<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
No. 1
CURRENT REPORT
------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 24, 1999
SL GREEN REALTY CORP.
(Exact name of Registrant as specified in its Charter)
Maryland
(State of Incorporation)
1-13199 13-3956775
(Commission File Number) (IRS Employer Id. Number)
420 Lexington Avenue 10170
New York, New York (Zip Code)
(Address of principal executive offices)
(212) 594-2700
(Registrant's telephone number, including area code)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant hereby amends the following items, financial statements, exhibits
or other portions of its Current Report on Form 8-K/A No.1, dated May 24,
1999 (filed with the Securities and Exchange Commission on June 8, 1999), as
set forth in the pages attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) FINANCIAL STATEMENTS OF PROPERTY ACQUIRED AND PRO FORMA
FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Balance Sheet
(Unaudited) as of March 31, 1999..................................... F-4
Pro Forma Income Statement
(Unaudited) for the three months
ended March 31, 1999................................................. F-5
Pro Forma Income Statement
(Unaudited) for the year ended
December 31, 1998.................................................... F-6
Notes to Pro Forma Financial Information............................... F-7
90 BROAD STREET
Report of Independent Auditors......................................... F-8
Statement of Revenues and Certain Expenses
of 90 Broad Street for the period May 1, 1998
through April 30, 1999 .............................................. F-9
Notes to Statement of Revenues and Certain
Expenses of 90 Broad Street.......................................... F-10
286 MADISON AVENUE, 290 MADISON AVENUE AND 292 MADISON AVENUE (THE "MADISON
PROPERTIES")
Report of Independent Auditors......................................... F-12
Combined Statements of Revenues and Certain
Expenses of the Madison Properties................................... F-13
Notes to Combined Statements of Revenues and
Common Expenses of the Madison Properties............................ F-14
(c) EXHIBITS
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SL GREEN REALTY CORP.
By: /s/ Thomas E. Wirth
------------------------------------------
Thomas E. Wirth
Chief Financial Officer
Date: August 7, 1999
<PAGE>
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma consolidated balance sheet of SL Green Realty
Corp. (the "Company") as of March 31, 1999 has been prepared as if the
Company's acquisitions of 90 Broad Street, 286, 290 and 292 Madison Avenue
had been consummated on March 31, 1999. The unaudited pro forma consolidated
income statements for the year ended December 31, 1998 and the three months
ended March 31, 1999 are presented as if the Company's acquisitions of 90
Broad Street, 286, 290 and 292 Madison Avenue and a 65% controlling interest
in a joint venture owning 555 West 57th Street occurred at January 1, 1998
and the effect was carried forward through the year and three month period.
On August 2, 1999, SL Green and Morgan Stanley Real Estate Fund III, LP
and its affiliates ("MSREF") entered into a joint venture agreement. As part
of the arrangement, SL Green has contributed the Property in exchange for a
35% interest in the joint venture. In addition, SL Green has been appointed
the operating member of the joint venture and will also be the managing
agent for the Property. The pro forma financial information does not reflect
this subsequent transaction.
The pro forma consolidated financial statements do not purport to
represent what the Company's financial position or results of operations
would have been assuming the completion of the Company's acquisition of 90
Broad Street, 286, 290 and 292 Madison Avenue and a 65% controlling interest
in a joint venture owning 555 West 57th Street had occurred at January 1,
1998 and period indicated, nor do they purport to project the Company's
financial position or results of operations at any future date or for any
future period. These pro forma consolidated financial statements should be
read in conjunction with the Company's 1998 annual report on Form 10-K and
the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1999.
