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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 fiscal year ended December 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 1-11706
CARRAMERICA REALTY CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 52-1796339
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(State of Incorporation) (I.R.S. Employer Identification No.)
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 624-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, $0.01 Par Value New York Stock Exchange
Series B Cumulative Redeemable
Preferred Stock, $0.01 Par Value New York Stock Exchange
Series C Depositary Cumulative
Redeemable Preferred Stock,
$0.001 Par Value New York Stock Exchange
Series D Depositary Cumulative
Redeemable Preferred Stock,
$0.001 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: 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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
As of March 4, 1998, the aggregate market value of the 32,403,511
shares of Common Stock held by non-affiliates of the registrant was
approximately $964.0 million, based upon the closing price of $29.75 on the New
York Stock Exchange composite tape on such date.
Number of shares of Common Stock outstanding as of March 4, 1998: 59,997,486
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the proxy statement for the
Annual Stockholders Meeting to be held in 1998 are incorporated by reference
into Part III.
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PART 1
Item 1. BUSINESS
THE COMPANY
General
CarrAmerica Realty Corporation (the "Company") is a fully integrated,
self-administered and self-managed publicly traded real estate investment trust
("REIT") that focuses primarily on the acquisition, development, ownership and
operation of office properties in select suburban growth markets across the
United States. As of March 1, 1998, the Company owned a greater than 50%
interest in a portfolio of 256 operating office properties, and 41 properties
under construction. These 256 operating properties contain an aggregate of
approximately 19.9 million square feet and the 41 properties under construction
will contain approximately 3.7 million square feet. The operating properties
owned by the Company as of December 31, 1997 were 95.9% leased as of that date,
with approximately 1,400 tenants.
The Company and its predecessor, The Oliver Carr Company ("OCCO"), have
developed, owned and operated office buildings in the Washington, D.C.
metropolitan area for more than 35 years. In November 1995, the Company
announced a strategic alliance with a wholly-owned subsidiary of Security
Capital U.S. Realty (together with Security Capital U.S. Realty, "SC-USREALTY"),
a European real estate operating company which owns strategic positions in
selected real estate companies in the United States. As of February 28, 1998,
SC-USREALTY owned approximately 44.1% of the outstanding common stock of the
Company (39.3% on a fully diluted basis).
The Company's experienced staff of over 1,200 employees, including
approximately 900 on-site building employees, provides a broad range of real
estate services. The Company's principal executive offices are located at 1700
Pennsylvania Avenue, N.W., Washington, D.C. 20006, and its telephone number is
(202) 624-7500. After July 1, 1998 the Company's principal offices will be
located at 1850 K Street, N.W., Washington, D.C. 20006 and its telephone number
will be (202) 729-7500. The Company's web site can be found at
www.carramerica.com. The Company was organized as a Maryland corporation on July
9, 1992.
Business Strategy
The Company's primary business objectives are to achieve long-term
sustainable per share cash flow growth and to maximize stockholder value through
a strategy of (i) acquiring, developing, owning and operating office properties
primarily in suburban markets throughout the United States that exhibit strong,
long-term growth characteristics and (ii) maintaining and enhancing a national
operating system that provides corporate users of office space with a mix of
products and services to meet their workplace needs at both the national and
local level. The Company has focused its investments primarily in suburban
markets throughout the United States because it believes that the suburban
markets provide growth oriented companies and their employees with workplace
locations which have lower operating costs, greater convenience and a higher
quality of life than traditional central business district locations.
Target Markets. The Company has focused its acquisition and development
activity in markets of the United States, which generally possess strong
long-term growth characteristics. Within these markets, the Company is targeting
specific submarkets in which (i) operating costs for businesses are relatively
low, (ii) long-term population and job growth generally are expected to exceed
the national average, (iii) large, well-educated employment pools exist, and
(iv) barriers to entry exist for new supplies of office space. The Company has
established a local presence in each of its existing target markets through its
investment activity and through relationships established by its experienced
market officers. The Company's target markets include the following: Suburban
Atlanta, Suburban Austin, Suburban Chicago, Suburban Dallas, Southeast Denver,
Tampa, Florida, Boca Raton, Florida, Orange County/Los Angeles, Suburban
Phoenix, Suburban Portland, Oregon, Sacramento, Suburban Salt Lake City, San
Diego, San Francisco Bay Area, Suburban Seattle and metropolitan Washington,
D.C.
2
For each identified target market, the Company has established a set of
general guidelines and physical characteristics to evaluate investment
opportunities. All investment decisions are driven by real estate research,
focusing on variables such as composition of economic base, rate and composition
of job growth and office space supply and demand fundamentals. During 1997, the
Company believes that it met its critical mass threshold in substantially all of
its target markets. By achieving such critical mass, the Company believes that
it is able to better serve its customers' needs, realize certain operating
efficiencies and achieve sustainable long-term per share cash flow growth and
maximize stockholder value.
As of December 31, 1997 the distribution of the Company's operating
properties (on a rentable square foot basis) was as follows: 38% in its Pacific
region, primarily in suburban Seattle and the California markets of Silicon
Valley, Pleasanton, San Mateo, Orange County, Los Angeles and San Diego; 31% in
its Southeast region, primarily in metropolitan Washington, D.C., suburban
Atlanta and Boca Raton, Florida; 14% in its Mountain region, primarily in
suburban Salt Lake City, southeast Denver and suburban Phoenix; and 17% in its
Central region, primarily in suburban Chicago, suburban Dallas and suburban
Austin. Downtown Washington, D.C., which represented 100% of the Company's
portfolio in 1993, accounted for approximately 13% of the Company's portfolio
(on a rentable square foot basis) as of December 31, 1997.
Operating Property Acquisitions. In November 1995, the Company
implemented a major initiative to acquire operating office properties in order
to establish the operating platform for its national business strategy. Between
January 1, 1996 and March 1, 1998, the Company acquired 241 operating properties
containing approximately 16.7 million square feet, resulting in an approximate
500% increase in the total square footage of operating properties in which the
Company has a majority interest. These properties were acquired for an aggregate
purchase price of approximately $1.9 billion.
Development Program. Development of office properties is an
increasingly important component of the Company's growth strategy as attractive
acquisition opportunities diminish due to the influx of capital into the office
property market. The Company believes that long-term investment returns
resulting from properties it develops generally will exceed those from
properties it acquires, and the Company will not assume significantly increased
investment risks. The Company minimizes its development risk by employing
extensively trained and experienced development personnel, by avoiding the
assumption of significant entitlement risk in conjunction with land acquisitions
and by entering into guaranteed maximum price (GMP) construction contracts with
seasoned and credible contractors. Most importantly, the Company carefully
analyzes the supply and demand characteristics of a target market before
commencing inventory development in the market. In general, the Company will
only undertake inventory development (which excludes properties under
construction that have been substantially pre-leased) in markets with strong
real estate fundamentals, and then the Company generally will construct office
buildings attractive to a wide range of office users. The Company's
research-driven development program enables it to tailor its development
activities in each target market, from inventory development, to build-to-suit
projects, to holding land for future development. From January 1, 1997 to March
1, 1998, the Company placed in service nine development properties containing
approximately 780,000 square feet. The total cost of these development
properties was $99.1 million and the Company expects that the first year
stabilized unlevered return of these properties will be 11.7%. In addition, as
of March 1, 1998, the Company had an additional 41 properties under construction
that will contain approximately 3.7 million square feet.
Investments in Land Held for Future Development. The Company believes
that acquiring land to support future development provides it with a competitive
advantage in responding to customers' needs for office space in markets with low
vacancy rates, barriers to entry for new supplies of office space and increasing
rental rates. The Company also believes that the long-term investment returns
available to it on office properties it develops generally will exceed those of
office property acquisition opportunities currently available to the Company. In
addition to its portfolio of operating properties and projects currently under
development, the Company owned or controlled, as of March 1, 1998, land in 15 of
its target markets that is expected to support future development of up to 5.9
million square feet. The Company believes that acquiring land to support future
development provides it with a competitive advantage in responding to customers'
needs for office space in markets with low vacancy rates.
3
National Operating System. As part of its business strategy, the
Company has developed and will continue to enhance a national operating system
to provide nationally coordinated customer service, marketing and development.
The Company's national operating system consists of three components: (i) a
Market Officer Group, currently consisting of 11 market officers focused on
developing and maintaining strong local relationships with the Company's
customers and the brokerage community and identifying investment opportunities
for the Company; (ii) a Corporate Services Group, which is dedicated to
marketing the Company's office space to a targeted list of companies; and
(iii) a National Development Group, which is responsible for developing office
properties, build-to-suit facilities and business parks. The Company's national
operating system is designed to provide corporate users of office space with a
mix of products and services to meet their workplace needs at both the national
and local levels. The Company believes that through its existing portfolio of
operating properties, property development opportunities and land acquired and
currently held for future development, the Company can generate incremental
demand through the relocation and expansion needs of many of its customers, both
within a single target market and in multiple target markets.
Market Officer Group. The Market Officer Group currently consists of 11
market officers who cover the 16 target markets in which the Company currently
owns properties. These market officers are responsible for maximizing the
performance of the Company's properties in their markets and ensuring that the
needs of the Company's customers are consistently being met. Because they meet
with the Company's customers on a regular basis, market officers are cognizant
of and responsive to customers' relocation or expansion needs. The market
officers have extensive knowledge of local conditions in their respective
markets and, therefore, are invaluable in identifying attractive investment
opportunities in their markets. In addition, through their contact with
customers, market officers are well positioned to help the Corporate Services
Group identify customers with new build-to-suit and multi-market requirements.
Corporate Services Group. The Company established the Corporate
Services Group in 1997. This group is responsible for marketing the Company's
properties, build-to-suit capabilities and the national scope of the Company's
operations to a targeted list of major corporate users. The Corporate Services
Group acts as a primary point of contact for national customers, coordinating
all of the office space the Company offers and giving corporate customers the
opportunity to address their national space requirements efficiently and
economically.
National Development Group. The National Development Group is
responsible for developing suburban office properties, build-to-suit facilities
and business parks. The Company's development team currently has over 40
professionals consisting of architects, engineers and construction professionals
across the United States who have an average of over 15 years of experience
developing office properties. This team of development professionals oversees
every aspect of the Company's land planning, building design, construction and
development of office properties, ensuring that all projects meet the same high
standards and uniform specifications in building design and systems. The Company
believes that, the National Development Group's expertise has given the Company
a competitive edge in marketing its facilities and services to customers.
Executive Office Suites Business. In August 1997, OmniOffices, Inc.
("OmniOffices"), an affiliate of the Company, acquired substantially all of the
assets of OmniOffices Group, Inc. and its subsidiaries for an aggregate purchase
price of approximately $50 million in cash. These assets included 28 executive
office suite centers containing approximately 1,650 office suites located in 14
markets across the country. In addition, OmniOffices has acquired an additional
10 executive office suite centers, and entered into an agreement to acquire
(subject to certain closing conditions) an additional 22 executive office suite
centers (although there can be no assurance that this pending acquisition will
be consummated), for an aggregate cash investment of approximately $88 million.
These additional 32 executive office suite centers contain approximately 2,300
office suites located primarily in New York City, San Francisco, Chicago, Tampa,
Indianapolis and San Diego, and are operated by the two largest franchisees of
the HQ(R) executive office suite network, the largest operator of executive
suites.
4
The "executive office suites" business typically involves leasing
20,000 to 30,000 square feet of an office building from the owner and outfitting
that space with 60-70 individual offices (known as office suites) that are
leased on a relatively short-term basis (i.e., one year or less) to customers
who generally utilize one to three offices at a time. OmniOffices generally
provides these customers with administrative support services (e.g.,
secretarial, duplicating, fax and receptionist services), conference and
training facilities, video conferencing, travel arrangements and catering
arrangements. The Company believes that approximately 60% of the current demand
being generated for executive office suites originates from national and
multi-national companies. The Company believes that this line of business has
significant potential for growth because the demand for executive office suites
is likely to increase as companies seek greater flexibility and alternative
workplace solutions for their staffing and business plan requirements. The
Company believes that its position as the only national office property owner
and operator providing both traditional, long-term office space and (through
OmniOffices) flexible, short-term workplace options provides it with a
competitive advantage in meeting the evolving needs of growing companies.
OmniOffices expects to continue expanding its operations through a
program encompassing both acquisitions and the creation of new executive office
suite centers. OmniOffices has financed its recent acquisitions primarily
through debt and equity investments by the Company. (In conformance with
limitations under the tax laws relating to REITs, OmniOffices is structured as a
taxable "C" corporation in which the Company owns 95% of the economic interest,
but none of the voting stock.) Because the tax laws relating to REITs limit the
amount of investment by the Company in OmniOffices to 5% of the Company's total
assets (or approximately $150 million), future growth of OmniOffices likely will
be financed through third-party debt financing (some or all of which may be
guaranteed by the Company) or equity investments by others (possibly including
public investors).
Asset Optimization. As a component of its business strategy, the
Company may dispose of assets that become inconsistent with its long-term
strategic or return objectives or where market conditions for disposition are
favorable. The Company would then redeploy the proceeds of such dispositions
into other office properties (utilizing tax-deferred exchanges where possible).
Consistent with this strategy, during 1997, the Company disposed of seven
properties containing approximately 664,000 square feet for approximately $68
million in value. The Company recognized a gain of $5.4 million in conjunction
with these transactions. In addition, in January 1998, the Company disposed of
an additional property containing 267,000 square feet for approximately $78
million in value, resulting in a gain of $43.8 million. The Company also may
consider disposing of additional properties or interests in properties, some of
which may be significant. The Company, however, has agreed with SC-USREALTY to
use its reasonable efforts to dispose of properties only through tax-deferred
exchanges (and the Company also is subject to other similar restrictions with
respect to certain properties acquired by CarrAmerica Realty, L.P. and Carr
Realty, L.P.).
Recent Developments
From January 1, 1997 to March 1, 1998, the Company invested
approximately $1.3 billion ($1.099 billion in cash, the assumption of $182.8
million of debt and the issuance of $26.0 million in partnership interests
("Units")) in 95 operating properties containing approximately 7.6 million
square feet and in land held for future development which is expected to support
the development of approximately 6.7 million square feet. On certain parcels of
land acquired between January 1, 1997 and March 1, 1998, the Company developed
and placed into service five properties containing an aggregate of approximately
346,000 square feet and placed under construction 31 properties which will
contain an aggregate of approximately 2.6 million square feet. The table below
provides certain information by market regarding the operating properties
acquired between January 1, 1997 and March 1, 1998:
Purchase
Price Number of Rentable
Region/Market (in millions) Properties Square Feet
------------------------ ------------ ------------- -----------
SOUTHEAST REGION
Suburban Atlanta $ 58.8 5 626,000
Boca Raton, Florida 42.8 1 279,000
PACIFIC REGION
San Francisco Bay Area 313.3 29 2,007,000
Sacramento 34.6 8 314,000
Orange County/Los Angeles 79.8 7 489,000
San Diego 35.6 5 325,000
Suburban Portland, Oregon 9.0 1 81,000
Suburban Seattle 51.0 8 438,000
CENTRAL REGION
Suburban Chicago 92.8 6 707,000
Suburban Austin 15.6 2 171,000
Suburban Dallas 93.8 9 936,000
MOUNTAIN REGION
Suburban Salt Lake City 50.1 8 463,000
Suburban Phoenix 112.6 6 714,000
======== ===== =========
Total $ 989.8 95 7,550,000
======== ====== =========
5
The following table provides certain information regarding the
Company's acquisition of land (including land subject to options), all of which
was acquired between January 1, 1997 and March 1, 1998:
Square Feet Future
Under Buildable
Region/Market Construction Square Footage
------------------------------ ---------------- ----------------
Pacific Region:
San Francisco Bay Area 776,000(1) 254,000
Suburban Portland, Oregon --(2) 444,000
Orange County/Los Angeles -- 136,000
San Diego 182,000 156,000
Suburban Seattle 279,000 286,000
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Subtotal 1,237,000 1,276,000
---------- ---------
Mountain Region:
Southeast Denver -- 128,000
Suburban Salt Lake City 50,000 193,000
Suburban Phoenix 137,000 350,000
---------- ---------
Subtotal 187,000 671,000
---------- ---------
Central Region:
Suburban Dallas 607,000 740,000
---------- ---------
Subtotal 607,000 740,000
---------- ---------
Southeast Region:
Suburban Washington, D.C. 322,000 --
Downtown Washington, D.C. -- 221,000
Boca Raton, Florida 188,000 388,000
Tampa, Florida -- 202,000
Suburban Atlanta 76,000 216,000
---------- ---------
Subtotal 586,000 1,027,000
---------- ---------
TOTAL 2,617,000 3,714,000
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(1) Excludes Baytech Business Park which was purchased in 1997 and
placed in service in January 1998.
(2) Excludes RadiSys II which was purchased in 1997 and placed in
service in December 1997.
Capital Transactions
During the fourth quarter of 1997, the Company raised aggregate net
proceeds of $246 million. The Company sold 6,000,000 depositary shares of Series
C Cumulative Redeemable Preferred Stock in October 1997, and 2,000,000
depositary shares of Series D Cumulative Redeemable Preferred Stock in December
1997, from which the Company raised net proceeds of $145 million and $48
million, respectively. In addition, the Company sold 1.8 million shares of its
common stock to two unit investment trusts and a concurrent sale to SC-USREALTY
in December, 1997, from which the Company raised net proceeds of $53 million.
The net proceeds of these offerings were used to acquire the suburban office
properties and land described above, to fund develpoment costs and to pay down
indebtedness under the Company's unsecured credit facility.
In February 1998, the Company sold seven-year and ten-year senior
unsecured notes in an offering that raised net proceeds of approximately $198
million. The net proceeds were used to acquire the suburban office properties
and land described above, to fund development costs, to pay down indebtedness
under the Company's unsecured credit facility, and to pay certain costs related
to certain related hedging contracts.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: national and local economic, business and real estate conditions that
will, among other things, affect demand for office properties, availability and
creditworthiness of tenants, the level of lease rents and the availability of
financing for both tenants and the Company, adverse changes in the real estate,
including, among other things, competition with other
6
companies, risks of real estate acquisition and development (including the
failure of pending acquisitions to close and pending developments to be
completed on time and within budget), governmental approvals, actions and
initiatives, and environmental/safety requirements.
Directors of the Company
The directors of the Company are divided into three classes, with
approximately one-third of the directors elected by the stockholders annually.
As of March 1, 1998, the Board of Directors of the Company consisted of the
following persons:
Oliver T. Carr, Jr., 72, has been the Chairman of the Board of
Directors of the Company since it commenced operations in February 1993. In May
1997, Mr. Carr resigned as Chief Executive Officer, a position he had since
February 1993. Mr. Carr's term as a director of the Company expires at the 1999
Annual Meeting of Stockholders. Mr. Carr founded the Company's predecessor, The
Oliver Carr Company, in 1962 and since that time has been its Chairman of the
Board and a director. In addition, Mr. Carr had served as President of The
Oliver Carr Company from 1993 to the present. He was Chairman of the board of
Trustees of The George Washington University from July 1988 to June 1995. Mr.
Carr is the father of Thomas A. Carr and Robert O. Carr. Mr. Carr is a member of
the Executive Committee and the Investment Committee of the Board of Directors.
Thomas A. Carr, 39, has been President and a director of the Company
since February 1993. Mr. Carr's term as a director of the Company expires at the
1998 Annual Meeting of Stockholders. In May 1997, Mr. Carr was appointed Chief
Executive Officer of the Company. Mr. Carr was the Company's Chief Operating
Officer from May 1995 to May 1997 and the Company's Chief Financial Officer from
February 1993 to May 1995. Mr. Carr was President of Carr Partners, Inc., a
financial services affiliate of The Oliver Carr Company, from 1991 until Carr
Partners, Inc. ceased operations in February 1993. Prior to that time, Mr. Carr
was Vice President of Suburban Development and Regional Development Partner for
Maryland beginning in 1985. Mr. Carr is a member of the National Association of
Real Estate Investment Trusts (NAREIT), a member of International Development
Research Council CRE 2000 Research project (IDRC), a director of Lafayette
Square Investments, Inc. and a director of The Oliver Carr Company. Mr. Carr
also serves as a director and officer of certain subsidiaries of the Company,
including as Chairman of the Board of Directors of OmniOffices. Mr. Carr holds a
Masters degree in Business Administration from Harvard Business School and a
Bachelor of Arts degree from Brown University. Mr. Carr is a member of the
Executive Committee and the Investment Committee of the Board of Directors. In
addition, Mr. Carr is a member of management's Operating Committee and
Investment Committee.
Andrew F. Brimmer, 71, has been a director of the Company since
February 1993. Dr. Brimmer's term as a director of the Company expires at the
1999 Annual Meeting of Stockholders. He has been President of Brimmer & Company,
Inc., an economic and financial consulting firm, since 1976. Since 1995, Dr.
Brimmer has served as the chairman of the District of Columbia Financial Control
Board. Dr. Brimmer was a member of the Board of Governors of the Federal Reserve
System from 1966 through 1974. He is also the Wilmer D. Barrett Professor of
Economics at the University of Massachusetts-Amherst. Dr. Brimmer serves as a
director of BlackRock Investment Income Trust, Inc. (and other affiliated
funds), E.I. du Pont de Nemours & Company, Navistar International Corporation,
Borg-Warner Automotive, Inc. and Airborne Express. Dr. Brimmer received a
Bachelor of Arts and a Masters degree in Economics from the University of
Washington and holds a Ph.D. in Economics from Harvard University. Dr. Brimmer
is a member of the Audit Committee of the Board of Directors.
A. James Clark, 70, has been a director of the Company since February
1993. Mr. Clark's term as a director of the Company expires at the 1998 Annual
Meeting of Stockholders. He has been Chairman of the Board and President of
Clark Enterprises, Inc., a Bethesda, Maryland-based company involved in real
estate, communications, and commercial and residential construction, since 1972.
Mr. Clark is a member of the University of Maryland Foundation, and serves on
the Board of Trustees of The Johns Hopkins Board of Medicine. He is also a
member of the PGA Tour Golfcourse Properties Advisory Board, an Advisory
Director of Lockheed Martin Corporation and a director of Potomac Electric Power
Company. Mr. Clark is a graduate of The University of Maryland. Mr. Clark is a
member of the Executive Committee, Executive Compensation Committee, Investment
Committee and Nominating Committee of the Board of Directors.
7
Todd W. Mansfield, 40, has been a director of the Company since
November 1997. Mr. Mansfield filled a vacancy for a directorship whose term
expires at the 2000 Annual Meeting of Stockholders. Mr. Mansfield has been
Managing Director of Security Capital (U.K.) Management Limited since May 1997.
Prior to that time, Mr. Mansfield had been with The Walt Disney Company since
May 1986, where he was Executive Vice President/General Manager of Disney
Development Company and President of The Celebration Company. Mr. Mansfield is a
director of Parking Services International (an affiliate of SC-USREALTY) and a
trustee of Urban Growth Property Trust (an affiliate of SC-USREALTY). Mr.
Mansfield also is a director of OmniOffices. Mr. Mansfield received his Masters
in Business Administration from Harvard University and his Bachelor of Arts from
Claremont McKenna College. Mr. Mansfield is a member of the Executive
Compensation Committee of the Board of Directors.
Caroline S. McBride, 44, has been a director of the Company since July
1996. Ms. McBride's term as a director of the Company expires at the 1998 Annual
Meeting of Stockholders. Ms. McBride is a Managing Director of Security Capital
Global Strategic Group, an affiliate of SC-USREALTY. From January 1995 to June
1996, Ms. McBride was the director of private market investments for the IBM
Retirement Fund and from January 1992 to January 1995, she was the director of
real estate investments for such fund. Prior to joining the IBM Retirement Fund
in 1992, Ms. McBride was director of finance, investments and asset management
for IBM's corporate real estate division. Ms. McBride is on the Boards of
Directors of Storage USA (an affiliate of SC-USREALTY), the Pension Real Estate
Association (PREA) and the Real Estate Research Institute. Ms. McBride received
her Masters in Business Administration from New York University and a Bachelor
of Arts degree from Middlebury College. Ms. McBride is a member of the
Investment Committee and the Audit Committee of the Board of Directors.
