-----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, E647obaT+CPzPhnpRIQ+GSnZnwUs9nG52NZ/qSW+HxfQdRJP21GgbMSQaKsCLaqT 1TcaxYrCmQesxoYRz1rOKg== 0001047469-99-034289.txt : 19990901 0001047469-99-034289.hdr.sgml : 19990901 ACCESSION NUMBER: 0001047469-99-034289 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990701 ITEM INFORMATION: FILED AS OF DATE: 19990831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE WEEKS REALTY LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0001003410 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 351898425 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-20625 FILM NUMBER: 99704115 BUSINESS ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: SUITE 1100 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 BUSINESS PHONE: 3178086000 MAIL ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STREET 2: STE 1100 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 FORMER COMPANY: FORMER CONFORMED NAME: DUKE REALTY LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19951114 8-K/A 1 8-K/A - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 1, 1999 DUKE-WEEKS REALTY LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Indiana 0-20625 35-1898425 (State or jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 8888 KEYSTONE CROSSING, SUITE 1200 INDIANAPOLIS, INDIANA 46240 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (317) 808-6000 Not applicable (Former name or former address, if changed since last report) - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Pro forma condensed consolidated balance sheet as of March 31, 1999 Notes to pro forma condensed consolidated balance sheet as of March 31, 1999 Pro forma condensed consolidated statement of operations for the three months ended March 31, 1999 Notes to pro forma condensed consolidated statement of operations for the three months ended March 31, 1999 Pro forma condensed consolidated balance sheet as of December 31, 1998 Notes to pro forma condensed consolidated balance sheet as of December 31, 1998 Pro forma condensed consolidated statement of operations for the year ended December 31, 1998 Notes to pro forma condensed consolidated statement of operations for the year ended December 31, 1998 DUKE-WEEKS REALTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following pro forma condensed financial statements for Duke-Weeks Realty Limited Partnership (the "Partnership") include certain pro forma adjustments to the historical financial statements of Duke Realty Limited Partnership ("Duke Operating Partnership") to reflect the proposed merger (the "Merger") of Duke Operating Partnership and Weeks Realty Limited Partnership ("Weeks Operating Partnership"). Duke Realty Investments, Inc., the general partner of Duke Operating Partnership, will merge with Weeks Corporation, the general partner of Weeks Operating Partnership, immediately following the merger of Duke Operating Partnership and Weeks Operating Partnership. After the merger of Duke Realty Investments, Inc. and Weeks Corporation, the combined company will be known as Duke-Weeks Realty Corporation (the "General Partner"), and will be the sole general partner of the Partnership. The Mergers will be accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. These pro forma condensed consolidated financial statements should be read in conjunction with the Duke Operating Partnership Form 10-Q as of and for the three months ended March 31, 1999, and also in conjunction with Weeks Operating Partnership Form 10-Q as of and for the three months ended March 31, 1999. The following pro forma condensed consolidated balance sheet is based upon the March 31, 1999 consolidated balance sheet of Duke Operating Partnership and the March 31, 1999 consolidated balance sheet of Weeks Operating Partnership, presented as if the Merger occurred on March 31, 1999. The following pro forma condensed consolidated statement of operations is based upon the consolidated statement of operations for the three months ended March 31, 1999 of Duke Operating Partnership and Weeks Operating Partnership, presented as if the Merger occurred as of January 1, 1999. The pro forma condensed consolidated financial statements do not purport to be indicative of the actual financial position or results of operations which would have been obtained assuming that the Merger had been completed as set forth above, or which may be obtained in the future. DUKE-WEEKS REALTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET March 31, 1999 (UNAUDITED) (IN THOUSANDS)
