-----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, Cv1RHMZ9F1hVRrL8TuyHEBrSGvw0mH579sWQJxu0JQ9chgp/Di0RHX0eaJlZlZLf v5CKWHodkBza2ENAVwkxFg== 0001047469-98-007248.txt : 19980224 0001047469-98-007248.hdr.sgml : 19980224 ACCESSION NUMBER: 0001047469-98-007248 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980219 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980223 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRANDYWINE REALTY TRUST CENTRAL INDEX KEY: 0000790816 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 232413352 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09106 FILM NUMBER: 98547649 BUSINESS ADDRESS: STREET 1: 16 CAMPUS BOULEVARD STREET 2: STE 100 CITY: NEWTOWN SQUARE STATE: PA ZIP: 19073 BUSINESS PHONE: 1-610-325-5600 MAIL ADDRESS: STREET 1: TWO GREENTREE CENTRE STREET 2: SUITE 100 CITY: MARLTON STATE: NJ ZIP: 08053 FORMER COMPANY: FORMER CONFORMED NAME: LINPRO SPECIFIED PROPERTIES DATE OF NAME CHANGE: 19920703 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 19, 1998 BRANDYWINE REALTY TRUST ------------------------------------------------------ (Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352 -------- ------ ---------- (State or other jurisdiction (Commission file number) (I.R.S. Employer of incorporation) Identification Number)
16 Campus Boulevard, Newtown Square, Pennsylvania 19073 (Address of principal executive offices) (610) 325-5600 (Registrant's telephone number, including area code) Page 1 of 5 pages ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On February 19, 1998, the Company consummated the acquisition of a portfolio of 14 properties that contain an aggregate of approximately 941,471 net rentable square feet. The aggregate purchase price for these properties was $55.5 million. The Company has provided additional information with respect to this acquisition under the caption "RREEF Portfolio" in Item 5 of a Current Report on Form 8-K filed with the Securities and Exchange Commission on January 27, 1998. ITEM 5. OTHER EVENTS I. THREE CHRISTINA CENTRE As of the date of this filing, the Company has determined that it is probable that it will acquire, through Brandywine Operating Partnership, L.P. ("Operating Partnership"), an office property containing approximately 311,286 net rentable square feet ("Three Christina Centre"). The property is located in Wilmington, Delaware. As of February 23, 1998, Three Christina Centre was fully leased to 10 tenants. First USA Bank occupies 269,361 net rentable square feet, which is more than 10% of the total net rentable area of the property. The Company anticipates closing the purchase of Three Christina Centre on or about March 5, 1998. The purchase price for Three Christina Centre is anticipated to total approximately $50.6 million. The Operating Partnership expects to pay the purchase price and closing expenses using borrowings under its existing revolving credit facility. The seller of Three Christina Centre, Advent Limited Partnership II, is a party unaffiliated with the Company and the Operating Partnership. The Company based its determination of the purchase price of the property on the expected cash flow, physical condition, location, competitive advantages, existing tenancies and opportunities to retain and attract additional tenants. The purchase price was determined by arm's-length negotiation between the Company and the seller. The table set forth below shows certain information regarding rental rates and lease expirations for Three Christina Centre. -2- Scheduled Lease Expirations (Three Christina Centre)
Year of Number of Leases Rentable Square Final Annualized Percentage of Total Lease Expiring Within Footage Subject Base Rent under Final Annualized Base Rent Expiration the Year at (1) to Expiring Leases Expiring Leases (2) Under Expiring Leases - ---------- ---------------- ------------------ ------------------- -------------------------- 1998 5 8,663 $ 119,118 2.2% 1999 1 100 2,856 0.1% 2000 1 403 10,547 0.2% 2001 - - - - 2002 - - - - 2003 - - - - 2004 1 4,157 74,826 1.4% 2005 - - - - 2006 - - - - 2007 and Thereafter 25 297,963 5,137,767 96.1% -- ------- ---------- ------ Total 33 311,286 $5,345,114 100.0% -- ------- ---------- ------ -- ------- ---------- ------
(1) A lease is considered to expire if, and at any time, it is terminable by the tenant without payment of penalty or premium. (2) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate in the final month prior to expiration multiplied by twelve. After giving effect to the acquisition of Three Christina Centre, the Company's portfolio will consist of 127 office properties and 28 industrial properties (including an office property that is currently under construction and that the Company has agreed to acquire upon its completion during the first or second quarter of 1998) that contain an aggregate of approximately 10.4 million net rentable square feet. II. FINANCIAL STATEMENTS Financial statements for Three Christina Centre are included in this Current Report under Item 7. After reasonable inquiry, the Company is not aware of any material factors relating to the above mentioned properties that would cause the reported financial information relating to such properties not to be necessarily indicative of future operating results. -3- Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements. The audited statement of revenue and certain operating expenses of Three Christina Centre for the year ended December 31, 1996 and the unaudited statement of revenue and certain operating expenses for the nine months ended September 30, 1997 are included on pages F-16 to F-19. (b) Pro Forma Financial Information. Pro forma financial information which reflects the Company's acquisition Three Christina Centre as of and for the nine months ended September 30, 1997 and for the year ended December 31, 1996 are included on pages F-1 to F-15. (c) Exhibits. 23.1 - Consent of Arthur Andersen LLP -4- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRANDYWINE REALTY TRUST Date: February 23, 1998 By: /s/ Gerard H. Sweeney ----------------- -------------------------------- Gerard H. Sweeney, President and Chief Executive Officer (Principal Executive Officer) Date: February 23, 1998 By: /s/ Mark S. Kripke ----------------- -------------------------------- Mark S. Kripke, Chief Financial Officer (Principal Financial and Accounting Officer) -5- BRANDYWINE REALTY TRUST INDEX TO FINANCIAL STATEMENTS I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION - - Pro Forma Condensed Consolidating Balance Sheet as of September 30, 1997............................................ F-4 - - Pro Forma Condensed Consolidating Statement of Operations for the Year Ended December 31, 1996.......................... F-5 - - Pro Forma Condensed Consolidating Statement of Operations for the Nine Months Ended September 30, 1997.................. F-6 - - Notes and Management's Assumptions to Unaudited Pro Forma Condensed Consolidating Financial Information................. F-7 II. THREE CHRISTINA CENTRE - - Report of Independent Public Accountants...................... F-16 - - Combined Statements of Revenue and Certain Expenses for the Year Ended December 31, 1996 (audited) and for the Nine Month Period Ended September 30, 1997 (unaudited)................... F-17 - - Notes to Statements of Revenue and Certain Expenses........... F-18 F-1 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following sets forth the pro forma condensed consolidating balance sheet of Brandywine Realty Trust ("the Company") as of September 30, 1997 and the pro forma condensed consolidating statements of operations for the nine months ended September 30, 1997 and for the year ended December 31, 1996. The pro forma condensed consolidating financial information should be read in conjunction with the historical financial statements of the Company and those acquisitions deemed significant pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited pro forma condensed consolidating financial information is presented as if the following events occurred on September 30, 1997 for balance sheet purposes, and at the beginning of the period presented for purposes of the statements of operations: - - The Company acquired the properties described in Note 1 to these pro forma financial statements. - - The Company acquired its partnership interests in Brandywine Operating Partnership, L.P. (the "Operating Partnership"). - - The Company issued 4,600,000 Common Shares at $16.50 per share, of which 600,000 shares related to the underwriter's exercise of the over-allotment option (the "1996 Offering"). - - The Company issued 636,363 Common Shares at $16.50 per share to a voting trust established for the benefit of the Pennsylvania State Employees Retirement System ("SERS"), in exchange for $10.5 million (the "SERS Offering") and contributed such proceeds to the Operating Partnership in exchange for 636,363 units of general partnership interest ("GP Units") in the Operating Partnership. - - The Company issued 709,090 Common Shares at $16.50 per share to two investment funds managed by Morgan Stanley Asset Management Inc. (the "Morgan Stanley Offering") and contributed the proceeds to the Operating Partnership in exchange for 709,090 GP Units. - - The Operating Partnership repaid $49,805,000 of mortgage indebtedness and $764,000 of loans made by Safeguard Scientifics, Inc. and paid a $500,000 prepayment penalty with a portion of the proceeds of the 1996 Offering, the SERS Offering and the Morgan Stanley Offering. - - The Company issued 2,375,500 Common Shares at $20.625 per share, of which 175,500 shares related to the underwriter's exercise of the over-allotment option (the "March 1997 Offering"). - - The Company issued 11,500,000 Common Shares at $20.75 per share, of which 1,500,000 shares related to the underwriter's exercise of the over-allotment option (the "July 1997 Offering"). The net proceeds from the July 1997 Offering were contributed to the Operating Partnership in exchange for 11,500,000 GP Units. - - The Operating Partnership repaid $160,775,000 of indebtedness under the Company's revolving credit facility using proceeds from the July 1997 Offering. - - The Company issued 786,840 Common Shares at $22.31 per share (the "September 1997 Offering"). The net proceeds from the September 1997 Offering were contributed to the Operating Partnership in exchange for 786,840 GP Units. - - The Company issued 751,269 Common Shares at $24.63 per share (the "December 1997 Offering"). The net proceeds from the December 1997 Offering were contributed to the Operating Partnership in exchange for 751,269 GP Units. F-2 - - The Company issued 10,000,000 Common Shares at $24.00 per share (the "January 1998 Offering"). The net proceeds from the January 1998 Offering were contributed to the Operating Partnership in exchange for 10,000,000 GP Units. - - The Company issued 1,012,820 Common Shares at $24.06 per share (the "February 1998 Offering"). The net proceeds from the February 1998 Offering were contributed to the Operating Partnership in exchange for 1,012,820 GP Units The pro forma condensed consolidating financial information is unaudited and is not necessarily indicative of what the actual financial position would have been at September 30, 1997, nor does it purport to represent the future financial position and the results of operations of the Company. F-3 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 30, 1997 (Notes 1 and 2) (Unaudited) (In thousands)
BRANDYWINE REALTY RECENT OTHER TRUST PUBLIC RECENT THREE HISTORICAL OFFERINGS ACQUISITIONS CHRISTINA PRO FORMA CONSOLIDATED (A) (B) (C) CENTRE (D) CONSOLIDATED -------------------- ------------- --------------- ------------- ----------------- ASSETS: Real estate investments, net................... $ 462,772 $ -- $ 386,513 $ 51,662 $ 900,947 Cash and cash equivalents........... 19,965 -- -- -- 19,965 Escrowed cash........... 348 -- -- -- 348 Accounts receivable..... 2,465 -- -- -- 2,465 Due from affiliates..... -- -- -- -- -- Investment in management company............... 318 -- -- -- 318 Deferred costs and other assets................ 8,470 -- -- -- 8,470 -------- ------------- --------------- ------------- -------- Total assets.......... 494,338 -- 386,513 51,662 932,513 -------- ------------- --------------- ------------- -------- -------- ------------- --------------- ------------- -------- LIABILITIES: Mortgage notes payable.. 47,984 -- -- -- 47,984 Notes payable, Credit Facility.............. 14,000 (267,970) 377,005 51,662 174,697 Accrued interest........ 303 -- -- -- 303 Accounts payable and accrued expenses...... 4,128 -- -- -- 4,128 Distributions payable... 8,338 -- -- -- 8,338 Tenant security deposits and deferred rents.... 3,960 -- -- -- 3,960 Tenant security deposits and deferred rents.... 