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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-13274
CALI REALTY CORPORATION
(Exact Name of Registrant as specified in its charter)
Maryland 22-3305147
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11 Commerce Drive, Cranford, New Jersey 07016-3599
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(Address of principal executive offices) (Zip code)
(908) 272-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of Each Class) (Name of Each Exchange on Which Registered)
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Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
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None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ X ]
As of February 28, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $1,304,410,000. The aggregate
market value was computed with references to the closing price on the New York
Stock Exchange on such date. This calculation does not reflect a determination
that persons are affiliates for any other purpose.
As of February 28, 1997, 36,671,657 shares of common stock, $.01 par
value, of the Company (the "Common Stock") were outstanding.
LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part
IV herein on page number 121.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's
definitive proxy statement to be issued in conjunction with the registrant's
annual meeting of stockholders to be held on May 15, 1997, are incorporated by
reference in Part III of this Form 10-K.
TABLE OF CONTENTS
FORM 10-K
PART I
Item 1 Business .....................................................
Item 2 Properties ....................................................
Item 3 Legal Proceedings..............................................
Item 4 Submission of Matters to a Vote of
Security Holders................................................
PART II
Item 5 Market for Registrant's Common Stock
and Related Stockholder Matters ................................
Item 6 Selected Financial Data........................................
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of
Operations .....................................................
Item 8 Financial Statements and Supplementary
Data ...........................................................
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............................................
PART III
Item 10 Directors and Executive Officers of
the Registrant ................................................
Item 11 Executive Compensation........................................
Item 12 Security Ownership of Certain
Beneficial Owners and Management...............................
Item 13 Certain Relationships and Related
Transactions ..................................................
PART IV
Item 14 Exhibits, Financial Statements, Schedules
and Reports on Form 8-K........................................
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PART I
ITEM I. BUSINESS
GENERAL
Cali Realty Corporation (together with its subsidiaries, the "Company") is a
fully-integrated real estate investment trust ("REIT") that owns and operates a
portfolio comprised primarily of Class A office and office/flex properties, as
well as commercial real estate leasing, management, acquisition, development and
construction businesses. At December 31, 1996, the Company owned 100 percent of
56 properties, consisting of 37 office properties (the "Year-End Office
Properties") and 19 office/flex properties (the "Year-End Office/Flex
Properties"), encompassing an aggregate of approximately 7.1 million square
feet, as well as one multi-family residential property (collectively, the
"Year-End Properties"). On January 31, 1997, the Company acquired substantially
all of the assets, consisting primarily of 65 properties (the "RM Properties")
of the Robert Martin Company, LLC and affiliates ("RM"), for approximately
$450.0 million. As of February 28, 1997, following the acquisition of RM (the
"RM Acquisition"), the Company owned 100 percent of 123 properties encompassing
approximately 11.4 million square feet (collectively the "Properties"). See
"Business -- Recent Developments." The Properties are comprised of 54 office
properties containing an aggregate of approximately 8.0 million square feet (the
"Office Properties"), 57 office/flex properties containing an aggregate of
approximately 3.0 million square feet (the "Office/Flex Properties"), six
industrial/warehouse properties containing an aggregate of approximately 400,000
square feet (the "Industrial/Warehouse Properties"), two multi-family
residential properties, two stand-alone retail properties, two land leases, and
land for the development of seven million square feet of office space. As of
December 31, 1996, the Year-End Office Properties and the Year-End Office/Flex
Properties, in the aggregate, were approximately 96.4 percent leased to
approximately 550 tenants. As of February 28, 1997, the Office Properties and
Office/Flex Properties, in the aggregate, were approximately 96.0 percent leased
to approximately 1,100 tenants. The Company believes that its Properties have
excellent locations and access and are well-maintained and professionally
managed. As a result, the Company believes that its Properties attract high
quality tenants and achieve among the highest rent, occupancy and tenant
retention rates within their markets.
The Company's strategy has been to focus its development and ownership of office
properties in sub-markets where it is, or can become, a significant and
preferred owner and operator. The Company will continue this strategy by
expanding, primarily through acquisitions, initially into sub-markets where it
has, or can achieve, similar status. Consistent with its growth strategy, during
1996, the Company acquired 15 office properties for an aggregate acquisition
cost of approximately $459.4 million, including the acquisition on November 4,
1996 of the 1.9 million square foot Harborside Financial Center in Jersey City,
Hudson County, New Jersey for approximately $292.7 million (the "Harborside
Acquisition"). Additionally, in January 1997 the Company completed the RM
Acquisition. See "Business -- Recent Developments." Management believes that the
recent trend towards increasing rental and occupancy rates in office buildings
in the Company's sub-markets continues to present significant opportunities for
growth. The Company may also develop properties in such sub- markets,
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particularly with a view towards potential utlitization of certain vacant land
recently acquired or on which the Company holds options. Management believes
that its extensive market knowledge provides the Company with a significant
competitive advantage which is further enhanced by its strong reputation for and
emphasis on delivering highly responsive management services, including direct
and continued access to the Company's senior management. See "Business -- Growth
Strategies."
The Company's ten largest office and office/flex tenants in the Year-End Office
Properties, based on actual December 1996 rent billings, are Donaldson, Lufkin &
Jenrette Securities Corp. ("DLJ"), Dow Jones Telerate Holdings, Inc., the
American Institute of Certified Public Accountants, NTT Data Communications
Corporation ("NTT"), Dean Witter Trust Company, Bank of Tokyo Information
Services Inc., Bankers Trust Harborside Inc., The United States Life Insurance
Company in New York City, SAP America, Inc. and Lonza, Inc. The average age of
the Year-End Office Properties and the Year-End Office/flex Properties is
approximately 10 years and 6 years, respectively.
Cali Associates, the entity to whose business the Company succeeded in 1994, was
founded by John J. Cali, Angelo R. Cali and Edward Leshowitz (the "Founders"),
who have been involved in the development, leasing, management, operation and
disposition of commercial and residential properties in Northern and Central New
Jersey for over 40 years and have been primarily focusing on office buildings
for the past fifteen years. In addition to the Founders, the Company's executive
officers at December 31, 1996 have been employed by the Company and its
predecessor for an average of approximately 10 years. The Company and its
predecessor have built approximately four million square feet of office space,
more than one million square feet of industrial facilities and over 5,500
residential units. As of February 28, 1997, officers and directors of the
Company and other former owners of interests in certain of the Properties (many
of whom are employees of the Company) owned approximately 10.0 percent of the
Company's outstanding shares of Common Stock (including Units redeemable for
shares of Common Stock). As used herein, the term "Units" refers to limited
partnership interests in Cali Realty, L.P. a Delaware limited partnership (the
"Operating Partnership" through which the Company conducts its real estate
activities.
The Company performs substantially all construction, leasing, management and
tenant improvements on an "in-house" basis and is self-administered and
self-managed.
The Company was incorporated on May 24, 1994. The Company's executive offices
are located at 11 Commerce Drive, Cranford, New Jersey 07016, and its telephone
number is (908) 272-8000. The Company has an internet Web address at
"http://www.calirealty.com".
GROWTH STRATEGIES
The Company's objectives are to maximize growth in Funds from Operations (as
defined in Item 6 below) and to enhance the value of its portfolio through
effective management, acquisition and development strategies. The Company
believes that opportunities exist to increase cash flow per share by: (i)
implementing operating strategies to produce increased effective rental and
occupancy rates and decreased concession and tenant installation costs as
vacancy rates in the Company's sub-markets continue to decline; (ii) acquiring
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properties with attractive returns in sub-markets where, based on its expertise
in leasing, managing and operating properties, it is, or can become, a
significant and preferred owner and operator; and (iii) developing properties
where such development will result in a favorable risk-adjusted return on
investment.
Based on its evaluation of current market conditions, the Company believes that
a number of factors will enable it to achieve its business objectives,
including: (i) the limited availability to competitors of capital for financing
development, acquisitions or capital improvements or for refinancing maturing
mortgages; (ii) the lack of new construction in the Company's markets providing
the Company with the opportunity to maximize occupancy levels at attractive
rental rates; and (iii) the large number of distressed sellers and inadvertent
owners (through foreclosure or otherwise) of properties in the Company's markets
creating enhanced acquisition opportunities. Management believes that the
Company is well positioned to exploit existing opportunities because of its
extensive experience in its markets and its proven ability to acquire, develop,
lease and efficiently manage properties.
The Company will focus on enhancing growth in cash flow per share by: (i)
maximizing cash flow from its existing properties through continued active
leasing and property management; (ii) managing operating expenses through the
use of in-house management, leasing, marketing, financing, accounting, legal,
construction management and data processing functions; (iii) emphasizing
programs of repairs and capital improvements to enhance the Properties'
competitive advantages in their markets; (iv) maintaining and developing
long-term relationships with a diverse tenant group; and (v) attracting and
retaining motivated employees by providing financial and other incentives to
meet the Company's operating and financial goals.
The Company will also seek to increase its cash flow per share by acquiring
additional properties that: (i) provide attractive initial yields with
significant potential for growth in cash flow from property operations; (ii) are
well located, of high quality and competitive in their respective sub-markets;
(iii) are located in its existing sub-markets or in sub-markets which lack a
significant owner or operator; and (iv) have been under-managed or are otherwise
capable of improved performance through intensive management and leasing that
will result in increased occupancy and rental revenues.
Consistent with its acquisition strategy, from January 1, 1996 through February
28, 1997, the Company has invested an aggregate of approximately $916.2 million
in the Harborside Acquisition, the RM Acquisition and the acquisition of 13
other office and office/flex properties (the "Individual Property
Acquisitions"), thereby increasing its portfolio by approximately 189 percent
(based upon total net rentable square feet). See "Business -- Recent
Developments." There can be no assurance, however, that the Company will be able
to improve the operating performance of any properties that are acquired.
The Company may also develop office, office/flex space, or certain vacant land
acquired in connection with various acquisitions or on which the Company holds
options, when market conditions support a favorable risk-adjusted return on such
development, primarily in stable submarkets where the demand for such space
exceeds available supply and where the Company is, or can become, a significant
owner and operator. The Company believes that opportunities exist for it to
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acquire properties in its sub-markets at less than replacement cost. Therefore,
the Company currently intends to emphasize its acquisition strategies over its
development strategies until market conditions change. To the extent that the
costs associated with implementing such acquisition and development strategies
are financed using the Company's cash flow, such costs may adversely affect the
Company's ability to make distributions.
The Company intends to maintain a ratio of debt to total market capitalization
(total debt of the Company as a percentage of the market value of issued and
outstanding shares of Common Stock, including interests redeemable therefor,
plus total debt) of approximately 50 percent or less, although the Company's
organizational documents do not limit the amount of indebtedness that the
Company may incur. As of December 31, 1996, the Company's total debt constituted
approximately 18.2 percent of the total capitalization of the Company, and as of
February 28, 1997, the Company's total debt constituted approximately 27.4
percent of the total capitalization of the Company. The Company will utilize the
most appropriate sources of capital for future acquisitions, development and
capital improvements, which may include undistributed funds from operations,
borrowings under its revolving credit facilities, issuances of equity securities
and/or other borrowings.
EMPLOYEES
As of December 31, 1996, the Company had 107 employees. As of February 28, 1997,
the Company had 186 employees.
COMPETITION
The leasing of real estate is highly competitive. The Company's Properties
compete for tenants with similar properties located in its markets primarily on
the basis of location, rent charged, services provided, and the design and
condition of the improvements. The Company also experiences competition when
attempting to acquire equity interests in desirable real estate, including
competition from domestic and foreign financial institutions, other REIT's, life
insurance companies, pension trusts, trust funds, partnerships and individual
investors.
REGULATIONS
Many laws and governmental regulations are applicable to the Properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
Under various laws and regulations relating to the protection of the
environment, an owner of real estate may be held liable for the costs of removal
or remediation of certain hazardous or toxic substances located on or in the
property. These laws often impose liability without regard to whether the owner
was responsible for, or even knew of, the presence of such substances. The
presence of such substances may adversely affect the owner's ability to rent or
sell the property or to borrow using such property as collateral and may expose
it to liability resulting from any release of, or exposure to, such substances.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances at another location may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws impose liability for release of asbestos-containing materials into the air,
Page 6
and third parties may also seek recovery from owners or operators of real
properties for personal injury associated with asbestos- containing materials
and other hazardous or toxic substances. In connection with the ownership
(direct or indirect), operation, management and development of real properties,
the Company may be considered an owner or operator of such properties or as
having arranged for the disposal or treatment of hazardous or toxic substances
and, therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental penalties and injuries to
persons and property.
The Company obtained Phase I Assessments of each of its original properties (the
"Original Properties") at the time of its initial public offering in August 1994
(the "IPO"). With the acquisition of each new property, the Company obtains a
new Phase I Assessment for such property. These Phase I Assessments have not
revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets or results of
operations taken as a whole, nor is the Company aware of any such material
environmental liability. However, four of the Office Properties are located on
or adjacent to a former municipal landfill (closed in the 1950s) that was
redeveloped with the participation of the State of New Jersey Economic
Development Authority. The Company obtained all necessary landfill disruption
permits to build the projects (other than such permits the absence of which
would not be expected to have a material adverse effect on the Company's
business, assets or results of operations taken as a whole) and state
environmental authorities approved the work. Although there can be no assurance,
the Company believes that there will be no further requirements with respect to
the former landfill at these Properties. Nevertheless, it is possible that the
Company's assessments do not reveal all environmental liabilities and that there
are material environmental liabilities of which the Company is unaware.
In connection with the RM Acquisition, the Company's environmental consultant
undertook environmental audits of the properties, including sampling activities,
which identified certain environmental conditions at several of the properties
(the "Designated Properties") that will likely require further investigation
and/or remedial activities. RM retained the liability and responsibility for
remediation of the environmental conditions of the Designated Properties, and
has established an escrow in the amount of $1.5 million (the "Environmental
Escrow") as a clean-up fund. Any remediation costs for the Designated Properties
exceeding the Environmental Escrow will remain the responsibility of the
principals of RM. See "Business -- Recent Developments -- RM Acquisition."
There can be no assurance that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current
environmental condition of the Properties will not be affected by tenants, by
the condition of land or operations in the vicinity of the Properties (such as
the presence of underground storage tanks), or by third parties unrelated to the
Company. If compliance with the various laws and regulations, now existing or
hereafter adopted, exceeds the Company's budgets for such items, the Company's
ability to make expected distributions to stockholders could be adversely
affected.
There are no other laws or regulations which have a material effect on the
Company's operations, other than typical federal, state and local laws affecting
the development and operation of real property, such as zoning laws.
Page 7
INDUSTRY SEGMENTS
The Company operates in only one industry segment. The Company does not have any
foreign operations and its business is not seasonal.
RECENT DEVELOPMENTS
From January 1, 1996 through February 28, 1997, the Company completed the
Harborside Acquisition, the RM Acquisition and the Individual Property
Acquisitions and has improved the operating performance of its existing
portfolio by maintaining high occupancies and controlling costs. The Company's
Funds from Operations (after adjustment for the straight-lining of rents) for
the year ended December 31, 1996 was $45.2 million. As a result of the Company's
improved operating performance, in September 1996 the Company announced a 5.9
percent increase in its regular quarterly distribution, commencing with the
Company's distribution with respect to the third quarter of 1996, from $.425 per
share of Common Stock ($1.70 per share of Common Stock on an annualized basis)
to $.45 per share of Common Stock ($1.80 per share of Common Stock on an
annualized basis). Since the IPO, the Company has increased its regular
quarterly distribution by 11.4 percent.
From January 1, 1996 through February 28, 1997, the Company invested
approximately $916.2 million in the Harborside Acquisition, the RM Acquisition
and the Individual Property Acquisitions, increasing its portfolio by 189
percent (based upon total net rentable square feet). The cash portions of the
acquisition costs for such acquisitions (as more fully described below) were
obtained by the Company from (i) the net proceeds of the Company's two 1996
public offerings of Common Stock in August and November 1996 for net proceeds of
approximately $76.8 million and $441.2 million, respectively, (ii) borrowings
under the Company's credit facilities (see Item 2 below), and (iii) available
working capital. In addition, a significant portion of the acquisition costs for
the RM Acquisition and the Harborside Acquisition included the assumption or
incurrence of permanent indebtedness. See "Business -- Financing Activities
- --Permanent Indebtedness." Set forth below are summary descriptions of the RM
Acquisition, the Harborside Acquisition and the Individual Property
Acquisitions:
RM Acquisition.
On January 31, 1997, the Company acquired the RM Properties for a total cost of
approximately $450.0 million. The RM Properties consist of 16 office properties
(the "RM Office Properties"), 38 office/flex properties (the "RM Office/Flex
Properties"), six industrial/warehouse properties, two stand-alone retail
properties, two land leases, and a multi-family residential property. The RM
Acquisition was financed through the assumption of a $185.3 million mortgage,
approximately $220.0 million in cash, substantially all of which was obtained
from the Company's cash reserves, and the issuance of 1,401,225 Units.
In connection with the RM Acquisition, the Company assumed a $185.3 million
non-recourse mortgage held by Teachers Insurance and Annuity Association of
America, with interest only payable monthly at a fixed annual rate of 7.18
percent (the "TIAA Mortgage"). The TIAA Mortgage is secured and
cross-collateralized by 43 of the RM Properties and matures on December 31,
2003. The Company, at its option, may convert the TIAA Mortgage to unsecured
debt upon achievement by the Company of an investment credit rating of Baa3/BBB-
or better. The TIAA Mortgage is prepayable in whole or in part subject to
certain provisions, including yield maintenance.
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The RM Properties, which consist primarily of 54 office and office/flex
properties aggregating approximately 3.7 million square feet and six
industrial/warehouse properties aggregating approximately 400,000 square feet,
are located primarily in established business parks in Westchester County, New
York and Fairfield County, Connecticut. The Company has agreed not to sell
certain of the RM Properties for a period of seven years without the consent of
the RM principals, except for sales made under certain circumstance and/or
conditions.
In connection with the RM Acquisition, the Company was granted a three-year
option to acquire a 115,000 square foot office property and an 84,000 square
foot office/flex property (the "Option Properties") for an aggregate minimum
purchase price of $19.0 million and has granted RM the right to put such
properties to the Company between an aggregate purchase price of $11.6 to $21.3
million, under certain conditions. The purchase prices are subject to adjustment
based on different formulas and are payable in cash or Units.
In addition, the Company provided an $11.6 million non-recourse mortgage loan
("Mortgage Receivable") to entities controlled by the RM principals, bearing
interest at an annual rate of 450 basis points over the one-month London
Inter-bank Offered Rate (LIBOR). The Mortgage Receivable, which is secured by
the Option Properties and guaranteed by certain of the RM principals, matures on
February 1, 2000. In addition, the Company received a three percent origination
fee in connection with the Mortgage Receivable.
RM has made certain customary representations and warranties to the Company,
most of which survive the closing for a period of one year. RM has agreed to
maintain a minimum net worth of $25.0 million during such period.
As part of the RM Acquisition, Brad W. Berger, President and Chief Executive
Officer of RM, and Timothy M. Jones, Chief Operating Officer of RM, joined the
Company as Executive Vice-Presidents under three year employment agreements.
Berger and Jones were each issued warrants to purchase 170,000 shares of the
Company's Common Stock at a stock price of $33 per share, which vest equally
over a three-year period and expire on January 31, 2007.
Robert F. Weinberg, co-founder of RM, and Berger will serve on the Company's
Board of Directors for an initial term of three years. The Company will also
appoint two additional independent Board members, thereby increasing the size of
the Board from nine to thirteen members.
Harborside Acquisition.
On November 4, 1996, the Company acquired Harborside Financial Center
("Harborside"), a 1.9 million square foot office complex located in Jersey City,
Hudson County, New Jersey for an acquisition cost of approximately $292.7
million. The Harborside Acquisition, which is located on the Hudson River
waterfront directly across from downtown Manhattan, increased the Company's
total office and office/flex portfolio as of the acquisition date by
approximately 44 percent. The acquisition cost included the assumption of
existing and seller-provided financing aggregating approximately $150.0 million.
See "Business --Financing Activities -- Permanent Indebtedness." The balance of
the acquisition cost, totaling approximately $142.7 million, was paid primarily
in cash and was financed substantially through drawings from the Company's
existing credit facilities (including the $80.0 million PCS Credit Facility, as
defined below). See "The Company -- Financing Activities -- Credit Facilities."
Harborside is located in the Exchange Place/Newport submarket of Jersey City,
adjacent to the Exchange Place Port Authority Trans-Hudson ("PATH") train
station. As of December 31, 1996, the property was approximately 97.1 percent
leased. Harborside's largest tenant is Bankers Trust Harborside, Inc., which
leases 385,000 square feet of space. Other major tenants include Dow Jones
Telerate Holdings, Inc., the American Institute of Certified Public Accountants
(AICPA), Dean Witter Trust Company and Bank of Tokyo.
As part of the Harborside Acquisition, the Company also acquired 11.3 acres of
land fully zoned and permitted for an additional 4.1 million square feet of
development and the water rights associated with 27.4 acres of land extending
into the Hudson River immediately east of Harborside, including two piers with
an area of 5.8 acres. The terms of the acquisition of the vacant parcels at
Harborside provide for payments (with an estimated net present value at the date
of acquisition of approximately $5.3 million) to be made to the seller for
development rights if and when the Company commences construction on the site
during the next several years. However, the agreement provides, among other
things, that even if the Company does not commence construction, the seller may
nevertheless require the Company to acquire these rights during the six-month
period after the end of the sixth year. After such period, the seller's option
lapses, but any development on years 7 through 30 will require a payment, on an
increasing scale, for the development rights.
Individual Property Acquisitions.
In addition to the RM Acquisition and the Harborside Acquisition, from January
1, 1996 through February 28, 1997, the Company has invested approximately $173.5
million in the acquisition of 13 office and office/flex properties.
On March 20, 1996, the Company sold its office building located at 15 Essex Road
in Paramus, Essex County, New Jersey ("Essex Road") and concurrently acquired a
96,000 square foot office building at 103 Carnegie Center in Princeton, Mercer
County, New Jersey (the "Princeton Property") with the net proceeds from the
sale of Essex Road of approximately $10.3 million. The concurrent transactions
qualified as a tax-free exchange, as the Company used substantially all of the
proceeds from the sale of Essex Road on March 12, 1996 to acquire the Princeton
Property.
On May 2, 1996, the Company acquired Rose Tree Corporate Center, a two-building
suburban office complex totaling approximately 260,000 square feet, located in
Media, Delaware County, Pennsylvania. The complex was acquired for approximately
$28.1 million, which was drawn from one of the Company's credit facilities.
On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two suburban
office buildings totaling approximately 115,000 square feet, located in Basking
Ridge, Somerset County, New Jersey. The buildings were acquired for
approximately $10.5 million, which was drawn from one of the Company's credit
facilities.
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On November 7, 1996, the Company acquired Five Sentry Parkway East & West ("Five
Sentry"), a two-building office complex comprised of approximately 130,000
square feet located in Plymouth Meeting, Montgomery County, Pennsylvania, for
approximately $12.5 million in cash, which was drawn from one of the Company's
credit facilities. Such borrowing was subsequently repaid from the net proceeds
received from the Company's public common stock offering of 17,537,500 shares
(the "November 1996 Offering") which was completed on November 22, 1996. See
"Business - Financing Activities - Equity Offerings."
On December 10, 1996, the Company acquired 300 Tice Boulevard ("Whiteweld"), a
230,000 square foot office building located in Woodcliff Lake, Bergen County,
New Jersey, for approximately $35.1 million in cash, made available from the net
proceeds received from the November 1996 Offering.
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 square
foot office building located in Fort Lee, Bergen County, New Jersey, for
approximately $26.9 million in cash, made available from the net proceeds
received from the November 1996 Offering.
On December 17, 1996, the Company acquired the International Court at Airport
Business Center ("Airport Center"), a three-building office complex comprised of
approximately 371,000 square feet located in Lester, Delaware County,
Pennsylvania for approximately $43.2 million in cash, made available from the
net proceeds received from the November 1996 Offering.
On January 28, 1997, the Company acquired 1345 Campus Parkway, a 76,000 square
foot office/flex property, located in Wall Township, Monmouth County, New Jersey
for approximately $6.8 million in cash, made available from the net proceeds
received from the November 1996 Offering. The property is located in the same
office park in which the Company previously acquired two office properties and
four office/flex properties in November 1995.
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Other Recent Developments.
During the second quarter of 1996, the Company completed its construction of
tenant improvements to 400 Alexander Park, a three story, 70,550 net rentable
square foot office building located in Princeton, Mercer County, New Jersey,
which the Company acquired in December 1995 and leased in its entirety to
Berlitz International Inc. ("Berlitz"). Also during the second quarter of 1996,
the Company entered into a lease agreement with Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") for an additional 73,200 square feet of office
space located at 95 Christopher Columbus Drive in Jersey City, increasing DLJ's
occupancy to approximately 66 percent of the property.
In December 1996, the Company completed the construction of two office/flex
properties on vacant land purchased in the Company's Totowa, Passaic County, New
Jersey office park acquired in November 1995. The two properties, which were 19
percent occupied at December 31, 1996, aggregated 47,100 square feet, and were
completed for a total cost of $2.7 million.
FINANCING ACTIVITIES
The Company utilizes the most appropriate sources of capital for acquisitions,
development, joint ventures and capital improvements, which sources may include
undistributed Funds from Operations, borrowings under its revolving credit
facilities, issuances of debt or equity securities and/or bank and other
institutional borrowings.
Credit Facilities.
After the consummation of the IPO, the Company obtained a $70.0 million
revolving credit facility (the "First Prudential Facility") from Prudential
Securities Credit Corp. ("PSC"), secured by a pledge of $74.5 million commercial
mortgage pay-through bonds held by the Company. The facility may be used to fund
acquisitions and new development projects and for general working capital
purposes, including capital expenditures and tenant improvements. The First
Prudential Facility bore interest at a floating rate equal to 150 basis points
over one-month LIBOR for January 1, 1996 through August 31, 1996. Effective
September 1, 1996, the interest rate was reduced to a floating rate equal to 125
basis points over one-month LIBOR. The First Prudential Facility is a recourse
liability of the Operating Partnership and is secured by a pledge of the $74.5
million commercial montage pay-through bonds held by the Company, which bonds
are, in turn, secured by underlying indebtedness incurred by certain of the
Company's subsidiaries. See "-- Permanent Indebtedness". The First Prudential
Facility requires monthly payments of interest only, with outstanding advances
and any accrued but unpaid interest due November 30, 1997 and is subject to
renewal at the lender's sole discretion. At December 31, 1996, $6.0 million was
outstanding under the First Prudential Facility. At February 28, 1997, $6.0
million remained outstanding under the First Prudential Facility.
