EX-99.2 3 w71129exv99w2.htm EXHIBIT 99.2 exv99w2
Exhibit 99.2
BRANDYWINE OPERATING PARTNERSHIP, L.P.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2008
(in thousands)
                                 
            NCA     Use of        
    Historical     transaction     Proceeds        
    (A)     (B)     (C)     Pro Forma  
ASSETS
                                
Real estate investments:
                                
Operating properties
   $ 4,478,032     $ —     $ —     $ 4,478,032  
Accumulated depreciation
     (595,209 )     —       —       (595,209 )
 
                        
Operating real estate investments, net
     3,882,823       —       —       3,882,823  
Development land and construction-in-progress
     363,936       —       —       363,936  
 
                        
Total real estate investments, net
     4,246,759       —       —       4,246,759  
 
                                
Cash and cash equivalents
     4,791       269,399 (B1)     (124,000 )     150,190  
Accounts receivable, net
     11,888       246 (B2)     —       12,134  
Accrued rent receivable, net
     86,783       —       —       86,783  
Assets held for sale, net
     417,127       (417,127) (B3)     —       —  
Investment in real estate ventures
     71,078       —       —       71,078  
Deferred costs, net
     85,665       —       —       85,665  
Intangible assets, net
     167,115       —       —       167,115  
Other assets
     59,712       37,067 (B4)     —       96,779  
 
                        
 
                                
Total assets
   $ 5,150,918     $ (110,415 )   $ (124,000 )   $ 4,916,503  
 
                        
 
                                
LIABILITIES AND BENEFICIARIES’ EQUITY
                                
 
                                
Mortgage notes payable
   $ 493,505     $ —     $ —     $ 493,505  
Unsecured term loans
     183,000       —       —       183,000  
Unsecured credit facility
     163,000       —       (124,000 )     39,000  
Unsecured notes, net of discounts
     2,177,118       —       —       2,177,118  
Accounts payable and accrued expenses
     67,946       1,997 (B2)     —       69,943  
Distributions payable
     42,419       —       —       42,419  
Tenant security deposits and deferred rents
     58,469       —       —       58,469  
Acquired below market leases, net
     53,662       —       —       53,662  
Other liabilities
     27,040       500 (B5)     —       27,540  
Mortgage notes payable and other liabilities held for sale
     113,897       (113,897) (B3)     —       —  
 
                        
 
Total liabilities
     3,380,056       (111,400 )     (124,000 )     3,144,656  
 
                                
Beneficiaries’ equity:
                                
Redeemable limited partnership units at redemption value
     51,640       —       —       51,640  
7.50% Series D Preferred Mirror Units
     47,912       —       —       47,912  
7.375% Series E Preferred Mirror Units
     55,538       —       —       55,538  
General Partnership Capital
     1,616,923       985 (B6)     —       1,617,908  
Accumulated other comprehensive loss
     (1,151 )     —       —       (1,151 )
 
                        
 
Total beneficiaries’ equity
     1,770,862       985       —       1,771,847  
 
                        
 
Total liabilities and beneficiaries’ equity
   $ 5,150,918     $ (110,415 )   $ (124,000 )   $ 4,916,503  
 
                        
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

1

 

BRANDYWINE OPERATING PARTNERSHIP, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 2008
(in thousands, except per unit data)
                                         
            NCA transaction     Other        
    Historical     Sold     Other     Dispositions        
    (a)     (b)     (c)     (d)     Pro Forma  
Revenue:
                                        
Rents
   $ 251,656     $ —     $ —     $ —     $ 251,656  
Tenant Reimbursements
     39,966       —       —       —       39,966  
Termination fees
     4,124       —       —       —       4,124  
Third party management fees, labor reimbursement and leasing
     10,849       —       —       23 (d2)     10,872  
Other
     1,599       —       —       —       1,599  
 
                              
Total revenue
     308,194       —       —       23       308,217  
 
                                        
Operating Expenses
                                        
Property operating expenses
     82,904       —       —       —       82,904  
Real estate taxes
     31,328       —       —       —       31,328  
Management expenses
     4,627       —       —       10 (d2)     4,637  
Depreciation and amortization
     104,324       —       —       —       104,324  
Administrative expenses
     11,039       —       —       —       11,039  
 