387 -- -- -- 387 -------- ------------- --------------- ------------- -------- Total liabilities..... 79,100 (267,970) 377,005 51,662 239,797 -------- ------------- --------------- ------------- -------- MINORITY INTEREST......... 4,894 -- 9,508 -- 14,402 -------- ------------- --------------- ------------- -------- BENEFICIARIES' EQUITY: Common shares of beneficial interest... 234 118 -- -- 352 Additional paid-in capital............... 428,787 267,852 -- -- 696,639 Share warrants.......... 962 -- -- -- 962 Cumulative earnings..... 5,209 -- -- -- 5,209 Cumulative distributions......... (24,848) -- -- -- (24,848) -------- ------------- --------------- ------------- -------- Total beneficiaries' equity.............. 410,344 267,970 -- -- 678,314 -------- ------------- --------------- ------------- -------- Total liabilities and beneficiaries' equity $ 494,338 $ -- $ 386,513 $ 51,662 $ 932,513 -------- ------------- --------------- ------------- -------- -------- ------------- --------------- ------------- --------
F-4 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (Notes 1 and 3) (Unaudited) (In thousands, except share and per share amounts)
BRANDYWINE REALTY TRUST 1997 RECENT THREE TOTAL HISTORICAL 1996 OTHER PUBLIC CHRISTINA PRO FORMA CONSOLIDATED (A) EVENTS (B) SUBTOTAL EVENTS (C) OFFERINGS (E) CENTRE (F) CONSOLIDATED ---------------- ---------- -------- ---------- ------------- ---------- ------------ REVENUE: Base rents............... $ 8,462 $ 12,646 $ 21,108 $ 79,446 $ -- $ 4,508 $ 105,062 Tenant reimbursements.... 1,372 2,838 4,210 10,397 -- 2,347 16,954 Other.................... 196 100 296 683 -- 14 993 ---------- --------- -------- --------- -------- --------- ---------- Total Revenue.......... 10,030 15,584 25,614 90,526 -- 6,869 123,009 ---------- --------- -------- --------- -------- --------- ---------- OPERATING EXPENSES: Interest................. 2,751 513 3,264 31,009 (20,098) 3,875 18,050 Depreciation and amortization........... 2,836 4,687 7,523 22,244 -- 1,653 31,420 Property expenses........ 3,709 6,830 10,539 37,477 -- 2,799 50,815 General and administrative......... 825 148 973 -- -- -- 973 ---------- --------- -------- --------- -------- --------- ---------- Total operating expenses........... 10,121 12,178 22,299 90,730 (20,098) 8,327 101,258 ---------- --------- -------- --------- -------- --------- ---------- Income (loss) before minority interest and equity in income (loss) of management company.................. (91) 3,406 3,315 (204) 20,098 (1,458) 21,751 Equity in income (loss) of management company....... (26) 66 40 1,291 -- 108 1,439 ---------- --------- -------- --------- -------- --------- ---------- Income (loss) before minority interest........ (117) 3,472 3,355 1,087 20,098 (1,350) 23,190 Minority interest in (income) loss............ (45) (429) (474) 362 (198) 17 (293) ---------- --------- -------- --------- -------- --------- ---------- Net income (loss).......... (162) 3,043 2,881 1,449 19,900 (1,333) 22,897 (Income) loss allocated to Preferred Shares...... (401) (1,847) (2,248) -- -- -- (2,248) ---------- --------- -------- --------- -------- --------- ---------- Income (loss) allocated to Common Shares......... $ (563) $ 1,196 $ 633 $ 1,449 $ 19,900 $ (1,333) $ 20,649 ---------- --------- -------- --------- -------- --------- ---------- ---------- --------- -------- --------- -------- --------- ---------- Earnings (loss) per Common Share.................... $ (0.43) $ 0.62 ---------- ---------- ---------- ---------- Weighted average number of shares outstanding including share equivalents.............. 1,302,648 33,342,335 ---------- ----------
F-5 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (Notes 1 and 3) (Unaudited) (In thousands, except share and per share amounts)
BRANDYWINE REALTY TRUST 1997 RECENT THREE TOTAL HISTORICAL OTHER PUBLIC CHRISTINA PRO FORMA CONSOLIDATED (A) EVENTS (D) OFFERINGS (E) CENTRE (F) CONSOLIDATED -------------------- ------------- ----------------- ------------- ---------------- REVENUE: Base rents.............. $ 32,290 $ 49,248 $ -- $ 3,474 $ 85,012 Tenant reimbursements... 5,731 5,801 -- 1,843 13,375 Other................... 818 402 -- 19 1,239 ----------- ------------- ------- ------------- ---------------- Total Revenue......... 38,839 55,451 -- 5,336 99,626 ----------- ------------- ------- ------------- ---------------- OPERATING EXPENSES: Interest................ 4,899 20,668 (15,033) 2,898 13,432 Depreciation and amortization.......... 10,051 13,463 -- 1,236 24,750 Property operating expenses.............. 14,805 21,324 -- 2,113 38,242 Other expenses.......... 705 -- -- -- 705 ----------- ------------- ------- ------------- ---------------- Total operating expenses.......... 30,460 55,455 (15,033) 6,247 77,129 ----------- ------------- ------- ------------- ---------------- Income (loss) before equity income of management company and minority interest....... 8,379 (4) 15,033 (911) 22,497 Equity in income (loss) of management company...... 332 871 -- 81 1,284 ----------- ------------- ------- ------------- ---------------- Income (loss) before minority interest....... 8,711 867 15,033 (830) 23,781 Minority interest in (income) loss........... (256) (11) (43) 10 (300) ----------- ------------- ------- ------------- ---------------- Net income (loss)......... 8,455 856 14,990 (820) 23,481 (Income) loss allocated to Preferred Shares........ (499) -- -- -- (499) ----------- ------------- ------- ------------- ---------------- Income (loss) allocated to Common Shares........... $ 7,956 $ 856 $ 14,990 $ (820) $ 22,982 ----------- ------------- ------- ------------- ---------------- ----------- ------------- ------- ------------- ---------------- Earnings (loss) per Common Share................... $ 0.65 $ 0.65 ----------- ---------------- ----------- ---------------- Weighted average number of shares outstanding including share equivalents............. 12,285,557 35,146,845 ----------- ----------------