On February 1, 1996, the Company obtained a credit facility (the "Bank
Facility") secured by certain of its properties in the amount of $75.0 million
from two participating banks. The Bank Facility has a three-year term and bears
interest at 150 basis points over one-month LIBOR. The terms of the Bank
Facility include certain restrictions and covenants which limit, among other
things, dividend payments and additional indebtedness and which require
compliance with specified financial ratios and other financial measurements. The
Bank Facility also requires a fee equal to one quarter of one percent of the
unused balance payable quarterly in arrears. At December 31, 1996, approximately
$23.8 million was outstanding under the Bank Facility. At February 28, 1997,
approximately $62.0 million was outstanding under the Bank Facility.
Page 11
On November 4, 1996, the Company obtained a credit facility (the "Second
Prudential Facility") from PSC totaling $80.0 million which bears interest at
125 basis points over one-month LIBOR, and matures on January 15, 1998, unless
the Company or PSC elects to extend the maturity date to not earlier than June
30, 1998, or the facility is refinanced prior to such date at the election of
either the Company or PSC. The Second Prudential Facility is a recourse
liability of the Operating Partnership and is secured by the Company's equity
interest in Harborside. The terms of the Second Prudential Facility include
certain restrictions and covenants that limit, among other things, dividend
payments and additional indebtedness and that require compliance with specified
financial ratios and other financial measurements. At December 31, 1996 and at
February 28, 1997, the Company did not have any outstanding borrowings under the
Second Prudential Facility.
Permanent Indebtedness.
As of December 31, 1996, the Company had outstanding an aggregate balance of
approximately $232.9 million of long-term mortgage indebtedness, and as of
February 28, 1997, the Company had outstanding an aggregate balance of
approximately $418.1 million of long-term mortgage indebtedness (excluding
borrowings under the Company's credit facilities).
Concurrent with the IPO, the Company's initial operating subsidiaries, which own
the Original Properties, issued five-year mortgage notes with an aggregate
principal balance of $144.5 million, secured and cross-collateralized by the
Original Properties, to an affiliate ("PSI") of Prudential Securities Inc. PSI
then issued commercial mortgage pay-through bonds ("Bonds") collateralized by
the mortgage notes. Bonds with an aggregate principal balance of $70.0 million
were purchased by unrelated third parties. Bonds with an aggregate principal
balance of $74.5 million were purchased by the Company. As a result, the
Company's initial mortgage financing was $70.0 (the "Mortgage Financing").
Approximately $38.0 million of the Mortgage Financing is guaranteed under
certain conditions by certain partners of the partnerships which owned the
Original Properties. The Mortgage Financing requires monthly payments of
interest only, with all principal and any accrued but unpaid interest due in
August 1999. $46.0 million of the Mortgage Financing bears interest at a net
cost to the Company equal to a fixed rate of 8.02 percent per annum and the
remaining $24.0 million bears interest at a net cost to the Company equal to a
floating rate of 100 basis points over one-month LIBOR (5.53 percent at December
31, 1996) with a lifetime interest rate cap of 11.6 percent. Pursuant to the
terms of the Mortgage Financing, the Company is required to escrow approximately
$143,000 per month for tenant improvements and leasing commissions and $53,000
per month for capital improvements. In advance of the sale of Essex Road, on
March 12, 1996, the Company prepaid approximately $5.5 million ($1.7
million-fixed rate, $3.8 million-floating rate debt) of the Mortgage Financing,
resulting in outstanding balances of $44.3 million for the 8.02 percent fixed
rate debt and $20.2 million for the floating rate debt. See "Business -- Recent
Development -- Individual Property Acquisitions."
In connection with the acquisition of an office building in Fair Lawn, Bergen
County, New Jersey on March 3, 1995, the Company assumed an $18.8 million
non-recourse mortgage loan ("Fair Lawn Mortgage") bearing interest at a fixed
rate of 8.25 percent per annum. The loan requires payment of interest only
through March 15, 1996 and payment of principal and interest thereafter, on a
20-year amortization schedule, with the remaining principal balance due October
1, 2003. At December 31, 1996, the principal balance for the Fair Lawn Mortgage
was approximately $18.4 million, and at February 28, 1997, the balance was
approximately $18.3 million.
Page 12
In connection with the Harborside Acquisition, on November 4, 1996, the Company
assumed existing mortgage debt and was provided with mortgage debt by the seller
aggregating $150.0 million. See "Business -- Recent Developments -- Harborside
Acquisition." The existing financing of approximately $107.5 million bears
interest at a fixed rate of 7.32 percent for a term of approximately nine years.
The seller-provided financing of approximately $42.5 million also has a term of
nine years and initially bears interest at a rate of 6.99 percent. The interest
rate on the seller-provided financing will be reset at the end of the third and
sixth loan years based on the yield of the three-year Treasury obligation at
that time, with spreads of 110 basis points in years four through six and 130
basis points in years seven through maturity.
In connection with the RM Acquisition on January 31, 1997, the Company assumed a
$185.3 million non-recourse mortgage loan with Teachers Insurance and Annuity
Association of America, with interest only payable monthly at a fixed annual
rate of 7.18 percent. The TIAA Mortgage is secured and cross-collateralized by
43 of the RM Properties and matures on December 31, 2003. The Company, at its
option, may convert the TIAA Mortgage to unsecured public debt upon achievement
by the Company of an investment credit rating of Baa3/BBB- or better. The TIAA
Mortgage is prepayable in whole or in part subject to certain provisions,
including yield maintenance
Interest Rate Swap Agreements.
On May 24, 1995, the Company entered into an interest rate swap agreement with a
commercial bank. The swap agreement fixes the Company's one-month LIBOR base to
a fixed 6.285 percent per annum on a notional amount of $24.0 million through
August 1999. On January 23, 1996, the Company entered into another interest rate
swap agreement with one of the participating banks in the Bank Facility. The
swap agreement has a three-year term and a notional amount of $26.0, which fixes
the Company's one-month LIBOR base to 5.265 percent on its floating rate credit
facilities. The Company is exposed to credit loss in the event of
non-performance by the other parties to the interest rate swap agreements.
However, the Company does not anticipate non-performance by either counterparty.
Equity Offerings and Shelf Registrations.
On May 13, 1996, the stockholders approved an increase in the number of
authorized shares of Common Stock of the Company from 25 million to 95 million.
On July 29, 1996, the Company filed a shelf registration statement (File No.
333- 09081) with the Securities and Exchange Commission ("SEC") for an aggregate
amount of $500.0 million in equity securities of the Company. The registration
statement was declared effective by the SEC on August 2, 1996.
On August 13, 1996, the Company sold 3,450,000 shares of its Common Stock
through a public stock offering (the "August 1996 Offering"), which included an
exercise of the underwriters over-allotment option of 450,000 shares. Net
proceeds from the August 1996 Offering (after offering costs) were approximately
$76.8 million. The offering was conducted using one underwriter and the shares
were issued from the Company's $250.0 million shelf registration statement (File
No. 33-96538).
Page 13
On November 22, 1996, the Company completed an underwritten public offer and
sale of 17,537,500 shares of its Common Stock using several different
underwriters to underwrite such public offer and sale (which included an
exercise of the underwriters' over-allotment option of 2,287,500 shares). The
shares were issued from the Company's $500.0 million shelf registration
statement (File No. 333- 09081). The Company received approximately $441.2
million in net proceeds (after offering costs) from the November 1996 Offering,
and used such funds to acquire certain of the Company's property acquisitions in
November and December, pay down outstanding borrowings on its revolving credit
facilities, and invested the excess funds in Overnight Investments.
On December 31, 1996, the Company filed a shelf registration statement (File No.
333-19101) with the SEC for an aggregate amount of $1.0 billion in equity
securities of the Company. The registration statement was declared effective by
the SEC on January 7, 1997. The Company has not issued any securities under this
shelf registration.
ITEM 2. PROPERTIES
GENERAL
As of December 31, 1996, the Company owned 100 percent of 57 Properties ranging
from one to nineteen stories, including a multi-family residential property. As
of February 28, 1997, the Company owned 100 percent of 123 properties ranging
from one to nineteen stories, including two stand-alone retail properties, two
land leases and two multi-family residential properties. All of the Properties
are strategically located in a contiguous area from Philadelphia, Pennsylvania
to Stamford, Connecticut. The Properties are easily accessible from major
thoroughfares and are in close proximity to numerous amenities. The Properties
contain a total of approximately 11.4 million square feet, with the individual
Office Properties ranging from approximately 23,350 to 761,200 square feet, the
individual Office/Flex Properties ranging from 13,275 to 76,298 square feet and
the individual Industrial/Warehouse Properties ranging from 6,638 to 195,741
square feet.
The Properties, each managed by on-site employees, generally have attractively
landscaped sites, atriums and covered parking in addition to quality design and
construction. As of February 28, 1997, the Office Properties, Office/Flex
Properties and Industrial/Warehouse Properties were approximately 96 percent
leased to approximately 1,100 tenants. The Company's tenants include many
service sector employers, including a large number of professional firms and
national and international businesses. The Company believes that all of its
Properties are well-maintained and do not require significant capital
improvements.
The following property information is provided separately for the Year-End
Properties and the RM Properties. It should be noted that as the RM Properties
were acquired on January 31, 1997, certain information provided for the RM
Properties may not be indicative of the results that will occur following the
Company's acquisition of such properties.
Page 14
Year-End Properties: Property Tables
The following tables set forth certain historical information relating to each
of the Year-End Office Properties and the Year-End Office/Flex Properties, which
are owned 100 percent by the Company as of December 31, 1996:
Page 15
Percentage
Of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
Year-End Office Properties
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive ......... 1973 56,000 100.0 941 814 1.27
11 Commerce Drive (6)..... 1981 90,000 95.8 1,219 1,099 1.64
20 Commerce Drive ........ 1990 176,600 100.0 3,677 2,936 4.95
65 Jackson Drive ......... 1984 82,778 86.4 953 895 1.28
CLARK, UNION COUNTY, NJ
100 Walnut Avenue ......... 1985 182,555 94.2 3,679 3,341 4.95
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive........... 1989 621,900 100.0 12,123 11,031 16.33
Harborside Financial Center(8)
Christopher Columbus Drive
Exchange Place & the
Hudson River
Plaza I ............... 1983(9) 400,000 100.0 516 516 0.69
Plaza II .............. 1990(9) 761,200 95.8 2,134 2,134 2.87
Plaza III ............. 1990(9) 725,600 97.0 2,391 2,391 3.22
Parking Agreement (10). N/A N/A 100.0 538 538 0.72
ROSELAND, ESSEX COUNTY, NJ
101 Eisenhower Parkway..... 1980 237,000 93.1 3,685 3,339 4.96
103 Eisenhower Parkway..... 1985 151,545 97.5 3,187 3,057 4.29
Page 16
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
Year-End Office Properties
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive ......... 16.80 14.54 Public Service Electric & Gas
Co. (18%), Excel Scientific
Protocols, Inc. (18%), Columbia
National, Inc. (13%)
11 Commerce Drive (6)..... 14.14 12.75 Public Service Electric & Gas Co.
(23%), Northeast
Administrators (23%)
20 Commerce Drive ........ 20.82 16.63 Public Service Electric & Gas Co.
(25%), Paychex, Inc. (12%)
65 Jackson Drive ......... 13.32 12.51 Kraft General Foods, Inc. (35%),
Allstate Insurance Co. (27%),
The Procter & Gamble Distribution
Co. Inc. (17%)
CLARK, UNION COUNTY, NJ
100 Walnut Avenue ......... 21.39 19.43 BDSI, Inc. (39%), The Equitable
Life Assurance Society of the
United States (15%)
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive........... 19.49 17.74 Donaldson, Lufkin & Jenrette
Securities Corp. (67%), NTT
Data Corp. (25%)
Harborside Financial Center(8)
Christopher Columbus Drive
Exchange Place & the
Hudson River
Plaza I ............... 1.29 1.29 Bankers Trust Harborside,Inc.(96%)
Plaza II .............. 2.93 2.93 Dow Jones Telerate Holdings, Inc. (44%),
Dean Witter Trust Co. (24%)
Plaza III ............. 3.40 3.40 American Institute of Certified
Public Accountants (34%), Bank of
Tokyo Information
Services, Inc. (19%)
Parking Agreement (10). N/A N/A Kinney Hackensack, Inc. (100%)
ROSELAND, ESSEX COUNTY, NJ
101 Eisenhower Parkway..... 16.70 15.13 Arthur Andersen LLP (29%),
Brach, Eichler, Rosenberg,
Silver, Bernstein & Hammer (13%)
103 Eisenhower Parkway..... 21.57 20.69 Ravin, Sarasohn, Cook, Baumgarten (18%), Lum,
Hoenes, Able (17%), Chelsea-GCA (15%)
Page 17
Percentage
Of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
Year-End Office Properties(cont.)
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard ......... 1984 235,000 99.0 4,611 3,954 6.21
300 Tice Boulevard (8)........ 1991 230,000 100.0 245 245 0.33
PARAMUS, BERGEN COUNTY, NJ
15 Essex Road ............. 1979 (7) (7) 261 224 0.35
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 ........... 1987 143,000 100.0 3,343 3,331 4.52
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (8) ...... 1981 200,000 90.7 174 174 0.24
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike ..... 1987 168,144 97.1 3,396 2,998 4.57
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road ....... 1978 96,000 99.4 1,471 1,444 1.98
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard ....... 1988 180,000 95.9 3,250 3,219 4.38
Page 18
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
Year-End Office Properties(cont.)
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard ......... 19.82 17.00 Syncsort, Inc. (22%)
300 Tice Boulevard (8)........ 1.07 1.07 Medco Containments
Services, Inc. (20%), Xerox
Corp. (13%), Chase Home
Mortgage Corp. (11%),
Comdisco, Inc. (11%)
PARAMUS, BERGEN COUNTY, NJ
15 Essex Road ............. (7) (7) (7)
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 ........... 23.38 23.29 Lonza, Inc. (63%), Chubb
Federal Insurance Co. (16%),
Boron-Lepone Assoc., Inc. (10%)
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (8) ...... 0.96 0.96 Broadview Associates LLP (16%),
Bozell Wordwide, Inc. (12%)
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike ..... 20.80 18.36 Bressler, Amery & Ross (24%),
General Motors Acceptance
Corp.(14%), Dun &
Bradstreet, Inc. (12%)
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road ....... 15.42 15.13 Metropolitan Life Insurance Co.
(36%), International Business
Machines (35%)
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard ....... 18.83 18.65 Allstate Insurance Co. (41%),
The Prudential Insurance Co. (21%),
Provident Savings F.A. (20%), John
Alden Life Insurance Co. of N.Y. (11%)
Page 19
Percentage
of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
Year-End Office Properties (cont.)
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive ............ 1987 98,500 99.2 2,048 2,037 2.76
400 Alexander Park(8)...... 1987 70,550 100.0 971 840 1.31
103 Carnegie Center(8)..... 1984 96,000 91.9 1,299 1,299 1.75
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ........ 1983 75,000 69.2 780 679 1.05
Clifton,
Passaic County, NJ
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive ....... 1988 56,066 97.5 967 963 1.30
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway ....... 1988 23,350 87.9 390 375 0.53
1350 Campus Parkway ....... 1990 79,747 80.5 1,174 1,161 1.58
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66 ............. 1989 180,000 100.0 2,411 2,411 3.25
EGG HARBOR,
ATLANTIC COUNTY, NJ
100 Decadon Drive ......... 1987 40,422 100.0 772 772 1.04
200 Decadon Drive ......... 1991 39,922 94.1 604 596 0.81
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (8)...... 1986 49,000 100.0 191 191 0.26
233 Mt. Airy Road (8)...... 1987 66,000 100.0 336 336 0.45
Page 20
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
Year-End Office Properties (cont.)
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive ............ 20.96 20.85 U.S. Trust of N.J. (19%), Princeton
Venture Research Corp. (14%), Woodrow
Wilson (12%), Villeroy & Boch
Tableware Ltd. (11%)
400 Alexander Park(8)...... 13.76 11.91 Berlitz International Inc.(100%)
103 Carnegie Center(8)..... 14.72 14.72 Ronin Development Corp. (11%)
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ........ 15.03 13.08 Motorola Inc. (19%)
Clifton,
Passaic County, NJ
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive ....... 17.69 17.62 Bank of New York (55%), Bankers
Financial (16%), Commonwealth Land (11%)
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway ....... 18.27 Centennial Cellular Corp. (41%),
19.00 McClaughlin, Bennett, Gelson(25%),
Premier Dash (12%), NJ Natural
Energy(10%)
1350 Campus Parkway ....... 18.09 New Jersey National Bank (17%),
18.29 Stephen E. Gertier (17%),
Hospital Computer
Systems, Inc. (11%)
NEPTUNE, MONMOUTH COUNTY, NJ 13.39
3600 Route 66 ............. 13.39 The U.S. Life Insurance Company
in New York City (100%)
EGG HARBOR,
ATLANTIC COUNTY, NJ 19.10
100 Decadon Drive ......... 19.10 Computer Sciences Corp. (79%)
16.08
200 Decadon Drive ......... 15.87 Hughes STX (27%), Reliance
Healthcare Group (19%),
International Business
Machines (14%), Computer
Sciences Corp. (11%)
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (8)...... 3.90 3.90 Lucent Technologies Inc. (100%)
233 Mt. Airy Road (8)...... 5.09 5.09 A.T.& T. Corp. (100%)
Page 21
Percentage
of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
Year-End Office Properties (cont.)
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East (8).. 1984 91,600 100.0 214 214 0.29
5 Sentry Parkway West (8).. 1984 38,400 100.0 95 95 0.13
MEDIA, DELAWARE COUNTY, PA
Rose Tree Coporate Center
Center I (8).............. 1986 100,000 96.1 1,221 1,221 1.64
Center II (8)............. 1990 160,000 99.0 1,847 1,846 2.49
LESTER, DELAWARE COUNTY, PA
Internationl Court at
Airport Business Center(8)
International Court I .. 1986 95,000 99.7 85 85 0.11
International Court II . 1987 208,000 99.8 153 153 0.21
International Court III. 1992 68,000 100.0 55 55 0.07
--------- ----- ------ ------ -----
Total Year-End Office Properties 6,372,879 97.0 67,407 63,009 90.78
--------- ----- ------ ------ -----
Page 22
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
Year-End Office Properties (cont.)
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East (8).. 2.34 2.34 Merck, Inc. (72%), Selas
Fluid Processing Corp. (22%)
5 Sentry Parkway West (8).. 2.47 2.47 Merck. Inc. (70%),
David Cutler Group (30%)
MEDIA, DELAWARE COUNTY, PA
Rose Tree Coporate Center
Center I (8).............. 12.71 12.71 General Services Administration
(13%), Erie Insurance
Company (11%)
Center II (8)............. 11.66 11.65 Barnett International (27%)
LESTER, DELAWARE COUNTY, PA
Internationl Court at
Airport Business Center(8)
International Court I .. 0.90 0.90 SAP America, Inc. (81%)
International Court II . 0.74 0.74 PNC Bank (51%), Mercy Health
Plan (34%)
International Court III. 0.81 0.81 SAP America, Inc. (38%), McLaren
Hart Environmental Engineering
Corp. (38%), Mercy Health
Plan(13%)
----- -----
Total Year-End Office Properties 19.00 (11) 17.54 (11)
----- -----
Page 23
Percentage
Of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
Year-End Office/Flex Properties
TOTOWA, PASSAIC COUNTY, NJ
11 Commerce Way ........... 1989 47,025 88.9 412 412 0.55
20 Commerce Way ........... 1992 42,540 100.0 467 467 0.63
29 Commerce Way ........... 1990 48,930 100.0 454 430 0.61
40 Commerce Way ........... 1987 50,576 100.0 426 416 0.57
45 Commerce Way ........... 1992 51,207 100.0 478 454 0.64
60 Commerce Way ........... 1988 50,333 100.0 292 273 0.39
80 Commerce Way (8)........ 1996 22,500 51.6 -- -- --
100 Commerce Way (8)....... 1996 24,600 -- -- -- --
120 Commerce Way ...... 1994 9,024 100.0 128 126 0.17
140 Commerce Way .......... 1994 26,881 100.0 210 210 0.28
Page 24
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
Year-End Office/Flex Properties
TOTOWA, PASSAIC COUNTY, NJ
11 Commerce Way ........... 9.86 9.86 Caremark Homecare (78%),
Quantum Health (11%),
20 Commerce Way ........... 10.98 10.98 Motorola Inc. (45%),
Siemens Electro-
Components (41%),
John Guest USA (14%)
29 Commerce Way ........... 9.28 8.79 Sandvik Sorting Systems,Inc.(44%),
Paterson Dental Supply Inc. (23%),
Fujitec America Inc. (22%),
Bell Atlantic
Meridian Systems(11%)
40 Commerce Way ........... 8.42 8.23 Thomson Electronics (35%),
Minolta Business
Systems Inc.(35%),
Snap-On, Inc. (14%),
Inchscape Testing Services (14%)
45 Commerce Way ........... 9.33 8.87 Ericsson Radio Systems Inc. (52%),
Woodward Clyde Consultants (27%),
Oakwood Corporate Housing (10%),
Sensormatic Electronics (10%)
60 Commerce Way ........... 5.80 5.42 Ericsson Inc. (43%),
Relectronic Service Corp. (43%),
Maxlite-S.K. America (14%)
80 Commerce Way (8)........ -- -- Hey Diddle Diddle Inc. (52%), Bell
Atlantic Communications (11.6%)
100 Commerce Way (8)....... -- --
120 Commerce Way ...... 14.18 13.96 Deerfield Healthcare (100%)
140 Commerce Way .......... 7.81 7.81 Advanced Images Systems Inc.(20%),
Philips Consumer (l9%), Holder
Group Inc. (11%), Showa Toll
USA Inc. (10%), Alpha Testing (10%),
Telsource Inc. (10%), Dairygold (10%),
Universal Hospital Services (10%)
Page 25
Percentage
of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
Year-End Office/Flex Properties(cont.)
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1325 Campus Parkway ....... 1988 35,000 91.9 392 391 0.53
1340 Campus Parkway ....... 1992 72,502 88.9 600 600 0.81
1320 Wykoff Road .......... 1986 20,336 100.0 190 190 0.26
1324 Wykoff Road .......... 1987 21,168 100.0 206 206 0.28
1433 Highway 34 ........... 1985 69,020 94.7 563 549 0.76
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive ........ 1989 13,275 100.0 226 226 0.30
200 Horizon Drive ......... 1991 45,770 85.3 445 445 0.60
300 Horizon Drive ......... 1989 69,780 100.00 923 919 1.25
500 Horizon Drive ......... 1990 41,205 92.8 436 427 0.59
--------- ------ ------ ------ ------
Total Yr-End Office/Flex Prop. 761,672 91.5 6,848 6,741 9.22
--------- ------ ------ ------ ------
Total Year-End Properties 7,134,551 96.4 74,255 69,750 100.00
========= ==== ====== ====== ======
See footnotes on subsequent page.
Page 26
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
Year-End Office/Flex Properties(cont.)
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1325 Campus Parkway ....... 1988 12.19 12.16 American Press (71%)
1340 Campus Parkway ....... 1992 9.31 9.31 Groundwater & Environmental
Services(33%), Software Shop(22%),
Lincare/Omni (15%), Association
for Retarded Citizens (11%)
1320 Wykoff Road .......... 1986 9.34 9.34 Eastern Automation (71%),
A.T.&T. Corp. (29%)
1324 Wykoff Road .......... 1987 9.73 9.73 A.T.& T. Corp. (29%),
State of New Jersey (25%),
Supply Saver, Inc. (22%)
1433 Highway 34 ........... 1985 8.61 8.40 State Farm Mutual Auto
Insurance (22%), NJ
Natural Gas Co. (14%),
Beacon Tool Inc. (12%)
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive ........ 1989 17.02 17.02 H.I.P. of New Jersey Inc. (100%)
200 Horizon Drive ......... 1991 11.40 11.40 O.H.M. Remediation
Services Corp. (85%)
300 Horizon Drive ......... 1989 13.23 13.17 State of NJ/D.E.P (50%),
McFaul & Lyons (26%),
Fluor Daniel GTI (24%)
500 Horizon Drive ......... 1990 11.40 11.17 First Financial (30%),
Lakeview Child Center Inc.(19%),
SHL Systems House Corp. (18%),
NJ Consumer Water Co. (14%),
Diedre Moire Corp. (11%)
----- ------
Total Yr-End Office/Flex Prop. 10.00 (11) 9.84 (11)
----- ------
Total Year-End Properties 17.28 (11) 16.07 (11)
----- ------
See footnotes on subsequent page.
Page 27
- -------------------------
(1) Based on all leases in effect as of December 31, 1996.
(2) Total base rent for 1996, determined in accordance with GAAP.
Substantially all of the leases provide for annual base rents plus
recoveries and escalation charges based upon the tenant's proportionate
share of and/or increases in real estate taxes and certain operating
costs, as defined, and the pass through of charges for electrical
usage.
(3) Total base rent for 1996 minus total 1996 amortization of tenant
improvements, leasing commissions and other concessions and costs,
determined in accordance with GAAP.
(4) Base rent for 1996 divided by net rentable square feet leased at
December 31, 1996. For those properties acquired by the Company during
1996, amounts presented reflected only that portion of the year during
which the Company owned the properties.
(5) Effective rent for 1996 divided by net rentable square feet leased at
December 31, 1996. For those properties acquired by the Company during
1996, base rent and effective rent amounts presented reflect only that
portion of the year during which the Company owned the properties.
(6) Excludes office space leased by the Company.
(7) 15 Essex Road was sold by the Company on March 20, 1996.
(8) As this Year-End Property was acquired or fully constructed by the
Company during 1996, the amounts represented in 1996 Base Rent and
Effective Rent as well as 1996 Average Base Rent per Sq.Ft. and 1996
Average Effective Rent per Sq.Ft. reflect only that portion of the year
during which the Company owned or placed the property in service during
the year. Accordingly, amounts may not be indicative of the property's
full year results.
(9) The Harborside Financial Center was completely reconstructed from 1983
through 1990, although the base structure was originally constructed in
1930.
