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): October 10, 2002
HRPT PROPERTIES TRUST
(Exact name of registrant as specified in charter)
Maryland 1-9317 04-6558834
(State or other (Commission (I.R.S. employer
jurisdiction of incorporation) file number) identification number)
400 Centre Street, Newton, MA 02458
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 617-332-3990
Item 5. Other Events.
On October 10, 2002, HRPT Properties Trust ("HRP" or the "Company") closed the
acquisition of Centre Square Office Building, 1500 Market Street, Philadelphia,
Pennsylvania. This property contains approximately 1.77 million square feet of
Class A office space in the center of downtown Philadelphia. The purchase price
was $183.5 million plus closing costs. Centre Square is 97% occupied by 37
different tenants. The larger tenants representing a combined 62% of the total
available space include Towers, Perrin, Forster & Crosby, Inc., a personnel
services company, Comcast Corporation (NASDQ: CMCSA) and banking affiliates of
Wachovia Corporation (NYSE: WB). As is customary in large central business
district multi-tenant office buildings, the current leases expire on a staggered
basis, but approximately 75% of the available space is leased to 2006 or beyond.
On October 11, 2002, HRP acquired Corporate Center at Academy Park located in
Lakewood, Colorado. This 213,000 sq. ft., Class A, suburban office property was
purchased for $28.75 million plus closing costs. This property is 100% leased to
the U.S. Government Department of the Interior to 2012.
HRP funded these purchases with cash on hand plus drawings under its unsecured
revolving bank credit facility.
Since the beginning of 2002, HRP has acquired seven office properties, including
the two properties referred to above. These seven properties contain 3,322,000
sq. ft. and were purchased for approximately $388 million. At the time these
properties were acquired they had a combined occupancy of 96% and the rents less
operating costs produced current yields of approximately 10.9% of the purchase
prices. Moreover, HRP expects that rents reportable under generally accepted
accounting principles which take account of scheduled rent increases in signed
leases may produce higher yields. Also, because of changes which will occur in
occupancy, rents and expenses over time, HRP expects that the yields which will
be realized from the properties it has purchased may be different from those
historically experienced.
Pro forma financial data for the Company and the financial statements prepared
pursuant to the requirements of Rule 3-14 of Regulation S-X, of Centre Square
and two other acquired properties are included in Item 7 to this Form 8-K.
1
FORWARD LOOKING STATEMENTS
THIS FORM 8-K CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD LOOKING
STATEMENTS ARE BASED UPON HRPT'S CURRENT BELIEFS AND EXPECTATIONS, BUT THEY ARE
NOT GUARANTEED. FOR EXAMPLE, THE RENTS IN EXCESS OF OPERATING EXPENSES MAY BE
LESS THEN CURRENTLY EXPECTED DUE TO CHANGING MARKET CONDITIONS, INCREASED
EXPENSES OR FOR OTHER REASONS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE UPON FORWARD LOOKING STATEMENTS.
2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements Under Rule 3-14 of Regulation S-X
Statement of Revenues and Certain Operating Expenses for Centre Square
Report of Independent Auditors F-1
Statement of Revenues and Certain Operating Expenses
for the Six Month Period Ended June 30, 2002 (unaudited),
and for the Year Ended December 31, 2001 F-2
Notes to Statement of Revenues and Certain Operating Expenses F-3
Statement of Revenues and Certain Operating Expenses for Unisource Energy Tower
Report of Independent Auditors F-5
Statement of Revenues and Certain Operating Expenses
for the Year Ended December 31, 2001 F-6
Notes to Statement of Revenues and Certain Operating Expenses F-7
Statement of Revenues and Certain Operating Expenses for Highland Place II
Report of Independent Auditors F-9
Statement of Revenues and Certain Operating Expenses
for the Year Ended December 31, 2001 F-10
Notes to Statement of Revenues and Certain Operating Expenses F-11
Neither the Company nor its affiliates are related to the sellers of
these properties. The historical financial statements listed in Item 7
(a) (the "Acquired Property Statements") present the results of
operations of acquired properties (the "Acquired Properties") during
periods prior to their acquisition by HRP and exclude, as permitted by
Rule 3-14 of Regulation S-X, items of revenue and expense which are not
comparable to the expected future operations by HRP. In assessing the
Acquired Properties, HRP considered each property's revenue sources,
including those which have been affected, and are expected to be
affected in the future by factors including, but not limited to,
demand, supply and competitive factors present in the local and
national markets for office space and the ability of tenants to make
payments when due. HRP also considered each property's expenses
including, but not limited to, utility costs, tax rates and other
expenses, and the portion of such expenses which may be recovered from
tenants. After inquiry of the respective sellers of the Acquired
Properties, HRP is not aware of any material factors other than those
discussed above or referred to in the pro forma data listed in Item 7
(b), below, which would cause the financial information reported in the
Acquired Property Statements not to be necessarily indicative of future
operating results.