William D. Sanders, 56, has been a director of the Company since May
1996. Mr. Sanders' term as a director of the Company expires at the 1999 Annual
Meeting of Stockholders. Mr. Sanders is the founder and Chairman of Security
Capital Group (an affiliate of SC-USREALTY). Mr. Sanders resigned on January 1,
1990, as chief executive officer of LaSalle Partners Limited, which he founded
in 1968. Mr. Sanders is on the Boards of Directors of R. R. Donnelley & Sons
Company, SC-USREALTY, Storage USA, Inc. (an affiliate of SC-USREALTY) and
Regency Realty Corporation (an affiliate of SC-USREALTY). Mr. Sanders is a
former trustee and member of the executive committee of the University of
Chicago and a former trustee fellow of Cornell University. Mr. Sanders received
his Bachelor of Science degree from Cornell University. Mr. Sanders is a member
of the Nominating Committee of the Board of Directors.
Wesley S. Williams, Jr., 55, has been a director of the Company since
February 1993. Mr. Williams' term as a director of the Company expires at the
1998 Annual Meeting of Stockholders. Mr. Williams has been a partner of the law
firm of Covington & Burling, Washington, DC, since 1975. He was an adjunct
professor of real estate finance law at the Georgetown University Law Center
from 1971 to 1973 and is a contributing author to several texts on banking law
and on real estate finance and investment. Mr. Williams is also on the Editorial
Advisory Board of the District of Columbia Real Estate Reporter. Mr. Williams
serves on the Boards of Directors of Blackstar Communications, Inc. and its
Florida, Michigan and Oregon subsidiaries; Blackstar LLC and its Nebraska and
South Dakota subsidiaries; and the Federal Reserve Bank of Richmond. Mr.
Williams is Chairman of the Boards of Directors of Broadcast Capital, Inc. and
Broadcast Capital Fund, Inc. and is Vice Chairman of The Lockhart Companies,
Incorporated. Mr. Williams also is a member of the Executive Committee of the
Board of Trustees of Penn Mutual Life Insurance Company. Mr. Williams received a
B.A. and J.D. from Harvard University, an M.A. from the Fletcher School of Law
and Diplomacy and an L.L.M. from Columbia University. Mr. Williams is a member
of the Executive Compensation Committee of the Board of Directors.
Executive Officers and Certain Key Employees of the Company
As of March 1, 1998, the Company's executive officers and key employees
were as follows:
Brian K. Fields, 38, has been the Company's Chief Financial Officer
since May 1995. Prior to that time, Mr. Fields had served as the Company's Vice
President, Treasurer and Controller since February 1993. Mr. Fields served as
Treasurer and Controller of The Oliver Carr Company from 1990 to February 1993.
Mr. Fields serves as a director and officer of certain subsidiaries of the
Company. He holds a Bachelor of Science degree in Accounting from Virginia Tech
and is a Certified Public Accountant. Mr. Fields is a member of management's
Operating Committee and Investment Committee.
8
Kent C. Gregory, 47, has been the Company's Managing
Director--Corporate Services since July 1997. Prior to that time, Mr. Gregory
had been employed by Opus, a real estate services company, since 1993, serving
as Senior Vice President of National Accounts. He holds a Masters in Business
Administration from Pace University and a Bachelor of Arts degree in Business
Administration from St. Thomas University. Mr. Gregory is a member of
management's Operating Committee and Investment Committee.
Philip L. Hawkins, 42, has been the Company's Managing Director--Asset
Management since February 1996. Prior to that time, Mr. Hawkins had been
employed by LaSalle Partners Limited, a real estate services company, since
1982, serving as Executive Vice President, Eastern Division, Asset Management
Group since 1995, Senior Vice President, Northeast Region, Asset Management
Group from 1990 to 1994, and in other asset management positions prior to that
time. Mr. Hawkins also was a director of LaSalle Partners Limited. He holds a
Masters in Business Administration from the University of Chicago Graduate
School of Business and a Bachelor of Arts degree from Hamilton College. Mr.
Hawkins is a member of management's Operating Committee and Investment
Committee. Mr. Hawkins serves as a director and officer of certain subsidiaries
of the Company, including as a director of OmniOffices.
Robert E. Peterson, 46, has been the Company's Managing Director--
Development since August 1997 and President of CarrAmerica Development, Inc.
since January 1, 1998. Prior to that time, Mr. Peterson had been Regional
Managing Director, Southeast Region, since November 1996. Mr. Peterson has over
23 years of real estate experience. Mr. Peterson's most recent experience
includes 18 years as President of Peterson Properties, which he co-founded in
1978. Mr. Peterson is a former member of the Society of Industrial and Office
Realtors and serves on the Developer Advisory Council for the Georgia Chapter of
the National Association of Industrial and Office Parks. Mr. Peterson holds a
Bachelor of Science in Business Administration from the University of North
Carolina at Chapel Hill. Mr. Peterson is the brother of James D. Peterson. Mr.
Peterson is a member of management's Operating Committee and Investment
Committee.
Robert G. Stuckey, 36, has been the Company's Chief Investment Officer
since August 1997. Prior to that time, Mr. Stuckey had been the Company's
Managing Director--Acquisitions and Development since February 1996. Prior to
that time, Mr. Stuckey was employed by Security Capital Industrial Trust (an
affiliate of SC-USREALTY) since January 1993, serving as Senior Vice President
managing the operations of the development group since November 1994, and as
Vice President supervising acquisition due diligence from May 1993 to November
1994. Mr. Stuckey serves as a director and officer of certain subsidiaries of
the Company. Mr. Stuckey holds a Masters in Business Administration from Harvard
Business School and a Bachelor of Science in Finance from the University of
Nebraska. Mr. Stuckey is a member of management's Operating Committee and
Investment Committee.
Paul R. Adkins, 39, has been the Company's Vice President, Market
Officer for Washington, D.C. since August 1996. Mr. Adkins has been with the
Company for over 15 years, including serving as Vice President of Acquisitions
from May 1994 to August 1996. Prior to that, Mr. Adkins served in a variety of
other capacities with the Company, with over 12 years in commercial real estate
leasing. Mr. Adkins is a member of the District of Columbia's Building Industry
Association and Northern Virginia's National Association of Industrial and
Office Parks. Mr. Adkins holds a Bachelor of Arts degree from Bucknell
University.
Steven N. Bralower, 47, has been Senior Vice President of Carr Realty,
L.P., a subsidiary of the Company, since May 1996. Mr. Bralower was Senior Vice
President of Carr Services, Inc., a subsidiary of the Company, from 1993 to May
1996. He was Senior Vice President of The Oliver Carr Company from 1985 to
February 1993, where he was responsible for overseeing and directing one-half of
that Company's leasing activities in its portfolio of commercial office and
retail space. Mr. Bralower first joined The Oliver Carr Company in 1978 as a
commercial leasing agent. Mr. Bralower has been a member of the Georgetown
University Law Center adjunct faculty since 1987. Mr. Bralower holds a Bachelor
of Arts degree from Kenyon College.
9
Robert L. Brumm, 46, has been a Senior Vice President of the Company
since February 1998. Prior to that Mr. Brumm had been Vice President, Human
Resources and Administration of the Company since May 1996. From 1993 to 1996,
Mr. Brumm held the same position with Carr Services, Inc., a subsidiary of the
Company, and from March 1990 to 1993 held the same position with The Oliver Carr
Company. He is responsible for managing the Human Resources, Risk Management,
Training, and Office Management functions. He has over 20 years of experience,
including eight years with Mark Controls Corporation and five years with the
real estate division of Philip Morris, Inc. Mr. Brumm received his L.C.
Bachelors degree from California State University at Long Beach.
Robert O. Carr, 47, has been President and Chairman of the Board of
Directors of Carr Services, Inc., a subsidiary of the Company, since February
1993. Mr. Carr served as a director of the Company from 1993 until 1997. Mr.
Carr is a director of The Oliver Carr Company and, from 1987 until February
1993, served as its President and Chief Executive Officer. Mr. Carr joined The
Oliver Carr Company in 1973 and has served in a number of positions, which have
included the supervision of all development operations since 1979 and all
day-to-day company operations since 1982 as Executive Vice President. Mr. Carr
is a member of the Boards of Directors for the Greater Washington Research
Center, the Corcoran School of Art and the National Cathedral School for Girls.
Mr. Carr is also a member of the Greater Washington Board of Trade, the Urban
Land Institute and the D.C. Chamber of Commerce. Mr. Carr holds a Bachelor of
Arts degree from Trinity College.
Clete Casper, 38, has been the Company's Vice President, Market Officer
for suburban Seattle since July 1996. Mr. Casper has over 10 years of experience
in real estate and marketing. Mr. Casper's most recent experience includes one
year as a Senior Associate with CB Commercial Real Estate Group Inc., Seattle,
Washington. Prior to that, Mr. Casper was with Sabey Corporation in Seattle,
Washington, serving as Development Manager for four years and a Marketing
Associate for five years. Mr. Casper is a graduate of Washington State
University.
John J. Donovan, Jr., 54, has been a Senior Vice President of Carr
Services, Inc., a subsidiary of the Company, since February 1993. Prior to that,
Mr. Donovan was Senior Vice President of The Oliver Carr Company from 1988 to
February 1993 and was responsible for overseeing and directing one-half of The
Oliver Carr Company's leasing activities in its portfolio of commercial office
and retail space. Mr. Donovan joined The Oliver Carr Company as a commercial
leasing agent in 1976. He is a member of the Advisory Board for Jubilee
Enterprise of Greater Washington (an affiliate of Jubilee Housing and The
Enterprise Foundation). Mr. Donovan holds a Bachelor of Arts degree from
Georgetown University.
Karen B. Dorigan, 33, has been a Senior Vice President of the Company
since May 1997. Prior to that, Ms. Dorigan was the Company's Vice
President--Land Due Diligence since January 1996. Prior to that time, Ms.
Dorigan served for more than nine years in a variety of capacities in the
development business of The Oliver Carr Company, including from February 1993 to
January 1996 as a Vice President. She is a past member of the Northern Virginia
Building Industry Association's Arlington Chapter Council. Ms. Dorigan holds a
Bachelor of Science degree in Economics from the University of Pennsylvania,
Wharton School.
J. Thad Ellis, 37, has been the Company's Vice President, Market
Officer for suburban Atlanta since November 1996. Mr. Ellis has over 13 years of
experience in real estate. Mr. Ellis' most recent experience includes 10 years
with Peterson Properties, where his primary responsibility was to oversee and
coordinate leasing and property management for the management services
portfolio. Mr. Ellis is a graduate of Washington & Lee University and is
involved with the National Association of Industrial and Office Parks and
Atlanta's Chamber of Commerce and is on the Advisory Board of Black's Guide.
10
Richard W. Greninger, 46, has been Senior Vice President--Operations of
the Company since January 1998. Prior to that, Mr. Greninger had been the Senior
Vice President of Carr Services, Inc., a subsidiary of the Company, since March
1995. Prior to that time, he had been Vice President of Carr Services, Inc.
since February 1993. Mr. Greninger was with The Oliver Carr Company as Vice
President of Property Management Services from January 1992 to February 1993.
During 1994, Mr. Greninger served as President of the Greater Washington
Apartment and Office Building Association. Mr. Greninger has served as a
director of both the Institute of Real Estate Management and the Building Owners
and Managers Association. Mr. Greninger holds a Masters in Business
Administration from the University of Cincinnati and a Bachelor of Science
degree from Ohio State University.
John S. Herr, 42, has been the Company's Senior Vice President, Market
Officer for Northern California since February 1998. Prior to that time, Mr.
Herr served as the Company's Vice President, Market Officer for Northern
California since September 1996. Mr. Herr has over 13 years of experience in
real estate marketing. Mr. Herr's most recent experience includes 2 years as the
President and Chief Executive Officer of Simeon Commercial Properties in San
Francisco, California. Prior to that, Mr. Herr spent 8 years with Trammel Crow,
serving as Principal and Executive Vice President in San Francisco for two
years; Partner in Richmond, Virginia for three years, and Marketing
Representative in Washington, D.C. for four years. Mr. Herr holds a Masters in
Business Administration from Stanford University and a Bachelors degree from the
U.S. Naval Academy.
Austin W. Lehr, 36, has been the Company's Vice President, Market
Officer for Southeast Denver since July 1996. Mr. Lehr has over 11 years of
experience in real estate marketing. Mr. Lehr's most recent experience includes
four years as a Vice President with Southwest Value Partners and Affiliates in
Phoenix, Arizona. Prior to that, Mr. Lehr spent four years with Draper and
Kramer, Incorporated in Washington, D.C. as the Director of Development and
Marketing. Mr. Lehr holds a Masters of Management degree from Northwestern
University and a Bachelor of Arts degree from Williams College.
Linda A. Madrid, 38, has been the Company's Senior Vice President and
General Counsel since March 1998. Prior to that time, Ms. Madrid had been Senior
Vice President, Managing Director of Legal Affairs and Corporate Secretary of
Riggs National Corporation/Riggs Bank N.A. since February 1996 and Vice
President and Litigation Manager from September 1993 to January 1996. Prior to
that time, Ms. Madrid practiced law in several law firms in Washington, D.C. and
served as Assistant General Counsel for Amtrak. Ms. Madrid holds a J.D. from
Georgetown University Law Center and a Bachelor of Arts degree from Arizona
State University.
Dwight L. Merriman, 37, has been the Company's Senior Vice President,
Market Officer for Southern California since February 1998. Prior to that time,
Mr. Merriman served as the Company's Vice President, Market Officer for Southern
California since August 1996. Mr. Merriman has over 12 years of experience in
real estate marketing. Mr. Merriman's most recent experience includes one year
as Vice President with Security Capital Industrial Trust (an affiliate of
SC-USREALTY) in Irvine, California. Prior to that, Mr. Merriman spent 11 years
with Overton, Moore in Los Angeles, serving as the Director of Marketing--Asset
Management (Partner) for five years, the Director of Marketing--Development
(Partner) for four years and Marketing Associate for two years. Mr. Merriman
holds a Masters in Business Administration from the University of California at
Los Angeles and a Bachelors degree from the University of Southern California.
B. Thomas Miller, Jr., 36, has been an Executive Vice President of
OmniOffices, Inc., since October 1997. Prior to that Mr. Miller had been the
Company's Vice President--Acquisitions and Marketing since September 1996. Mr.
Miller has over 10 years of experience in real estate marketing. Mr. Miller's
most recent experience includes three years as Vice President of Security
Capital Investment Research Incorporated (an affiliate of SC-USREALTY). Prior to
that time, Mr. Miller spent three years as a Senior Manager with Arthur Andersen
S.C. Real Estate Services Group and two years as an Associate in Management
Advisory Services at Kenneth Leventhal & Company. Mr. Miller holds a Bachelor of
Arts degree in Finance from University of Texas at Austin.
11
Robert M. Milkovich, 38, has been the Company's Vice President, Market
Officer for suburban Phoenix, Arizona since January 1998. Mr. Milkovich has over
14 years of experience in real estate leasing. Mr. Milkovich's most recent
experience includes five years as the Assistant Vice President of Leasing for
Carr Services, Inc. a subsidiary of the Company. Mr. Milkovich holds a Bachelor
of Science in Business Administration from the University of Maryland. Mr.
Milkovich serves as President of the executive committee of The Real Estate
Group.
Gerald J. O'Malley, 54, has been the Company's Vice President, Market
Officer for suburban Chicago since July 1996. Mr. O'Malley has over 30 years of
experience in real estate marketing. Mr. O'Malley's most recent experience
includes 10 years as founder and President of G. J. O'Malley & Company, a real
estate office leasing company. Mr. O'Malley holds a Bachelors degree from Loyola
University.
Jeffrey S. Pace, 35, has been the Company's Vice President, Market
Officer for Austin, Texas since May 1997. Mr. Pace has over 12 years of
experience in real estate marketing. Mr. Pace's most recent experience was with
Trammell Crow Company as Marketing Director. Prior to that time, Mr. Pace held
the position of Marketing Representative in the Dallas and Austin markets for
Carlisle Property Company, Stockton, Luedmann, French & West and Trammell Crow
Company. Mr. Pace holds a Masters of Business Administration from the University
of Texas at Arlington and a Bachelor of Science from the University of Texas at
Austin.
James D. Peterson, 50, has been the Company's Vice President, Market
Officer for Florida since November 1996. Mr. Peterson has over 25 years of
experience in the real estate field. Mr. Peterson's most recent experience
includes three years (from 1993 to October 1996) as Vice President of Peterson
Properties with responsibility for property operations in Florida. Mr. Peterson
is involved with the National Association of Industrial and Office Parks and is
a member of Boca Raton's Chamber of Commerce. Mr. Peterson holds a Masters in
Business Administration from University of Texas at Austin and a Bachelor of
Science degree in Economics from University of North Carolina at Chapel Hill.
M. Bruce Snyder, 37, has been the Company's Vice President, Capital
Markets since December 1997. Prior to that time, Mr. Snyder had been Vice
President, Corporate Finance of Charles E. Smith Residential Realty, Inc. since
1994. Mr. Snyder held several different accounting and finance positions with
the Charles E. Smith Company, the predecessor of Charles E. Smith Residential
Realty, Inc., for 13 years. He is a member of the National Investor Relations
Institute. Mr. Snyder holds a Master of Business Administration and Bachelor of
Science in Accounting from The George Washington University.
William H. Vanderstraaten, 37, has been the Company's Vice President,
Market Officer for suburban Dallas since April 1997. Mr. Vanderstraaten has over
15 years of experience in real estate development and leasing fields. Mr.
Vanderstraaten's most recent experience includes eight years as Vice
President--New Development for Harwood Pacific Corporation in Dallas, Texas,
where his primary responsibilities were directing large scale development
projects and coordinating leasing efforts for portfolios. Mr. Vanderstraaten
holds a Bachelor of Science degree in Business Administration from Southern
Methodist University.
Debra A. Volpicelli, 33, has been the Company's Treasurer and
Controller since May 1995. Prior to that time, Ms. Volpicelli had been the
Company's Tax Manager since February 1993. Ms. Volpicelli was Tax Manager for
The Oliver Carr Company from 1990 to February 1993. Ms. Volpicelli holds a
Bachelor of Science degree in Business Administration from Georgetown University
and is a Certified Public Accountant.
Joseph D. Wallace, 34, has been the Executive Vice President of
OmniOffices, Inc. since October 1997. Prior to that time, Mr. Wallace had served
as the Company's Vice President--Building Due Diligence since January 1996 and
was responsible for supervising building acquisition due diligence. Prior to
that time, Mr. Wallace had been the Company's Vice President of Asset Management
since February 1993. Mr. Wallace was Vice President of Carr Partners, Inc. from
1990 to February 1993. Mr. Wallace holds a Bachelor of Science degree in
Commerce from University of Virginia.
12
James S. Williams, 41, has been a Senior Vice President of CarrAmerica
Development, Inc. with responsibility for oversight of all project management,
design and construction operations since October 1996. Mr. Williams rejoined the
Company after two years as Vice President of Operations of Obadwick
International. Mr. Williams' initial tenure with the Company was from 1983 to
1994, during which time he served in a variety of capacities in The Oliver Carr
Company. Mr. Williams is a guest lecturer at George Washington University. Mr.
Williams holds a Bachelor of Science degree in Business Administration from West
Virginia University.
Item 2. PROPERTIES
General. As of December 31, 1997, the Company owned interests in 248
operating office properties consisting of whole or partial ownership interests,
ranging from two to 16 stories each, located in 16 target markets across the
United States. As of December 31, 1997, the Company owned fee simple title or
leasehold interest in 240 operating office properties, controlling partial
interests in three operating office properties, and non-controlling partial
interests of 5% to 50% in five operating office properties. In addition, as of
December 31, 1997, the Company owned 40 office properties under development.
Except as disclosed in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources,"
the Company has no immediate plans to renovate its operating office properties
other than for routine capital maintenance. The Company believes its properties
are adequately covered by insurance. The Company believes that, as a result of
its national operating system, market research capabilities, access to capital,
and experience as an owner, operator and developer of office properties, it will
continue to be able to identify and consummate acquisition and development
opportunities and to operate its portfolio more effectively than competitors
without such capabilities. The Company, however, competes in many of its target
markets with other real estate operators, some of which may have been active in
such markets for a longer period than the Company.