                              
Total operating expenses
     234,222       —       —       10       234,232  
 
                              
 
                                        
Operating income (loss)
     73,972       —       —       13       73,985  
 
                                        
Other Income (Expense):
                                        
Interest income
     382       —       —       —       382  
Interest expense
     (71,807 )     —       2,950 (c3)     —       (68,857 )
Interest expense — Deferred financing costs
     (2,706 )     —       —       —       (2,706 )
Equity in income of real estate ventures
     2,779       —       —       —       2,779  
Net gain on disposition of undepreciated real estate
     (24 )     —       —       —       (24 )
Gain on early extinguishmnet of debt
     4,342       —       —       —       4,342  
 
                              
 
                                        
Income (loss) before minority interest
     6,938       —       2,950       13       9,901  
Minority interest — partners’ share of consolidated real estate ventures
     (78 )     —       —       —       (78 )
 
                              
Income (loss) from continuing operations
     6,860       —       2,950       13       9,823  
 
                                        
Income allocated to Preferred Units
     (3,996 )     —       —       —       (3,996 )
 
                              
Income (loss) allocated to Common Partnership Units from continuing operations
   $ 2,864     $ —     $ 2,950     $ 13     $ 5,827  
 
                              
 
                                        
Per unit data:
                                        
Basic earnings per Common Unit from continuing operations
   $ 0.03                             $ 0.06  
 
                                        
Diluted earnings per Common Unit from continuing operations
   $ 0.03                             $ 0.06  
 
                                        
Weighted average number of Common Partnership Units outstanding
     90,736                               90,736  
 
                                        
Weighted average number of common and dilutive common equivalent partnership units outstanding
     90,944                               90,944  
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

2

 

BRANDYWINE OPERATING PARTNERSHIP, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 2007
(in thousands, except per unit data)
                                         
                            Other        
                            Dispositions        
            NCA transaction     and Venture        
    Historical     Sold     Other     transaction        
    (a)     (b)     (c)     (d)     Pro Forma  
Revenue:
                                        
Rents
   $ 251,315     $ —     $ —     $ (13,107) (d1)   $ 238,208  
Tenant Reimbursements
     38,744       —       —       (1,601) (d1)     37,143  
Termination fees
     1,764       —       —       —       1,764  
Third party management fees, labor reimbursement and leasing
     9,704       —       —       963 (d2)     10,667  
Other
     2,439       —       —       (18) (d1)     2,421  
 
                              
Total revenue
     303,966       —       —       (13,763 )     290,203  
 
                                        
Operating Expenses
                                        
Property operating expenses
     82,299       —       —       (4,303) (d1)     77,996  
Real estate taxes
     29,956       —       —     (1,574) (ed1)     28,382  
Management expenses
     4,991       —       —       643 (d2)     5,634  
Depreciation and amortization
     111,340       —       —       (5,833) (d1)     105,507  
Administrative expenses
     14,417       —       —       —       14,417  
 
                              
Total operating expenses
     243,003       —       —       (11,067 )     231,936  
 
                              
 
                                        
Operating income (loss)
     60,963       —       —       (2,696 )     58,267  
 
                                        
Other Income (Expense):
                                        
Interest income
     2,378       —       733 (c2)     —       3,111  
Interest expense
     (78,396 )     —       7,584 (c3)     2,486 (d3)     (68,326 )
Interest expense — Deferred financing costs
     (2,323 )     —       —       —       (2,323 )
Equity in income of real estate ventures
     5,258       —       —       321 (d4)     5,579  
 
                              
 
                                        
Income (loss) before minority interest
     (12,120 )     —       8,317       111       (3,692 )
Minority interest — partners’ share of consolidated real estate ventures
     (108 )     —       —       —       (108 )
Income (loss) from continuing operations
     (12,228 )     —       8,317       111       (3,801 )
 
                              
 