HISTORICAL PRO FORMA DUKE-WEEKS --------------------------- MERGER POST-MERGER ASSETS DUKE WEEKS ADJUSTMENTS PRO FORMA ------ ---- ----- ------------ ---------- Real estate $2,720,892 $1,412,983 $281,323 (A) $4,415,198 Land held for development 185,507 37,118 - (B) 222,625 Investment in unconsolidated real estate companies 115,527 7,676 - (B) 123,203 Less accumulated depreciation (188,856) (101,640) 101,640 (A) (188,856) ------------ ------------- ------------ ----------- Net real estate investment 2,833,070 1,356,137 382,963 4,572,170 Cash and cash equivalents 34,981 2,159 (17,000)(D) 20,140 Accounts receivable 8,562 8,807 - 17,369 Straight-line rent receivable 21,664 6,529 (6,529)(C) 21,664 Investment in and notes receivable from unconsolidated service companies - 42,926 - 42,926 Deferred financing costs 12,864 7,939 (7,939)(C) 12,864 Deferred other costs 52,642 20,466 (20,466)(C) 52,642 Other assets 105,223 14,781 - 120,004 ----------- ------------- ------------ ----------- TOTAL ASSETS $3,069,006 $1,459,744 $331,029 $4,859,779 ---------- ------------- ------------ ------------ ---------- ------------- ------------ ------------ LIABILITIES AND PARTNERS' EQUITY Liabilities: Secured debt $333,560 $243,764 $ 12,109 (E) $589,433 Unsecured debt 715,000 285,000 1,994 (E) 1,001,994 Lines of credit 65,000 140,140 - 205,140 Accounts payable and other liabilities 166,695 38,945 - 205,640 ---------- ----------- ------------- --------- Total liabilities 1,280,255 707,849 14,103 2,002,207 Minority interest 501 - - 501 Partners' equity: Preferred equity 460,000 250,000 (4,545)(A) 705,455 Common equity 1,328,250 501,895 321,471 (A) 2,151,616 ---------- ----------- ----------- --------- Total partners' equity 1,788,250 751,895 316,926 2,857,071 ---------- ----------- ------------ -------- TOTAL LIABILITIES AND PARTNERS' EQUITY $3,069,006 $1,459,744 $331,029 $4,859,779 ----------- ----------- ------------- ---------- ----------- ----------- ------------- ----------
See accompanying notes to pro forma condensed consolidated balance sheet DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS) (a) Represents adjustments to record Weeks Operating Partnership's assets and liabilities at their respective purchase values based on the purchase method of accounting. The assumed purchase price of $1.8 billion was computed as follows:
WEEKS DUKE DUKE OPERATING OPERATING OPERATING PARTNERSHIP PARTNERSHIP PARTNERSHIP UNITS EXCHANGE UNITS VALUE ACQUISITION OUTSTANDING RATIO ISSUED PER UNIT COSTS ----------- --------- ----------- ----------- ----------- Common units 27,079 1.38 37,369 $21.75 $812,776 (1) ----------- ----------- Preferred Series A Units 6,000 1.00 6,000 $23.75 142,500 (2) ----------- ----------- Preferred Series C Units 1,400 1.00 1,400 $25.00 35,000 (3) ----------- ----------- Preferred Series D Units 2,600 1.00 2,600 $26.14 67,955 (4) ----------- ----------- General Partner options and warrants issued 11,990 (5) Weeks Operating Partnership outstanding debt assumed 683,007 (6) Other Weeks Operating Partnership liabilities assumed 38,945 Estimated transaction costs 17,000 (7) --------- Total assumed purchase price $1,809,173 --------- ---------
(1) Represents the value of the Duke Operating Partnership common units that will be exchanged for the assumed outstanding Weeks Operating Partnership common units. The value of the Duke Operating Partnership common units is based upon the five day average of the closing price of the General Partner's common stock as listed on the New York Stock Exchange immediately before, during and after the date the terms of the Merger were agreed to and announced to the public on March 1, 1999. The following purchase accounting adjustments will be made to partners' equity:
Value of Duke Operating Partnership common units issued $812,776 Less net book value of Weeks Operating Partnership common equity at March 31, 1999 501,895 --------- Adjustments to common equity for Duke Operating Partnership common units issued 310,881 Adjustment to preferred equity for Duke Operating Partnership Series F Preferred Units issued (see note (a) (2)) (7,500) Adjustment to preferred equity for Duke Operating Partnership Preferred D Units (see note (a) (4)) 2,955 Adjustment to common equity for General Partner options and warrants issued (see note (a) (5)) 10,590 --------- Total purchase accounting adjustment to partners' equity $316,926 ---------- ----------
DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS) (2) Each outstanding unit of Preferred Series A Cumulative Redeemable Preferred Units of Weeks Operating Partnership will be converted into the right to receive one depositary unit of Duke Operating Partnership representing 1/1000 of a unit of Series F Cumulative Redeemable Preferred Units of Duke Operating Partnership. The assumed value of the Duke Operating Partnership Series F preferred units is based upon the average closing price of the Weeks Corporation Series A Preferred Stock the two days immediately following the date the terms of the Merger were agreed to and announced to the public. The following purchase accounting adjustment will be made to partners' preferred equity: Value of Duke Operating Partnership Series F Preferred Units issued $ 142,500 Less net book value of Weeks Operating Partnership Series A Preferred Units at March 31, 1999 150,000 -------- Purchase accounting adjustment to partners' preferred equity $ (7,500) -------- --------