13
General
The following table sets forth certain information about each operating
property owned by the Company as of December 31, 1997:
Company's Net Total
Effective Rentable Annualized
Property Area Percent Base Rent(3)
Property Ownership (square feet)(1) Leased(2) (in thousands)
- -------- --------- ---------------- --------- --------------
Consolidated Properties
SOUTHEAST REGION
Downtown Washington, D.C.:
International Square (3 Properties) 100.0% 1,018,383 87.7% $28,408
1730 Pennsylvania Avenue 100.0 229,292 99.3 8,753
2550 M Street 100.0 187,931 100.0 6,305
1775 Pennsylvania Avenue (6) 100.0 143,981 99.1 3,481
900 19th Street 100.0 100,907 86.4 2,643
1747 Pennsylvania Avenue 89.7(7) 152,119 89.1 4,076
1255 23rd Street 75.0(8) 304,538 97.3 8,098
2445 M Street (14) 74.0(7) 266,902 95.0 6,849
Suburban Washington, D.C.:
One Rock Spring Plaza (6) 100.0 205,298 100.0 4,653
Tycon Courthouse 100.0 416,195 99.0 8,199
Three Ballston Plaza 100.0 302,875 99.7 7,382
Sunrise Corporate Center (formerly Reston 100.0 260,643 99.9 5,312
Quadrangle) (3 Properties)
Parkway One 100.0 87,842 100.0 1,371
Suburban Atlanta:
Veridian (22 Properties) 100.0 187,842 96.0 2,465
Glenridge 100.0 64,431 99.4 984
Century Springs West 100.0 94,766 96.7 1,457
Holcomb Place 100.0 72,823 100.0 1,147
DeKalb Tech (5 Properties) 100.0 163,159 76.2 1,124
Midori 100.0 99,900 100.0 1,745
Crestwood 100.0 88,186 96.0 1,445
Parkwood 100.0 151,020 89.7 2,436
Lakewood 100.0 80,338 98.2 1,135
Average Base
Rent Per
Leased
Property Square Foot(4) Significant Tenants(5)
- -------- -------------- ----------------------
Consolidated Properties
SOUTHEAST REGION
Downtown Washington, D.C.:
International Square (3 Properties) $ 31.80 International Monetary Fund (42%)
1730 Pennsylvania Avenue 38.44 Federal Deposit Insurance Corporation (52%)
King & Spalding (26%)
2550 M Street 33.55 Patton Boggs, LLP (86%), Pocket Communications (10%)
1775 Pennsylvania Avenue (6) 24.40 Citibank F.S.B.(81%)
900 19th Street 30.32 America's Community Bankers (29%), Lucent
Technologies (11%)
1747 Pennsylvania Avenue 38.07 Legg Mason Wood Walker (16%)
1255 23rd Street 27.33 Academy for Educational Development (18%),
Chronicle of Higher Education (16%),
Seabury & Smith (16%), Peabody & Brown (11%)
2445 M Street (14) 27.02 Wilmer, Cutler & Pickering (84%)
Suburban Washington, D.C.:
One Rock Spring Plaza (6) 22.67 Sybase (27%), Caterair (22%)
Tycon Courthouse 19.90 Siemens Rolm (19%), GSA-FINCEN (16%), Vie de France (11%)
Three Ballston Plaza 24.46 CACI (50%), Eastman Kodak (20%), Nixon & Vanderhye, PC (11%)
Sunrise Corporate Center (formerly Reston 20.41 Software AG (67%), Lucas (14%), LaFarge Corporation (11%)
Quadrangle) (3 Properties)
Parkway One 15.61 EIS International (89%)
Suburban Atlanta:
Veridian (22 Properties) 13.68 Edwards Baking Co.(17%)
Glenridge 15.37 Industrial Computer Corp. (40%), Crawford & Co. (27%)
Century Springs West 15.89 Retirement Care Associates (27%)
Holcomb Place 15.75 Prudential (24%), Intercept Holdings, Inc. (20%),
The Progeni Corp. (13%)
DeKalb Tech (5 Properties) 9.04 Lucent Technologies (21%), Moreland & Altobelli (21%)
Midori 17.46 National Consumer Services Corp. (58%), UPS (21%)
Crestwood 17.06 EBC Gwinnet Enterprises (24%), Eveready Battery Co.(13%)
Parkwood 17.98 Columbian Chemicals Company (32%)
Lakewood 14.39 Paychex (26%), ISS (25%), Hickson Corp. (23%),
Morrison's (18%)
14
Company's Net Total
Effective Rentable Annualized
Property Area Percent Base Rent(3)
Property Ownership (square feet)(1) Leased(2) (in thousands)
- -------- --------- ---------------- --------- --------------
The Summit 100.0 % 178,382 100.0% $ 2,416
Triangle Parkway (formerly Spalding 100.0 82,102 100.0 1,096
Triangle II) (3 Properties)
2400 Lake Park 100.0 99,534 98.2 1,385
680 Engineering Drive 100.0 62,154 76.1 407
Embassy Row (3 Properties) 100.0 463,846 98.7 7,101
Boca Raton, Florida:
Peninsula Plaza (formerly Lake Wyman 100.0 160,081 94.7 2,063
Plaza)
Presidential Circle 100.0 278,766 93.2 3,997
------- ---- -----
Southeast Region Subtotal 6,004,236 94.9 127,933
PACIFIC REGION
Southern California,
Orange County/Los Angeles:
Scenic Business Park (4 Properties) 100.0 139,012 100.0 1,547
Harbor Corporate Park (4 Properties) 100.0 148,747 93.0 2,033
Plaza PacifiCare 100.0 104,377 100.0 960
Katella Corporate Center 100.0 79,917 96.4 1,242
Warner Center (12 Properties) `100.0 342,866 97.3 7,716
South Coast Executive Center 100.0 160,301 94.9 3,078
(2 Properties)
Warner Premier 100.0 61,553 100.0 1,354
Westlake Corporate Center (2 Properties) 100.0 71,419 82.2 1,047
Von Karman 100.0 103,713 100.0 2,439
2600 W. Olive 100.0 145,304 100.0 3,051
Bay Technology Center (2 Properties) 100.0 107,481 100.0 1,570
Southern California,
San Diego:
Del Mar Corporate Plaza (2 Properties) 100.0 123,142 100.0 1,841
Wateridge Pavilion 100.0 62,194 100.0 886
Lightspan 100.0 64,800 100.0 1,081
Century Park II (3 Properties) 100.0 198,306 100.0 2,403
Average Base
Rent Per
Leased
Property Square Foot(4) Significant Tenants(5)
- -------- -------------- ---------------------------
The Summit $ 13.54 Unisys Corp. (73%), GE Claims Service (14%)
Triangle Parkway (formerly Spalding 13.35 OHM Remediation Services Corp. (28%), UNI
Triangle II) (3 Properties) Distribution Corp. (18%), Wakefield/Beasley & Associates (16%)
2400 Lake Park 14.16 GSA (23%), Computer Language Research (22%), United
Healthcare Services, Inc. (20%)
680 Engineering Drive 8.60 EMS Technologies (43%), Tie/Communications, Inc.
(12%), Loral Aerospace Corporation (12%)
Embassy Row (3 Properties) 15.51 Ceridian Corporation (25%), Cabot Corporation (10%)
Boca Raton, Florida:
Peninsula Plaza (formerly Lake Wyman 13.61 Motorola (16%)
Plaza)
Presidential Circle 15.39 Suncoast Savings (12%)
-----
Southeast Region Subtotal 22.45
PACIFIC REGION
Southern California,
Orange County/Los Angeles:
Scenic Business Park (4 Properties) 11.13 FHP (30%), Talbert Medical Management (29%), So. Cal
Blood & Tissue (12%)
Harbor Corporate Park (4 Properties) 14.70 Delmas (25%), Texaco Refining & Marketing (13%),
Clayton Environmental (10%)
Plaza PacifiCare 9.20 Pacificare Health Systems (100%)
Katella Corporate Center 16.12 Friendly Hills Healthcare (19%)
Warner Center (12 Properties) 23.13 El Camino Resources (18%), GSA (17%)
South Coast Executive Center 20.23 State Compensation Insurance Fund (33%)
(2 Properties)
Warner Premier 21.99 Panorama Software (34%), RSL COM, USA (27%), Paging
Network of L.A. (12%)
Westlake Corporate Center (2 Properties) 17.83 No tenant occupies more than 10%
Von Karman 23.52 Fidelity National Title Insurance (82%), Taco Bell
Corporation (18%)
2600 W. Olive 21.00 The Walt Disney Company (89%)
Bay Technology Center (2 Properties) 14.61 AMRESCO (100%)
Southern California,
San Diego:
Del Mar Corporate Plaza (2 Properties) 14.95 Peregrine Systems, Inc. (77%), Newgen Results Company (23%)
Wateridge Pavilion 14.24 Stellcom, Inc. (37%), Platinum Solutions, Inc. (19%),
Wateridge Insurance Services (18%), TCS Mortgage, Inc. (14%)
Lightspan 16.69 The Lightspan Partnership, Inc. (100%)
Century Park II (3 Properties) 12.12 San Diego Gas & Electric Co. (100%)
15
Company's Net Total
Effective Rentable Annualized
Property Area Percent Base Rent(3)
Property Ownership (square feet)(1) Leased(2) (in thousands)
- -------- --------- ---------------- --------- --------------
Northern California,
San Francisco Bay Area:
CarrAmerica Corporate Center (formerly 100.0% 949,281 100.0% $18,456
AT&T Center)(6 Properties)
Sunnyvale Research Plaza (3 Properties) 100.0 126,000 100.0 1,672
Rio Robles (7 Properties) 100.0 368,178 100.0 4,179
Valley Business Park II (formerly San 100.0 161,040 100.0 1,731
Jose Orchard Business Park - B
(6 Properties)
Bayshore Centre (formerly Orchard 100.0 195,249 100.0 2,711
Bayshore Center) (2 Properties)
Rincon Centre (formerly Orchard Rincon 100.0 201,178 100.0 1,892
Centre) (3 Properties)
Valley Centre II (formerly Orchard Office 100.0 212,082 100.0 2,385
Centre II) (4 Properties)
Valley Office Centre (formerly Orchard 100.0 68,731 100.0 1,639
Office Centre) (2 Properties)
Valley Centre (formerly Orchard Centre) 100.0 102,291 100.0 1,181
(2 Properties)
Valley Business Park I (formerly San Jose 100.0 67,784 100.0 904
Orchard Business Park - A) (2 Properties)
3745 North First Street 100.0 67,582 100.0 852
3571 North First Street 100.0 116,000 100.0 1,219
Mission Plaza (2 Properties) 100.0 102,687 100.0 1,083
North San Jose Technology Park (formerly 100.0 299,233 100.0 2,780
Fortran) (4 Properties)
Foster City Technology Center 100.0 66,869 100.0 936
(2 Properties)
150 River Oaks 100.0 100,024 100.0 1,320
Amador/Rinconada (3 Properties) 100.0 134,476 100.0 1,694
Amador III 100.0 82,944 100.0 1,138
Arroyo Center (2 Properties) 100.0 104,741 100.0 956
San Mateo I 100.0 70,000 100.0 2,394
San Mateo II and III (2 Properties) 100.0 140,675 94.8 3,346
900-910 East Hamilton (2 Properties) 100.0 351,811 60.4 3,750
Northern California,
Sacramento:
1860 Howe Avenue 100.0 97,887 94.6 1,910
University Office Park (2 Properties) 100.0 121,257 95.4 1,966
Capital Corporate Center (5 Properties) 100.0 94,670 93.5 1,404
Average Base
Rent Per
Leased
Property Square Foot(4) Significant Tenants(5)
- -------- -------------- ----------------------
Northern California,
San Francisco Bay Area:
CarrAmerica Corporate Center (formerly $ 19.44 AT&T (53%), PeopleSoft (20%)
AT&T Center) (6 Properties)
Sunnyvale Research Plaza (3 Properties) 13.27 Cadence Design Systems (68%), AEA Credit Union (27%)
Rio Robles (7 Properties) 11.35 Fujitsu (41%), KLA Instruments (31%), NEC Systems
Laboratory (23%)
Valley Business Park II (formerly San 10.75 Computer Training Academy (20%), Pericom (17%)
Jose Orchard Business Park - B
(6 Properties)
Bayshore Centre (formerly Orchard 13.88 Clarify, Inc. (51%), Alantec (49%)
Bayshore Center) (2 Properties)
Rincon Centre (formerly Orchard Rincon 9.40 Ontrak Systems (44%), Toshiba America Electronic
Centre) (3 Properties) (38%), Future Electronics (19%)
Valley Centre II (formerly Orchard Office 11.25 Boston Scientific (100%)
Centre II) (4 Properties)
Valley Office Centre (formerly Orchard 23.85 Bank of America (21%), Quadrep (20%)
Office Centre) (2 Properties)
Valley Centre (formerly Orchard Centre) 11.55 Seagate Technology (40%), Gregory Associates (38%),
(2 Properties) Neoparadigm Labs, Inc. (22%)
Valley Business Park I (formerly San Jose 13.33 Leybold-Heraeus (35%), Tylan General (17%), Arcom
Orchard Business Park - A) (2 Properties) Electronics (15%)
3745 North First Street 12.60 Comdisco, Inc. (100%)
3571 North First Street 10.51 Sun Microsystems, Inc. (100%)
Mission Plaza (2 Properties) 10.55 Intel Corp (62%), Deskin Research (38%)
North San Jose Technology Park (formerly 9.29 AG Associates (38%), Reply Corp. (27%), Elexsys
Fortran) (4 Properties) International (22%), Novellus Systems (13%)
Foster City Technology Center 14.00 Nortel Communications System (46%), Storybook
(2 Properties) Heirlooms (30%), Genomyx, Inc. (20%)
150 River Oaks 13.20 Seiko-Epson Corporation (100%)
Amador/Rinconada (3 Properties) 12.60 Vanstar Corporation (100%)
Amador III 13.72 Pacific Bell Corporation (100%)
Arroyo Center (2 Properties) 9.13 Hexcel Corporation (53%), TOPCOM America Corporation (47%)
San Mateo I 34.20 Franklin Resources (100%)
San Mateo II and III (2 Properties) 25.08 Franklin Resources, Inc. (37%), Peoplesoft/Red Pepper (20%)
900-910 East Hamilton (2 Properties) 17.66 Apple Computer, Inc. (50%), Philips Electronics (10%)
Northern California,
Sacramento:
1860 Howe Avenue 20.61 Transamerica Information (31%), Anytime Access, Inc.
(19%), GSA (19%), TIG Insurance Company (12%)
University Office Park (2 Properties) 17.00 State Lands Commission (26%), Western Buyers (10%)
Capital Corporate Center (5 Properties) 15.85 Vision Services Plan (31%), Capital Center Investors (29%)
16
Company's Net Total
Effective Rentable Annualized
Property Area Percent Base Rent(3)
Property Ownership (square feet)(1) Leased(2) (in thousands)
- -------- --------- ---------------- --------- --------------
Suburban Portland:
RadiSys Corporate Headquarters 100.0% 80,525 100.0% $ 822
RadiSys II 100.0 45,655 100.0 614
Suburban Seattle:
Redmond East (10 Properties) 100.0 398,030 98.9 4,603
Willow Creek (formerly Data I/O) 100.0 96,179 100.0 981
Canyon Park Business Center (6 Properties) 100.0 246,565 100.0 3,243
Canyon Park Commons (formerly Tract 17) 100.0 95,290 100.0 1,358
--------- ----- -------
Pacific Region Subtotal 7,278,046 97.1 107,367
CENTRAL REGION
Austin, Texas:
Great Hills Plaza 100.0 135,333 100.0 2,155
Balcones Center 100.0 75,761 80.2 940
Park North (2 Properties) 100.0 132,923 88.4 1,775
City View Centre (formerly The Settings) 100.0 132,647 95.8 2,136
(3 Properties)
Tower of the Hills (2 Properties) 100.0 171,157 98.1 2,332
Suburban Chicago:
Parkway North (2 Properties) 100.0 508,749 95.7 7,982
Unisys (2 Properties) 100.0 355,386 96.0 5,792
The Crossings (2 Properties) 100.0 296,624 91.6 4,668
Bannockburn I & II (2 Properties) 100.0 209,860 100.0 3,248
Bannockburn IV 100.0 108,470 98.7 1,681
Summit Oaks 100.0 91,601 89.8 1,367
Dallas, Texas:
Greyhound 100.0 92,890 100.0 845
Search Plaza 100.0 151,176 95.3 2,408
Quorum North 100.0 113,420 80.1 1,471
Quorum Place 100.0 176,260 91.9 2,413
Average Base
Rent Per
Leased
Property Square Foot(4) Significant Tenants(5)
- -------- -------------- ----------------------
Suburban Portland:
RadiSys Corporate Headquarters $ 10.21 RadiSys Corp. (100%)
RadiSys II 13.46 RadiSys II Corporation (100%)
Suburban Seattle:
Redmond East (10 Properties) 11.70 Mosaix, Inc. (21%), Incontrol, Inc. (17%), Edmark
Corp (15%), Genetic Systems (14%), Trigon Packaging (10%)
Willow Creek (formerly Data I/O) 10.20 Data I/O Corporation (100%)
Canyon Park Business Center (6 Properties) 13.15 Cellpro Inc. (27%), Board of Regents of UWA (22%),
Federal Express (13%), ITT Educational Services (11%)
Canyon Park Commons (formerly Tract 17) 14.25 Microsoft (100%)
-----
Pacific Region Subtotal 15.19
CENTRAL REGION
Austin, Texas:
Great Hills Plaza 15.92 First USA Management, Inc. (48%), Blue Cross (24%),
Skjerven Morrill, Machpherson (13%), Businesssuites (12%)
Balcones Center 15.47 Medianet (37%), Austin Diagnostic Clinic (15%), Amil
International Ins.(11%)
Park North (2 Properties) 15.11 CSC Continuum Inc.(28%)
City View Centre (formerly The Settings) 16.81 Holt, Rinehart & Winston (78%), Barter Exchange (13%)
(3 Properties)
Tower of the Hills (2 Properties) 13.89 Texas Guaranteed Student (67%)
Suburban Chicago:
Parkway North (2 Properties) 16.39 Fujisawa USA (27%), Alliant Foodservice (23%), Baxter
Healthcare Corporation (13%)
Unisys (2 Properties) 16.97 Unisys (21%), PNC Mortgage (14%), Sears Logistical (14%)
The Crossings (2 Properties) 17.17 Allstate Ins. Co (13%), Abercrbomei & Kent (11%)
Bannockburn I & II (2 Properties) 15.48 IMC Global (38%), Deutsche Credit Corp. (36%)
Bannockburn IV 15.70 Open Text (35%), Abbott Laboratories (11%), NY Life
Insurance (10%)
Summit Oaks 16.61 GSA (18%), BMG Music (14%), Master Printer Credit
Union (14%), National Truck Leasing Suite (12%)
Dallas, Texas:
Greyhound 9.10 Greyhound Lines (100%)
Search Plaza 16.72 Basic Capital Management (34%)
Quorum North 16.19 Digital Matrix Systems (20%), HQ Dallas Quorum North
(14%), ElectronicTransmissions (10%)
Quorum Place 14.91 VHASouthwest, Inc. (22%), Objectspace (16%)
17
Company's Net Total
Effective Rentable Annualized
Property Area Percent Base Rent(3)
Property Ownership (square feet)(1) Leased(2) (in thousands)
- -------- --------- ---------------- --------- --------------
Cedar Maple Plaza (3 Properties) 100.0% 112,185 96.1% $ 1,923
Tollhill East & West (2 Properties) 100.0 238,808 90.1 3,106
Two Mission Park 100.0 76,933 85.6 832
------ ---- ---
Central Region Subtotal 3,180,183 93.9 47,074
MOUNTAIN REGION
Southeast Denver:
Harlequin Plaza (2 Properties) 100.0 327,711 98.0 4,720
Quebec Court I & II (2 Properties) 100.0 287,041 100.0 2,887
Greenwood Center 100.0 75,866 75.6 971
Quebec Center (3 Properties) 100.0 106,849 97.7 1,467
Panorama Corporate Center I 100.0 100,542 98.7 2,019
JD Edwards 100.0 189,087 100.0 2,716
Phoenix, Arizona:
Camelback Lakes (2 Properties) 100.0 199,029 99.8 3,414
Pointe Corridor IV 100.0 178,373 93.2 2,739
Highland Park 100.0 78,019 87.5 1,129
The Grove at Black Canyon (formerly Cigna 100.0 103,304 91.7 1,833
Healthcare)
US West (4 Properties) 100.0 532,506 100.0 8,129
Salt Lake City, Utah:
Sorenson Research Park (5 Properties) 100.0 285,144 99.1 3,262
Wasatch Corporate Center (formerly Draper
Park North) (3 Properties) 100.0 178,098 100.0 1,961
------- ----- -----
Mountain Region Subtotal 2,641,569 97.6 37,247
--------- ---- ------
TOTAL CONSOLIDATED PROPERTIES: 19,104,034 $ 319,621
---------- ---------
WEIGHTED AVERAGE 95.9%
----
Average Base
Rent Per
Leased
Property Square Foot(4) Significant Tenants(5)
- -------- -------------- ----------------------
Cedar Maple Plaza (3 Properties) $ 17.84 Fidelity National Bank (12%)
Tollhill East & West (2 Properties) 14.44 Digital Equipment Corporation (22%)
Two Mission Park 12.64 Bland Garvey and Taylor (16%)
-----
Central Region Subtotal 15.76
MOUNTAIN REGION
Southeast Denver:
Harlequin Plaza (2 Properties) 14.70 Travelers Insurance (21%), Bellco First Federal
Credit Union (12%)
Quebec Court I & II (2 Properties) 10.06 Time Warner Communications (45%), Alert Centre (37%),
TCI Digital Satellite (17%)
Greenwood Center 16.93 General Motors Corp. (33%)
Quebec Center (3 Properties) 14.05 Gordon Gumeeson & Associates (12%), Walberg & Dagner (11%)
Panorama Corporate Center I 20.34 Teleport Communications Group (70%), Sprint Spectrum, LP (11%)
JD Edwards 14.36 JD Edwards (100%)
Phoenix, Arizona:
Camelback Lakes (2 Properties) 17.19 Vanguard Group (38%), Humana Health Plan (14%)
Pointe Corridor IV 16.47 Jostens Learning Corp (26%), Aetna Life Insurance
Company (22%), Jennifer Loomis Associates, Inc. (16%)
Highland Park 16.54 Mastering Computers, Inc. (26%), Ryland Group, Inc. (17%)
The Grove at Black Canyon (formerly Cigna 19.36 Cigna Healthcare of Arizona (81%)
Healthcare)
US West (4 Properties) 15.27 US West Business Resources (100%)
Salt Lake City, Utah:
Sorenson Research Park (5 Properties) 11.55 Foundation Health Corp (24%), Matrix Marketing, Inc. (22%),
Datachem Laboratories, Inc. (20%), Dayna Communications,
Wasatch Corporate Center (formerly Draper Inc. (14%), ITT Educational Services (12%)
Park North) (3 Properties) 11.01 Advanta Financial Corp (28%), Times Mirror Training,
----- Inc. (23%), Fonix Corp. (14%), Keytex Corp (14%),
Novus Credit Services, Inc. (12%)
Mountain Region Subtotal 14.44
-----
TOTAL CONSOLIDATED PROPERTIES:
WEIGHTED AVERAGE $ 17.44
--------
18
Company's Net Total
Effective Rentable Annualized
Property Area Percent Base Rent(3)
Property Ownership (square feet)(1) Leased(2) (in thousands)
- -------- --------- ---------------- --------- --------------
Unconsolidated Properties
Downtown Washington, D.C.:
1717 Pennsylvania Avenue 50.0% (9) 184,446 99.3% $ 6,254
AARP Headquarters 24.0 (10) 477,187 100.0 16,780
Bond Building 15.0 (11) 162,097 100.0 4,714
Willard Office/Hotel 5.0 (12) 242,787 98.8 9,255
Suburban Washington, D.C.:
Booz-Allen & Hamilton Building 50.0 (13) 222,989 100.0 3,307
---------- ----- -----
TOTAL UNCONSOLIDATED PROPERTIES: 1,289,506 $ 40,310
--------- -------
WEIGHTED AVERAGE 99.7 %
----
ALL OPERATING PROPERTIES
TOTAL: 20,393,540 $359,931
========== ========
WEIGHTED AVERAGE 96.2 %
====
Average Base
Rent Per
Leased
Property Square Foot(4) Significant Tenants(5)
- -------- -------------- ----------------------
Unconsolidated Properties
Downtown Washington, D.C.:
1717 Pennsylvania Avenue $ 34.15 MCI Telecommunications (57%)
AARP Headquarters 35.17 American Association of Retired Persons (99%)
Bond Building 29.08 General Services Administration - Dept of Justice (93%)
Willard Office/Hotel 38.60 Vinson & Elkins (27%), Hale & Dorr (17%)
Suburban Washington, D.C.:
Booz-Allen & Hamilton Building 14.83 Booz Allen & Hamilton (100%)
-----
TOTAL UNCONSOLIDATED PROPERTIES:
WEIGHTED AVERAGE $ 31.35
--------
ALL OPERATING PROPERTIES
TOTAL:
WEIGHTED AVERAGE $18.35
======
- --------------
(1) Includes office and retail space but excludes storage space.
(2) Includes space for leases that have been executed and have commenced as
of December 31, 1997.
(3) Total annualized base rent equals total original base rent, including
historical contractual increases and excluding (i) percentage rents,
(ii) additional rent payable by tenants such as common area
maintenance, real estate taxes and other expense reimbursements, (iii)
future contractual or contingent rent escalations, and (iv) parking
rents.
(4) Calculated as total annualized base rent divided by net rentable area
leased.
(5) Includes tenants leasing 10% or more of rentable square footage (with
the percentage of rentable square footage in parentheses).
(6) The Company owns the improvements on the property and has a leasehold
interest in all or a portion of the underlying land.
(7) The Company holds a general and limited partner interest in a
partnership that owns the property.
(8) The Company holds a 50% joint venture interest in the joint venture
that owns this property and a 50% joint venture interest in another
joint venture, which holds the remaining 50% interest in the joint
venture that owns the property. As a result of preferential rights to
annual distributions from another venture, the Company will receive
distributions of less than 75% (but in no event less than 50%) of the
total amount distributed with respect to this property in each year
until the preferential distribution requirements are satisfied, but
will receive 100% of any subsequent distributions during the year until
its aggregate distributions equal 75% of the cumulative distributions
with respect to the property since inception of the partnership.
Thereafter, the Company will receive 75% of the distributions made
during the year with respect to the property. Upon sale of the
property, the Company will receive 75% of the distributions until the
Company receives its preference amount, 50% until the remaining
venturer receives its preference amount, and 75% of the distributions
thereafter.