F-6 BRANDYWINE REALTY TRUST NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION: Brandywine Realty Trust (the "Company") is a Maryland real estate investment trust. As of February 23, 1998, the Company owned 153 properties. The Company's interest in all of the Properties is held through Brandywine Operating Partnership, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership and as of February 23, 1998, the Company held a 98.7% interest in the Operating Partnership. These pro forma financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company, the SSI/TNC Properties, the LibertyView Building, the nine properties (the "SERS Properties") acquired in November 1996 from SERS and its subsidiaries, Delaware Corporate Center I, 700/800 Business Center Drive, the Columbia Acquisition Properties, the Main Street Acquisition Properties, the TA Properties, the Emmes Properties, the Greentree Executive Campus Acquisition Properties, 748 & 855 Springdale Drive, the Green Hills Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive, Metropolitan Industrial Center, Atrium 1, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties, the RREEF Properties and Three Christina Centre. In management's opinion, all adjustments necessary to reflect the effects of the 1996 Offering, the SERS Offering, the Morgan Stanley Offering, the March 1997 Offering, the July 1997 Offering, the September 1997 Offering, the December 1997 Offering, the January 1998 Offering, the February 1998 Offering, the acquisitions of the SSI/TNC Properties, the LibertyView Building, the 1996 Additional Acquisition Properties (consisting of the SERS Properties, Delaware Corporate Center I, 700/800 Business Center Drive and 8000 Lincoln Drive), the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, the Greentree Executive Campus, Five Eves Drive, Kings Manor, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Green Hills Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties, the RREEF Properties and Three Christina Centre by the Company have been made. 2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET: (A) Reflects the Company's historical consolidated balance sheet as of September 30, 1997. (B) Reflects the Company's recent public share offerings and the use of the aggregate net proceeds to repay $268.0 million of indebtedness under the Credit Facility, as summarized below:
NET PROCEEDS ------------ December 1997 Offering................ $ 17,593 January 1998 Offering................. 227,300 February 1998 Offering................ 23,077 ------------ Total................................. $ 267,970 ------------ ------------
F-7 (C) Reflects the Company's acquisition of several property acquisitions for cash and Operating Partnership units as follows:
PROPERTY PURCHASE PRICE CLOSING COSTS TOTAL -------- -------------- ------------- --------- Atrium I...................... $ 10,250 $ 45 $ 10,295 5 & 6 Cherry Hill Executive Campus...................... 3,484 20 3,504 220 Commerce Drive............ 5,300 129 5,429 Provident Place............... 6,300 152 6,452 PECO Building................. 9,500 146 9,646 Bala Pointe Office Center..... 26,750 403 27,153 Scarborough Properties........ 37,075 122 37,197 GMH Properties................ 229,015 1,665 230,680 RREEF Properties.............. 55,500 657 56,157 -------------- ------------- --------- Total....................... $ 383,174 $ 3,339 $ 386,513 -------------- ------------- --------- -------------- ------------- ---------
(D) Reflects the Company's acquisition of Three Christina Centre as follows: Purchase Price............................................. $ 50,600 Closing Costs.............................................. 1,062 --------- $ 51,662 --------- ---------
3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS: (A) Reflects the historical consolidated operations of the Company. (B) Reflects the historical operations of the SSI/TNC Properties, LibertyView Building and the 1996 Additional Acquisition Properties from January 1, 1996 through the respective dates of acquisition, plus the pro forma 1996 Offering adjustments. The table below reflects the adjustments:
1996 SSI/TNC PRO FORMA PROPERTIES AND DELAWARE 700/800 & OTHER TOTAL LIBERTY VIEW SERS CORPORATE BUSINESS CENTER 8000 LINCOLN OFFERING PRO FORMA BUILDING PROPERTIES CENTER DRIVE DRIVE ADJUSTMENTS 1996 EVENTS ------------- ---------- --------- --------------- ------------ ----------- ----------- REVENUE: Base rents............... $ 5,714 $ 4,008 $ 2,036 $ 651 $ 237 $ -- $ 12,646 Tenant reimbursements.... 2,511 249 -- 76 2 -- 2,838 Other.................... 100 -- -- -- -- -- 100 ------------- ---------- --------- --------------- ------------ ----------- ----------- Total Revenue.......... 8,325 4,257 2,036 727 239 -- 15,584 OPERATING EXPENSES: Interest................. 3,783 194 -- -- -- (3,464) 513 Depreciation and amortization........... 2,819 818 374 212 89 375 4,687 Property expenses........ 2,831 2,217 552 270 231 729 6,830 General and administrative......... 715 -- -- -- -- (567) 148 ------------- ----------- --------- --------------- ------------ ----------- ----------- Total operating expenses........... 10,148 3,229 926 482 320 (2,927) 12,178 Income (loss) before management company and minority interest........ (1,823) 1,028 1,110 245 (81) 2,927 3,406 Equity in income (loss) of management company....... 75 -- -- -- -- (9) 66 ------------- ----------- --------- --------------- ------------ ----------- ----------- Income (loss) before minority interest........ (1,748) 1,028 1,110 245 (81) 2,918 3,472 Minority interest in (income) loss............ 513 -- -- -- -- (942) (429) ------------- ----------- --------- --------------- ------------ ----------- ----------- Net income (loss).......... (1,235) 1,028 1,110 245 (81) 1,976 3,043 Income loss allocated to Preferred Shares...... -- -- -- -- -- (1,847) (1,847) ------------- ----------- --------- --------------- ------------ ----------- ----------- Income (loss) allocated to Common Shares......... $ (1,235) $ 1,028 $ 1,110 $ 245 $ (81) $ 129 $ 1,196 ------------- ----------- --------- --------------- ------------ ----------- -----------
F-8 (C) Reflects the pro forma statements of operations of the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties and the RREEF Properties for the year ended December 31, 1996 and other pro forma adjustments to reflect the March 1997 Offering, the July 1997 Offering and the September 1997 Offering for the year ended December 31, 1996. The operating results reflected below include the historical results and related pro forma adjustments to reflect the period January 1, 1996 through the earlier of the respective acquisition dates or December 31, 1996. Operating results from those dates forward are included in the historical results of the Company.