(10) The Company has a lease agreement with a parking services company for
the use of certain land at Harborside to be used as a paid parking
area.
(11) Includes only those properties owned by the Company on January 1, 1996.
Page 28
RM Properties: Property Tables
The following tables set forth certain historical information relating to each
of the RM Office Properties, the RM Office/Flex Properties and the
Industrial/Warehouse properties which were owned 100 percent by RM as of
December 31, 1996.
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
100 Clearbrook Road(6) .... 1975 60,000 93.8 776 1.32
101 Executive Boulevard ... 1971 50,000 94.3 893 1.52
570 Taxter Road ........... 1972 75,000 94.2 1,483 2.52
HAWTHORNE,
WESTCHESTER COUNTY, NY
1 Skyline Drive ........... 1980 20,400 50.0 134 0.23
2 Skyline Drive ........... 1987 30,000 100.0 420 0.71
17 Skyline Drive .......... 1989 85,000 100.0 1,130 1.92
30 Saw Mill River Road .... 1982 248,400 100.0 4,471 7.59
Page 29
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
Property per Rentable Area
Location Sq. Ft. per Property
-------- ($)(3) as of 12/31/96(4)
------ -----------------
RM Office Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
100 Clearbrook Road(6) .... 13.79 ANS (34%)
101 Executive Boulevard ... 18.92 Pennysaver Group (18%),
MCS Business Machines(11%),
Alcone Sim's O'Brien (12%)
570 Taxter Road ........... 20.99 Connecticut General (15%)
HAWTHORNE,
WESTCHESTER COUNTY, NY
1 Skyline Drive ........... 13.11 Childtime Childcare (50%)
2 Skyline Drive ........... 13.99 MW Samara (41%),
Perinin Construction (30%),
Boykoff & Bell (13%)
17 Skyline Drive .......... 13.29 IBM (100%)
30 Saw Mill River Road .... 18.00 IBM (100%)
Page 30
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office Properties(cont.)
YONKERS,
WESTCHESTER COUNTY, NY
1 Executive Boulevard...... 1982 112,000 82.5 1,958 3.32
3 Executive Boulevard...... 1987 58,000 95.0 1,100 1.87
TARRYTOWN,
WESTCHESTER COUNTY, NY
200 White Plains Road ..... 1982 89,000 91.3 1,588 2.69
220 White Plains Road...... 1984 89,000 96.2 1,772 3.01
WHITE PLAINS,
WESTCHESTER COUNTY, NY
1 Barker Avenue ........... 1975 68,000 100.0 1,461 2.48
3 Barker Avenue ........... 1983 65,300 98.9 1,216 2.06
1 Water Street ............ 1979 45,700 100.0 874 1.48
11 Martine Avenue ......... 1987 180,000 100.0 4,224 7.17
50 Main Street ............. 1985 309,000 96.7 7,039 11.95
--------- ------ ------- -----
Total RM Office Properties 1,584,800 95.9 30,539 51.84
--------- ------ ------- -----
Page 31
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
RM Office Properties(cont.)
YONKERS,
WESTCHESTER COUNTY, NY
1 Executive Boulevard...... 21.19 Wise/Contact US (14%)
3 Executive Boulevard...... 19.97 GMAC/MIC (47%),
Metropolitan Life (22%)
TARRYTOWN,
WESTCHESTER COUNTY, NY
200 White Plains Road ..... 19.53 Independent Health (28%),
Allmerica Finance (17%),
NYS Dept. of
Environmental Services(13%)
220 White Plains Road...... 20.70 Stellare Management (11%)
WHITE PLAINS,
WESTCHESTER COUNTY, NY
1 Barker Avenue ........... 21.49 O'Connor, McGuinn (19%),
United Skys
Realty Corp. (19%)
3 Barker Avenue ........... 18.82 Bernard C. Harris (56%)
1 Water Street ............ 19.13 Trigen Energy (37%),
Stewart Title (15%)
11 Martine Avenue ......... 23.47 KPMG Peat Marwick (14%),
McCarthy Fingar (11%),
David Worby (11%)
50 Main Street ............. 23.57 National Economic
----- Research Assoc. Inc.(10%)
Total RM Office Properties 20.10
-----
Page 32
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office/Flex Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Westchester Plaza ..... 1967 25,000 100.0 282 0.48
2 Westchester Plaza ..... 1968 25,000 100.0 387 0.66
3 Westchester Plaza ..... 1969 93,500 100.0 1,088 1.85
4 Westchester Plaza ...... 1969 44,700 86.6 520 0.88
5 Westchester Plaza ...... 1969 20,000 100.0 229 0.39
6 Westchester Plaza ...... 1968 20,000 76.5 196 0.33
7 Westchester Plaza ...... 1972 46,200 100.0 619 1.05
8 Westchester Plaza ...... 1971 67,200 68.5 711 1.21
Page 33
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
RM Office/Flex Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Westchester Plaza ..... 11.30 KCI Therapeutic (40%),
Thin Film Concepts (20%),
RS Knapp(20%),
American Greeting (20%)
2 Westchester Plaza ..... 15.50 Board of Cooperation (78%),
Kin-Tronics (12%),
Squires Production (10%)
3 Westchester Plaza ..... 11.63 Apria Healthcare (32%),
Kangol Headware (27%),
V-Band Corp. (16%),
Dental Concepts (12%)
4 Westchester Plaza ...... 13.43 Metropolitan Life (38%),
EEV Inc. (34%)
5 Westchester Plaza ...... 11.45 Kramer Scientific (26%),
Rokonet Industries (25%),
UA Plumbers Education
(25%), Furniture
Etc. (13%), Fujitsu (13%)
6 Westchester Plaza ...... 12.80 Xerox (27%), Signacon
Control (27%), PC Technical
(23%), Girard Rubber
Co. (12%)
7 Westchester Plaza ...... 13.41 Emigrant Savings (56%),
Fire-End Croker (22%),
Health Maintenance (10%)
8 Westchester Plaza ...... 15.46 Westchester Library (19%),
Mamiya Amnerica (16%),
Self Powered
Lighting (13%)
Page 34
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office/Flex Properties(cont.)
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
11 Clearbrook Road ....... 1974 31,800 100.0 267 0.45
75 Clearbrook Road ....... 1990 32,720 100.0 665 1.13
150 Clearbrook Road ...... 1975 74,900 100.0 939 1.59
175 Clearbrook Road ...... 1973 98,900 97.6 1,191 2.02
200 Clearbrook Road ...... 1974 94,000 100.0 946 1.61
250 Clearbrook Road ...... 1973 155,000 84.1 1,206 2.05
50 Executive Boulevard ... 1969 45,200 98.1 386 0.66
77 Executive Boulevard ... 1977 13,000 100.0 169 0.29
85 Executive Boulevard ... 1968 31,000 100.0 287 0.49
Page 35
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
RM Office/Flex Properties(cont.)
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
11 Clearbrook Road ....... 8.41 Eastern Jungle (27%),
Treetops Inc. (21%)
MCS Marketing (18%),
Creative Medical (14%),
Puig Perfumes (14%)
75 Clearbrook Road ....... 20.33 Evening Out (100%)
150 Clearbrook Road ...... 12.54 Court Sports I(24%),
Philips Medical (18%),
Transwestern Pub (12%)
175 Clearbrook Road ...... 12.34 Midland Avenue (35%),
Hypres (12%)
200 Clearbrook Road ...... 10.06 Midland Avenue (22%),
Proftech Corp. (20%),
IR Industries (18%),
Wyse Technology (14%)
250 Clearbrook Road ...... 9.25 AFP Imaging (42%),
The Artina Group (14%)
50 Executive Boulevard ... 8.71 MMO Music Group (69%),
Medical Billing (22%)
77 Executive Boulevard ... 13.03 Bright Horizons (55%),
WNN Corporation (35%)
85 Executive Boulevard ... 9.25 Vrex Inc. (49%), Westhab
Inc,. (18%), Saturn II
Systems (11%), John
Caulfields (13%)
Page 36
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office/Flex Properties(cont.)
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
300 Executive Blvd ....... 1970 60,000 100.0 514 0.87
350 Executive Blvd ....... 1970 15,400 100.0 238 0.40
399 Executive Blvd ....... 1962 80,000 100.0 926 1.57
400 Executive Blvd ....... 1970 42,200 100.0 550 0.93
500 Executive Blvd ....... 1970 41,600 100.0 566 0.96
525 Executive Blvd ....... 1972 61,700 100.0 752 1.28
HAWTHORNE,
WESTCHESTER COUNTY, NY
4 Skyline Drive ........... 1987 80,600 100.0 1,082 1.84
8 Skyline Drive ........... 1985 50,000 100.0 487 0.83
10 Skyline Drive .......... 1985 20,000 81.0 215 0.36
Page 37
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
RM Office/Flex Properties(cont.
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
300 Executive Blvd ....... 8.57 Varta Batteries (44%),
Princeton Ski Outlet (43%),
LMG International (12%)
350 Executive Blvd ....... 15.45 Ikon Office (100%)
399 Executive Blvd ....... 11.57 American Banknote (72%),
Kaminstein Imports (28%)
400 Executive Blvd ....... 13.03 Baker Engineering (38%),
North American Van
Lines (24%)
500 Executive Blvd ....... 13.61 Singer Holding Corp. (36%),
Dover Elevator (16%),
Commerce Overseas(16%),
Charles Martine (13%),
Olsten Home Health (13%)
525 Executive Blvd ....... 12.18 Vie de France (57%),
New York Blood Center
(21%)
HAWTHORNE,
WESTCHESTER COUNTY, NY
4 Skyline Drive ........... 13.43 GEC Alsthom (50%),
RMI Direct Marketing (10%)
8 Skyline Drive ........... 9.75 Cityscape (51%),
Reveco Inc. (29%),
Stratasys Inc. (12%)
10 Skyline Drive .......... 13.27 DX Communications (65%),
Galston Corp. (17%)
Page 38
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office/Flex Properties(cont.)
HAWTHORNE,
WESTCHESTER COUNTY, NY(cont.)
11 Skyline Drive .......... 1989 45,000 100.0 679 1.15
15 Skyline Drive .......... 1989 55,000 100.0 902 1.53
200 Saw Mill River Road ... 1965 51,100 100.0 611 1.04
YONKERS,
WESTCHESTER COUNTY, NY
100 Corporate Boulevard ... 1987 78,000 100.0 1,260 2.14
4 Executive Plaza ......... 1986 80,000 83.6 704 1.19
6 Executive Plaza ......... 1987 80,000 100.0 962 1.63
1 Odell Plaza ............. 1980 106,000 98.2 1,099 1.87
5 Odell Plaza ............. 1983 38,400 100.0 439 0.74
7 Odell Plaza............. 1984 42,600 100.0 587 1.00
Page 39
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
------ -----------------
RM Office/Flex Properties(cont.)
HAWTHORNE,
WESTCHESTER COUNTY, NY(cont.)
11 Skyline Drive .......... 15.09 Cube Computer (40%), Steri
Pharmacy (19%), Bowthorpe
Holdings (18%), Planned
Parenthood (11%)
15 Skyline Drive .......... 16.40 United Parcel Service (61%),
Emisphere Technology (23%),
Minolta Copier (16%)
200 Saw Mill River Road ... 11.96 Walter Degruyter (21%),
Xerox (17%), Argents Air
Express(12%), SI Industrial
(10%), AAR Hardware (10%)
YONKERS,
WESTCHESTER COUNTY, NY
100 Corporate Boulevard ... 16.15 Bank of New York (28%),
Montefore (19%), Xerox
(13%), Quality Lifestyle
(12%), Medigene (11%)
4 Executive Plaza ......... 10.52 O K Industries (43%),
Minami International (11%)
6 Executive Plaza ......... 12.02 Cablevision System (39%),
KVL Audio Visual (12%),
Empire Managed (10%)
1 Odell Plaza ............. 10.55 Court Sports II (19%),
Gannett Satellite (11%),
Crown Trophy (10%)
5 Odell Plaza ............. 11.42 Voyetra Technology (45%),
Photo Fili Inc. (34%),
Premier Pharmacy (22%)
7 Odell Plaza............. 13.78 US Post Office (41%),
Bright Horizons (16%),
TT Systems Corp. (12%),
CP Bourg Inc. (12%)
Page 40
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
RM Office/Flex Properties(cont.)
STAMFORD,
FAIRFIELD COUNTY, CT
419 West Avenue ........... 1986 88,000 100.0 1,333 2.26
500 West Avenue ........... 1988 25,000 100.0 320 0.54
550 West Avenue ........... 1990 54,000 100.0 721 1.22
--------- ------ ------- -----
Total RM Office/Flex Properties 2,112,720 96.3 25,035 42.49
--------- ------ ------- -----
Page 41
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
RM Office/Flex Properties(cont.)
STAMFORD,
FAIRFIELD COUNTY, CT
419 West Avenue ........... 15.15 Lear Siegal Inc. (81%)
500 West Avenue ........... 12.80 TNT Skypac (26%), Stamford
Associates (26%), Lead
Trackers(21%), Delecor
USA (17%), M. Cohen &
Sons (11%)
550 West Avenue ........... 13.35 Lifecodes Corp. (44%),
Davidoff of Geneva (39%)
-----
Total RM Office/Flex Properties 12.31
-----
Page 42
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
Industrial/Warehouse Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Warehouse Lane .......... 1957 6,600 100.0 42 0.07
2 Warehouse Lane .......... 1957 10,900 95.9 109 0.19
3 Warehouse Lane .......... 1957 77,200 100.0 249 0.42
4 Warehouse Lane .......... 1957 195,500 80.0 1,758 2.99
5 Warehouse Lane .......... 1957 75,100 100.0 737 1.25
6 Warehouse Lane .......... 1982 22,100 100.0 445 0.75
--------- ----- ------- ------
Total Industrial/Warehouse Prop. 387,400 89.8 3,340 5.67
--------- ----- ------- ------
Total RM Office, Office/Flex and
Industrial/Warehouse Properties 4,084,920 95.5 58,914 100.00
========= ===== ======= ======
See footnotes on subsequent page.
Page 43
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96 (4)
-------- ------ --------------
Industrial/Warehouse Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Warehouse Lane .......... 6.38 JP Trucking Service(100%)
2 Warehouse Lane .......... 10.48 RJ Bruno Roofing (55%),
Savin Engineering (41%)
3 Warehouse Lane .......... 3.23 United Parcel Service Inc. (100%)
4 Warehouse Lane .......... 11.24 San Mar Laboratory (55%),
Marcraft Clothes (18%),
2 Westchester Medical
(11%)
5 Warehouse Lane .......... 9.82 Metbev Inc. (42%), E&H
Tire Buying (19%),
Backstage Exclusive
Knitwear (16%),
Conway Import Co. (10%)
6 Warehouse Lane .......... 20.12 Conway General (96%)
-----
Total Industrial/Warehouse Prop. 9.60
-----
Total RM Office, Office/Flex and
Industrial/Warehouse Properties 15.10
-----
See footnotes on subsequent page.
Page 44
- -------------------------
(1) Based on all leases in effect as of December 31, 1996.
(2) Total base rent for RM, as recorded in 1996, determined in accordance with
GAAP. Substantially all of the leases provide for annual base rents plus
recoveries and escalation charges based upon the tenant's proportionate
share of and/or increases in real estate taxes and certain operating costs,
as defined, and the pass through of charges for electrical usage.
(3) Base rent for 1996 divided by net rentable square feet leased at December
31, 1996.
(4) Excludes office space leased by RM as of December 31, 1996.
Retail Properties.
The Company owns two stand-alone retail properties as of February 28, 1997, both
acquired in the RM Acquisition.
The Company owns an 8,000 square foot restaurant, constructed in 1986, located
in the South Westchester Executive Park in Yonkers, Westchester County, New
York. The restaurant is 100 percent leased to Magic at Yonkers, Inc. for use as
a Red Robin restaurant under a 25-year lease. The lease currently provides for
fixed annual rent of $230,000, with fully-reimbursed real estate taxes, and
operating expenses escalated based on CPI over a base year CPI. The lease, which
expires on June 30, 2012, includes scheduled rent increases in July 1997 to
approximately $265,000 annually, and in July 2002 to approximately $300,000
annually. The lease also provides for additional rent calculated as a percentage
of sales over a specified sales amount, as well as for two five-year renewal
options. 1996 base rental revenue, calculated in accordance with GAAP, to RM was
approximately $198,000.
The Company also owns a 9,300 square foot restaurant, constructed in 1984,
located at 230 White Plains Road, Tarrytown, Westchester County, New York. The
restaurant is 100 percent leased to TGI Fridays under a 10-year lease which
provides for fixed annual rent of approximately $195,000, with fully-reimbursed
real estate taxes, and operating expenses escalated based on CPI over a base
year CPI. The lease, which expires on August 31, 2004, also provides for
additional rent calculated as a percentage of sales over a specified sales
amount, as well as for four five-year renewal options. 1996 base rental revenue,
calculated in accordance with GAAP, to RM was approximately $195,000.
Land Leases.
The Company owns two land leases as of February 28, 1997, both acquired in the
RM Acquisition.
Page 45
The Company has land leased to Star Enterprises, where a 2,264 square foot
Texaco Gas Station was constructed, located at 1 Enterprise Boulevard in
Yonkers, Westchester County, New York. The 15-year, triple-net land lease
provides for annual rent of approximately $125,000 through January 1998, with an
increase to approximately $145,000 annual rent through April 30, 2005. The lease
also provides for two five-year renewal options. 1996 base rental revenue,
calculated in accordance with GAAP, to RM was approximately $135,000.
The Company also leases five acres of land to Rake Realty, where a 103,500
office building exists, located at 700 Executive Boulevard, Elmsford,
Westchester County, New York. The 22-year, triple-net land lease provides for
fixed annual rent plus a CPI adjustment every five years, and expires on
November 30, 2000. RM's 1996 base rent, calculated in accordance with GAAP,
under this lease was approximately $97,000. The lease also provides for several
renewal options which could extend the lease term for an additional 30 years.
Multi-family Residential Properties.
As of February 28, 1997, the Company owned two multi-family residential
properties, described below:
Tenby Chase Apartments, Delran, Burlington County, New Jersey
The Company's multi-family residential property, known as the Tenby Chase
Apartments, was built in 1970. The property contains 327 units, comprised of 196
one-bedroom units and 131 two-bedroom units, with an average size of
approximately 1,235 square feet per unit. The property had an average monthly
rental rate of approximately $713 per unit during 1996 and was approximately 97
percent leased as of December 31, 1996. The property had 1996 total base rent of
approximately $2.7 million which represented approximately 3.5 percent of the
Company's 1996 total base rent. The average occupancy rate for the Property in
each of 1996, 1995, and 1994, was 95.3 percent, 93.6 percent, and 94.8 percent
respectively.
25 Martine Avenue, White Plains, Westchester County, New York
The Company's multi-family residential property, acquired in the RM Acquisition
and known as 25 Martine Avenue, was completed in 1987. The property contains 124
units, comprised of 18 studio units, 71 one-bedroom units and 35 two-bedroom
units, with an average size of approximately 722 square feet per unit. The
property had an average monthly rental rate of approximately $1,488 per unit
during 1996 and was 100.0 percent leased as of December 31, 1996. The property
had 1996 total base rent to RM of approximately $2.1 million which represented
approximately 3.5 percent of the RM Properties' 1996 total base rent of RM. The
average occupancy rate for the property in each of 1996, 1995 and 1994 was 96.4
percent, 98.3 percent and 97.6 percent, respectively.
Page 46
Year-End Office Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the
Year-End Office Properties beginning January 1, 1997, assuming that none of the
tenants exercises renewal options:
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
1997 ............ 80 446,492 7.49 8,335 18.67
1998 ............ 93 963,384 16.17 13,883 14.41
1999 ............ 109 755,273 12.68 14,383 19.04
2000 ............ 84 1,132,727 19.01 21,036 18.57
2001 ............ 57 579,496 9.73 11,831 20.42
2002 ............ 26 275,143 4.62 6,416 23.32
2003 ............ 15 367,381 6.17 6,363 17.32
2004 ............ 6 67,411 1.13 1,480 21.95
2005 ............ 6 126,663 2.13 2,005 15.83
2006 ............ 8 147,911 2.48 3,072 20.77
2007 & Thereafter 16 1,096,443 18.39 22,837 20.83
--- --------- ------ ------- -----
Total/Weighted
Average ........ 500 5,958,324 100.00 111,641 18.74
=== ========= ====== ======= -----
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent, determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
Page 47
Year-End Office/Flex Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the
Year-End Office/Flex Properties, beginning January 1, 1997, assuming that none
of the tenants exercises renewal options:
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
1997 ............ 17 149,866 21.68 1,380 9.21
1998 ............ 9 89,266 12.91 864 9.68
1999 ............ 13 97,601 14.12 1,039 10.65
2000 ............ 13 176,531 25.53 1,963 11.12
2001 ............ 9 85,987 12.44 854 9.93
2002 ............ 2 13,824 2.00 135 9.77
2003 ............ 1 9,024 1.31 128 14.18
2004 ............ 1 39,060 5.65 445 11.39
2005 ............ 1 7,225 1.05 71 9.83
2007 & Thereafter 2 22,844 3.31 230 10.07
-- ------- ------ ------- -----
Total/Weighted
Average ........ 68 691,228 100.00 7,109 10.28
== ======= ====== ======= -----
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office tenants. Some tenants have multiple
leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
Page 48
RM Office Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the RM
Office Properties beginning January 1, 1997, assuming that none of the tenants
exercises renewal options:
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
1997 ............ 76 262,279 17.77 5,422 20.67
1998 ............ 51 204,357 13.85 4,473 21.89
1999 ............ 61 185,156 12.55 3,840 20.74
2000 ............ 29 468,778 31.77 8,282 17.67
2001 ............ 28 193,965 13.14 4,237 21.85
2002 ............ 10 49,716 3.37 1,034 20.79
2003 ............ 6 61,267 4.15 1,349 22.02
2004 ............ 2 5,470 0.37 124 22.62
2005 ............ 4 37,015 2.51 840 22.71
2006 ............ 1 6,108 0.41 153 25.00
2007 & Thereafter 1 1,667 0.11 31 18.50
--- --------- ------ ------ -----
Total/Weighted
Average ........ 269 1,475,778 100.00 29,785 20.18
=== ========= ====== ====== -----
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate historical base rent to RM, determined in accordance
with GAAP, including all leases dated on or before December 31, 1996.
Page 49
RM Office/Flex Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the RM
Office/Flex Properties, beginning January 1, 1997, assuming that none of the
tenants exercises renewal options:
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
1997 ............ 37 215,598 10.70 2,528 11.73
1998 ............ 61 349,817 17.37 4,319 12.35
1999 ............ 45 290,765 14.44 3,329 11.45
2000 ............ 34 344,358 17.10 4,190 12.17
2001 ............ 41 450,701 22.38 5,481 12.16
2002 ............ 15 168,364 8.36 2,038 12.10
2003 ............ 2 31,871 1.58 422 13.23
2006 ............ 4 88,699 4.40 1,351 15.23
2007 & Thereafter 2 73,934 3.67 1,080 14.61
--- --------- ------ --------- ---------
Total/Weighted
Average ........ 241 2,014,107 100.00 24,738 12.28
=== ========= ====== ========= ---------
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office tenants. Some tenants have multiple
leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent to RM determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
Page 50
RM Industrial/Warehouse Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the RM
Industrial/Warehouse Properties, beginning January 1, 1997, assuming that none
of the tenants exercises renewal options:
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
1997 ......... 4 31,500 9.18 272 8.65
1998 ......... 5 150,803 43.94 923 6.12
2000 ......... 2 18,504 5.39 207 11.18
2001 ......... 3 33,778 9.84 592 17.52
2004 ......... 1 108,600 31.65 1,112 10.24
-- ------- ------ ------- -----
Total/Weighted
Average ..... 15 343,185 100.00 3,106 9.05
== ======= ====== ======== -----
(1) Includes industrial/warehouse tenants only. Excludes leases for amenity,
retail, parking and month-to-month office tenants. Some tenants have
multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate historical base rent to RM, determined in accordance
with GAAP, including all leases dated on or before December 31, 1996.
Page 51
95 Christopher Columbus Drive, Jersey City, Hudson County, NJ
As the 1996 revenues of 95 Christopher Columbus Drive, Jersey City ("Grove
Street") was in excess of 10 percent of the Company's consolidated total
revenues for the year ended December 31, 1996, additional information regarding
Grove Street is provided below.
Grove Street is located in the Waterfront Region submarket of Hudson County,
which includes Hoboken, Jersey City and Weehawken. The building, built in 1989,
is located on approximately 1.8 acres and has 36,600 square feet on each of the
first 18 floors and 24,000 square feet on the 19th floor. On April 9, 1996, DLJ,
a significant tenant that previously leased approximately 55 percent of the
space at Grove Street, signed a lease with the Company for an additional 73,200
square feet of office space and on December 31, 1996, DLJ signed a lease for an
additional 6,507 square feet of space, which, in the aggregate, increased DLJ's
occupancy to approximately 67 percent of the property as of December 31, 1996.
The building currently contains 621,900 net rentable square feet and was 100%
leased as of December 31, 1996. The building has 13 passenger and two freight
elevators and offers 24-hour card access. Other amenities include fiber optics
telecommunications, a separate power source for the most sophisticated computer
systems, building life safety systems connected to an uninterruptable power
source, extra height ceilings to accommodate raised floors, five-story skylit
atrium with waterfall and reflecting pool, multiple on-premises retail services,
six level attached parking deck with 485 spaces and an elevator and direct
access to the Grove Street PATH subway station. The Grove Street PATH subway
station provides direct access to midtown and downtown Manhattan.
The following table sets forth certain information (on a per net rentable square
foot basis unless otherwise indicated) about 95 Christopher Columbus Drive,
Jersey City since January 1, 1992 (based upon an average of all lease
transactions during the respective periods):
Year Ended December 31,
----------------------------------------------
1992 1993 1994 1995 1996
------ ----- ------ ------ ------
Number of leases signed during period(1) ......... 1 1 2 1 2
Rentable square footage leased during period(1) .. 36,600 24,379 29,810 5,004 79,707
Base rent($)(1)(2) ............................... 19.31 17.80 15.87 13.50 18.42
Tenant improvements($)(3) ........................ 31.25 11.03 11.42 24.00 39.18
Leasing commissions($)(4) ........................ 2.54 7.21 6.27 2.47 2.56
Other concessions($)(5) .......................... -- -- -- -- --
Effective rent($)(6) ............................. 17.00 15.12 12.89 9.09 15.23
Expense stop($)(7) ............................... -- -- -- -- --
Effective equivalent triple net rent($)(8) ....... 17.00 15.12 12.89 9.09 15.23
Occupancy rate at end of period(%)(1) ............ 76.35 83.76 86.70 88.00 100.00
See footnotes on subsequent page.