3
(b) Pro Forma Financial Data
Introduction to Unaudited Pro Forma Condensed Consolidated
Financial Statements F-13
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 2002 F-14
Unaudited Pro Forma Condensed Consolidated Statement
of Income for the Six Months Ended June 30, 2002 F-15
Unaudited Pro Forma Condensed Consolidated Statement
of Income for the Year Ended December 31, 2001 F-16
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements F-17
(c) Exhibits
2.1 Purchase and Sale Agreement dated October 4, 2002, by and
between Centre Square, as seller and HUB Properties Trust, as
purchaser.
2.2 First Amendment to Purchase and Sale Agreement dated October
4, 2002 between Centre Square, as seller and HUB Properties
Trust, as purchaser.
2.3 Second Amendment to Purchase and Sale Agreement dated October
4, 2002 between Centre Square, as seller and HUB Properties
Trust, as purchaser.
23.1 Consent of Ernst & Young LLP
4
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees
HRPT Properties Trust
We have audited the accompanying statement of revenues and certain operating
expenses of the Property ("Centre Square") acquired from Centre Square, a
Pennsylvania general partnership, as described in Note 1, for the year ended
December 31, 2001. This financial statement is the responsibility of Centre
Square's management. Our responsibility is to express an opinion on the
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 significant estimates made
by management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of HRPT Properties Trust and is not intended to be a
complete presentation of Centre Square's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain operating expenses of Centre
Square for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
Boston, Massachusetts
October 10, 2002
F-1
Centre Square
Statement of Revenues and Certain Operating Expenses
For the six
month period
ended June For the year
30, 2002 ended
(unaudited) December 31, 2001
------------- ------------------
Revenues:
Rental income $15,113,117 $29,755,950
Reimbursement from tenants and other income 3,560,924 7,235,740
----------- -----------
18,674,041 36,991,690
----------- -----------
Certain operating expenses:
Rental property operating expenses 5,566,236 10,516,140
Real estate taxes and insurance 2,881,016 5,527,059
General and administrative 1,383,794 3,014,659
----------- -----------
9,831,046 19,057,858
----------- -----------
Revenues in excess of certain operating expenses $ 8,842,995 $17,933,832
=========== ===========
See accompanying notes
F-2
Centre Square
Notes to Statement of Revenues and Certain Operating Expenses
1. General Information and Summary of Significant Accounting Policies:
Centre Square, a Pennsylvania general partnership ("CSGP") owned and
operated two office towers and a parking garage located at 1500 Market
Street in Philadelphia, Pennsylvania (collectively the "Property"). The
partners of CSGP are Metropolitan Life Insurance Company ("MLIC") (99%)
and Metropolitan Tower Realty Company ("MTRC") (1%). The Property was
subject to a ground lease with Centre Square Two, a Pennsylvania
general partnership, and a related party to both MLIC and MTRC. On
October 10, 2002, HRPT Properties Trust ("HRPT") acquired the Property
and ground lease and assumed ownership and management responsibilities.
The accompanying financial statement has been prepared in accordance
with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission for inclusion in Form 8-K of HRPT. Accordingly, certain
historical operating expenses of the Property that may not be
comparable to the expenses expected to be incurred in the future have
been excluded. Excluded expenses consist of depreciation and
amortization, interest expense, ground lease expense, and other costs
not directly related to the future operations. In addition, certain
payments received by the Property for lease terminations have been
excluded from revenues.
Use of Estimates - Preparation of this financial statement in
conformity with accounting principles generally accepted in the United
States requires CSGP management to make estimates and assumptions that
may affect the amounts reported in this financial statement and
accompanying notes. Actual results could differ from those estimates.
Rental Revenues - Tenant leases are accounted for as operating leases.
Rental income is recognized on a straight-line basis over the term of
the related leases.
Reimbursements from Tenants - Reimbursement from tenants, principally
for increases in operating expenses and real estate taxes over base
year amounts, are recognized when they become billable to the tenants.