(9) The Company holds a 50% interest in the limited liability company that
owns the property and serves as the entity's managing member.
(10) The Company holds an effective 24% interest in the property by virtue
of a 48% general partner interest in a partnership that owns a 50%
general partner interest in the property.
(11) The Company holds an effective 15% interest in the property by virtue
of a 30.6% limited partner interest in a partnership that has a 49%
limited partner interest in the property.
(12) The Company holds an effective 5% interest in the property by virtue of
a 7.85% limited partner interest in a partnership that owns a 63.7%
limited partner interest in the property. The partnership in which the
Company holds an interest owns the improvements on the property and has
a leasehold interest in the underlying land.
(13) The Company holds a 50% joint venture interest, and is the managing
partner.
(14) The property was disposed of in January 1998.
19
Occupancy, Average Rentals and Lease Expirations. As of December 31,
1997, 95.9% of the aggregate net rentable square footage in the 243 operating
office properties whose results are consolidated in the financial statements of
the Company was leased. The following table sets forth the percent leased and
average annualized rent per leased square foot (excluding storage space) for
office and retail space combined for the past five years for the operating
office properties that were consolidated for financial statement purposes at
each of the dates indicated:
Average
Percent Annualized Rent Number of
Leased at Per Leased Consolidated
December 31, Year End Square Foot (1) Properties
------------ ------------ ---------------- ------------
1997 95.9% $ 19.38 243
1996 93.6 19.37 159
1995 93.5 27.36 13
1994 95.9 32.48 11
1993 95.5 34.35 9
- ---------------------
(1) Calculated as total annualized building operating revenue, including
tenant reimbursements for operating expenses and excluding parking and
storage revenue, divided by the total square feet, excluding storage,
in the building under lease at year end.
The following table sets forth a schedule of the lease expirations for
leases in place as of December 31, 1997 in each of the next ten years beginning
with 1998 and thereafter for the 243 operating office properties whose results
are consolidated in the financial statements of the Company, assuming that no
tenants exercise renewal options:
Net Annual Percent of
Rentable Area Base Rent Total Annual
Number of Subject to Under Base Rent
Year Tenants With Expiring Expiring Represented
of Lease Expiring Leases (1) Leases by Expiring
Expiration Leases (square feet) (in thousands) Leases
---------- ------------ ------------- -------------- ------------
1998 384 3,239,000 $ 55,393 17.3%
1999 266 1,891,000 31,932 10.0
2000 219 2,519,000 42,895 13.4
2001 193 2,255,000 34,239 10.7
2002 142 2,065,000 38,629 12.1
2003 59 1,436,000 22,535 7.1
2004 33 1,159,000 25,245 7.9
2005 25 557,000 10,146 3.2
2006 31 1,059,000 21,499 6.7
2007 18 1,154,000 18,674 5.8
2008 and thereafter 12 996,000 18,434 5.8
- ----------------------
(1) Excludes 774,000 square feet of space that was vacant as of December 31,
1997.
20
Building and Lease Information. The following table sets forth certain
information for the 243 operating office properties that were consolidated for
financial statement purposes regarding leases that commenced during the year
ended December 31, 1997, excluding leases for office properties that were
executed prior to the date of acquisition of such properties:
Calculated on a Weighted Average Basis
Operating Properties, ----------------------------------------------------------------------
Downtown Tenant Base
Washington, D.C. Improvements Rent Leasing
(10 Properties) Total & Cash per Lease Abatements Commission
Square Allowances per Square Life in in Per Square
Type of Lease Feet Leased Square Foot Foot Years Months Foot
- ------------- ----------- ----------- ---- ----- ------ ----
Office 634,462 $ 4.60 $ 31.03 6.4 0.1 $ 1.27
Retail 19,699 11.01 26.87 7.2 1.1 4.41
--------
Total/Weighted Average 654,161 4.80 30.90 6.4 0.1 1.37
======== ======= ======= ===== ====== =======
New leases or
expansion space 139,106 $ 14.61 $ 29.69 6.0 0.5 $ 3.28
Renewals of existing
tenants' space 515,055 2.15 31.23 6.5 0.0 .85
--------
Total/Weighted Average 654,161 4.80 30.90 6.4 0.1 1.37
======== ======= ======= ===== ====== =======
Calculated on a Weighted Average Basis
Operating Properties, ----------------------------------------------------------------------
Other Than Downtown Tenant Base
Washington, D.C. Improvements Rent Leasing
(233 Properties) Total & Cash per Lease Abatements Commission
Square Allowances per Square Life in in Per Square
Type of Lease Feet Leased Square Foot Foot Years Months Foot
- ------------- ----------- ----------- ---- ----- ------ ----
Office 2,421,129 $ 4.70 $ 16.00 5.2 0.4 $ 1.64
Retail 5,492 0.00 4.28 3.2 0.0 0.00
---------
Total/Weighted Average 2,426,621 4.69 15.98 5.2 0.4 1.64
========= ======= ======= ===== ===== =======
New leases or
expansion space 1,856,220 $ 5.64 $ 15.18 5.5 0.5 $ 2.01
Renewals of existing
tenants' space 570,401 1.60 18.56 4.4 0.2 0.44
--------
Total/Weighted Average 2,426,621 4.69 15.98 5.2 0.4 1.64
========= ======= ======= ===== ===== =======
21
Mortgage Financing. As of December 31, 1997, certain of the 243
operating office properties that were consolidated for financial statement
purposes were subject to fixed rate mortgage indebtedness in an aggregate
principal amount of $591 million. The Company's fixed rate mortgage debt bears
an effective weighted average interest rate of 8.1% and a weighted average
maturity of 5.9 years (assuming loans callable before maturity are called as
early as possible). Certain information regarding the existing mortgage
indebtedness for the consolidated operating office properties subject to fixed
rate mortgage indebtedness is set forth in the table below as of December 31,
1997:
Principal Annual Debt Due at
Interest Balance Service Maturity Maturity
Property Rate (in thousands) (in thousands) Date (in thousands)
- -------- ---- -------------- -------------- ---- --------------
US West 6.50% $ 11,562 $ (1) 1/9/98 $ (1)
2600 W. Olive 7.52 19,517 1,994 6/1/98 19,264 (2)
1775 Pennsylvania Avenue 7.50 6,245 586 2/1/99 6,098 (2)
South Coast Executive Center 9.01 10,226 1,015 5/31/99 10,103 (2)
Quorum Place 6.99 7,719 665 11/15/00 7,327 (2)
Warner Center 7.40 26,000 1,924 12/1/00 26,000 (2)
Presidential Circle 7.14 23,418 2,061 3/1/01 22,041 (2)
Bannockburn I & II 9.52 20,464 2,801 8/31/01 16,835 (2)
Quorum North 8.27 6,658 640 12/1/01 6,258 (2)
Valley Business Park (formerly San
Jose Orchard Business Park - A) }
Valley Office Centre (formerly
Orchard Office Center) } 8.25 43,773 4,655 12/10/01 37,873 (2)
Valley Centre II
(formerly Orchard Center II) }
Rincon Centre
(formerly Orchard Rincon Center) }
Bayshore Centre
(formerly Orchard Bayshore Center)}
2445 M Street (6) 8.90 36,890 4,646 6/1/02 26,925 (2)
International Square
1850 K Street }
1825 Eye Street }
1875 Eye Street } 8.80 93,500 8,228 2/1/03 87,164 (2)
1730 Pennsylvania Avenue}
1255 23rd Street} 7.75 40,000 3,100 2/1/03 36,981 (2)
International Square Land 7.55 40,000 3,020 2/1/03 36,781 (2)
International Square Land 8.00 10,000 800 2/1/03 9,243 (2)
Parkway North I 7.96 29,250 2,328 12/1/03 29,250 (4)
Canyon Park Commons (formerly Tract 17) 9.13 5,822 713 12/1/04 4,071 (2)
US West 7.92 57,584 8,495 12/1/05
(7)
Redmond East 8.38 27,724 2,648 1/1/06 24,022 (3)
Century Springs West }
Glenridge }
Crestwood }
Lakewood }
Parkwood } 7.20 21,464 2,126 1/1/06 15,209 (5)
Wateridge Pavilion 8.25 3,530 338 11/1/06 2,921 (2)
22
Principal Estimated
Balance Balance
as of Annual Debt Due at
Interest 12/31/97 Service Maturity Maturity
Property Rate (in thousands) (in thousands) Date (in thousands)
- -------- ---- -------------- -------------- ---- --------------
Wasatch Corporate Center
(formerly Draper Park North) 8.15 12,834 1,220 1/2/07 10,569(2)
Sorenson Research Park 7.75 2,737 328 7/1/11 (7)
Sorenson Research Park 8.88 1,681 182 5/1/17 (7)
1747 Pennsylvania Avenue 9.50 15,357 1,730 7/10/17(8) (8)
900 19th Street 8.25 16,690 1,656 7/15/19(9) (9)
-------- -------
Total $590,645 $57,899
======== =======
- --------------------
(1) Note was repaid in full in January 1998.
(2) Currently prepayable at the rates stated in the loan documents.
(3) Prepayable after December 19, 2005 at the rates stated in the loan
documents.
(4) Prepayable after December 1, 1999 at the rates stated in the loan
documents.
(5) Prepayable after January 2001 at the rates stated in the loan documents.
(6) In January 1998, the Company disposed of its interest in 2445 M Street.
The lender kept the debt in place and accepted substitute collateral
consisting of two properties in Northern California and one property in
Dallas, all of which were acquired in 1998.
(7) Note will be fully repaid at maturity.
(8) Note is callable by the lender after June 30, 2002. The estimated
principal balance at June 30, 2002 will be $13,840,000.
(9) Note is callable by the lender after July 1, 2004. The estimated principal
balance at July 1, 2004 will be $14,262,000.
For additional information regarding the Company's office properties
and their operation, see "Item 1, Business."
Item 3. LEGAL PROCEEDINGS
The Company is a party to a variety of legal proceedings arising in the
ordinary course of its business. All of these matters, taken together, are not
expected to have a material adverse impact on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
23
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY & RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York Stock Exchange
("NYSE") under the symbol "CRE". As of February 28, 1998, there were 425
stockholders of record. The following table sets forth the high and low sale
prices of the Company's common stock as reported on the NYSE Composite Tape, and
the dividends per share of common stock paid for each full quarterly period
within the two most recent fiscal years:
1997 1Q 2Q 3Q 4Q Full Year
-------------- ------------- ------------- ------------- -------------- -----------------
High $32 1/4 30 5/8 32 3/16 33 7/16 33 7/16
Low $28 1/4 26 1/4 27 3/4 28 1/4 26 1/4
Dividend $.4375 .4375 .4375 .4375 1.75
1996 1Q 2Q 3Q 4Q Full Year
-------------- ------------- ------------- ------------- -------------- -----------------
High $25 25 1/4 25 7/8 29 1/2 29 1/2
Low $23 5/8 23 5/8 21 7/8 24 7/8 21 7/8
Dividend $.4375 .4375 .4375 .4375 1.75
The Company, in order to qualify as a REIT, is required to make
distributions (other than capital gain distributions) to its stockholders in
amounts at least equal to (i) the sum of (A) 95% of its "REIT taxable income"
(computed without regard to the dividends paid deduction and its net capital
gain) and (B) 95% of the net income (after tax), if any, from foreclosure
property, minus (ii) the sum of certain items of non-cash income. The Company's
distribution strategy is to distribute what it believes is a conservative
percentage of its cash flow permitting the Company to retain funds for capital
improvements and other investments while funding its distributions.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, nontaxable return of capital or a combination thereof.
Distributions that exceed the Company's current and accumulated earnings and
profits (calculated for tax purposes) constitute a return of capital rather than
a dividend and reduce the stockholder's basis in his or her shares of common
stock. To the extent that a distribution exceeds both current and accumulated
earnings and profits and the stockholder's basis in his or her shares, it will
generally be treated as gain from the sale or exchange of that stockholder's
shares. The Company annually notifies stockholders of the taxability of
distributions paid during the preceding year.
The following table sets forth the taxability of common stock
distributions paid in 1997 and 1996:
1997 1996
---- ----
Ordinary income 90% 95%
Capital Gain -- --
Return of Capital 10% 5%
24
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating
information for the Company as of December 31, 1997, 1996, 1995, 1994 and 1993
and for the years ended December 31, 1997, 1996, 1995 and 1994 and the period
from February 16, 1993 (commencement of operations) to December 31, 1993. The
following table also sets forth selected financial and operating information for
the Carr Group, the predecessor entity to the Company, for the period from
January 1, 1993 to February 15, 1993.
The following selected financial and operating information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and all of the financial statements and
notes thereto included elsewhere in this Annual Report on Form 10-K:
(In thousands, except per share data)
The Company Carr Group
------------------------------------------------------------------- ----------------
Period from Period from
February 16, January 1,
1993 to 1993 to
Year Ended December 31, December 31, February 15,
--------------------------------------------------- --------------- ----------------
1997 1996 1995 1994 1993 1993
--------------- ----------- ----------- ----------- --------------- ----------------
Operating Data:
Real Estate Operating Revenue:
Rental revenue $ 325,502 154,165 89,539 82,665 59,932 8,209
Real estate service revenue 15,998 12,512 11,315 8,890 8,978 1,096
Executive office suites revenue 17,865 -- -- -- -- --
------ ------- ------ ------ ------- ----------
Total revenue 359,365 166,677 100,854 91,555 68,910 9,305
Net income (loss) 78,132 24,318 (1) 12,067(1) 12,097 (1,464)(2) 1,251
Dividends paid to common
stockholders 97,195 42,914 23,344 20,204 10,578 --
Per Share Data:
Basic income before extraordinary
item 1.23 0.90 0.90 1.06 0.41 --
Diluted income before extraordinary
item 1.23 0.90 0.90 1.06 0.41 --
Dividends paid to common
stockholders 1.75 1.75 1.75 1.75 1.06 --
Weighted average shares
outstanding - basic 54,873 26,932 13,338 11,387 10,000 --
Weighted average shares
outstanding - diluted 59,597 26,999 13,339 11,387 10,024 --
(In thousands)
The Company
--------------------------------------------------------------------------
As of December 31,
1997 1996 1995 1994 1993
--------------- -------------- --------------- ------------- -------------
Balance Sheet Data:
Real estate, before accumulated
depreciation $2,397,023 1,475,998 480,589 429,537 286,764
Total assets 2,744,060 1,536,564 458,860 407,948 284,633
Mortgages and notes payable 1,028,946 655,449 317,374 254,933 185,827
Minority interest 74,955 50,597 34,850 38,644 25,373
Total stockholders' equity 1,552,697 787,478 95,543 106,042 59,590
Total shares outstanding 59,994 43,789 13,409 13,248 10,000
25
(In thousands)
The Company Carr Group
------------------------------------------------------------------- ----------------
Period from Period from
February 16, January 1,
1993 to 1993 to
Year Ended December 31, December 31, February 15,
--------------------------------------------------- --------------- ----------------
1997 1996 1995 1994 1993 1993
-------------- ----------- ------------ ----------- --------------- ----------------
Other Data:
Net Cash provided (used) by
operating activities $ 138,628 82,300 35,277 29,908 (663) (1,286)
Net cash used by investing
activities (1,004,284) (876,947) (81,635) (67,046) (85,363) (1,015)
Net cash provided (used) by
financing activities 861,864 813,067 37,113 32,652 108,974 (4,391)
Funds from operations before
allocation to the
unitholders(3) 153,262 64,496(1) 33,190(1) 30,640 14,286(4) 2,421
(1) Net income includes non-recurring deductions of approximately $2.3
million and $1.9 million in 1996 and 1995, respectively, related to the
write-off of the unamortized purchase price of certain third party real
estate service contracts that were terminated in 1996 and the
termination of an agreement to acquire the development business of The
Evans Company in 1995, respectively.
(2) Net loss includes a deduction for reorganization costs of $9.6 million
and an extraordinary loss on early extinguishment of debt of $5.6
million.
(3) The Company believes that funds from operations is helpful to investors
as a measure of the performance of an equity REIT because, along with
cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of
the Company to incur and service debt, to make capital expenditures and
to fund other cash needs. In accordance with the final National
Association of Real Estate Investment Trusts (NAREIT) White Paper on
Funds From Operations as approved by the Board of Governors of NAREIT on
March 3, 1995, funds from operations represents net income (loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring or sales of
property, plus depreciation and amortization of assets uniquely
significant to the real estate industry and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to reflect
funds from operations on the same basis. For purposes of calculating the
Company's funds from operations, the Company has added amortization
expense associated with goodwill amortization related to the purchase of
the assets of OmniOffices Group, Inc. back to net income. The Company
computes funds from operations in accordance with standards established
by NAREIT, except for adding back goodwill amortization. The Company's
funds from operations may not be comparable to funds from operations
reported by other REITs that do not define the term in accordance with
the current NAREIT definition or that interpret the current NAREIT
definition differently than the Company. The Company's funds from
operations in 1994 and 1993 have been restated to conform to the NAREIT
definition of funds from operations. Funds from operations does not
represent net income or cash flow generated from operating activities in
accordance with generally accepted accounting principles and, as such,
should not be considered an alternative to net income as an indication
of the Company's performance or to cash flow as a measure of liquidity
or the Company's ability to make distributions.
(4) Net loss used to calculate funds from operations includes a deduction
of approximately $9.6 million related to reorganization costs associated
with the formation of the Company.
26
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is based primarily on the Consolidated
Financial Statements of CarrAmerica Realty Corporation and its subsidiaries (the
"Company") as of December 31, 1997 and 1996, and for the years ended December
31, 1997, 1996 and 1995. The comparability of the periods is significantly
impacted by acquisitions made during 1997 and 1996. As of December 31, 1995, the
Company owned 13 properties. This number grew to 159 as of December 31, 1996 and
243 as of December 31, 1997.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These consolidated
financial statements include all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the periods presented, and
all such adjustments are of a normal, recurring nature.
RESULTS OF OPERATIONS - 1997 TO 1996
Real Estate Operating Revenue. Total real estate operating revenue increased
$192.7 million, or 115.6%, to $359.4 million for 1997 as compared to $166.7
million for 1996. The increase in revenue was primarily attributable to a $171.3
million and a $21.4 million increase in rental revenue and other real estate
operating revenue, respectively. The Company experienced net growth in its
rental revenue as a result of its acquisitions, and development properties
placed in service, which together contributed approximately $168.0 million of
additional rental revenue in 1997. Rental revenue from properties that were
fully operational throughout both periods increased by approximately $3.3
million primarily due to increased occupancy in these properties. Other real
estate operating revenue increased by $21.4 million, or 170.6%, for 1997 to
$33.9 million as compared to $12.5 million for 1996, primarily as a result of
executive office suites revenue earned by OmniOffices, which acquired the assets
of OmniOffices Group, Inc. in August 1997.
Real Estate Operating Expenses. Total real estate operating expenses increased
$143.8 million for 1997, or 105.0%, to $280.9 million as compared to $137.1
million for 1996. The net increase in operating expenses was attributable to a
$62.9 million increase in property operating expenses, a $19.9 million increase
in interest expense, the addition of $15.7 million in executive office suites
operating expenses associated with OmniOffices, a $6.6 million increase in
general and administrative expenses, and a $38.7 million increase in
depreciation and amortization. Property operating expenses increased $62.6
million primarily as a result of property acquisitions. The Company also
experienced an increase in property operating expenses from properties that were
fully operational in both periods of approximately $.3 million. The increase in
the Company's interest expense is primarily related to borrowings for
acquisitions. The addition of executive office suites operating expenses is a
result of the acquisition of the assets of OmniOffices Group, Inc. by
OmniOffices in August 1997. The increase in general and administrative expenses
is predominately a result of the addition of new staff to implement the
Company's business strategy. The increase in depreciation and amortization is
predominately a result of additional depreciation and amortization on the
Company's real estate acquisitions.
Other Operating Income (Expense). Other operating income (expense) increased
$8.6 million for 1997, to $8.5 million as compared to ($.1) million for 1996,
primarily due to an increase in interest income and gains on the disposition of
664,000 square feet.
Net Income. Net income of $78.1 million was earned for 1997 as compared to $24.3
million during 1996. The comparability of net income between the two periods is
impacted by the acquisitions the Company made and the other changes described
above.
Cash Flows. Net cash provided by operating activities increased $56.3 million,
or 68.4%, to $138.6 million for 1997 as compared to $82.3 million for 1996,
primarily as a result of the acquisitions made by the Company. Net cash used by
investing activities increased $127.3 million, to $1.004 billion for 1997 as
compared to $876.9 million for 1996, primarily as a result of capital deployed
by the Company for acquisitions of office properties, land held for future
development and construction in progress. Net cash provided by financing
activities increased $48.8 million, to $861.9 million for 1997 as compared to
$813.1 million for 1996, primarily as a result of proceeds from the sale of
common and preferred stock and the issuance of unsecured notes, net of
repayments of mortgages payable and a portion of the unsecured credit facility
and the payment in dividends paid to the common and preferred stockholders.
27
RESULTS OF OPERATIONS - 1996 TO 1995
Real Estate Operating Revenue. Total real estate operating revenue increased
$65.8 million, or 65.3%, to $166.7 million for 1996 as compared to $100.9
million for 1995. The increase in revenue was primarily attributable to $64.6
million and $1.2 million increases in rental revenue and real estate service
revenue, respectively. The Company experienced net growth in its rental revenue
as a result of its acquisitions, which contributed approximately $68.2 million
of additional rental revenue in 1996. Rental revenue from properties that were
fully operational throughout both years decreased by approximately $3.6 million
due to increased vacancies experienced in those properties. Real estate service
revenue increased by $1.2 million, or 10.6%, for 1996 to $12.5 million as
compared to $11.3 million for 1995. The increase was primarily as a result of
development fees earned by CarrAmerica Development which was acquired in May
1996.
Real Estate Operating Expenses. Total real estate operating expenses increased
$54.4 million for 1996, or 65.8%, to $137.1 million as compared to $82.7 million
for 1995. The net increase in operating expenses was attributable to a $20.3
million increase in property operating expenses, a $9.8 million increase in
interest expense, a $4.5 million increase in general and administrative
expenses, and a $19.8 million increase in depreciation and amortization. The
increase in property operating expenses was primarily attributable to $20.2
million in operating expenses associated with property acquisitions. Exclusive
of operating expenses attributable to new property acquisitions, property
operating expenses increased by $.1 million for 1996. The increase in the
Company's interest expense is primarily related to borrowings for acquisitions.
The increase in general and administrative expenses is predominantly a result of
the addition of new staff to implement the Company's new business strategy, the
addition of approximately $1.8 million of expenses associated with CarrAmerica
Development and inflation. The increase in depreciation and amortization was
predominately a result of additional depreciation and amortization on the
Company's real estate acquisitions.
Other Operating Income (Expense). Other operating income (expense) increased $.8
million for 1996, to ($.1) million as compared to ($.9) million for 1995,
primarily as a result of an increase in interest income and the addition of
equity in earnings of CC-JM II Associates, a joint venture which owns the
Booz-Allen & Hamilton Building. The Company is a 50% venturer in this entity,
which constructed the Booz-Allen & Hamilton Building that was placed in service
in January 1996. The increases in other operating income were partially offset
by an additional loss recognized on the write-off of intangible assets.
Net Income. Net income of $24.3 million was earned for 1996 as compared to $12.1
for 1995. The comparability of net income between the two periods is impacted by
the acquisitions the Company made and the other changes described above.
