partnership increased its in-service portfolio of rental properties from 128 properties comprising 12.9 million square feet at December 31, 1994 to 202 properties comprising 20.1 million square feet at December 31, 1995 through the acquisition of 60 properties totaling 4.6 million square feet and the placement in service of 17 properties and two building expansions totaling 3.2 million square feet developed by the Partnership. The Partnership also disposed of three properties totaling 570,000 square feet. These 74 net additional rental properties primarily account for the $24.3 million increase in revenues from Rental Operations from 1994 to 1995. The increase from 1994 to 1995 in rental expenses, real estate taxes and depreciation and amortization expense is also a result of the additional 74 in- service rental properties. Interest expense increased by approximately $2.6 million. This increase was primarily because of interest expense on the $150 million of unsecured notes which the Partnership issued in September 1995. These notes bear interest at an effective rate of 7.46%. The proceeds from these notes were used to (i) retire the outstanding balance of $35.0 million on the Partnership's line of credit; (ii) retire $39.5 million of mortgage debt which had a weighted average interest rate of 6.08% and was scheduled to reset at a market interest rate in the fourth quarter of 1995; and (iii)fund development and acquisition of additional rental properties during the fourth quarter of 1995. As a result of the above-mentioned items, earnings from rental operations increased $10.1 million from $26.6 million for the year ended December 31, 1994 to $36.7 million for the year ended December 31, 1995. Management expects occupancy of the in-service property portfolio to remain stable because (i) only 10.3% and 8.2% of the Partnership's occupied square footage is subject to leases expiring in 1996 and 1997, respectively, and (ii) the Partnership's renewal percentage averaged 65%, 73% and 65% in 1995, 1994 and - 14 - 1993, respectively. The following table reflects the Partnership's lease expiration schedule as of December 31, 1995, including properties under development, 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 ----------------------- ---------------------- ----------------------- --------------------- Year of Square Square Square Square Expiration Feet Dollar Feet Dollar Feet Dollar Feet Dollar - ----------- ----------- --------- ---------- -------- ----------- --------- --------- --------- 1996 1,825 $ 7,232 382 $ 3,662 83 $ 838 2,290 $ 11,732 1997 1,269 5,851 458 4,648 92 1,031 1,819 11,530 1998 2,262 8,466 549 5,631 109 1,165 2,920 15,262 1999 1,862 7,724 626 6,602 125 1,280 2,613 15,607 2000 1,849 7,238 441 5,454 124 1,442 2,414 14,134 2001 1,490 5,696 293 3,148 60 633 1,843 9,477 2002 265 1,115 595 6,333 88 792 948 8,240 2003 40 442 131 1,627 36 329 207 2,399 2004 810 3,128 89 1,043 13 136 912 4,306 2005 703 2,556 498 6,494 160 1,487 1,361 10,536 Thereafter 2,460 7,582 1,413 19,060 981 6,983 4,854 33,625 ------ ------- ------ ------- ------ ------- ------- -------- Total Leased 14,835 $57,030 5,475 $63,702 1,871 $16,116 22,181 $136,848 ------ ------- ------ ------- ------ ------- ------- ------- ------ ------- ------ ------- ------ ------- ------- ------- Total Portfolio 15,672 5,841 2,008 23,521 ------ ------ ------ ------- ------ ------ ------ ------- Annualized net effective rent per square foot $ 3.84 $ 11.63 $ 8.61 $ 6.16 ------- ------- ------- ------- ------- ------- ------- -------
This stable occupancy, along with stable 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 placement in-service of the 3.4 million square feet of properties under development at December 31, 1995 over the next seven quarters; (ii) the development and acquisition of additional rental properties in its primary markets; and (iii) the expansion into other attractive Midwestern markets. SERVICE OPERATIONS Earnings from Service Operations decreased by approximately $600,000 in 1995 as compared to 1994. This decrease results primarily from a decrease in construction fees even though total construction volume remained consistent. This decrease in fees resulted from certain contracts with above-market fees in 1994 which were not obtained in 1995. Property management, maintenance and leasing fees remained consistent from 1994 to 1995. Payroll expense decreased from 1994 to 1995 as a result of the allocation of a greater portion of these costs to the Partnership's Rental Operations segment. Other operating expenses did not change materially. At December 31, 1995, the backlog of construction fees on signed construction contracts was $3.9 million as compared to $1.7 million at December 31, 1994. As a result of the acquisition by an unconsolidated subsidiary of the Partnership of 2.2 million square feet of managed property, the Partnership anticipates a slight decrease in management, leasing and maintenance fee revenues in 1996 as well as a decrease in the operating expenses of the segment. - 15 - OTHER INCOME (EXPENSE) Interest income increased from $1.1 million for the year ended December 31, 1994 to $1.7 million for the year ended December 31, 1995 as a result of the temporary short-term investment of excess proceeds from the 1995 Offering as well as the 1995 Debt Offering. As part of its October 1993 acquisition of Duke Associates, the Partnership acquired an option to purchase an interest in an entity which provided telecommunication services to tenants in properties owned and managed by the Partnership. At the time the option was acquired, the option was not considered to have value because of recurring net operating losses being incurred by such entity. Subsequent to the acquisition of the option, the entity made changes in its operations, principally entering into new contracts for the purchase of telecommunication services and the provision of billing services, which significantly improved its operating results. As a result of these improvements in operating results, the entity entered into an agreement to sell its telecommunications business to an unaffiliated third party at an amount significantly in excess of the Partnership's option price. The net proceeds from the sale were then loaned to the Partnership with a mortgage on certain property. The Partnership subsequently exercised its option to acquire the interest in this entity and recognized a gain of approximately $2.0 million based on the difference between its option price and the net proceeds received from the sale to the unaffiliated third-party. Such gain is included in earnings from property sales in 1994. NET INCOME Net income for the year ended December 31, 1995 was $41.6 million compared to net income of $33.0 million for the year ended December 31, 1994. This increase results primarily from the operating result fluctuations in rental and service operations explained above. COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993 RENTAL OPERATIONS As of December 31, 1992, the Predecessor Company owned 30 properties totaling approximately 2.0 million square feet. In October 1993, the Partnership acquired substantially all of the properties of Duke Associates, a full-service commercial real estate firm operating primarily in the Midwest. In connection with the acquisition, the Predecessor Company effected a 1 for 4.2 reverse stock split relating to its existing shares and subsequently issued an additional 14,000,833 shares of Common Stock through an offering (the "1993 Offering"). Substantially all of the approximately $309.3 million of net proceeds of the 1993 Offering were contributed to the Partnership and were used to repay property indebtedness of Duke Associates assumed by the Partnership as part of the acquisition. The Predecessor Company also contributed their 30 owned properties to the Partnership. The Partnership acquired 83 in-service properties as part of this transaction. The operating results of the acquired properties have been included in the Partnership's consolidated operating results subsequent to the date of acquisition. As a result of the acquisition in October 1993, the 1993 results of operations include nine months of operations of the Predecessor Company's 30 original property portfolio and three months of operations of the 113 property portfolio. Also, during 1994, the Partnership developed and placed in service and acquired a total of 15 properties to bring its total portfolio of in-service properties to 128 as of December 31, 1994. A full year of operations for the 113 properties as well as the addition of the 15 properties account for the increase in Rental Operation revenues and operating expenses from 1993 to 1994. - 16 - SERVICE OPERATIONS The Partnership acquired its Service Operations as part of its acquisition of Duke Associates in October 1993. Service Operation revenues and operating expenses subsequent to the date of acquisition are included in the Partnership's 1993 operations. The increase in Service Operation revenue, operating expenses and earnings from 1993 to 1994 results from the inclusion of a full year of such operations in 1994. GENERAL AND ADMINISTRATIVE General and administrative expense increased from 1993 to 1994 primarily as a result of the increase in the size of the Partnership through the acquisition of Duke Associates' Rental and Service Operations and the placement in-service of 15 developed or acquired properties in 1994. OTHER INCOME (EXPENSE) Interest income increased from 1993 to 1994 primarily as a result of an increase in temporary cash investments because of the increased size of the Partnership as well as the temporary short-term investment of excess proceeds from the 1994 Offering. Earnings from property sales increased from 1993 to 1994 primarily as a result of the gain recognized on the exercise by the Partnership of an option to acquire an interest in a telecommunications entity as discussed above under Other Income (Expense) in the comparison of 1994 to 1995. Minority interest in earnings of subsidiaries resulted from the acquisition of Duke Associates in October 1993. The increase from 1993 to 1994 results from allocation of a full year's income to the minority interests in 1994. NET INCOME Primarily as a result of the discussed above, net income increased from $6.7 million for the year ended December 31, 1993 to $33.0 million for the year ended December 31, 1994. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities totaling $78.6 million, $51.9 million and $14.4 million for the years ended December 31, 1995, 1994 and 1993, respectively, represents the primary source of liquidity to fund distributions to Unitholders and the 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 $289.6 million, $116.2 million and $315.0 million for the years ended December 31, 1995, 1994 and 1993, 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. Of the $315.0 million used in investing activities in 1993, $302.1 million related to acquisition of the Duke Associates' rental properties and service businesses. In 1994, $107.4 million was - 17 - invested in the development and acquisition of additional rental properties and $12.4 million was used for tenant improvements, leasing costs and other deferred assets. In 1995, the development and acquisition of additional rental properties increased to $251.0 million with $24.1 million being used for tenant improvements, costs and other deferred costs. In addition, in 1995, $16.7 million was invested in rental operations of a newly formed, 50% owned, joint venture which also included the contribution of rental property and undeveloped land with a carrying value of approximately $42.7 million. Net cash provided by financing activities totaling $176.2 million, $94.7 million and $310.7 million for the years ended December 31, 1995, 1994 and 1993, respectively, is comprised of debt and equity issuances net of distributions to unitholders and repayments of outstanding indebtedness. In 1993, the Partnership received $309.2 million from the 1993 Offering which was used primarily for the acquisition of Duke Associates. In 1994, the Partnership received $92.1 million from the 1994 Offering and $60.0 million from a seven- year mortgage loan. Of the $152.1 million of these proceeds, the Partnership used $60.0 million to repay the balance outstanding on the line of credit, $6.0 million to retire outstanding mortgage indebtedness, and the remainder primarily to fund development and acquisition of additional rental properties. In 1995, the Partnership received $96.3 million from the 1995 Offering and used $11.0 million to repay the balance outstanding on the line of credit and the remainder to fund development and acquisition of additional rental properties. The Partnership also received $150.0 million from the 1995 Debt Offering and used $39.5 million to retire outstanding mortgage indebtedness, $35.0 million to repay the balance outstanding on the line of credit, and the remainder 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. Following is an analysis of the Partnership's recurring capital expenditures (in thousands):