F-3
Centre Square
Notes to Statement of Revenues and Certain Operating Expenses
2. Leases
CSGP, as lessor, has entered into non-cancelable operating leases at
the Property. Minimum future rentals under the leases in effect at
December 31, 2001, are summarized as follows:
Year
----
2002 $ 31,827,358
2003 32,478,044
2004 32,290,121
2005 27,771,612
2006 16,234,950
Thereafter 39,105,571
--------------
$ 179,707,656
==============
The leases at the Property are generally for a term greater than one
year and less than forty years and provide for operating expense and
real estate tax escalations as well as renewal options at market rates.
For the year ended December 31, 2001, two tenants comprised
approximately 25% and 15% of Property rental income, respectively.
F-4
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees
HRPT Properties Trust
We have audited the accompanying statement of revenues and certain operating
expenses of the Property ("Unisource Energy Tower") acquired from Big Tucson
Limited Partnership, a Texas limited partnership, as described in Note 1, for
the year ended December 31, 2001. This financial statement is the responsibility
of Unisource Energy Tower's management. Our responsibility is to express an
opinion on the financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 significant estimates made
by management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of HRPT Properties Trust and is not intended to be a
complete presentation of Unisource Energy Tower's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain operating expenses of Unisource
Energy Tower for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
Boston, Massachusetts
August 30, 2002
F-5
Unisource Energy Tower
Statement of Revenues and Certain Operating Expenses
For the year ended December 31, 2001
Revenues:
Rental income $4,639,202
Parking income 585,337
Reimbursement from tenants and other income 586,576
----------
5,811,115
----------
Certain operating expenses:
Rental property operating expenses 1,193,468
Parking operating expenses 97,155
Real estate taxes and insurance 952,953
General and administrative 240,255
----------
2,483,831
----------
Revenues in excess of certain operating expenses $3,327,284
==========
See accompanying notes.
F-6
Unisource Energy Tower
Notes to Statement of Revenues and Certain Operating Expenses
1. General Information and Summary of Significant Accounting Policies:
Prior to February 27, 2002, Big Tucson Limited Partnership, a Texas
limited partnership, ("BTLP") owned and operated Unisource Energy
Tower, a property consisting of one office building and one parking
structure located in Tucson, Arizona (collectively the "Property"). On
February 27, 2002, HRPT Properties Trust ("HRPT") acquired the Property
from BTLP and assumed management and ownership responsibilities.
The accompanying financial statement has been prepared in accordance
with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission for inclusion in Form 8-K of HRPT. Accordingly, certain
historical operating expenses of the Property that may not be
comparable to the expenses expected to be incurred in the future have
been excluded. Excluded expenses consist of depreciation, amortization
and interest expense not directly related to the future operations of
the Property.
Use of Estimates - Preparation of this financial statement in
conformity with accounting principles generally accepted in the United
States requires BTLP management to make estimates and assumptions that
may affect the amounts reported in this financial statement and
accompanying notes. Actual results could differ from those estimates.
Rental Revenues - Tenant leases are accounted for as operating leases.
Rental income is recognized on a straight-line basis over the term of
the related leases.
Reimbursements from Tenants - Reimbursements from tenants, principally
for increases in operating expenses and real estate taxes over base
year amounts, are recognized when they become billable to tenants.
F-7
Unisource Energy Tower
Notes to Statement of Revenues and Certain Operating Expenses
2. Leases
BTLP, as lessor, has entered into non-cancelable operating leases at
the Property. These leases were assumed by HRPT when the Property was
acquired. Minimum future rentals under the leases in effect at December
31, 2001, are summarized as follows:
Year
----
2002 $4,836,886
2003 4,668,503
2004 3,181,246
2005 1,840,494
2006 1,641,172
Thereafter 5,487,094
-------------
$21,655,395
=============
The leases at the Property are generally for a term greater than one
year and less than twenty-six years and provide for operating expense
and real estate tax escalations as well as renewal options at market
rates.
For the year ended December 31, 2001, one tenant comprised
approximately 17% of Property rental income.