(3) The Duke Operating Partnership will issue preferred units valued at the book value (which approximates estimated fair value), of Weeks Operating Partnership Preferred C Units at March 31, 1999. The Duke Operating Partnership Preferred Units will have the same economic attributes as the Weeks Operating Partnership Preferred C Units. (4) The Duke Operating Partnership will issue preferred units valued at the estimated fair value of the Weeks Operating Partnership Preferred D Units at March 31, 1999. The Duke Operating Partnership Preferred D Units will have the same economic attributes as the Weeks Operating Partnership Preferred D Units. The adjustment to estimated fair value is based on the present value of amounts to be paid using pricing levels available to the General Partner for preferred equity with similar terms and features around March 1, 1999, the announced date of the Merger. The following purchase accounting adjustment will be made to partners' preferred equity: Value of Duke Operating Partnership Preferred D Units $67,955 Less net book value of Weeks Operating Partnership Series D Preferred Units at March 31, 1999 65,000 ------- Purchase accounting adjustment to partners' preferred equity $ 2,955 ------- -------
(5) Represents the fair value (computed using an option pricing model) of the General Partner's stock options and warrants to be issued to replace outstanding Weeks Corporation stock options and warrants. The General Partner's stock options and warrants will carry the same terms and remaining vesting schedule as the Weeks Corporation stock options and warrants being replaced and provide for the option to purchase up to 3,116,000 of General Partner common shares. The following purchase accounting adjustment will be made to partners' common equity: Value of General Partner issued stock options and warrants $11,990 Less book value of Weeks Corporation warrants at March 31, 1999 (1,400) ------- Purchase accounting adjustment to partners' common equity $10,590 ------- -------
(6) The Weeks Operating Partnership outstanding debt assumed is calculated as follows (see note (e)): Weeks Operating Partnership outstanding debt $668,904 Fair value adjustment to secured debt 12,109 Fair value adjustment to unsecured debt 1,994 --------- $683,007 --------- ---------
(7) Represents estimated costs to be incurred by Duke Operating Partnership in connection with the Merger (see note (d)). DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS) (8) The total purchase accounting adjustment to net real estate investments is calculated as follows: Total adjustment for Duke Operating Partnership common units issued per note (a) (1) $310,881 Total adjustment for Duke Operating Partnership Series F Preferred Units issued per note (a) (2) (7,500) Total adjustment for Duke Operating Partnership Series D preferred units issued per note (a) (4) 2,955 Total adjustment for cash paid for closing costs per note (d) 17,000 Total adjustment to record Weeks Operating Partnership debt to fair market value per note (a) (6) 14,103 Total adjustment to record General Partner stock options issued per note (a) (5) 10,590 Total adjustment to eliminate assets of Weeks Operating Partnership with no future value per note (c) 34,934 --------- Total purchase accounting adjustment to net real estate investments $382,963 --------- ---------
(b) The book value of Weeks Operating Partnership's land held for development and investments in unconsolidated companies at March 31, 1999, was estimated to approximate the fair value because substantially all land acquisitions and investments in unconsolidated companies occurred within the last 24 months and the acquisition or investment cost is representative of current market conditions. (c) Represents the elimination of assets of Weeks Operating Partnership that have no future value to the combined company. (d) Represents the expected cash expenditures to fund the following costs to be incurred with the merger: Advisory Fees $13,000 Legal and Professional Fees 3,000 Other 1,000 ------- $17,000 ------- -------
(e) Represents adjustments to Weeks Operating Partnership secured and unsecured debt to reflect the premium or discount to adjust these financial instruments to their estimated fair value. The adjustment is based on the present value of amounts to be paid using interest rates available to Duke Operating Partnership for debt obligations with similar terms and features. The borrowing rates available to Duke Operating Partnership are assumed to be comparable to the borrowing rates available to the combined company. The adjustments are based on current effective interest rates ranging from 6.29% to 7.45%. See note (a)(6). DUKE-WEEKS REALTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA)