Page 52
(1) Includes only office tenants with lease terms of 12 months or longer.
Excludes leases for amenity, parking, retail and month-to-month office
tenants.
(2) Equals aggregate base rent received over their respective terms from all
lease transactions during the period, divided by the terms in months for
such leases during the period, multiplied by 12, divided by the total net
rentable square feet leased under all lease transactions during the period.
(3) Equals work letter cost net of estimated provision for profit and overhead,
or costs incurred by the Company in connection with tenant improvements
allowances per the respective lease agreement. Actual cost tenant
improvements may differ from estimated work letter costs.
(4) Equals an aggregate of leasing commissions payable to employees and third
parties based on standard commission rates and excludes negotiated
commission discounts obtained from time to time.
(5) Includes moving expenses, furniture allowances and other concessions.
(6) Equals aggregate base rent received over their respective terms from all
lease transactions during the period minus all tenant improvements, leasing
commissions and other concessions from all lease transactions during the
period, divided by the terms in months for such leases, multiplied by 12,
divided by the total net rentable square feet leased under all lease
transactions during the period.
(7) All leases in this Property are triple net leases. Tenants pay their
proportionate share of real estate taxes, operating costs and utility
costs.
(8) Equals effective rent minus expense stop.
Page 53
The following table sets forth the average percentage leased and average annual
rental per leased square foot (excluding storage space) for the past five years
for 95 Christopher Columbus Drive, Jersey City. All of the leases at 95
Christopher Columbus Drive, Jersey City are triple net leases (i.e., tenants pay
their proportionate share of real estate taxes, insurance and operating
expenses).
Average Average Annual
Percentage Rental per Leased
Year Leased(%)(1) Square Foot($)(2)
---- ------------ ------------------
1996 94.0 20.74
1995 87.4 20.70
1994 85.8 20.31
1993 80.1 20.92
1992 76.4 20.74
- -------------------
(1) Average of beginning and end of year aggregate percentage leased.
(2) Total base rents for the year, determined in accordance with GAAP,
divided by average of beginning and end of year aggregate net rentable
area leased.
Two tenants at Grove Street occupy approximately 92 percent of the net rentable
square feet in the aggregate at December 31, 1996. As of December 31, 1996, DLJ,
a national securities firm, occupied 413,852 square feet (approximately 67
percent of the net rentable square feet of Grove Street) pursuant to four leases
which expire July 13, 2009, with two five-year renewal options. Total rental
income from DLJ in 1996, including escalations and recoveries, was approximately
$11.5 million (excluding lobby and storage space). The DLJ leases provide for,
among other things, annual rental rate increases of approximately $1.3 million
in July 1999 and approximately $1.6 million in July 2004. NTT, an international
communications firm, occupies 137,000 square feet (approximately 22 percent of
the net rentable square feet of Grove Street) pursuant to a lease which expires
September 30, 2000, with three five-year renewal options. NTT's billed rent for
1996 was approximately $3.0 million (excluding lobby space).
Page 54
The following table sets forth a schedule of the lease expirations for Grove
Street, assuming that none of the tenants exercises renewal options or
termination rights:
Average
Annual Rent
Percentage of Per Net
Total Leased Annual Base Rentable
Net Rentable Square Feet Rent Under Square Foot
Number of Area Subject Represented Expiring Represented
Year of Leases to Expiring By Expiring Leases By Expiring
Expiration Expiring(1) Leases (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ----------------- ----------- ---------------- ------------- ----------- ------------
1999 ............. 1 21,749 3.60 348 16.00
2000 ............. 4 161,339 26.69 3,159 19.58
2001 ............. 2 6,019 1.00 84 14.09
2002 ............. 1 8,061 1.33 125 15.52
2009 ............. 4 407,345 67.38 8,387 20.59
-- ------- ------ ------- -----
Total/Weighted
Average....... 12 604,513 100.00 12,103 20.02
== ======= ====== ======= -----
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
The aggregate tax basis of depreciable real property at Grove Street for federal
income tax purposes was approximately $74 million as of December 31, 1996.
Depreciation and amortization are computed on the declining balance and
straight-line methods over the estimated useful life of the real property which
range from 31.5 to 39 years. The aggregate tax basis of depreciable personal
property associated with Grove Street for federal income tax purposes was
approximately $15,000 as of December 31, 1996. Depreciation and amortization are
computed on the double declining balance method over the estimated useful life
of the personal property of five to seven years.
Grove Street has been granted an abatement under the Fox-Lance program by Jersey
City, which establishes the payment to the City of Jersey City for municipal
services to be paid in lieu of conventional real estate taxes. The abatement
program is in effect for the 15-year period from completion of the project (1989
through 2004). The total annual charge in lieu of real estate taxes has been
designated by the program at two percent of the project cost (i.e., $1,131,000
per annum) for the first ten years and 2.5 percent (i.e., $1,413,750 per annum)
for years 11 through 15.
Page 55
Harborside Financial Center, Jersey City, Hudson County, NJ
As the book value of Harborside was in excess of 10 percent of the Company's
total assets at December 31, 1996, additional information regarding the property
is provided below.
Harborside, acquired by the Company on November 4, 1996, is a completely
redeveloped, three-building office complex containing 1,886,800 square feet of
net rentable area located in the Exchange Place Newport Center submarket of
Jersey City, New Jersey. This submarket is a satellite office market of
Manhattan and is occupied primarily by the support and technical operations of
New York City-based financial institutions. The buildings, known as Plazas I, II
and III were developed as a complete reconstruction of existing buildings in two
phases, the first completed in 1983 and the second in 1990. The buildings are
connected via an enclosed 1,000 foot waterfront promenade featuring restaurants,
service retail shops and a food court, as well as an atrium lobby. The promenade
includes various retail operations such as restaurants, a bank, and a dry
cleaner. The property is situated on 47.98 acres for the existing building
complex, 11.29 acres of undeveloped land, 5.78 acres of piers and 21.61 acres of
underwater land (excluding piers).
Plaza I is served by six passenger elevators as well as a 15,000 lb. freight
car. Plazas II and III are each served by ten passenger elevators and have seven
oversized freight elevators in total. In addition, there are large shafts where
freight elevators have been removed which enable tenants to bring significant
electric telecommunications cabling to their space at minimal cost.
The property leases space to a parking operator and provides for approximately
1,685 parking spaces including 200 spaces on the south pier. Public
transportation to the property is available through the Exchange Place PATH rail
station which is immediately adjacent to the property and links Harborside to
downtown Manhattan in approximately four minutes. The PATH also provides access
to midtown Manhattan, Newark and Hoboken in less than twenty minutes. The
property is also connected to Manhattan by road via a three mile drive to the
Holland Tunnel and a five-mile drive to the Lincoln Tunnel. Interstates 78 and
495, US Routes 1, 9 and 440, and NJ Route 3 connect the property to locations
throughout northern New Jersey.
Page 56
The following table sets forth certain information (on a per rentable square
foot basis unless otherwise indicated) about the property since January 1, 1992
(based upon an average of all lease transactions during the respective periods):
Year Ended December 31, 1996
-------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Number of leases signed
during period (1) ...... 4 3 9 5 8
Rentable sq. footage leased
during period (1) ...... 192,278 12,143 201,933 50,806 186,133
Base rent ($) (2) ......... 18.18 20.35 16.04 22.33 20.41
Tenant improvements (3) ... 39.82 24.31 17.69 19.21 13.38
Leasing commissions (4) ... 14.60 8.68 10.28 4.71 10.45
Other concessions (5) ..... -- -- -- -- --
Effective rent ($) (6) .... 14.41 13.86 13.91 19.95 18.07
Expense stop ($) (7) ...... 0.98 3.42 3.91 2.52 4.34
Effective equivalent triple
net rent ($) (8) ........ 13.43 10.44 10.00 17.43 13.73
Occupancy rate at end of
period (%) (1) .......... 78.60 88.10 93.30 96.10 98.80
See footnotes on subsequent page.
Page 57
(1) Includes only office tenants with lease terms of 12 months or longer.
Excludes leases for amenities, parking, retail and month-to-month
office tenants.
(2) Equals aggregate base rent received over their respective terms from
all lease transactions during the period, divided by the terms in
months for such leases during the period, multiplied by 12, divided by
the total net rentable square feet leased under all lease transactions
during the period.
(3) Equals work letter costs net of estimated provision for profit and
overhead. Actual cost tenant improvements may differ from estimated
work letter costs.
(4) Equals an aggregate of leasing commissions payable to employees and
third parties based on standard commission rates and excludes
negotiated commission discounts obtained from time to time.
(5) Includes moving expenses, furniture allowances and other concessions.
(6) Equals aggregate base rent received over their respective terms from
all lease transactions during the period minus all tenant improvements,
leasing commissions and other concessions from all lease transactions
during the period, divided by the terms in months for such leases,
multiplied by 12, divided by the total net rentable square feet under
all lease transactions during the period.
(7) Equals the aggregate of each base year tax and common area maintenance
pool multiplied by the respective pro rata share for all lease
transactions during the period, divided by the total net rentable
square feet leased under all lease transactions during the period.
(8) Equals effective rent minus expense stop.
The following schedule sets forth the average percent leased and average annual
rental per leased square foot for the years ended December 31, 1992 through 1996
for Harborside:
Average Annual
Average Rental Per
Percentage Leased Square
Year Leased(%)(1) Foot ($) (2)
---- ------------ ------------
1996 97.50 $16.23
1995 94.70 15.99
1994 90.70 15.26
1993 83.40 16.36
1992 73.50 14.69
(1) Average of beginning and end of year aggregate percentage leased.
(2) Total base rents for the year, determined in accordance with generally
accepted accounting principles, divided by average of beginning and end
of year aggregate net rentable area leased.
Page 58
Four tenants at Harborside occupy approximately 63 percent of the net rentable
square feet in the aggregate as of December 31, 1996, as follows:
Bankers Trust Harborside, Inc., a commercial bank, occupied 385,000 square feet
(approximately 21 percent of the net rentable square feet of Harborside) at
December 31, 1996, pursuant to a triple net lease which expires March 31, 2003,
with a five-year renewal option. Total rental income from Bankers Trust,
including escalations and recoveries, was approximately $548,000 for the period
November 4 through December 31, 1996. The lease provides, among other things,
for an annual rent increase of $770,000 to an annual rent of $3,272,500
beginning on April 1, 1998.
Dow Jones Telerate Holdings, Inc., a telecommunications firm, occupied 378,232
square feet at December 31, 1996 (approximately 20 percent of the net rentable
square feet of Harborside) pursuant to various leases expiring June 30, 1999
through March 31, 2001, with two five-year renewal options on 187,817 square
feet of the space and one five-year option on 45,187 square feet of the space.
Total rental income from Dow Jones Telerate Holdings, Inc., including
escalations and recoveries was approximately $1,483,000 for the period November
4 through December 31, 1996. Certain of the leases provide for annual rental
increases totaling approximately $181,000 beginning in June 2001.
AICPA, a professional organization, occupied approximately 250,000 square feet
(approximately 13 percent of the net rentable square feet of Harborside) at
December 31, 1996, pursuant to a lease which expires July 31, 2012, with a
ten-year renewal option. Total rental income from the AICPA, including
escalations and recoveries, was approximately $1,153,000 for the period November
4 through December 31, 1996. The AICPA lease provides for, among other things,
annual rental increases of approximately $836,000 in July 2002 and $836,000 in
July 2007.
Dean Witter Trust Company, a securities firm, occupied 179,131 square feet
(approximately 9.5 percent of the net rentable square feet of Harborside) at
December 31, 1996, pursuant to a lease which expires February 8, 2008, with
ten-year and five-year renewal options. Total rental income from Dean Witter,
including escalations and recoveries, was approximately $796,000 for the period
November 4, 1996 through December 31, 1996. The lease provides for, among other
things, annual rental increases of approximately $221,000 beginning in February
1998, $30,000 in September 2000, $473,000 in February 2003, and $64,000 in
September 2005.
Page 59
The following table sets forth a schedule of the lease expirations for
Harborside, beginning January 1, 1997, assuming that none of the tenants
exercise renewal options:
Percentage Annual Avg. Annual
Net of Total Base Rent Rent Per Net
Number of Rentable Area Leased Sq. Ft. Under Expiring Rentable Sq. Ft.
Year of Leases Subject to Expiring Represented Leases Represented by
Expiration Expiring(1) Leases (Sq.Ft.) Leases (%.)(2) ($000) (3) Expir.Leases
---------- ----------- --------------- -------------- ---------- ------------
1997 2 19,540 1.16 428 $21.90
1998 5 415,233 24.65 3,222 7.76
1999 7 85,209 5.06 1,986 23.31
2000 8 296,057 17.58 5,921 20.00
2001 2 69,996 4.16 1,679 23.99
2003 1 6,299 0.37 166 26.35
2004 1 24,729 1.47 590 23.86
2005 4 114,641 6.81 1,688 14.72
2006 5 85,389 5.07 1,740 20.38
2007 and Thereafter 8 567,392 33.67 12,188 21.48
-- --------- ------ ------ -------
Total/Weighted
Average 43 1,684,485 100.00 29,608 17.58
== ========= ====== ====== -------
- -------------------------------------
(1) Includes office tenants only. Excludes leases for amenities, retail, parking
and month-to-month office tenants.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent, calculated in accordance with GAAP,
including all leases dated on or before December 31, 1996.
The aggregate tax basis of depreciable real property at Harborside for federal
income tax purposes was approximately $254 million as of December 31, 1996.
Depreciation and amortization are computed on the declining balance and
straight-line methods over the estimated useful life of the real property which
range from 31.5 to 39 years. There is no depreciable personal property
associated with Harborside for federal income tax purposes as of December 31,
1996. Depreciation and amortization are computed on the double declining balance
method over the estimated useful life of the personal property of five to seven
years.
Page 60
Tax abatements for Harborside were obtained in 1988 by the former owner of the
property from the City of Jersey City under the Fox-Lance Program and were
assumed by the Company as part of the acquisition of Harborside on November 4,
1996. The abatements, which commenced in 1990, are for a term of 15 years. The
Company is required to pay municipal services equal to two percent of Total
Project Costs, as defined, in year one and increase by $75,000 per annum through
year fifteen. Total Project Costs, as defined, are $148.7 million. The service
charges for the remaining undeveloped parcels will be equal to two percent of
Total Project Costs for each unit in year one and increase to three percent by
year fifteen.
The Company's Real Estate Markets.
The Company's Properties are strategically located in a contiguous area from
Philadelphia, Pennsylvania to Stamford, Connecticut. The following is a
discussion of the markets within which the Company's properties are located:
Northern New Jersey: The Northern New Jersey market consists of Bergen, Essex,
Hudson, Morris and Passaic Counties. Northern New Jersey's five counties are
part of the greater New York metropolitan area, are less than a 45 minute drive
from Manhattan, and are widely regarded as major centers for corporate and
international business. The region has direct access to New York City by public
transportation and extensive road networks. In addition to being home to the two
largest cities in New Jersey, Newark and Jersey City, Newark International
Airport and the New York/New Jersey Harbor are also located within the
five-county boundary.
Overall vacancy rates have declined in the Northern New Jersey market for the
fourth consecutive year as a direct result of an increase in leasing activity
and net absorption levels. Although some built-to-suit activity is present,
speculative construction remains virtually nonexistent. The Company owns and
operates approximately 4.5 million square feet of office and office/flex space
in Northern New Jersey.
Central New Jersey: The Central New Jersey market consists of Union, Somerset,
Hunterdon, Middlesex, Mercer and Monmouth Counties. Encompassing approximately
2,000 square miles in six counties, Central New Jersey is notable for its
proximity to major highway arteries like Interstates 78 and 287, Route 1, the
Garden State Parkway and the New Jersey Turnpike. This market continues to be a
prime location for Fortune 500 headquarters, research & development operations
and financial, insurance and real estate (FIRE) sector businesses.
Central New Jersey vacancy rates are decreasing while average asking rents are
increasing. This is, in part, attributable to the increase in demand, measured
by leasing activity, which rose predominantly due to corporate expansions. The
Company owns and operates approximately 1.6 million square feet of office and
office/flex space in the Central New Jersey Counties of Union, Somerset, Mercer
and Monmouth.
Southern New Jersey: The Southern New Jersey market consists of Burlington,
Camden, Atlantic, Ocean, Gloucester, Salem, Cumberland and Cape May Counties.
This market has extensive geographic boundaries, stretching from the Delaware
River and Philadelphia, to the Atlantic Ocean and Atlantic City. The region is
mainly suburban, with the exception of Camden County, which is home to many
affluent communities, and Atlantic City, one of the nation's largest centers for
gaming/tourism.
Page 61
The Company owns and operates 80,000 square feet of office space in Atlantic
County and a 327-unit multi family residential complex in Burlington County.
Suburban Philadelphia, Pennsylvania: The Suburban Philadelphia market consists
of Bucks, Chester, Delaware, Montgomery, Lehigh and Northampton Counties. These
six surround the City of Philadelphia, are home to many affluent communities and
are regarded as major centers for corporate and international business. The
areas are served by an extensive highway network allowing easy access to
Philadelphia International Airport and the Port of Philadelphia.
Over the last few years the overall vacancy rate in this region has declined and
in 1996, the rate dipped below 10 percent for the first time as a result of
strong leasing activity and virtually no new construction. The Company owns and
operates approximately 761,000 square feet in Suburban Philadelphia.
Rockland County, New York: Rockland County, New York is located north of the New
Jersey/New York border directly adjacent to Bergen County. Rockland County has
excellent highway access to both New York City via Interstate 87 and to New
Jersey via Interstate 287.
The Company owns and operates a 180,000 square foot office property in Rockland
County.
Westchester County, New York: Westchester County, New York, is located
immediately north of New York City. There is access to the City by public
transportation and through an extensive road network. The vacancy rate in
Westchester County has declined steadily over the last three years as the office
market has absorbed 3 million square feet that IBM, A.T.& T. and NYNEX vacated
from 1989 to 1993. Speculative construction has been virtually non-existent
during the past five years.
The Company owns and operates approximately 1.6 million square feet of office
space, approximately 1.6 million square feet of office/flex space, approximately
386,000 square feet of industrial/warehouse space and a 124-unit residential
multifamily property in Westchester County, New York. The Company entered this
market for the first time with the RM Acquisition.
Fairfield County, Connecticut: Fairfield County, Connecticut is the county in
Connecticut closest in proximity with New York City. It has direct access to the
City via public transportation and through an extensive road network. The county
is home to ten Fortune 500 headquarters and there has been a substantial decline
in vacancy during the past two years.
The Company owns approximately 166,000 square feet of office/flex space in
Fairfield County. The Company entered this market for the first time with the RM
Acquisition.
Page 62
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to its business, to which the Company is a party or to
which any of its Properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders in the
fourth quarter of the fiscal year ending December 31, 1996.
Page 63
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CLI.
Market Information. The Company's Common Stock has been traded on the New York
Stock Exchange ("NYSE") since August 25, 1994. The high, low, and close price
per share of Common Stock for the years ended December 31, 1995 and 1996 are as
follows:
For the Year Ended December 31, 1995:
High Low Close
---- --- -----
First Quarter $17.375 $15.500 $17.375
Second Quarter $19.375 $16.500 $19.375
Third Quarter $20.250 $18.875 $20.250
Fourth Quarter $22.500 $19.125 $21.875
For the Year Ended December 31, 1996:
High Low Close
---- --- -----
First Quarter $23.625 $20.750 $22.375
Second Quarter $24.625 $21.500 $24.250
Third Quarter $27.125 $22.625 $27.125
Fourth Quarter $30.875 $26.125 $30.875
On February 28, 1997, the closing stock sales price on the NYSE was $32.00 per
share.
Holders. The approximate number of holders of record of the shares of the
Company's Common Stock was 244 as of February 28, 1997.
Dividends and Distributions. As a result of the Company's improved operating
performance, in September 1996 the Company announced a 5.9 percent increase in
its regular quarterly distribution, commencing with the Company's distribution
with respect to the third quarter of 1996, from $.425 per share to $.450 per
share of Common Stock ($1.80 per share of Common Stock on an annualized basis).
The Company declared a cash dividend of $.450 per share on December 20, 1996, to
stockholders of record on January 4, 1997. Also on that date, the Company
declared a cash distribution to the limited partners in the Operating
Partnership that was equivalent to $.450 per share. The dividend and
distribution were paid on January 19, 1997. The declaration and payment of
dividends and distributions will continue to be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition, capital requirements, applicable legal
restrictions and other factors.
Page 64
ITEM 6. SELECTED FINANCIAL DATA
CALI REALTY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following table sets forth selected financial data on a consolidated
basis for the Company and on a combined basis for the Cali Group. The
consolidated selected financial data of the Company as of December 31, 1996,
1995 and 1994 and for the years ended December 31, 1996 and 1995, and for the
period from August 31, 1994 to December 31, 1994 and the combined selected
financial data of the Cali Group as of December 31, 1993 and 1992, and for the
periods ended August 30, 1994, December 31, 1993 and 1992 have been derived from
the Company's financial statements.(1)
OPERATING DATA: The Company The Cali Group
---------------------------------- -----------------------------------
(in thousands, except per share data) August 31, January 1,
Year Ended 1994 to 1994 to Year Ended
December 31, December 31, August 30, December 31,
1996 1995 1994 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues $95,472 $62,335 $16,841 $33,637 $47,900 $45,300
Operating and other expenses $29,662 $20,705 $ 5,240 $11,155 $16,408 $15,163
General and administrative $ 5,800 $ 3,712 $ 1,079 $ 2,288 $ 2,618 $ 2,773
Depreciation and amortization $15,812 $12,111 $ 3,764 $ 5,454 $ 8,231 $ 7,640
Interest expense $12,677 $ 8,661 $ 1,768 $13,608 $21,707 $21,896
Income (loss) before gain on sale of rental property,
minority interest and extraordinary items $31,521 $17,146 $ 4,990 $ (110) $(1,064) $(2,172)
Gain on sale of rental property $ 5,658 $ -- $ -- $ -- $ -- $ --
Income (loss) before extraordinary items $32,419 $13,638 $ 3,939 $ (110) $(1,064) $(2,172)
Net income per common share $1.73 $1.23 $0.38
Dividends declared per common share $1.75 $1.66 $0.54
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA: The Company The Cali Group
(in thousands) ----------------------------------- --------------------------------
December 31, December 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Rental property, before accumulated
depreciation and amortization $ 853,352 $387,675 $234,470 $213,675 $210,407
Total assets $1,026,328 $363,949 $225,295 $208,828 $208,863
Mortgages and loans payable $ 268,010 $135,464 $ 77,000 $231,981 $230,385
Total liabilities $ 297,985 $150,058 $ 88,081 $243,163 $241,052
Stockholders' equity (partners' deficit) $ 701,379 $185,808 $108,311 $(34,355) $(32,189)
- ------------------------------------------------------------------------------------------------------------------------------------
See footnotes on subsequent page.
Page 65
CALI REALTY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
OTHER DATA: The Company The Cali Group
---------------------------------- -----------------------------------
(in thousands) August 31, January 1,
Year Ended 1994 to 1994 to Year Ended
December 31, December 31, August 30, December 31,
1996 1995 1994 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by operating activities $ 46,823 $ 28,446 $ 6,367 $ 6,328 $ 2,735 $ 5,883
Cash flows (used in) provided
by investing activities $(307,752) $(133,736) $(8,947) $ 1,975 $(3,227) $(5,633)
Cash flows provided by
(used in) financing activities $ 464,769 $ 99,863 $ 8,974 $(1,038) $ (886) $ 5,283
Funds from Operations after straight-lining
of rents before minority interest of
unitholders (2) $ 45,220 $ 27,397 $ 8,404
- ------------------------------------------------------------------------------------------------------------------------------------
(1) See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
(2) The Company considers Funds from Operations ("FFO"), after adjustment for straight-lining of rents, one measure of real estate
investment trust ("REIT") performance. FFO is defined as net income (loss) before minority interest of unitholders computed in
accordance with Generally Accepted Accounting Principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate-related depreciation and amortization. FFO should not be considered as an alternative for
net income as an indication of the Company's performance or to cash flows as a measure of liquidity. FFO presented herein is
not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies
use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current
definition of the National Association of Real Estate Investment Trusts ("NAREIT"), as published in March 1995, after the
adjustment for straight-lining of rents.
Page 66
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CALI REALTY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Company's Financial Statements and the Notes thereto.
The Company was incorporated on May 24, 1994, as a Maryland corporation, and
commenced operations effective with the completion of its Initial Public
Offering ("IPO") on August 31, 1994, which was simultaneous with effecting a
business combination with the Cali Group (not a legal entity). The Cali Group
was engaged in development, ownership and operation of a portfolio of twelve
office buildings and one multi-family residential property, all located in New
Jersey.
Following the IPO, during 1994 and 1995, the Company acquired 28 office and
office/flex properties, aggregating approximately 1.7 million square feet, for a
total cost of $157.5 million. The financing for the 1994 and 1995 acquisitions
was primarily facilitated by a public stock offering in November 1995 (from
which the Company raised $72.5 million in net proceeds) and funds made available
from the Company's credit facility. Additionally, in conjunction with one of the
1995 acquisitions, the Company issued 93,458 Units in the Operating Partnership
and assumed an $18.8 million mortgage loan.
At the end of 1995, the Company's portfolio of 39 Class A office and
office/flex properties, and one multi-family residential property, were located
in New Jersey, except for one office property located in Rockland County, New
York. The Company's portfolio at December 31, 1995 aggregated approximately 3.9
million square feet, which was an increase of 78 percent over the Company's
portfolio square feet at its IPO.
In 1996, the Company acquired 15 office and office/flex properties,
aggregating approximately 3.3 million square feet, for a total cost of $459.4
million. The financing for the 1996 acquisitions was facilitated by two public
stock offerings in 1996, from which the Company raised an aggregate of $518.2
million in net proceeds, and the assumption of $150.0 million in mortgage
financing in connection with the acquisition of the Harborside Financial Center
("Harborside").