1995 1994 1993 --------- --------- --------- Tenant improvements $ 4,312 $ 3,056 $ 2,015 Leasing costs 3,519 2,407 636 Building improvements 757 474 136 --------- --------- --------- Total $ 8,588 $ 5,937 $ 2,787 --------- --------- --------- --------- --------- ---------
In March 1994, the Partnership obtained a $60 million secured credit facility which was available to fund development and acquisition of additional rental properties and to provide working capital as needed. In April 1995, the Partnership replaced the secured line of credit with a $100 million unsecured line of credit which matures in April 1998. Borrowings of $45 million under this line of credit as of December 31, 1995 bear interest at one month LIBOR plus 2.00%, which ranged from 7.7500% to 7.9375%. In January 1996, the Partnership increased the unsecured line of credit to $150 million and reduced the borrowing rate to LIBOR plus 1.625%. The current effective interest rate on the line of credit based on the 30-day LIBOR rate as of March 4, 1996 is 6.94%. 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, 1995 of approximately $330 million to issue additional common stock, preferred stock or unsecured debt securities. The General Partner and the Partnership intend to issue additional securities under such Shelf Registrations to fund the development and acquisition of additional rental properties. - 18 - The total debt outstanding at December 31, 1995 consists of notes totaling $454.8 million with a weighted average interest rate of 7.50% maturing at various dates through 2018. Scheduled principal amortization of such debt totaled $1.65 million for the year ended December 31, 1995. Following is a summary of the scheduled future amortization and maturities of the Partnership's indebtedness:
Weighted Average Interest Rate of Year Repayments Future Repayments ---- -------------------------------------------------- ------------------- (in thousands) Scheduled Amortization Maturities Total ------------ ---------- ------ 1996 $ 1,855 $ 59,619 $ 61,474 5.31% 1997 2,156 - 2,156 8.04% 1998 2,410 90,216 92,626 7.49% 1999 2,625 - 2,625 8.25% 2000 2,637 4,852 7,489 7.86% 2001 2,291 59,954 62,245 8.72% 2002 2,494 50,000 52,494 7.37% 2003 252 68,813 69,065 8.48% 2004 274 - 274 5.20% 2005 300 100,000 100,300 7.51% Thereafter 4,072 - 4,072 5.20% --------- -------- -------- Total $ 21,366 $433,454 $454,820 --------- -------- -------- --------- -------- --------
The 1996 maturities of $59.6 million indicated above occur in October through December. The Partnership currently intends to repay this debt through the use of the net proceeds from the issuance of either common or preferred equity by the General Partner or unsecured debt securities by the Partnership available under the Shelf Registrations. The Partnership estimates that if unsecured debt securities are issued, based on current market interest rates, the rate on such debt would increase by approximately 1.6%. Of the 1998 maturities, $45.0 million represents the outstanding balance as of December 31, 1995 on the Partnership's line of credit. The Partnership intends to pay regular quarterly distributions from net cash provided by operating activities. A quarterly distribution of $.49 per Unit was declared on February 1, 1996 which represents an annualized distribution of $1.96 per Unit. FUNDS FROM OPERATIONS Management believes that Funds From Operations ("FFO"), which is defined by the National Association of Real Estate Investment Trusts as net income or loss excluding gains or losses from debt restructuring and sales of property plus depreciation and amortization, and after adjustments for minority interest, unconsolidated partnerships and joint ventures (adjustments for minority interest, unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis), is the industry standard for reporting the operations of real estate investment trusts. - 19 - The following table reflects the calculation of the Partnership's FFO for the years ended December 31, as follows (in thousands):
1995 1994 1993 -------- -------- ------- Net income $ 41,600 $ 32,968 $ 6,670 Add back: Depreciation and amortization 23,118 16,785 7,075 Amortization of deferred financing costs and depreciation of non-rental real estate assets 1,918 1,453 327 Share of joint venture depreciation and amortization 411 352 60 Gain on property sales (283) (2,198) (517) -------- -------- ------- FUNDS FROM OPERATIONS $ 66,764 $ 49,360 $ 13,615 -------- -------- ------- -------- -------- ------- CASH FLOW PROVIDED BY (USED BY): Operating activities $ 78,637 $ 51,856 $ 14,363 Investing activities (289,569) (116,227) (315,025) Financing activities 176,187 94,733 310,717 The increase in FFO for the three year period results primarily from the increased in-service rental property portfolio as discussed above under "Results of Operations." The following table indicates components of such growth for each of the years ended December 31, as follows (in thousands): 1995 1994 1993 -------- -------- ------- Rental operations: Original portfolio $ 59,399 $ 58,201 $ 23,300 Development 10,668 2,240 - Acquisitions 12,014 2,463 - Investments in unconsolidated companies 1,121 1,407 357 Interest expense (21,462) (18,920) (10,334) -------- -------- ------- Net rental operations 61,740 45,391 13,323 Service operations, net of minority interest 4,767 5,389 1,277 Other, net 257 (1,420) (985) -------- -------- ------- FUNDS FROM OPERATIONS $ 66,764 $ 49,360 $ 13,615 -------- -------- -------- -------- -------- -------
In March 1995, NAREIT issued a clarification of its definition of FFO effective for years beginning after December 31, 1995. The clarification provides that amortization of deferred financing costs and depreciation of non-rental real estate assets are no longer to be added back to net income in arriving at FFO. The Partnership's FFO under the new method of calculation would have been $64.9 million, $47.9 million, and $13.3 million for the three years ended December 31, 1995, 1994, and 1993, respectively. While management believes that FFO is a relevant measure of the Partnership's operating performance because it is widely used by industry analysts to measure the operating performance of equity REITs and real estate partnerships, such amount does not represent cash flow from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Partnership's operating performance, and is not indicative of cash available to fund all cash flow needs. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data are included under Item 14 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. - 20 - PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership does not have any directors or officers. The information required by this Item for Directors and certain Executive Officers of the General Partner will be contained in a definitive proxy statement of Duke Realty Investments, Inc. which the Registrant anticipates will be filed no later than April 29, 1996, which proxy statement is incorporated herein by reference, and thus this part has been omitted in accordance with General Instruction G(3) to Form 10-K. The following information is provided regarding the executive officers of the General Partner who do not serve as Directors of the General Partner: GARY A. BURK Age 44, 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. ROSS C. FARRO Age 52, Vice President, Cleveland Group - Mr. Farro joined the Partnership in January 1996 and is responsible for the Cleveland activities of the Partnership. Prior to joining the Partnership, Mr. Farro was an independent real estate developer and operator. ROBERT D. FESSLER Age 38, Vice President, Ohio Industrial Group - Mr. Fessler joined the Partnership in 1987 and is responsible for the Cincinnati industrial activities of the Partnership. Prior to joining the Partnership, Mr. Fessler was a leasing representative with Trammel Crow. JOHN R. GASKIN Age 34, 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 38, Vice President of Acquisitions - Mr. Horn joined the Partnership in 1984. Mr. Horn is responsible for the acquisition activities of the Partnership and also oversees the Nashville and Michigan operations of the Partnership. DONALD J. HUNTER Age 36, Vice President, Columbus Group - Mr. Hunter joined the Partnership in 1989 and is responsible for the Columbus activities of the Partnership. Prior to joining the Partnership, Mr. Hunter was with Cushman and Wakefield, a national real estate firm. - 21 - STEVEN R. KENNEDY Age 39, Vice President of Construction Services - Mr. Kennedy joined the Partnership in 1986. Prior to that time, Mr. Kennedy was a Project Manager for Charles Pankow Builders, Inc. WAYNE H. LINGAFELTER Age 36, Vice President, Indiana Office Group - Mr. Lingafelter joined the Partnership in 1987 and is responsible for the Indiana office activities of the Partnership. Prior to that time, Mr. Lingafelter was with the management consulting firm of DRI, Inc. WILLIAM E. LINVILLE, III Age 41, Vice President, Indiana Industrial Group - Mr. Linville joined the Partnership in 1987 and is responsible for the Indianapolis 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 41, General Manager of Services Operations and President 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. DAVID P. MINTON Age 38, Vice President, St. Louis Group - Mr. Minton joined the Partnership in 1995 and is responsible for the St. Louis activities of the Partnership. Prior to joining the Partnership, Mr. Minton was Vice President of the Paragon Group, a national real estate development and management firm. MICHAEL L. MYRVOLD Age 40, Vice President, Retail Group - Mr. Myrvold joined the Partnership in 1995 and is responsible for retail activities of the Partnership. Prior to joining the Partnership, Mr. Myrvold was Vice President of Real Estate of the Melville Realty Co., Inc. JOHN M. NEMECEK Age 40, President of Asset and Property Management - Mr. Nemecek joined the Partnership in 1994. Prior to joining the Partnership, Mr. Nemecek was the Senior Vice President/Florida Division of Compass Real Estate. DENNIS D. OKLAK Age 42, Vice President and Treasurer - Mr. Oklak joined the Partnership in 1986 and has served as Tax Manager and Controller of Development. Prior to joining the Partnership, Mr. Oklak was a Senior Manager with the public accounting firm of Deloitte Haskins + Sells. JEFFREY G. TULLOCH Age 50, Vice President and General Manager, Cincinnati Group - Mr. Tulloch joined the Partnership in 1995 and is responsible for allCincinnati activities of the Partnership. Mr. Tulloch was Senior Vice President of the Galbreath Partnership before joining the Partnership. - 22 - Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the officers and directors of the General Partner, and persons who own more than 10% of the Limited Partner Units, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Such officers, directors and greater than 10% Unitholders are required by Securities and Exchange Commission regulations to furnish the Partnership with copies of all Section 16(a) forms they file. To date, there have been no delinquencies in filing such reports. ITEM 11, 12, 13 EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by Item 11, Item 12 and 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 April 29, 1996, 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 only person known by the Partnership as of February 12, 1996 who beneficially owned more than five percent of the outstanding Limited Partner Units whose ownership will not be reflected in the proxy statement of Duke Realty Investments, Inc. was Allied Domecq Pension Fund who beneficially owned 605,620 Limited Partner Units through affiliates of Wyndham Investments Limited, a property holding company. 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, 1995 and 1994 Consolidated Statements of Operations, Years Ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows, Years Ended December 31, 1995, 1994 and 1993 Consolidated Statements of Partners' Equity, Years Ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements Duke Associates Combined Statements of Operations and Cash Flows for the Nine Months Ended September 30, 1993 (Unaudited) 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, 1995 (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. - 23 - INDEPENDENT AUDITORS' REPORT The Partners 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, 1995 and 1994 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 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 31, 1996 - 24 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