HISTORICAL PRO FORMA DUKE-WEEKS ------------------------ MERGER POST-MERGER DUKE WEEKS ADJUSTMENTS PRO FORMA ----------- --------- ------------ ------------ Revenues Rental income $99,479 $44,421 $374 (F) $144,274 Equity in earnings of unconsolidated real estate companies 2,508 89 - 2,597 ---------- -------- --------- ---------- Total income 101,987 44,510 374 146,871 ----------- -------- --------- ---------- Expenses Rental expenses 18,626 6,341 - 24,967 Real estate taxes 10,817 3,912 - 14,729 Interest 15,991 9,103 (1,029)(G) 24,065 Depreciation and amortization 20,454 11,344 416 (H) 32,214 ----------- -------- --------- --------- Total expenses 65,888 30,700 (613) 95,975 ----------- -------- --------- -------- Earnings from rental operations 36,099 13,810 987 50,896 Earnings from service operations 5,036 - - 5,036 Equity in earnings from unconsolidated service companies - 503 - 503 General and administrative (3,615) (1,756) - (5,371) Other income and expenses 2,681 5,224 - 7,905 ----------- -------- --------- ---------- Earnings from continuing operations before minority interest 40,201 17,781 987 58,969 Other minority interest in earnings of subsidiaries (430) (2,102) - (2,532) ----------- --------- -------- --------- Net income from continuing operations 39,771 15,679 987 56,437 Less distributions to preferred unitholders (8,842) (3,000) - (11,842) ----------- -------- --------- ---------- Net income from continuing operations available for common unitholders $30,929 $12,679 $987 $44,595 ----------- -------- --------- ---------- ----------- -------- --------- ---------- Weighted average common units outstanding- basic 97,198 27,051 134,528 ----------- -------- ---------- ----------- -------- ---------- Weighted average common units outstanding- diluted 98,094 27,177 135,598 ----------- -------- ---------- ----------- -------- ---------- Net income from continuing operations per common unit (note (I)): Basic $0.32 $0.47 $ 0.33 ----------- -------- ---------- ----------- -------- ---------- Diluted $0.32 $0.47 $ 0.33 ----------- -------- ---------- ----------- -------- ----------
See accompanying notes to pro forma consolidated statement of operations DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA) (f) Represents the net increase in rental income as a result of the re-setting of straight-line rents for Weeks Operating Partnership under purchase accounting. (g) Represents the decrease in interest expense as a result of the following items for the three months ended March 31, 1999: Decrease based on the pro forma interest rates resulting from the adjustments of Weeks Operating Partnership debt to estimated fair market value as described in note (e) $(513) Decrease in Weeks Operating Partnership deferred finance cost amortization related to the elimination of Weeks Operating Partnership deferred finance costs as described in note (c). $(516) -------- $(1,029) -------- --------
(h) Represents the net increase in depreciation of real estate as a result of the allocation of purchase price to record Weeks Operating Partnership's real estate at estimated fair value for the three months ended March 31, 1999 (in thousands). Additional basis in real estate basis (see note (a)) $382,963 Less amount of step-up allocated to: Developments in progress (76,327) Land portion of operating facilities (43,512) -------- Depreciable portion of additional basis $263,124 -------- --------
The depreciable portion of the additional basis is then allocated to properties placed in service prior to or during the first quarter of 1999 and depreciation expense is computed over the time in service for each property during 1999, based upon a 40 year estimated useful life. The depreciation expense attributable to the additional basis is $1,617, offset by a decrease in amortization expense of $1,201, which is related to the elimination of Weeks Operating Partnership deferred costs as described in note (c). DUKE-WEEKS REALTY LIMITED PARTNERHIP NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA) (i) The following summarizes the calculation of basic and diluted pro forma earnings per common unit for the three months ended March 31, 1999: Basic Earnings Per Common Unit Calculation Weighted average common units outstanding: Duke Operating Partnership prior to merger 97,198 Duke Operating Partnership common units issued to Weeks Operating Partnership (1) 37,330 -------- Adjusted weighted average common units outstanding - basic 134,528 -------- -------- Pro forma net income from continuing operations available for common unitholders $ 44,595 -------- -------- Basic pro forma earnings per common unitholder $ .33 -------- -------- Diluted Earnings Per Common Unit Calculation Adjusted weighted average common units outstanding- Basic 134,528 Weighted average dilutive potential common units: Duke Operating Partnership dilutive potential securities 896 Additional Duke Operating Partnership dilutive potential securities after Merger conversion (1) 174 ---------- Adjusted weighted average common and dilutive potential common units 135,598 -------- -------- Pro forma net income from continuing operations available for common unitholders $ 44,595 -------- -------- Diluted pro forma earnings per common unitholder $ .33 -------- --------