At the end of 1996, the Company's portfolio of 56 office and office/flex
properties, and a multi-family residential property, was located primarily in
New Jersey, except for seven office properties acquired in 1996 in suburban
Philadelphia, and one office property located in Rockland County, New York. The
Company's portfolio at December 31, 1996 aggregated 7.1 million square feet,
which represented an increase of 82 percent over the Company's portfolio square
feet at December 31, 1995.
As a result of the acquisitions by the Company in 1995 and 1996, the
operating results of the Company during such periods are not
directly comparable.
Page 67
RESULTS OF OPERATIONS
The following comparisons for the year ended December 31, 1996 ("1996"), as
compared to the year ended December 31, 1995 ("1995") and for 1995 as compared
to the twelve month period ended December 31, 1994 makes reference to the
following: (i) the effect of the "Initial Properties," which represent all
properties owned by the Company at December 31, 1994, (ii) the effect of the
"Acquired Properties," which represent all properties acquired since January 1,
1995, and (iii) the effect of the "Disposition," which refers to the Company's
sale of Essex Road on March 20, 1996.
Year Ended December 31, 1996 Compared to
Year Ended December 31, 1995
Total revenues increased $33.1 million, or 53.2 percent, for 1996 over 1995.
Base rents increased $26.1 million, or 51.4 percent, of which an increase of
$26.4 million, or 52.0 percent, was attributable to the Acquired Properties, and
an increase of $0.9 million, or 1.8 percent, as a result of occupancy changes at
the Initial Properties, offset by a decrease of $1.2 million, or 2.4 percent, as
a result of the Disposition. Escalations and recoveries increased $4.9 million,
or 51.8 percent, of which an increase of $4.6 million, or 49.0 percent, was
attributable to the Acquired Properties, and $0.4 million, or 4.0 percent, as a
result of occupancy changes at the Initial Properties, offset by a decrease of
$0.1 million, or 1.2 percent, due to the Disposition. Interest income increased
$1.6 million for 1996 over 1995, due primarily to the funds held at December 31,
1996 from the Company's common stock offering in November 1996. Parking and
other income increased $0.5 million, or 29.5 percent, of which $0.3 million, or
17.9 percent, was attributable to the Initial Properties, and $0.3 million, or
15.9 percent, due to the Acquired Properties, offset by a decrease of $0.1
million, or 4.3 percent, due to the Disposition.
Total expenses for 1996 increased $18.7 million, or 41.5 percent, as compared
to 1995. Real estate taxes increased $3.5 million, or 60.4 percent, for 1996
over 1995, of which $3.6 million, or 60.9 percent, was a result of the Acquired
Properties, and $0.1 million, or 2.6 percent, related to the Initial Properties,
offset by a decrease of $0.2 million, or 3.1 percent, due to the Disposition.
Additionally, operating services increased $3.6 million, or 42.4 percent, and
utilities increased $1.8 million, or 28.6 percent. The aggregate increase in
operating services and utilities of $5.4 million, or 36.5 percent, consists of
$5.9 million, or 39.9 percent, attributable to the Acquired Properties, offset
by a decrease of $0.5 million, or 3.5 percent, as a result of the Disposition.
General and administrative expense increased $2.1 million, or 56.3 percent, of
which $2.2 million, or 57.5 percent, is primarily attributable to an increase in
payroll and related costs as a result of the Company's expansion in 1996, offset
by a decrease of $0.1 million, or 1.2 percent, due to the Disposition.
Depreciation and amortization increased $3.7 million, or 30.6 percent, for 1996
over 1995, of which $4.4 million, or 36.7 percent, related to depreciation on
the Acquired Properties, offset by decreases of $0.5 million, or 4.1 percent,
for amortization of deferred financing costs due to reduction in debt
outstanding on the Initial Properties, and $0.2 million, or 2.0 percent, as a
result of the Disposition. Interest expense increased $4.0 million, or 46.4
percent, primarily due to an increase in the average outstanding borrowings on
the Company's credit facilities during 1996 over 1995 in connection with an
increase in property acquisitions, as well as the increase in mortgage
indebtedness assumed in connection with the acquisition of Harborside.
Page 68
Income before gain on sale of rental property, minority interest and
extraordinary item increased to $31.5 million in 1996 from $17.1 million in
1995. The increase of $14.4 million was due to the factors discussed above.
Net income increased $18.3 million for 1996, from $13.6 million in 1995 to
$31.9 million in 1996, as a result of an increase in income before gain on sale
of property, minority interest and extraordinary item of $14.4 million and a
gain on sale of the Disposition property of $5.7 million, offset by the increase
in minority interest of $1.3 million and the recognition in 1996 of an
extraordinary loss for the early retirement of debt of $0.5 million (net of
minority interest's share of $0.1 million).
Year Ended December 31, 1995 Compared to
Year Ended December 31, 1994
The following comparison is for Cali Realty Corporation Consolidated
Operations for the year ended December 31, 1995 as compared to Cali Realty
Corporation Consolidated Operations for the period August 31, 1994 to December
31, 1994, plus Cali Group Combined Operations for the period January 1, 1994 to
August 30, 1994 (collectively, "1994").
Total revenues increased $11.9 million, or 23.5 percent, for 1995 over 1994.
Base rents increased $10.4 million, or 25.6 percent, of which $9.3 million, or
22.8 percent, was attributable to the Acquired Properties and $1.1 million, or
2.8 percent, was due to increased occupancy at the Initial Properties.
Escalations and recoveries increased $1.4 million, or 17.6 percent, of which
$1.1 million, or 13.6 percent, was attributable to the Acquired Properties and
$0.3 million, or 4.0 percent, to the Initial Properties.
Total expenses for 1995 decreased $0.4 million from 1994. Interest expense
decreased $6.7 million, or 43.7 percent, primarily due to the reduction in
indebtedness resulting from the repayment of the mortgages and loans in
connection with the IPO. Additionally, in 1994, the Cali Group recognized an
expense of $0.7 million, in connection with the settlement of a tenant
participation agreement and ground rent of $0.6 million was eliminated as a
result of the purchase by the Company of the land previously leased.
These decreases were partially offset by an increase in depreciation and
amortization of $2.9 million, or 31.4 percent, for 1995 over 1994. This increase
is primarily attributable to increases of $1.9 million in rental property
depreciation, of which $1.3 million is attributable to the Acquired Properties,
and increases of $0.7 million in amortization of costs relating to the Mortgage
Financing and $0.3 million related to amortization of leasing-related costs. In
addition, utilities increased $1.5 million, or 29.8 percent, of which $1.1
million, or 23.5 percent, is attributable to the Acquired Properties; real
estate taxes increased $0.9 million, or 18.0 percent, of which $1.1 million, or
21.8 percent, was attributable to the Acquired Properties offset by a decrease
of $0.2 million, or 3.8 percent, for the Initial Properties; operating services
increased $2.0 million, or 29.9 percent, of which $1.4 million, or 20.9 percent,
was attributable to the Acquired Properties, and general and administrative
costs increased $0.3 million as a result of increased salaries and benefits.
Income before gain on sale of rental property, minority interest and
extraordinary item increased to $17.1 million for 1995 from $4.9 million for
1994. The increase of $12.2 million was due to the factors discussed above.
Page 69
Net income decreased $2.0 million from $15.7 million in 1994 to $13.6 million
in 1995 as a result of recognition in 1994 of an $11.9 million extraordinary
gain primarily due to the early retirement of indebtedness at less than carrying
value.
LIQUIDITY AND CAPITAL RESOURCES
Statement of Cash Flows
During the year ended December 31, 1996, the Company generated $46.8 million
in cash flow from operating activities, and, together with $518.2 million in net
proceeds from its common stock offerings in 1996, $10.3 million of proceeds from
the sale of a rental property, $2.0 million in proceeds from stock options
exercised, and funds from escrow cash balances relating to the Mortgage
Financing of $0.1 million, used an aggregate $577.4 million to (i) purchase 15
rental properties for $304.2 million, (ii) complete construction of two
office/flex properties for $2.7 million, (iii) acquire land for future
development, tenant improvements and building improvements for $11.3 million
(including $2.9 million for tenant improvement costs incurred in connection with
the DLJ Expansion and $1.8 million in tenant improvement costs in connection
with the leasing of 62,275 square feet to Berlitz International Inc. at the
Company's 400 Alexander Park, Princeton, Mercer County, New Jersey office
property), (iv) pay quarterly dividends and distributions of $32.4 million, (v)
prepay a portion of its mortgage notes and prepayment penalties and other
related costs for $5.8 million, (vi) pay the amortization on mortgage principal
of $0.3 million, (vii) reduce its outstanding borrowings on its credit
facilities by a net amount of $16.9 million, and (viii) increase its cash and
cash equivalents balance by $203.8 million.
Acquisition and Development Activity
On March 20, 1996, the Company sold its office building located at 15 Essex
Road in Paramus, Bergen County, New Jersey ("Essex Road") and concurrently
acquired a 96,000 square foot office building at 103 Carnegie Center in
Princeton, Mercer County, New Jersey. The concurrent transactions with unrelated
parties qualified as a tax-free exchange, as the Company used substantially all
of the proceeds from the sale of Essex Road to acquire the Princeton property.
The financial statements for the year ended December 31, 1996 include a gain of
$5.7 million relating to this transaction.
On May 2, 1996, the Company acquired Rose Tree Corporate Center, a
two-building suburban office complex totaling 260,000 square feet, located in
Media, Delaware County, Pennsylvania, for approximately $28.1 million, which was
drawn from one of the Company's credit facilities.
During the second quarter of 1996, the Company completed its construction of
tenant improvements to 400 Alexander Park, a three-story, 70,550 square foot
office building located in Princeton, Mercer County, New Jersey, which the
Company acquired in December 1995 and leased the property in its entirety to
Berlitz International Inc. Also during the second quarter of 1996, the Company
entered into a lease agreement with Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") for an additional 73,200 square feet of office space located
at 95 Christopher Columbus Drive in Jersey City, increasing DLJ's occupancy to
approximately 66 percent of the property.
Page 70
On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two
suburban office buildings totaling 115,000 square feet, located in Basking
Ridge, Somerset County, New Jersey, for approximately $10.5 million, which was
drawn from one of the Company's credit facilities.
On November 4, 1996, the Company acquired Harborside, a 1.9 million square
foot office complex located in Jersey City, Hudson County, New Jersey for
approximately $292.7 million. The acquisition cost included the assumption of
existing and seller-provided mortgage financing aggregating $150.0 million. The
balance of the cost was paid primarily in cash and was financed substantially
through drawings from the Company's credit facilities. As part of the purchase,
the Company also acquired 11.3 acres of land fully zoned and permitted for an
additional 4.1 million square feet of development and the water rights
associated with 27.4 acres of land extending into the Hudson River immediately
east of Harborside, including two piers with an area of 5.8 acres.
On November 7, 1996, the Company acquired Five Sentry Parkway East & West, a
two-building office complex comprised of approximately 130,000 square feet
located in Plymouth Meeting, Montgomery County, Pennsylvania for approximately
$12.5 million, which was drawn from one of the Company's credit facilities.
On December 10, 1996, the Company acquired 300 Tice Boulevard, a 230,000
square foot office building located in Woodcliff Lake, Bergen County, New
Jersey, for approximately $35.1 million in cash, made available from the net
proceeds received from the Company's common stock offering in November 1996 (the
"November 1996 Offering").
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 square
foot office building located in Fort Lee, Bergen County, New Jersey, for
approximately $26.9 million in cash, made available from the net proceeds
received from the November 1996 Offering.
On December 17, 1996, the Company acquired the International Court at Airport
Business Center, a three-building office complex comprised of approximately
371,000 square feet located in Lester, Delaware County, Pennsylvania for
approximately $43.2 million in cash, made available from the net proceeds
received from the November 1996 Offering.
In December 1996, the Company completed the construction of two office/flex
properties on vacant land purchased in the Company's Totowa, Passaic County, New
Jersey office park acquired in November 1995. The two properties, which were 25
percent leased at December 31, 1996, aggregated 47,100 square feet, and were
constructed for an aggregate cost of $2.7 million.
On January 28, 1997, the Company acquired 1345 Campus Parkway, a 76,000
square foot office/flex property, located in Wall Township, Monmouth County, New
Jersey, for approximately $6.8 million in cash, made available from the net
proceeds received from the November 1996 Offering. The property is located in
the same office park in which the Company previously acquired two office
properties and four office/flex properties in November 1995.
Page 71
On January 31, 1997, the Company acquired 65 properties (the "RM Properties")
of Robert Martin Company LLC and affiliates ("RM"), for a total cost of
approximately $450.0 million. The cost of the transaction was financed through
the assumption of $185.3 million in mortgage indebtedness, approximately $220.0
million in cash, substantially all of which was obtained from the Company's cash
reserves, and the issuance of 1,401,225 Units in the Operating Partnership.
The RM Properties consist primarily of 54 office and office/flex properties
aggregating approximately 3.7 million square feet and six industrial/warehouse
properties aggregating approximately 400,000 square feet. The RM Properties are
located primarily in established business parks in Westchester County, New York
and Fairfield County, Connecticut. The Company has agreed not to sell certain of
the RM Properties for a period of seven years without the consent of the RM
principals, except for sales made under certain circumstances and/or conditions.
In connection with the RM transaction, the Company was granted a three-year
option to acquire a 115,000 square foot office property and an 84,000 square
foot office/flex property (the "Option Properties") for an aggregate minimum
price of $19.0 million and has granted RM the right to put such properties to
the Company between a range of an aggregate purchase price of $11.6 million to
$21.3 million, under certain conditions. The purchase prices, under the
agreement, are subject to adjustment based on different formulas and are payable
in cash or Units.
Financing Activities
Mortgage Debt, Credit Facilities and Interest Rate Swaps
Concurrent with the IPO, the Company's initial operating subsidiaries, which
own the Initial Properties, issued five-year mortgage notes with an aggregate
principal balance of $144.5 million secured and cross-collateralized by the
Initial Properties to an affiliate ("PSI") of Prudential Securities Inc. PSI
then issued commercial mortgage pay-through bonds ("Bonds") collateralized by
the mortgage notes. Bonds with an aggregate principal balance of $70.0 million
were purchased by unrelated third parties. Bonds with an aggregate principal
balance of $74.5 million were purchased by the Company. As a result, the
Company's initial mortgage financing was $70.0 million (the "Mortgage
Financing"). Approximately $38.0 million of the Mortgage Financing is guaranteed
under certain conditions by certain partners of the Cali Group partnerships
which owned the Initial Properties. The Mortgage Financing requires monthly
payments of interest only, with all principal and any accrued but unpaid
interest due in August 1999. $46.0 million of the $70.0 million Mortgage
Financing bears interest at a net cost to the Company equal to a fixed rate of
8.02 percent per annum and the remaining $24.0 million bears interest at a net
cost to the Company equal to a floating rate of 100 basis points over one-month
LIBOR (5.53 percent at December 31, 1996) with a lifetime interest rate cap of
11.6 percent. Pursuant to the terms of the Mortgage Financing, the Company is
required to escrow $143,000 per month for tenant improvements and leasing
commissions and $53,000 per month for capital improvements.
In advance of the sale of Essex Road, on March 12, 1996, the Company prepaid
$5.5 million ($1.7 million-fixed rate, $3.8 million-floating rate debt) of the
Mortgage Financing, resulting in outstanding balances of $44.3 million for the
8.02 percent fixed rate debt and $20.2 million for the floating rate debt.
Page 72
At the IPO, the Company obtained a $70.0 million revolving credit facility
from Prudential Securities Credit Corp.("PSC") (the "First Prudential
Facility"), which may be used to fund acquisitions and new development projects
and for general working capital purposes, including capital expenditures and
tenant improvements. In connection with the Mortgage Financing, the Company
obtained a $6.0 million letter of credit, secured by the First Prudential
Facility, to meet certain tenant improvement and capital expenditure reserve
requirements. The First Prudential Facility bore interest at a floating rate
equal to 150 basis points over one-month LIBOR for January 1, 1996 through
August 31, 1996. Effective September 1, 1996, the interest rate was reduced to a
floating rate equal to 125 basis points over one-month LIBOR. The First
Prudential Facility is a recourse liability of the Operating Partnership and is
secured by a pledge of the $74.5 million Bonds held by the Company. The First
Prudential Facility requires monthly payments of interest only, with outstanding
advances and any accrued but unpaid interest due November 30, 1997 and is
subject to renewal at the lender's sole discretion. Subsequent to December 31,
1996 and through March 1, 1997, the Company did not draw any additional funds
from the First Prudential Facility.
In connection with the acquisition of an office building in Fair Lawn, Bergen
County, New Jersey on March 3, 1995, the Company assumed an $18.8 million
non-recourse mortgage loan ("Fair Lawn Mortgage") bearing interest at a fixed
rate of 8.25 percent per annum. The loan requires payment of interest only
through March 15, 1996 and payment of principal and interest thereafter, on a
20-year amortization schedule, with the remaining principal balance due October
1, 2003. For the year ended December 31, 1996, the Company paid $319,000 for
amortization of principal on the Fair Lawn Mortgage.
On May 24, 1995, the Company entered into an interest rate swap agreement
with a commercial bank. The swap agreement fixes the Company's one-month LIBOR
base to a fixed 6.285 percent per annum on a notional amount of $24.0 million
through August 1999.
On January 23, 1996, the Company entered into an interest rate swap agreement
with one of the participating banks in the Bank Facility. The swap agreement has
a three-year term and a notional amount of $26.0 million, which fixes the
Company's one-month LIBOR base to 5.265 percent on its floating rate credit
facilities.
On February 1, 1996, the Company obtained a credit facility (the "Bank
Facility"), secured by certain of its properties, in the amount of $75.0 million
from two participating banks. The Bank Facility has a three-year term and bears
interest at 150 basis points over one-month LIBOR. The terms of the Bank
Facility include certain restrictions and covenants which limit, among other
things, dividend payments and additional indebtedness and which require
compliance with specified financial ratios and other financial measurements. The
Bank Facility also requires a fee equal to one quarter of one percent of the
unused balance payable quarterly in arrears.
Page 73
In connection with the acquisition of Harborside, on November 4, 1996, the
Company assumed existing mortgage debt and was provided seller-mortgage debt
aggregating $150.0 million. The existing financing of approximately $107.5
million bears interest at a fixed rate of 7.32 percent for a term of
approximately nine years. The seller-provided financing of approximately $42.5
million also has a term of nine years and initially bears interest at a rate of
6.99 percent. The interest rate on the seller-provided financing will be reset
at the end of the third and sixth loan years based on the yield of the
three-year treasury obligation at that time, with spreads of 110 basis points in
years four through six and 130 basis points in years seven through maturity.
As part of the Harborside acquisition, the Company agreed to make payments
(with an estimated net present value of approximately $5.3 million) to the
seller for development rights ("Contingent Obligation") if and when the Company
commences construction on the acquired site during the next several years.
However, the agreement provides, among other things, that even if the Company
does not commence construction, the seller may nevertheless require the Company
to acquire these rights during the six-month period after the end of the sixth
year. After such period, the seller's option lapses, but any development in
years 7 through 30 will require a payment, on an increasing scale, for the
development rights.
On November 4, 1996, the Company obtained a revolving credit facility
("Second Prudential Facility") from PSC totaling $80.0 million which bears
interest at 125 basis points over one-month LIBOR, and matures on January 15,
1998, unless the Company or PSC elects to extend the maturity date to not
earlier than June 30, 1998, or the facility is refinanced prior to such date at
the election of either the Company or PSC. The Second Prudential Facility is a
recourse liability of the Operating Partnership and is secured by the Company's
equity interest in Harborside. The terms of the Second Prudential Facility
include certain restrictions and covenants that limit, among other things,
dividend payments and additional indebtedness and that require compliance with
specified financial ratios and other financial measurements.
In connection with the RM transaction on January 31, 1997, the Company
assumed a $185.3 million non-recourse mortgage loan with Teachers Insurance and
Annuity Association of America with interest only payable monthly at a fixed
annual rate of 7.18 percent (the "TIAA Mortgage"). The TIAA Mortgage is secured
and cross-collateralized by 43 of the RM Properties and matures on December 31,
2003. The Company, at its option, may convert the TIAA Mortgage to unsecured
public debt upon achievement by the Company of an investment credit rating of
Baa3/BBB- or better. The TIAA Mortgage is prepayable in whole or in part subject
to certain provisions, including yield maintenance.
Common Stock Offerings and Shelf Registrations
On May 13, 1996, the stockholders approved an increase in the authorized
shares of common stock in the Company from 25 million to 95 million.
On July 29, 1996, the Company filed a shelf registration statement (File No.
333-09081) with the Securities and Exchange Commission ("SEC") for an aggregate
amount of $500.0 million in equity securities of the Company. The registration
statement was declared effective by the SEC on August 2, 1996.
Page 74
On August 13, 1996, the Company sold 3,450,000 shares of its common stock
through a public stock offering (the "August 1996 Offering"), which included an
exercise of the underwriters' over-allotment option of 450,000 shares. Net
proceeds from the August 1996 Offering (after offering costs) were approximately
$76.8 million. The offering was conducted using one underwriter and the shares
were issued from the Company's $250.0 million shelf registration statement (File
No. 33-96538).
Pursuant to the Company's Registration Statement on Form S-3 (File No.
333-09081), on November 22, 1996, the Company completed an underwritten public
offer and sale of 17,537,500 shares of its common stock using several different
underwriters to underwrite such public offer and sale (which included an
exercise of the underwriters' over-allotment option of 2,287,500 shares). The
Company received approximately $441.2 million in net proceeds (after offering
costs) from the November 1996 Offering, and used such funds to acquire certain
of the Company's property acquisitions in November and December, pay down
outstanding borrowings on its revolving credit facilities, and invested the
excess funds in Overnight Investments.
On December 31, 1996, the Company filed a shelf registration statement (File
No. 333-19101) with the SEC for an aggregate amount of $1.0 billion in equity
securities of the Company. The registration statement was declared effective by
the SEC on January 7, 1997.
STRATEGIC PLAN
Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures. Management believes that the Company will
have access to the capital resources necessary to expand and develop its
business. To the extent that the Company's cash flow from operating activities
is insufficient to finance its non-recurring capital expenditures such as
property acquisition costs and other capital expenditures, the Company expects
to finance such activities through the credit facilities and other debt and
equity financing.
The Company presently has no plans for major capital improvements to the
existing properties, other than normal recurring expenditures.
The Company expects to meet its short-term liquidity requirements generally
through its working capital and net cash provided by operating activities along
with the First Prudential Facility, the Bank Facility and the Second Prudential
Facility. The Company is frequently examining potential property acquisitions
and, at any one given time, one or more of such acquisitions may be under
consideration. Accordingly, the ability to fund property acquisitions is a major
part of the Company's financing requirements. The Company expects to meet its
financing requirements through funds generated from operating activities,
long-term or short-term borrowings (including draws on the Company's credit
facilities), and the issuance of debt securities or additional equity
securities. In addition, the Company anticipates utilizing the First Prudential
Facility, the Bank Facility and the Second Prudential Facility primarily to fund
property acquisition activities.
Page 75
The Company does not intend to reserve funds to retire the existing Mortgage
Financing, indebtedness under the credit facilities or other mortgages and loans
payable upon maturity. Instead, the Company will seek to refinance such debt at
maturity or retire such debt through the issuance of additional equity
securities. The Company anticipates that its available cash and cash equivalents
and cash flows from operating activities, together with cash available from
borrowings and other sources, will be adequate to meet the Company's capital and
liquidity needs both in the short and long-term. However, if these sources of
funds are insufficient or unavailable, the Company's ability to make the
expected distributions discussed below may be adversely affected.
To maintain its qualification as a real estate investment trust, the Company
must make annual distributions to its stockholders of at least 95 percent of its
REIT taxable income, excluding the dividends paid deduction and net capital
gains. Moreover, the Company intends to continue to make regular quarterly
distributions to its stockholders which, based upon current policy, in the
aggregate would equal approximately $66.0 million on an annual basis. However,
any such distribution, whether for federal income tax purposes or otherwise,
would only be paid out of available cash after meeting both operating
requirements and scheduled debt service on mortgages and loans payable and
required annual capital expenditure reserves pursuant to its mortgage indenture.
FUNDS FROM OPERATIONS
The Company considers Funds from Operations ("FFO") after adjustment for the
straight-lining of rents one measure of REIT performance. FFO is defined as net
income (loss) before minority interest of unitholders, computed in accordance
with Generally Accepted Accounting Principles, excluding gains (or losses) from
debt restructuring and sales of property, plus real estate-related depreciation
and amortization. FFO should not be considered as an alternative to net income
as an indication of the Company's performance or to cash flows as a measure of
liquidity.
Page 76
FFO for the years ended December 31, 1996 and 1995, as calculated in
accordance with the National Association of Real Estate Investment Trusts
("NAREIT") definition published in March 1995, are summarized in the following
table (in thousands):
Year Ended
December 31,
1996 1995
- -----------------------------------------------------------------
Income before gain on sale of property,
minority interest, and extraordinary item $31,521 $17,146
Add: Real estate-related depreciation
and amortization 14,677 10,563
- ---------------------------------------------------------------
Funds from Operations 46,198 27,709
Deduct: Rental income adjustment for
straight-lining of rents (978) (312)
- ---------------------------------------------------------------
Funds from Operations after adjustment
for straight-lining of rents $45,220 $27,397
===============================================================
Weighted average shares outstanding (1) 21,171 13,986
- ---------------------------------------------------------------
(1) Assumes redemption of all Units, calculated on a weighted average basis,
for shares of common stock in the Company.
INFLATION
The Company's leases with the majority of its tenants provide for recoveries
and escalation charges based upon the tenant's proportionate share of and/or
increases in real estate taxes and certain operating costs, which reduce the
Company's exposure to increases in operating costs resulting from inflation.
