-----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, E1oqbsPf4ua2AhohiGndkR0RBFma8nN2ZBH9p8TPv0tOjzo7aSJX5uWW40VFfamR owZ0yUr13dk5LGsY4084tA== 0000950168-98-003928.txt : 19981228 0000950168-98-003928.hdr.sgml : 19981228 ACCESSION NUMBER: 0000950168-98-003928 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980618 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGHWOODS PROPERTIES INC CENTRAL INDEX KEY: 0000921082 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 561871668 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13100 FILM NUMBER: 98774310 BUSINESS ADDRESS: STREET 1: 3100 SMOKETREE CT STREET 2: STE 600 CITY: RALEIGH STATE: NC ZIP: 27604 BUSINESS PHONE: 9198724924 MAIL ADDRESS: STREET 1: 3100 SMOKETREE COURT STREET 2: STE 600 CITY: RALEIGH STATE: NC ZIP: 27604 8-K 1 HIGHWOODS PROPERTIES, INC. 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): June 18, 1998 HIGHWOODS PROPERTIES, INC. -------------------------- (Exact name of registrant specified in its charter) Maryland 1-13100 56-1871668 -------- ------- ---------- (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604 (Address of principal executive offices, zip code) Registrant's telephone number, including area code: (919) 872-4924 ITEM 5. OTHER EVENTS The purpose of this filing is to set forth certain audited financial statements of certain businesses recently acquired by Highwoods Properties, Inc. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired LANDMARK CENTER Report of Independent Auditors Combined Statement of Revenue and Certain Expenses Notes to Combined Statement of Revenue and Certain Expenses SHELTON PROPERTIES Report of Independent Auditors Combined Statement of Revenue and Certain Expenses Notes to Combined Statement of Revenue and Certain Expenses (b) Pro Forma Information None (c) Exhibits 23 Consent of Independent Auditors SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: December 23, 1998 HIGHWOODS PROPERTIES, INC. By: /s/ Carman J. Liuzzo Carman J. Liuzzo Vice-President, Chief Executive Officer and Treasurer Audited Combined Financial Statement Landmark Center Year ended December 31, 1997 with Report of Independent Auditors Landmark Center Audited Combined Financial Statement Year ended December 31, 1997 Contents Report of Independent Auditors...............................................1 Audited Combined Financial Statement Combined Statement of Revenue and Certain Expenses...........................2 Notes to Combined Statement of Revenue and Certain Expenses..................3 Report of Independent Auditors To the Board of Directors and Stockholders Highwoods Properties, Inc. We have audited the accompanying Combined Statement of Revenue and Certain Expenses of Landmark Center as described in Note 1 for the year ended December 31, 1997. This financial statement is the responsibility of Landmark Center'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 basis of accounting used and the 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 accompanying Combined Statement of Revenue and Certain Expenses was prepared using the basis of accounting described in Note 1 for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to be a complete presentation of Landmark Center's revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in Note 1 of Landmark Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Raleigh, North Carolina June 18, 1998 Landmark Center Combined Statement of Revenue and Certain Expenses Year ended December 31, 1997 Rental income $8,217,908 Expenses: Repairs and maintenance 1,495,293 Taxes 973,349 Utilities 564,049 Insurance 26,645 Management fees 61,186 ------------- Total expenses 3,120,522 ------------- Revenue in excess of certain expenses $5,097,386 ============= See accompanying notes. Landmark Center Notes to Combined Statement of Revenue and Certain Expenses December 31, 1997 1. Basis of Presentation Presented herein is the Combined Statement of Revenue and Certain Expenses related to the operations of two commercial real estate properties located in the Orlando, Florida metropolitan market identified as Landmark Center. Landmark Center is not a legal entity but rather a combination of the operations of certain real estate properties acquired by Highwoods Properties, Inc. in February 1998. The accompanying Combined Statement of Revenue and Certain Expenses includes the accounts of the following commercial real estate properties, each of which is owned by entities under common control, but not affiliated with Highwoods Properties, Inc. Number of Property Properties Owner --------------------------------------------------------------------------- Landmarks Orlando I Limited Landmark Center I 1 Partnership Landmarks Orlando II Limited Landmark Center II 1 Partnership The accompanying financial statement is prepared in accordance with Rule 3-14 of Regulation S-X and thus is not necessarily representative of the actual operations for the year presented as certain expenses that may not be comparable to the expenses expected to be incurred by Highwoods Properties, Inc. in the proposed future operations of the aforementioned properties have been excluded. Expenses excluded consist of interest, depreciation and general and administrative expenses not directly related to future operations. 2. Significant Accounting Policies Revenue Recognition Rental income is recognized on a straight-line basis over the term of the lease. Certain lease agreements contain provisions which provide reimbursement of real estate taxes, insurance, advertising and certain common area maintenance (CAM) costs. These additional rents are recorded on the accrual basis. All rent and other receivables from tenants are due from commercial building tenants located in the properties. Landmark Center Notes to Combined Statement of Revenue and Certain Expenses (continued) 2. Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those amounts. 