(1) The Partnership's pro forma weighted average common units outstanding reflects adjustments based on the issuance of 1.38 Duke Operating Partnership common units for each weighted average unit of Weeks Operating Partnership common unit and each weighted average unit of Weeks Operating Partnership dilutive potential securities. DUKE-WEEKS REALTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following pro forma condensed financial statements for Duke-Weeks Realty Limited Partnership (the "Partnership") include certain pro forma adjustments to the historical financial statements of Duke Realty Limited Partnership ("Duke Operating Partnership") to reflect the proposed merger (the "Merger") of Duke Operating Partnership and Weeks Realty Limited Partnership ("Weeks Operating Partnership"). Duke Realty Investments, Inc., the general partner of Duke Operating Partnership, will merge with Weeks Corporation, the general partner of Weeks Operating Partnership, immediately following the merger of Duke Operating Partnership and Weeks Operating Partnership. After the merger of Duke Realty Investments, Inc. and Weeks Corporation, the combined company will be known as Duke-Weeks Realty Corporation (the "General Partner"), and will be the sole general partner of the Partnership. The Mergers will be accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. These pro forma condensed consolidated financial statements should be read in conjunction with the Duke Operating Partnership Form 10-K as of and for the three years ended December 31, 1998, and also in conjunction with Weeks Operating Partnership Form 10-K as of and for the three years ended December 31, 1998. The following pro forma condensed consolidated balance sheet is based upon the December 31, 1998 consolidated balance sheet of Duke Operating Partnership and the December 31, 1998 consolidated balance sheet of Weeks Operating Partnership, presented as if the Merger occurred on December 31, 1998. The following pro forma condensed consolidated statement of operations is based upon the consolidated statement of operations for the year ended December 31, 1998 of Duke Operating Partnership and Weeks Operating Partnership, presented as if the Merger occurred as of January 1, 1998. The pro forma condensed consolidated financial statements do not purport to be indicative of the actual financial position or results of operations which would have been obtained assuming that the Merger had been completed as set forth above, or which may be obtained in the future. DUKE-WEEKS REALTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET December 31, 1998 (UNAUDITED) (IN THOUSANDS)
HISTORICAL PRO FORMA DUKE-WEEKS --------------------------------------- MERGER POST-MERGER ASSETS DUKE WEEKS ADJUSTMENTS PRO FORMA ------ ---- ----- ----------- --------- Real estate $2,589,729 $1,361,843 $287,642 (A) $4,239,214 Land held for development 146,911 42,438 - (B) 189,349 Investment in unconsolidated real estate companies 125,746 35,204 - (B) 160,950 Less accumulated depreciation (179,887) (96,383) 96,383 (A) (179,887) ------------------- ------------------ ---------------- ---------------- Net real estate investment 2,682,499 1,343,102 384,025 4,409,626 Cash and cash equivalents 6,626 1,503 (8,453)(D) (324) Accounts receivable 9,641 9,483 - 19,124 Straight-line rent receivable 20,332 5,833 (5,833)(C) 20,332 Investment in and notes receivable from unconsolidated service companies - 43,639 - 43,639 Deferred financing costs 11,316 8,455 (8,455)(C) 11,316 Deferred other costs 53,281 20,708 (20,708)(C) 53,281 Other assets 70,367 14,869 - 85,236 ------------------- ------------------ ---------------- ---------------- TOTAL ASSETS $2,854,062 $1,447,592 $340,576 $4,642,230 ------------------- ------------------ ---------------- ---------------- ------------------- ------------------ ---------------- ---------------- LIABILITIES AND PARTNERS' EQUITY Liabilities: Secured debt $326,317 $251,399 $12,109 (E) $589,825 Unsecured debt 590,000 285,000 1,994 (E) 876,994 Lines of credit 91,000 118,025 8,547 (D) 217,572 Accounts payable and other liabilities 168,390 42,603 - 210,993 ------------------- ------------------ ---------------- ---------------- Total liabilities 1,175,707 697,027 22,650 1,895,384 Minority interest 367 - - 367 Partners' equity: Preferred equity 360,000 250,000 (4,545)(A) 605,455 Common equity 1,317,988 500,565 322,471 (A) 2,141,024 ------------------- ------------------ ---------------- ---------------- Total partners' equity 1,677,988 750,565 317,926 2,746,479 ------------------- ------------------ ---------------- ---------------- TOTAL LIABILITIES AND PARTNERS' EQUITY $2,854,062 $1,447,592 $340,576 $4,642,230 ------------------- ------------------ ---------------- ---------------- ------------------- ------------------ ---------------- ----------------