Page 77
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
Report of Independent Accountants
To the Board of Directors and
Shareholders of Cali Realty Corporation
and the Partners of the Cali Group
In our opinion, the consolidated and combined financial statements listed in the
index appearing in Item 14(a)(1) and (2) present fairly, in all material
respects, the financial position of Cali Realty Corporation (the "Company") and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for the periods ended December 31, 1996, 1995
and 1994, and the results of operations and cash flows of Cali Group for the
period January 1, 1994 through August 30, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's and Cali Group's management; our responsibility
is to express and opinion on these financial statements based upon our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
- --------------------------
Price Waterhouse LLP
New York, New York
February 18, 1997
Page 78
CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
December 31,
ASSETS 1996 1995
- ----------------------------------------------------------------------------------------
Rental property
Land $ 98,127 $ 38,962
Buildings and improvements 718,466 319,028
Tenant improvements 35,626 28,588
Furniture, fixtures and equipment 1,133 1,097
- ----------------------------------------------------------------------------------------
853,352 387,675
Less -- accumulated depreciation and amortization (68,610) (59,095)
- ----------------------------------------------------------------------------------------
Total rental property 784,742 328,580
Cash and cash equivalents (includes $201,269 in overnight
investments at December 31, 1996) 204,807 967
Unbilled rents receivable 19,705 18,855
Deferred charges and other assets, net of accumulated amortization 11,840 10,873
Restricted cash 3,160 3,229
Accounts receivable, net of allowance of $189 and $134 2,074 1,445
- ----------------------------------------------------------------------------------------
Total assets $1,026,328 $363,949
========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------
Mortgages and loans payable $ 268,010 $135,464
Dividends and distributions payable 17,554 7,606
Accounts payable and accrued expenses 5,068 3,245
Rents received in advance and security deposits 6,025 3,114
Accrued interest payable 1,328 629
- ----------------------------------------------------------------------------------------
Total liabilities 297,985 150,058
- ----------------------------------------------------------------------------------------
Minority interest of unitholders in Operating Partnership 26,964 28,083
- ----------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity
Preferred stock, 5,000,000 shares authorized, none issued
Common stock, $.01 par value, 95,000,000 shares authorized,
36,318,937 and 15,104,725 shares outstanding 363 151
Additional paid-in capital 701,016 185,657
Retained earnings -- --
- ----------------------------------------------------------------------------------------
Total stockholders' equity 701,379 185,808
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,026,328 $363,949
========================================================================================
The accompanying notes are an integral part of these financial statements.
Page 79
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Cali Group
Cali Realty Corporation Consolidated Combined
---------------------------------------- ---------------
Year Ended August 31, 1994 January 1, 1994
December 31, to to
REVENUES 1996 1995 December 31, 1994 August 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Base rents $76,922 $50,808 $13,805 $26,653
Escalations and recoveries from tenants 14,429 9,504 2,523 5,557
Parking and other 2,204 1,702 434 1,121
Interest income 1,917 321 79 306
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 95,472 62,335 16,841 33,637
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate taxes 9,395 5,856 1,680 3,282
Utilities 8,138 6,330 1,522 3,354
Operating services 12,129 8,519 2,038 4,519
General and administrative 5,800 3,712 1,079 2,288
Depreciation and amortization 15,812 12,111 3,764 5,454
Interest expense 12,677 8,661 1,768 13,608
Ground rent -- -- -- 589
Participation agreement settlement -- -- -- 653
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 63,951 45,189 11,851 33,747
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before gain on sale of rental property,
minority interest and extraordinary item 31,521 17,146 4,990 (110)
Gain on sale of rental property 5,658 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest
and extraordinary item 37,179 17,146 4,990 (110)
Minority interest 4,760 3,508 1,051 --
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item 32,419 13,638 3,939 (110)
Extraordinary items-- (loss) gain
(net of minority interest's share of $86 in 1996) (475) -- -- 11,864
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $31,944 $13,638 $3,939 $11,754
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
Page 80
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Cali Realty Corporation Consolidated
----------------------------------------
Year Ended August 31, 1994
December 31, to
1996 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Net income per common share:
Income before extraordinary item --
loss on early retirement of debt $1.76 $1.23 $0.38
Extraordinary item-- loss on early retirement of debt (0.03) -- --
- ------------------------------------------------------------------------------------------------------------------
Net income per common share $1.73 $1.23 $0.38
==================================================================================================================
Dividends declared per common share $1.75 $1.66 $0.54
- ------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 18,461 11,122 10,500
- ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Page 81
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
(in thousands)
Partners'
CALI GROUP COMBINED Deficit
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $(34,335)
Contributions 3,130
Distributions (11,857)
Net income 11,754
- --------------------------------------------------------------------------------------------------------
Balance at August 30, 1994 $(31,308)
- --------------------------------------------------------------------------------------------------------
Additional Total
Common stock Paid-In Retained Stockholders'
CALI REALTY CORPORATION CONSOLIDATED Shares Par Value Capital Earnings Equity
- --------------------------------------------------------------------------------------------------------------------
Net proceeds from IPO 10,500 $105 $165,413 -- $165,518
Adjustments for minority interest of unitholders
in Operating Partnership at IPO -- -- (55,493) -- (55,493)
Net income -- -- -- $ 3,939 3,939
Dividends -- -- (1,714) (3,939) (5,653)
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 10,500 105 108,206 -- 108,311
Purchase of treasury stock (100) (1) (1,594) -- (1,595)
Conversion of 105 Units to shares of common stock 105 1 1,097 -- 1,098
Net income -- -- -- 13,638 13,638
Dividends -- -- (5,600) (13,638) (19,238)
Net proceeds from common stock offering 4,600 46 83,548 -- 83,594
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 15,105 151 185,657 -- 185,808
Conversion of 101 Units to shares of common stock 101 1 1,072 -- 1,073
Net income -- -- -- 31,944 31,944
Dividends -- -- (5,722) (31,944) (37,666)
Net proceeds from common stock offerings 20,987 210 518,009 -- 518,219
Stock options exercised 126 1 2,000 -- 2,001
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 36,319 $363 $701,016 -- $701,379
====================================================================================================================
The accompanying notes are an integral part of these financial statements.
Page 82
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(in thousands)
Cali Group
Cali Realty Corporation Consolidated Combined
---------------------------------------- ---------------
Year Ended August 31, 1994 January 1, 1994
December 31, to to
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995 December 31, 1994 August 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 31,944 $ 13,638 $ 3,939 $ 11,754
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,812 12,111 3,764 5,454
Gain on sale of rental property (5,658) -- -- --
Minority interest 4,760 3,508 1,051 --
Extraordinary item-- loss (gain) 475 -- -- (11,864)
Participation agreement settlement -- -- -- 653
Changes in operating assets and liabilities:
(Increase) decrease in unbilled rents receivable (979) (312) 95 (1,583)
Increase in deferred charges and other assets, net (4,335) (1,678) (3,133) (669)
(Increase) decrease in accounts receivable, net (629) (99) (225) 1,100
Increase in accounts payable and accrued expenses 1,823 35 322 1,005
Increase in rents received in advance and security deposits 2,911 878 162 763
Increase (decrease) in accrued interest payable 699 365 392 (285)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 46,823 28,446 6,367 6,328
===================================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to rental property (318,145) (133,489) (19,804) (2,235)
Proceeds from sale of rental property 10,324 -- -- --
Decrease (increase) in restricted cash 69 (247) (2,204) 809
Cash from contributed assets -- -- 13,061 --
Proceeds from sale of investments -- -- -- 3,401
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (307,752) (133,736) (8,947) 1,975
===================================================================================================================================
Page 83
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(in thousands)
Cali Group
Cali Realty Corporation Consolidated Combined
---------------------------------------- ---------------
Year Ended August 31, 1994 January 1, 1994
December 31, to to
CASH FLOWS FROM FINANCING ACTIVITIES 1996 1995 December 31, 1994 August 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from mortgages and loans payable 272,113 60,402 79,000 16,327
Repayments of mortgages and loans payable (294,819) (20,702) (223,811) (16,571)
Payment of financing costs -- (102) (5,233) (1,952)
Debt prepayment premiums and other costs (312) -- -- --
Purchase of treasury stock -- (1,595) -- --
Proceeds from common stock offerings 518,219 83,594 165,518 --
Proceeds from stock options exercised 2,001 -- -- --
Payment of dividends and distributions (32,433) (21,734) (1,790) --
Proceeds from concurrent placement -- -- 5,175 --
Cash distributions to partners -- -- (5,175) (1,972)
Payments to non-continuing partners in connection with IPO -- -- (4,710) --
Cash contributions from partners of the Cali Group -- -- -- 3,130
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 464,769 99,863 8,974 (1,038)
===================================================================================================================================
Net increase (decrease) in cash and cash equivalents 203,840 (5,427) 6,394 7,265
Cash and cash equivalents, beginning of period 967 6,394 -- 5,796
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 204,807 $ 967 $ 6,394 $ 13,061
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
Page 84
CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Cali Realty Corporation and subsidiaries (the "Company"), a Maryland
corporation, is a fully integrated, self-administered, self-managed real estate
investment trust ("REIT") providing leasing, management, acquisition,
development, construction and tenant-related services for its properties. As of
December 31, 1996, the Company owned and operated 57 properties, consisting of
56 office and office/flex buildings totaling approximately 7.1 million square
feet and a multi-family residential property (the "Properties"). The Properties
are located in New Jersey, New York and Pennsylvania.
The Company was incorporated on May 24, 1994 and commenced operations on
August 31, 1994. On August 31, 1994, the Company completed an initial public
offering ("IPO") and effected a business combination with the Cali Group (not a
legal entity). The Company raised (net of offering costs) approximately $165,518
of capital through the IPO issuing 10,500,000 shares of common stock, and used
the proceeds to acquire a 78.94 percent interest in Cali Realty, L.P. (the
"Operating Partnership") and related entities, which are the successors to the
operations of the Cali Group. In connection with the business combination, the
Operating Partnership assumed net liabilities of $26,133. Prior to the
completion of the business combination with the Company, the Cali Group was
engaged in development, ownership and operation of a portfolio of 12 office
buildings and one multi-family residential property, all located in New Jersey
(the "Original Properties").
Acquisitions
In 1994 and 1995, following the Company's IPO, the Company acquired 28 office
and office/flex properties totaling 1.7 million square feet for approximately
$157,481. These properties are all located in New Jersey, except for one, which
is located in Rockland County, New York.
On March 20, 1996, the Company sold its office building located at 15 Essex
Road in Paramus, Bergen County, New Jersey ("Essex Road") and concurrently
acquired a 96,000 square foot office building at 103 Carnegie Center in
Princeton, Mercer County, New Jersey. The concurrent transactions with unrelated
parties qualified as a tax-free exchange, as the Company used substantially all
of the proceeds from the sale of Essex Road to acquire the Princeton property.
The financial statements for the year ended December 31, 1996 include a gain of
$5,658 relating to this transaction.
In advance of the sale of Essex Road, on March 12, 1996, the Company prepaid
$5,492 of the Mortgage Financing (see Note 5) and obtained a release of the
mortgage liens on the property. On account of prepayment penalties, write-offs
of loan origination fees and costs, legal fees and other costs incurred in the
retirement of the debt, an extraordinary loss of $475, (net of minority
interest's share of the loss ($86)), is recorded for the year ended December 31,
1996.
Page 85
On May 2, 1996, the Company acquired Rose Tree Corporate Center, a
two-building suburban office complex totaling 260,000 square feet, located in
Media, Delaware County, Pennsylvania, for approximately $28,100, which was drawn
from one of the Company's credit facilities.
On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two
suburban office buildings totaling 115,000 square feet, located in Basking
Ridge, Somerset County, New Jersey, for approximately $10,478, which was drawn
from one of the Company's credit facilities.
On November 4, 1996, the Company acquired the property known as the
Harborside Financial Center ("Harborside"), a 1.9 million square foot office
complex located in Jersey City, Hudson County, New Jersey for approximately
$292,670. The acquisition cost included the assumption of existing and
seller-provided mortgage financing aggregating $150,000 (see Note 5). The
balance of the cost was paid in cash and was financed substantially through
drawings from the Company's credit facilities. As part of the purchase, the
Company also acquired 11.3 acres of land fully zoned and permitted for an
additional 4.1 million square feet of development and the water rights
associated with 27.4 acres of land extending into the Hudson River immediately
east of Harborside, including two piers with an area of 5.8 acres.
On November 7, 1996, the Company acquired Five Sentry Parkway East & West, a
two-building office complex comprised of approximately 130,000 square feet
located in Plymouth Meeting, Montgomery County, Pennsylvania for approximately
$12,484, which was drawn from one of the Company's credit facilities.
On December 10, 1996, the Company acquired 300 Tice Boulevard, a 230,000
square foot office building located in Woodcliff Lake, Bergen County, New
Jersey, for approximately $35,112 in cash, made available from the net proceeds
received from the Company's common stock offering in November 1996 (the
"November 1996 Offering").
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 square
foot office building located in Fort Lee, Bergen County, New Jersey, for
approximately $26,901 in cash, made available from the net proceeds received
from the November 1996 Offering.
On December 17, 1996, the Company acquired the International Court at Airport
Business Center, a three-building office complex comprised of approximately
371,000 square feet located in Lester, Delaware County, Pennsylvania for
approximately $43,178 in cash, made available from the net proceeds received
from the November 1996 Offering.
In December 1996, the Company completed the construction of two office/flex
properties on vacant land purchased in the Company's Totowa, Passaic County, New
Jersey office park acquired in November 1995. The two properties, which were 19
percent leased at December 31, 1996, aggregate 47,100 square feet, and were
completed for a total cost of $2,714.
On January 28, 1997, the Company acquired 1345 Campus Parkway, a 76,000
square foot office/flex property, located in Wall Township, Monmouth County, New
Jersey, for approximately $6,800 in cash, made available from the net proceeds
received from the November 1996 Offering. The property is located in the same
office park in which the Company previously acquired two office properties and
four office/flex properties in November 1995.
Page 86
On January 31, 1997, the Company acquired 65 properties (the "RM Properties")
of the Robert Martin Company LLC and affiliates ("RM"), for a total cost of
approximately $450,000. The cost of the transaction was financed through the
assumption of $185,283 mortgage indebtedness, approximately $220,000 in cash,
substantially all of which was obtained from the Company's cash reserves, and
the issuance of 1,401,225 Units in the Operating Partnership.
The RM Properties consist primarily of 54 office and office/flex properties
aggregating approximately 3.7 million square feet and six industrial/warehouse
properties aggregating approximately 400,000 square feet. The RM Properties are
located primarily in established business parks in Westchester County, New York
and Fairfield County, Connecticut. The Company has agreed not to sell certain of
the RM Properties for a period of seven years without the consent of the RM
principals, except for sales made under certain circumstances and/or conditions.
In connection with the RM transaction, the Company was granted a three-year
option to acquire a 115,000 square foot office property and an 84,000 square
foot office/flex property (the "Option Properties") for an aggregate minimum
price of $19,000 and has granted RM the right to put such properties to the
Company between a range of an aggregate purchase price of $11,600 to $21,300,
under certain conditions. The purchase prices, under the agreement, are subject
to adjustment based on different formulas and are payable in cash or Units.
The Company provided an $11,600 non-recourse mortgage loan ("Mortgage
Receivable") to entities controlled by the RM principals, bearing interest at an
annual rate of 450 basis points over the one-month London Inter-Bank Offered
Rate ("LIBOR"). The Mortgage Receivable, which is secured by the Option
Properties and guaranteed by certain of the RM principals, matures on February
1, 2000. In addition, the Company received a three percent origination fee in
connection with the Mortgage Receivable.
In connection with the RM transaction, RM has made certain customary
representations and warranties to the Company, most of which survive the closing
for a period of one year. RM has agreed to maintain a minimum net worth of
$25,000 during such period.
As part of the RM transaction, Brad W. Berger, President and Chief Executive
Officer of RM, and Timothy M. Jones, Chief Operating Officer of RM, joined the
Company as Executive Vice- Presidents under three year employment agreements.
The agreements provide for, among other things, both Berger and Jones to be
issued warrants to purchase 170,000 shares of the Company's common stock at a
price of $33 per share, which vest equally over a three-year period and expire
on January 31, 2007.
Robert F. Weinberg, co-founder of RM, and Berger will serve on the Company's
Board of Directors for an initial term of three years. The Company intends to
appoint two additional independent Board members, thereby increasing the size of
the Board from nine to thirteen members.
Following the transaction, the Company's portfolio consists of 123
properties, aggregating 11.4 million square feet of office, office/flex and
industrial/warehouse properties, located in New Jersey, New York, Pennsylvania
and Connecticut.
Page 87
Basis of Presentation
The accompanying consolidated financial statements include all accounts of
the Company and its majority-owned subsidiaries, which consist principally of
the Operating Partnership. The Company's investment in Cali Services, Inc. (an
entity formed to provide third party management services in which the Operating
Partnership has a 99 percent interest) is accounted for under the equity method.
The accompanying combined statements of operations, cash flows, and partners'
deficit of the Cali Group include all the operations of the entities comprising
the Cali Group and are presented on a combined basis because of common
management and because all of the entities became wholly-owned by the Operating
Partnership and the Company.
Certain other properties affiliated with the Cali Group have been excluded
from the statements as they were not included in the business combination
described above.
All significant intercompany accounts and transactions have been eliminated.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
Rental Property -- Rental properties are stated at cost less accumulated
depreciation. Costs include interest, property taxes, insurance and other
project costs incurred during the period of construction. Ordinary repairs and
maintenance are expensed as incurred; major replacements and betterments are
capitalized and depreciated over their estimated useful lives. Fully depreciated
assets are removed from the accounts. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets as follows:
Buildings and improvements 39 to 40 years
- ----------------------------------------------------------------
Tenant improvements The shorter of the term of the
related lease or useful life
- ----------------------------------------------------------------
Furniture, fixtures and equipment 5 to 10 years
- ----------------------------------------------------------------
On a periodic basis, management assesses whether there are any indicators
that the value of the real estate properties may be impaired. A property's value
is impaired only if management's estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by the property are
less than the carrying value of the property. Management does not believe that
the value of any of its real estate properties are impaired.
Page 88
Deferred Financing Costs -- Costs incurred in obtaining financing are
capitalized and amortized on a straight-line basis, which approximates the
effective interest method, over the term of the related indebtedness.
Amortization of such costs were $1,081, $1,456, $445 and $361 for the years
ended December 31, 1996 and 1995, and the periods August 31, 1994 to December
31, 1994 and January 1, 1994 to August 30, 1994, respectively.
Deferred Leasing Costs -- Costs incurred in connection with leases are
capitalized and amortized on a straight-line basis over the terms of the related
leases. Unamortized deferred leasing costs are charged to amortization expense
upon early termination of the lease.
Revenue Recognition -- The Company recognizes base rental revenue on a
straight-line basis over the terms of the respective leases. Unbilled rents
receivable represents the amount by which straight-line rental revenue exceeds
rents currently billed in accordance with the lease agreements. Parking revenue
includes income from parking spaces leased to tenants.
Rental income on residential property under operating leases having terms
generally of one year or less is recognized when earned.
Cash and Cash Equivalents -- All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents. At
December 31, 1996, cash and cash equivalents included investments in overnight
reverse repurchase agreements ("Overnight Investments") totaling $201,269.
Investments in Overnight Investments are subject to the risks that the
counterparty will default and the collateral will decline in market value. The
Overnight Investments matured on January 2, 1997. The entire balance, including
interest income earned, was realized by the Company and ultimately used in the
funding of the RM transaction on January 31, 1997.
Income and Other Taxes -- The Company has elected to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code (the "Code"). As a REIT,
the Company will not be subject to federal income tax to the extent it
distributes at least 95 percent of its REIT taxable income to its shareholders.
REITs are subject to a number of organizational and operational requirements. If
the Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates. The Company may be subject
to certain state and local taxes. Taxes were not provided for in the Cali Group
combined financial statements because the entities that comprised the Cali Group
were partnerships and any taxable income or loss was included in the income tax
returns of the individual partners.
Net Income Per Share -- Net income per share is computed using the weighted
average common shares outstanding during the period. The assumed exercise of
outstanding stock options using the treasury stock method is not considered
dilutive in any period.
Page 89
Dividends and Distributions Payable -- The dividends and distributions payable
at December 31, 1996 represent dividends payable to shareholders of record on
January 6, 1997 (36,318,937 shares) and distributions payable to minority
interest unitholders (2,689,945 Units) on that same date. The fourth quarter
dividends and distributions of $0.45 per share and per Unit were approved by the
Board of Directors on December 19, 1996 and were paid on January 21, 1997. All
dividends paid and declared during the year ended December 31, 1996 are
considered ordinary income to the Company's shareholders for federal income tax
purposes. The status of such dividend is subject to final determination by the
Internal Revenue Service.
Extraordinary Items -- The extraordinary items represent the net effects
resulting from the early settlement of certain mortgage obligations, including
accrued interest, net of write-offs of related deferred financing costs and
prepayment penalties.
Participation Agreement Settlement -- In connection with its original ten-year
lease entered into in 1988, a tenant was granted a rent concession in the form
of a residual share, as defined, of the proceeds of any sale or refinancing of
the property during the tenants' lease term. In connection with the IPO, the
tenant was paid $1,135 in settlement of this participation agreement, of which
$653 was expensed during the period ended August 30, 1994 and the balance of
$482 is being amortized over the remaining term of the original ten-year term of
the lease.
Underwriting Commissions and Offering Costs -- Underwriting commissions and
offering costs incurred in connection with the Company's common stock offerings
have been reflected as a reduction of additional paid-in-capital.
Stock Options -- The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations.
Under APB No. 25, compensation cost is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the
exercise price of the option granted. Compensation cost for stock options, if
any, is recognized ratably over the vesting period. The Company's policy is to
grant options with an exercise price equal to the quoted market price of the
Company's stock on the grant date. Accordingly, no compensation cost has been
recognized for the Company's stock option plans. The Company provides additional
pro forma disclosures as required under Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." (See Note
8.)
Page 90
3. RESTRICTED CASH
Restricted cash includes security deposits for the residential property, and
escrow and reserve funds for debt service, real estate taxes, property
insurance, capital improvements, tenant improvements, and leasing costs
established pursuant to certain mortgage financing arrangements and is comprised
of the following:
December 31,
1996 1995
- ----------------------------------------------------------------
Escrow and other reserve funds $2,814 $2,901
Residential security deposits 346 328
- ----------------------------------------------------------------
Total restricted cash $3,160 $3,229
================================================================
4. DEFERRED CHARGES AND OTHER ASSETS
December 31,
1996 1995
- ----------------------------------------------------------------
Deferred leasing costs $14,031 $13,498
Deferred financing costs 5,390 5,778
- ----------------------------------------------------------------
19,421 19,276
Accumulated amortization (8,994) (9,035)
- ----------------------------------------------------------------
Deferred charges, net 10,427 10,241
Prepaid expenses and other assets 1,413 632
- ----------------------------------------------------------------
Total deferred charges and other assets $11,840 $10,873
================================================================
5. MORTGAGES AND LOANS PAYABLE
December 31,
1996 1995
- ----------------------------------------------------------------
Harborside Mortgages $150,000 $ --
Mortgage Financing 64,508 70,000
Fair Lawn Mortgage 18,445 18,764
First Prudential Facility 6,000 46,700
Bank Facility 23,805 --
Contingent Obligation 5,252 --
- ----------------------------------------------------------------
Total mortgages and loans payable $268,010 $135,464
================================================================
Harborside Mortgages
In connection with the acquisition of Harborside, on November 4, 1996, the
Company assumed existing mortgage debt and was provided seller-mortgage debt
aggregating $150,000. The existing financing of approximately $107,480 bears
interest at a fixed rate of 7.32 percent for a term of approximately nine years.
The seller-provided financing of approximately $42,520 also has a term of nine
Page 91
years and initially bears interest at a rate of 6.99 percent. The interest rate
on the seller-provided financing will be reset at the end of the third and sixth
loan years based on the yield of the three-year treasury obligation at that
time, with spreads of 110 basis points in years four through six and 130 basis
points in years seven through maturity.
Mortgage Financing
Concurrent with the IPO, the Company's initial operating subsidiaries, which
own the Original Properties, issued five-year mortgage notes with an aggregate
principal balance of $144,500 secured and cross-collateralized by the Original
Properties to an affiliate ("PSI") of Prudential Securities Inc. PSI then issued
commercial mortgage pay-through bonds ("Bonds") collateralized by the mortgage
notes. Bonds with an aggregate principal balance of $70,000 were purchased by
unrelated third parties. Bonds with an aggregate principal balance of $74,500
were purchased by the Company. As a result, the Company's initial mortgage
financing was $70,000 (the "Mortgage Financing"). Approximately $38,000 of the
$70,000 is guaranteed under certain conditions by certain partners of the Cali
Group partnerships which owned the Original Properties. The Mortgage Financing
requires monthly payments of interest only, with all principal and any accrued
but unpaid interest due in August 1999. $46,000 of the $70,000 Mortgage
Financing bears interest at a net cost to the Company equal to a fixed rate of
8.02 percent per annum and the remaining $24,000 bears interest at a net cost to
the Company equal to a floating rate of 100 basis points over one-month LIBOR
(5.53 percent at December 31, 1996) with a lifetime interest rate cap of 11.6
percent. Pursuant to the terms of the Mortgage Financing, the Company is
required to escrow $143 per month for tenant improvements and leasing
commissions and $53 per month for capital improvements.
In advance of the sale of Essex Road, on March 12, 1996, the Company prepaid
$5,492 ($1,687 -- fixed rate debt, $3,805 -- floating rate debt) of the Mortgage
Financing, resulting in outstanding balances of $44,313 for the 8.02 percent
fixed rate debt and $20,195 for the floating rate debt.
Fair Lawn Mortgage
In connection with the acquisition of an office building in Fair Lawn, Bergen
County, New Jersey on March 3, 1995, the Company assumed an $18,764 non-recourse
mortgage loan ("Fair Lawn Mortgage") bearing interest at a fixed rate of 8.25
percent per annum. The loan requires payment of interest only through March 15,
1996 and payment of principal and interest thereafter, on a 20-year amortization
schedule, with the remaining principal balance due October 1, 2003. For the year
ended December 31, 1996, the Company has paid $319 for amortization of principal
on the Fair Lawn Mortgage.
First Prudential Facility
The Company has a $70,000 revolving credit facility (the "First Prudential
Facility") with Prudential Securities Credit Corp. ("PSC"), which may be used to
fund acquisitions and new development projects and for general working capital
purposes, including capital expenditures and tenant improvements. In connection
with the Mortgage Financing, the Company obtained a $6,005 letter of credit,
secured by the First Prudential Facility, to meet certain tenant improvement and
capital expenditure reserve requirements. The First Prudential Facility bore
interest at a floating rate equal to 150 basis points over one-month LIBOR for
January 1, 1996 through August 31, 1996. Effective September 1, 1996, the
Page 92
interest rate was reduced to a floating rate equal to 125 basis points over
one-month LIBOR. The First Prudential Facility is a recourse liability of the
Operating Partnership and is secured by a pledge of the $74,500 Bonds held by
the Company. The First Prudential Facility requires monthly payments of interest
only, with outstanding advances and any accrued but unpaid interest due November
30, 1997 and is subject to renewal at the lender's sole discretion. Subsequent
to December 31, 1996 and through February 18, 1997, the Company did not draw any
additional funds from the First Prudential Facility.