F-8
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees
HRPT Properties Trust
We have audited the accompanying statement of revenues and certain operating
expenses of the Property ("Highland Place II") acquired from Brookfield
Colorado, Inc., a Colorado corporation as described in Note 1, for the year
ended December 31, 2001. This financial statement is the responsibility of
Highland Place II's management. Our responsibility is to express an opinion on
the financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 significant estimates made
by management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of HRPT Properties Trust and is not intended to be a
complete presentation of Highland Place II's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain operating expenses of Highland
Place II for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
Boston, Massachusetts
August 30, 2002
F-9
Highland Place II
Statement of Revenues and Certain Operating Expenses
For the year ended December 31, 2001
Revenues:
Rental income $2,380,763
Reimbursement from tenants and other income 157,317
----------
2,538,080
----------
Certain operating expenses:
Rental property operating expenses 661,886
Real estate taxes and insurance 418,389
General and administrative 82,797
----------
1,163,072
----------
Revenues in excess of certain operating expenses $1,375,008
==========
See accompanying notes.
F-10
Highland Place II
Notes to Statement of Revenues and Certain Operating Expenses
1. General Information and Summary of Significant Accounting Policies:
Prior to November 2, 2001, Brookfield Colorado, Inc., a Colorado
corporation ("Brookfield") owned and operated Highland Place II, a
three-story office building located in Englewood, Colorado (the
"Property"). On November 2, 2001, HRPT Properties Trust ("HRPT")
acquired the Property from Brookfield and assumed management and
ownership responsibilities.
The accompanying financial statement has been prepared in accordance
with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission for inclusion in Form 8-K of HRPT. Accordingly, certain
historical operating expenses of the Property that may not be
comparable to the expenses expected to be incurred in the future have
been excluded. Excluded expenses consist of depreciation, amortization
and interest expense not directly related to the future operations of
the Property. In addition, certain payments received by the Property
for lease terminations have been excluded from revenues.
Use of Estimates - Preparation of this financial statement in
conformity with accounting principles generally accepted in the United
States requires Brookfield management to make estimates and assumptions
that may affect the amounts reported in this financial statement and
accompanying notes. Actual results could differ from those estimates.
Rental Revenues - Tenant leases are accounted for as operating leases.
Rental income is recognized on a straight-line basis over the term of
the related leases.
Reimbursements from Tenants - Reimbursements from tenants, principally
for increases in operating expenses and real estate taxes over base
year amounts, are recognized when they become billable to tenants.
F-11
Highland Place II
Notes to Statement of Revenues and Certain Operating Expenses
2. Leases
Brookfield, as lessor, has entered into non-cancelable operating leases
which were assumed by HRPT upon acquisition. Minimum future rentals
under the leases in effect at December 31, 2001, are summarized as
follows:
Year
----
2002 $ 2,982,065
2003 2,994,312
2004 2,787,561
2005 2,525,628
2006 1,744,232
Thereafter 203,995
--------------
$13,237,793
==============
The leases at the Property are generally for a term greater than one
year and for less than eleven years and provide for operating expense
and real estate tax escalations as well as renewal options at market
rates.
For the year ended December 31, 2001, one tenant comprised
approximately 40% of Property rental income.
F-12
HRPT Properties Trust
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as of
June 30, 2002, reflects the financial position of the Company as if the
transactions described in the footnotes to the unaudited pro forma condensed
consolidated financial statements were completed on June 30, 2002. The unaudited
pro forma condensed consolidated statements of income for the six months ended
June 30, 2002, and the year ended December 31, 2001, present the results of
operations of the Company as if the transactions described in the notes to the
unaudited pro forma condensed consolidated financial statements were completed
on January 1, 2001. These unaudited pro forma condensed consolidated financial
statements should be read in connection with, and are qualified in their
entirety by reference to, the financial statements of the Company for the six
months ended June 30, 2002, included in the Company's Quarterly Report on Form
10-Q, the financial statements of the Company for the year ended December 31,
2001, included in the Company's Annual Report on Form 10-K and the financial
statements included in Item 7(a) of this Form 8-K. These unaudited pro forma
financial statements are not necessarily indicative of the expected results of
operations of the Company for any future period. Differences could result from,
among other considerations, future changes in the Company's portfolio of
investments, changes in interest rates, changes in the capital structure of the
Company, changes in property level operating expenses, and changes in property
level revenues including rents expected to be received on leases in place or
signed during and after 2001.