F-3
<PAGE>
SL GREEN REALTY CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SL GREEN PURCHASE OF
REALTY CORP. THE MAY 1999 COMPANY
HISTORICAL ACQUISITIONS PRO FORMA
(A) (B) AS ADJUSTED
------------ ---------- -----------
<S> <C> <C> <C>
ASSETS :
Commercial real estate
properties at cost:
Land and land interests....... $ 128,016 $ 16,900 $ 144,916
Buildings and improvements.... 566,633 67,600 634,233
Building leasehold............ 107,561 107,561
Property under capital lease.. 12,208 12,208
------------ ---------- -----------
814,418 84,500 898,918
Less accumulated
depreciation............ (41,911) (41,911)
------------ ---------- -----------
772,507 84,500 857,007
Cash and cash equivalents..... 21,411 21,411
Restricted cash............... 23,863 23,863
Receivables................... 5,847 5,847
Related party receivables..... 362 362
Deferred rents receivable, net
of reserve for tenant credit
loss of $3,101.............. 25,940 25,940
Investment in and advances to
Service Corporations........ 9,249 9,249
Deferred costs, net........... 22,108 22,108
Mortgage loans receivable..... 26,401 26,401
Other assets.................. 12,619 12,619
------------ ---------- -----------
Total assets.............. $ 920,307 $ 84,500 $ 1,004,807
------------ ---------- -----------
------------ ---------- -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Mortgage notes payable........ $ 94,278 $ 52,700 $ 146,978
Secured bridge facilities..... 87,500 31,800 119,300
Revolving credit facility..... 112,800 112,800
Accrued interest payable...... 1,711 1,711
Capitalized lease
obligations................. 14,808 14,808
Deferred land lease payable... 10,388 10,388
Accounts payable and accrued
expenses.................... 9,428 9,428
Dividend and distributions
payable..................... 11,670 11,670
Security deposits............. 17,805 17,805
------------ ---------- ----------
Total liabilities......... 360,388 84,500 444,888
------------ ---------- ----------
Minority interests in operating
partnership and Commercial
Real Estate................. 44,949 44,949
Preferred stock............... 110,049 110,049
Common stock.................. 242 242
Additional paid-in capital.... 422,128 422,128
Deferred compensation plan.... (8,160) (8,160)
Officers' loans............... (478) (478)
Distributions in excess
of earnings.................. (8,811) (8,811)
------------ ---------- ----------
Total stockholders'
equity.................. 404,921 404,921
------------ ---------- ----------
Total liabilities and
stockholders' equity.... $ 920,307 $ 84,500 $1,004,807
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
F-4
<PAGE>
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SL GREEN
REALTY CORP. MAY 1999 PRO
HISTORICAL ACQUISITIONS FORMA COMPANY PRO
(A) (B) ADJUSTMENTS FORMA
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenue................. $ 41,244 $ 3,362 $ (63)(C) $ 44,543
Escalations and reimbursement
revenues..................... 4,932 535 5,467
Investment income.............. 837 837
Other income................... 466 61 527
--------- --------- ----------- ----------
Total revenues............. 47,479 3,958 (63) 51,374
--------- --------- ----------- ----------
Equity in net income from
Service Corporations......... 211 211
--------- --------- ----------- ----------
EXPENSES:
Operating expenses including
$756 to affiliates............ 12,037 1,606 13,643
Ground rent.................... 3,207 3,207
Interest....................... 5,238 1,338 (D) 6,576
Depreciation and amortization.. 5,438 423 (E) 5,861
Real estate taxes.............. 7,083 591 7,674
Marketing, general and
administrative............... 2,645 2,645
--------- --------- ----------- ----------
Total expenses............. 35,648 2,197 1,761 39,606
--------- --------- ----------- ----------
Income (loss) before minority
interest and preferred
dividends.................. 12,042 1,761 (1,824) 11,979
Minority interests (F)....... (1,429) (162) 168 (1,423)
--------- --------- ----------- ----------
Income (loss) before preferred