Cash Flows. Net cash provided by operating activities increased $47.0 million,
or 133.3%, to $82.3 million for 1996 as compared to $35.3 million for 1995,
primarily as a result of the acquisitions made by the Company. Net cash used by
investing activities increased $795.3 million, to $876.9 million for 1996 as
compared to $81.6 million for 1995, primarily as a result of capital deployed by
the Company for acquisitions of office properties, land held for future
development and construction in progress. Net cash provided by financing
activities increased $776.0 million to $813.1 million provided for 1996 as
compared to $37.1 million for 1995, primarily as a result of the sale of common
and preferred stock by the Company and net borrowings for the Company's
acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company seeks to create and maintain a capital structure that will
enable it to diversify its capital sources and thereby allow the Company to
obtain additional capital from a number of different sources, including
additional equity offerings of common and/or preferred stock, public and private
debt financings, and, where appropriate, asset dispositions. Management believes
that the Company will have access to the capital resources necessary to expand
and develop its business, to fund its operating and administrative expenses, to
continue debt service obligations, to pay dividends in accordance with REIT
requirements, to acquire additional properties and land, and to pay for
construction in progress in both the short and long term.
The Company has three investment grade ratings. Duff & Phelps Credit
Rating Co. (DCR) and Standard & Poors (S&P) have each assigned their BBB rating
to prospective senior unsecured debt offerings of the Company and their BBB-
rating to prospective cumulative preferred stock offerings of the Company.
Moody's Investor Service (Moody's) has assigned its Baa3 rating to prospective
senior unsecured debt offerings of the Company and its Ba2 rating to prospective
cumulative preferred stock offerings of the Company.
28
The Company's total indebtedness at December 31, 1997 was $1.029
billion, of which $159.5 million, or 15.5%, bears a LIBOR-based floating
interest rate. The weighted average interest rate under the unsecured credit
facility for 1997 was 6.9%. Currently, the unsecured credit facility bears
interest at 90 basis points over LIBOR. The Company's mortgage payable fixed
rate indebtedness bears an effective weighted average interest rate of 8.1% at
December 31, 1997 and has a weighted average term to maturity of 5.9 years.
Based upon the Company's total market capitalization at December 31, 1997 of
$3.552 billion (the common stock price was $31.6875 per share; the total shares
of common stock, convertible preferred stock and Units outstanding was
67,012,464 and the aggregate liquidation value of the cumulative redeemable
preferred stock was $400 million), the Company's debt represented 29.0% of its
total market capitalization. The Company has a $450.0 million unsecured credit
facility with a current borrowing capacity of $312.0 million. As of March 16,
1998, the Company had $217.5 million outstanding and $94.5 million available for
draw under this unsecured credit facility.
In first quarter of 1998, the Company developed a plan to address Year
2000 issues and began converting its computer systems to be Year 2000 compliant.
The plan provides for the conversion efforts to be completed prior to the end of
1999 for both the Company's financial and property related systems. The Year
2000 issues are the result of computer programs being written using two digits
rather than four to define the applicable year. The Company believes that
through its commitment to maintaining the highest level of systems support and
by working closely with vendors providing services to the Company's properties,
it will, through the normal course of business, convert all systems users to
Year 2000 compliant equipment prior to the end of 1999. The Company estimates
the costs associated with implementation of the plan will not be significant to
the Company's financial statements.
The Company will require capital to invest in its existing portfolio of
operating assets for major capital projects such as large-scale renovations,
routine capital expenditures and deferred maintenance on certain properties
recently acquired and tenant related capital expenditures, such as tenant
improvements and allowances and leasing commissions. With respect to major
capital projects, the Company is planning renovations of three properties
containing 563,000 square feet during 1998 which will cost $11.9 million, or
approximately $21.00 per square foot. With respect to routine capital
expenditures and deferred maintenance on certain properties recently acquired,
the Company anticipates spending approximately $17.7 million, or approximately
$0.85 per square foot, during 1998 on its portfolio of operating assets owned as
of December 31, 1997. The Company expects this amount to decrease in subsequent
years as deferred maintenance activities are completed on recently acquired
properties and as the emphasis of the Company's growth shifts from acquiring
existing office properties to developing new properties. The Company's capital
requirements for tenant related capital expenditures are dependent upon a number
of factors, including the square footage covered by expiring leases, tenant
retention ratios and whether the expiring leases are in central business
district properties or suburban properties. As of March 1, 1998, the Company had
367,011 square feet and 2,872,184 square feet of expiring leases in central
business district properties and suburban properties, respectively.
Tenant-related capital expenditures (tenant improvements, cash allowances and
leasing commissions) were $6.17 per square foot and $6.33 per square foot for
leases executed in 1997 for the Company's central business district properties
and suburban properties, respectively. The Company intends to use cash flow from
operations and its unsecured revolving credit facility to meet its working
capital needs for its existing portfolio of operating assets.
The Company will also require a substantial amount of capital for
development projects currently underway and planned for the future. As of March
1, 1998, the Company had 41 development projects underway which are expected to
require a total investment by the Company of $518.0 million. The Company intends
to use cash flow from operations, its unsecured, revolving credit facility and
the Company's access to public and private equity and debt markets to meet its
capital needs for development projects.
Net cash provided by operating activities was $138.6 million for the
year ended December 31, 1997, compared to $82.3 million for the year ended
December 31, 1996. The increase in net cash provided by operating activities was
primarily a result of acquisitions made by the Company. The Company's investing
activities used approximately $1.004 billion and $876.9 million for the years
ended December 31, 1997 and 1996, respectively. The Company's investment
activities included the acquisitions of office buildings, executive office
suites businesses, and land held for future development and additions to
construction in process of approximately $1.014 billion for the year ended
December 31, 1997, as compared to $855.4 million in acquisitions during the same
period in 1996. Additionally, the Company invested approximately $36.3 million
and $11.5 million in its existing real estate assets for the years ended
December 31, 1997 and 1996, respectively. Net of distributions to the Company's
stockholders and minority interests, the Company's financing activities provided
net cash of $976.2 million and $863.4 million for the years ended December 31,
1997 and 1996, respectively. For the year ended December 31, 1997, the Company
raised $1.1 billion through the sale of common and
29
preferred stock and unsecured notes which was used to repay amounts outstanding
under its unsecured credit facility and its secured credit facility (which has
been canceled) and to fund acquisitions. The Company also drew amounts from its
unsecured credit facility during 1997 to finance its acquisitions and other
investing activities. For the year ended December 31, 1997, the Company's net
repayments of its unsecured credit facility were approximately $55.5 million.
Rental revenue and real estate service revenue have been the principal
sources of capital to fund the Company's operating expenses, debt service and
capital expenditures, excluding non-recurring capital expenditures. The Company
believes that rental revenue and real estate service revenue will continue to
provide the necessary funds for its operating expenses and debt service. The
Company expects to fund capital expenditures, including tenant concession
packages, building renovations and construction costs, from (i) available funds
from operations, (ii) existing capital reserves, and (iii) if necessary, credit
facilities established with third party lenders. If these sources of funds are
insufficient, the Company's ability to make expected distributions may be
adversely impacted. As of December 31, 1997, the Company had cash of $41.9
million, of which $18.0 million was restricted.
The Company's dividends are paid quarterly. Amounts accumulated for
distribution are primarily invested by the Company in short-term investments
that are collateralized by securities of the United States Government or certain
of its agencies. For the fourth quarter 1997, the Company increased its
quarterly dividend, to be paid in the first quarter of 1998, from $0.4375 to
$0.4625. This increase was necessary in order for the Company to be in
compliance during 1998 with the REIT requirement to distribute 95% of taxable
income.
Management believes that the Company will have access to the capital
resources necessary to expand and develop its business. The Company may seek to
obtain funds through additional equity offerings or debt offerings in a manner
consistent with its intention to operate with a conservative borrowing policy.
The Company anticipates that adequate cash will be available to fund its
operating and administrative expenses, continuing debt service obligations, the
payment of dividends in accordance with REIT requirements in both the short term
and long term, and future acquisitions of office properties.
The Company believes that funds from operations is helpful to investors
as a measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of the Company to incur and
service debt, to make capital expenditures and to fund other cash needs. In
accordance with the final National Association of Real Estate Investment Trusts
(NAREIT) White Paper on Funds From Operations as approved by the Board of
Governors of NAREIT on March 3, 1995, funds from operations represents net
income (loss) (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring or sales of
property, plus depreciation and amortization of assets uniquely significant to
the real estate industry and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect funds from operations on the same basis. For
purposes of calculating the Company's funds from operations, the Company has
added amortization expense associated with goodwill amortization related to the
purchase of the assets of OmniOffices Group, Inc. back to net income. The
Company computes funds from operations in accordance with standards established
by NAREIT, except for adding back goodwill amortization. The Company's funds
from operations may not be comparable to funds from operations reported by other
REITs that do not define the term in accordance with the current NAREIT
definition or that interpret the current NAREIT definition differently than the
Company. Funds from operations does not represent net income or cash flow
generated from operating activities in accordance with generally accepted
accounting principles and, as such, should not be considered an alternative to
net income as an indication of the Company's performance or to cash flow as a
measure of liquidity or the Company's ability to make distributions.
30
The following table provides the calculation of the Company's funds
from operations for 1997, 1996 and 1995:
(in thousands):
1997 1996 1995
---- ---- ----
Net operating income before minority interest
and extraordinary items $ 87,013 29,534 17,284
Adjustments to derive funds from operations:
Add:
Depreciation and amortization 72,922(2) 35,888 17,564
Deduct:
Minority interests' (non Unitholders)
share of depreciation, amortization and
net income (1,253) (926) (1,658)
Gain on sale of assets (5,420) -- --
-------- ------- -------
Funds from operations before allocation to
the minority Unitholders 153,262 64,496 33,190
Less: Funds from operations allocable to the
minority Unitholders (12,697) (8,610) (7,876)
-------- ------ -------
Funds from operations allocable
to CarrAmerica Realty Corporation 140,565 55,886 25,314
Less: Preferred stock dividends (1) (8,786) -- --
-------- ------ -------
Funds from operations attributable
to common shareholders: $131,779 55,886 25,314
======== ====== =======
- ----------
(1) Excludes dividends on shares of Series A Preferred Stock which are
convertible into common shares.
(2) Includes $426 of goodwill amortization related to the acquisition
of the assets of OmniOffices Group, Inc.
Changes in funds from operations are largely attributable to changes in net
income between the periods, as previously discussed.
ACQUISITION AND DEVELOPMENT ACTIVITY
The following is a discussion of the Company's acquisition and
development activity during 1997. A more detailed discussion can be found in
"Item 1. Business--Recent Developments".
During 1997, the Company acquired the following properties: in its
Pacific region, the Company acquired 51 properties containing a total of
approximately 3.3 million square feet, for an aggregate purchase price of
approximately $464.2 million; in its Mountain region, the Company acquired 14
properties containing a total of approximately 1.2 million square feet, for an
aggregate purchase price of approximately $162.7 million; in its Central region,
the Company acquired 16 properties containing a total of approximately 1.6
million square feet for an aggregate purchase price of approximately $178.2
million; and in its Southeast region, the Company acquired six properties
containing a total of approximately .9 million square feet for an aggregate
purchase price of approximately $101.6 million.
During 1997, the Company acquired land that is expected to support the
development of up to 4.6 million square feet for an aggregate purchase price of
$117.3 million. In addition, as of December 31, 1997, the Company had 40 office
properties under construction: 1,196,000 square feet in its Pacific region;
425,000 square feet in its Mountain region; 1,194,000 square feet in its Central
region; and 714,000 square feet in its Southeast region. Costs incurred during
1997 for properties under construction were $180.1 million. An additional $62.4
million is expected to be expended for completion of projects already under
construction as of December 31, 1997.
31
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data included in this Annual
Report on Form 10-K are listed in Part IV, Item 14(a).
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 this item is hereby incorporated by
reference to the material appearing in Part I of this Annual Report on Form 10-K
and in the Proxy Statement for the Annual Stockholders Meeting to be held in
1998 (the "Proxy Statement").
Item 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Executive Compensation."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Voting Securities and Principal Holders Thereof."
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by
reference to the material appearing in the Proxy Statement under the caption
"Certain Relationships and Transactions."
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM
8-K
14(a)(1) Financial Statements
Reference is made to the Index to Financial Statements and
Schedule on page F-1
14(a)(2) Financial Statement Schedule
Reference is made to the Index to Financial Statements and
Schedule on page S-1.
14(a)(3) Exhibits
3.1 Amendment and Restatement of Articles of
Incorporation of CarrAmerica Realty Corporation, as
amended on April 29, 1996 and April 30, 1996
(incorporated by reference to the same numbered
exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996).
3.2 Second Amendment and Restatement of By-laws of
CarrAmerica Realty Corporation (incorporated by
reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K filed February 12, 1997).
3.3 Articles Supplementary relating to Series A
Cumulative Convertible Redeemable Preferred Stock
dated October 24, 1996 (incorporated by reference
to Exhibit 4.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1996).
32
3.4 Articles Supplementary relating to Series B
Cumulative Redeemable Preferred Stock dated August
8, 1997 (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997).
3.5 Articles Supplementary relating to Series C
Cumulative Redeemable Preferred Stock dated October
30, 1997 (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K dated
and filed on November 6, 1997).
3.6 Articles Supplementary relating to Series D
Cumulative Redeemable Preferred Stock dated
December 17, 1997 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form
8-K dated December 16, 1997 and filed on December
19, 1997).
4.1 Indenture, dated as of July 1, 1997, by and among
the Company, as Issuer, CarrAmerica Realty, L.P.,
as Guarantor, and Bankers Trust Company, as
Trustee, relating to the Company's 7.20% Notes due
2004 and 7.375% Notes due 2007 (incorporated by
reference to Exhibit 4.1 to the Company's quarterly
report on Form 10-Q for the quarter ended June 30,
1997).
4.2 Indenture, dated as of February 23, 1998, by and
among the Company, as Issuer, CarrAmerica Realty,
L.P., as Guarantor, and Bankers Trust Company, as
Trustee, relating to the Company's 6.625% Notes due
2005 and 6.875% Notes due 2008.
10.1 Second Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated May
9, 1997 (incorporated by reference to Exhibit 10.1
to the Company's quarterly report on Form 10-Q for
the quarter ended March 31, 1997).
10.2 First Amendment to Second Amended and Restated
Agreement of Limited Partnership of CarrAmerica
Realty, L.P., dated October 6, 1997.
10.3 Second Amendment to Second Amended and Restated
Agreement of Limited Partnership of CarrAmerica
Realty, L.P., dated December 12, 1997.
10.4 Third Amendment to Second Amended and Restated
Agreement of Limited Partnership of CarrAmerica
Realty, L.P., dated December 31, 1997.
10.5 Third Amended and Restated Agreement of Limited
Partnership of Carr Realty, L.P., dated March 5,
1996, as amended (incorporated by reference to
Exhibit 3.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996).
10.6 1993 Carr Realty Option Plan (incorporated by
reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-11, No. 33-53626).
10.7 Non-Employee Director Stock Option Plan
(incorporated by reference to the Company's
Registration Statement on Form S-8, No. 33-92136).
10.8 1997 Stock Option and Incentive Plan (incorporated
by reference to Exhibit 10.5 to the Company's
annual report on Form 10-K for the year ended
December 31, 1996).
10.9 Noncompetition and Restriction Agreement by and
among The Oliver Carr Company, Oliver T. Carr, Jr.,
Carr Realty Corporation and Carr Realty, L.P.
(incorporated by reference to Exhibit 10.7 of the
Company's Registration Statement on Form S-11, No.
33-53626).
10.10 Promissory Note from Carr Realty, L.P. to the
Northwestern Mutual Life Insurance Company
(incorporated by reference to Exhibit 10.27 of the
Company's Registration Statement on Form S-11, No.
33-72974).
10.11 Deed of Trust and Security Agreement by and among
Carr Realty, L.P., Patrick H. McGuire, III, and the
Northwestern Mutual Life Insurance Company
(incorporated by reference to Exhibit 10.28 of the
Company's Registration Statement on Form S-11, No.
33-72974).
10.12 Stock Purchase Agreement, dated November 5, 1995,
by and among Carr Realty Corporation, Security
Capital Holdings, S.A. and Security Capital U.S.
Realty (incorporated by reference to Exhibit 5.1 to
the Company's Current Report on Form 8-K filed
November 6, 1995).
10.13 Stockholders Agreement, dated April 30, 1996 by and
among Carr Realty Corporation, Carr Realty, L.P.,
Security Capital Holdings, S.A. and Security
Capital U.S. Realty (incorporated by reference to
Exhibit 2.2 of Security Capital U.S. Realty's
Schedule 13D dated April 30, 1996).
33
10.14 Registration Rights Agreement, dated April 30, 1996
by and among Carr Realty Corporation, Security
Capital Holdings, S.A. and Security Capital U.S.
Realty (incorporated by reference to Exhibit 2.3 of
Security Capital U.S. Realty's Schedule 13D dated
April 30, 1996).
10.15 Third Amended and Restated Credit Agreement, dated
March 11, 1998 by and among CarrAmerica Realty
Corporation, Carr Realty, L.P., CarrAmerica Realty,
L.P., Morgan Guaranty Trust Company of New York,
Commerzbank Aktiengesellschaft, New York Branch,
NationsBank, N.A., Wells Fargo Bank, National
Association, Bank of America National Trust and
Savings Association, and the other banks listed
therein.
21.1 List of Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP, dated March 18,
1998.
27 Financial Data Schedule.
14(b) Reports on Form 8-K
Form 8-K filed December 23, 1997 regarding (i) Underwriting
Agreement for offering of 594,377 shares of common stock
under the Legg Mason Unit Investment Trust, (ii)
Underwriting and Terms Agreement for offering of 642,510
shares of common stock under the Prudential Unit Investment
Trust, and (iii) opinion of Hogan & Hartson L.L.P. on such
common stock offerings.
Form 8-K filed December 19, 1997 regarding Terms Agreement,
Articles Supplementary, Deposit Agreement and opinion of
Hogan & Hartson L.L.P. for offering of 2,000,000 depositary
shares of the Company's Series D Preferred Stock.
Form 8-K filed December 16, 1997 regarding the Company's
Pro Forma Balance Sheet for the nine months ended September
30, 1997 and Pro Forma Statements of Operations for the
nine months ended September 30, 1997 and the year ended
December 31, 1996 for Presidential Circle and 900-910 East
Hamilton.
Form 8-K filed December 16, 1997 regarding the Company's
Pro Forma Balance Sheet for the nine months ended September
30, 1997 and Pro Forma Statements of Operations for the
nine months ended September 30, 1997 and the year ended
December 31, 1996.
Form 8-K filed November 6, 1997 regarding Terms Agreement,
Articles Supplementary, Deposit Agreement and opinion of
Hogan & Hartson L.L.P. for offering of 6,000,000 depositary
shares of the Company's Series C Preferred Stock.
34
Form 8-K filed October 31, 1997 regarding Supplemental
Financial and Operating Information of the Company as of
September 30, 1997.
Form 8-K filed October 30, 1997 regarding the Company's Pro
Forma Balance Sheet for the nine months ended September 30,
1997 and Pro Forma Statements of Operations for the nine
months ended September 30, 1997 and the year ended December
31, 1996.
Form 8-K filed October 30, 1997 regarding the Company's (i)
Historical Financial Statements for the nine months ended
September 30, 1997 and the year ended December 31, 1996 for
U.S. West, 2600 West Olive, CM Capital and Cedar Maple,
(ii) Historical Financial Statements for the three months
ended March 31, 1997 and the year ended December 31, 1996
for Bannockburn IV, Sorenson Research Park, Tollhill East
and West and Draper Park North, and (iii) Historical
Financial Statements for the year ended December 31, 1996
for Presidential Circle and Quorum Place.
14(c) Exhibits
The list of exhibits filed with this report is set
forth in response to Item 14(a)(3). The required
exhibit index has been filed with the exhibits.
14(d) Financial Statements
None.
35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registration has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the District of Columbia on March 19, 1998.
CARRAMERICA REALTY CORPORATION
a Maryland corporation
By: /s/ THOMAS A. CARR
-------------------------------------
Thomas A. Carr
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following person on behalf
of the registrant and in the capacities indicated on March 19, 1998.
Signature Title
* Chairman of the Board
---------------------------- and Director
Oliver T. Carr, Jr.
/s/ THOMAS A. CARR President, Chief Executive Officer
---------------------------- and Director
Thomas A. Carr
/s/ BRIAN K. FIELDS Chief Financial Officer
----------------------------
Brian K. Fields
*
---------------------------- Director
Andrew F. Brimmer
*
---------------------------- Director
A. James Clark
*
---------------------------- Director
Todd W. Mansfield
*
---------------------------- Director
Caroline S. McBride
*
---------------------------- Director
William D. Sanders
*
---------------------------- Director
Wesley S. Williams, Jr.
*/s/ BRIAN K. FIELDS
----------------------------
Brian K. Fields,
Attorney-in-Fact
36
CARRAMERICA REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements and Schedule of
CarrAmerica Realty Corporation and Subsidiaries and the Independent Auditors'
Reports thereon are attached hereto:
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1997 and 1996.............................F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995.................................................F-3
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995.................................................F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.................................................F-5
Notes to Consolidated Financial Statements...............................................F-7
Independent Auditors' Report.............................................................F-21
FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report.............................................................S-1
Schedule III: Consolidated Real Estate and Accumulated Depreciation as of
December 31, 1997 for CarrAmerica Realty Corporation and Subsidiaries............S-2
All other schedules are omitted because they are not applicable, or because the
required information is included in the financial statements or notes thereto.