F-13
HRPT PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2002
(dollars in thousands)
Pro Forma
Historical Adjustments (A) Pro Forma
------------ --------------- --------------
ASSETS
Real estate properties, at cost $ 2,714,447 $ 289,054 $ 3,003,501
Less accumulated depreciation 250,449 -- 250,449
----------- ----------- -----------
2,463,998 289,054 2,753,052
Equity investments 267,586 -- 267,586
Other assets 119,125 -- 119,125
----------- ----------- -----------
$ 2,850,709 $ 289,054 $ 3,139,763
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving credit facility $ 23,000 $ 149,054 $ 172,054
Senior notes payable, net 794,464 (150,000) 644,464
Mortgage notes payable, net 337,773 -- 337,773
Other liabilities 51,542 -- 51,542
Shareholders' equity 1,643,930 290,000 1,933,930
----------- ----------- -----------
$ 2,850,709 $ 289,054 $ 3,139,763
=========== =========== ===========
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
F-14
HRPT PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income
Six Months Ended June 30, 2002
(amounts in thousands, except per share amounts)
Pro Forma Adjustments
---------------------------------------------------
Centre Square Other Financing
Historical Acquisition (B) Acquisitions (C) Transactions (D) Pro Forma
----------- --------------- --------------- ---------------- -----------
REVENUES:
Rental income $ 197,671 $ 20,532 $ 8,441 $-- $ 226,644
Interest and other income 1,733 -- -- -- 1,733
--------- --------- --------- --------- ---------
Total revenues 199,404 20,532 8,441 -- 228,377
--------- --------- --------- --------- ---------
EXPENSES:
Operating expenses 71,883 9,831 1,997 -- 83,711
Interest 41,297 -- -- (1,664) 39,633
Depreciation and amortization 34,665 2,109 1,568 -- 38,342
General and administrative 7,876 469 348 -- 8,693
--------- --------- --------- --------- ---------
Total expenses 155,721 12,409 3,913 (1,664) 170,379
--------- --------- --------- --------- ---------
Income before equity in earnings of equity
investments and extraordinary item 43,683 8,123 4,528 1,664 57,998
Equity in earnings of equity investments 9,058 -- -- -- 9,058
Loss on equity transactions of equity investments (1,421) -- -- -- (1,421)
--------- --------- --------- --------- ---------
Income before extraordinary item 51,320 8,123 4,528 1,664 65,635
Preferred distributions (9,875) -- -- (13,125) (23,000)
--------- --------- --------- --------- ---------
Income before extraordinary item available for
common shareholders $ 41,445 $ 8,123 $ 4,528 $ (11,461) $ 42,635
========= ========= ========= ========= =========
Weighted average common shares outstanding 128,809 128,809
========= =========
Basic and diluted earnings per common share:
Income before extraordinary item available for
common shareholders $0.32 $0.33
========= =========
See accompanying notes to unaudited pro forma
condensed consolidated financial statements.
F-15
HRPT PROPERTIES TRUST
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ended December 31, 2001
(amounts in thousands, except per share amounts)
Pro Forma Adjustments
---------------------------------------------------
Centre Square Other Financing
Historical Acquisition (E) Acquisitions (F) Transactions (G) Pro Forma
----------- --------------- --------------- ---------------- -----------
REVENUES:
Rental income $ 387,561 $ 41,179 $ 25,702 $-- $ 454,442
Interest and other income 6,611 -- (421) -- 6,190
--------- --------- --------- --------- ---------
Total revenues 394,172 41,179 25,281 -- 460,632
--------- --------- --------- --------- ---------
EXPENSES:
Operating expenses 140,592 19,058 9,567 -- 169,217
Interest 87,075 -- -- (1,262) 85,813
Depreciation and amortization 65,187 4,217 5,105 -- 74,509
General and administrative 15,614 937 1,135 -- 17,686
Impairment of assets (3,955) -- -- -- (3,955)
--------- --------- --------- --------- ---------
Total expenses 304,513 24,212 15,807 (1,262) 343,270
--------- --------- --------- --------- ---------
Income before equity in earnings of equity
investments and extraordinary item 89,659 16,967 9,474 1,262 117,362
Equity in earnings of equity investments 14,559 -- -- -- 14,559
Loss on equity transactions of equity investments (19,265) -- -- -- (19,265)
--------- --------- --------- --------- ---------
Income before extraordinary item 84,953 16,967 9,474 1,262 112,656
Preferred distributions (16,842) -- -- (29,158) (46,000)
--------- --------- --------- --------- ---------
Income before extraordinary item available for
common shareholders $ 68,111 $ 16,967 $ 9,474 $ (27,896) $ 66,656
========= ========= ========= ========= =========
Weighted average common shares outstanding 130,253 130,253
========= =========
Basic and diluted earnings per common share:
Income before extraordinary item available for
common shareholders $0.52 $0.51
========= =========
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
F-16
HRPT PROPERTIES TRUST
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(dollars in thousands, except per share amounts)
Unaudited Pro Forma Condensed Consolidated Balance Sheet Adjustments
(A) Represents the impact of the Company's acquisitions subsequent to June
30, 2002, through October 11, 2002, of properties located in Lakewood,
CO, Philadelphia, PA ("Centre Square") and Fresno, CA, and the
repayment of $150,000 of 6.75% senior notes due in December 2002. These
activities were funded in part with borrowings under the Company's
revolving bank credit facility and in part with the net proceeds from
the Company's September 2002 sale of $300,000 of 8.75% preferred
shares.