Bank Facility
On February 1, 1996, the Company obtained a credit facility (the "Bank
Facility") secured by certain of its properties in the amount of $75,000 from
two participating banks. The Bank Facility has a three-year term and bears
interest at 150 basis points over one-month LIBOR. The terms of the Bank
Facility include certain restrictions and covenants which limit, among other
things, dividend payments and additional indebtedness and which require
compliance with specified financial ratios and other financial measurements. The
Bank Facility also requires a fee equal to one quarter of one percent of the
unused balance payable quarterly in arrears. Subsequent to December 31, 1996 and
through February 18, 1997, the Company had additional net borrowings of $41,195
from the Bank Facility, used for the cash portion of the financing for the RM
transaction on January 31, 1997.
Contingent Obligation
As part of the Harborside acquisition, the Company agreed to make payments
(with an estimated net present value of approximately $5,252) to the seller for
development rights ("Contingent Obligation") if and when the Company commences
construction on the acquired site during the next several years. However, the
agreement provides, among other things, that even if the Company does not
commence construction, the seller may nevertheless require the Company to
acquire these rights during the six-month period after the end of the sixth
year. After such period, the seller's option lapses, but any development in
years 7 through 30 will require a payment, on an increasing scale, for the
development rights.
Second Prudential Facility
On November 4, 1996, the Company obtained a revolving credit facility
("Second Prudential Facility") from PSC totaling $80,000 which bears interest at
125 basis points over one-month LIBOR, and matures on January 15, 1998, unless
the Company or PSC elects to extend the maturity date to not earlier than June
30, 1998, or the facility is refinanced prior to such date at the election of
either the Company or PSC. The Second Prudential Facility is a recourse
liability of the Operating Partnership and is secured by the Company's equity
interest in Harborside. The terms of the Second Prudential Facility include
certain restrictions and covenants that limit, among other things, dividend
payments and additional indebtedness and that require compliance with specified
financial ratios and other financial measurements. Subsequent to December 31,
1996 and through February 18, 1997, the Company did not draw any additional
funds from the Second Prudential Facility.
Page 93
TIAA Mortgage
In connection with the RM transaction on January 31, 1997, the Company
assumed a $185,283 non-recourse mortgage loan with Teachers Insurance and
Annuity Association of America with interest only payable monthly at a fixed
annual rate of 7.18 percent (the "TIAA Mortgage"). The TIAA Mortgage is secured
and cross-collateralized by 43 of the RM Properties and matures on December 31,
2003. The Company, at its option, may convert the TIAA Mortgage to unsecured
public debt upon achievement by the Company of an investment credit rating of
Baa3/BBB- or better. The TIAA Mortgage is prepayable in whole or in part subject
to certain provisions, including yield maintenance.
Interest Rate Swap Agreements
On May 24, 1995, the Company entered into an interest rate swap agreement
with a commercial bank. The swap agreement fixes the Company's one-month LIBOR
base to a fixed 6.285 percent per annum on a notional amount of $24,000 through
August 1999.
On January 23, 1996, the Company entered into an interest rate swap agreement
with one of the participating banks in the Bank Facility. The swap agreement has
a three-year term and a notional amount of $26,000, which fixes the Company's
one-month LIBOR base to 5.265 percent on its floating rate credit facilities.
The Company is exposed to credit loss in the event of non-performance by the
other parties to the interest rate swap agreements. However, the Company does
not anticipate non-performance by either counterparty.
Scheduled Principal Payments and Interest Paid
Scheduled principal payments on the mortgages and loans payable, as of
December 31, 1996, are as follows:
Year Amount
- ----------------------------------------------------------------
1997 $ 6,412
1998 448
1999 88,799
2000 527
2001 573
Thereafter 171,251
- ----------------------------------------------------------------
Total $268,010
================================================================
Cash paid for interest for the years ended December 31, 1996 and 1995, and
the periods from August 31, 1994 to December 31, 1994 and from January 1, 1994
to August 30, 1994 was $12,096, $8,322, $1,504, and $15,977, respectively.
Additionally, interest capitalized by the Company for the years ended December
31, 1996 and 1995 was $118 and $27, respectively, while no interest was
capitalized during the periods August 31, 1994 to December 31, 1994 and January
1, 1994 to August 30, 1994 .
Page 94
6. MINORITY INTEREST
Certain individuals and entities contributing interests to the Operating
Partnership received Units. A Unit and a share of common stock of the Company
have substantially the same economic characteristics in as much as they
effectively share equally in the net income or loss of the Operating
Partnership. Minority interest in the accompanying consolidated financial
statements relates to Units held by parties other than the Company.
Units are able to be redeemed by the unitholders at their option, subject to
certain restrictions, on the basis of one Unit for either one share of common
stock or cash equal to the fair market value of a share at the time of the
redemption. The Company has the option to deliver shares of common stock in
exchange for all or any portion of the cash requested. When a unitholder redeems
a Unit, minority interest is reduced and the Company's investment in the
Operating Partnership is increased. During the year ended December 31, 1996,
100,671 Units were redeemed for common stock of the Company. As of December 31,
1996, the minority interest unitholders owned 6.9 percent of the Operating
Partnership.
7. RELATED PARTY TRANSACTIONS
Certain employees of the Operating Partnership provide leasing services to
the Properties and receive fees as compensation ranging from 0.667 to 2.667
percent of adjusted rents. For the years ended December 31, 1996 and 1995, such
fees, which are capitalized and amortized, approximated $490 and $575,
respectively.
The Cali Group
Prior to the IPO, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
was an affiliate of a 20 percent limited partner of one property partnership.
Total rental income, including escalations and recoveries, from DLJ for the
period January 1, 1994 to August 30, 1994 approximated $6,472.
Prior to the IPO, two limited partners in the Roseland II Limited Partnership
were tenants occupying, in the aggregate, 21 percent of the property. Total
rental income, including escalations and recoveries, from these tenants for the
period January 1, 1994 to August 30, 1994 approximated $578.
The Cali Group provided administrative services to certain properties not
included in the accompanying combined financial statements and earned fees of
$108 for such services for the period January 1, 1994 to August 30, 1994.
Certain Cali Group employees provided leasing services to the Original
Properties and received fees as additional compensation ranging from .667
percent to 2.667 percent of adjusted rents. For the period January 1, 1994 to
August 30, 1994 such fees, which are capitalized and amortized, approximated
$108.
Page 95
8. STOCK OPTION AND EXECUTIVE
COMPENSATION PLANS
Stock Option Plans
In 1994, and as amended on May 13, 1996, the Company established the Cali
Employee Stock Option Plan ("Employee Plan") and the Cali Director Stock Option
Plan ("Director Plan") under which a total of 1,880,188 (subject to adjustment)
of the Company's shares of common stock have been reserved for issuance
(1,780,188 shares under the Employee Plan and 100,000 under the Director Plan).
Stock options granted under the Employee Plan in 1994 and 1995 become
exercisable over a three-year period and those options granted under the
Employee Plan in 1996 become exercisable over a five-year period. All stock
options granted under the Director Plan become exercisable in one year. All
options were granted at the fair market value at the dates of grant and have a
term of ten years.
CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
Information regarding the Company's stock option plans is summarized below:
Employee Director
Shares under option: Plan Plan
- -----------------------------------------------------------------
Granted on August 31, 1994 at
$17.25 per share 600,000 20,000
Granted at $15.25 per share -- 5,000
- -----------------------------------------------------------------
Outstanding at December 31, 1994 600,000 25,000
Granted at $17.25 per share 181,200 10,000
Granted at $19.875 per share 39,000 --
Less-- Lapsed or canceled (3,588) --
- -----------------------------------------------------------------
Outstanding at December 31, 1995 816,612 35,000
$15.25 - $19.875 per share
Granted at $21.50 per share 361,750 14,000
Granted at $25.25 per share 58,950 --
Granted at $26.25 per share 375,000 --
Less -- Lapsed or canceled (7,164) --
Exercised at $17.25 per share (116,041) (10,000)
- -----------------------------------------------------------------
Outstanding at December 31, 1996 1,489,107 39,000
$15.25 - $26.25 per share
=================================================================
Exercisable at December 31, 1996 509,710 25,000
- -----------------------------------------------------------------
Available for grant at
December 31, 1995 463,576 15,000
- -----------------------------------------------------------------
Available for grant at
December 31, 1996 175,040 51,000
- -----------------------------------------------------------------
The weighted-average fair value of options granted during 1996 and 1995 were
$2.41 and $1.28 per option, respectively. The fair value of each significant
option grant is estimated on the date of grant using the Black-Scholes model.
The following weighted average assumptions are included in the Company's fair
value calculations:
Page 96
1996 1995
- ---------------------------------------------------------------
Expected life (years) 6 6
Risk-free interest rate 6.11% 6.58%
Volatility 19.14% 1.41%
Dividend yield 7.58% 10.20%
Under the above models, the value of stock options granted under the Employee
Plan and Director Plan during 1996 and 1995 totaled approximately $1,955 and
$294, respectively, which would be amortized ratably on a pro forma basis over
the appropriate vesting period. Had the Company determined compensation cost for
these plans in accordance with SFAS No. 123, the Company's pro forma net income
and earnings per share would have been $31,980 and $1.73 in 1996 and $13,553 and
$1.22 in 1995. The SFAS No. 123 method of accounting does not apply to options
granted prior to January 1, 1995 and accordingly, the resulting pro forma
compensation cost may not be representative of that to be expected in the
future.
Executive Compensation Plans
In January 1997, the Company entered into employment contracts with seven of
its key executives which provide for, among other things, compensation in the
form of stock awards (the "Stock Award Rights") and Company-financed stock
purchase rights (the "Stock Purchase Rights") and associated tax obligation
payments. In connection with the Stock Award Rights, the executives will receive
199,070 shares of the Company's common stock vesting over a five-year period
contingent on the Company meeting certain performance objectives. Pursuant to
the terms of the Stock Purchase Rights, the Company provided fixed rate,
non-prepayable loans to such executives to finance their purchase of 152,000
shares of the Company's common stock, which the Company has agreed to forgive
ratably over five years.
9. EMPLOYEE BENEFIT PLAN
All employees of the Company who meet certain minimum age and period of
service requirements are eligible to participate in a Section 401(k) plan (the
"Plan") as defined by the Code. The Plan allows eligible employees to defer up
to 15 percent of their annual compensation. The amounts contributed by employees
are immediately vested and non-forfeitable. The Company, at management's
discretion, may match employee contributions. No employer contributions have
been made to date.
10. DISCLOSURE OF FAIR VALUE OF
FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by management
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize on disposition
of the financial instruments at December 31, 1996 and 1995. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
Page 97
Cash equivalents, receivables, accounts payable, and accrued expenses and
other liabilities are carried at amounts which reasonably approximate their fair
values.
Mortgages and loans payable have an aggregate carrying value of $268,010 and
$135,464 at December 31, 1996 and 1995, respectively, which approximates their
estimated aggregate fair value (excluding prepayment penalties) based upon then
current interest rates for debt with similar terms and remaining maturities.
The estimated net gain on settling the Company's interest rate swap
agreements, at December 31, 1996, based on quoted market prices of comparable
swaps, was $140.
Disclosure about fair value financial instruments is based on pertinent
information available to management as of December 31, 1996 and 1995. Although
management is not aware of any factors that would significantly affect the fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since December 31, 1996 and current estimates of
fair value may differ significantly from the amounts presented herein.
11. COMMITMENTS AND CONTINGENCIES
Tax Abatement Agreements
Grove Street Property:
Pursuant to an agreement with the City of Jersey City, New Jersey expiring in
2009, the Company is required to make payments in lieu of property taxes
("PILOT") on its property at 95 Christopher Columbus Drive, Jersey City. Such
PILOT is determined based on the greater of two percent of the property cost, as
defined, or $1,131 per annum, through 1999 and 2.5 percent, or $1,414 per annum,
through 2004.
Harborside Financial Center Property:
Tax abatements for Harborside were obtained in 1988 by the former owner of
the property of the City of Jersey City and were assumed by the Company as part
of the acquisition of Harborside on November 4, 1996. The abatements, which
commenced in 1990, are for a term of 15 years. Such PILOT is equal to two
percent of Total Project Costs, as defined, in year one and increase by $75 per
annum through year fifteen. Total Project Costs, as defined, are $148,712. The
service charges for the remaining undeveloped parcels will be equal to two
percent of Total Project Costs for each unit in year one and increase to three
percent by year fifteen.
12. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2011. Substantially all of the leases provide for
annual base rents plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs as defined and the pass through of charges for electrical usage.
At December 31, 1995, DLJ leased approximately 55 percent of the space in the
Company's 95 Christopher Columbus Drive, Jersey City, Hudson County, New Jersey
property. On April 9, 1996, DLJ signed a lease with the Company for an
additional 73,200 square feet of space ("DLJ Expansion"), increasing its
occupancy to approximately 66 percent of the property.
Page 98
Total rental income from DLJ, including escalations and recoveries, was
$11,498, $10,352 and $3,324 for the years ended December 31, 1996 and 1995 and
the period ended December 31, 1994, respectively. At December 31, 1996 and 1995,
unbilled rents receivable included $12,862 and $12,164, respectively, from DLJ.
Future minimum rentals to be received under noncancelable operating leases at
December 31, 1996 are as follows:
Year Amount
- -----------------------------------------------------
1997 $117,705
1998 107,399
1999 94,462
2000 76,575
2001 59,081
Thereafter 285,198
- -----------------------------------------------------
Total $740,420
=====================================================
13. STOCKHOLDERS' EQUITY
To maintain its qualification as a REIT, not more than 50 percent in value of
the outstanding shares of the Company may be owned, directly or indirectly, by
five or fewer individuals (defined to include certain entities), applying
certain constructive ownership rules. To help ensure that the Company will not
fail this test, the Company's Articles of Incorporation provide for, among other
things, certain restrictions on the transfer of the common stock to prevent
further concentration of stock ownership. Moreover, to evidence compliance with
these requirements, the Company must maintain records that disclose the actual
ownership of its outstanding common stock and will demand written statements
each year from the holders of record of designated percentages of its common
stock requesting the disclosure of the beneficial owners of such common stock.
During 1995, the Company completed a public offering of 4,600,000 shares of
common stock and received net proceeds of $83,594. Additionally in 1995, the
Company purchased, for constructive retirement, 100,000 shares of its
outstanding common stock for $1,595. The excess of the purchase price over par
value was recorded as a reduction to additional paid-in capital. Concurrent with
this purchase, the Company sold to the Operating Partnership 100,000 Units for
$1,595.
On May 13, 1996, the stockholders approved an increase in the authorized
shares of common stock in the Company from 25,000,000 to 95,000,000.
On July 29, 1996, the Company filed a shelf registration statement (File No.
333-09081) with the Securities and Exchanges Commission ("SEC") for an aggregate
amount of $500,000 in equity securities of the Company. The registration
statement was declared effective by the SEC on August 2, 1996.
On August 13, 1996, the Company sold 3,450,000 shares of its common stock
through a public stock offering (the "August 1996 Offering"), which included an
exercise of the underwriters' over-allotment option of 450,000 shares. Net
proceeds from the August 1996 Offering (after offering costs) were approximately
$76,830. The offering was conducted using one underwriter and the shares were
issued from the Company's $250,000 shelf registration statement (File No.
33-96538).
Page 99
Pursuant to the Company's Registration Statement on Form S-3 (File No.
333-09081), on November 22, 1996, the Company completed an underwritten public
offer and sale of 17,537,500 shares of its common stock using several different
underwriters to underwrite such public offer and sale (which included an
exercise of the underwriters' over-allotment option of 2,287,500 shares). The
Company received approximately $441,215 in net proceeds (after offering costs)
from the November 1996 Offering, and used such funds to acquire certain of the
Company's property acquisitions in November and December, pay down outstanding
borrowings on its revolving credit facilities, and invested the excess funds in
Overnight Investments.
On December 31, 1996, the Company filed a shelf registration statement (File
No. 333-19101) with the SEC for an aggregate amount of $1,000,000 in equity
securities of the Company. The registration statement was declared effective by
the SEC on January 7, 1997.
Page 100
14. CONDENSED QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following summarizes the condensed quarterly financial information for
the Company:
Quarter Ended 1996
- -------------------------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- -------------------------------------------------------------------------------------------------------------------------
Revenues $32,370 $22,518 $21,013 $19,571
Operating and other expenses 9,404 7,035 6,579 6,644
General and administrative 2,365 1,371 1,128 936
Depreciation and amortization 5,157 3,747 3,614 3,294
Interest expense 4,388 2,721 2,999 2,569
- -------------------------------------------------------------------------------------------------------------------------
Income before gain on sale of rental property,
minority interest and extraordinary item 11,056 7,644 6,693 6,128
Gain on sale of rental property -- -- -- 5,658
- -------------------------------------------------------------------------------------------------------------------------
Income before minority interest and extraordinary item 11,056 7,644 6,693 11,786
Minority interest 894 1,045 1,009 1,812
- -------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 10,162 6,599 5,684 9,974
Extraordinary item -- loss on early retirement debt
(net of minority interest's share of $86) -- -- -- 475
- -------------------------------------------------------------------------------------------------------------------------
Net income $10,162 $ 6,599 $ 5,684 $ 9,499
=========================================================================================================================
Net income per common share:
Income before extraordinary item --
loss on early retirement of debt $0.34 $0.39 $0.37 $0.66
Extraordinary item-- loss on early retirement of debt -- -- -- (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Net income per common share $0.34 $0.39 $0.37 $0.63
=========================================================================================================================
Dividends declared per common share $0.45 $0.45 $0.43 $0.43
=========================================================================================================================
Quarter Ended 1995
- -------------------------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- -------------------------------------------------------------------------------------------------------------------------
Revenues $17,535 $15,777 $15,151 $13,872
Operating and other expenses 5,911 5,381 4,872 4,541
General and administrative 922 856 1,001 933
Depreciation and amortization 3,175 3,009 3,095 2,832
Interest expense 2,500 2,347 2,173 1,641
- -------------------------------------------------------------------------------------------------------------------------
Income before minority interest 5,027 4,184 4,010 3,925
Minority interest 888 911 873 836
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 4,139 $ 3,273 $ 3,137 $ 3,089
=========================================================================================================================
Net income per common share $0.31 $0.31 $0.30 $0.29
=========================================================================================================================
Dividends declared per common share $0.43 $0.43 $0.40 $0.40
=========================================================================================================================
Page 101
CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (CONTINUED)
15. PRO FORMA FINANCIAL INFORMATION
(Unaudited)
The following unaudited pro forma financial information for the years ended
December 31, 1996 and 1995 are presented as if the acquisitions and common stock
offerings which occurred during 1996 and 1995 had occurred on January 1, 1995.
In management's opinion, all adjustments necessary to reflect the effects of
these transactions have been made.
This unaudited pro forma financial information is not necessarily indicative
of what the actual results of operations of the Company would have been assuming
such transactions had been completed as of the beginning of the respective
periods, nor do they represent the results of operations of future periods.
Year Ended
December 31,
1996 1995
- ----------------------------------------------------------------
Revenues $153,619 $145,982
Operating and other expenses 44,571 42,424
General and administrative 8,820 7,862
Depreciation and amortization 23,945 23,778
Interest expense 19,300 19,924
- ----------------------------------------------------------------
Income before minority interest 56,983 51,994
Minority interest 5,043 4,742
- ----------------------------------------------------------------
Net income $ 51,940 $ 47,252
================================================================
Net income per common share $1.86 $1.70
- ----------------------------------------------------------------
The following unaudited pro forma financial information for the year ended
December 31, 1996 is presented as if the acquisitions and common stock offerings
which occurred during 1996 and the January 1997 Robert Martin transaction had
occurred on January 1, 1996. In management's opinion, all adjustments necessary
to reflect the effects of these transactions have been made.
This unaudited pro forma financial information is not necessarily indicative
of what the actual results of operations of the Company would have been assuming
such transactions had been completed as of the beginning of the year, nor do
they represent the results of operations of future periods.
Page 102
Year Ended
December 31,
1996
- ----------------------------------------------------------------
Revenues $226,578
Operating and other expenses 69,260
General and administrative 12,817
Depreciation and amortization 34,070
Interest expense 34,264
- ----------------------------------------------------------------
Income before minority interest 76,167
Minority interest 7,769
- ----------------------------------------------------------------
Net income $ 68,398
================================================================
Net income per common share $1.89
- ----------------------------------------------------------------
Page 103
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
Costs
Property Location/Type INITIAL COSTS Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive (O) .................... 1973 -- $ 1,752(a) $ 250 $ -- $ 2,567
11 Commerce Drive (O) ................... 1981 -- 3,480(a) 470 -- 5,599
20 Commerce Drive (O) ................... 1990 -- 10,309(a) 2,346 -- 21,066
65 Jackson Drive (O) .................... 1984 -- 3,747(a) 541 -- 6,682
CLARK, UNION COUNTY, NJ
100 Walnut Avenue (O) ................... 1985 -- 13,706(a) -- -- 15,874
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive (O) ..................... 1989 -- 51,476(a) 6,205 -- 79,230
Harborside Financial Center
Christopher Columbus Drive
Exchange Plaza & the
Hudson River (O)
Plaza I ............................. 1930 1996 42,520 3,923 51,013 5
Plaza II ............................ 1930 1996 (e) 17,655 100,546 61
Plaza III ........................... 1930 1996 (e) 17,655 101,878 131
ROSELAND, ESSEX COUNTY NJ
101 Eisenhower Parkway(O) ............... 1980 -- 12,409(a) 228 -- 13,209
103 Eisenhower Parkway(O) ............... 1985 -- 10,488(a) -- -- 13,950
Page 104
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
------------------------------
Property Location/Type
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive (O) ....... $ 250 $ 2,567 $ 2,817 $ 1,326
11 Commerce Drive (O) ...... 470 5,599 6,069 2,642
20 Commerce Drive (O) ...... 2,346 21,066 23,412 4,213
65 Jackson Drive (O) ....... 541 6,682 7,223 2,078
CLARK, UNION COUNTY, NJ
100 Walnut Avenue (O) ...... 1,822 14,052 15,874 5,162
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive (O) ........ 6,205 79,230 85,435 16,761
Harborside Financial Center
Christopher Columbus Drive
Exchange Plaza & the
Hudson River (O)
Plaza I ................ 3,923 51,018 54,941 213
Plaza II ............... 17,655 100,607 118,262 420
Plaza III .............. 17,655 102,009 119,664 420
ROSELAND, ESSEX COUNTY NJ
101 Eisenhower Parkway(O) .. 228 13,209 13,437 6,378
103 Eisenhower Parkway(O) .. 2,300 11,650 13,950 4,254
Page 105
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type ---------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ---------
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard (O) ..................... 1984 -- 12,795(a) 4,500 -- 25,228
300 Tice Boulevard (O) .................... 1991 1996 -- 5,424 29,688 --
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 (O) ....................... 1987 1995 18,445 3,067 19,415 272
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (O) ...................... 1981 1996 -- 2,439 24,462 --
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike (O) ................. 1987 -- 10,300(a) 1,564 -- 14,897
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road (O) ................... 1978 1994 (d) 1,257 5,594 350
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard (O) ................... 1988 1995 (d) 1,090 13,412 424
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive (O) ........................ 1987 1995 (d) 657 9,800 104
400 Alexander Park (O) .................... 1987 1995 -- 344 3,917 2,123
103 Carnegie Center (O) ................... 1984 1996 -- 2,566 7,868 --
Page 106
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
---------------------------
Property Location/Type
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
- ------------------- ---- ---------- ----- ---------
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard (O) .............. 4,500 25,228 29,728 8,504
300 Tice Boulevard (O) ............. 5,424 29,688 35,112 61
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 (O) ................ 3,067 19,687 22,754 904
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (O) ............... 2,439 24,462 26,901 --
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike (O) .......... 1,564 14,897 16,461 4,510
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road (O) ............ 1,257 5,944 7,201 310
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard (O) ............ 1,090 13,836 14,926 610
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive (O) ................. 657 9,904 10,561 354
400 Alexander Park (O) ............. 344 6,040 6,384 167
103 Carnegie Center (O) ............ 2,566 7,868 10,434 166
Page 107
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type --------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive (F) ...................... 1989 1995 (d) 205 1,676 65
200 Horizon Drive (F) ...................... 1991 1995 (d) 205 3,027 1
300 Horizon Drive (F) ...................... 1989 1995 (d) 379 4,355 8
500 Horizon Drive (F) ...................... 1990 1995 (d) 379 3,395 39
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ......................... 1983 -- 1,323(a) -- -- 6,817
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive (O) .................... 1988 1995 (d) 476 6,024 49
11 Commerce Way (F) ........................ 1989 1995 (d) 586 2,986 43
20 Commerce Way (F) ........................ 1992 1995 (d) 516 3,108 26
29 Commerce Way (F) ........................ 1990 1995 (d) 586 3,092 225
40 Commerce Way (F) ........................ 1987 1995 (d) 516 3,260 104
45 Commerce Way (F) ........................ 1992 1995 (d) 536 3,379 124
60 Commece Way (F) ......................... 1988 1995 (d) 526 3,257 152
80 Commerce Way (F) ........................ 1996 -- (d) 743 -- 1,134
100 Commerce Way (F) ....................... 1996 -- (d) 742 -- 1,133
120-140 Commerce Way (F) ................... 1994 1995 (d) 457 2,346 27
Page 108
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
---------------------------
Property Location/Type
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive (F) .............. 205 1,741 1,946 49
200 Horizon Drive (F) .............. 205 3,028 3,233 89
300 Horizon Drive (F) .............. 379 4,363 4,742 128
500 Horizon Drive (F) .............. 379 3,434 3,813 104
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ................. 1,100 5,717 6,817 2,024
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive (O) ............ 476 6,073 6,549 180
11 Commerce Way (F) ................ 586 3,029 3,615 88
20 Commerce Way (F) ................ 516 3,134 3,650 91
29 Commerce Way (F) ................ 586 3,317 3,903 103
40 Commerce Way (F) ................ 516 3,364 3,880 103
45 Commerce Way (F) ................ 536 3,503 4,039 117
60 Commece Way (F) ................. 526 3,409 3,935 108
80 Commerce Way (F) ................ 743 1,134 1,877 7
100 Commerce Way (F) ............... 742 1,133 1,875 6
120-140 Commerce Way (F) ........... 457 2,373 2,830 69
Page 109
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type -------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway (O) ................. 1988 1995 (d) 335 2,560 27
1325 Campus Parkway (F) ................. 1988 1995 (d) 270 2,928 10
1340 Campus Parkway (F) ................. 1992 1995 (d) 489 4,621 158
1350 Campus Parkway (O) ................. 1990 1995 (d) 454 7,134 103
1320 Wykoff Road (F) .................... 1986 1995 (d) 255 1,285 --
1324 Wykoff Road (F) .................... 1987 1995 (d) 230 1,439 --
1433 Highway 34 (F) ..................... 1985 1995 (d) 889 4,321 37
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66 ........................... 1989 1995 (d) 1,099 18,146 28
EGG HARBOR,
MONMOUTH COUNTY, NJ
100 Decadon Drive (O) ................... 1987 1995 (d) 300 3,282 66
200 Decadon Drive (O) ................... 1991 1995 (d) 369 3,241 48
Page 110
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
Property Location/Type ---------------------------
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway (O) ............ 335 2,587 2,922 86
1325 Campus Parkway (F) ............ 270 2,938 3,208 86
1340 Campus Parkway (F) ............ 489 4,779 5,268 135
1350 Campus Parkway (O) ............ 454 7,237 7,691 218
1320 Wykoff Road (F) ............... 255 1,285 1,540 37
1324 Wykoff Road (F) ............... 230 1,439 1,669 42
1433 Highway 34 (F) ................ 889 4,358 5,247 126
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66 ...................... 1,099 18,174 19,273 531
EGG HARBOR,
MONMOUTH COUNTY, NJ
100 Decadon Drive (O) .............. 300 3,348 3,648 96
200 Decadon Drive (O) .............. 369 3,289 3,658 99
Page 111
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type --------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (O) ...................... 1986 1996 -- 775 3,636 --
233 Mt. Airy Road (O) ...................... 1987 1996 -- 1,034 5,033 --
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East(O) ................... 1984 1996 -- 642 8,168 --
5 Sentry Parkway West(O) ................... 1984 1996 -- 268 3,406 --
MEDIA, DELAWARE COUNTY, PA
Rose Tree Corporate Center(O)
Center I .................................. 1986 1996 -- 1,042 9,054 70
Center II ................................. 1990 1996 -- 1,543 16,464 101
LESTER, DELAWARE COUNTY, PA
Internation Court at
Airport Business Center (O)
International Court I ..................... 1986 1996 -- 1,349 10,018 --
International Court II .................... 1987 1996 -- 1,644 20,186 --
International Court III ................... 1992 1996 -- 491 9,490 --
Page 112
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
Property Location/Type ---------------------------
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (O) .............. 775 3,636 4,411 38
233 Mt. Airy Road (O) .............. 1,034 5,033 6,067 52
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East(O) ........... 642 8,168 8,810 34
5 Sentry Parkway West(O) ........... 268 3,406 3,674 14
MEDIA, DELAWARE COUNTY, PA
Rose Tree Corporate Center(O)
Center I .......................... 1,042 9,124 10,166 157
Center II ......................... 1,543 16,565 18,108 284
LESTER, DELAWARE COUNTY, PA
Internation Court at
Airport Business Center (O)
International Court I ............. 1,349 10,018 11,367 --
International Court II ............ 1,644 20,186 21,830 --
International Court III ........... 491 9,490 9,981 --
Page 113
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type ----------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
DELRAN, BURLINGTON COUNTY, NJ
Tenby Chase Apartments-
Route 130 [residential] ............ 1970 -- 7,223(a) 395 -- 5,036
Furnitures, fixtures
& equipment ....................... n/a n/a -- -- -- 1,133
-------- -------- --------
TOTALS ...................... $ 92,906 $541,910 $218,536
======== ======== ========
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
Property Location/Type -------------------------------
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
DELRAN, BURLINGTON COUNTY, NJ
Tenby Chase Apartments-
Route 130 [residential] .... 395 5,036 5,431 2,996
Furnitures, fixtures
& equipment ............... -- 1,133 1,133 860
-------- -------- -------- --------
TOTALS .............. $ 98,128 $755,224 $853,352 $ 68,610
======== ======== ======== ========
See footnotes on subsequent page.