F-1
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets for the Years Ended December 31, 1997 and 1996
---------------------------------------------------------------------------
(In thousands, except share amounts)
1997 1996
---- ----
Assets
Rental property (notes 2 and 11):
Land $ 557,536 356,797
Buildings 1,692,389 1,017,313
Tenant improvements 131,527 99,760
Furniture, fixtures and equipment 15,571 2,128
---------- ---------
2,397,023 1,475,998
Less - accumulated depreciation (184,266) (119,657)
---------- ---------
Total rental property 2,212,757 1,356,341
Land held for development 81,647 32,277
Construction in progress 210,829 31,723
Restricted and unrestricted cash and cash equivalents (note 2) 41,894 35,866
Accounts and notes receivable (note 8) 38,321 11,899
Investments (note 4) 20,128 13,524
Accrued straight-line rents 33,212 23,810
Tenant leasing costs, net of accumulated amortization
of $15,576 in 1997 and $11,986 in 1996 19,473 13,499
Deferred financing costs, net of accumulated amortization
of $4,100 in 1997 and $1,979 in 1996 6,899 3,800
Prepaid expenses and other assets, net of accumulated
depreciation and amortization of $6,179 in 1997 and
$3,506 in 1996 78,900 13,825
---------- ---------
$2,744,060 1,536,564
========== =========
Liabilities, Minority Interest, and Stockholders' Equity
Liabilities:
Mortgages and notes payable (notes 2 and 11) 1,028,946 655,449
Accounts payable and accrued expenses 67,311 32,657
Rent received in advance and security deposits 20,151 10,383
---------- ---------
Total liabilities 1,116,408 698,489
Minority interest (note 3) 74,955 50,597
Stockholders' equity (notes 6 and 7):
Preferred Stock, $.01 par value, authorized 15,000,000 shares:
Series A Cumulative Convertible Redeemable Preferred Stock, $.01 par value,
780,000 shares issued and outstanding at December 31, 1997, and 1,740,000 shares
issued and outstanding at December 31, 1996 with an aggregate liquidation
preference of $19.5 million and $43.5 million, respectively. 8 17
Series B, C and D Cumulative Redeemable Preferred Stock, outstanding
8,800,000 shares at December 31, 1997, with an aggregate liquidation
preference of $400.0 million. 88 --
Common Stock, $.01 par value, authorized 90,000,000 shares, issued and
outstanding 59,993,778 shares at December 31, 1997 and 43,789,073 shares at
December 31, 1996. 600 438
Additional paid in capital 1,629,214 837,355
Cumulative dividends in excess of net income (77,213) (50,332)
---------- ---------
Total stockholders' equity 1,552,697 787,478
---------- ---------
Commitments and contingencies (notes 5, 8 and 10)
$2,744,060 1,536,564
========== =========
See accompanying notes to consolidated financial statements
F-2
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995
--------------------------------------------------------------------------
(In thousands, except per common share amounts)
1997 1996 1995
---- ---- ----
Real estate operating revenue (notes 5 and 8):
Rental revenue:
Minimum base rent $274,603 133,807 79,688
Recoveries from tenants 37,134 14,105 5,266
Parking and other tenant charges 13,765 6,253 4,585
-------- -------- --------
Total rental revenue 325,502 154,165 89,539
Executive suites revenue 17,865 -- --
Real estate service income 15,998 12,512 11,315
-------- -------- --------
Total revenue 359,365 166,677 100,854
-------- -------- --------
Real estate operating expenses:
Property operating expenses:
Operating expenses 84,432 37,047 21,894
Real estate taxes 30,394 14,880 9,685
Interest expense 51,528 31,630 21,873
Executive suites operating expenses 15,728 -- --
General and administrative 21,839 15,228 10,711
Depreciation and amortization 76,958 38,264 18,495
-------- -------- --------
Total operating expenses 280,879 137,049 82,658
-------- -------- --------
Real estate operating income 78,486 29,628 18,196
-------- -------- --------
Other operating income (expense):
Interest Income 2,452 1,701 1,121
Equity in earnings (losses) of
unconsolidated partnerships (note 4) 655 484 (131)
Gain on sale of assets (note 9) 5,420 -- --
Loss on write-off of investment and
intangible assets (note 9) -- (2,279) (1,902)
-------- -------- --------
Total other operating income (expense) 8,527 (94) (912)
-------- -------- --------
Net operating income before minority
interest and extraordinary item 87,013 29,534 17,284
Minority interest (note 3) (8,273) (4,732) (5,217)
-------- -------- --------
Income before extraordinary item 78,740 24,802 12,067
Extraordinary item - loss on early
extinguishment of debt (608) (484) --
-------- -------- --------
Net income $ 78,132 24,318 12,067
======== ======== ========
Basic net income per common share:
Income before extraordinary item (note 1) $ 1.23 0.90 0.90
Extraordinary item - loss on early
extinguishment of debt (0.01) (0.02) --
--------- -------- --------
Basic net income per common share $ 1.22 0.88 0.90
========= ======== ========
Diluted net income per common share:
Income before extraordinary item (note 1) $ 1.23 0.90 0.90
Extraordinary item - loss on early
extinguishment of debt (0.01) (0.02) --
--------- -------- --------
Diluted net income per common share $ 1.22 0.88 0.90
========= ======== ========
See accompanying notes to consolidated financial statements
F-3
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995
- -------------------------------------------------------------------------------
(In thousands, except share amounts)
Dividends in
Additional excess of
Common Preferred Common Preferred paid-in cumulative
shares shares stock stock capital earnings Total
----------- ----------- ---------- --------- --------- ----------- -------
Balance at December 31, 1994 13,248,011 -- $ 132 -- 126,059 (20,149) 106,042
Shares issued in exchange
for Unit redemptions (note 3) 161,166 -- 2 -- 776 -- 778
Net income -- -- -- -- -- 12,067 12,067
Dividends paid -- -- -- -- -- (23,344) (23,344)
---------- --------- ----- ------ --------- --------- --------
Balance at December 31, 1995 13,409,177 -- 134 -- 126,835 (31,426) 95,543
Sales of common stock 30,102,907 -- 301 -- 665,178 -- 665,479
Sale of Series A Cumulative
Convertible Redeemable
Preferred Stock -- 1,740,000 -- 17 42,976 -- 42,993
Shares issued in exchange
for Unit redemptions (note 3) 212,293 -- 2 -- 831 -- 833
Exercise of stock options 2,000 -- -- -- 36 -- 36
Shares issued to acquire
rental property 62,696 -- 1 -- 1,499 -- 1,500
Net income -- -- -- -- -- 24,318 24,318
Dividends paid -- -- -- -- -- (43,224) (43,224)
---------- --------- ----- ------ --------- --------- --------
Balance at December 31, 1996 43,789,073 1,740,000 438 17 837,355 (50,332) 787,478
Sales of common stock 15,032,815 -- 151 -- 400,781 -- 400,932
Sales of Preferred Stock -- 8,800,000 -- 88 386,843 -- 386,931
Shares issued in exchange
for Unit redemptions
(note 3) 199,223 -- 2 -- 3,955 -- 3,957
Exercise of stock options 12,667 -- -- -- 280 -- 280
Conversion of Series A
Cumulative Convertible
Redeemable
Preferred Stock to
Common stock 960,000 (960,000) 9 (9) -- -- --
Net income -- -- -- -- -- 78,132 78,132
Dividends Paid -- -- -- -- -- (105,013) (105,013)
---------- --------- ------ ----- --------- --------- ---------
Balance at December 31, 1997 59,993,778 9,580,000 $ 600 96 1,629,214 (77,213) 1,552,697
========== ========= ====== ===== ========= ========= =========
See accompanying notes to consolidated financial statements
F-4
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
- -------------------------------------------------------------------------------
(In thousands)
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income $ 78,132 24,318 12,067
---------- -------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 76,958 38,264 18,495
Minority interest in income 8,273 4,732 5,217
Equity in (earnings) losses of unconsolidated partnerships (655) (464) 161
Extraordinary item-loss on early extinguishment of debt 608 484 --
Loss on write-off of assets -- 2,279 --
Increase in accounts receivable and notes receivable (26,422) (3,171) (3,124)
Decrease (increase) in accrued straight-line rents (9,402) (1,373) 1,931
Additions to tenant leasing costs (10,671) (5,530) (1,350)
Increase in prepaid expenses and other assets (22,615) (5,915) (884)
Increase in accounts payable and
accrued expenses 34,654 20,029 2,969
Increase (decrease) in rent received in advance and
security deposits 9,768 8,647 (205)
---------- -------- -------
Total adjustments 60,496 57,982 23,210
---------- -------- -------
Net cash provided by operating activities 138,628 82,300 35,277
---------- -------- -------
Cash flows from investing activities:
Acquisition of executive suites assets (45,736) -- --
Additions to rental property (36,303) (11,525) (8,927)
Acquisitions of rental property (692,001) (800,628) (64,363)
Additions to land held for development (96,225) (23,022) --
Additions to construction in progress (180,104) (31,723) --
Acquisition of real estate service contracts and other
intangibles -- (1,750) (7,419)
Distributions from unconsolidated partnerships 1,574 1,739 4,399
Investments in unconsolidated partnerships (7,398) (4,055) (3,437)
Acquisition of minority interest -- (3) (1,546)
Increase in restricted cash and cash equivalents (6,019) (5,980) (342)
Proceeds from disposition of rental property, land held
for development and construction in progress 57,928 -- --
---------- -------- -------
Net cash used by investing activities (1,004,284) (876,947) (81,635)
----------- -------- -------
Cash flows from financing activities:
Net proceeds from sales of common and preferred stock 788,143 708,508 --
Net borrowings (repayments) on unsecured line of credit (55,500) 215,000 --
Proceeds from issuance of unsecured notes 275,000 -- --
Borrowings on mortgages payable -- -- 72,000
Repayment of mortgages payable (19,305) (57,048) (2,559)
Disposition of mortgage payable from sale of rental property (9,508) -- --
Contributions from minority interests 1,502 -- 17
Dividends paid (105,013) (43,224) (23,344)
Additions to deferred financing costs (4,179) (3,020) (879)
Distributions to minority interests (9,276) (7,149) (8,122)
---------- -------- -------
Net cash provided by financing activities 861,864 813,067 37,113
---------- -------- -------
Increase (decrease) in unrestricted cash
and cash equivalents (3,792) 18,420 (9,245)
Unrestricted cash and cash equivalents, beginning of the period 27,637 9,217 18,462
---------- -------- -------
Unrestricted cash and cash equivalents, end of the period $ 23,845 27,637 9,217
========== ======== =======
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $12,571 in
1997, $2,664 in 1996 and $226 in 1995) $ 41,170 29,693 21,825
========== ======== ======
F-5
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
- -------------------------------------------------------------------------------
(Continued)
Supplemental disclosure of noncash investing and financing activities:
(a) During 1997, the Company funded a portion of the aggregate purchase
price of its property acquisitions by assuming $182.8 million of debt
and liabilities and by issuing $26.0 million of units.
(b) During 1996, the Company funded a portion of the aggregate purchase
price of its property acquisitions by assuming $184.4 million of debt
and liabilities and by issuing $1.5 million of common stock and $18.0
million of Units. The Company also repaid $1.0 million of liabilities
by issuing $1.0 million of Units.
(c) On July 6, 1995, the Company formed a limited liability company (the
"LLC") with a commingled pension trust fund. The Company contributed
its ownership in 1717 Pennsylvania Avenue to the LLC in exchange for a
50 percent ownership interest. The Company was credited with a
contribution of $20.0 million, reduced by $7.0 million of indebtedness
secured by the property. Subsequent to the Company's contribution to
the LLC, the Company received a distribution from the LLC of $2.9
million.
See accompanying notes to consolidated financial statements
F-6
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
CarrAmerica Realty Corporation (the "Company") is a
self-administered and self-managed equity real estate
investment trust ("REIT"), organized under the laws of
Maryland, which owns, develops, acquires and operates office
properties. The Company's office properties primarily are
located in 16 suburban markets across the United States.
(b) Basis of Presentation
The accounts of the Company and its majority-owned subsidiaries
are consolidated in the accompanying financial statements. The
Company uses the equity method of accounting for its
investments in and earnings and losses of unconsolidated
partnerships not controlled by the Company. Management of the
Company has made a number of estimates and assumptions relating
to the reporting of assets and liabilities, revenues and
expenses, and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity
with generally accepted accounting principles. Actual results
could differ from those estimates. Certain amounts for prior
years have been reclassified to conform with the presentation
for 1997.
(c) Rental Property
Rental property is recorded at cost less accumulated
depreciation (which is less than the net realizable value of
the rental property). Depreciation is computed on the
straight-line basis over the estimated useful lives of the
assets, as follows:
Base Building.........................30 to 50 years
Building components...................7 to 20 years
Tenant improvements...................Terms of the leases or
useful lives, whichever
is shorter
Furniture, fixtures and equipment.....5 to 15 years
Expenditures for maintenance and repairs are charged to
operations as incurred. Significant renovations are
capitalized.
The Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets.
(d) Development Property
Land held for development and construction in progress is
carried at cost. Specifically identifiable direct and indirect
acquisition, development and construction costs are capitalized
including, where applicable, salaries and related costs, real
estate taxes, interest and certain pre-construction costs
essential to the development of a property.
(e) Tenant Leasing Costs
Fees and costs incurred in the successful negotiation of leases
have been deferred and are being amortized on a straight-line
basis over the terms of the respective leases.
(f) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to
obtain financing and are being amortized over the terms of the
respective loans on a basis which approximates the interest
method.
F-7
(g) Goodwill, Real Estate Service Contracts and Other Intangibles
Real estate service contracts and other intangible assets
represent the purchase price of net assets of real estate
service operations acquired and are amortized on the
straight-line basis over the expected lives of the respective
real estate service contracts. Goodwill which represents the
excess of purchase price over the fair value of net assets
acquired in the acquisition of OmniOffices, is amortized on the
straight-line basis over 30 years. The Company assesses the
recoverability of these intangible assets by determining
whether the balance can be recovered over its remaining life
through undiscounted future operating cash flows of the related
assets or operations acquired. The amount of impairment loss,
if any, is measured as the amount by which the carrying amount
of the assets exceeds the fair value of the assets. The
assessment of the recoverability of these intangible assets
will be impacted if estimated future operating cash flows are
not achieved.
(h) Fair Value of Financial Instruments
The carrying amount of the following financial instruments
approximates fair value because of their short-term maturity:
cash and cash equivalents; accounts and notes receivable;
accounts payable and accrued expenses.
(i) Revenue Recognition
The Company reports base rental revenue for financial statement
purposes straight-line over the terms of the respective leases.
Accrued straight-line rents represent the amount that
straight-line rental revenue exceeds rents collected in
accordance with the lease agreements. Management, considering
current information and events regarding the tenants' ability
to fulfill their lease obligations, considers accrued
straight-line rents to be impaired if it is probable that the
Company will be unable to collect all rents due according to
the contractual lease terms. If accrued straight-line rents
associated with a tenant are considered to be impaired, the
amount of the impairment is measured based on the present value
of expected future cash flows. Impairment losses, if any, are
recorded through a loss on the write-off of assets. Cash
receipts on impaired accrued straight-line rents are applied to
reduce the remaining outstanding balance and as rental revenue,
thereafter.
The Company earns real estate service revenue for certain
properties it manages, leases and develops for third parties
and revenue from its executive suites business. Such revenue is
recognized as earned.
(j) New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 130, "Reporting Comprehensive Income," which
requires an enterprise to display comprehensive income and its
components in a financial statement to be included in an
enterprise's full set of financial statements. Comprehensive
income represents a measure of all changes in equity of an
enterprise that result from recognized transactions and other
economic events for the period other than transactions with
owners in their capacity as owners. Comprehensive income
includes net income and such items as foreign currency items
and certain unrealized gains and losses. This standard is
effective for the Company's fiscal year 1998 and requires prior
years' comparative financial statements to be reclassified to
reflect the provisions of this standard.
Also in June 1997, the FASB issued SFAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information," which
requires a public entity to report selected information about
operating segments in financial reports issued to shareholders.
It also establishes standards for related disclosures about
products and services, geographic areas and major customers.
This standard is also effective for the Company's 1998 fiscal
year. The Company is currently in the process of evaluating the
effect this new standard will have on its financial statement
presentation and disclosures and the required information, if
any, will be reflected in the Company's 1998 financial
statements.
F-8
(k) Income and Other Taxes
The Company qualifies as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended. A REIT will
generally not be subject to federal income taxation on that
portion of its income that qualifies as REIT taxable income to
the extent that it distributes at least 95 percent of its
taxable income to its shareholders and complies with certain
other requirements. Accordingly, no provision has been made for
federal income taxes for the Company and certain of its
subsidiaries in the accompanying consolidated financial
statements. At December 31, 1997 and 1996, the Company's income
tax basis in its assets was approximately $2.5 billion and $1.5
billion, respectively.
Certain subsidiaries, organized as partnerships, of the Company
are subject to District of Columbia franchise taxes. Franchise
taxes are recorded as general and administrative expenses in
the accompanying consolidated financial statements.
CarrAmerica Development, Inc. ("CarrAmerica Development"), the
Company's development subsidiary, Carr Real Estate Services,
Inc. ("Carr Services, Inc."), the Company's real estate service
subsidiary, and OmniOffices, Inc. ("OmniOffices"), the
Company's executive suites subsidiary, file separate tax
returns and are subject to federal, state and local income
taxes. The Company has adopted the asset and liability method
of accounting for income taxes for these subsidiaries. Under
the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases and to operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized
in income in the period of the enactment date. The income taxes
and the effect of the asset and liability method of the
accounting for income taxes for these subsidiaries, are
insignificant to the financial statements of the Company.
(l) Hedging Transactions
From time to time, the Company enters into interest rate lock
and collar agreements that are designed to hedge against the
impact of interest rate fluctuations on certain of the
Company's existing and probable future long-term debt
instruments. Because these agreements qualify for hedge
accounting treatment, any gains or losses are recognized as
adjustments to interest expense over the lives of the
underlying debt instruments. For hedge agreements that are
terminated early or that are associated with anticipated future
debt instruments, gains or losses are deferred until those debt
instruments are entered into. If the Company determines it is
no longer probable that the Company will enter into an
anticipated debt instrument, any related deferred gains or
losses are recognized in the current period.
F-9
(m) Per Share Data and Dividends
Effective December 31, 1997, the Company adopted the provisions
of SFAS No. 128 "Earnings Per Share." SFAS No. 128 supersedes
APB No. 15 and specifies computation, presentation and
disclosure requirements for EPS and requires restatement of
prior years' comparative EPS amounts. The following is a
reconciliation of the numerators and denominators of the basic
and diluted EPS computations for income before extraordinary
loss.
Year Ended December 31, 1997 Year Ended December 31, 1996 Year Ended December 31, 1995
------------------------------- ------------------------------ -------------------------------
Income Per Income Per Income Per
(000's) Shares Share (000's) Shares Share (000's) Shares Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
------------------------------- ------------------------------- -------------------------------
Basic EPS $ 67,749 54,873 $1.23 $24,230 26,932 $0.90 $12,067 13,338 $0.90
Effect of Dilutive
Securities
Stock Options -- 205 -- -- 67 -- -- 1 --
Units in Carr
Realty, LP 5,530 4,519 -- -- -- -- -- -- --
-------- ------ ----- ------- ------ ----- ------- ------ -----
Diluted EPS $ 73,279 59,597 $1.23 $24,230 26,999 $0.90 $12,067 13,339 $0.90
======== ====== ======= ====== ======= =======
Income before extraordinary item has been reduced by
preferred stock dividends of $10,991 and $572 for 1997 and 1996, respectively.
The effects of units and Series A Preferred Stock are not
included in the computation of diluted EPS for a given year if their effect is
antidilutive.
Following is the income tax status of common stock dividends
paid during the last three calendar years:
1997 1996 1995
---- ---- ----
Ordinary income 90% 95% 85%
Capital Gain -- -- --
Return of Capital 10% 5% 15%
(n) Cash Equivalents
For the purposes of reporting cash flows, the Company considers
all highly liquid investments with a maturity of three months
or less at the time of purchase to be cash equivalents.
(o) Stock/Unit Option Plans
Prior to January 1, 1996, the Company accounted for its option
plans in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. As such,
compensation expenses would be recorded only if the current
market price of the underlying unit or stock on the date of
grant exceeded the exercise price. As of January 1, 1996, the
Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense,
over the vesting period, the fair value of all unit-based and
stock-based awards on the date of grant. Alternatively, SFAS
No. 123 allows entities to continue to apply the provisions of
APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee option grants
made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosures permitted by SFAS No.
123.
F-10
(2) Mortgages, Unsecured Notes and Credit Facility
The Company's mortgages payable, unsecured notes and credit facilities
are summarized as follows (in thousands):
December 31, December 31,
1997 1996
---- ----
Fixed rate mortgages $ 590,645 440,449
Unsecured credit facility 159,500 215,000
Notes payable 3,801 --
Senior unsecured notes 275,000 --
---------- -------
$1,028,946 655,449
========== =======
Mortgages payable are collateralized by certain rental properties and
generally require monthly principal and/or interest payments. Mortgages
payable mature at various dates from June 1998 through July 2019. The
weighted average interest rate of mortgages payable was 8.1% at
December 31, 1997 and 1996. A mortgage payable of $27.7 million at
December 31, 1997 is held by Carr Redmond Corporation, a wholly-owned
subsidiary of the Company, which owns the Redmond East office campus.
The Company also has a $450.0 million unsecured credit facility with
Morgan Guaranty Trust Company of New York (Morgan), as agent for a
group of banks. At December 31, 1997, the credit facility bore
interest, as selected by the Company, at either (i) the higher of the
prime rate or the Federal Funds Rate for such day or (ii) an interest
rate equal to 100 basis points above the 30 day London Interbank
Offered Rate (LIBOR). The Company has predominately selected interest
rates equal to 1.00 percent above the 30 day LIBOR rate. The credit
facility matures in September 2000. The weighted average effective
interest rate for 1997 was 6.9%.
The Company's unsecured credit facility contains a number of financial
and other covenants with which the Company must comply including, but
not limited to, covenants relating to ratios of annual EBITDA (earning
before interest, taxes, depreciation and amortization) to interest
expense, annual EBITDA to debt service, and total debt to tangible fair
market value of the Company's assets , and restrictions on the ability
of the Company to make dividend distributions in excess of 90% of funds
from operations. Availability under the unsecured credit facility is
also limited to a specified percentage of the Company's unsecured
properties.
In June 1997, the Company sold senior unsecured notes in the aggregate
principal amount of $275 million of its long-term debt, in the form of
$150 million of 7.20% notes due in 2004 and, $125 million of 7.375%
notes due in 2007. The Company's senior unsecured notes contain various
covenants with which the Company must comply, including but not limited
to: limits on the aggregate amount of indebtedness the company may have
outstanding on a consolidated basis; limits on the aggregate amount of
secured indebtedness the Company may have outstanding on a consolidated
basis; and, limits on the Company's required debt service payments. The
senior unsecured notes are unconditionally guaranteed by CarrAmerica
Realty, L.P.
F-11
The annual maturities of debt as of December 31, 1997 are summarized as
follows (in thousands):
1998 $ 43,621
1999 34,430
2000 208,682
2001 101,092
2002 42,236
2003 & thereafter 598,885
----------
$1,028,946
==========
Restricted and unrestricted cash and cash equivalents include $18.0
million and $8.2 million of restricted cash at December 31, 1997 and
1996, respectively, consisting primarily of escrow deposits required by
lenders to be used for future building renovations, tenant improvements
or as collateral for letters of credit.
Based on the borrowing rates available to the Company for mortgages
payable with similar terms and average maturities, the estimated fair
value of the Company's mortgages at December 31, 1997 and 1996 was
approximately $615.5 million and $644.5 million, respectively.
(3) Minority Interest
In conjunction with the formation of the Company and its majority-owned
subsidiary, Carr Realty, L.P., persons contributing interests in
properties to Carr Realty, L.P. had the right to elect to receive
either common stock of the Company or Units in Carr Realty, L.P. In
addition, the Company has acquired certain assets since its formation
by issuing distribution paying Units and non-distribution paying Units
of Carr Realty, L.P. and CarrAmerica Realty, L.P. The non-distribution
paying Units are not entitled to any distributions until they
automatically convert into distribution paying Units at various dates
in the future. Each distribution paying Unit, subject to certain
restrictions, may be redeemed for either one share of common stock or,
at the option of the Company, cash equal to the fair market value of a
share of common stock at the time of the redemption. When a Unitholder
redeems a distribution paying Unit for a share of common stock or cash,
minority interest is reduced and the Company's investment in Carr
Realty, L.P. or CarrAmerica Realty, L.P., as the case may be, is
increased. During the years ended December 31, 1997 and 1996, 199,223
and 212,293 distribution paying Units, of Carr Realty, L.P. and
CarrAmerica Realty, L.P., respectively, were redeemed for common stock
of the Company.
The following table sets forth the common stock and preferred stock
which is convertible into common stock, of the Company and Units of
Carr Realty, L.P. and CarrAmerica Realty, L.P. (in thousands):
Convertible Distribution Non-Distribution
Common Stock Preferred Stock Paying Units Paying Units
Outstanding Outstanding Outstanding Outstanding
----------- ----------- ----------- -----------
As of December 31,:
1997 59,994 780 5,699 540
1996 43,789 1,740 4,940 540
1995 13,409 -- 4,080 668
====== ======= ===== ===
Weighted average for:
1997 54,873 1,322 5,381 540
1996 26,932 328 4,131 872
1995 13,338 -- 4,151 668
====== ======= ===== ===
Minority interest in the accompanying consolidated financial statements
relates primarily to holders of Units.
F-12
(4) Investments in Unconsolidated Partnerships
The Company owns interests ranging from 5% to 50% in office properties
through unconsolidated partnerships. The Company had five investments
in 1997 and seven investments in 1996 and 1995 in these partnerships.