Income allocated to Preferred Units
     (3,996 )     —       —       —       (3,996 )
 
                              
Income (loss) allocated to Common Partnership Units from continuing operations
   $ (16,224 )   $ —     $ 8,317     $ 111     $ (7,796 )
 
                              
 
                                        
Per unit data:
                                        
Basic earnings per Common Unit from continuing operations
   $ (0.18 )                           $ (0.09 )
 
                                        
Diluted earnings per Common Unit from continuing operations
   $ (0.18 )                           $ (0.08 )
 
                                        
Weighted average number of Common Partnership Units outstanding
     91,620                               91,620  
 
                                        
Weighted average number of common and dilutive common equivalent partnership units outstanding
     92,238                               92,238  
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

3

 

BRANDYWINE OPERATING PARTNERSHIP, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 2007
(in thousands, except per unit data)
                                         
                            Other        
                            Dispositions        
            NCA transaction     and Venture        
    Historical     Sold     Other     transaction        
    (a)     (b)     (c)     (d)     Pro Forma  
Revenue:
                                        
Rents
   $ 562,514     $ (44,616 )   $ —     $ (30,352 )(d1)   $ 487,546  
Tenant Reimbursements
     85,404       (3,384 )     —       (4,129 )(d1)     77,891  
Termination fees
     10,236       (188 )     —       (54 )(d1)     9,994  
Third party management fees, labor reimbursement and leasing
     19,691       —       —       1,925  (d2)     21,616  
Other
     6,127       (163 )     —       (45 )(d1)     5,919  
 
                              
Total revenue
     683,972       (48,351 )     —       (32,655 )     602,966  
 
                                        
Operating Expenses
                                        
Property operating expenses
     189,130       (16,866 )     —       (9,602) (d1)     162,662  
Real estate taxes
     64,895       (3,832 )     —       (3,696) (d1)     57,367  
Management expenses
     10,361       —       —       1,284 (d2)     11,645  
Depreciation and amortization
     242,312       (16,411 )     —       (12,230) (d1)     213,671  
Administrative expenses
     28,182       —       —       —       28,182  
 
                              
Total operating expenses
     534,880       (37,109 )     —       (24,244 )     473,527  
 
                              
 
                                        
Operating income (loss)
     149,092       (11,242 )     —       (8,411 )     129,439  
 
                                        
Other Income (Expense):
                                        
Interest income
     4,040       (22 )     1,467 (c2)     —       5,485  
Interest expense
     (162,675 )     5,497       14,937 (c3)     5,803 (d3)     (136,438 )
Interest expense — Deferred financing costs
     (4,496 )     —       —       —       (4,496 )
Loss on settlement of treasury lock agreements
     (3,698 )     —       —       —       (3,698 )
Equity in income of real estate ventures
     6,955       —       —       641 (d4)     7,596  
Net gain on disposition of depreciated real estate
     40,498       —       —       —       40,498  
Net gain on disposition of undepreciated real estate
     421       —       —       —       421  
 
                              
 
                                        
Income (loss) before minority interest
     30,137       (5,767 )     16,404       (1,967 )     38,807  
Minority interest — partners’ share of consolidated real estate ventures
     (465 )     —       —       —       (465 )
 
                              
Income (loss) from continuing operations
     29,672       (5,767 )     16,404       (1,967 )     38,342  
 
                                        
Income allocated to Preferred Units
     (7,992 )     —       —       —       (7,992 )
 
                              
Income (loss) allocated to Common Partnership Units from continuing operations
   $ 21,680     $ (5,767 )   $ 16,404     $ (1,967 )   $ 30,350  
 
                              
 
                                        
Per unit data:
                                        
Basic earnings per Common Unit from continuing operations
   $ 0.24                             $ 0.33  
 
                                        
Diluted earnings per Common Unit from continuing operations
   $ 0.24                             $ 0.33  
 
                                        
Weighted average number of Common Partnership Units outstanding
     91,170                               91,170  
 
                                        
Weighted average number of common and dilutive common equivalent partnership units outstanding
     91,219                               91,219  
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

4

 