COLUMBIA MAIN STREET 1336 GREENTREE ACQUISITION ACQUISITION ENTERPRISE EXECUTIVE PROPERTIES PROPERTIES DRIVE KINGS MANOR CAMPUS ------------- ------------- ------------- --------------- ----------- Revenue: Base rents................................... $ 5,146 $ 3,141 $ 437 $ 411 $ 1,862 Tenant reimbursements........................ 359 347 75 107 175 Other........................................ 376 -- -- -- -- ------ ------ ----- ----- ----------- Total revenue.............................. 5,881 3,488 512 518 2,037 ------ ------ ----- ----- ----------- Operating Expenses: Interest (i)................................. 1,680 -- -- -- 841 Depreciation and amortization (ii)........... 1,007 629 117 114 359 Property expenses............................ 1,979 2,194 107 170 1,018 General and administrative................... -- -- -- -- -- ------ ------ ----- ----- ----------- Total operating expenses................... 4,666 2,823 224 284 2,218 ------ ------ ----- ----- ----------- Income (loss) before equity in income of management company and minority interest..... 1,215 665 288 234 (181) Equity in income (loss) of management company (iii)........................................ -- -- -- -- -- ------ ------ ----- ----- ----------- Income (loss) before minority interest......... 1,215 665 288 234 (181) Minority interest in (income) loss............. (15) (8) (4) (3) 2 ------ ------ ----- ----- ----------- Net income..................................... $ 1,200 $ 657 $ 284 $ 231 $ (179) ------ ------ ----- ----- ----------- ------ ------ ----- ----- -----------
FIVE EVES DRIVE ------------- Revenue: Base rents................................... $ 348 Tenant reimbursements........................ 39 Other........................................ 1 ----- Total revenue.............................. 388 ----- Operating Expenses: Interest (i)................................. 254 Depreciation and amortization (ii)........... 108 Property expenses............................ 151 General and administrative................... -- ----- Total operating expenses................... 513 ----- Income (loss) before equity in income of management company and minority interest..... (125) Equity in income (loss) of management company (iii)........................................ -- ----- Income (loss) before minority interest......... (125) Minority interest in (income) loss............. 2 ----- Net income..................................... $ (123) ----- -----
748 & 855 EMMES SPRINGDALE 1974 SPROUL MARCH 1997 TA PROPERTIES PROPERTIES DRIVE ROAD OFFERING --------------- ----------- ------------- ------------- --------------- Revenue: Base rents.................................. $ 5,102 $ 6,214 $ 940 $ 774 $ -- Tenant reimbursements....................... 735 2,681 -- 118 -- Other....................................... 9 10 -- -- -- ------ ----------- ----- ------------- --- Total revenue............................. 5,846 8,905 940 892 -- ------ ----------- ----- ------------- --- Operating Expenses: Interest (i)................................ 3,168 4,987 400 -- (525) Depreciation and amortization (ii).......... 1,352 2,128 171 134 -- Property expenses........................... 1,962 3,482 250 492 -- General and administrative.................. -- -- -- -- -- ------ ----------- ----- ------------- --- Total operating expenses.................. 6,482 10,597 821 626 (525) ------ ----------- ----- ------------- --- Income (loss) before equity in income of management company and minority interest.... (636) (1,692) 119 266 525 Equity in income (loss) of management company (iii)....................................... 105 65 23 22 -- ------ ----------- ----- ------------- --- Income (loss) before minority interest........ (531) (1,627) 142 288 525 Minority interest in (income) loss............ 7 21 (2) (4) 350 ------ ----------- ----- ------------- --- Net income.................................... $ (524) $ (1,606) $ 140 $ 284 $ 875 ------ ----------- ----- ------------- --- ------ ----------- ----- ------------- ---
JULY 1997 OFFERING ----------- Revenue: Base rents.................................. $ -- Tenant reimbursements....................... -- Other....................................... -- ----------- Total revenue............................. -- ----------- Operating Expenses: Interest (i)................................ (12,058) Depreciation and amortization (ii).......... -- Property expenses........................... -- General and administrative.................. -- ----------- Total operating expenses.................. (12,058) ----------- Income (loss) before equity in income of management company and minority interest.... 12,058 Equity in income (loss) of management company (iii)....................................... -- ----------- Income (loss) before minority interest........ 12,058 Minority interest in (income) loss............ (90) ----------- Net income.................................... $ 11,968 ----------- -----------
F-9
CHRISTIANA METROPOLITAN BERWYN PARK GREEN HILLS 500/501 OFFICE CORPORATE INDUSTRIAL PROPERTIES PROPERTIES (IV) CENTER DRIVE CENTER CENTER ------------- --------------- --------------- ------------- ------------- Revenue: Base rents............................. $ 3,815 $ 7,700 $ 1,754 $ 768 $ 1,811 Tenant reimbursements.................. 720 -- 1,358 61 406 Other.................................. 108 -- 43 2 9 ------ ------ ------ ----- ------ Total revenue........................ 4,643 7,700 3,155 831 2,226 ------ ------ ------ ----- ------ Operating Expenses: Interest (i)........................... -- 1,200 1,125 430 1,238 Depreciation and amortization (ii)..... 1,205 1,294 547 183 528 Property expenses...................... 1,991 3,419 1,561 337 678 General and administrative............. -- -- -- -- -- ------ ------ ------ ----- ------ Total operating expenses............. 3,196 5,913 3,233 950 2,444 ------ ------ ------ ----- ------ Income (loss) before equity in income of management company and minority interest............................... 1,447 1,787 (78) (119) (218) Equity in income (loss) of management company (iii).......................... 166 (115) 76 5 53 ------ ------ ------ ----- ------ Income (loss) before minority interest... 1,613 1,672 (2) (114) (165) Minority interest in (income) loss....... (20) (21) -- 1 2 ------ ------ ------ ----- ------ Net income............................... $ 1,593 $ 1,651 $ (2) $ (113) $ (163) ------ ------ ------ ----- ------ ------ ------ ------ ----- ------
ATRIUM 1 ----------- Revenue: Base rents............................. $ 1,226 Tenant reimbursements.................. 33 Other.................................. 26 ----------- Total revenue........................ 1,285 ----------- Operating Expenses: Interest (i)........................... 772 Depreciation and amortization (ii)..... 329 Property expenses...................... 755 General and administrative............. -- ----------- Total operating expenses............. 1,856 ----------- Income (loss) before equity in income of management company and minority interest............................... (571) Equity in income (loss) of management company (iii).......................... 31 ----------- Income (loss) before minority interest... (540) Minority interest in (income) loss....... 7 ----------- Net income............................... $ (533) ----------- -----------
5 & 6 CHERRY SEPTEMBER HILL EXECUTIVE 220 COMMERCE PROVIDENT PECO 1997 OFFERING CAMPUS DRIVE PLACE BUILDING (V) ----------------- ----------------- ----------------- ----------- ------------- Revenue: Base rents............................... $ -- $ 152 $ 572 $ 756 $ 1,017 Tenant reimbursements.................... -- -- -- 105 -- Other.................................... -- -- -- 8 -- ----------------- ----------------- ----------------- ----------- ------------- Total revenue.......................... -- 152 572 869 1,017 ----------------- ----------------- ----------------- ----------- ------------- Operating Expenses: Interest (i)............................. -- 263 407 484 723 Depreciation and amortization (ii)....... -- 112 174 206 309 Property expenses........................ -- 169 194 333 -- General and administrative............... -- -- -- -- -- ----------------- ----------------- ----------------- ----------- ------------- Total operating expenses............... -- 544 775 1,023 1,032 ----------------- ----------------- ----------------- ----------- ------------- Income (loss) before equity in income of management company and minority interest................................. -- (392) (203) (154) (15) Equity in income (loss) of management company (iii)............................ -- -- 12 18 -- ----------------- ----------------- ----------------- ----------- ------------- Income (loss) before minority interest..... -- (392) (191) (136) (15) Minority interest in (income) loss......... 10 5 2 2 -- ----------------- ----------------- ----------------- ----------- ------------- Net income................................. $ 10 $ (387) $ (189) $ (134) $ (15) ----------------- ----------------- ----------------- ----------- ------------- ----------------- ----------------- ----------------- ----------- -------------
