10-Q 1 f66732e10-q.txt FORM 10-Q FOR QUARTERLY PERIOD ENDED SEPT.30, 2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 33-98372-01 SPIEKER PROPERTIES, L.P. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 94-3188774 ---------------------------------------- -------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2180 SAND HILL ROAD, MENLO PARK, CA 94025 ---------------------------------------- -------------------- (Address of principal executive offices) (Zip code) (650) 854-5600 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]. No [ ]. Page 1 of 24 Exhibit Index is located on Page 22. 2 SPIEKER PROPERTIES, L.P. QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2000 TABLE OF CONTENTS

2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Attached are the following unaudited consolidated financial statements of Spieker Properties, L.P.: (i) Consolidated Balance Sheets as of September 30, 2000, and December 31, 1999 (ii) Consolidated Statements of Operations for the Three months and Nine months ended September 30, 2000 and 1999 (iii) Consolidated Statement of Partners' Capital for the Nine months ended September 30, 2000 (iv) Consolidated Statements of Cash Flows for the Nine months ended September 30, 2000 and 1999 (v) Notes to Consolidated Financial Statements The financial statements referred to above should be read together with the Annual Report on Form 10-K for the year ended December 31, 1999, and Forms 10-Q for the three month period ended March 31, 2000, and for the six month period ended June 30, 2000. 3 4 SPIEKER PROPERTIES, L.P. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000, AND DECEMBER 31, 1999 (unaudited, dollars in thousands) ASSETS

The accompanying notes are an integral part of these consolidated statements. 4 5 SPIEKER PROPERTIES, L.P. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000, AND DECEMBER 31, 1999 (unaudited, dollars in thousands, except share data) LIABILITIES AND PARTNERS' CAPITAL

The accompanying notes are an integral part of these consolidated statements. 5 6 SPIEKER PROPERTIES, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (unaudited, dollars in thousands, except share amounts)

The accompanying notes are an integral part of these consolidated statements. 6 7 SPIEKER PROPERTIES, L.P. CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (unaudited, dollars in thousands)

The accompanying notes are an integral part of these consolidated statements. 7 8 SPIEKER PROPERTIES, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (unaudited, dollars in thousands)

The accompanying notes are an integral part of these consolidated statements. 8 9 SPIEKER PROPERTIES, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 AND 1999 (unaudited, dollars in thousands) 1. ORGANIZATION AND BASIS OF PRESENTATION As used herein, the terms "we", "us", "our", or the "Operating Partnership" refer collectively to Spieker Properties, L.P., a California limited partnership, and consolidated entities. We were formed on November 10, 1993, and commenced operations on November 19, 1993, when Spieker Properties, Inc., the general partner in the Operating Partnership, completed its initial public offering on November 18, 1993. As of September 30, 2000, Spieker Properties, Inc. owned an approximate 88.1% general and limited partnership interest in the Operating Partnership. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Our consolidated financial statements include the consolidated financial position of the Operating Partnership and its subsidiaries as of September 30, 2000, and December 31, 1999, and its consolidated results of operations and cash flows for the three and nine months ended September 30, 2000 and 1999. Our investment in Spieker Northwest, Inc., an unconsolidated Preferred Stock subsidiary, and our investment in Spieker Griffin/W9 Associates, LLC, are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Interim Financial Information The consolidated financial statements as of, and for the three and nine months ended September 30, 2000 and 1999, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and, in management's opinion, include all adjustments necessary for a fair presentation of results for such interim periods. Certain information and note disclosures normally included in annual financial statements, prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to SEC rules or regulations; however, we believe that adequate disclosures have been made. The interim results for the three and nine months ended September 30, 2000 and 1999, are not necessarily indicative of results for the full year. We suggest that these financial statements be read together with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 1999, and Forms 10-Q for the three month period ended March 31, 2000, and for the six month period ended June 30, 2000. Land Held for Investment Construction in progress costs related to land parcels that are either held for investment or are in the design and approval process as of September 30, 2000, were approximately $18.8 million. 9 10 Net Income Per Unit Per unit amounts are computed using the weighted average common units outstanding during the period. Additionally, earnings used in the calculation are reduced by dividends owed to Series A, B, C and E preferred stockholders, and Preferred Operating Partnership unit holders. The diluted weighted average units outstanding include the dilutive effects of stock options, using the Treasury Stock method, and Series A Preferred Stock. Series A Preferred Stock was dilutive for the three and nine months ended September 30, 2000, and antidilutive for the three and nine months ended September 30, 1999. The basic and diluted weighted average general partner units and limited partner units outstanding for the three and nine months ended September 30, 2000 and 1999, are as follows:

Reclassifications Certain items in the 1999 financial statements have been reclassified to conform to the 2000 presentation with no effect on results of operations. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. ACQUISITIONS AND DISPOSITIONS Acquisitions We acquired the following properties, referred to as the "2000 Acquisitions", during the nine months ended September 30, 2000.

d 10 11 Drake's Landing Peninsula/North Bay - Greenbrae, CA O August 121,470 37,454 Lincoln Center Pacific Northwest - Portland, OR O September 725,961 118,937 --------- -------- 1,316,291 $259,804 ========= ========

(1) "O" indicates office property. (2) Represents the initial acquisition costs of the properties excluding any additional repositioning costs. In addition to the projects listed above, we acquired an asset to be redeveloped in Southern California at an initial cost of $11,500 during the first quarter of 2000. In addition, during the first nine months of 2000, we acquired two parcels of land for development at an initial cost of $19,174. During the nine months ended September 30, 1999, we acquired four office properties totaling 526,341 square feet at an initial cost of $75,885. In addition, we acquired four parcels of land for development at an initial cost of $46,633. Dispositions We disposed of the following projects referred to as the "Dispositions", during the nine months ended September 30, 2000:

(1) I- Industrial; L- Land; O- Office (2) Represents sale of approximately 0.8 acres. (3) Represents sale of approximately 4.7 acres. (4) Represents sale of approximately 6.2 acres. 11 12 The gross proceeds for land and property dispositions were $186,344 for the three months ended September 30, 2000, and $268,993 for the nine months ended September 30, 2000. Cash proceeds, net of closing costs, received from the dispositions were $184,044 for the three months ended September 30, 2000, and $264,438 for the nine months ended September 30, 2000. These proceeds were used to fund our recent acquisitions and our existing development pipeline. Gain recognized on disposition of real estate was $61,013 for the three months ended September 30, 2000, and $98,690 for the nine months ended September 30, 2000. The gross proceeds for the land and property dispositions were $20,256 for the three months ended September 30, 1999, and $91,099 for the nine months ended September 30, 1999. Included in the proceeds were $5,170 recognized in the first quarter of 1999 for a condemnation gain. Cash proceeds, net of closing costs, received from the disposition of the properties and land were $19,987 for the three months ended September 30, 1999, and $88,618 for the nine months ended September 30, 1999. 4. TRANSACTIONS WITH AFFILIATES Revenues and Expenses We received $433 for the three months and $878 for the nine months ended September 30, 2000, and $276 for the three months and $876 for the nine months ended September 30, 1999, for management services provided to certain properties that are controlled and operated by either Spieker Northwest, Inc., or SNI, Spieker Griffin/W9 Associates, LLC, or Spieker Partners. Certain of our officers are partners in Spieker Partners. Receivable From Affiliates The $297 receivable from affiliates at September 30, 2000, and the $144 at December 31, 1999, represent management fees and reimbursements due from SNI, Spieker Griffin/W9 Associates, LLC, and Spieker Partners. Investments in Mortgages Investments in mortgages of $9,357 at September 30, 2000, and $18,725 at December 31, 1999, are loans to SNI. The loans are secured by deeds of trust on real property, bear interest at 8.5% to 9.5%, and mature in 2012. Interest income on the notes of $231 for the three months ended and $915 for the nine months ended September 30, 2000, are included in interest and other income. Investment in Affiliates The investment in affiliates includes an investment in SNI. We own 95% of the non-voting Preferred Stock of SNI. Certain senior officers and one former officer of ours own 100% of the voting stock of SNI. At September 30, 2000, SNI owned 85,114 square feet of office and industrial property located in California. SNI also owns 1 parcel of land totaling 3.4 acres. In addition to property ownership, SNI provides property management services to certain properties owned by Spieker Partners. Additionally, investment in affiliates includes the 50.0% common interest in Spieker Griffin/W9 Associates, LLC. During the second quarter of 2000, our 37.5% preferred interest in Spieker Griffin/W9 Associates, LLC was converted to common interest. Spieker Griffin/W9 Associates, LLC owns a 535,000 square foot office complex, located in Orange County, California, which we manage. 5. PROPERTIES HELD FOR DISPOSITION We continue to review our portfolio and our long-term strategy for properties. Over time we will dispose of assets that do not have a strategic fit within the portfolio. Included in properties held for disposition of $240,528 at September 30, 2000, are thirty-six properties representing 6,415,478 square feet of industrial property and 383,120 square feet of office property, and three land parcels representing 23.7 acres. Thirteen industrial properties and one 12 13 office property are located in the Pacific Northwest. Twenty industrial properties, two office properties, and two land parcels are located in Northern California. One land parcel is located in Southern California. The following summarizes the condensed results of operations for the properties held for disposition at September 30, 2000, for the nine months ended September 30, 2000 and 1999.