BRANDYWINE OPERATING PARTNERSHIP, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 2006
(in thousands, except per unit data)
                                         
            NCA transaction     Other        
    Historical     Sold     Other     Dispositions        
    (a)     (b)     (c)     (d)     Pro Forma  
Revenue:
                                        
Rents
   $ 519,282     $ (44,082 )   $ —     $ (4,540) (d1)   $ 470,660  
Tenant Reimbursements
     78,817       (4,162 )     —       (505) (d1)     74,150  
Termination fees
     7,231       (531 )     —       —       6,700  
Third party management fees, labor reimbursement and leasing
     19,453       —       4,318 (c1)     126 (d2)     23,897  
Other
     5,502       (143 )     —       1 (d1)     5,360  
 
                              
Total revenue
     630,285       (48,918 )     4,318       (4,918 )     580,767  
 
                                        
Operating Expenses
                                        
Property operating expenses
     171,924       (17,175 )     —       (632) (d1)     154,117  
Real estate taxes
     60,808       (4,097 )     —       (557) (d1)     56,154  
Management expenses
     10,675       —       2,850 (c1)     57 (d2)     13,582  
Depreciation and amortization
     230,710       (17,727 )     —       (682) (d1)     212,301  
Administrative expenses
     29,644       —       —       —       29,644  
 
                              
Total operating expenses
     503,761       (38,999 )     2,850       (1,814 )     465,798  
 
                              
 
                                        
Operating income (loss)
     126,524       (9,919 )     1,468       (3,104 )     114,969  
 
                                        
Other Income (Expense):
                                        
Interest income
     9,513       (24 )     1,467 (c2)     —       10,956  
Interest expense
     (171,177 )     5,570       10,094 (c3)     —       (155,513 )
Interest expense — Deferred financing costs
     (4,607 )     —       —       —       (4,607 )
Equity in income of real estate ventures
     2,165       —       —       —       2,165  
Net gain on sale of real estate
     14,190       —       —       —       14,190  
Gain on termination of purchase contract
     3,147       —       —       —       3,147  
 
                              
 
                                        
Income (loss) before minority interest
     (20,245 )     (4,373 )     13,029       (3,104 )     (14,693 )
Minority interest — partners’ share of consolidated real estate ventures
     270       —       —       —       270  
 
                              
Income (loss) from continuing operations
     (19,975 )     (4,373 )     13,029       (3,104 )     (14,423 )
 
                                        
Income allocated to Preferred Units
     (7,992 )     —       —       —       (7,992 )
 
                              
Income (loss) allocated to Common Partnership Units from continuing operations
   $ (27,967 )   $ (4,373 )   $ 13,029     $ (3,104 )   $ (22,415 )
 
                              
 
                                        
Per unit data:
                                        
Basic earnings per Common Unit from continuing operations
   $ (0.30 )                           $ (0.24 )
 
                                        
Diluted earnings per Common Unit from continuing operations
   $ (0.30 )                           $ (0.24 )
 
                                        
Weighted average number of Common Partnership Units outstanding
     93,704                               93,704  
 
                                        
Weighted average number of common and dilutive common equivalent partnership units outstanding
     94,322                               94,322  
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 2005
(in thousands, except per unit data)
                                         
            NCA transaction     Other        
    Historical     Sold     Other     Dispositions        
    (a)     (b)     (c)     (d)     Pro Forma  
Revenue:
                                        
Rents
   $ 302,530     $ —     $ —     $ (3,589) (d1)   $ 298,941  
Tenant Reimbursements
     48,069       —       —       (306) (d1)     47,763  
Termination fees
     6,083       —       —       —       6,083  
Third party management fees, labor reimbursement and leasing
     3,582       —       —       23 (d2)     3,605  
Other
     4,171       —       —       (1) (d1)     4,170  
 
                              
Total revenue
     364,435       —       —       (3,873 )     360,562  
 
                                        
Operating Expenses
                                        
Property operating expenses
     103,968       —       —       (619) (d1)     103,349  
Real estate taxes
     36,356       —       —       (335) (d1)     36,021  
Management expenses
     1,394       —       —       —       1,394  
Depreciation and amortization
     106,175       —       —       (606) (d1)     105,569  
Administrative expenses
     17,982       —       —       —       17,982  
 