F-10
BALA POINTE SCARBOROUGH GMH RREEF TOTAL OTHER OFFICE CENTRE PROPERTIES PROPERTIES PROPERTIES 1997 EVENTS --------------- ------------- ----------- ----------- ----------- Revenue: Base rents.................................... $ 3,572 $ 4,971 $ 22,906 $ 4,051 $ 79,446 Tenant reimbursements......................... 21 239 2,175 643 10,397 Other......................................... 35 -- 56 -- 683 ------ ------ ----------- ----------- ----------- Total revenue............................... 3,628 5,210 25,137 4,694 90,526 ------ ------ ----------- ----------- ----------- Operating Expenses: Interest (i).................................. 2,036 2,071 17,301 4,212 31,009 Depreciation and amortization (ii)............ 869 1,190 7,382 1,797 22,244 Property expenses............................. 1,559 2,424 10,964 1,288 37,477 General and administrative.................... -- -- -- -- -- ------ ------ ----------- ----------- ----------- Total operating expenses.................... 4,464 5,685 35,647 7,297 90,730 ------ ------ ----------- ----------- ----------- Income (loss) before equity in income of management company and minority interest...... (836) (475) (10,510) (2,603) (204) Equity in income (loss) of management company (iii)......................................... 64 119 550 97 1,291 ------ ------ ----------- ----------- ----------- Income (loss) before minority interest.......... (772) (356) (9,960) (2,506) 1,087 Minority interest in (income) loss.............. 10 (49) 125 32 362 ------ ------ ----------- ----------- ----------- Net income...................................... $ (762) $ (405) $ (9,835) $ (2,474) $ 1,449 ------ ------ ----------- ----------- ----------- ------ ------ ----------- ----------- -----------
(i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. The adjustment for the Columbia Acquisition Properties also reflects an effective interest rate of 9.5% on assumed debt. The adjustments for the March 1997 Offering and the July 1997 Offering represent interest savings related to the payoff of $7 million and $160.8 million, respectively, of credit facility borrowings at an effective rate of 7.5%. (ii) Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (iii) Pro forma equity in income of management company is presented based on management fees less incremental costs estimated to be incurred. (iv) Pro forma property expenses of the Green Hill Properties exclude $666,000 from historical amounts. Such amount represents expected salary savings. (v) Pro forma base rents for the Peco Building are based on the lease in place as of November 25, 1997 as historically the property was owner occupied and was not an operating property. All property expenses are paid directly by the tenant. (D) Reflects the pro forma adjustments relating to the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties and the RREEF Properties for the nine months ended September 30, 1997 and other pro forma adjustments to reflect the March 1997 Offering, the July 1997 Offering and the September 1997 Offering for the nine months ended September 30, 1997. The operating results reflected below include the historical results and related pro forma adjustments to reflect the period January 1, 1997 through the earlier of the respective acquisition date or September 30, 1997. F-11
COLUMBIA MAIN STREET 1336 GREENTREE ACQUISITION ACQUISITION ENTERPRISE EXECUTIVE PROPERTIES PROPERTIES DRIVE KINGS MANOR CAMPUS ------------- --------------- --------------- --------------- ------------- Revenue: Base rents................................... $ 338 $ 542 $ 78 $ 105 $ 602 Tenant reimbursements........................ 24 60 13 27 17 Other........................................ 25 -- -- -- -- ----- ----- --- ----- ----- Total revenue.............................. 387 602 91 132 619 ----- ----- --- ----- ----- Operating Expenses: Interest (i)................................. 110 -- -- -- 249 Depreciation and amortization (ii)........... 66 109 21 29 106 Property expenses............................ 130 379 19 43 272 General and administrative................... -- -- -- -- -- ----- ----- --- ----- ----- Total operating expenses................... 306 488 40 72 627 ----- ----- --- ----- ----- Income (loss) before equity in income of management company and minority interest..... 81 114 51 60 (8) Equity in income (loss) of management company (iii)........................................ -- -- -- -- -- ----- ----- --- ----- ----- Income (loss) before minority interest......... 81 114 51 60 (8) Minority interest in (income) loss............. (1) (1) (1) (1) -- ----- ----- --- ----- ----- Net income..................................... $ 80 $ 113 $ 50 $ 59 $ (8) ----- ----- --- ----- ----- ----- ----- --- ----- -----
FIVE EVES DRIVE ------------- Revenue: Base rents................................... $ 103 Tenant reimbursements........................ 12 Other........................................ -- ----- Total revenue.............................. 115 ----- Operating Expenses: Interest (i)................................. 75 Depreciation and amortization (ii)........... 32 Property expenses............................ 45 General and administrative................... -- ----- Total operating expenses................... 152 ----- Income (loss) before equity in income of management company and minority interest..... (37) Equity in income (loss) of management company (iii)........................................ -- ----- Income (loss) before minority interest......... (37) Minority interest in (income) loss............. -- ----- Net income..................................... $ (37) ----- -----
748 & 855 EMMES SPRINGDALE 1974 SPROUL MARCH 1997 TA PROPERTIES PROPERTIES DRIVE ROAD OFFERING --------------- ----------- ------------- ------------- --------------- Revenue: Base rents.................................. $ 2,053 $ 2,570 $ 414 $ 354 $ -- Tenant reimbursements....................... 299 1,130 -- 54 -- Other....................................... 6 2 -- -- -- ------ ----------- ----- ------ --- Total revenue............................. 2,358 3,702 414 408 -- ------ ----------- ----- ------ --- Operating Expenses: Interest (i)................................ 1,241 2,049 171 -- (91) Depreciation and amortization (ii).......... 530 875 73 61 -- Property expenses........................... 698 1,332 99 225 -- General and administrative.................. -- -- -- -- -- ------ ----------- ----- ------ --- Total operating expenses................ 2,469 4,256 343 286 (91) ------ ----------- ----- ------ --- Income (loss) before equity in income of management company and minority interest.... (111) (554) 71 122 91 Equity in income (loss) of management company (iii)....................................... 41 27 10 10 -- ------ ----------- ----- ------ --- Income (loss) before minority interest........ (70) (527) 81 132 91 Minority interest in (income) loss............ 1 7 (1) (2) (50) ------ ----------- ----- ------ --- Net income.................................... $ (69) $ (520) $ 80 $ 130 $ 41 ------ ----------- ----- ------ --- ------ ----------- ----- ------ --- JULY 1997 OFFERING ----------- Revenue: Base rents.................................. $ -- Tenant reimbursements....................... -- Other....................................... -- ----------- Total revenue............................. -- ----------- Operating Expenses: Interest (i)................................ (6,904) Depreciation and amortization (ii).......... -- Property expenses........................... -- General and administrative.................. -- ----------- Total operating expenses.................. (6,904) ----------- Income (loss) before equity in income of management company and minority interest.... 6,904 Equity in income (loss) of management company (iii)....................................... -- ----------- Income (loss) before minority interest........ 6,904 Minority interest in (income) loss............ 74 ----------- Net income.................................... $ 6,978 ----------- -----------