(1) Property Operating Expenses consist of property related rental expenses and real estate taxes. 6. DEBT

(1) Mortgage loans generally require monthly principal and interest payments. Short-term borrowings include a $250,000 unsecured credit facility which matures in August 2001. The credit facility carries interest at the London Interbank Offering Rate, referred to as LIBOR, plus 0.80%. The one-month LIBOR at September 30, 2000, was 6.62%. The credit facility also includes an annual administrative fee of $50 and an annual facility fee of 0.20%. As of September 30, 2000, the amount drawn on the credit facility was $103,000. As of September 30, 2000, the short-term borrowings also include a $100,000 secured development facility which matures in May 2003. The development facility carries interest at LIBOR plus 1.25%, including an annual administrative fee of $35 and an unused facility fee of 0.25%. As of September 30, 2000, the amount drawn on the development facility was $38,055. Both the credit facility and the development facility are subject to financial covenants concerning leverage, interest coverage and certain other ratios. We are currently in compliance with all of the covenants on both the facilities. Our unsecured investment grade notes are subject to financial covenants concerning leverage, interest coverage and certain other ratios. We are currently in compliance with all of the covenants in the unsecured note agreements governing this indebtedness.

13 14 7. PARTNERS' DISTRIBUTIONS PAYABLE The distributions payable at September 30, 2000, and December 31, 1999, represent amounts payable to the partners of record. The unit holders of record are as follows:

8. SEGMENT INFORMATION We have five reportable segments or "regions": Pacific Northwest; East Bay/Sacramento, California; Peninsula/North Bay, California; Silicon Valley, California; and Southern California. Each region has a Regional President who is directly responsible for managing all phases of the region's operations including acquisition, development, leasing and property management. Each region includes both office and industrial properties which are leased to tenants engaged in various types of business activities. The accounting policies for the five regions are the same as those described in the summary of significant accounting policies. We evaluate performance based upon the combined net operating income of the properties in each region. Each of the five operating regions consists of differing mixes of office and industrial properties. The rental income and net operating income for the regions are not comparable, given the differing mixes of properties within the regions. Effective January 1, 2000, the North-East Bay/Sacramento region was split into two regions. The two new regions are now called East Bay/Sacramento and Peninsula/North Bay. The 1999 rental income and net operating income disclosure below has been restated to reflect these new regions. Significant information for the reportable segments for the nine months ended September 30, 2000, and 1999 is as follows:

(1) The basis of the assets re-allocated from the split of the North-East Bay/Sacramento region was approximately $803,710 to the East Bay/Sacramento region and $477,242 to the Peninsula/North Bay Region. (2) Net operating income for the properties is calculated by subtracting property related rental expenses and real estate taxes from rental income on the accompanying consolidated statements of operations. (3) See Note 3 to the consolidated financial statements for the related square footage by region of the additions and reductions to properties. (4) Represents the initial acquisition costs of the properties excluding any additional repositioning costs. 14 15 9. SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements contained in this Item 2, "Management's Discussion and Analysis of Financial Conditions and Results of Operations," and elsewhere in this Quarterly Report on Form 10-Q which are not historical facts may be forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including, but not limited to, those risks and special considerations set forth in our other SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS The following comparison is of our consolidated operations for the three and nine month periods ended September 30, 2000, as compared to the corresponding periods ended September 30, 1999 (amounts in tables are presented in millions).