December 31, ------------------------------ 1995 1994 ---------- ---------- ASSETS Real estate investments (Note 5): Land and improvements $ 91,550 $ 72,758 Buildings and tenant improvements 712,614 580,794 Construction in progress 96,698 22,967 Land held for development 62,637 47,194 ---------- ---------- 963,499 723,713 Accumulated depreciation (56,335) (38,058) ---------- ---------- Net real estate investments 907,164 685,655 Cash and cash equivalents 5,682 40,427 Accounts receivable from tenants, net of allowance of $624 and $450 5,184 4,257 Accrued straight-line rents, net of allowance of $841 8,101 5,030 Receivables on construction contracts 9,462 7,478 Investments in unconsolidated companies (Note 4) 67,771 8,418 Deferred financing costs, net of accumulated amortization of $2,072 and $1,755 8,141 6,390 Deferred leasing and other costs, net of accumulated amortization of $4,959 and $2,702 20,609 11,845 Escrow deposits and other assets 14,418 6,384 ---------- ---------- $1,046,532 $ 775,884 ---------- ---------- ---------- ---------- LIABILITIES AND PARTNERS' EQUITY Indebtedness (Note 5): Mortgage debt $ 259,820 $ 298,640 Unsecured notes 150,000 - Line of credit 45,000 - ---------- ---------- 454,820 298,640 Construction payables and amounts due subcontractors 21,410 9,464 Accounts payable 1,132 869 Accrued real estate taxes 10,374 8,983 Accrued interest 3,461 314 Other accrued expenses 5,454 2,860 Other liabilities 5,490 3,564 Tenant security deposits and prepaid rents 3,872 3,472 ---------- ---------- Total liabilities 506,013 328,166 ---------- ---------- Minority interest 298 420 ---------- ---------- Partners' equity: General partner 535,783 446,383 Limited partner 4,438 915 ---------- ---------- Total partners' equity 540,221 447,298 ---------- ---------- $1,046,532 $ 775,884 ---------- ---------- ---------- ----------
See accompanying Notes to Consolidated Financial Statements. - 25 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
Year ended December 31, -------------------------------------- 1995 1994 1993 --------- -------- -------- RENTAL OPERATIONS: Revenues: Rental income (Note 7) $112,931 $88,243 $33,351 Equity in earnings of unconsolidated companies (Note 4) 710 1,056 297 --------- -------- -------- 113,641 89,299 33,648 --------- -------- -------- Operating expenses: Rental expenses 21,497 17,507 7,059 Real estate taxes 9,683 8,256 3,403 Interest expense (Note 5) 21,462 18,920 10,334 Depreciation and amortization 24,337 18,036 7,369 --------- -------- -------- 76,979 62,719 28,165 --------- -------- -------- Earnings from rental operations 36,662 26,580 5,483 --------- -------- -------- SERVICE OPERATIONS: Revenues: Property management, maintenance and leasing fees 11,138 11,084 3,000 Construction management and development fees 5,582 6,107 2,501 Other income 1,057 1,282 153 --------- -------- -------- 17,777 18,473 5,654 --------- -------- -------- Operating expenses: Payroll 8,241 8,723 2,688 Maintenance 1,344 1,069 473 Office and other 2,451 2,373 957 --------- -------- -------- 12,036 12,165 4,118 --------- -------- -------- Earnings from service operations 5,741 6,308 1,536 --------- -------- -------- General and administrative expenses (1,877) (2,145) (737) --------- -------- -------- Operating income 40,526 30,743 6,282 OTHER INCOME (EXPENSE): Interest income 1,702 1,115 164 Earnings from property sales 283 2,198 517 Minority interest in earnings of subsidiaries (911) (1,088) (293) --------- -------- -------- Net income $ 41,600 $ 32,968 $ 6,670 --------- -------- -------- --------- -------- -------- Net income per Unit $ 1.55 $ 1.54 $ 1.02 --------- -------- -------- --------- -------- -------- Weighted average number of Units outstanding 26,791 21,467 6,540 --------- -------- -------- --------- -------- --------
See accompanying Notes to Consolidated Financial Statements. - 26 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Year ended December 31, ---------------------------------------------- 1995 1994 1993 --------- -------- -------- Cash flows from operating activities: Net income $41,600 $ 32,968 $ 6,670 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of buildings and tenant improvements 20,416 15,068 6,459 Amortization of deferred financing costs 1,218 1,251 294 Amortization of deferred leasing and other costs 2,703 1,717 616 Minority interest in earnings of subsidiaries 911 1,088 293 Straight-line rent adjustment (3,198) (2,307) (570) Allowance for straight-line rent receivable - 748 93 Earnings from property sales, net (283) (2,198) (517) Construction contracts, net 8,722 2,405 (919) Other accrued revenues and expenses, net 6,737 1,335 2,075 Equity in earnings of unconsolidated companies (189) (219) (131) -------- --------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 78,637 51,856 14,363 -------- --------- -------- Cash flows from investing activities: Proceeds from property sales, net 5,281 3,337 1,306 Rental property development costs (128,879) (55,819) (7,168) Rental property recurring building improvements (757) (474) (136) Acquisition of rental properties (57,427) (44,201) - Acquisition of undeveloped land (38,361) (6,924) - Acquisition of businesses (25,620) - (302,070) Recurring tenant improvements (4,312) (3,056) (2,015) Recurring leasing costs (3,519) (2,407) (636) Other deferred costs and other assets (16,225) (6,960) (4,106) Net investment in and advances to unconsolidated companies (19,750) 277 (200) -------- --------- -------- NET CASH USED BY INVESTING ACTIVITIES (289,569) (116,227) (315,025) -------- --------- -------- Cash flows from financing activities: Contributions from partners 96,302 92,145 309,334 Proceeds from indebtedness 195,051 61,504 88,945 Payments on indebtedness (60,030) (16,149) (78,496) Distributions to partners (50,807) (39,514) (3,438) Distributions to minority interest (1,032) (1,191) - Deferred financing costs (3,297) (2,062) (5,628) -------- --------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 176,187 94,733 310,717 -------- --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (34,745) 30,362 10,055 Cash and cash equivalents at beginning of year 40,427 10,065 10 -------- --------- -------- Cash and cash equivalents at end of year $ 5,682 $ 40,427 $ 10,065 -------- --------- -------- -------- --------- --------
See accompanying Notes to Consolidated Financial Statements. - 27 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
General Limited Partner Partners Total ------- -------- ----- BALANCE AT DECEMBER 31, 1992 $ 36,129 $ - $ 36,129 Capital contribution from Duke Realty Investments, Inc. 310,334 - 310,334 Net income 5,013 1,657 6,670 Distributions to partners ($1.68 per Unit) (3,438) - (3,438) ---------- ------- ---------- BALANCE AT DECEMBER 31, 1993 348,038 1,657 349,695 Net income 26,216 6,752 32,968 Capital contribution from Duke Realty Investments, Inc. 92,171 - 92,171 Acquisition of partnership interest for Common Stock of Duke Realty Investments, Inc. 11,523 - 11,523 Acquisition of property in exchange for Limited Partner Units - 455 455 Distributions to partners ($1.84 per Unit) (31,565) (7,949) (39,514) ---------- ------- ---------- BALANCE AT DECEMBER 31, 1994 446,383 915 447,298 Net income 35,070 6,530 41,600 Capital contribution from Duke Realty Investments, Inc. 96,433 - 96,433 Acquisition of partnership interest for Common Stock of Duke Realty Investments, Inc. 796 - 796 Acquisition of property in exchange for Limited Partner Units - 4,901 4,901 Distributions to partners ($1.92 per Unit) (42,899) (7,908) (50,807) ---------- ------- ---------- BALANCE AT DECEMBER 31, 1995 $ 535,783 $ 4,438 $ 540,221 ---------- ------- ---------- ---------- ------- ---------- UNITS OUTSTANDING AT DECEMBER 31, 1995 24,152 4,151 28,303 ---------- ------- ---------- ---------- ------- ---------- UNITS OUTSTANDING AT DECEMBER 31, 1994 20,391 3,993 24,384 ---------- ------- ---------- ---------- ------- ----------
See accompanying Notes to Consolidated Financial Statements. -28- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) THE PARTNERSHIP Duke Realty Limited Partnership (the "Partnership") was formed on October 4, 1993, when Duke Realty Investments, Inc. (the "Predecessor Company" or the "General Partner") contributed all of its properties and related assets and liabilities along with the net proceeds of $309.2 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. In connection with the 1993 Offering, the formation of the Partnership and the acquisition of Duke Associates, the General Partner effected a 1 for 4.2 reverse stock split of its existing common shares. The General Partner is the sole general partner of the Partnership and received 16,046,144 units of partnership interest in exchange for its original contribution which represented a 78.36% interest in the Partnership. As part of the acquisition, Duke Associates received 4,432,109 units of limited partnership interest ("Limited Partner Units" (together with the units of general partner interests, the ("Units")) which represented a 21.64% interest in the Partnership. The Limited Partner Units are exchangeable for shares of the General Partner's common stock on a one-for-one basis subject generally to a one-year holding period. The acquisition of Duke Associates was accounted for under the purchase method. The value of $466.0 million assigned to the acquired properties and businesses was equal to the property debt and other net liabilities assumed, of which $302.1 million was repaid with the proceeds of the Predecessor Company's contribution. The operating results of the acquired properties and businesses have been included in the consolidated operating results subsequent to the date of acquisition. The Partnership owns and operates a portfolio of industrial, office and retail properties in the Midwest and provides real estate services to third-party property owners. The Partnership's primary markets are Indianapolis, Indiana; Cincinnati and Columbus, Ohio; Detroit, Michigan; St. Louis, Missouri and Nashville, Tennessee. The service operations are conducted through Duke Realty Services Limited Partnership ("DRSLP") and Duke Construction Limited Partnership ("DCLP"), 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. -29- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements In 1994, the General Partner issued an additional 3,887,300 shares of Common Stock through an additional offering ("1994 Offering") and received net proceeds of approximately $92.1 million. These proceeds were contributed to the Partnership in exchange for additional Units and were used by the Partnership to fund development and acquisition costs of additional rental properties. In 1995, the General Partner issued an additional 3,727,500 shares of Common Stock through another offering ("1995 Offering") and received net proceeds of approximately $96.3 million. The proceeds of the 1995 Offering were contributed to the Partnership in exchange for additional Units and were used by the Partnership to fund development and acquisition of additional rental properties. On September 22, 1995, the Partnership issued $150 million of unsecured notes through a debt offering ("Debt Offering"). A portion of the proceeds of the Debt Offering was used to reduce amounts outstanding on its unsecured credit facility and other mortgage debt and to fund current development and acquisition of additional rental properties. In 1995 and 1994, as a result of partners exchanging their Limited Partner Units for shares of Common Stock of the General Partner pursuant to the Partnership Agreement, the General Partner acquired an additional interest in the Partnership through the issuance of 27,760 and 456,375 shares of Common Stock, respectively. The acquired additional interest was accounted for using the purchase method with the assets acquired recorded at the fair market value of the General Partners' Common Stock on the date of acquisition. The acquisition amounts of $796,000 and $11.5 million in 1995 and 1994, respectively, were allocated to rental property, undeveloped land and investments in unconsolidated companies based on their estimated fair values. The General Partner owns an 85.3% interest in the Partnership at December 31, 1995. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Predecessor Company for the period from December 31, 1992 to October 4, 1993 and the accounts and operations of the Partnership and its majority- owned or controlled subsidiaries for the period from October 4, 1993 (date of formation) to December 31, 1993, and for the years ended December 31, 1995 and 1994. The equity interests in these majority-owned or controlled subsidiaries not owned by the Partnership are reflected as minority interests in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. SEGMENT OPERATIONS The Partnership is engaged in two business segments, the ownership and rental of real estate investments ("Rental Operations") and the providing of various real estate services such as property management, maintenance, leasing and construction management to third-party property owners - 30 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements ("Service Operations"). There are no intersegment sales or transfers between Rental Operations and Service Operations. The identifiable assets of the Service Operations consisting of cash, accounts receivable, construction receivables and other assets as of December 31, 1995 and 1994 were $15.8 million and $13.2 million, respectively. Capital expenditures related to Service Operations were $1.5 million, $761,000 and $134,000 for the years ended December 31, 1995, 1994, and 1993, respectively. All remaining assets, capital expenditures, depreciation, amortization and investments in and advances to unconsolidated companies relate to Rental Operations. The operations of each segment are reflected separately on the Statement of Operations. REAL ESTATE INVESTMENTS Real estate investments are stated at the lower of cost less accumulated depreciation or fair value if impairment is identified. Buildings and land improvements are depreciated on the straight-line method over 40 years, and tenant improvement costs are depreciated on the straight-line method over the term of the related lease. Project costs, including interest and real estate taxes incurred in connection with construction or expansion of real estate investments, are capitalized as a cost of the property and depreciated over the estimated useful life of the related asset. The Partnership has adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, with no impact on the financial statements. The Partnership evaluates its real estate investments upon occurrence of significant changes in the operations, but not less than annually, to assess whether any impairment indications are present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of the recorded value. If any real estate investment is considered impaired, a loss is provided to reduce the carrying value of the property to its estimated fair value. INVESTMENTS IN UNCONSOLIDATED COMPANIES The equity method of accounting is used for investments in non-majority owned partnerships and joint ventures in which the Partnership has the ability to exercise significant influence over operating and financial policies. Any difference between the carrying amount of these investments and the underlying equity in net assets is amortized to equity in earnings of unconsolidated companies over 40 years. The cost method of accounting is used for non-majority owned joint ventures over which the Partnership does not have the ability to exercise significant influence. The difference between the cost method and the equity method for such ventures does not significantly affect the financial position or results of operations of the Partnership. CASH EQUIVALENTS Highly liquid investments with a maturity of three months or less when purchased are classified as cash equivalents. DEFERRED COSTS Costs incurred in connection with financing or leasing are amortized on the straight-line method over the term of the related loan or lease. Unamortized costs are charged to expense upon the early termination of the lease or upon early payment of the financing. -31- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements Prepaid interest is amortized to interest expense using the effective interest method over the terms of the related loans. REVENUES RENTAL OPERATIONS Rental income from leases with scheduled rental increases during their terms is recognized for financial reporting purposes on a straight-line basis. SERVICE OPERATIONS Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Maintenance fees are based upon established hourly rates and are recognized as the services are performed. Leasing fees are based on a percentage of the total rental due under completed leases and are generally recognized upon lease execution. Construction management and development fees are generally based on a percentage of costs and are recognized as the project costs are incurred. Other income consists primarily of payroll reimbursements for on-site property management services. STOCK BASED COMPENSATION The Partnership and the General Partner grant stock options for a fixed number of shares of the General Partner's Common Stock to employees with an exercise price equal to the fair value of the shares at the date of grant. The Partnership accounts for stock option grants in accordance with APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and, accordingly, recognizes no compensation expense for the stock option grants. PROJECT COSTS All direct and indirect costs clearly associated with the acquisition, development, construction and rental of real estate projects owned by the Partnership are capitalized. Capitalized costs associated with acquisition, development and construction of properties are included in real estate investments and costs associated with the rental of properties are included in deferred costs. NET INCOME PER UNIT Net income per Unit is calculated using the weighted average number of Units outstanding during the year. Unit equivalents that in the aggregate dilute net income per Unit by less than 3% are not considered in computing weighted average Units outstanding. -32- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements FEDERAL INCOME TAXES As a partnership, the allocated share of income or loss for the year is included in the income tax returns of the partners; accordingly, no accounting for income taxes is required in the accompanying consolidated financial statements. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair values of the Partnership's financial instruments, including accounts receivable, accounts payable, accrued expenses, mortgage debt, unsecured notes payable, line of credit and other financial instruments, generally determined using the present value of estimated future cash flows using a discount rate commensurate with the risks involved, approximate their carrying or contract values. USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. (3) RELATED PARTY TRANSACTIONS The Partnership provides management, leasing, construction and other tenant related services to partnerships in which certain executive officers of the General Partner have continuing ownership interests. The Partnership was paid fees totaling $1,942,000, $2,271,000 and $885,000 for such services in 1995, 1994 and 1993, 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. (4) INVESTMENTS IN UNCONSOLIDATED COMPANIES The Partnership has equity interests ranging from 10% to 50% in unconsolidated partnerships and joint ventures which own and operate rental properties and hold land for development in the Midwest. In 1995, the Partnership acquired its unaffiliated partner's 50% interest in a joint venture which owned two suburban office rental properties (one of which was under construction as of December 31, 1995) and 40.3 acres of land held for development. The Partnership accounted for the acquisition of the 50% interest using the purchase method with its recorded investment in the properties equal to the sum of the balance of its investment in and advances to the joint venture at the date of acquisition, the net liabilities assumed and cash paid to the joint venture partner amounting to $24.4 million. In 1994, the Partnership acquired its unaffiliated partner's 55% interest in a partnership which owned a suburban office rental property. -33- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements The Partnership accounted for the acquisition of the 55% interest using the purchase method with its recorded investment in the property equal to the sum of its investment in the partnership at the date of acquisition, the cash payment to the unaffiliated partner, cash repayment of a portion of the partnership's mortgage loan and net liabilities assumed, including the remaining balance on the partnership's mortgage loan of $4.5 million. The fair value of the property exceeds the Company's recorded investment. Also in 1994, a partnership in which the Partnership owned a 50% interest was dissolved through the distribution of all assets and liabilities to the partners. At the date of dissolution, the Partnership had loans and advances to the partnership totaling $4.2 million. Under terms of the dissolution agreement, the Partnership received 71 acres of land held for development and the partnership was not required to repay the Partnership's loans and advances. The Partnership's recorded investment in the property received is equal to the sum of its investment in and loans and advances to the partnership at the date of dissolution. The fair value of the property exceeds the Company's recorded investment. On December 28, 1995, the Partnership formed a joint venture (Dugan Realty L.L.C.) with an institutional real estate investor and purchased 25 industrial buildings totaling approximately 2.3 million square feet. Upon formation of the venture, the Partnership contributed approximately 1.4 million square feet of recently developed and acquired industrial properties, 113 acres of recently acquired land held for future development, and approximately $16.7 million of cash for a 50.1% interest in the joint venture. The Partnership's recorded investment at December 31, 1995 in the joint venture of $59.4 million is the sum of the carrying value of the properties, land, and cash contributed. Upon completion of 1.1 million square feet of property currently under development at an agreed value of $50.8 million, the Partnership will contribute these properties to the joint venture and receive a $12.5 million cash distribution. The agreed value of this 1.1 million square feet upon contribution is expected to be approximately $25.0 million. The Partnership will record its investment in the joint venture related to the additional contribution at its carrying value. The joint venture partner is required to contributed cash to the venture equal to 49.9% of the agreed value of the properties contributed and this cash will be distributed to the Partnership and reduce its recorded investment in the venture. The Partnership's joint venture partner contributed cash of $67.5 million which was equal to the agreed value of the Partnership's contribution. The total cash contributed by the Partnership and the joint venture partner was used to purchase the 25 industrial buildings noted above. The recently acquired industrial properties and the undeveloped land which were contributed were acquired as part of the acquisition of Park Fletcher, Inc., an Indianapolis, Indiana based real estate development and management company. The acquisition was accounted for under the purchase method. The recorded carrying value of acquired properties and land was equal to the net liabilities assumed plus cash paid plus mortgage indebtedness assumed of $17.4 million. The fair value of the property exceeds the Company's recorded investment. The operating results of the acquired properties and land have been included in the consolidated operating results subsequent to the date of acquisition. The Partnership accounts for its investment in this joint venture on the equity method because the joint venture partner's approval is required for all major decisions and the joint venture partner has equal control regarding the primary day-to-day operations of the venture. -34- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements Combined summarized financial information of the companies which are accounted for by the equity method as of December 31, 1995 and December 31, 1994 and for the years ended December 31, 1995, and 1994, and 1993 are as follows (in thousands):
December 31, ---------------------- 1995 1994 -------- ------- Land, buildings and tenant improvements, net $155,628 $14,530 Land held for development 8,515 1,377 Other assets 4,742 1,978 ------- ------ 168,885 17,885 ------- ------ ------- ------ Property indebtedness 28,185 17,719 Other liabilities 3,736 591 ------- ------ 31,921 18,310 Owners' equity (deficit) 136,964 (425) ------- ------ $168,885 $17,885 ------- ------ ------- ------ Year ended December 31, ----------------------------- 1995 1994 1993 ---- ---- ---- Rental income $3,398 $3,419 $ 950 ----- ----- --- ----- ----- --- Net income $ 363 $ 224 $ 211 ---- ---- --- ---- ---- ---
Investments in unconsolidated companies include $6.0 million and $6.4 million at December 31, 1995 and 1994, respectively, related to joint ventures on the cost method. Included in equity in earnings of unconsolidated companies are distributions from a joint venture accounted for on the cost method totaling $521,000, $837,000 and $166,000 in 1995, 1994 and 1993, respectively. -35- DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements (5) INDEBTEDNESS Indebtedness at December 31 consists of the following:
1995 1994 ---- ---- (in thousands) Mortgage note with monthly payments of $668,000 including principal and interest at 8.50% due in 2003 $ 78,832 $ 80,621 Mortgage note with monthly payments of interest of $436,000 through August 1997. Thereafter, monthly payments of $471,000 including principal and interest at 8.72% due in 2001 60,000 60,000 Mortgage note with monthly payments of interest at 7.25% due in 1998 25,500 25,500 Three mortgage notes with monthly payments of interest at rates ranging from 5.29% to 5.44% due in 1996 59,619 59,568 Mortgage note with monthly payments of interest at 5.81% due in 1998 - 22,000 Mortgage note with monthly payments of $104,000 including principal and interest at 6.80% due in 1998 15,619 15,802 Mortgage notes with monthly payments in varying amounts including interest at rates ranging from 5.20% to 10.25% due in varying amounts through 2018 20,250 35,149 ------- ------- Total Mortgage Debt 259,820 298,640 Unsecured notes with semi-annual payments of interest at 7.25% (effective rate of 7.328%) due in 2002 50,000 - Unsecured notes with semi-annual payments of interest at 7.375% (effective rate of 7.519%) due in 2005 100,000 - Unsecured line of credit with monthly payments of interest at LIBOR + 2.00% due in 1998 45,000 - ------- ------- Total Indebtedness $454,820 $298,640 ------- ------- ------- -------