                              
Total operating expenses
     265,875       —       —       (1,560 )     264,315  
 
                              
 
                                        
Operating income (loss)
     98,560       —       —       (2,313 )     96,247  
 
                                        
Other Income (Expense):
                                        
Interest income
     1,370       —       —       —       1,370  
Interest expense
     (70,380 )     —       —       2,231 (d3)     (68,149 )
Interest expense — Deferred financing costs
     (3,540 )     —       —       —       (3,540 )
Equity in income of real estate ventures
     3,171       —       —       —       3,171  
Net gain on sale of real estate
     4,640       —       —       —       4,640  
 
                              
 
                                        
Income (loss) from continuing operations
     33,821       —       —       (82 )     33,739  
 
Income allocated to Preferred Units
     (7,992 )     —       —       —       (7,992 )
 
                              
Income (loss) allocated to Common Partnership Units from continuing operations
   $ 25,829     $ —     $ —     $ (82 )   $ 25,747  
 
                              
 
                                        
Per unit data:
                                        
Basic earnings per Common Unit from continuing operations
   $ 0.45                             $ 0.45  
 
                                        
Diluted earnings per Common Unit from continuing operations
   $ 0.44                             $ 0.44  
 
                                        
Weighted average number of Common Partnership Units outstanding
     57,853                               57,853  
 
                                        
Weighted average number of common and dilutive common equivalent partnership units outstanding
     58,111                               58,111  
The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

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BRANDYWINE OPERATING PARTNERSHIP, L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
     Note 1: Presentation
On October 8, 2008 Brandywine Operating Partnership, L.P. (the “Partnership”) sold five properties in Oakland, California (the “Northern California or NCA transaction”) for an aggregate gross sales price of $412.5 million. The five properties contain approximately 1.7 million net rentable square feet and are comprised of: One Kaiser Plaza (“The Ordway”); 1901 Harrison Street; 1333 Broadway; 2101 Webster Street; and 2100 Franklin Street. The sale also included the Partnership’s condominium interest in a parking garage at 2353 Webster Street. The purchaser of the portfolio, an affiliate of the CIM Group (“CIM”), is unaffiliated with the Partnership and the terms of sale were determined through arm’s-length negotiation.
The purchaser funded the purchase price through (i) the assumption of three mortgage loans aggregating approximately $95.3 million; (ii) an interest free loan of $40.0 million (with an imputed interest rate of 4.0%), due in August 2010 which is secured by a deed of trust on each of 2101 Webster Street and 2100 Franklin Street (the “$40.0 million loan”); and (iii) a cash payment to the Partnership of approximately $271.6 million (or approximately $269.4 million after estimated transaction costs). The Partnership used proceeds of the sale to repay existing debt and to provide cash balances for general corporate purposes.
The Partnership has also granted CIM a 15 year purchase option (the “purchase option”) for the Two Kaiser Plaza land parcel adjacent to The Ordway and it has committed to lease to CIM 150 parking spaces on that same parcel for a period of 99 years for the benefit of The Ordway’s tenants. The Partnership will be paid to manage and lease the five properties for at least one year following the closing in exchange for a market based fee. The Partnership has not included any estimated parking revenues associated with the purchase option in the pro forma information as the revenues from Two Kaiser Plaza are already included in the historical operations of the Company.
These Northern California properties were acquired in the Prentiss merger on January 5, 2006. Accordingly, no pro forma information for the year ended December 31, 2005 is required for the Northern California properties.
Certain other capital transactions were completed during the six-month period ended June 30, 2008 and the year ended December 31, 2007. Certain other property dispositions (the “Other Dispositions”) including three properties containing 0.3 million net rentable square feet and a 3.2 acre land parcel for an aggregate proceed of $56.2 million in four transactions were completed during the six-month period ended June 30, 2008. On December 19, 2007, the Partnership completed the transfer of 29 office properties to a new joint venture (the “Venture”) formed with G&I VI Investment Interchange Office LLC (“G&I VI”), an investment vehicle advised by DRA Advisors LLC (the “Venture transaction”). These transactions are significant to the understanding of the Partnership’s current financial position and operations.
The pro forma effects of the Prentiss Merger on the year ending December 31, 2006 have previously been included in a Form 8-K filed on December 21, 2007 as such the details have not been repeated.