For the quarter ended September 30, 2000, rental revenues increased by $28.7 million over the same period last year. $18.2 million, or 63.4%, of the rental revenue increase was generated by the "1999 Core Portfolio", defined as properties owned at January 1, 1999, and still owned at September 30, 2000. The increase in the 1999 Core Portfolio revenue was attributable to higher rollover rental rates realized on the renewal and re-leasing of our rentable space and increases in occupancies. Also included in rental revenue for the three months ended September 30, 2000, is $1.4 million of termination fees, up from $.5 million for the same period in 1999. During the quarter, 15 16 we completed 321 lease transactions for the renewal and re-lease of approximately 1.9 million square feet of second generation space. Rollover effective rent growth on these leases was, on average, 83.4% higher than the previous rents received on those same spaces. This rent growth is the measurement of the difference between effective (average) rents on new and renewed leases as compared to the expiring coupon rent on those same spaces. Lease terms on leases signed during the quarter were 67.0 months on a weighted average basis. The Developments contributed $11.4 million, or 39.7%, to the rental revenue increase over the same period last year. The Developments include both properties completed and added to our portfolio of stabilized properties, as well as properties currently in the development pipeline. We consider properties "stabilized" at the earlier of eighteen months after shell completion or when a 95.0% occupancy rate has been reached. During the three months ended September 30, 2000 we stabilized four properties consisting of approximately 683,000 square feet at estimated final costs of $116.9 million. Our development pipeline at September 30, 2000, consists of eight properties totaling approximately 1.8 million square feet and represents an estimated total cost of $457.5 million. The Developments were 59.1% preleased at September 30, 2000. Although certain properties in the development pipeline are shell complete and are partially occupied, they are not yet considered stabilized. The 2000 Acquisitions contributed $4.1 million, or 14.3%, to the rental revenue increase over the same period as last year. During the three months ended September 30, 2000, we acquired two office properties totaling 847,431 square feet for a total investment of $158.5 million. These properties were acquired during the quarter and, as such, a full quarter's worth of revenue and expense was not recognized during the period. As used herein, the term "total investment" represents the initial purchase price of acquisitions, plus projected costs of certain repositioning and rehab capital expenditures anticipated at the time of purchase. The 1999 Acquisitions contributed $2.4 million, or 8.4%, to the rental revenue increase over the same period as last year. During 1999, we acquired five office properties totaling 807,037 square feet for a total investment of $134.3 million. The properties were acquired at various dates throughout the year, therefore a full quarter's worth of revenue and expense may not be reflected in the three months ended September 30, 1999. The increases in rental revenues are partially offset by a decrease of $7.4 million attributable to properties which we disposed of during the nine months ended September 30, 2000. The Dispositions took place at various dates during the year, therefore a full quarter's worth of revenues and expenses may not be reflected in the 2000 rental revenues. During the quarter we disposed of nineteen properties totaling 3,066,343 square feet (see Note 3 to the consolidated financial statements). One property totaling 286,921 square feet represented the final disposition of approximately 3.6 million square feet of the Seattle industrial portfolio.

Rental revenues for the nine months ended September 30, 2000, increased by $72.1 million. $46.5 million, or 64.5%, of the rental revenue increase was due to revenues generated by the 1999 Core Portfolio. The increase in the 1999 Core Portfolio revenue during the last nine months was attributed to higher rollover rental rates realized on the renewal and re-leasing of second generation space and increases in occupancies. Also included in rental revenue for the nine months ended September 30, 2000, is $4.8 million of termination fees, up from $1.7 million for the same period in 1999. During the nine months ended September 30, 2000, we completed 1,083 lease transactions for the 16 17 renewal and re-lease of 6.5 million square feet of second generation space. On average, year-to-date, the new effective rates were 69.4% higher than the expiring coupon rent. The Developments contributed $27.3 million, or 37.9%, to the rental revenue increase for the nine months ended September 30, 2000. The 1999 Acquisitions contributed $8.2 million to the rental revenue increase, and the 2000 Acquisitions contributed $7.7 million. During the nine months ended September 30, 2000, we acquired five office properties totaling 1,316,291 square feet for a total investment of $266.7 million. These increases in rental revenues are partially offset by a decrease of $17.6 million attributable to the Dispositions. During the nine months ended September 30, 2000, we disposed of twenty-nine properties totaling 4,333,349 square feet (see Note 3 to the consolidated financial statements).

Interest and other income during the comparable nine month periods increased due to additional management fees and salary reimbursements collected from outside parties, and from interest income on deposits held in escrow from disposed properties. Average cash balances for the three month and nine month periods ended September 30, 2000, were $41.5 million and $30.9 million, and for 1999 were $33.9 million and $27.8 million.