3. Leases Landmark Center is being leased to tenants under operating leases that will expire over the next nine years. The minimum rental amounts under the leases are either subject to scheduled fixed increases or adjustments based on the Consumer Price Index. Generally, the leases also require that the tenants reimburse Landmark Center for increases in certain costs above their base year costs. Expected future minimum rents to be received over the next five years and thereafter from tenants for leases in effect at December 31, 1997 are as follows: Total -------------- 1998 $ 7,778,749 1999 6,647,040 2000 5,593,267 2001 4,343,103 2002 2,369,008 Thereafter 4,916,422 ============== $31,647,589 ============== 4. Environmental Matters All of the Company's properties have been subjected to Phase I environmental reviews. Such reviews have not revealed, nor is management aware of, any environmental liability that management believes would have a material adverse effect on the accompanying combined financial statement. Audited Combined Financial Statement Shelton Properties Year ended December 31, 1997 with Report of Independent Auditors Shelton Properties Audited Combined Financial Statement Year ended December 31, 1997 Contents Report of Independent Auditors...............................................1 Audited Combined Financial Statement Combined Statement of Revenue and Certain Expenses...........................2 Notes to Combined Statement of Revenue and Certain Expenses..................3 Report of Independent Auditors To the Board of Directors and Stockholders Highwoods Properties, Inc. We have audited the accompanying Combined Statement of Revenue and Certain Expenses of the Shelton Properties as described in Note 1 for the year ended December 31, 1997. This financial statement is the responsibility of Shelton Properties' 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 basis of accounting used and the 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 accompanying Combined Statement of Revenue and Certain Expenses was prepared using the basis of accounting described in Note 1 for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Highwoods Properties, Inc. and is not intended to be a complete presentation of Shelton Properties' revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in Note 1 of Shelton Properties for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Raleigh, North Carolina July 1, 1998 Shelton Properties Combined Statement of Revenue and Certain Expenses Year ended December 31, 1997 Rental income $17,997,279 Expenses: Repairs and maintenance 438,420 Taxes 1,220,276 Utilities 31,077 Insurance 102,409 Management fees 35,844 -------------- Total expenses 1,828,026 ------------- Revenue in excess of certain expenses $16,169,253 ============= See accompanying notes. Shelton Properties Notes to Combined Statement of Revenue and Certain Expenses December 31, 1997 1. Basis of Presentation Presented herein is the Combined Statement of Revenue and Certain Expenses related to the 32 commercial real estate properties and one parking deck located in Winston-Salem, Greensboro and Charlotte, North Carolina. Shelton Properties is not a legal entity but rather a combination of the operations of certain real estate properties under common control acquired by Highwoods Properties, Inc. The accompanying Combined Statement of Revenue and Certain Expenses includes the accounts of the following commercial real estate properties, each of which was owned by a party not affiliated with Highwoods Properties, Inc. Number of Property Properties Owner --------------------------------------------------------------------------- Colony Center 1 Chedren, Inc. Madison 1 Chedren, Inc. Chimney Rock Road 6 SMS Partnership Madison Park 7 Shelton Company Northridge 7 Shelton Company Members 1 Shelton Company Twin Lakes 1 Shelton Company Grassy Creek 3 GMS Partnership Clementine Road 5 Hampton Investments Indiana Avenue 1 Wright-Shelton Partners The accompanying financial statement is prepared in accordance with Rule 3-14 of Regulation S-X and thus is not necessarily representative of the actual operations for the year presented as certain expenses that may not be comparable to the expenses expected to be incurred by Highwoods Properties, Inc. in the proposed future operations of the aforementioned properties have been excluded. Expenses excluded consist of interest, depreciation and general and administrative expenses not directly related to future operations. Shelton Properties Notes to Combined Statement of Revenue and Certain Expenses (continued) 2. Significant Accounting Policies Revenue Recognition Rental income is recognized on a straight-line basis over the term of the lease. Certain lease agreements contain provisions which provide reimbursement of real estate taxes, insurance, advertising and certain common area maintenance (CAM) costs. These additional rents are recorded on the accrual basis. All rent and other receivables from tenants are due from commercial building tenants located in the properties. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those amounts. 3. Leases Shelton Properties are being leased to tenants under operating leases that will expire over the next eleven years. The minimum rental amounts under the leases are either subject to scheduled fixed increases or adjustments based on the Consumer Price Index. Generally, the leases also require that the tenants reimburse the Shelton Properties for increases in certain costs above their base year costs. Expected future minimum rents to be received over the next five years and thereafter from tenants for leases in effect at December 31, 1997 are as follows: Total ------------ 1998 $ 16,488,722 1999 15,570,220 2000 13,563,201 2001 11,218,683 2002 9,756,293 Thereafter 39,006,202 ------------ $105,603,321 ============ Three major tenants represent 63% of rental income for the year ended December 31, 1997. Shelton Properties Notes to Combined Statement of Revenue and Certain Expenses (continued) 4. Environmental Matters All of the Company's properties have been subjected to Phase I environmental reviews. Such reviews have not revealed, nor is management aware of, any environmental liability that management believes would have a material adverse effect on the accompanying combined financial statement. EX-23 2 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-39247, 333-51671-01, 333-51759 and 333-61913, and Form S-8 Nos. 333-12117, 333-29759, 333-29763 and 333-55901) and related Prospectuses of Highwoods Properties, Inc. and in the Registration Statement (Form S-3 Nos. 333-51671) and related Prospectus of Highwoods Realty Limited Partnership of our report dated June 18, 1998 with respect to the statement of revenue and certain expenses of Landmark Center for the year ended December 31, 1997, and of our report dated July 1, 1998 with respect to the statement of revenue and certain expenses of Shelton Properties for the year ended December 31, 1997, included in the Current Reports on Form 8-K of Highwoods Properties, Inc. and Highwoods Realty Limited Partnership dated June 18, 1998, filed with the Securities and Exchange Commission. ERNST & YOUNG LLP /s/ Ernst & Young LLP Raleigh, North Carolina December 22, 1998 -----END PRIVACY-ENHANCED MESSAGE-----