The combined condensed financial information for the unconsolidated
partnerships is as follows:
(in thousands)
December 31,
Balance Sheets 1997 1996
---- ----
Assets
Rental property, net $258,571 310,100
Cash and cash equivalents 14,348 15,577
Other assets 41,959 38,073
-------- -------
$314,878 363,750
======== =======
Liabilities and Accumulated Deficit
Liabilities:
Notes payable $294,328 362,849
Other liabilities 23,897 17,233
-------- -------
Total liabilities 318,225 380,082
Accumulated deficit (3,347) (16,332)
-------- -------
$314,878 363,750
======== =======
1997 1996 1995
---- ---- ----
Statements of Operations
Revenue $82,583 85,702 81,182
Depreciation and amortization expense 10,217 6,266 3,608
Interest expense 26,257 24,470 22,998
Other expenses 42,335 41,787 41,304
------- ------- ------
Net income $ 3,774 13,179 13,272
======= ======= ======
(5) Lease Agreements
The following table summarizes future minimum base rent to be received
under noncancelable tenant leases and the percentage of total rentable
space under leases expiring each year, as of December 31, 1997 (in
thousands):
Percentage
Future of Total
Minimum Space Under
Rent Leases Expiring
-------------- ----------------
1998 $ 319,273 17.7%
1999 297,152 10.3
2000 268,027 13.7
2001 229,138 12.3
2002 191,538 11.3
2003 & thereafter 547,299 34.7
==========
$1,852,427
==========
The leases also provide for additional rent based on increases in the
Consumer Price Index (CPI) and increases in operating expenses. These
increases are generally payable in equal installments throughout the
year, based on estimated increases, with any differences being adjusted
in the succeeding year.
F-13
(6) Preferred Stock
The Company is authorized to issue 15,000,000 shares of Preferred
Stock. On October 25, 1996, the Company issued 1,740,000 shares of
Series A Cumulative Convertible Redeemable Preferred Stock ("Series A
Preferred Stock") at $25 per share. Dividends for the Series A
Preferred Stock are cumulative from the date of issuance and are
payable quarterly in arrears in an amount per share equal to the
greater of (1) $1.75 per share per annum, or (2) the cash dividend paid
on the number of shares, or portion thereof, of the Company's common
stock into which a share of Series A Preferred Stock is convertible.
The Series A Preferred Stock has a liquidation preference of $25 per
share. After April 25, 1997, each share of Series A Preferred Stock
became convertible, at the option of the holder, into one share of the
Company's common stock, subject to certain conversion adjustments. As
of December 31, 1997, 960,000 shares of Series A Preferred Stock had
been converted into the Company's common stock. After October 25, 1999,
each outstanding share of Series A Preferred Stock is redeemable at the
Company's option, at $25 per share, plus accrued and unpaid dividends.
During 1997, the Company issued additional preferred stock as follows:
Liquidation
Shares Issue Date Preference Dividend Rate
---------------------- -------------- -------------------- ------------------ -----------------
Series B 8,000,000 August 1997 $ 25.00 8.57%
Series C 6,000,000 November 1997 $ 25.00 8.55%
Series D 2,000,000 December 1997 $ 25.00 8.45%
Series C and D shares listed above are Depositary Shares, each
representing a 1/10 fractional interest in a share of preferred stock.
Dividends for the Series B, C and D shares are cumulative from the date
of issuance and are payable quarterly in arrears on the last day of
February, May, August and November of each year. These preferred shares
are redeemable at the option of the Company not prior to the following
dates:
Series B - August 12, 2002
Series C - November 6, 2002
Series D - December 19, 2002
(7) Stock/Unit Option Plans
As of December 31, 1997, the Company had three option plans: two plans
for the purpose of attracting and retaining executive officers and
other key employees (1997 Employee Stock Option and Incentive Plan and
the 1993 Employee Unit Option Plan); and the other plan for the purpose
of attracting and retaining directors who are not employees of the
Company (Non-Employee Director Stock Option Plan).
The 1997 Employee Stock Option and Incentive Plan ("Stock Option Plan")
allows for the grant of options to purchase the Company's common stock
at an exercise price which is equal to the fair market value of the
common stock at the date of grant. The Stock Option Plan was approved
by the Company's stockholders at its Annual Meeting of Stockholders on
May 8, 1997. At December 31, 1997, the Company had 3,000,000 shares of
common stock reserved for issuance under the Stock Option Plan, of
which 897,121 were outstanding. All of these options have a ten-year
term from the date of grant and vest over a five-year period, 20% per
year.
The 1993 Employee Unit Option Plan allows for the grant of options to
purchase Units of Carr Realty, L.P. (Unit options) that are exercisable
at the fair market value of the Units at the date of grant, which is
deemed to be equivalent to the fair market value of the Company's
common stock at such date. Units (following exercise of Unit options)
are redeemable for cash or common stock of the Company, at the option
of the Company.
F-14
At December 31, 1997, the Company had 1,266,900 Units reserved for
issuance under the Employee Unit Option Plan, of which 827,000 were
outstanding. All of these options have a ten-year term from the date of
grant and vest over a five-year period, 20% per year.
The Non-Employee Director Stock Option Plan provides for the grant of
options to purchase the Company's common stock at an exercise price
which is equal to the fair market value of the common stock on the date
of grant. The Non-Employee Director Stock Option Plan was approved by
the Company's stockholders at its Annual Meeting of Stockholders on
April 28, 1995, following which each then-serving non-employee director
was granted options to purchase 3,000 shares of the Company's common
stock. Immediately following each annual election of directors, each
continuing non-employee director will receive options to purchase 5,000
shares of the Company's common stock. Each newly elected director will
receive options to purchase 3,000 shares of common stock. The stock
options have a 10-year term from the date of grant and vest over a
three-year period, 33 1/3% per year. At December 31, 1997, the Company
had 150,000 shares of common stock reserved for issuance under the
Non-Employee Director Stock Option Plan, of which 66,333 were
outstanding.
The per share weighted-average fair value of Unit options and stock
options granted during 1997 and 1996 was $2.84 and $2.15, respectively,
on the date of grant using the Black Scholes option-pricing model with
the following weighed-average assumptions: 1997 - expected dividend
yield of 7.36%, risk free interest rate of 6.26%, stock volatility of
19.42%, and expected option life of 5.46 years; 1996 - expected
dividend yield of 7.89%, risk free interest rate of 6.08%, stock
volatility of 19.45%, and expected option life of 4.02 years.
The Company applies APB Opinion No. 25 in accounting for its Unit
options and stock options and, accordingly, no compensation cost has
been recognized for its Unit options and stock options in the financial
statements. However, pro forma information regarding net income and
earnings per share is required by SFAS No. 123 and has been determined
as if the Company had accounted for its unit and stock options under
the fair value method. For 1997, the Company's pro forma net income and
basic EPS is $77,725 and $1.22, respectively. The pro forma effect for
1996 is insignificant. Unit option and stock option activity during
1997 and 1996 is as follows:
Number of Weighted Average
Units/Shares Exercise Price
------------ ---------------
Balance at December 31, 1995 937,348 $ 22.86
Granted 112,000 24.70
Exercised 4,000 20.75
Forfeited -- --
Expired -- --
---------
Balance at December 31, 1996 1,045,348 23.06
Granted 917,202 29.01
Exercised 96,015 23.04
Forfeited 76,081 24.09
Expired -- --
---------
Balance at December 31, 1997 1,790,454 $ 26.07
========= =======
At December 31, 1997, the range of exercise prices was between $17.75
and $30.25 per Unit/share and the weighted average remaining
contractual life of outstanding options was 7.70 years.
At December 31, 1997 and 1996, the number of options exercisable was
639,572 and 526,420, respectively, and the weighted average exercise
price of those options was $22.80 and $22.72 per Unit/share,
respectively.
F-15
(8) Transactions With Affiliates
Parking Services International, Inc., a subsidiary of SC-USREALTY and
The Oliver Carr Company, both stockholders of the Company, manages
certain of the parking garages in the Company's properties for fees
ranging from 24 to 62 percent of gross receipts from garage operations.
Parking Services International, Inc. is responsible for payment of all
garage operating expenses. Parking revenue recognized is net of fees
paid to Parking Services International, Inc. of $4.5 million in 1997,
$1.9 million in 1996, and $1.8 million in 1995. Accounts receivable
includes $.8 million and $.3 million at December 31, 1997 and 1996,
respectively, due from Parking Services International, Inc.
Accounts receivable includes management and leasing fees, development
and architectural fees and payroll reimbursements receivable from
affiliates of $3.6 million at December 31, 1997 and $4.0 million at
December 31, 1996. This amount includes a leasing commission receivable
of $2.5 million at December 31, 1997 and $2.7 million at December 31,
1996, which receivable is collectible in quarterly installments of
approximately $47 thousand through September 2011. The fair market
value of this receivable is $1.5 million at December 31, 1997 and $1.6
million at December 31, 1996. The leasing commission is due from an
unconsolidated investee partnership.
The Company earned management, leasing, development and architectural
fees in 1997 and 1996 from affiliated partnerships of $7.4 million in
1997, $6.9 million in 1996, and $6.7 million in 1995.
A wholly owned subsidiary of Clark Enterprises, Inc., a Unitholder, has
provided construction management services to the Company. In connection
with these services, the Company paid $1.5 million in 1997, $1.3
million in 1996, and $.7 million in 1995. Additionally, a wholly owned
subsidiary of Clark Enterprises, Inc. received a total of $19.6 million
during the years of 1996, 1995 and 1994 under a construction contract
for the Booz-Allen & Hamilton Building (in which the Company is a 50%
joint venturer).
The Company leases office space from a partnership affiliated with The
Oliver Carr Company. Rent expense amounted to $1.2 million in 1997,
$1.1 million in 1996, and $.9 million in 1995 under the lease. Future
minimum payments under the lease are $.4 million in 1998.
The Company paid Security Capital Markets Group, Inc., an affiliate of
SC-USREALTY, a placement fee of $.4 million in 1996 for services
rendered in connection with the sale of 1,740,000 shares of Series A
Preferred Stock issued in October 1996.
During 1997 and 1996, payments of $.1 million and $1.1 million,
respectively were made to Security Capital Investment Research
Incorporated, an affiliate of SC-USREALTY, for research rendered in
connection with the acquisition of operating and development
properties.
(9) Gains/Losses From Dispositions of Assets
The Company disposed of assets that are inconsistent with its long-term
strategic or return objectives or where market conditions for sale are
favorable. The proceeds were redeployed into other office properties
(utilizing tax-deferred exchanges where possible). As such, during
1997, the Company disposed of seven properties. The Company recognized
gains totaling $5.4 million on these dispositions.
On January 31,1996, the Company terminated an agreement to acquire the
development business of The Evans Company ("Evans") and, as a result,
in 1995 the Company recognized a $1.9 million loss on its investment.
Furthermore, in 1996, the Company wrote off approximately $2.3 million
of the unamortized purchase price of certain third-party real estate
service contracts that were terminated during the year. These contracts
were acquired from Evans in 1995 and were terminated early as a result
of the sale of the properties by third-party owners.
F-16
(10) Commitments and Contingencies
At December 31, 1997, the Company is contingently liable on letters
of credit amounting to approximately $1.4 million for various
completion escrows and on performance bonds amounting to approximately
$6.3 million to ensure completion of required public improvements on
its construction projects.
The Company leases certain commercial office space for its executive
suite business under non-cancelable operating leases with initial terms
ranging from 10 to 15 years, expiring through 2012. Future minimum
lease payments required under these operating leases as of December 31,
1997 were as follows:
1998 $ 13,857
1999 14,032
2000 13,732
2001 13,746
2002 11,432
2003 & thereafter 38,174
--------
$104,973
========
The Company leases land beneath two office properties located in
metropolitan Washington, D.C. The Company also leases land adjacent to
an office property in suburban Chicago. The terms of these leases range
from 5 years to 99 years, with the last lease maturing in the year
2086. The minimum base annual rental payment associated with these
leases is $1.1 million.
In September 1997, the Company entered into an agreement with a
counterparty to hedge against the impact that interest rate
fluctuations may have on debt instruments the Company issued in
February 1998. The agreement is a forward treasury lock agreement on a
notional amount of $75 million based on the 10-year U.S. Treasury Bill
at 6.415%. In February 1998, the Company paid $5.9 million to the
counterparty to unwind the agreement in connection with the sale of
$200 million of senior unsecured notes by the Company in February 1998
(see note 12). The amount paid by the Company will be deferred and
amortized over the term of the debt instruments as a component of
interest expense.
In October 1997, the Company entered into a similar agreement to
effectively fix its interest rate as of February 26, 1998, based on the
10-year U.S. Treasury Bill at 5.898% on a notional amount of $50
million. On February 18, 1998, the Company paid $1.5 million to unwind
this agreement in connection with the sale of senior unsecured notes
described above. The amount will be deferred and amortized over the
term of the senior unsecured notes.
At December 31, 1997, the amount due to the counterparty under the
forward Treasury Lock Agreements of $4.3 million has been
deferred/accrued in the Company's financial statements.
The Company has a 401(k) plan for employees that will match 50% of
employee contributions up to the first 4% of an employee's pay and will
make a base contribution of 3% of pay for participants who remain
employed on December 31 (the end of the plan year). Company
contributions to the plan are subject to a five-year graduated vesting
schedule. Company contributions to the plan amounted to $.6 million in
1997, $.3 million in 1996, and $.3 million in 1995.
In the course of the Company's normal business activities, various
lawsuits, claims and proceedings have been or may be instituted or
asserted against the Company. Based on currently available facts,
management believes that the disposition of matters that are pending or
asserted will not have a material adverse effect on the consolidated
financial position, results of operations or liquidity of the Company.
F-17
(11) Acquisition and Development Activities
During 1997, the Company made the following acquisitions: in its
Pacific region, the Company acquired 51 properties containing a total
of approximately 3.3 million square feet (unaudited), for an aggregate
purchase price of approximately $464.2 million; in its Mountain region,
the Company acquired 14 properties containing a total of approximately
1.2 million square feet (unaudited), for an aggregate purchase price of
approximately $162.7 million; in its Central region, the Company
acquired 16 properties containing a total of approximately 1.6 million
square feet (unaudited), for an aggregate purchase price of
approximately $178.2 million; and in its Southeast region, the Company
acquired six properties containing a total of approximately .9 million
square feet (unaudited), for an aggregate purchase price of
approximately $101.6 million.
During 1997, the Company acquired land that will support the
development of up to 4.6 million square feet (unaudited) for an
aggregate purchase price of approximately $117.3 million. In addition,
as of December 31, 1997, the Company had 40 office properties under
construction: 1,196,000 square feet (unaudited) in its Pacific region;
425,000 square feet (unaudited) in its Mountain region; 1,194,000
square feet (unaudited) in its Central region; and 714,000 square feet
(unaudited) in its Southeast region. Costs incurred during 1997 for
properties under construction were $180.1 million. An additional $62.4
million (unaudited) is expected to be expended for completion of
projects already under construction as of December 31, 1997.
During 1997, the Company acquired the assets of OmniOffices Group, Inc.
for approximately $50 million in cash. OmniOffices, Inc. owned 28
executive suites located in 14 markets nationally.
During 1996, the Company made the following acquisitions: in its
Pacific region, the Company acquired 73 properties containing a
total of approximately 4.0 million square feet (unaudited), for an
aggregate purchase price of approximately $454.3 million; in its
Mountain region, the Company acquired 13 properties containing a total
of approximately 1.3 million square feet (unaudited), for an aggregate
purchase price of approximately $112.7 million; in its Central region,
the Company acquired 17 properties containing a total of approximately
2.1 million square feet (unaudited), for an aggregate purchase price of
approximately $243.5 million; and in its Southeast region, the Company
acquired 43 properties containing a total of approximately 1.8 million
square feet (unaudited), for an aggregate purchase price of
approximately $178.3 million.
During 1996, the Company acquired, or purchased options to acquire,
land which will support the future development of 3.2 million square
feet (unaudited) in four of its target markets: suburban Seattle;
Southeast Denver; Austin, Texas; and suburban Chicago. In addition, as
of December 31, 1996, the Company had three properties under
construction: 128,000 square feet (unaudited) in suburban Atlanta; and
two properties that will contain approximately 295,000 square feet
(unaudited) in southeast Denver (including a build-to-suit project with
189,000 rentable square feet). Land held for development was purchased
for an aggregate purchase price of $32.3 million. Costs incurred during
1996 for properties under construction were $31.7 million. An
additional $36.3 million (unaudited) is expected to be expended for
completion of projects already under construction as of December 31,
1996.
All acquisitions have been accounted for as purchases. Operations of
the properties acquired have been included in the accompanying
consolidated financial statements from their respective dates of
acquisition.
F-18
The following unaudited pro forma summary presents information as if
the Company's acquisitions, sales of common and preferred stock, and
issuance of debt securities through December 31, 1997 had occurred at
the beginning of each year. The pro forma information is provided for
informational purposes only. It is based on historical information and
does not necessarily reflect the actual results that would have
occurred nor is it necessarily indicative of future results of
operations of the Company.
Pro forma Information (unaudited)
(in thousands, except per share amounts)
1997 1996
----------- -----------
Total Revenue $ 437,818 $ 384,671
Net Income before extraordinary item $ 103,502 $ 83,000
Net Income $ 102,894 $ 82,516
Basic net income per common share $ 1.12 $ 0.78
========= =========
(12) Subsequent Events
In March 1998, the Company, through its subsidiary OmniOffices, Inc.,
acquired the operations of an executive suites business for
approximately $32.5 million in cash plus warrants to purchase stock of
OmniOffices, Inc. The business has ten centers with 800 suites located
in three markets.
In March 1998, the Company loaned $51.0 million to finance the
construction of two operating office buildings located in Northern
California. The Company has the option to purchase the buildings once
construction is complete. The interest rate on the loan during the
option period ranges from 9.34% to 10.32%. If the option to purchase is
not exercised prior to March 10, 2003, the loan will bear an interest
rate of 9.0% and will mature on February 10, 2018.
In March 1998, the Company's unsecured credit facility was amended so
as to reduce the interest rate from 100 basis points over LIBOR to 90
basis points over LIBOR. The amendment also increased the Company's
availability under the facility by increasing the percentage of the
Company's unsecured properties available for draw.
In February 1998, the Company sold an aggregate principal amount of
$200 million of its long-term debt, in the form of $100 million
aggregate principal amount of 6.625% unsecured notes due in 2005 and
$100 million aggregate principal amount of 6.875% unsecured notes due
in 2008. The notes contain various covenants substantially similar to
the notes issued in June 1997. The offering raised net proceeds of $198
million which were used to acquire the suburban office properties and
land discussed below, to pay down indebtedness under the Company's
unsecured credit facility, and to cover costs relating to certain
hedging contracts entered into in September and October 1997 in
anticipation of the offering and for general corporate purposes.
From January 1, 1998, to March 1, 1998 the Company acquired eight
office properties and placed into service six office buildings. In
addition, since January 1, 1998, the Company has acquired land which is
expected to support the future development of 2.0 million square feet.
The Company paid $130.2 million to purchase the properties and land.
These acquisitions and properties placed in service added to the
Company's holdings as follows (unaudited):
Buildable
Square Feet
of Land Held
Square for
# of Feet Development
Region Buildings (unaudited) (unaudited)
----------------------- ------------- ------------- ---------------
Pacific Region 12 763,000 1,204,000
Mountain Region 1 101,000 230,000
Central Region 1 218,000 567,000
Southeast Region -- -- --
------------- ------------ -----------
Total 14 1,082,000 2,001,000
============= ============ ===========
In January 1998, the Company disposed of a 267,000 square foot
(unaudited) building for $78.1 million in value and recorded a gain of
$43.8 million. The Company entered into a contract with the purchaser
F-19
to continue to manage and lease the property. The proceeds of this transaction
have been used to acquire eight operating office properties. The debt formerly
secured by the property remains in place, under the same terms, with the newly
acquired properties serving as substitute collateral.
(13) Quarterly Financial Information (unaudited)
The following is a summary of quarterly results of operations for 1997
and 1996 (in thousands, except per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1997
----
Rental revenue $ 66,289 77,688 87,855 93,670
======== ====== ====== ======
Real estate service revenue $ 4,178 3,759 3,575 4,486
======== ====== ====== ======
Real estate operating income $ 14,495 19,524 20,679 23,788
======== ====== ====== ======
Income before extraordinary item $ 13,259 18,531 19,481 27,469
======== ====== ====== ======
Net income $ 13,259 18,531 18,873 27,469
======== ====== ====== ======
Basic net income per share:
Income before extraordinary item $ 0.26 0.32 0.29 0.35
======= ====== ====== =======
Net income $ 0.26 0.32 0.28 0.35
======= ====== ====== =======
Diluted net income per share:
Income before extraordinary item $ 0.26 0.32 0.29 0.35
======= ====== ====== =======
Net income $ 0.26 0.32 0.28 0.35
======= ====== ====== =======
1996
----
Rental revenue $ 25,350 32,784 42,506 53,525
======== ====== ====== =======
Real estate service revenue $ 2,726 2,904 3,634 3,248
======== ====== ====== =======
Real estate operating income $ 4,321 5,280 8,670 11,357
======== ====== ====== =======
Income before extraordinary item $ 3,335 4,741 7,910 8,816
======== ====== ====== =======
Net income $ 3,335 4,257 7,910 8,816
======== ====== ====== =======
Basic net income per share:
Income before extraordinary item $ 0.25 0.22 0.20 0.21
======= ====== ====== =======
Net income $ 0.25 0.20 0.20 0.21
======= ====== ====== =======
Diluted net income per share:
Income before extraordinary item $ 0.25 0.22 0.20 0.20
======= ====== ====== =======
Net income $ 0.25 0.20 0.20 0.20
======= ====== ======= =======
F-20
INDEPENDENT AUDITORS' REPORTS
CarrAmerica Realty Corporation and Subsidiaries
- -------------------------------------------------------------------------------
The Board of Directors and Stockholders
CarrAmerica Realty Corporation:
We have audited the accompanying consolidated
balance sheets of CarrAmerica Realty Corporation
and subsidiaries as of December 31, 1997 and 1996
and the related consolidated statements of
operations, stockholders' equity, and cash flows
for each of the years in the three-year period
ended December 31, 1997. These consolidated
financial statements are the responsibility of
the Company's management. Our responsibility is
to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence supporting
the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in
all material respects, the financial position of
CarrAmerica Realty Corporation and subsidiaries
as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each
of the years in the three-year period ended
December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1998, except as to notes 10 and 12
which are as of March 1998
F-21
INDEPENDENT AUDITORS' REPORT
CarrAmerica Realty Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Board of Directors and Stockholders
CarrAmerica Realty Corporation:
Under date of February 6, 1998, we reported on
the consolidated balance sheets of CarrAmerica
Realty Corporation and subsidiaries as of
December 31, 1997 and 1996, and the related
consolidated statements of operations,
stockholders' equity, and cash flows for each
of the years in the three-year period ended
December 31, 1997, which are included in this
Form 10-K. In connection with our audits of the
aforementioned consolidated financial
statements, we also audited the related
consolidated financial statement schedule in
this Form 10-K. This financial statement
schedule is the responsibility of the Company's
management. Our responsibility is to express an
opinion on this financial statement schedule
based on our audits.