Page 114
- -----------
(a) Bonds, which are collateralized by these encumbrances, with an aggregate
principal amount of $74.5 million, are owned by the Company (see Note 5 to
the Financial Statements).
(b) The aggregate cost for federal income tax purposes at December 31, 1996 was
$784,706.
(c) The buildings'depreciable lives are between 5 to 40 years.
(d) These buildings are cross-collateralized by the $75,000 million Bank
Facility, of which $23,805 million was outstanding at December 31, 1996
(see Note 5 to the Financial Statements).
(e) These buildings are cross-collateralized by the $107,480 mortgage assumed
in the acquisition of Harborside.
Page 115
Cali Realty Corporation and Cali Group
Note to Schedule III
Changes in rental properties and accumulated depreciation for the periods ended
December 31, 1996, 1995 and 1994, and August 30, 1994, are as follows:
Cali Realty Corporation Cali Group
----------------------- ----------
August 31 to January 1 to
1996 1995 December 31, 1994 August 30, 1994
---- ---- ----------------- ---------------
Rental Properties:
Balance at beginning of year $ 387,675 $ 234,470 $ 217,282 $ 213,675
Additions ............. 473,371 153,753 17,340 4,126
Retirements/ Disposals (7,694) (548) (152) (519)
--------- --------- --------- ---------
Balance at end of year ..... $ 853,352 $ 387,675 $ 234,470 $ 217,282
========= ========= ========= =========
Accumulated Depreciation:
Balance at beginning of year $ 59,095 $ 50,800 $ 48,201 $ 44,084
Depreciation expense .. 12,810 8,807 2,688 4,267
Retirements/ Disposals (3,295) (512) (89) (150)
--------- --------- --------- ---------
Balance at end of year ..... $ 68,610 $ 59,095 $ 50,800 $ 48,201
========= ========= ========= =========
Page 116
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
Page 117
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
(a)1. Financial Statements and Report of Price Waterhouse LLP, Independent
Accountants (See Item 8)
Report of Independent Accountants
Financial Statements:
Balance Sheets:
Cali Realty Corporation Consolidated as of December 31, 1996 and 1995
Statements of Operations:
Cali Realty Corporation Consolidated for the Years Ended December 31,
1996 and December 31, 1995, and for the Period from August 31, 1994 to
December 31, 1994
Cali Group Combined for the Period from January 1, 1994 to August 30,
1994
Statements of Stockholders' Equity and Partners' Deficit:
Cali Realty Corporation Consolidated for the Years Ended December 31,
1996 and December 31, 1995, and for the Period from August 31, 1994 to
December 31, 1994
Cali Group Combined for the Period from January 1, 1994 to August 30,
1994
Statements of Cash Flows:
Cali Realty Corporation Consolidated for the Years Ended December 31,
1996 and December 31, 1995, and for the Period from August 31, 1994 to
December 31, 1994
Cali Group Combined for the Period from January 1, 1994 to August 30,
1994
(a)2. Financial Statement Schedules:
Schedule III - Real Estate Investments and Accumulated Depreciation as
of December 31, 1996 (See Item 8)
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes
thereto.
(a)3. Exhibits
The following exhibits are filed herewith or are incorporated by
reference to exhibits previously filed:
Page 118
Exhibit
Number Exhibit Title
- ------ -------------
1.1 Underwriting Agreement, dated November 18, 1996, between Cali Realty
Corporporation and Prudential Securities Incorporated. (1)
23 Consent of Price Waterhouse LLP.
10.42 Agreement of Purchase and Sale, dated September 11, 1996, among Plaza
One Exchange Place Limited Partnership, Harborside Exchange Place
Limited Partnership, Plaza II and III Urban Renewal Associates, L.P.
(Seller) and Cali Realty Corporation (Purchaser). (2)
10.43 Contingent Consideration Agreement, dated November 4, 1996, between
Harborside Exchange PlaceLimited Partnership and Cali Harborside (Fee)
Associates L.P. (2)
10.44 Revolving Credit Facility Agreement, dated November 1, 1996, among
Cali Realty, L.P., as Borrower, the Lenders parties thereto, and
Prudential Securities Credit Corp., as Administrative Agent, in the
amount of $800,000,000. (2)
10.45 Mortgage Note in the amount of $42,087,513 between Cali Harborside
Plaza I(Fee) Associates L.P. and US West Pension Trust Investment
Management Company, dated November 4, 1996. (2)
10.46 Assignment and Assumption Agreement, dated as of November 4, 1996,
among Plaza One Exchange Place Limited Partnership (formerly known as
BT Exchange Limited Partnership), Harborside Exchange Place Limited
Partnership, Harborside Urban Renewal Associates L.P., Plaza II and
III Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates
L.P., Plaza V Urban Renewal Associates L.P., Plaza VI Urban Renewal
Associates L.P., Cali Harborside (Fee) Associates L.P., Cal- Harbor II
& III Urban Renewal Associates L.P., Cal-Harbor IV Urban Renewal
Association L.P., Cal-Harbor V Urban Renewal Associates, L.P.,
Cal-Harbor VI Urban Renewal Associates L.P., Cal-Harbor VII Urban
Renewal Associates L.P., The Northwestern Mutual Life Insurance
Company and Principal Mutual Life Insurance Company. (2)
10.47 Management Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II & III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal-Harbor IV Urban Renewal Associates L.P., Plaza V Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Harborside Exchange Place Limited
Partnership, Cal-Harbor VIII Urban Renewal Associates L.P., North Pier
Urban Renewal Associates L.P., Cal-Harbor No. Pier Urban Renewal
Associates L.P., South Pier Urban Renewal Associates L.P., Cal-Harbor
So. Pier Urban Renewal Associates L.P. and Institutional Realty
Management, LLC, as Manager. (2)
Page 119
10.48 Rental Agency Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II and III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal-Harbor IV Urban Renewal Associates L.P., Plaza V Urban Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Cal-Harbor VI Urban Renewal Associates
L.P., Harborside Exchange Place Limited Partnership, Cal-Harbor VII
Urban Renewal Associates L.P., North Pier Urban Renewal Associates
L.P., Cal-Harbor No. Pier Urban Renewal Associates L.P., South Pier
Urban Renewal Associates L.P., Cal-Harbor So. Pier Urban Renewal
Associates L.P., and Institutional Realty Management, LLC, as Rental
Agent. (2)
10.49 Company Pledge Agreement, dated as of November 1, 1996, between Cali
Realty Corporation and Prudential Securities Credit Corp., as
Administrative Agent for the Lenders. (2)
10.50 Pledge Agreement, dated as of November 1, 1996, between Cali Realty,
L.P. and Prudential Securities Credit Corp., as Administrative Agent
for the benefit of the Lenders. (2)
10.51 Agreement of Assignment of Agreement for Purchase and Sale of Real
Estate and Related Property, dated as of October 23, 1996, between
Bryemere, L.P. and Five Sentry Realty Associates, L.P. (3)
10.52 Purchase Agreement, dated October 11, 1996, between Whiteweld Centre,
Inc. and Cali Realty Acquisition Corporation.(3)
10.53 First Amendment to Purchase Agreement, dated as of December 10, 1996,
by and between Whiteweld Centre, Inc. and Cali Realty Acquisition
Corporation.(3)
10.54 Agreement of Sale, dated October 23, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.55 Amendment to Agreement of Sale, dated December 3, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.56 Second Amendment to Agreement of Sale, dated December 17, 1996, by and
among Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.57 Sale Agreement between Metropolitan Life Insurance Company, a New York
corporation, as Seller, and Cali Realty Acquisition Corp., a Delaware
corporation, as Purchaser, as of November 26, 1996.(4)
Page 120
10.58 Amendment to Sale Agreement as of December 4, 1996, by and between
Metropolitan Life Insurance Company, a New York corporation, and Cali
Realty Acquisition Corp., a Delaware corporation.(4)
10.59 Amended and Restated Employment Agreement between Cali Realty
Corporation and John R. Cali, dated as of January 21, 1997. *
10.60 Restricted Share Agreement between Cali Realty Corporation and John R.
Cali, dated as of January 21, 1997. *
10.61 Amended and Restated Employment Agreement between Cali Realty
Corporation and Brant Cali, dated as of January 21, 1997. *
10.62 Restricted Share Agreement between Cali Realty Corporation and Brant
Cali, dated as of January 21, 1997. *
10.63 Amended and Restated Employment Agreement between Cali Realty
Corporation and Thomas A. Rizk, dated as of January 21, 1997. *
10.64 Restricted Share Agreement between Cali Realty Corporation and Thomas
A. Rizk dated as of January 21, 1997. *
10.65 Stock Pledge Agreement between Cali Realty Corporation and Thomas A.
Rizk, dated as of January 21, 1997. *
10.66 Secured Non-Recourse Promissory Note issued by Thomas A. Rizk to Cali
Realty Corporation, dated as of January 21, 1997. *
10.67 Employment Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.68 Restricted Share Agreement between Cali Realty Corporation and Roger
W. Thomas, dated as of January 21, 1997. *
10.69 Stock Pledge Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.70 Secured Non-Recourse Promissory Note issued by Roger W. Thomas to Cali
Realty Corporation, dated as of January 21, 1997. *
10.71 Employment Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.72 Restricted Share Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.73 Stock Pledge Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997.*
10.74 Secured Non-Recourse Promissory Note issued by Barry Lefkowitz to Cali
Realty Corporation, dated as of January 21, 1997. *
Page 121
10.75 Employment Agreement between Cali Realty Corporation and James Nugent,
dated as of January 21, 1997. *
10.76 Restricted Share Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.77 Stock Pledge Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.78 Secured Non-Recourse Promissory Note issued by James Nugent to Cali
Realty Corporation, dated as of January 21, 1997. *
10.79 Employment Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.80 Restricted Share Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.81 Stock Pledge Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.82 Secured Non-Recourse Promissory Note issued by Albert Spring to Cali
Realty Corporation, dated as of January 21, 1997. *
10.83 Employment Agreement between Cali Realty Corporation and Brad W.
Berger, dated as of January 31, 1997. *
10.84 Warrant issued by Cali Realty Corporation to Brad W. Berger, dated
January 31, 1997, and amendment No. 1 to the warrant.*
10.85 Employment Agreement between Cali Realty Corporation and Timothy M.
Jones, dated as of January 31, 1997. *
10.86 Warrant issued by Cali Realty Corporation to Timothy M. Jones, dated
January 31, 1997, and amendment No. 1 to the warrant. *
10.87 Warrant issued by Cali Realty Corporation to Greg Berger, dated
January 31, 1997.
10.88 Warrant issued by Cali Realty Corporation to Andrew Greenspan, dated
January 31, 1997.
10.89 Warrant issued by Cali Realty Corporation to Michael Grossman, dated
January 31, 1997.
10.90 Non-Competition Agreement between Cali Realty Corporation and Robert
F. Weinberg, dated January 31, 1997.
10.91 Non-Competition Agreement between Cali Realty Corporation and Martin
S. Berger, dated January 31, 1997.
Page 122
- ----------------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated November 21, 1996.
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated November 18, 1996.
(3) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 30, 1996.
(4) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 31, 1996.
- ----------------------
(b) Reports on Form 8-K
The Company filed Current Reports on Form 8-K dated October 8, 1996,
October 28, 1996, October 29, 1996, November 18, 1996, November 21, 1996,
December 30, 1996 and December 31, 1996, during the quarter ended
December 31, 1996. Items 2, 5 and 7 were reported.
Included in the Form 8-K's dated October 8, 1996, October 28, 1996 and
October 29, 1996 was the Company's audited consolidated statement of
operations for the year ended December 31, 1995 and the Company's
unaudited consolidated financial statements as of and for the six months
ended June 30, 1996. Included in the Form 8-K dated December 31, 1996 was
the Company's audited consolidated statement of operations for the year
ended December 31, 1995 and the Company's unaudited financial statements
as of and for the nine months ended September 30, 1996. Also included in
the Form 8-K dated October 8, 1996 was the audited financial statements
for the year ended December 31, 1995, and the unaudited financial
statements for the six months ended June 30, 1996 for the Mount Airy
Buildings. Also included in the Form 8-K dated October 28, 1996 was the
audited financial statements for the year ended December 31, 1995, 1994
and 1993 and the unaudited financial statements for the six months ended
June 30, 1996 for the Harborside Financial Center. Also included in the
Form 8-K dated October 29, 1996 was the audited financial statements for
the year ended December 31, 1995 and the unaudited financial statements
for the six months ended June 30, 1996 for each of the following: 5
Sentry Parkway, Whiteweld Centre, and Airport Business Center. Also
included in the Form 8-K dated December 31, 1996 was the audited
financial statements for the year ended December 31, 1995 and the
unaudited financial statements for the nine months ended September 30,
1996 for One Bridge Plaza, and the unaudited financial statements for the
nine months ended June 30, 1996 for each of the following: Harborside
Financial Center, 5 Sentry Parkway, Whiteweld Centre and Airport Business
Center.
Page 123
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.
CALI REALTY CORPORATION
(Registrant)
Dated: March 28, 1997 /s/ John J. Cali
----------------
John J. Cali
Chairman of the Board
Dated: March 28, 1997 /s/ Thomas A. Rizk
------------------
Thomas A. Rizk
President, Chief Executive
Officer and Director
Dated: March 28, 1997 /s/ Barry Lefkowitz
-------------------
Barry Lefkowitz
Chief Financial Officer
Dated: March 28, 1997 /s/ Brad W. Berger
------------------
Brad W.Berger
Executive Vice President
and Director
Dated: March 28, 1997 /s/ Angelo R. Cali
------------------
Angelo R. Cali
Director
Dated: March 28, 1997 /s/ Edward Leshowitz
--------------------
Edward Leshowitz
Director
Page 124
Dated: March 28, 1997 /s/ Brendan T. Byrne
--------------------
Brendan T. Byrne
Director
Dated: March 28, 1997 /s/ Kenneth A. DeGhetto
-----------------------
Kenneth A. DeGhetto
Director
Dated: March 28, 1997 /s/ James W. Hughes
-------------------
James W. Hughes
Director
Dated: March 28, 1997 /s/ Irvin D. Reid
-----------------
Irvin D. Reid
Director
Dated: March 28, 1997 /s/ Alan Turtletaub
-------------------
Alan Turtletaub
Director
Dated: March 28, 1997 /s/ Robert F. Weinberg
----------------------
Robert F. Weinberg
Director
Dated: March 28, 1997 /s/ Alan G. Philibosian
-----------------------
Alan G. Philibosian
Director
Page 125
EXHIBIT INDEX
Exhibit
Number Exhibit Title
- ------ -------------
1.1 Form of Underwriting Agreement. (1)
23 Consent of Price Waterhouse LLP.
10.42 Agreement of Purchase and Sale, dated September 11, 1996, among Plaza
One Exchange Place Limited Partnership, Harborside Exchange Place
Limited Partnership, Plaza II and III Urban Renewal Associates, L.P.
(Seller) and Cali Realty Corporation (Purchaser). (2)
10.43 Contingent Consideration Agreement, dated November 4, 1996, between
Harborside Exchange Place Limited Partnership and Cali Harborside
(Fee) Associates L.P. (2)
10.44 Revolving Credit Facility Agreement, dated November 1, 1996, among
Cali Realty, L.P., as Borrower, the Lenders parties thereto, and
Prudential Securities Credit Corp., as Administrative Agent, in the
amount of $800,000,000. (2)
10.45 Mortgage Note in the amount of $42,087,513 between Cali Harborside
Plaza I(Fee) Associates L.P. and US West Pension Trust Investment
Management Company, dated November 4, 1996. (2)
10.46 Assignment and Assumption Agreement, dated as of November 4, 1996,
among Plaza One Exchange Place Limited Partnership (formerly known as
BT Exchange Limited Partnership), Harborside Exchange Place Limited
Partnership, Harborside Urban Renewal Associates L.P., Plaza II and
III Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates
L.P., Plaza V Urban Renewal Associates L.P., Plaza VI Urban Renewal
Associates L.P., Cali Harborside (Fee) Associates L.P., Cal-Harbor II
& III Urban Renewal Associates L.P., Cal-Harbor IV Urban Renewal
Association L.P., Cal-Harbor V Urban Renewal Associates, L.P.,
Cal-Harbor VI Urban Renewal Associates L.P., Cal-Harbor VII Urban
Renewal Associates L.P., The Northwestern Mutual Life Insurance
Company and Principal Mutual Life Insurance Company. (2)
10.47 Management Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II & III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal- Harbor IV Urban Renewal Associates L.P., Plaza V Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Harborside Exchange Place Limited
Partnership, Cal- Harbor VIII Urban Renewal Associates L.P., North
Pier Urban Renewal Associates L.P., Cal-Harbor No. Pier Urban Renewal
Associates L.P., South Pier Urban Renewal Associates L.P., Cal-Harbor
So. Pier Urban Renewal Associates L.P. and Institutional Realty
Management, LLC, as Manager. (2)
Page 126
10.48 Rental Agency Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II and III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal-Harbor IV Urban Renewal Associates L.P., Plaza V Urban Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Cal-Harbor VI Urban Renewal Associates
L.P., Harborside Exchange Place Limited Partnership, Cal-Harbor VII
Urban Renewal Associates L.P., North Pier Urban Renewal Associates
L.P., Cal-Harbor No. Pier Urban Renewal Associates L.P., South Pier
Urban Renewal Associates L.P., Cal-Harbor So. Pier Urban Renewal
Associates L.P., and Institutional Realty Management, LLC, as Rental
Agent. (2)
10.49 Company Pledge Agreement, dated as of November 1, 1996, between Cali
Realty Corporation and Prudential Securities Credit Corp., as
Administrative Agent for the Lenders. (2)
10.50 Pledge Agreement, dated as of November 1, 1996, between Cali Realty,
L.P. and Prudential Securities Credit Corp., as Administrative Agent
for the benefit of the Lenders. (2)
10.51 Agreement of Assignment of Agreement for Purchase and Sale of Real
Estate and Related Property, dated as of October 23, 1996, between
Bryemere, L.P. and Five Sentry Realty Associates, L.P. (3)
10.52 Purchase Agreement, dated October 11, 1996, between Whiteweld Centre,
Inc. and Cali Realty Acquisition Corporation.(3)
10.53 First Amendment to Purchase Agreement, dated as of December 10, 1996,
by and between Whiteweld Centre, Inc. and Cali Realty Acquisition
Corporation.(3)
10.54 Agreement of Sale, dated October 23, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.55 Amendment to Agreement of Sale, dated December 3, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.56 Second Amendment to Agreement of Sale, dated December 17, 1996, by and
among Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.57 Sale Agreement between Metropolitan Life Insurance Company, a New York
corporation, as Seller, and Cali Realty Acquisition Corp., a Delaware
corporation, as Purchaser, as of November 26, 1996.(4)
Page 126
10.58 Amendment to Sale Agreement as of December 4, 1996, by and between
Metropolitan Life Insurance Company, a New York corporation, and Cali
Realty Acquisition Corp., a Delaware corporation.(4)
10.59 Amended and Restated Employment Agreement between Cali Realty
Corporation and John R. Cali, dated as of January 21, 1997. *
10.60 Restricted Share Agreement between Cali Realty Corporation and John R.
Cali, dated as of January 21, 1997. *
10.61 Amended and Restated Employment Agreement between Cali Realty
Corporation and Brant Cali, dated as of January 21, 1997. *
10.62 Restricted Share Agreement between Cali Realty Corporation and Brant
Cali, dated as of January 21, 1997. *
10.63 Amended and Restated Employment Agreement between Cali Realty
Corporation and Thomas A. Rizk, dated as of January 21, 1997. *
10.64 Restricted Share Agreement between Cali Realty Corporation and Thomas
A. Rizk dated as of January 21, 1997. *
10.65 Stock Pledge Agreement between Cali Realty Corporation and Thomas A.
Rizk, dated as of January 21, 1997. *
10.66 Secured Non-Recourse Promissory Note issued by Thomas A. Rizk to Cali
Realty Corporation, dated as of January 21, 1997. *
10.67 Employment Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.68 Restricted Share Agreement between Cali Realty Corporation and Roger
W. Thomas, dated as of January 21, 1997. *
10.69 Stock Pledge Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.70 Secured Non-Recourse Promissory Note issued by Roger W. Thomas to Cali
Realty Corporation, dated as of January 21, 1997. *
10.71 Employment Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.72 Restricted Share Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.73 Stock Pledge Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997.*
10.74 Secured Non-Recourse Promissory Note issued by Barry Lefkowitz to Cali
Realty Corporation, dated as of January 21, 1997. *
10.75 Employment Agreement between Cali Realty Corporation and James Nugent,
dated as of January 21, 1997. *
Page 127
10.76 Restricted Share Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.77 Stock Pledge Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.78 Secured Non-Recourse Promissory Note issued by James Nugent to Cali
Realty Corporation, dated as of January 21, 1997. *
10.79 Employment Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.80 Restricted Share Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.81 Stock Pledge Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.82 Secured Non-Recourse Promissory Note issued by Albert Spring to Cali
Realty Corporation, dated as of January 21, 1997. *
10.83 Employment Agreement between Cali Realty Corporation and Brad W.
Berger, dated as of January 31, 1997. *
10.84 Warrant issued by Cali Realty Corporation to Brad W. Berger, dated
January 31, 1997.
10.85 Employment Agreement between Cali Realty Corporation and Timothy M.
Jones, dated as of January 31, 1997. *
10.8 Warrant issued by Cali Realty Corporation to Timothy M. Jones, dated
January 31, 1997. *
10.87 Warrant issued by Cali Realty Corporation to Greg Berger, dated
January 31, 1997.
10.88 Warrant issued by Cali Realty Corporation to Andrew Greenspan, dated
January 31, 1997.
10.89 Warrant issued by Cali Realty Corporation to Michael Grossman, dated
January 31, 1997.
10.90 Non-Competition Agreement between Cali Realty Corporation and Robert
F. Weinberg, dated January 31, 1997.
10.91 Non-Competition Agreement between Cali Realty Corporation and Martin
S. Berger, dated January 31, 1997.
- ----------------------
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated November 18, 1996.
(3) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 30, 1996.
(4) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 31, 1996.