As of December 31, 1995, the $259.8 million of mortgage notes are collateralized by rental properties with a net carrying value of $440 million. As of December 31, 1994, the $298.6 million of mortgage notes were collateralized by rental properties with a net carrying value of $490 million and the Partnership's $60 million secured line of credit was collateralized by rental properties with a net carrying value of $122 million. On September 22, 1995, the Partnership issued $150 million of unsecured notes. Interest is payable semi-annually on March 22 and September 22, commencing on March 22, 1996. In 1994, the Partnership obtained a $60 million secured line of credit which was available to fund development costs and provide working capital. This secured line of credit was scheduled to mature on - 36 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 1996. The interest rate was based on LIBOR plus 2% (an average effective rate of 6.45% for 1994). The maximum and average amounts outstanding during 1994 were $60.0 million and $18.0 million, respectively. The Partnership had no borrowings under the line at December 31, 1994. In April 1995, the Partnership replaced its secured line of credit with an unsecured line of credit in the aggregate amount of $100 million. The unsecured line of credit matures in April 1998. Borrowings under this line of credit required interest at one month LIBOR plus 2.00% which ranged from 7.7500% to 7.9375% as of December 31, 1995. The maximum and average amounts outstanding during 1995 under both lines of credit were $45.0 million and $2.2 million respectively, with an average effective rate of 7.89%. In January 1996, the Partnership increased its amount available under the unsecured line of credit to $150 million and reduced the borrowing rate to LIBOR plus 1.625%. The General Partner has guaranteed the unsecured line of credit. The Partnership has an interest rate swap agreement on $35.2 million of the Partnership's outstanding mortgage debt to effectively fix the interest rate on the majority of its floating rate debt. Under the interest rate swap, the Partnership pays or receives the difference between a fixed rate of 4.38% and a floating rate of LIBOR plus .75% based on the notional principal amount of $35.2 million. The amount paid or received on the swap agreement is included in interest expense on a monthly basis. The swap matures along with the related mortgage loan in October 1996. The estimated fair value of the interest rate swap agreement at December 31, 1995 was $174,000. The fair value was estimated by discounting the expected cash flows to be received under the swap agreement using rates currently available for interest rate swaps of similar terms and maturities. The Partnership has a $6.2 million letter of credit which secures $6.2 million of mortgage notes. The letter of credit requires a 2% annual fee and matures in September 1999. The Partnership also has guaranteed fifty percent of an $8.1 million letter of credit obligation of one of its unconsolidated companies which matures in September 1997. At December 31, 1995, scheduled amortization and maturities of all indebtedness for the next five years and thereafter are as follows:
Year Amount ---- ------ (in thousands) 1996 $ 61,474 1997 2,156 1998 92,626 1999 2,625 2000 7,489 Thereafter 288,450 -------- $454,820 -------- --------
Cash paid for interest in 1995, 1994, and 1993 was $22.1 million, $20.3 million, and $10.5 million, respectively. Total interest capitalized in 1995 and 1994 was $4.2 million and $1.7 million, respectively. No interest was capitalized in 1993. - 37 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) LEASING ACTIVITY Future minimum rents due to the Partnership under non-cancelable operating leases at December 31, 1995 are scheduled as follows:
Year Amount ---- ------ (in thousands) 1996 $113,325 1997 111,573 1998 100,807 1999 88,059 2000 73,106 Thereafter 433,083 -------- $919,953 -------- --------
In addition to minimum rents, certain leases require reimbursements of specified operating expenses which amounted to $12.7 million, $10.0 million, and $3.6 million for the years ended December 31, 1995, 1994 and 1993, respectively. (7) EMPLOYEE BENEFIT PLANS In October 1993, the Partnership established a profit sharing and salary deferral plan. The Partnership matches the employees' contributions up to two percent of the employees' salary and may also make annual discretionary contributions to the plan. Total expense recognized by the Partnership was $245,000, $370,000 and $74,000 for 1995, 1994 and 1993, respectively. In October 1993, the Partnership also established a contributory health and welfare plan. The Partnership makes contributions to the plan throughout the year as necessary to fund claims not covered by employee contributions. Total expense recognized by the Partnership related to this plan was $882,000, $766,000 and $204,000 for 1995, 1994 and 1993, respectively. Included in total expense is an estimate based on historical experience of the effect of claims incurred but not reported as of year-end. - 38 - DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements (8) STOCK OPTION PLAN In October 1993, the Partnership and the General Partner established a stock option plan under which 1,315,000 shares of the General Partners' common stock were reserved for the exercise of options which may be issued to the executive officers of the General Partner and certain key employees of the Partnership. The term of these options is ten years from the date of grant. The options vest 20% per year over a five-year period with initial vesting one year from the date of grant.
Number of Option shares subject price per to options share -------------- --------- Balance at January 1, 1993 - - Options granted 681,500 $23.75 Options forfeited - - Options exercised - - ------- ------------------- Balance at December 31, 1993 681,500 $23.75 Options granted - - Options forfeited - - Options exercised - - ------- ------------------- Balance at December 31, 1994 681,500 $23.75 Options granted 225,466 $25.875 to $30.625 Options forfeited (39,900) $23.75 to $25.875 Options exercised (1,000) $23.75 ------- ------------------- Balance at December 31, 1995 866,066 $ 23.75 to $30.625 ------- ------------------- ------- -------------------
- 39 - DUKE ASSOCIATES COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 (IN THOUSANDS) (UNAUDITED)
Rental Operations: Revenues: Rental income $42,721 Interest and other income 1,012 ------- 43,733 ------- Operating expenses: Rental expenses 8,765 Real estate taxes 4,340 Interest expense 25,580 Depreciation and amortization 10,599 General and administrative 780 ------- 50,064 ------- Loss from rental operations (6,331) ------- Property management operations: Revenue: Property management, maintenance and leasing fees 8,431 Construction and development fees 2,591 Interest and other income 932 ------- 11,954 ------- Operating expenses: Payroll 6,077 Maintenance 941 Office and other 1,543 ------- 8,561 ------- Earnings from property management operations 3,393 ------- Operating loss (2,938) Equity in earnings of non-combined companies 199 ------- Net loss $(2,739) ------- -------
See accompanying notes to combined financial statements. - 40 - DUKE ASSOCIATES COMBINED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 (IN THOUSANDS) (UNAUDITED) Cash flows from operating activities: Net loss $ (2,739) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 7,200 Amortization 3,399 Straight-line rent adjustment (1,356) Increase in construction receivables (10,109) Other accrued revenues and expenses, net 9,298 Equity in earnings of non-combined companies (199) ------------- Net cash provided by operating activities 5,494 ------------- Cash flows from investing activities: Land and construction costs (3,252) Distributions from non-combined companies 47 Deferred charges and other assets (3,193) ------------- Net cash used by investing activities (6,398) ------------- Cash flows from financing activities: Proceeds from property indebtedness 39,407 Payments on property indebtedness (5,959) Contributions by owners 10,221 Distributions to owners (24,224) Advances from affiliates, net (13,480) ------------- Net cash provided by financing activities 5,965 ------------- Net increase in cash and cash equivalents 5,061 Cash and cash equivalents at beginning of period 1,046 ------------- Cash and cash equivalents at end of period $ 6,107 ------------- -------------
See accompanying notes to combined financial statements. - 41 - DUKE ASSOCIATES NOTES TO COMBINED STATEMENTS OF OPERATIONS AND CASH FLOWS (UNAUDITED) (1) ORGANIZATION AND BASIS OF COMBINATION The accompanying combined statements of operations and cash flows of Duke Associates include the operations and cash flows from the operating businesses, commercial rental properties and undeveloped land acquired by Duke Realty Investments, Inc. (the "Company"). Duke Associates represents substantially all of the real estate properties and operating businesses under common control of the current Duke Associates owners which are engaged in the ownership, leasing, management, construction and development businesses of commercial real estate in the Midwest. The statements of operations and cash flows of Duke Asssociates have been presented on the combined basis because of the common ownership and management of the related properties and operating businesses. After the aforementioned acquisition, the properties and operating businesses will be majority owned and controlled by the Company through its subsidiaries to be formed and known as Duke Realty Limited Partnership and Duke Services, Inc. The equity method of accounting is used for investments in non-majority owned partnerships and joint ventures in which Duke Associates has the ability to exercise significant influence over operating and financial policies. The cost method of accounting is used for two non-majority owned joint ventures over which Duke Associates does not have the ability to exercise significant influence, and the differences between the cost method and the equity method of accounting for these joint ventures does not significantly affect the financial position or results of operations. All significant intercompany balances and transactions have been eliminated in the combined financial statements. The combined statements of operations and cash flows for the nine months ended September 30, 1993 are unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the combined financial statements for this interim period have been included. The results for the interim period ended September 30, 1993 are not necessarily indicative of the results to be obtained for the full fiscal year. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUES All leases are classified as operating leases and rental income is recognized on the straight-line basis over the terms of the leases. Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Leasing fees are based on the gross value of leases signed and are recognized as earned under the terms of the various contracts. Maintenance fees are recognized as the services are performed based upon established hourly rates. Construction management fees are generally based on a fixed percentage of costs and are recognized as the project costs are incurred. - 42 - DUKE ASSOCIATES NOTES TO COMBINED STATEMENTS OF OPERATIONS AND CASH FLOWS - (CONTINUED) (UNAUDITED) Development fees are generally based on a percentage of total project costs of properties developed and are recognized throughout the development process of the related properties. FINANCING AND LEASING COSTS Costs incurred in connection with financing or leasing are amortized on a straight-line method over the term of the related loan or lease. Unamortized leasing costs are charged to expense upon the early termination of the lease. INCOME TAXES Income taxes are not provided in the accompanying combined financial statements because the entities that own the properties and the operating businesses are either partnerships or S corporations and the taxable income or loss is included in the income tax returns of the individual partners or shareholders. - 43 -