F-12
CHRISTIANA METROPOLITAN BERWYN PARK GREEN HILLS 500/501 OFFICE CORPORATE INDUSTRIAL PROPERTIES PROPERTIES (IV) CENTER DRIVE CENTER CENTER ------------- --------------- --------------- ------------- ------------- Revenue: Base rents............................... $ 2,492 $ 4,567 $ 1,106 $ 615 $ 1,395 Tenant reimbursements.................... 376 -- 919 22 306 Other.................................... 36 -- 48 45 33 ------ ------ ------ ----- ------ Total revenue............................ 2,904 4,567 2,073 682 1,734 ------ ------ ------ ----- ------ Operating Expenses: Interest (i)............................. -- 690 700 309 926 Depreciation and amortization (ii)....... 700 745 340 131 395 Property expenses........................ 1,073 2,059 971 218 472 General and administrative............... -- -- -- -- -- ------ ------ ------ ----- ------ Total operating expenses................. 1,773 3,494 2,011 658 1,793 ------ ------ ------ ----- ------ Income (loss) before equity in income of management company and minority interest............................... 1,131 1,073 62 24 (59) Equity in income (loss) of management company (iii).......................... 95 (66) 44 4 40 ------ ------ ------ ----- ------ Income (loss) before minority interest... 1,226 1,007 106 28 (19) Minority interest in (income) loss....... (15) (13) (1) -- -- ------ ------ ------ ----- ------ Net income............................... $ 1,211 $ 994 $ 105 $ 28 $ (19) ------ ------ ------ ----- ------ ------ ------ ------ ----- ------ ATRIUM 1 ----------- Revenue: Base rents............................. $ 962 Tenant reimbursements.................. 33 Other.................................. 26 ----- Total revenue........................ 1,021 ----- Operating Expenses: Interest (i)........................... 577 Depreciation and amortization (ii)..... 246 Property expenses...................... 555 General and administrative............. -- ----- Total operating expenses............. 1,378 ----- Income (loss) before equity in income of management company and minority interest............................... (357) Equity in income (loss) of management company (iii).......................... 23 ----- Income (loss) before minority interest... (334) Minority interest in (income) loss....... 4 ----- Net income............................... $ (330) ----- -----
5 & 6 CHERRY SEPTEMBER HILL EXECUTIVE 220 COMMERCE PROVIDENT PECO 1997 OFFERING CAMPUS DRIVE PLACE BUILDING (V) ----------------- ----------------- ----------------- ------------- --------------- Revenue: Base rents............................... $ -- $ 114 $ 525 $ 567 $ 762 Tenant reimbursements.................... -- -- -- 79 -- Other.................................... -- -- -- 6 -- --- ----- ----- ----- ----- Total revenue.......................... -- 114 525 652 762 --- ----- ----- ----- ----- Operating Expenses: Interest (i)............................. -- 197 304 362 541 Depreciation and amortization (ii)....... -- 84 130 154 231 Property expenses........................ -- 126 164 249 -- General and administrative................. -- -- -- -- -- --- ----- ----- ----- ----- Total operating expenses................... -- 407 598 765 772 --- ----- ----- ----- ----- Income (loss) before equity in income of management company and minority interest................................. -- (293) (73) (113) (10) Equity in income (loss) of management company (iii)............................ -- -- 9 13 -- --- ----- ----- ----- ----- Income (loss) before minority interest..... -- (293) (64) (100) (10) Minority interest in (income) loss......... 26 4 1 1 -- --- ----- ----- ----- ----- Net income................................. $ 26 $ (289) $ (63) $ (99) $ (10) --- ----- ----- ----- ----- --- ----- ----- ----- -----
F-13
BALA POINTE SCARBOROUGH GMH RREEF TOTAL OTHER OFFICE CENTRE PROPERTIES PROPERTIES PROPERTIES 1997 EVENTS --------------- ------------- ----------- ----------- ----------- Revenue: Base rents.................................... $ 2,837 $ 4,292 $ 18,735 $ 3,120 $ 49,248 Tenant reimbursements......................... 27 425 1,449 529 5,801 Other......................................... 28 17 130 -- 402 ------ ------ ----------- ----------- ----------- Total revenue............................... 2,892 4,734 20,314 3,649 55,451 ------ ------ ----------- ----------- ----------- Operating Expenses: Interest (i).................................. 1,523 1,549 12,940 3,150 20,668 Depreciation and amortization (ii)............ 650 890 5,521 1,344 13,463 Property expenses............................. 1,243 1,834 8,179 939 21,324 General and administrative.................... -- -- -- -- -- ------ ------ ----------- ----------- ----------- Total operating expenses.................... 3,416 4,273 26,640 5,433 55,455 ------ ------ ----------- ----------- ----------- Income (loss) before equity in income of management company and minority interest...... (524) 461 (6,326) (1,784) (4) Equity in income (loss) of management company (iii)......................................... 48 89 411 73 871 ------ ------ ----------- ----------- ----------- Income (loss) before minority interest.......... (476) 550 (5,915) (1,711) 867 Minority interest in (income) loss.............. 6 (146) 75 22 (11) ------ ------ ----------- ----------- ----------- Net income...................................... $ (470) $ 404 $ (5,840) $ (1,689) $ 856 ------ ------ ----------- ----------- ----------- ------ ------ ----------- ----------- -----------
- ------------------------ (i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. The adjustment for the Columbia Acquisition Properties also reflects an effective interest rate of 9.5% on assumed debt. The adjustments for the March 1997 Offering and the July 1997 Offering represent interest savings related to the payoff of $7 million and $160.8 million, respectively, of credit facility borrowings at an effective rate of 7.5%. (ii) Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (iii) Pro forma equity in income of management company is presented based on management fees less incremental costs estimated to be incurred. (iv) Pro forma property expenses for the Green Hill Properties exclude $333,000 from historical amounts. Such amount represents expected salary savings. (v) Pro forma base rents for the Peco Building are based on the lease in place as of November 25, 1997 as historically the property was owner occupied and was not an operating property. All property expenses are paid directly by the tenant. (E) Represents interest expense savings from debt repayments upon the application of the net proceeds from the December 1997 Offering, the January 1998 Offering and the February 1998 Offering. (F) Reflects the pro forma statements of operations of Three Christina Centre for the nine months ended September 30, 1997 and for the year ended December 31, 1996. All amounts represent historical operations except for the pro forma adjustments noted:
- - For the nine months ended September 30, 1997: THREE CHRISTINA CENTRE ----------------- Revenue: Base rents..................................................................................... $ 3,474 Tenant reimbursements.......................................................................... 1,843 Other.......................................................................................... 19 ------ Total revenue................................................................................ 5,336 ------ Operating Expenses: Interest (i)................................................................................... 2,898 Depreciation and amortization (ii)............................................................. 1,236 Property expenses.............................................................................. 2,113 General and administrative..................................................................... -- ------ Total operating expenses..................................................................... 6,247 ------ Income (loss) before equity in income of management company and minority interest................ (911) Equity in income (loss) of management company (iii).............................................. 81 ------ Income (loss) before minority interest........................................................... (830) Minority interest in (income) loss............................................................... 10 ------ Net income....................................................................................... $ (820) ------ ------