See accompanying notes to pro forma condensed consolidated balance sheet DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS) (a) Represents adjustments to record Weeks Operating Partnership's assets and liabilities at their respective purchase values based on the purchase method of accounting. The assumed purchase price of $1.8 billion was computed as follows:
WEEKS DUKE DUKE OPERATING OPERATING OPERATING OPERATING PARTNERSHIP PARTNERSHIP PARTNERSHIP UNITS EXCHANGE UNITS VALUE ACQUISITION OUTSTANDING RATIO ISSUED PER Unit COSTS ----------- -------- ----------- ----------- ----------- Common units 27,068 1.38 37,354 $21.75 $812,446 (1) ------- ------- Preferred Series A Units 6,000 1.00 6,000 $23.75 142,500 (2) ------- Preferred Series C Units 1,400 1.00 1,400 $25.00 35,000 (3) ------- ------- Preferred Series D Units 2,600 1.00 2,600 $26.14 67,955 (4) ------- ------- General Partner options and warrants issued 11,990 (5) Weeks Operating Partnership outstanding debt assumed 668,527 (6) Other Weeks Operating Partnership liabilities assumed 42,603 Estimated transaction costs 17,000 (7) ---------- Total assumed purchase price $1,798,021 ---------- ----------
(1) Represents the value of the Duke Operating Partnership common units that will be exchanged for the assumed outstanding Weeks Operating Partnership common units. The value of the Duke Operating Partnership common units is based upon the five day average of the closing price of the General Partner's common stock as listed on the New York Stock Exchange immediately before, during and after the date the terms of the Merger were agreed to and announced to the public on March 1, 1999. The following purchase accounting adjustments will be made to partners' equity:
Value of Duke Operating Partnership common units issued $812,446 Less net book value of Weeks Operating Partnership common equity at December 31, 1998 500,565 -------- Adjustments to common equity for Duke Operating Partnership common units issued 311,881 Adjustment to preferred equity for Duke Operating Partnership Series F Preferred Units issued (see note (a) (2)) (7,500) Adjustment to preferred equity for Duke Operating Partnership Preferred D Units (see note (a) (4)) 2,955 Adjustment to common equity for General Partner options and warrants issued (see note (a) (5)) 10,590 --------- Total purchase accounting adjustment to partners' equity $317,926 --------- ---------
DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS) (2) Each outstanding unit of Preferred Series A Cumulative Redeemable Preferred Units of Weeks Operating Partnership will be converted into the right to receive one depositary unit of Duke Operating Partnership representing 1/1000 of a unit of Series F Cumulative Redeemable Preferred Units of Duke Operating Partnership. The assumed value of the Duke Operating Partnership Series F preferred units is based upon the average closing price of the Weeks Corporation Series A Preferred Stock the two days immediately following the date the terms of the Merger were agreed to and announced to the public. The following purchase accounting adjustment will be made to partners' preferred equity: Value of Duke Operating Partnership Series F Preferred Units issued $142,500 Less net book value of Weeks Operating Partnership Series A Preferred Units at December 31, 1998 150,000 Purchase accounting adjustment to partners' preferred equity -------- $ (7,500) -------- --------
(3) The Duke Operating Partnership will issue preferred units valued at the book value (which approximates estimated fair value), of Weeks Operating Partnership Preferred C Units at December 31, 1998. The Duke Operating Partnership Preferred Units will have the same economic attributes as the Weeks Operating Partnership Preferred C Units. (4) The Duke Operating Partnership will issue preferred units valued at the estimated fair value of the Weeks Operating Partnership Preferred D Units at December 31, 1998. The Duke Operating Partnership Preferred D Units will have the same economic attributes as the Weeks Operating Partnership Preferred D Units. The adjustment to estimated fair value is based on the present value of amounts to be paid using pricing levels available to the General Partner for preferred equity with similar terms and features around March 1, 1999, the announced date of the Merger. The following purchase accounting adjustment will be made to partners' preferred equity: Value of Duke Operating Partnership Preferred D Units $67,955 Less net book value of Weeks Operating Partnership Series D Preferred Units at December 31, 1998 65,000 Purchase accounting adjustment to partners' preferred equity ------- $ 2,955 ------- -------