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The Partnership’s continuing involvement with the properties transferred in the Venture transaction through its ownership interest and management fees and leasing commissions represents a significant continuing involvement in the properties. Accordingly, under EITF 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations”, the Partnership has determined that the operations of the properties should not be included in discontinued operations for the six-months ended June 30, 2007 and the year ended December 31, 2007 in its Quarterly Report on Form 10-Q filed on August 8, 2008 and in its Annual Report on Form 10-K filed on February 28, 2008. As a result, pro forma adjustments related to the Venture transaction are necessary in those periods to reflect the operations of the Partnership as if the Venture transaction occurred on January 1, 2007.
The Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2008 presents the historical amounts for the Partnership, adjusted for the effects of the Northern California transaction as if the transaction had occurred on June 30, 2008.
The Unaudited Pro Forma Consolidated Balance Sheet is unaudited and is not necessarily indicative of what the actual financial position of the Partnership would have been had the Northern California transaction actually occurred on June 30, 2008, nor does it purport to represent the future financial position of the Partnership.
The Unaudited Pro Forma Consolidated Statements of Operations for the six month period ended June 30, 2008 and the year ended December 31, 2006 present the historical amounts for the Partnership, adjusted for the effects of the Northern California transaction and Other Dispositions, as if such transactions had occurred on January 1, 2006. The Unaudited Pro Forma Consolidated Statements of Operations for the six month period ended June 30, 2007 and for the year ended December 31, 2007 present the historical amounts for the Partnership, adjusted for the effects of the Northern California transaction, the Venture transaction and Other Dispositions, as if such transactions had occurred at January 1, 2007. The Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2005 present the historical amounts for the Partnership, adjusted for the Other Dispositions, as if such transactions had occurred at January 1, 2005.
The Unaudited Pro Forma Consolidated Statements of Operations for the six month periods ended June 30, 2008 and 2007 and for the years ended December 31, 2007, 2006 and 2005 are unaudited and are not necessarily indicative of what the actual results of operations of the Partnership would have been had the Venture transaction actually occurred at January 1, 2007, the Northern California transaction actually occurred at January 1, 2006 and the Other Dispositions actually occurred at January 1, 2005, nor does it purport to represent the future operations of the Partnership.
The pro forma financial information should be read in conjunction with the financial statements and related notes of each of Brandywine Realty Trust and Brandywine Operating Partnership, L.P. included in their respective reports filed under the Securities Exchange Act of 1934, as amended. In the opinion of management, all adjustments necessary to reflect the effects of the Northern California transaction, the Venture transaction, and Other Dispositions have been made.
     Note 2: Pro Forma Consolidated Balance Sheet Notes and Management Assumptions
  (A)   Reflects the consolidated historical balance sheet of the Partnership as of June 30, 2008 as contained in the historical consolidated financial statements and notes in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
 
  (B)   Represents the adjustments to reflect the Northern California transaction, as follows:
(B1) Represents the net proceeds received by the Partnership, including the settlement of certain liabilities related to the Northern California properties and transaction costs.