In our opinion, this financial statement
schedule, when considered in relation to the
basic consolidated financial statements taken
as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1998
S-1
CARRAMERCA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1997
- --------------------------------------------------------------------------------
Gross Amount at Which
Initial Cost Carried at Close of Period
----------------------- ---------------------------
Costs Capitalized
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements Total
- ---------- ------------ ---- ------------ --------------- ---- ------------ -----
Downtown Washington, D.C.:
International Square (1) $183,500 (2) 69,651 100,921 4,097 69,651 105,018 174,669
1730 Pennsylvania Avenue, N.W. -- (2) 2,196 11,013 12,455 2,196 23,468 25,664
2550 M Street, N.W. -- 2,340 11,348 3,742 2,340 15,090 17,430
1775 Pennsylvania Avenue, N.W. 6,245 -- 19,000 1,981 -- 20,981 20,981
Presidential Plaza 16,690 1,985 13,358 1,897 1,985 15,255 17,240
1747 Pennsylvania Avenue, N.W. 15,357 1,636 8,157 5,031 1,636 13,188 14,824
1255 23rd Street (2) 10,793 40,214 4,344 10,793 44,558 55,351
2445 M Street (6) 36,890 4,530 37,439 (254) 4,530 37,185 41,715
1201 F Street (7) -- 421 -- 90 511 -- 511
Virginia:
Ballston Plaza -- 8,250 46,926 1,173 8,250 48,099 56,349
Tycon Courthouse -- 14,183 31,772 2,024 14,183 33,796 47,979
Sunrise Corporate Center -- 8,997 34,322 579 9,011 34,887 43,898
(formerly Reston Quadrangle)
Parkway One -- 2,010 4,663 112 2,013 4,772 6,785
Reston Crossing (8) -- 8,379 -- 1,358 -- 9,737 9,737
Maryland:
One Rock Spring Plaza -- -- 18,409 1,118 -- 19,527 19,527
Orange County/Los Angeles:
Plaza PacifiCare -- 3,493 6,392 57 3,493 6,449 9,942
Katella Corporate Center -- 2,671 4,314 434 2,681 4,738 7,419
Warner Center 26,000 16,490 33,698 1,841 16,509 35,520 52,029
Scenic Business Park -- 2,469 4,503 520 2,469 5,023 7,492
South Coast Executive Center 10,226 3,324 17,212 365 3,372 17,529 20,901
Harbor Corporate Park -- 2,191 5,784 1,596 2,191 7,380 9,571
Westlake Corporate Center -- 1,705 4,450 271 1,722 4,704 6,426
Warner Premier -- 3,252 6,040 94 3,285 6,101 9,386
2600 W. Olive 19,517 3,855 25,054 2,271 3,855 27,325 31,180
Bay Technology Center -- 2,442 11,164 -- 2,442 11,164 13,606
Von Karman -- 3,731 12,493 121 3,744 12,601 16,345
Pacific Corporate Plaza -- 5,756 -- 13 5,769 -- 5,769
San Diego:
Del Mar Corporate Center -- 2,860 13,252 77 2,869 13,320 16,189
Wateridge Pavilion 3,530 881 5,509 93 894 5,589 6,483
Century Park II -- 4,863 16,207 -- 4,863 16,207 21,070
Lightspan -- 1,438 5,710 720 1,439 6,429 7,868
Towne Center Technology Park -- 2,522 -- 1,352 -- 3,874 3,874
(formerly Eastgate
Technology Park) (8)
Towne Center Technology Park -- 2,407 -- -- 2,407 -- 2,407
(formerly Eastgate
Technology Park)
San Francisco Bay Area:
CarrAmerica Corporate Center -- 32,946 75,720 4,911 32,949 80,628 113,577
(formerly AT&T Center)
Sunnyvale Research Plaza -- 5,082 11,191 172 5,101 11,344 16,445
Valley Business Park I 43,773 (3) 3,859 3,155 138 3,865 3,287 7,152
(formerly San Jose Orchard
Business Park - A)
Valley Business Park II -- 8,753 7,155 342 8,765 7,485 16,250
(formerly San Jose Orchard
Business Park - B)
Valley Centre (formerly -- 6,051 4,945 76 6,059 5,013 11,072
Orchard Center)
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
Downtown Washington, D.C.:
International Square (1) 51,481 1977,1979,1982 1993
1730 Pennsylvania Avenue, N.W. 9,595 1972 1993
2550 M Street, N.W. 7,778 1978 1993
1775 Pennsylvania Avenue, N.W. 2,030 1975 1994
Presidential Plaza 5,493 1986 1993
1747 Pennsylvania Avenue, N.W. 5,529 1970 1993
1255 23rd Street 15,009 1983 1993
2445 M Street (6) 11,109 1986 1993
1201 F Street (7) -- N/A 1997
Virginia:
Ballston Plaza 7,997 1991 1994
Tycon Courthouse 2,412 1983 1995
Sunrise Corporate Center 2,304 1987-1989 1996
(formerly Reston Quadrangle)
Parkway One 414 1985 1996
Reston Crossing (8) -- N/A 1997
Maryland:
One Rock Spring Plaza 3,131 1989 1995
Orange County/Los Angeles:
Plaza PacifiCare 415 1986 1996
Katella Corporate Center 286 1982 1996
Warner Center 2,376 1981-1985 1996
Scenic Business Park 467 1985 1996
South Coast Executive Center 680 1987 1996
Harbor Corporate Park 561 1987 1996
Westlake Corporate Center 110 1986 1997
Warner Premier 215 1990 1997
2600 W. Olive 219 1986 1997
Bay Technology Center 16 1985 1997
Von Karman 198 1981 1997
Pacific Corporate Plaza -- N/A 1997
San Diego:
Del Mar Corporate Center 673 1986 1996
Wateridge Pavilion 166 1987 1997
Century Park II -- 1986 1997
Lightspan 129 1985 1997
Towne Center Technology Park -- N/A 1997
(formerly Eastgate Technology
Park) (8)
Towne Center Technology Park -- N/A 1997
(formerly Eastgate
Technology Park)
San Francisco Bay Area:
CarrAmerica Corporate Center 14,292 1988 1996
(formerly AT&T Center)
Sunnyvale Research Plaza 777 1985 1996
Valley Business Park I 134 1981 1996
(formerly San Jose Orchard
Business Park - A)
Valley Business Park II 307 1979 1996
(formerly San Jose Orchard
Business Park - B)
Valley Centre (formerly 211 1980 1996
Orchard Center)
S-2
Gross Amount at Which
Initial Cost Carried at Close of Period
----------------------- ----------------------------
Costs Capitalized
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements Total
- ---------- ------------ ---- ------------ --------------- ---- ------------ -----
Valley Office Centre (3) 6,134 5,014 99 6,142 5,105 11,247
(formerly Orchard Office Center)
Valley Centre II (formerly (3) 13,658 11,164 (341) 13,676 10,805 24,481
Orchard Center II)
Rincon Centre (formerly (3) 12,464 10,188 366 12,480 10,538 23,018
Orchard Rincon Center)
Bayshore Centre (formerly (3) 17,545 14,342 842 17,569 15,160 32,729
Orchard Bayshore Center)
3745 North First Street -- 3,388 4,884 216 3,411 5,077 8,488
Mission Plaza -- 3,978 6,280 85 4,010 6,333 10,343
North San Jose Technology -- 9,124 21,681 272 9,169 21,908 31,077
Park (formerly Fortran)
150 River Oaks -- 6,409 8,698 83 6,444 8,746 15,190
Foster City Technology Center -- 3,986 5,614 383 4,014 5,969 9,983
Rio Robles -- 16,655 29,598 413 16,669 29,997 46,666
San Mateo II & III -- 9,723 15,556 100 9,755 15,624 25,379
3571 North First Street -- 6,297 8,862 70 6,326 8,903 15,229
San Mateo I -- 5,703 9,126 -- 5,703 9,126 14,829
900-910 East Hamilton -- 28,264 52,993 -- 28,264 52,993 81,257
Amador I/Rinconda, Amador -- 14,448 24,706 115 14,490 24,779 39,269
III, Arroyo Center
Baytech Business Park (8) -- 14,958 -- 18,654 -- 33,612 33,612
Oakmead West (8) -- 22,842 -- 12,082 -- 34,924 34,924
Sacramento:
1860 Howe Avenue -- 2,824 8,944 98 2,843 9,023 11,866
University Park -- 3,217 10,185 358 3,239 10,521 13,760
Capital Corporate Center -- 2,189 6,932 69 2,205 6,985 9,190
Southeast Denver:
Quebec Center -- 1,423 5,659 419 1,423 6,078 7,501
Greenwood Center -- 289 6,619 151 289 6,770 7,059
Quebec Court I & II -- 2,368 19,819 564 2,371 20,380 22,751
Harlequin Plaza -- 4,746 21,344 1,700 4,748 23,042 27,790
Panorama Corporate Center III (8) -- 1,541 -- 9,887 -- 11,428 11,428
Panorama Phase IV-VII -- 4,962 -- 5,125 10,087 -- 10,087
JD Edwards -- 3,006 5,479 19,173 3,242 24,416 27,658
Panorama Corporate Center I -- 1,325 6,486 1,712 1,325 8,198 9,523
Panorama Corporate Center II (8) -- 1,844 -- 8,190 -- 10,034 10,034
Marriott Tract -- 4,060 -- 55 4,115 -- 4,115
Suburban Seattle:
Redmond East 27,724 6,957 32,390 676 6,972 33,051 40,023
Redmond Hilltop (8) -- 2,511 -- 5,114 -- 7,625 7,625
Canyon Park -- 5,748 23,624 200 5,782 23,790 29,572
Canyon Park-Land -- 5,112 -- 513 5,625 -- 5,625
Canyon Park Commons 5,822 2,375 9,958 -- 2,375 9,958 12,333
(formerly Tract 17)
Willow Creek Corporate -- 1,709 6,972 79 1,724 7,036 8,760
Center (formerly Data I/O)
Willow Creek Corporate -- 3,029 -- -- 3,029 -- 3,029
Center (formerly Data I/O) (8)
Willow Creek Corporate Center -- 3,456 -- 14,640 -- 18,096 18,096
(formerly Data I/O)
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
Valley Office Centre 191 1981 1996
(formerly Orchard Office Center)
Valley Centre II (formerly 502 1980 1996
Orchard Center II)
Rincon Centre (formerly 560 1984 1996
Orchard Rincon Center)
Bayshore Centre (formerly 841 1984 1996
Orchard Bayshore Center)
3745 North First Street 156 1984 1997
Mission Plaza 299 1985 1997
North San Jose Technology 913 1984 1997
Park (formerly Fortran)
150 River Oaks 182 1984 1997
Foster City Technology Center 152 1988 1997
Rio Robles 1,128 1985 1996
San Mateo II & III 239 1985 1997
3571 North First Street 136 1985 1997
San Mateo I 63 1986 1997
900-910 East Hamilton 74 1989 1997
Amador I/Rinconda, Amador 310 1983 1997
III, Arroyo Center
Baytech Business Park (8) -- N/A 1997
Oakmead West (8) -- N/A 1997
Sacramento:
1860 Howe Avenue 113 1983 1997
University Park 133 1981 1997
Capital Corporate Center 87 1985 1997
Southeast Denver:
Quebec Center 432 1985 1996
Greenwood Center 375 1982 1996
Quebec Court I & II 1,474 1979/1980 1996
Harlequin Plaza 1,519 1981 1996
Panorama Corporate Center III (8) -- 1996 1996
Panorama Phase IV-VII -- N/A 1996
JD Edwards 371 N/A 1996
Panorama Corporate Center I 455 N/A 1996
Panorama Corporate Center II (8) -- N/A 1996
Marriott Tract -- N/A 1997
Suburban Seattle:
Redmond East 2,566 1988-1992 1996
Redmond Hilltop (8) -- N/A 1996
Canyon Park 461 1989 1997
Canyon Park-Land -- N/A 1997
Canyon Park Commons 62 1988 1997
(formerly Tract 17)
Willow Creek Corporate 146 1981 1997
Center (formerly Data I/O)
Willow Creek Corporate -- N/A 1997
Center (formerly Data I/O) (8)
Willow Creek Corporate Center -- N/A 1997
(formerly Data I/O)
S-3
CARRAMERCA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1997
- --------------------------------------------------------------------------------
Gross Amount at Which
Initial Cost Carried at Close of Period
----------------------- -----------------------------
Costs Capitalized
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements Total
- ---------- ------------ ---- ------------- --------------- ---- ------------ -----
Salt Lake City, Utah:
Sorenson Research Park 4,418 4,389 25,304 291 4,423 25,561 29,984
Wasatch Corporate Center 12,834 3,318 15,495 68 3,326 15,555 18,881
(formerly Draper Park North)
Wasatch Corporate Center -- 1,268 -- 878 -- 2,146 2,146
(formerly Draper Park North) (8)
Wasatch Corporate Center -- 1,368 -- -- 1,368 -- 1,368
(formerly Draper Park North)
Sorenson Research Park -- 2,262 -- 183 2,445 -- 2,445
Suburban Chicago:
Parkway North I 29,250 3,727 29,146 598 3,733 29,738 33,471
Parkway North III & IV -- 4,304 34,390 1,024 4,310 35,408 39,718
Unisys -- 6,387 45,111 1,383 6,346 46,535 52,881
Parkway North III - Land -- 6,807 -- 3,170 9,977 -- 9,977
Parkway North III - Land (8) -- 2,003 -- 1,573 -- 3,576 3,576
The Crossings -- 5,268 34,215 1,566 5,289 35,760 41,049
Bannockburn IV -- 1,914 12,729 160 1,924 12,879 14,803
Summit Oaks -- 949 7,285 290 952 7,572 8,524
Bannockburn I & II 20,464 3,448 22,928 694 3,472 23,598 27,070
Austin, Texas:
Balcones Center -- 949 7,649 128 949 7,777 8,726
Great Hills Plaza -- 1,680 13,545 393 1,680 13,938 15,618
Park North -- 1,671 13,471 442 1,671 13,913 15,584
City View Centre (formerly -- 1,718 13,854 631 1,718 14,485 16,203
The Setting I, II & III)
Tower of the Hills -- 1,633 13,625 22 1,633 13,647 15,280
Riata Buildings 4,5,8,9 (8) -- 3,976 - 10,384 -- 14,360 14,360
Riata -- 6,145 -- -- 6,145 -- 6,145
City View Centre (8) -- 1,890 -- 12,034 -- 13,924 13,924
Braker Pointe (formerly -- 6,602 -- 691 7,293 -- 7,293
Mopac at Braker, formerly
Aubrey Smith)
Dallas, Texas:
Greyhound -- 1,312 7,999 90 1,321 8,080 9,401
Search Plaza -- 1,822 13,362 171 1,827 13,528 15,355
Quorum North 6,658 1,357 9,078 548 1,365 9,618 10,983
Quorum Place 7,719 1,941 14,234 902 1,954 15,123 17,077
Tollhill East & West -- 2,603 19,086 1,239 2,612 20,316 22,928
Two Mission Park -- 823 4,320 172 829 4,486 5,315
Cedar Maple Plaza -- 1,220 10,982 248 1,225 11,225 12,450
Cedar Maple Plaza-Land -- 520 -- 49 569 -- 569
Tollway I & II (8) -- 2,960 -- 7,280 -- 10,240 10,240
Tollway III -- 2,522 -- 160 2,682 -- 2,682
Royal Ridge (8) -- 3,159 -- 721 -- 3,880 3,880
Phoenix, Arizona:
Camelback Lakes -- 5,476 21,365 (3,746) 4,565 18,530 23,095
Highland Park -- 1,956 5,544 181 1,968 5,713 7,681
The Grove @ Black Canyon -- 1,748 9,658 453 1,748 10,111 11,859
(formerly Cigna Health Care)
U.S. West 69,146 18,517 74,069 -- 18,517 74,069 92,586
Pointe Corridor IV -- 2,396 12,580 485 2,403 13,058 15,461
Gateway Plaza (8) -- 3,420 -- 2,161 -- 5,581 5,581
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
Salt Lake City, Utah:
Sorenson Research Park 604 1988,1989,1993, 1997
1995, 1997
Wasatch Corporate Center 281 1996 1997
(formerly Draper Park North)
Wasatch Corporate Center N/A 1997
(formerly Draper Park North) (8)
Wasatch Corporate Center -- N/A 1997
(formerly Draper Park North)
Sorenson Research Park -- N/A 1997
Suburban Chicago:
Parkway North I 1,726 1986-1989 1996
Parkway North III & IV 2,778 1986-1989 1996
Unisys 1,696 1984-1985 1996
Parkway North III - Land -- N/A 1996
Parkway North III - Land (8) -- N/A 1996
The Crossings 1,329 1985 1997
Bannockburn IV 232 1988 1997
Summit Oaks 150 1982 1997
Bannockburn I & II 702 1980 1997
Austin, Texas:
Balcones Center 449 1985 1996
Great Hills Plaza 961 1985 1996
Park North 769 1981 1996
City View Centre (formerly 936 1985 1996
The Setting I, II & III)
Tower of the Hills 19 1986 1997
Riata Buildings 4,5,8,9 (8) -- N/A 1997
Riata -- N/A 1996
City View Centre (8) -- N/A 1996
Braker Pointe (formerly -- N/A 1997
Mopac at Braker, formerly
Aubrey Smith)
Dallas, Texas:
Greyhound 303 1962 1996
Search Plaza 469 1985 1996
Quorum North 274 1983 1997
Quorum Place 420 1981 1997
Tollhill East & West 502 1974 1997
Two Mission Park 71 1983 1997
Cedar Maple Plaza 367 1985 1997
Cedar Maple Plaza-Land -- N/A 1997
Tollway I & II (8) -- N/A 1997
Tollway III -- N/A 1997
Royal Ridge (8) -- N/A 1997
Phoenix, Arizona:
Camelback Lakes 835 1982 1996
Highland Park 138 1986 1997
The Grove @ Black Canyon 45 1986 1997
(formerly Cigna Health Care)
U.S. West 98 1988 1997
Pointe Corridor IV 657 1990 1996
Gateway Plaza (8) -- N/A 1997
S-4
Gross Amount at Which
Initial Cost Carried at Close of Period
--------------------- --------------------------------
Costs Capitalized
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements Total
- ---------- ------------ ---- ------------- --------------- ---- ------------ -----
Suburban Portland:
Radisys Corporate -- 1,448 7,518 49 1,456 7,559 9,015
Headquarters
Radisys II -- 926 -- 4,612 798 4,740 5,538
Suburban Atlanta:
Veridian -- 2,730 13,308 (5,064) 1,766 9,208 10,974
Century Springs West 21,464 (5) 1,642 7,646 (1,727) 1,280 6,281 7,561
Glenridge (5) 1,423 4,870 (350) 1,292 4,651 5,943
Crestwood (5) 1,423 7,306 847 1,543 8,033 9,576
Midori -- 1,802 6,715 2,798 2,320 8,995 11,315
Triangle Parkway (formerly -- 1,365 5,449 (690) 1,188 4,936 6,124
Spalding Triangle)
Summit -- 2,237 15,027 367 2,241 15,390 17,631
Holcomb Place -- 1,419 4,574 101 1,421 4,673 6,094
DeKalb Tech -- 1,090 7,662 80 1,092 7,740 8,832
Parkwood (5) 2,080 12,678 2,731 2,362 15,127 17,489
Lakewood (5) 1,040 6,789 299 1,049 7,079 8,128
Spalding Ridge (8) -- 1,550 4,950 8,020 -- 14,520 14,520
2400 Lake Park Drive -- 805 6,539 234 812 6,766 7,578
680 Engineering Drive -- 559 3,420 340 563 3,756 4,319
Embassy Row -- 7,916 36,907 1,683 7,959 38,547 46,506
Embassy Row-Land -- 1,868 -- -- 1,868 -- 1,868
Embassy Row - Land (8) -- 2,460 -- 2,157 -- 4,617 4,617
Preston Ridge -- 1,993 -- 89 2,082 -- 2,082
Boca Raton Florida:
Peninsula Plaza (Formerly -- 3,003 10,475 4,353 3,745 14,086 17,831
Lake Wyman Plaza)
Presidential Circle 23,418 7,074 35,370 1 7,074 35,371 42,445
Peninsula Executive Center -- 5,962 -- 2,693 -- 8,655 8,655
(formerly Glades Site) (8)
Peninsula Corporate Center -- 12,020 -- 981 13,001 -- 13,001
(formerly Knight Site)
Tampa, Florida
Rocky Point Plaza -- 2,667 -- 7 2,674 -- 2,674
------- ------- --------- ------- ------- --------- ---------
Subtotal 590,645 714,609 1,732,834 229,701 639,183 2,037,961 2,677,144
OmniOffices, Inc. 3,801 -- 10,198 2,157 -- 12,355 12,355
------- ------- --------- ------- ------- --------- ---------
Total 594,446 714,609 1,743,032 231,858 639,183 2,050,316 2,689,499
======= ======= ========= ======= ======= ========= =========
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
Suburban Portland:
Radisys Corporate 199 1996 1997
Headquarters
Radisys II 9 1997 1997
Suburban Atlanta:
Veridian 347 1976 1996
Century Springs West 247 1982 1996
Glenridge 190 1986 1996
Crestwood 308 1986 1996
Midori 334 1989 1996
Triangle Parkway (formerly 175 1988 1996
Spalding Triangle)
Summit 576 1986 1996
Holcomb Place 178 1982 1996
DeKalb Tech 285 1985 1996
Parkwood 571 1985 1996
Lakewood 270 1985 1996
Spalding Ridge (8) -- N/A 1996
2400 Lake Park Drive 172 1982 1997
680 Engineering Drive 158 1985 1997
Embassy Row 1,198 1983 1997
Embassy Row-Land -- N/A 1997
Embassy Row - Land (8) -- N/A 1997
Preston Ridge -- N/A 1997
Boca Raton Florida: 1997
Peninsula Plaza (formerly 616 1988 1996
Lake Wyman Plaza)
Presidential Circle 245 1989 1997
Peninsula Executive Center -- N/A 1997
(formerly Glades Site) (8)
Peninsula Corporate Center -- N/A 1997
(formerly Knight Site)
Tampa, Florida:
Rocky Point Plaza -- N/A 1997
-------
Subtotal 183,343
OmniOffices, Inc. 923 N/A 1997
-------
Total 184,266
=======
Depreciation and amortization of the investment in building and improvements
reflected in the statements of operations are calculated over the estimated
lives of the assets as follows:
Base Building 30 to 50 years
Building components 7 to 20 years
Tenant improvements Terms of leases or useful lives,
whichever is shorter
Furniture, fixtures and equipment 5 to 15 years
The aggregate cost for federal income tax purposes was approximately $2,549,405
at December 31, 1997.
S-5
CARRAMERCA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1997
- --------------------------------------------------------------------------------
The changes in total real estate assets and accumulated depreciation and
amortization for the three years ended December 31, 1997, 1996, and 1995 are as
follows:
Total Real Estate Assets Accumulated Depreciation
------------------------------ --------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Balance, beginning of period $1,539,998 $ 480,589 $429,537 Balance, beginning of period $119,657 $ 98,873 $88,408
Acquisitions 1,023,070 1,050,227 65,783
Improvements 186,541 20,536 3,029 Depreciation for the period 67,353 32,078 10,465
Retirements and write-offs (60,110) (11,354) (17,760) Retirements and write-offs (2,744) (11,294) --
---------- ---------- -------- -------- -------- -------
$2,689,499 $1,539,998 $480,589 $184,266 $119,657 $98,873
========== ========== ======== ======== ======== =======
- ---------------------
Notes:
(1) Represents 3 properties: 1850 K Street, N.W., 1875 Eye Street, N.W., and
1825 Eye Street, N.W.
(2) Consists of four loans secured by International Square, 1730 Pennsylvania
Avenue & 1255 23rd Street.
(3) Secured by Valley Business Park I (formerly San Jose Orchard Business Park
- A), Valley Office Centre (formerly Orchard Office Center), Valley Centre
II (formerly Orchard Center II), Rincon Centre (formerly Orchard Rincon
Center) and Bayshore Centre (formerly Orchard Bayshore Center).
(4) Costs capitalized are offset by retirements and write-offs.
(5) Secured by Century Springs West, Glenridge, Crestwood, Lakewood and
Parkwood.
(6) Includes the effect of consolidating 2445 M Street, NW, effective January
1, 1994.
(7) Represents cost of options to acquire land for future development.
(8) Under construction as of December 31, 1997. Construction costs are shown
under buildings and improvements until completion. At that time, costs will
be allocated between land and buildings and improvements.
S-6