(5) Represents the fair value (computed using an option pricing model) of the General Partner's stock options and warrants to be issued to replace outstanding Weeks Corporation stock options and warrants. The General Partner's stock options and warrants will carry the same terms and remaining vesting schedule as the Weeks Corporation stock options and warrants being replaced and provide for the option to purchase up to 3,116,000 of General Partner common shares. The following purchase accounting adjustment will be made to partners' common equity: Value of General Partner issued stock options and warrants $11,990 Less book value of Weeks Corporation warrants at December 31, 1998 (1,400) ------- Purchase accounting adjustment to partners' common equity $10,590 ------- -------
(6) The Weeks Operating Partnership outstanding debt assumed is calculated as follows (see note (e)): Weeks Operating Partnership outstanding debt $654,424 Fair value adjustment to secured debt 12,109 Fair value adjustment to unsecured debt 1,994 ------- $668,527 -------- --------
(7) Represents estimated costs to be incurred by Duke Operating Partnership in connection with the Merger (see note (d)) DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS) (8) The total purchase accounting adjustment to net real estate investments is calculated as follows: Total adjustment for Duke Operating Partnership common units issued per note (a) (1) $311,881 Total adjustment for Duke Operating Partnership Series F Preferred Units issued per note (a) (2) (7,500) Total adjustment for Duke Operating Partnership Series D preferred units issued per note (a) (4) 2,955 Total adjustment for cash paid for closing costs per note (d) 17,000 Total adjustment to record Weeks Operating Partnership debt to fair market value per note (a) (6) 14,103 Total adjustment to record General Partner stock options issued per note (a) (5) 10,590 Total adjustment to eliminate assets of Weeks Operating Partnership with no future value per note (c) 34,996 -------- Total purchase accounting adjustment to net real estate investments $384,025 -------- --------
(b) The book value of Weeks Operating Partnership's land held for development and investments in unconsolidated companies at December 31, 1998, was estimated to approximate the fair value because substantially all land acquisitions and investments in unconsolidated companies occurred within the last 24 months and the acquisition or investment cost is representative of current market conditions. (c) Represents the elimination of assets of Weeks Operating Partnership that have no future value to the combined company. (d) Represents the expected incremental borrowings and cash expenditures to fund the following costs to be incurred with the merger: Advisory Fees $13,000 Legal and Professional Fees 3,000 Other 1,000 ------- $17,000 -------
(e) Represents adjustments to Weeks Operating Partnership secured and unsecured debt to reflect the premium or discount to adjust these financial instruments to their estimated fair value. The adjustment is based on the present value of amounts to be paid using interest rates available to Duke Operating Partnership for debt obligations with similar terms and features. The borrowing rates available to Duke Operating Partnership are assumed to be comparable to the borrowing rates available to the combined company. The adjustments are based on current effective interest rates ranging from 6.29% to 7.45%. See note (a)(6). DUKE-WEEKS REALTY LIMITED PARTNERSHIP PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA DUKE-WEEKS --------------------- MERGER POST-MERGER DUKE WEEKS ADJUSTMENTS PRO FORMA ------- --------- ----------- ---------- Revenues: Rental income $337,768 $150,974 $2,102 (F) $490,844 Equity in earnings of unconsolidated real estate companies 10,857 329 - 11,186 -------- -------- ---------- -------- Total income 348,625 151,303 2,102 502,030 -------- -------- ---------- -------- Expenses: Rental expenses 59,769 22,494 - 82,263 Real estate taxes 33,906 12,824 - 46,730 Interest 60,217 30,782 (3,054)(G) 87,945 Depreciation and amortization 68,766 38,348 1,987 (H) 109,101 -------- -------- ---------- -------- Total expenses 222,658 104,448 (1,067) 326,039 -------- -------- ---------- -------- Earnings from rental operations 125,967 46,855 3,169 175,991 Earnings from service operations 7,195 - - 7,195 Equity in earnings from unconsolidated service companies - 2,535 - 2,535 General and administrative (11,573) (5,809) - (17,382) Other income and expenses 2,608 1,018 - 3,626 -------- -------- ---------- -------- Earnings from continuing operations before