DUKE REALTY LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31,1995 SCHEDULE III (IN THOUSANDS) BUILDING ENCUMBER- LOCATION / DEVELOPMENT BUILDING TYPE ANCES - ------------------------------ --------------------------- -------------- ------------ INDIANAPOLIS, INDIANA - --------------------- PARK 100 BUSINESS PARK BUILDING #32 RETAIL $ 512 PARK 100 BUSINESS PARK BUILDING #34 OFFICE 1,083 PARK 100 BUSINESS PARK BUILDING #38 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #79 INDUSTRIAL 1,035 PARK 100 BUSINESS PARK BUILDING #80 INDUSTRIAL 1,339 PARK 100 BUSINESS PARK BUILDING #83 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #84 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #95 INDUSTRIAL 3,444 PARK 100 BUSINESS PARK BUILDING #96 INDUSTRIAL 6,488 PARK 100 BUSINESS PARK BUILDING #97 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #98 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #100 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #107 INDUSTRIAL 1,560 PARK 100 BUSINESS PARK BUILDING #109 INDUSTRIAL 1,200 PARK 100 BUSINESS PARK BUILDING #116 OFFICE 2,016 PARK 100 BUSINESS PARK BUILDING #118 OFFICE 1,254 PARK 100 BUSINESS PARK BUILDING #119 OFFICE 0 PARK 100 BUSINESS PARK BUILDING #121 RETAIL 0 PARK 100 BUSINESS PARK BUILDING #122 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #125 INDUSTRIAL 1,690 PARK 100 BUSINESS PARK BUILDING #126 INDUSTRIAL 0 PARK 100 BUSINESS PARK BUILDING #127 INDUSTRIAL 0 PARK 100 BUSINESS PARK NORGATE LAND LEASE INDUSTRIAL 0 PARK 100 BUSINESS PARK SCHAHET HOTELS LAND LEASE INDUSTRIAL 0 PARK 100 BUSINESS PARK KENNY ROGERS LAND LEASE INDUSTRIAL 0 PARK 100 BUSINESS PARK NORCO LAND LEASE INDUSTRIAL 0 PARK 100 BUSINESS PARK ZOLLMAN LAND LEASE INDUSTRIAL 0 SHADELAND STATION 7351 SHADELAND OFFICE 0 SHADELAND STATION BUILDING #204/205 INDUSTRIAL 1,832 SHADELAND STATION 7240 SHADELEND OFFICE (2) 2,706 SHADELAND STATION 7330 SHADELAND OFFICE 2,420 SHADELAND STATION 7369 SHADELAND OFFICE 0 SHADELAND STATION 7340 SHADELAND OFFICE 0 SHADELAND STATION 7400 SHADELAND OFFICE 0 CASTLETON CORNER CUB PLAZA RETAIL 3,304 CASTLETON SHOPPING CENTER MICHAEL'S PLAZA RETAIL 2,447 SOUTH PARK, INDIANA BUILDING #1 OFFICE 0 SOUTH PARK, INDIANA BUILDING #2 INDUSTRIAL 0 SOUTH PARK, INDIANA BUILDING #3 OFFICE 0 SOUTH PARK, INDIANA BRYLANE PARKING LOT LEASE OFFICE 0 SOUTH PARK, INDIANA LEE'S IN LAND LEASE INDUSTRIAL 0 GREENWOOD CORNER GREENWOOD CORNER RETAIL 2,176 GREENWOOD CORNER 1st INDIANA BANK BRANCH RETAIL 257 CARMEL MEDICAL I CARMEL MEDICAL I MEDICAL 1,948 ST. FRANCIS ST. FRANCIS MEDICAL 0 COMMUNITY MOB COMMUNITY MOB MEDICAL 0 CARMEL MEDICAL II CARMEL MEDICAL II MEDICAL 2,525 HILLSDALE TECHNECENTER BUILDING #4 INDUSTRIAL 2,482 HILLSDALE TECHNECENTER BUILDING #5 INDUSTRIAL 1,752 HILLSDALE TECHNECENTER BUILDING #6 INDUSTRIAL 2,111 KEYSTONE AT THE CROSSING 8465 KEYSTONE OFFICE 0 WOODFIELD AT THE CROSSING WOODFIELD II OFFICE 6,241 WOODFIELD AT THE CROSSING WOODFIELD III OFFICE 0 KEYSTONE AT THE CROSSING 3520 COMMERCE CRSG OFFICE 0 ONE PARKWOOD ONE PARKWOOD OFFICE 0 PALAMOR PALAMOR INDUSTRIAL 0 FRANKLIN ROAD BUSINESS CTR. FRANKLIN ROAD BUSINESS CTR. INDUSTRIAL 0 NAMPAC BUILDING NAMPAC BUILDING INDUSTRIAL 0 HAMILTON CROSSING BUILDING #1 OFFICE 0 KEYSTONE AT THE CROSSING F.C. TUCKER BUILDING OFFICE 0 PARK FLETCHER BUILDING #14 INDUSTRIAL 0 FORT WAYNE - ------------------------------ COLDWATER CROSSING COLDWATER SHOPPES RETAIL 11,703 NASHVILLE, TENNESSEE - ------------------------------ KEEBLER BUILDING KEEBLER BUILDING INDUSTRIAL 0 HAYWOOD OAKS TECHNECENTER BUILDING #2 INDUSTRIAL 1,055 HAYWOOD OAKS TECHNECENTER BUILDING #3 INDUSTRIAL 1,003 HAYWOOD OAKS TECHNECENTER BUILDING #4 INDUSTRIAL 1,151 HAYWOOD OAKS TECHNECENTER BUILDING #5 INDUSTRIAL 1,742 HAYWOOD OAKS TECHNECENTER BUILDING #6 INDUSTRIAL 0 HAYWOOD OAKS TECHNECENTER BUILDING #7 INDUSTRIAL 0 GREENBRIAR BUSINESS PARK GREENBRIAR INDUSTRIAL 0 HEBRON, KENTUCKY - ------------------------------ SOUTHPARK, KENTUCKY CR SERVICES INDUSTRIAL 3,277 SOUTHPARK, KENTUCKY BUILDING #1 INDUSTRIAL 0 SOUTHPARK, KENTUCKY BUILDING #3 INDUSTRIAL 0 SOUTHPARK, KENTUCKY REDKEN INDUSTRIAL 2,471 CINCINNATI, OHIO - ------------------------------ PARK 50 TECHNECENTER BUILDING #17 OFFICE 3,602 PARK 50 TECHNECENTER BUILDING #20 INDUSTRIAL 4,336 PARK 50 TECHNECENTER BUILDING #24 RETAIL 0 PARK 50 TECHNECENTER BUILDING #25 INDUSTRIAL 0 PARK 50 TECHNECENTER SDRC BUILDING OFFICE 13,640 FIDELITY DRIVE DUN & BRADSTREET OFFICE 1,836 WORLD PARK BUILDING #5 INDUSTRIAL 2,217 WORLD PARK BUILDING #6 INDUSTRIAL 2,459 WORLD PARK BUILDING #7 INDUSTRIAL 2,854 WORLD PARK BUILDING #8 INDUSTRIAL 2,842 WORLD PARK BUILDING #9 INDUSTRIAL 1,613 WORLD PARK BUILDING #11 INDUSTRIAL 2,563 WORLD PARK BUILDING #14 INDUSTRIAL 1,937 WORLD PARK BUILDING #15 INDUSTRIAL 0 WORLD PARK BUILDING #16 INDUSTRIAL 1,621 EASTGATE PLAZA EASTGATE PLAZA RETAIL 0 FAIRFIELD BUSINESS CENTER BUILDING D OFFICE 0 FAIRFIELD BUSINESS CENTER BUILDING E OFFICE 0 UNIVERSITY MOVING UNIVERSITY MOVING INDUSTRIAL 0 TRI-COUNTY OFFICE PARK BUILDINGS #1 - #4 OFFICE (3) 0 GOVERNOR'S PLAZA GOVERNOR'S PLAZA RETAIL 7,173 GOVERNOR'S PLAZA KING'S MALL II RETAIL 3,816 GOVERNOR'S PLAZA KOHLS RETAIL 0 SOFA EXPRESS SOFA EXPRESS RETAIL 0 OFFICE MAX OFFICE MAX RETAIL 0 312 ELM BUILDING 312 ELM OFFICE 34,990 311 ELM STREET ZUSSMAN OFFICE 0 ENTERPRISE BUSINESS PARK BUILDING 1 INDUSTRIAL 4,310 ENTERPRISE BUSINESS PARK BUILDING 2 INDUSTRIAL 3,118 ENTERPRISE BUSINESS PARK BUILDING A INDUSTRIAL 514 ENTERPRISE BUSINESS PARK BUILDING B INDUSTRIAL 790 ENTERPRISE BUSINESS PARK BUILDING D INDUSTRIAL 1,322 312 PLUM STREET S & L DATA OFFICE 0 TRIANGLE OFFICE PARK BUILDINGS #1 - #38 OFFICE 6,155 GOVERNOR'S HILL 8790 GOVERNOR'S HILL OFFICE 0 GOVERNOR'S HILL 8700 GOVERNOR'S HILL OFFICE 0 GOVERNOR'S HILL 8800 GOVERNOR'S HILL OFFICE 1,736 GOVERNOR'S HILL 8600 GOVERNOR'S HILL OFFICE 15,619 GOVERNOR'S POINTE 4770 GOVERNOR'S POINTE OFFICE 4,839 GOVERNOR'S POINTE 4700 BUILDING INDUSTRIAL 3,647 GOVERNOR'S POINTE 4900 BUILDING INDUSTRIAL 3,018 GOVERNOR'S POINTE 4705 GOVERNOR'S POINTE OFFICE 0 GOVERNOR'S POINTE 4800 GOVERNOR'S POINTE OFFICE 0 GOVERNOR'S POINTE 4605 GOVERNOR'S POINTE OFFICE 11,080 MONTGOMERY CROSSING STEINBERG'S RETAIL 719 MONTGOMERY CROSSING II SPORTS UNLIMITED RETAIL 2,844 GOVERNOR'S PLAZA KING'S AUTO MALL I RETAIL 3,383 SUGARCREEK PLAZA SUGARCREEK PLAZA RETAIL 4,132 COLUMBUS - ------------------------------ CORP. PARK AT TUTTLE CRSG LITEL OFFICE 0 CORP. PARK AT TUTTLE CRSG STERLING 1 OFFICE 0 CORP. PARK AT TUTTLE CRSG INDIANA INSURANCE OFFICE 0 CORP. PARK AT TUTTLE CRSG STERLING 2 OFFICE 0 CORP. PARK AT TUTTLE CRSG JOHN ALDEN LIFE INSURANCE OFFICE 0 CORP. PARK AT TUTTLE CRSG CARDINAL HEALTH OFFICE 0 SOUTH POINTE BUILDING A INDUSTRIAL 0 PET FOODS BUILD-TO-SUIT PET FOODS DISTRIBUTION INDUSTRIAL 0 GALYAN'S GALYAN'S RETAIL 3,234 BEST BUY BEST BUY RETAIL 0 MBM BUILDING MBM BUILDING INDUSTRIAL 0 V.A. HOSPITAL V.A. HOSPITAL MEDICAL 6,340 CORP. PARK AT TUTTLE CRSG XEROX OFFICE 4,500 LIVONIA, MICHIGAN - ------------------------------ LIVONIA BUILDING A OFFICE 0 LIVONIA BUILDING B OFFICE 0 DECATUR, ILLINOIS - ------------------------------ PARK 101 BUILDING #3 INDUSTRIAL 1,964 PARK 101 BUILDING #8 INDUSTRIAL 1,057 PARK 101 ILL POWER LAND LEASE INDUSTRIAL 0 BLOOMINGTON, ILLINOIS - ------------------------------ LAKEWOOD PLAZA LAKEWOOD PLAZA RETAIL 5,308 CHAMPAIGN, ILLINOIS - ------------------------------ MARKET VIEW SHOPPING CTR MARKET VIEW CENTER RETAIL 4,263 ELLISVILLE, MISSOURI - ------------------------------ ELLISVILLE PLAZA ELLISVILLE PLAZA RETAIL 2,204 ST. LOUIS, MISSOURI - ------------------------------ LAUMEIER I LAUMEIER I OFFICE 0 LAUMEIER II LAUMEIER II OFFICE 0 WESTVIEW PLACE WESTVIEW PLACE OFFICE 0 WESTMARK WESTMARK OFFICE 0 VARIOUS LOCATIONS - ------------------------------ LAND IMP. - UNDEVELOPED LAND N/A N/A 0 ELIMINATIONS --------------- TOTALS $ 259,820 --------------- --------------- INITIAL COST TO PARTNERSHIP COSTS (1) ------------------------- CAPITALIZED BUILDINGS/ SUBSEQUENT TO LOCATION/DEVELOPMENT BUILDING LAND IMPROVEMENTS ACQUISITION - ------------------------------ --------------------------- -------- ------------ --------------- INDIANAPOLIS, INDIANA - ------------------------------ PARK 100 BUSINESS PARK BUILDING #32 64 740 45 PARK 100 BUSINESS PARK BUILDING #34 131 1,455 208 PARK 100 BUSINESS PARK BUILDING #38 25 241 25 PARK 100 BUSINESS PARK BUILDING #79 184 1,764 207 PARK 100 BUSINESS PARK BUILDING #80 251 2,412 125 PARK 100 BUSINESS PARK BUILDING #83 247 2,572 88 PARK 100 BUSINESS PARK BUILDING #84 347 2,604 63 PARK 100 BUSINESS PARK BUILDING #95 642 4,756 8 PARK 100 BUSINESS PARK BUILDING #96 1,414 8,734 37 PARK 100 BUSINESS PARK BUILDING #97 676 4,294 1,029 PARK 100 BUSINESS PARK BUILDING #98 473 6,022 1,169 PARK 100 BUSINESS PARK BUILDING #100 103 2,179 526 PARK 100 BUSINESS PARK BUILDING #107 99 1,575 89 PARK 100 BUSINESS PARK BUILDING #109 240 1,865 (119) PARK 100 BUSINESS PARK BUILDING #116 341 3,144 (147) PARK 100 BUSINESS PARK BUILDING #118 226 2,229 154 PARK 100 BUSINESS PARK BUILDING #119 388 3,386 161 PARK 100 BUSINESS PARK BUILDING #121 592 960 53 PARK 100 BUSINESS PARK BUILDING #122 284 3,359 173 PARK 100 BUSINESS PARK BUILDING #125 358 2,291 5 PARK 100 BUSINESS PARK BUILDING #126 165 1,362 80 PARK 100 BUSINESS PARK BUILDING #127 96 1,726 379 PARK 100 BUSINESS PARK NORGATE LAND LEASE 51 0 0 PARK 100 BUSINESS PARK SCHAHET HOTELS LAND LEASE 131 0 0 PARK 100 BUSINESS PARK KENNY ROGERS LAND LEASE 56 0 9 PARK 100 BUSINESS PARK NORCO LAND LEASE 0 38 0 PARK 100 BUSINESS PARK ZOLLMAN LAND LEASE 115 0 (0) SHADELAND STATION 7351 SHADELAND 101 1,359 91 SHADELAND STATION BUILDING #204/205 260 2,595 179 SHADELAND STATION 7240 SHADELEND 152 3,113 776 SHADELAND STATION 7330 SHADELAND 255 4,045 (293) SHADELAND STATION 7369 SHADELAND 100 1,129 37 SHADELAND STATION 7340 SHADELAND 165 2,458 68 SHADELAND STATION 7400 SHADELAND 570 2,959 252 CASTLETON CORNER CUB PLAZA 540 4,850 80 CASTLETON SHOPPING CENTER MICHAEL'S PLAZA 749 3,400 175 SOUTH PARK, INDIANA BUILDING #1 287 2,328 271 SOUTH PARK, INDIANA BUILDING #2 334 3,081 262 SOUTH PARK, INDIANA BUILDING #3 208 2,150 333 SOUTH PARK, INDIANA BRYLANE PARKING LOT LEASE 0 54 3 SOUTH PARK, INDIANA LEE'S IN LAND LEASE 0 5 0 GREENWOOD CORNER GREENWOOD CORNER 390 3,435 (223) GREENWOOD CORNER 1st INDIANA BANK BRANCH 46 245 7 CARMEL MEDICAL I CARMEL MEDICAL I 0 3,710 (485) ST. FRANCIS ST. FRANCIS 0 5,839 0 COMMUNITY MOB COMMUNITY MOB 350 1,925 521 CARMEL MEDICAL II CARMEL MEDICAL II 0 4,000 181 HILLSDALE TECHNECENTER BUILDING #4 366 4,711 88 HILLSDALE TECHNECENTER BUILDING #5 251 3,235 161 HILLSDALE TECHNECENTER BUILDING #6 315 4,054 25 KEYSTONE AT THE CROSSING 8465 KEYSTONE 89 1,302 11 WOODFIELD AT THE CROSSING WOODFIELD II 719 9,106 508 WOODFIELD AT THE CROSSING WOODFIELD III 3,767 19,817 1,245 KEYSTONE AT THE CROSSING 3520 COMMERCE CRSG 19 560 23 ONE PARKWOOD ONE PARKWOOD 1,018 9,578 0 PALAMOR PALAMOR 158 1,148 303 FRANKLIN ROAD BUSINESS CTR. FRANKLIN ROAD BUSINESS CTR. 594 3,986 945 NAMPAC BUILDING NAMPAC BUILDING 274 1,622 0 HAMILTON CROSSING BUILDING #1 526 2,424 189 KEYSTONE AT THE CROSSING F.C. TUCKER BUILDING 0 264 5 PARK FLETCHER BUILDING #14 76 722 0 FORT WAYNE - ------------------------------ COLDWATER CROSSING COLDWATER SHOPPES 2,310 15,827 236 NASHVILLE, TENNESSEE - ------------------------------ KEEBLER BUILDING KEEBLER BUILDING 307 1,183 0 HAYWOOD OAKS TECHNECENTER BUILDING #2 395 1,767 34 HAYWOOD OAKS TECHNECENTER BUILDING #3 346 1,575 168 HAYWOOD OAKS TECHNECENTER BUILDING #4 435 1,948 12 HAYWOOD OAKS TECHNECENTER BUILDING #5 629 2,816 180 HAYWOOD OAKS TECHNECENTER BUILDING #6 924 5,730 229 HAYWOOD OAKS TECHNECENTER BUILDING #7 456 1,642 183 GREENBRIAR BUSINESS PARK GREENBRIAR 1,445 4,490 209 HEBRON, KENTUCKY - ------------------------------ SOUTHPARK, KENTUCKY CR SERVICES 1,085 4,060 0 SOUTHPARK, KENTUCKY BUILDING #1 682 3,725 94 SOUTHPARK, KENTUCKY BUILDING #3 841 3,382 98 SOUTHPARK, KENTUCKY REDKEN 779 3,095 5 CINCINNATI, OHIO - ------------------------------ PARK 50 TECHNECENTER BUILDING #17 500 6,200 (737) PARK 50 TECHNECENTER BUILDING #20 461 7,450 (732) PARK 50 TECHNECENTER BUILDING #24 151 809 84 PARK 50 TECHNECENTER BUILDING #25 1,161 3,758 126 PARK 50 TECHNECENTER SDRC BUILDING 911 19,004 391 FIDELITY DRIVE DUN & BRADSTREET 270 2,510 260 WORLD PARK BUILDING #5 270 3,260 141 WORLD PARK BUILDING #6 378 4,488 (795) WORLD PARK BUILDING #7 525 4,150 50 WORLD PARK BUILDING #8 561 5,309 45 WORLD PARK BUILDING #9 317 2,993 47 WORLD PARK BUILDING #11 460 4,701 174 WORLD PARK BUILDING #14 380 3,592 59 WORLD PARK BUILDING #15 373 2,274 211 WORLD PARK BUILDING #16 321 3,033 20 EASTGATE PLAZA EASTGATE PLAZA 2,030 4,079 18 FAIRFIELD BUSINESS CENTER BUILDING D 135 1,639 0 FAIRFIELD BUSINESS CENTER BUILDING E 398 2,461 0 UNIVERSITY MOVING UNIVERSITY MOVING 248 1,612 0 TRI-COUNTY OFFICE PARK BUILDINGS #1 - #4 217 5,211 484 GOVERNOR'S PLAZA GOVERNOR'S PLAZA 2,012 8,452 215 GOVERNOR'S PLAZA KING'S MALL II 1,928 3,636 117 GOVERNOR'S PLAZA KOHLS 1,345 3,575 6 SOFA EXPRESS SOFA EXPRESS 145 771 19 OFFICE MAX OFFICE MAX 651 1,223 2 312 ELM BUILDING 312 ELM 4,750 43,823 3,520 311 ELM STREET ZUSSMAN 339 6,226 146 ENTERPRISE BUSINESS PARK BUILDING 1 1,030 5,482 254 ENTERPRISE BUSINESS PARK BUILDING 2 733 3,443 719 ENTERPRISE BUSINESS PARK BUILDING A 119 685 0 ENTERPRISE BUSINESS PARK BUILDING B 119 1,117 0 ENTERPRISE BUSINESS PARK BUILDING D 243 1,802 24 312 PLUM STREET S & L DATA 2,539 24,312 1,023 TRIANGLE OFFICE PARK BUILDINGS #1 - #38 1,000 10,440 1,281 GOVERNOR'S HILL 8790 GOVERNOR'S HILL 400 4,581 216 GOVERNOR'S HILL 8700 GOVERNOR'S HILL 459 5,705 151 GOVERNOR'S HILL 8800 GOVERNOR'S HILL 225 2,305 344 GOVERNOR'S HILL 8600 GOVERNOR'S HILL 1,220 17,689 863 GOVERNOR'S POINTE 4770 GOVERNOR'S POINTE 586 7,609 (183) GOVERNOR'S POINTE 4700 BUILDING 584 5,465 (10) GOVERNOR'S POINTE 4900 BUILDING 654 4,017 326 GOVERNOR'S POINTE 4705 GOVERNOR'S POINTE 719 6,910 1,207 GOVERNOR'S POINTE 4800 GOVERNOR'S POINTE 978 4,742 554 GOVERNOR'S POINTE 4605 GOVERNOR'S POINTE 630 16,236 527 MONTGOMERY CROSSING STEINBERG'S 260 852 79 MONTGOMERY CROSSING II SPORTS UNLIMITED 778 3,687 0 GOVERNOR'S PLAZA KING'S AUTO MALL I 1,085 3,859 657 SUGARCREEK PLAZA SUGARCREEK PLAZA 898 6,492 (549) COLUMBUS - ------------------------------ CORP. PARK AT TUTTLE CRSG LITEL 2,618 17,428 442 CORP. PARK AT TUTTLE CRSG STERLING 1 1,494 11,856 284 CORP. PARK AT TUTTLE CRSG INDIANA