- -For the year ended December 31, 1996:
THREE CHRISTINA CENTRE ----------------- Revenue: Base rents..................................................................................... $ 4,508 Tenant reimbursements.......................................................................... 2,347 Other.......................................................................................... 14 ------ Total revenue................................................................................ 6,869 ------ Operating Expenses: Interest (i)................................................................................... 3,875 Depreciation and amortization (ii)............................................................. 1,653 Property expenses.............................................................................. 2,799 General and administrative..................................................................... -- ------ Total operating expenses................................................................... 8,327 ------ Income (loss) before equity in income of management company and minority interest................ (1,458) Equity in income (loss) of management company (iii).............................................. 108 ------ Income (loss) before minority interest........................................................... (1,350) Minority interest in (income) loss............................................................... 17 ------ Net income....................................................................................... $ (1,333) ------ ------
(i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. (ii) Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (iii) Pro forma equity in income of management company is presented based on management fees less incremental costs estimated to be incurred. F-15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Brandywine Realty Trust: We have audited the statement of revenue and certain expenses of Three Christina Centre described in Note 1, for the year ended December 31, 1996. This financial statement is the responsibility of the Property's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a current report on Form 8-K of Brandywine Realty Trust, as described in Note 1, and is not intended to be a complete presentation of Three Christina Centre's revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of Three Christina Centre for the year ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pa., January 23, 1998 F-16 THREE CHRISTINA CENTRE STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
FOR THE NINE FOR THE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1997 1996 (UNAUDITED) ------------ ------------- REVENUE: Minimum rent (Note 2)............................................................. $4,508,000 $ 3,474,000 Tenant reimbursements............................................................. 2,347,000 1,843,000 Other Income...................................................................... 14,000 19,000 ------------ ------------- Total revenue................................................................... 6,869,000 5,336,000 ------------ ------------- CERTAIN EXPENSES: Maintenance and other operating expenses.......................................... 1,456,000 1,073,000 Utilities......................................................................... 929,000 705,000 Real estate taxes................................................................. 414,000 335,000 ------------ ------------- Total certain expenses........................................................ 2,799,000 2,113,000 ------------ ------------- REVENUE IN EXCESS OF CERTAIN EXPENSES............................................... $4,070,000 $ 3,223,000 ------------ ------------- ------------ -------------
The accompanying notes are an integral part of this financial statement. F-17 THREE CHRISTINA CENTRE NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES DECEMBER 31, 1996 1. BASIS OF PRESENTATION: This statement of revenue and certain expenses reflects the operations of Three Christina Centre (the "Property") as of December 31, 1996. The Property is expected to be acquired in January 1998 by Brandywine Realty Trust (the "Company") under a sales agreement with TA Associates Realty. The Properties have an aggregate net rentable area of approximately 311,193 square feet (99% leased as of December 31, 1996). The expected purchase price is approximately $50.6 million. This statement of revenue and certain expenses is to be included in the Company's current report on Form 8-K, as the above described transaction has been deemed significant pursuant to the rules and regulations of the Securities and Exchange Commission. The accounting records of the Property are maintained on an cash basis. Adjusting entries have been made to present the accompanying financial statements in accordance with generally accepted accounting principles. The accompanying financial statements exclude certain expenses such as interest, depreciation and amortization, and other costs not directly related to the future operations of the Property. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The actual results could differ from those estimates. The statement of revenue and certain expenses for the nine months ended September 30, 1997 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for the fair presentation of the statement of revenue and certain expenses for the interim period have been included. The results of the interim periods are not necessarily indicative of the results for the full year. F-18 2. OPERATING LEASES: Base rents presented for the year ended December 31, 1996, include straight-line adjustments for rental revenue increases in accordance with generally accepted accounting principles. The aggregate rental revenue increases resulting from the straight-line adjustment for the year ended December 31, 1996 and the nine months ended September 30, 1996 were $ 289,000 and $237,000, (unaudited), respectively. The following tenants had minimum rental payments greater than 10% of the total minimum rent in 1996: First USA Bank $3,245,000 The Properties are leased to tenants under operating leases with expiration dates extending to the year 2012. Future minimum rentals under noncancelable operating leases, excluding tenant reimbursements of operating expenses as of December 31, 1996, are as follows: 1997....................................... $4,101,000 1998....................................... 3,904,000 1999....................................... 3,744,000 2000....................................... 3,747,000 2001....................................... 3,766,000 Thereafter................................. 39,731,000 ----------- $58,993,000 ----------- -----------
Certain leases also include provisions requiring tenants to reimburse the Property for management costs and other operating expenses up to stipulated amounts. 3. RELATED PARTY TRANSACTIONS: The Property paid management fees of $165,000 to Flynn Management Company, a related party, based on 2.5% of cash receipts as defined in the management agreement. These management fees are included within maintenance and other operating expenses in the statement of revenue and certain expenses. F-19 EX-23.1 2 EX23.1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated January 23, 1998 in this Form 8-K on the combined statement of revenue and certain expenses of Three Christina Centre into the Company's previously filed Registration Statements on Forms S-3 (File No. 333-46647, File No. 333-39155 and File No. 333-20999) and Forms S-8 (File No. 333-14243 and File No. 333-28427). ARTHUR ANDERSEN LLP Philadelphia, Pa., February 23, 1998 -----END PRIVACY-ENHANCED MESSAGE-----