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(B2) Represents certain assets and liabilities associated with the Northern California properties that were not sold as part of the NCA transaction.
(B3) Represents the sale of certain Northern California assets and liabilities, net of amounts presented in (B2).
(B4) Represents the $40.0 million loan, net of imputed interest of $2.9 million calculated using a 4.0% rate. The Partnership believes this rate is appropriate considering the low loan to value of the properties held as security, a guarantee from the buyer and the fact that the loan will mature in 22 months.
(B5) Represents the value ascribed to the purchase option based on its estimated fair value at the closing of the NCA transaction.
(B6) Represents the estimated gain on sale recognized by the Partnership if the Northern California transaction was completed on June 30, 2008, however the amount presented in these pro forma financial statements does not consider changes in the recorded amounts of the Northern California assets and liabilities since June 30, 2008. The Partnership recorded an impairment charge of $6.9 million resulting from the reclassification of the assets from held for use to held for sale at June 30, 2008 based on estimated the fair value of the Northern California assets and liabilities at that date.
  (C)   Represents use of a portion of the proceeds to reduce outstanding balances under the Partnership’s unsecured revolving credit facility. The $124.0 million payment reduces the Partnership’s balance on its unsecured credit facility to $0 as the amount outstanding decreased from June 30, 2008 through the completion of the NCA transaction.
     Note 3: Pro Forma Consolidated Statements of Operations Notes and Management Assumptions
The presentation of the pro forma Consolidated Statement of Operations presents income from continuing operations. Accordingly, no adjustment is required for dispositions which are presented within discontinued operations in the historical presentation for the applicable periods.
  (a)   Reflects the consolidated results of operations of the Partnership for the six month periods ended June 30, 2008 and 2007 and for the years ended December 31, 2007, 2006 and 2005, as contained in the historical consolidated financial statements and notes thereto in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2007, respectively.
 
  (b)   Represents the revenues and expenses of the properties sold in the Northern California transaction for the years ended December 31, 2007 and 2006. For the six month periods ended June 30, 2008 and 2007, the revenues and expenses for the Northern California properties were reclassified to discontinued operations in the June 30, 2008 Quarterly Report on Form 10-Q that was filed by the Partnership on August 8, 2008, as such no adjustment is necessary. Interest expense being eliminated represents interest charged to expense related to the mortgages being assumed as part of the NCA transaction as if they were assumed January 1, 2006.

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  (c)   Represents additional adjustments made in connection with the Northern California transaction as follows:
(c1) Third party management fees, labor reimbursement and leasing income represent the management fee income pursuant to the management and leasing agreement. Prior to the Northern California transaction, property management fee income was eliminated upon consolidation and property management operating expenses were reflected in property operating expenses. This management fee income after the Northern California transaction will be reflected as third party management fees, labor reimbursement and leasing income. Management expenses represent the direct incremental costs of managing the Properties for which the Partnership is fully reimbursed pursuant to the management agreement. The agreement can be terminated by CIM any time after the first year without penalty, and therefore this amount is only included for the year ended December 31, 2006.
(c2) Interest income represents the imputed interest income on the $40.0 million loan.
(c3) Interest expense represents the elimination of interest expense on the Partnership’s revolving credit facility that was assumed to be repaid with proceeds from the Northern California transaction.
  (d)   Reflects the impact of the Other Dispositions and the Venture transaction as follows:
(d1) Represents the elimination of the actual historical results of operations as if the Other Dispositions occurred on January 1, 2005 and the Venture transaction occurred on January 1, 2007. The historical reported numbers already reflect the reclassification of revenues and expenses to results of discontinued operations for the Other Dispositions for the six month periods ending June 30, 2008 and 2007.
(d2) Third party management fees, labor reimbursement and leasing income represent income pursuant to the management and leasing agreement with the Venture. Prior to the Venture transactions, property management fee income was eliminated upon consolidation and property management operating expenses were reflected in property operating expenses. This management fee income (relating to portion not owned) is reflected as third party management fees, labor reimbursement and leasing income after the Venture transactions. Management expenses represent the direct incremental costs of managing the Properties for which the Partnership is fully reimbursed pursuant to the management agreement.
(d3) Reflects the reduction in interest expense for the Other Dispositions and the Venture transaction where the cash proceeds for each were used to reduce outstanding borrowings on the Partnership’s revolving credit facility computed as if the Other Dispositions occurred on January 1, 2005 and the Venture transaction occurred on January 1, 2007 using actual monthly rates on the line over the respective periods. This adjustment assumes that such outstanding borrowings were first paid down with proceeds from the NCA transaction as noted in (c3) above.
(d4) Equity in income of real estate ventures represents the Partnership’s allocable income from the Venture.

10