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for
the Six Months Ended June 30, 2002
(B) Represents the pro forma impact on rental income and operating expenses
of Centre Square for the six months ended June 30, 2002, and the pro
forma impact of this acquisition on depreciation and amortization and
general and administrative expenses. Rental income presented exceeds
historical rental income for the six months ended June 30, 2002, by
$1,858, an amount derived from the pro forma application, as of the
beginning of the presented period, of the generally accepted accounting
principle which requires that rents from noncancellable operating
leases be recognized on a straight line basis over the remaining length
of the leases. This principle is expected to be applied by the Company
as of the date of acquisition and actual future rental income is
expected to differ from amounts presented for the pro forma periods.
(C) Represents the impact on rental income and operating expenses of other
properties acquired by the Company during 2002 through October 11,
2002, and the pro forma impact of these acquisitions on depreciation
and amortization and general and administrative expenses.
(D) Represents the net effect on interest expense and preferred
distributions resulting from the acquisitions described in Notes (B)
and (C), above, the issuance of $300,000 of 8.75% preferred shares in
September 2002, the repayment of $150,000 of 6.75% senior notes in
October 2002 and $160,000 of 6.875% senior notes in March 2002, the
issuance of $200,000 of 6.95% senior notes in April 2002, plus the net
impact of these activities on interest expense related to the net
change in the Company's revolving credit facility. During the presented
period, the average rate on the credit facility was 2.7%.
F-17
HRPT PROPERTIES TRUST
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(dollars in thousands, except per share amounts)
Unaudited Pro Forma Condensed Consolidated Statement of Income Adjustments for
the Year Ended December 31, 2001
(E) Represents the pro forma impact on rental income and operating expenses
of Centre Square for the twelve months ended December 31, 2001, and the
pro forma impact of this acquisition on depreciation and amortization
and general and administrative expenses. Rental income presented
exceeds historical rental income for the year ended December 31, 2001,
by $4,187, an amount derived from the pro forma application, as of the
beginning of the presented period, of the generally accepted accounting
principle which requires that rents from noncancellable operating
leases be recognized on a straight line basis over the remaining length
of the leases. This principle is expected to be applied by the Company
as of the date of acquisition and actual future rental income is
expected to differ from amounts presented for the pro forma periods.
(F) Represents the impact on rental income and operating expenses of other
properties acquired during 2001 through October 11, 2002, and the pro
forma impact of these acquisitions on interest income, depreciation and
amortization and general and administrative expenses. One of the
acquired properties is 100% leased to the United States government. On
November 30, 2001, the United States government lease, which provided
annual rents of $2.4 million, ended and was thereafter replaced with a
new, 10-year lease to the same tenant, for annual rent of $8.9 million.
If the new lease had begun as of January 1, 2001, pro forma rental
income would have been approximately $460.9 million, or $6.5 million
higher than the amounts presented. Similarly, income before
extraordinary item available for common shareholders would have been
$72.2 million ($0.55 per share), or $5.5 million ($0.04 per share)
higher than the amounts presented.
(G) Represents the net effect on interest expense and preferred
distributions resulting from the acquisitions described in Notes (E)
and (F), above, the 2002 financing transactions discussed in Note (D),
above, the issuance of $200,000 of 9.875% preferred shares in February
2001, the repayment of $202,547 of the Company's subordinated
debentures in March 2001, plus the net impact of these activities on
interest expense related to the net change in the Company's revolving
credit facility. During the presented period, the average rate on the
credit facility was 4.3%.
F-18
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.
HRPT PROPERTIES TRUST
By: /s/ John C. Popeo
John C. Popeo
Treasurer and Chief Financial Officer
Dated: October 24, 2002