The overall increase in rental expenses and real estate taxes, collectively referred to as "property operating expenses", is primarily a result of the growth in the square footage of our portfolio of office properties, as well as higher compensation costs included in rental expenses. These increases are consistent with the increases in rental revenue. 17 18 Rental revenues net of property operating expenses, referred to as "net operating income," are presented in the following table:

Interest expense increased due to the net effect of interest expense incurred from additional note offerings during the second quarter of 1999, increased borrowings under our development facility, and a slight decrease in interest capitalized in relation to the Developments we had in process during the three and nine months ended September 30, 2000, offset by lower balances on our mortgage loans. The average outstanding debt for the three and nine months ended September 30, 2000, was $2.1 billion and $2.0 billion, and the average outstanding debt for the three and nine months ended September 30, 1999, was $2.0 billion and $1.9 billion. Depreciation and amortization expense increased by $4.1 million for the three month period and $13.4 million for the nine month period ended September 30, 2000, compared with the same periods in 1999, due primarily to the 1999 Acquisitions, the 2000 Acquisitions and the Developments. General and administrative expenses increased by $1.4 million for the three month period and $3.6 million for the nine month period ended September 30, 2000, compared with the same periods in 1999, primarily as a result of increases in salaries given current wage pressures experienced on the West Coast. General and administrative expenses during 2000 have, however, remained relatively consistent with 1999 levels on a percentage of revenue basis. 18 19

The increase in income from operations before disposition of real estate and minority interests of $16.0 million for the three month period and $34.3 million for the nine month period ended September 30, 2000, is principally due to rent increases in the 1999 Core Portfolio, the 1999 Acquisitions, the 2000 Acquisitions and the Developments. During the first nine months of 2000, we recorded gains on the dispositions of three land parcels, one office property and twenty-five industrial properties totaling $98.7 million (see Note 3 to the consolidated financial statements). LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 2000, we generated $302.2 million in cash flows from operating activities. These cash flows were primarily generated by income provided by our operating properties. The cash flows from investing activities of ($181.8) million were the net effect of the cost of additions of real estate assets offset by proceeds from the disposition of assets. The cash flows from financing activities of ($96.1) million can be attributed to the payments of dividends and distributions and debt service, offset by additional borrowings. During the first nine months of 2000, net cash used by financing activities included net borrowings of approximately $40.0 million under our facility, $38.1 million under our development facility and principal payments of $12.4 million on mortgage loans. Payments of dividends and distributions increased by $7.2 million due to a 14.8% increase general and limited partner unit distributions to $2.10 per unit for the first nine months in 2000 from $1.83 per unit in 1999, as well as a higher number of units outstanding. Our principal sources of funding for acquisitions, development, expansion and renovation of the properties and for debt maturities are unsecured and secured short-term borrowings, public and privately placed equity financing, public unsecured debt financing, the issuance of partnership units, proceeds from dispositions, the assumption of secured debt on properties acquired and cash flow provided by operations. We believe that our liquidity and our ability to access capital and proceeds from disposition of non-strategic assets are adequate to continue to meet liquidity requirements for the foreseeable future. At September 30, 2000, we had no material commitments for capital expenditures related to the renewal or re-leasing of space. We believe that the cash provided by operations and our facilities provide sufficient sources of liquidity to fund capital expenditure costs associated with the renewal or re-leasing of space. As of September 30, 2000, we had $1.8 billion of investment grade rated, unsecured debt securities outstanding. The debt securities have fixed interest rates which vary from 6.65% to 8.00%, and maturity dates which range from 2000 to 2027. We are currently in compliance with all of the covenants in the unsecured note agreements. In December 2000, $100.0 million of the unsecured notes are scheduled to mature. We expect to fund this maturity either through additional note offerings, drawings on our credit facility, or proceeds from future property dispositions. We have a $250.0 million unsecured credit facility bearing interest at the London Interbank Offering Rate plus 0.80%. The facility matures in August 2001 and has a competitive bid option that allows us to request bids from the lenders for advances up to $150.0 million. At September 30, 2000, we had $103.0 million outstanding under the credit facility. We have a $100.0 million secured development facility which carries interest at the London Interbank Offering Rate plus 1.25% and matures in May 2003. At September 30, 2000, the amount drawn on the development facility was $38.1 million. 19 20 The credit facility and the development facility are subject to financial covenants concerning leverage, interest coverage and certain other ratios. We are currently in compliance with all of the covenants of the facilities. In addition to the unsecured debt securities and the facilities, we have $85.0 million of secured indebtedness, or mortgages, outstanding at September 30, 2000. The mortgages have interest rates varying from 7.00% to 9.88% and maturity dates from 2001 to 2013. The mortgages are secured by first or second deeds of trust on the related properties and generally require monthly principal and interest payments. We also have $7.4 million of assessment bonds payable as of September 30, 2000. We have the capacity pursuant to shelf registration statements to issue up to approximately $663.8 million in equity securities, and we have the capacity to issue up to $413.5 million in debt securities. FUNDS FROM OPERATIONS We consider Funds from Operations to be a useful financial measure of the operating performance of an equity REIT because, together with net income and cash flows, Funds from Operations provides investors with an additional basis to evaluate the ability of a REIT to incur and service debt, and to fund acquisitions, developments, and other capital expenditures. Funds from Operations does not represent net income or cash flows from operations as defined by generally accepted accounting principles, or GAAP, and Funds from Operations should not be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity. Funds from Operations does not measure whether cash flow is sufficient to fund all of our cash needs including principal amortization, capital improvements, and distributions to stockholders. Funds from Operations does not represent cash flows from operating, investing, or financing activities as defined by GAAP. Further, Funds from Operations as disclosed by other REITs may not be comparable to our calculation of Funds from Operations, as described below. Pursuant to the National Association of Real Estate Investment Trust's revised definition of Funds from Operations, we calculate Funds from Operations by adjusting income from operations before disposition of real estate, calculated in accordance with GAAP, for real estate related depreciation and amortization, dividends and distributions on units and shares, other equity interests that are not convertible into shares of Common Stock, and certain other non-cash items. We do not add back the depreciation of corporate items, such as computers or furniture and fixtures, or the amortization of deferred financing costs or debt discount. However, we eliminate the effect of straight-line rents, as defined under GAAP, in our Funds from Operations calculation, as management believes this presents a more meaningful picture of rental income over the reporting period. Funds from Operations per unit is calculated based on weighted average units outstanding, assuming the conversion of all shares of dilutive Series A Preferred Stock into common units, and including the dilutive effect of stock option equivalents computed using the Treasury Stock method. 20 21 STATEMENT OF FUNDS FROM OPERATIONS (amounts in thousands)