minority interest 124,197 44,599 3,169 171,965 Other minority interest in earnings of subsidiaries (1,252) - - (1,252) -------- -------- ---------- -------- Net income from continuing operations 122,945 44,599 3,169 170,713 Less distributions to preferred unitholders (19,833) (13,191) - (33,024) -------- -------- ---------- -------- Net income from continuing operations available for common unitholders $103,112 $31,408 $3,169 $137,689 -------- -------- ---------- -------- -------- -------- ---------- -------- Weighted average common units outstanding- basic 91,576 26,134 127,641 -------- -------- -------- -------- -------- -------- Weighted average common units outstanding- diluted 92,468 26,299 128,761 -------- -------- -------- -------- -------- -------- Net income from continuing operations per unit (note (I)): Basic $1.13 $1.20 $ 1.08 -------- -------- -------- -------- -------- -------- Diluted $1.12 $1.19 $ 1.07 -------- -------- -------- -------- -------- --------
See accompanying notes to pro forma consolidated statement of operations DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA) (f) Represents the net increase in rental income as a result of the re-setting of straight-line rents for Weeks Operating Partnership under purchase accounting. (g) Represents the net change in interest expense as a result of the following items for the year ended December 31, 1998: Decrease based on the pro forma interest rates resulting from the adjustments of Weeks Operating Partnership debt to estimated fair market value as described in note (e) $(1,931) Decrease in Weeks Operating Partnership deferred finance cost amortization related to the elimination of Weeks Operating Partnership deferred finance costs as described in note (c). (1,686) Increase related to additional borrowings on the line of credit to fund Merger related Costs identified in note (d) 563 -------- $(3,054) -------- --------
(h) Represents the net increase in depreciation of real estate as a result of the allocation of purchase price to record Weeks Operating Partnership's real estate at estimated fair value for the three months ended December 31, 1998 (in thousands). Additional basis in real estate basis (see note (a)) $384,025 Less amount of step-up allocated to: Developments in progress (85,487) Land portion of operating facilities (42,118) Depreciable portion of additional basis --------- $256,420 --------- ---------
The depreciable portion of the additional basis is then allocated to properties placed in service prior to or during 1998 and depreciation expense is computed over the time in service for each property during 1998, based upon a 40 year estimated useful life. The depreciation expense attributable to the additional basis is $5,586, offset by a decrease in amortization expense of $3,599, which is related to the elimination of Weeks Operating Partnership deferred costs as described in note (c). DUKE-WEEKS REALTY LIMITED PARTNERSHIP NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA) (i) The following summarizes the calculation of basic and diluted pro forma earnings per common unit for the three months ended December 31, 1998:
Basic Earnings Per Common Unit Calculation Weighted average common units outstanding: Duke Operating Partnership prior to merger 91,576 Duke Operating Partnership common units issued to Weeks Operating Partnership (1) 36,065 -------- Adjusted weighted average common units outstanding - basic 127,641 -------- -------- Pro forma net income from continuing operations available for common unitholders $ 137,689 --------- --------- Basic pro forma earnings per common unitholder $ 1.08 --------- --------- Diluted Earnings Per Common Unit Calculation Adjusted weighted average common units outstanding- Basic 127,641 Weighted average dilutive potential common units: Duke Operating Partnership dilutive potential securities 892 Additional Duke Operating Partnership dilutive potential securities after Merger conversion (1) 228 --------- Adjusted weighted average common and dilutive potential common units 128,761 --------- --------- Pro forma net income from continuing operations available for common unitholders $ 137,689 --------- --------- Diluted pro forma earnings per common unitholder $ 1.07 --------- ---------
(1) The Partnership's pro forma weighted average common units outstanding reflects adjustments based on the issuance of 1.38 Duke Operating Partnership common units for each weighted average unit of Weeks Operating Partnership common unit and each weighted average unit of Weeks Operating Partnership dilutive potential securities. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DUKE-WEEKS REALTY LIMITED PARTNERSHIP By: DUKE-WEEKS REALTY CORPORATION Date: August 31, 1999 By: /s/ Matthew A. Cohoat ------------------------ Matthew A. Cohoat Vice President and Corporate Controller -----END PRIVACY-ENHANCED MESSAGE-----