INSURANCE 717 2,081 746 CORP. PARK AT TUTTLE CRSG STERLING 2 605 5,300 9 CORP. PARK AT TUTTLE CRSG JOHN ALDEN LIFE INSURANCE 1,066 6,856 13 CORP. PARK AT TUTTLE CRSG CARDINAL HEALTH 1,600 9,556 0 SOUTH POINTE BUILDING A 594 4,355 442 PET FOODS BUILD-TO-SUIT PET FOODS DISTRIBUTION 268 4,932 929 GALYAN'S GALYAN'S 1,925 3,146 6 BEST BUY BEST BUY 1,570 2,538 437 MBM BUILDING MBM BUILDING 170 1,916 5 V.A. HOSPITAL V.A. HOSPITAL 703 9,239 11 CORP. PARK AT TUTTLE CRSG XEROX 1,580 8,630 25 LIVONIA, MICHIGAN - ------------------------------ LIVONIA 0 9,474 612 LIVONIA BUILDING A 0 11,930 554 BUILDING B DECATUR, ILLINOIS - ------------------------------ PARK 101 BUILDING #3 275 2,405 572 PARK 101 BUILDING #8 80 1,660 9 PARK 101 ILL POWER LAND LEASE 212 0 0 BLOOMINGTON, ILLINOIS - ------------------------------ LAKEWOOD PLAZA LAKEWOOD PLAZA 766 7,199 824 CHAMPAIGN, ILLINOIS - ------------------------------ MARKET VIEW SHOPPING CTR MARKET VIEW CENTER 740 6,830 (512) ELLISVILLE, MISSOURI - ------------------------------ ELLISVILLE PLAZA ELLISVILLE PLAZA 802 3,143 (295) ST. LOUIS, MISSOURI - ------------------------------ LAUMEIER I LAUMEIER I 1,220 9,091 0 LAUMEIER II LAUMEIER II 1,258 9,054 315 WESTVIEW PLACE WESTVIEW PLACE 673 8,389 4 WESTMARK WESTMARK 1,200 9,759 0 VARIOUS LOCATIONS - ------------------------------ LAND IMP. - UNDEVELOPED LAND N/A 0 0 0 ELIMINATIONS -------- ------------ --------------- TOTALS 89,643 686,595 28,340 -------- ------------ --------------- -------- ------------ --------------- GROSS BOOK VALUE AT DECEMBER 31, 1995 --------------------------------------- LAND & BUILDINGS/ LOCATION/DEVELOPMENT BUILDING IMPROVEMENTS IMPROVEMENTS TOTAL - ------------------------------ --------------------- ------------ ------------ -------- INDIANAPOLIS, INDIANA - ------------------------------ PARK 100 BUSINESS PARK BUILDING #32 65 784 849 PARK 100 BUSINESS PARK BUILDING #34 133 1,661 1,794 PARK 100 BUSINESS PARK BUILDING #38 26 265 291 PARK 100 BUSINESS PARK BUILDING #79 187 1,968 2,155 PARK 100 BUSINESS PARK BUILDING #80 256 2,532 2,788 PARK 100 BUSINESS PARK BUILDING #83 252 2,655 2,907 PARK 100 BUSINESS PARK BUILDING #84 354 2,660 3,014 PARK 100 BUSINESS PARK BUILDING #95 642 4,764 5,406 PARK 100 BUSINESS PARK BUILDING #96 1,436 8,750 10,186 PARK 100 BUSINESS PARK BUILDING #97 676 5,323 5,999 PARK 100 BUSINESS PARK BUILDING #98 273 7,390 7,664 PARK 100 BUSINESS PARK BUILDING #100 103 2,706 2,809 PARK 100 BUSINESS PARK BUILDING #107 99 1,663 1,762 PARK 100 BUSINESS PARK BUILDING #109 246 1,740 1,986 PARK 100 BUSINESS PARK BUILDING #116 348 2,990 3,338 PARK 100 BUSINESS PARK BUILDING #118 230 2,379 2,609 PARK 100 BUSINESS PARK BUILDING #119 395 3,539 3,935 PARK 100 BUSINESS PARK BUILDING #121 604 1,001 1,605 PARK 100 BUSINESS PARK BUILDING #122 290 3,526 3,816 PARK 100 BUSINESS PARK BUILDING #125 358 2,295 2,654 PARK 100 BUSINESS PARK BUILDING #126 165 1,443 1,608 PARK 100 BUSINESS PARK BUILDING #127 96 2,105 2,201 PARK 100 BUSINESS PARK NORGATE LAND LEASE 51 0 51 PARK 100 BUSINESS PARK SCHAHET HOTELS LAND LEASE 131 0 131 PARK 100 BUSINESS PARK KENNY ROGERS LAND LEASE 56 9 65 PARK 100 BUSINESS PARK NORCO LAND LEASE 0 38 38 PARK 100 BUSINESS PARK ZOLLMAN LAND LEASE 115 0 115 SHADELAND STATION 7351 SHADELAND 103 1,449 1,551 SHADELAND STATION BUILDING #204/205 266 2,768 3,034 SHADELAND STATION 7240 SHADELEND 152 3,889 4,041 SHADELAND STATION 7330 SHADELAND 260 3,746 4,007 SHADELAND STATION 7369 SHADELAND 102 1,164 1,266 SHADELAND STATION 7340 SHADELAND 169 2,523 2,691 SHADELAND STATION 7400 SHADELAND 581 3,199 3,781 CASTLETON CORNER CUB PLAZA 550 4,920 5,470 CASTLETON SHOPPING CENTER MICHAEL'S PLAZA 764 3,561 4,324 SOUTH PARK, INDIANA BUILDING #1 292 2,594 2,886 SOUTH PARK, INDIANA BUILDING #2 341 3,336 3,677 SOUTH PARK, INDIANA BUILDING #3 212 2,479 2,691 SOUTH PARK, INDIANA BRYLANE PARKING LOT LEASE 0 57 57 SOUTH PARK, INDIANA LEE'S IN LAND LEASE 0 5 5 GREENWOOD CORNER GREENWOOD CORNER 400 3,202 3,602 GREENWOOD CORNER 1st INDIANA BANK BRANCH 47 251 298 CARMEL MEDICAL I CARMEL MEDICAL I 0 3,225 3,225 ST. FRANCIS ST. FRANCIS 0 5,839 5,839 COMMUNITY MOB COMMUNITY MOB 350 2,446 2,796 CARMEL MEDICAL II CARMEL MEDICAL II 0 4,181 4,181 HILLSDALE TECHNECENTER BUILDING #4 366 4,800 5,165 HILLSDALE TECHNECENTER BUILDING #5 251 3,396 3,647 HILLSDALE TECHNECENTER BUILDING #6 315 4,080 4,394 KEYSTONE AT THE CROSSING 8465 KEYSTONE 89 1,313 1,402 WOODFIELD AT THE CROSSING WOODFIELD II 733 9,600 10,333 WOODFIELD AT THE CROSSING WOODFIELD III 3,843 20,987 24,829 KEYSTONE AT THE CROSSING 3520 COMMERCE CRSG 0 602 602 ONE PARKWOOD ONE PARKWOOD 1,018 9,578 10,596 PALAMOR PALAMOR 158 1,450 1,608 FRANKLIN ROAD BUSINESS CTR. FRANKLIN ROAD BUSINESS CTR. 594 4,931 5,525 NAMPAC BUILDING NAMPAC BUILDING 274 1,622 1,896 HAMILTON CROSSING BUILDING #1 536 2,603 3,139 KEYSTONE AT THE CROSSING F.C. TUCKER BUILDING 0 269 269 PARK FLETCHER BUILDING #14 76 722 798 FORT WAYNE - ------------------------------ COLDWATER CROSSING COLDWATER SHOPPES 2,310 16,063 18,373 NASHVILLE, TENNESSEE - ------------------------------ KEEBLER BUILDING KEEBLER BUILDING 307 1,183 1,490 HAYWOOD OAKS TECHNECENTER BUILDING #2 395 1,801 2,196 HAYWOOD OAKS TECHNECENTER BUILDING #3 346 1,742 2,089 HAYWOOD OAKS TECHNECENTER BUILDING #4 435 1,960 2,395 HAYWOOD OAKS TECHNECENTER BUILDING #5 629 2,996 3,625 HAYWOOD OAKS TECHNECENTER BUILDING #6 946 5,938 6,883 HAYWOOD OAKS TECHNECENTER BUILDING #7 456 1,826 2,282 GREENBRIAR BUSINESS PARK GREENBRIAR 1,445 4,699 6,145 HEBRON, KENTUCKY - ------------------------------ SOUTHPARK, KENTUCKY CR SERVICES 1,085 4,060 5,145 SOUTHPARK, KENTUCKY BUILDING #1 696 3,805 4,501 SOUTHPARK, KENTUCKY BUILDING #2 858 3,463 4,321 SOUTHPARK, KENTUCKY REDKEN 779 3,100 3,879 CINCINNATI, OHIO - ------------------------------ PARK 50 TECHNECENTER BUILDING #17 510 5,453 5,963 PARK 50 TECHNECENTER BUILDING #20 469 6,710 7,179 PARK 50 TECHNECENTER BUILDING #24 154 890 1,044 PARK 50 TECHNECENTER BUILDING #25 1,184 3,861 5,045 PARK 50 TECHNECENTER SDRC BUILDING 929 19,377 20,306 FIDELITY DRIVE DUN & BRADSTREET 277 2,763 3,040 WORLD PARK BUILDING #5 276 3,395 3,671 WORLD PARK BUILDING #6 385 3,686 4,071 WORLD PARK BUILDING #7 537 4,188 4,725 WORLD PARK BUILDING #8 561 5,354 5,915 WORLD PARK BUILDING #9 317 3,041 3,357 WORLD PARK BUILDING #11 460 4,875 5,335 WORLD PARK BUILDING #14 380 3,651 4,031 WORLD PARK BUILDING #15 381 2,477 2,858 WORLD PARK BUILDING #16 321 3,053 3,374 EASTGATE PLAZA EASTGATE PLAZA 2,030 4,097 6,127 FAIRFIELD BUSINESS CENTER BUILDING D 135 1,639 1,774 FAIRFIELD BUSINESS CENTER BUILDING E 398 2,461 2,859 UNIVERSITY MOVING UNIVERSITY MOVING 248 1,612 1,860 TRI-COUNTY OFFICE PARK BUILDINGS #1 - #4 221 5,691 5,912 GOVERNOR'S PLAZA GOVERNOR'S PLAZA 2,053 8,627 10,679 GOVERNOR'S PLAZA KING'S MALL II 1,952 3,729 5,681 GOVERNOR'S PLAZA KOHLS 1,345 3,582 4,927 SOFA EXPRESS SOFA EXPRESS 145 789 935 OFFICE MAX OFFICE MAX 651 1,226 1,877 312 ELM BUILDING 312 ELM 5,428 46,664 52,093 311 ELM STREET ZUSSMAN 0 6,711 6,711 ENTERPRISE BUSINESS PARK BUILDING 1 1,051 5,715 6,766 ENTERPRISE BUSINESS PARK BUILDING 2 747 4,148 4,895 ENTERPRISE BUSINESS PARK BUILDING A 119 685 804 ENTERPRISE BUSINESS PARK BUILDING B 119 1,117 1,236 ENTERPRISE BUSINESS PARK BUILDING D 243 1,827 2,070 312 PLUM STREET S & L DATA 2,590 25,285 27,874 TRIANGLE OFFICE PARK BUILDINGS #1 - #38 1,018 11,703 12,721 GOVERNOR'S HILL 8790 GOVERNOR'S HILL 408 4,789 5,197 GOVERNOR'S HILL 8700 GOVERNOR'S HILL 468 5,847 6,315 GOVERNOR'S HILL 8800 GOVERNOR'S HILL 231 2,642 2,874 GOVERNOR'S HILL 8600 GOVERNOR'S HILL 1,245 18,527 19,772 GOVERNOR'S POINTE 4770 GOVERNOR'S POINTE 596 7,416 8,012 GOVERNOR'S POINTE 4700 BUILDING 595 5,444 6,039 GOVERNOR'S POINTE 4900 BUILDING 673 4,324 4,997 GOVERNOR'S POINTE 4705 GOVERNOR'S POINTE 733 8,103 8,836 GOVERNOR'S POINTE 4800 GOVERNOR'S POINTE 998 5,276 6,274 GOVERNOR'S POINTE 4605 GOVERNOR'S POINTE 643 16,750 17,393 MONTGOMERY CROSSING STEINBERG'S 260 931 1,191 MONTGOMERY CROSSING II SPORTS UNLIMITED 778 3,687 4,465 GOVERNOR'S PLAZA KING'S AUTO MALL I 1,124 4,477 5,601 SUGARCREEK PLAZA SUGARCREEK PLAZA 922 5,919 6,841 COLUMBUS - ------------------------------ CORP. PARK AT TUTTLE CRSG LITEL 2,670 17,818 20,488 CORP. PARK AT TUTTLE CRSG STERLING 1 1,524 12,110 13,634 CORP. PARK AT TUTTLE CRSG INDIANA INSURANCE 717 2,827 3,544 CORP. PARK AT TUTTLE CRSG STERLING 2 605 5,309 5,914 CORP. PARK AT TUTTLE CRSG JOHN ALDEN LIFE INSURANCE 1,066 6,869 7,935 CORP. PARK AT TUTTLE CRSG CARDINAL HEALTH 1,600 9,556 11,156 SOUTH POINTE BUILDING A 594 4,797 5,391 PET FOODS BUILD-TO-SUIT PET FOODS DISTRIBUTION 1,031 5,098 6,130 GALYAN'S GALYAN'S 1,925 3,152 5,077 BEST BUY BEST BUY 1,570 2,974 4,544 MBM BUILDING MBM BUILDING 170 1,921 2,091 V.A. HOSPITAL V.A. HOSPITAL 703 9,250 9,953 CORP. PARK AT TUTTLE CRSG XEROX 1,580 8,655 10,235 LIVONIA, MICHIGAN - ------------------------------ LIVONIA BUILDING A 0 10,086 10,086 LIVONIA BUILDING B 0 12,484 12,484 DECATUR, ILLINOIS - ------------------------------ PARK 101 BUILDING #3 280 2,972 3,252 PARK 101 BUILDING #8 184 1,566 1,749 PARK 101 ILL POWER AND LEASE 212 0 212 BLOOMINGTON, ILLINOIS - ------------------------------ LAKEWOOD PLAZA LAKEWOOD PLAZA 786 8,003 8,789 CHAMPAIGN, ILLINOIS - ------------------------------ MARKET VIEW SHOPPING CTR MARKET VIEW CENTER 755 6,303 7,058 ELLISVILLE, MISSOURI - ------------------------------ ELLISVILLE PLAZA ELLISVILLE PLAZA 802 2,848 3,650 ST. LOUIS, MISSOURI - ------------------------------ LAUMEIER I LAUMEIER I 1,220 9,091 10,311 LAUMEIER II LAUMEIER II 1,258 9,368 10,626 WESTVIEW PLACE WESTVIEW PLACE 673 8,393 9,066 WESTMARK WESTMARK 1,200 9,759 10,959 VARIOUS LOCATIONS - ------------------------------ LAND IMP. - UNDEVELOPED LAND N/A 0 0 0 ELIMINATIONS 0 (414) (414) ------------ ------------ -------- TOTALS 91,550 712,614 804,164 ------------ ------------ -------- ------------ ------------ -------- ACCUMULATED DATE OF DATE DEPRECIABLE LOCATION/DEVELOPMENT BUILDING DEPRECIATION CONSTRUCTION ACQUIRED LIFE - ------------------------------ --------------------- ------------- ------------ -------- ----------- INDIANAPOLIS, INDIANA - ------------------------------ PARK 100 BUSINESS PARK BUILDING #32 194 1978 1986 (6) PARK 100 BUSINESS PARK BUILDING #34 439 1979 1986 (6) PARK 100 BUSINESS PARK BUILDING #38 15 1978 1993 (6) PARK 100 BUSINESS PARK BUILDING #79 137 1988 1993 (6) PARK 100 BUSINESS PARK BUILDING #80 173 1988 1993 (6) PARK 100 BUSINESS PARK BUILDING #83 166 1989 1993 (6) PARK 100 BUSINESS PARK BUILDING #84 150 1989 1993 (6) PARK 100 BUSINESS PARK BUILDING #95 238 1993 1994 (6) PARK 100 BUSINESS PARK BUILDING #96 219 1994 1994 (6) PARK 100 BUSINESS PARK BUILDING #97 304 1994 1994 (6) PARK 100 BUSINESS PARK BUILDING #98 381 1968 1994 (6) PARK 100 BUSINESS PARK BUILDING #100 41 1995 1995 (6) PARK 100 BUSINESS PARK BUILDING #107 48 1984 1995 (6) PARK 100 BUSINESS PARK BUILDING #109 482 1985 1986 (6) PARK 100 BUSINESS PARK BUILDING #116 551 1988 1988 (6) PARK 100 BUSINESS PARK BUILDING #118 166 1988 1993 (6) PARK 100 BUSINESS PARK BUILDING #119 227 1989 1993 (6) PARK 100 BUSINESS PARK BUILDING #121 56 1989 1993 (6) PARK 100 BUSINESS PARK BUILDING #122 233 1990 1993 (6) PARK 100 BUSINESS PARK BUILDING #125 96 1994 1994 (6) PARK 100 BUSINESS PARK BUILDING #126 67 1984 1994 (6) PARK 100 BUSINESS PARK BUILDING #127 50 1995 1995 (6) PARK 100 BUSINESS PARK NORGATE LAND LEASE 0 N/A 1995 (6) PARK 100 BUSINESS PARK SCHAHET HOTELS LAND LEASE 0 N/A 1995 (6) PARK 100 BUSINESS PARK KENNY ROGERS LAND LEASE 0 N/A 1995 (6) PARK 100 BUSINESS PARK NORCO LAND LEASE 31 N/A 1995 (6) PARK 100 BUSINESS PARK ZOLLMAN LAND LEASE 0 N/A 1994 (6) SHADELAND STATION 7351 SHADELAND 92 1983 1993 (6) SHADELAND STATION BUILDING #204/205 694 1984 1986 (6) SHADELAND STATION 7240 SHADELEND 938 1985 1993 (6) SHADELAND STATION 7330 SHADELAND 658 1988 1988 (6) SHADELAND STATION 7369 SHADELAND 67 1989 1993 (6) SHADELAND STATION 7340 SHADELAND 145 1989 1993 (6) SHADELAND STATION 7400 SHADELAND 223 1990 1993 (6) CASTLETON CORNER CUB PLAZA 1,224 1986 1986 (6) CASTLETON SHOPPING CENTER MICHAEL'S PLAZA 222 1984 1993 (6) SOUTH PARK, INDIANA BUILDING #1 238 1989 1993 (6) SOUTH PARK, INDIANA BUILDING #2 217 1990 1993 (6) SOUTH PARK, INDIANA BUILDING #3 233 1990 1993 (6) SOUTH PARK, INDIANA BRYLANE PARKING LOT LEASE 8 N/A 1994 (6) SOUTH PARK, INDIANA LEE'S IN LAND LEASE 0 N/A N/A (6) GREENWOOD CORNER GREENWOOD CORNER 790 1986 1986 (6) GREENWOOD CORNER 1st INDIANA BANK BRANCH 14 1988 1993 (6) CARMEL MEDICAL I CARMEL MEDICAL I 838 1985 1986 (6) ST. FRANCIS ST. FRANCIS 129 1995 1995 (6) COMMUNITY MOB COMMUNITY MOB 18 1995 1995 (6) CARMEL MEDICAL II CARMEL MEDICAL II 528 1989 1990 (6) HILLSDALE TECHNECENTER BUILDING #4 282 1987 1993 (6) HILLSDALE TECHNECENTER BUILDING #5 206 1987 1993 (6) HILLSDALE TECHNECENTER BUILDING #6 229 1987 1993 (6) KEYSTONE AT THE CROSSING 8465 KEYSTONE 13 1983 1995 (6) WOODFIELD AT THE CROSSING WOODFIELD II 646 1987 1993 (6) WOODFIELD AT THE CROSSING WOODFIELD III 1,370 1989 1993 (6) KEYSTONE AT THE CROSSING 3520 COMMERCE CRSG 107 1976 1993 (6) ONE PARKWOOD ONE PARKWOOD 0 1989 1995 (6) PALAMOR PALAMOR 36 1973 1995 (6) FRANKLIN ROAD BUSINESS CTR. FRANKLIN ROAD BUSINESS CTR. 103 1962 1995 (6) NAMPAC BUILDING NAMPAC BUILDING 27 1974 1995 (6) HAMILTON CROSSING BUILDING #1 162 1989 1993 (6) KEYSTONE AT THE CROSSING F.C. TUCKER BUILDING 15 1978 1993 (6) PARK FLETCHER BUILDING #14 5 1978 1995 (6) FORT WAYNE - ------------------------------ COLDWATER CROSSING COLDWATER SHOPPES 621 1990 1994 (6) NASHVILLE, TENNESSEE - ------------------------------ KEEBLER BUILDING KEEBLER BUILDING 25 1985 1995 (6) HAYWOOD OAKS TECHNECENTER BUILDING #2 109 1988 1993 (6) HAYWOOD OAKS TECHNECENTER BUILDING #3 159 1988 1993 (6) HAYWOOD OAKS TECHNECENTER BUILDING #4 110 1988 1993 (6) HAYWOOD OAKS TECHNECENTER BUILDING #5 205 1988 1993 (6) HAYWOOD OAKS TECHNECENTER BUILDING #6 365 1989 1993 (6) HAYWOOD OAKS TECHNECENTER BUILDING #7 5 1995 1995 (6) GREENBRIAR BUSINESS PARK GREENBRIAR 179 1986 1993 (6) HEBRON, KENTUCKY - ------------------------------ SOUTHPARK, KENTUCKY CR SERVICES 156 1994 1994 (6) SOUTHPARK, KENTUCKY BUILDING #1 211 1990 1993 (6) SOUTHPARK, KENTUCKY BUILDING #2 193 1991 1993 (6) SOUTHPARK, KENTUCKY REDKEN 123 1994 1994 (6) CINCINNATI, OHIO - ------------------------------ PARK 50 TECHNECENTER BUILDING #17 1,566 1985 1986 (6) PARK 50 TECHNECENTER BUILDING #20 1,246 1987 1988 (6) PARK 50 TECHNECENTER BUILDING #24 56 1989 1993 (6) PARK 50 TECHNECENTER BUILDING #25 217 1989 1993 (6) PARK 50 TECHNECENTER SDRC BUILDING 1,078 1991 1993 (6) FIDELITY DRIVE DUN & BRADSTREET 739 1972 1986 (6) WORLD PARK BUILDING #5 803 1987 1990 (6) WORLD PARK BUILDING #6 738 1987 1990 (6) WORLD PARK BUILDING #7 722 1987 1990 (6) WORLD PARK BUILDING #8 300 1989 1993 (6) WORLD PARK BUILDING #9 177 1989 1993 (6) WORLD PARK BUILDING #11 307 1989 1993 (6) WORLD PARK BUILDING #14 216 1989 1993 (6) WORLD PARK BUILDING #15 164 1990 1993 (6) WORLD PARK BUILDING #16 171 1989 1993 (6) EASTGATE PLAZA EASTGATE PLAZA 89 1990 1995 (6) FAIRFIELD BUSINESS CENTER BUILDING D 5 1990 1995 (6) FAIRFIELD BUSINESS CENTER BUILDING E 7 1990 1995 (6) UNIVERSITY MOVING UNIVERSITY MOVING 34 1991 1995 (6) TRI-COUNTY OFFICE PARK BUILDINGS #1 - #4 355 1971 1993 (6) GOVERNOR'S PLAZA GOVERNOR'S PLAZA 483 1990 1993 (6) GOVERNOR'S PLAZA KING'S MALL II 207 1988 1989 (6) GOVERNOR'S PLAZA KOHLS 104 1994 1994 (6) SOFA EXPRESS SOFA EXPRESS 5 1995 1995 (6) OFFICE MAX OFFICE MAX 14 1995 1995 (6) 312 ELM BUILDING 312 ELM 2,680 1992 1993 (6) 311 ELM STREET ZUSSMAN 367 1902(4) 1993 (6) ENTERPRISE BUSINESS PARK BUILDING 1 335 1990 1993 (6) ENTERPRISE BUSINESS PARK BUILDING 2 337 1990 1993 (6) ENTERPRISE BUSINESS PARK BUILDING A 10 1987 1995 (6) ENTERPRISE BUSINESS PARK BUILDING B 17 1988 1995 (6) ENTERPRISE BUSINESS PARK BUILDING D 29 1989 1995 (6) 312 PLUM STREET S & L DATA 1,416 1987 1993 (6) TRIANGLE OFFICE PARK BUILDINGS #1 - #38 3,842 1965(5) 1986 (6) GOVERNOR'S HILL 8790 GOVERNOR'S HILL 270 1985 1991 (6) GOVERNOR'S HILL 8700 GOVERNOR'S HILL 324 1985 1993 (6) GOVERNOR'S HILL 8800 GOVERNOR'S HILL 873 1985 1986 (6) GOVERNOR'S HILL 8600 GOVERNOR'S HILL 1,112 1986 1991 (6) GOVERNOR'S POINTE 4770 GOVERNOR'S POINTE 1,384 1986 1988 (6) GOVERNOR'S POINTE 4700 BUILDING 1,084 1987 1988 (6) GOVERNOR'S POINTE 4900 BUILDING 969 1987 1989 (6) GOVERNOR'S POINTE 4705 GOVERNOR'S POINTE 421 1988 1993 (6) GOVERNOR'S POINTE 4800 GOVERNOR'S POINTE 399 1989 1993 (6) GOVERNOR'S POINTE 4605 GOVERNOR'S POINTE 963 1990 1993 (6) MONTGOMERY CROSSING STEINBERG'S 25 1993 1993 (6) MONTGOMERY CROSSING II SPORTS UNLIMITED 129 1994 1994 (6) GOVERNOR'S PLAZA KING'S AUTO MALL I 804 1990 1993 (6) SUGARCREEK PLAZA SUGARCREEK PLAZA 1,094 1988 1988 (6) COLUMBUS - ------------------------------ CORP. PARK AT TUTTLE CRSG LITEL 989 1990 1993 (6) CORP. PARK AT TUTTLE CRSG STERLING 1 673 1990 1993 (6) CORP. PARK AT TUTTLE CRSG INDIANA INSURANCE 196 1994 1994 (6) CORP. PARK AT TUTTLE CRSG STERLING 2 98 1995 1995 (6) CORP. PARK AT TUTTLE CRSG JOHN ALDEN LIFE INSURANCE 127 1995 1995 (6) CORP. PARK AT TUTTLE CRSG CARDINAL HEALTH 125 1995 1995 (6) SOUTH POINTE BUILDING A 56 1995 1995 (6) PET FOODS BUILD-TO-SUIT PET FOODS DISTRIBUTION 167 1993 1993 (6) GALYAN'S GALYAN'S 98 1994 1994 (6) BEST BUY BEST BUY 15 1995 1995 (6) MBM BUILDING MBM BUILDING 48 1978 1994 (6) V.A. HOSPITAL V.A. HOSPITAL 294 1994 1994 (6) CORP. PARK AT TUTTLE CRSG XEROX 366 1992 1994 (6) LIVONIA, MICHIGAN - ------------------------------ LIVONIA BUILDING A 687 1988 1993 (6) LIVONIA BUILDING B 787 1989 1993 (6) DECATUR, ILLINOIS - ------------------------------ PARK 101 BUILDING #3 872 1979 1986 (6) PARK 101 BUILDING #8 408 1980 1986 (6) PARK 101 ILL POWER AND LEASE 0 N/A 1994 (6) BLOOMINGTON, ILLINOIS - ------------------------------ LAKEWOOD PLAZA LAKEWOOD PLAZA 1,430 1987 1988 (6) CHAMPAIGN, ILLINOIS - ------------------------------ MARKET VIEW SHOPPING CTR MARKET VIEW CENTER 1,553 1985 1986 (6) ELLISVILLE, MISSOURI - ------------------------------ ELLISVILLE PLAZA ELLISVILLE PLAZA 506 1987 1988 (6) ST. LOUIS, MISSOURI - ------------------------------ LAUMEIER I LAUMEIER I 133 1987 1995 (6) LAUMEIER II LAUMEIER II 137 1988 1995 (6) WESTVIEW PLACE WESTVIEW PLACE 122 1988 1995 (6) WESTMARK WESTMARK 40 1987 1995 (6) VARIOUS LOCATIONS - ------------------------------ LAND IMP. - UNDEVELOPED LAND N/A 316 ELIMINATIONS 0 ------------- TOTALS 56,335 ------------- -------------
44 DUKE REALTY LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 (IN THOUSANDS) (1) Costs capitalized subsequent to acquisition include decreases for purchase price reduction payments received and land sales or takedowns. (2) The Partnership owns a 66.67% interest in the partnership owning this building. The Partnership shares in the cash flow of this building in accordance with the Partnership's ownership interests. (3) The four buildings comprising Tri-County Office Park were constructed in 1971,1973, and 1982. (4) This building was renovated in 1986. (5) This building was renovated in 1985. (6) Depreciation of real estate is computed using the straight-line method over 40 years for building and shorter periods based on lease terms (generally 3 to 10 years) for tenant improvements.
Real Estate Assets Accumulated Depreciation --------------------------------- -------------------------------- 1995 1994 1993 1995 1994 1993 --------------------------------- -------------------------------- Balance at beginning of year $ 653,552 $ 540,376 132,459 $ 38,058 $ 23,725 17,508 Additions during year: Acquisitions 114,705 57,218 400,198 0 0 (242) Construction costs and tenant improvements 84,790 41,125 8,881 0 0 0 Depreciation expense 0 0 0 20,416 15,068 6,459 Acquisition of minority interest and joint venture interest 796 15,742 0 0 0 0 --------------------------------- -------------------------------- 853,843 654,461 541,538 58,474 38,793 23,725 Deductions during year: Cost of real estate sold (4,393) (909) (1,162) (1,259) 0 0 Contribution to Joint Venture (44,725) 0 0 (319) 0 0 Other (561) 0 0 (561) (735) 0 ---------------------------------------------------------------------- Balance at end of year $ 804,164 $ 653,552 540,376 $ 56,335 $ 38,058 23,725 ---------------------------------------------------------------------- ----------------------------------------------------------------------
- 45 - 3. EXHIBITS EXHIBIT NUMBER DESCRIPTION 4.1 Amended and Restated Agreement of Limited Partnership of Duke Realty Limited Partnership ("DRLP") is incorporated herein by reference to Exhibit 10.1 to the registration statement of Duke Realty Investments, Inc. on Form S-2, as amended, filed on June 8, 1993, as File No. 33-64038 (the "1993 Registration Statement"). 4.2 First and Second Amendments to Amended and Restated Agreement of Limited Partnership of DRLP are incorported herein by reference to Exhibit 10.2 of the Annual Report on Form 10-K of Duke Realty Investments, Inc. for the year ended December 31, 1995 (File No. 1-9044)("DRE 10-K"). 4.3 Indenture between DRLP and The First National Bank of Chicago, Trustee, and the First Supplement thereto, are incorporated by reference to Exhibits 4.1 and 4.2 to the report of Duke Realty Investments, Inc. on Form 8-K filed September 19, 1995. 10.3 Second Amended and Restated Agreement of Limited Partnership of Duke Realty Services Limited Partnership (the "Services Partnership") is incorporated herein by reference to Exhibit 10.3 of the DRE 10-K. 10.4 Promissory Note of the Services Partnership is incorporated herein by reference to Exhibit 10.3 to the 1993 Registration Statement. 10.5 Duke Realty Services Partnership 1993 Stock Option Plan is incorporated herein by reference to Exhibit 10.4 to the 1993 Registration Statement. 10.6 Acquisition Option Agreement relating to certain properties not contributed to DRLP by Duke Associates (the "Excluded Properties") is incorporated herein by reference to Exhibit 10.5 to the 1993 Registration Statement. 10.7 Management Agreement relating to the Excluded Properties is incorporated herein by reference to Exhibit 10.6 to the 1993 Registration Statement. 10.8 Contribution Agreement for certain properties and land contributed by Duke Associates and Registrant to DRLP is incorporated herein by reference to Exhibit 10.7 to the 1993 Registration Statement. 10.9 Contribution Agreement for certain assets and contracts contributed by Duke Associates to the Service Partnership is incorporated herein by reference to Exhibit 10.8 to the 1993 Registration Statement. 10.10 Contribution Agreement for certain contracts contributed by Duke Associates to DRLP is incorporated herein by reference to Exhibit 10.9 to the 1993 Registration Statement. - 46 - 10.11 Stock Purchase Agreement is incorporated herein by reference to Exhibit 10.10 to the 1993 Registration Statement. 10.12 Indemnification Agreement is incorporated herein by reference to Exhibit 10.11 to the 1993 Registration Statement. 10.13 1995 Key Employee Stock Option Plan is incorporated herein by reference to Exhibit 10.13 of the DRE 10-K. 10.14 1995 Dividend Increase Unit Plan is incorporated herein by reference to Exhibit 10.14 of the DRE 10-K. 10.15 1995 Shareholder Value Plan is incorporated herein by reference to Exhibit 10.15 of the DRE 10-K. 21. List of Subsidiaries of Registrant. 23. Consent of KPMG Peat Marwick LLP. 24. Executed powers of attorney of certain directors. 27. Financial Data Schedule 99.1 Selected Quarterly Financial Information - 47 - The Partnership will furnish to any security holder, upon written request, copies of any exhibit incorporated by reference, for a fee of 15 cents per page, to cover the costs of furnishing the exhibits. Written request should include a representation that the person making the request was the beneficial owner of securities. (b) REPORTS ON FORM 8-K A report on Form 8-K dated January 12, 1996 was filed with the Commission to report under Item 5 the formation of a joint venture with an institutional real estate investor. - 48 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DUKE REALTY LIMITED PARTNERSHIP By: Duke Realty Investments, Inc. Its General Partner March 20 ,1996 By: /s/ Thomas L. Hefner - ------------------------------ ------------------------------- Thomas L. Hefner President and Chief Executive Officer By: /s/ Darell E. Zink, Jr. ------------------------------- Darell E. Zink, Jr. Executive Vice President and Chief Financial Officer By: /s/ Dennis D. Oklak ------------------------------- Dennis D. Oklak Vice President and Treasurer (Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Date Title --------- ---- ----- John W. Wynne* 3/20/96 Chairman of the Board - --------------------------- ----------- John W. Wynne Thomas L. Hefner* 3/20/96 President and Chief Executive - --------------------------- ----------- Officer and Director Thomas L. Hefner Daniel C. Staton* 3/20/96 Executive Vice President and Chief - --------------------------- ----------- Operating Officer and Director Daniel C. Staton Darell E. Zink, Jr.* 3/20/96 Executive Vice President and Chief - --------------------------- ----------- Financial Officer and Director Darell E. Zink, Jr. - 49 - Geoffrey Button* 3/20/96 Director - --------------------------- ----------- Geoffrey Button John D. Peterson* 3/20/96 Director - --------------------------- ----------- John D. Peterson Ngaire E. Cuneo* 3/20/96 Director - --------------------------- ----------- Ngaire E. Cuneo Lee Stanfield* 3/20/96 Director - --------------------------- ----------- Lee Stanfield Jay J. Strauss* 3/20/96 Director - --------------------------- ----------- Jay J. Strauss Howard L. Feinsand* 3/20/96 Director - --------------------------- ----------- Howard L. Feinsand James E. Rogers* 3/20/96 Director - --------------------------- ----------- James E. Rogers *By Dennis D. Oklak, Attorney-in-Fact - 50 - EX-23 2 EXHIBIT 23 EXHIBIT 23 The Partners DUKE REALTY LIMITED PARTNERSHIP: We consent to incorporation by reference in the registration statement (No. 33-61361) on Form S-3 of Duke Realty Investments, Inc. and Duke Realty Limited Partnership of our report dated January 31, 1996, relating to the consolidated balance sheets of Duke Realty Limited Partnership and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, partners' equity and cash flows for each of the years in the three-year period ended December 31, 1995 and the related schedule, which report appears in the December 31, 1995 annual report on Form 10-K/A of Duke Realty Limited Partnership. /s/ KPMG Peat Marwick, LLP Indianapolis, Indiana March 18, 1996 -----END PRIVACY-ENHANCED MESSAGE-----