OTHER PROPERTY INFORMATION The table below outlines our top 20 tenants as a % of total net rents, as of September 30, 2000, along with square footage occupied:

(1) Our top 50 tenants represent approximately 24.3% of our total net rents and occupy approximately 7.5 million square feet. 21 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information below summarizes our market risks associated with our fixed and variable rate debt outstanding as of September 30, 2000. The following table presents debt balances outstanding and related weighted average interest rates by year of maturity.

(1) Represents 93.2% of all debt outstanding. (2) Represents 6.8% of all debt outstanding. The carrying amount of our debt approximates fair value. Our fixed and variable rate debt is described in "Management's Discussion and Analysis of Financial Condition and Results of Operations." At September 30, 2000, we had no interest rate caps or swaps. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION ENVIRONMENTAL MATTERS Compliance with laws and regulations relating to the protection of the environment, including those regarding the discharge of materials into the environment, has not had any material effect upon our financial condition or results of operations. Refer to our Annual Report on Form 10-K for the year ended December 31, 1999 for a complete discussion of environmental matters to date at our properties. As of September 30, 2000, there have been no developments on these cases with the exception of the discussion below. Site assessments undertaken by the purchaser of our Benicia Industrial Park property in Benicia, California have revealed soil and groundwater contamination on portions of the property. The source(s) and extent of contamination have not been defined and the purchaser's site assessment process is continuing. Based on the information available to us to date, we believe that potential liabilities and clean-up costs associated with this contamination, if any, will be covered by our pollution insurance policy, except to the extent of the deductible under such policy, which is immaterial to our overall financial position. Although the environmental investigations conducted to date have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets or results of operations, and we are not aware of any such liability, it is possible that these investigations did not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware. No assurances can be given that (1) future laws, ordinances, or regulations will not impose any material environmental liability, or (2) the current environmental condition of our properties has not been, or will not be affected by tenants and occupants of our properties, by the condition of properties in the vicinity of our properties, or by third parties unrelated to us. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits The exhibits listed below are filed as part of this quarterly report on Form 10-Q. 22 23 Exhibit Number 27.1 Article 5 Financial Data Schedule (EDGAR Filing Only) (B) Reports on Form 8-K None. 23 24 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 there unto duly authorized. Spieker Properties, L.P. (Registrant) Dated: November 14, 2000 /s/ Cary D. Anderson ----------------------------------- Cary D. Anderson Vice President and Principal Accounting Officer 24 25 EXHIBIT INDEX

SPIEKER PROPERTIES L P 10-Q