stock dividends......... 10,613 1,599 (1,656) 10,556
Preferred stock dividends
and accretion.............. (2,399) (2,399)
--------- --------- ----------- ----------
Income available to common
shareholders......... $ 8,214 $ 1,599 $ (1,656) $ 8,157
--------- --------- ----------- ----------
--------- --------- ----------- ----------
Income per common share--basic
and diluted (G)............ $ 0.34 $ 0.34
--------- ----------
--------- ----------
</TABLE>
F-5
<PAGE>
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SL GREEN 555 WEST
REALTY CORP. 57TH MAY 1999 PRO
HISTORICAL STREET ACQUISITIONS FORMA COMPANY PRO
(A) (B) (C) ADJUSTMENTS FORMA
------------ --------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental revenue................. $ 117,304 $ 14,188 $ 13,913 $ 688(D) $ 146,093
Escalations and reimbursement
revenues..................... 15,923 1,954 2,290 -- 20,167
Investment income.............. 3,267 -- -- -- 3,267
Other income................... 478 565 258 1,280(E) 2,581
--------- --------- --------- ---------- ----------
Total revenues............. 136,972 16,707 16,461 1,968 172,108
--------- --------- --------- ---------- ----------
Equity in net income from
Service Corporations......... 387 -- -- -- 387
--------- --------- --------- ---------- ----------
EXPENSES:
Operating expenses............. 36,545 6,000 6,382 -- 48,927
Ground rent.................... 11,082 -- -- 11,082
Interest....................... 13,086 3,361 -- 2,477(F) 24,548
5,624(J)
Depreciation and amortization.. 15,404 -- 1,632(G) 18,726
1,690(K)
Real estate taxes.............. 21,224 2,901 2,348 -- 26,473
Loss on hedge transaction...... 176 -- -- 176
Loss on terminated project..... 1,065 -- -- 1,065
Marketing, general and
administrative............... 5,760 -- -- 5,760
--------- --------- --------- ---------- ----------
Total expenses............. 104,342 12,262 8,730 11,423 136,757
--------- --------- --------- ---------- ----------
Income (loss) before minority
interest, extraordinary
item and preferred
dividends.................. 33,017 4,445 7,731 (9,455) 35,738
Minority interest in joint
venture (H)................ (1,556) -- (271) (1,827)
Minority interest in
operating partnership (L).. (3,043) (266) (711) 845 (3,175)
--------- --------- --------- ---------- ----------
Income (loss) before
extraordinary item......... 29,974 2,623 7,020 (8,881) 30,736
Preferred stock dividends
and accretion.............. (5,970) (5,970)
--------- --------- --------- ---------- ----------
Income available to common
shareholders before
extraordinary item......... $ 24,004 $ 2,623 $ 7,020 $ (8,881) $ 24,766
--------- --------- --------- ---------- ----------
--------- --------- --------- ---------- ----------
Income per common share basic
(I)........................ $ 1.22 $ 1.26
--------- ----------
--------- ----------
Income per common
share - diluted (I).......... $ 1.22 $ 1.25
--------- ----------
--------- ----------
</TABLE>
F-6
<PAGE>
SL GREEN REALTY CORP
THREE MONTHS ENDED
MARCH 31, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(A) To reflect the consolidated balance sheet of SL Green Realty Corp. as
reported on form 10-Q at March 31, 1999.
(B) To reflect the May 24, 1999 purchase price allocation for the
Company's acquisition of the properties located at 90 Broad Street, 286, 290
and 292 Madison Avenue (the "May 1999 Acquisitions") as of March 31, 1999 for
$84.5 million. There was no independent valuation performed on these
properties. The cash portion of purchase was financed through a $52.75
million mortgage note collateralized by the May 1999 Acquisition pro with the
remainder financed through the Company revolving credit facility.
NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT
(A) To reflect the consolidated statement of SL Green Realty Corp. for
the three months ended March 31, 1999 as reported on the Company's Quarterly
Report on Form 10-Q.
(B) To reflect the combined historical operations of the May 1999
Acquisitions for the three months ended March 31, 1999.
(C) Rental income from the May 1999 Acquisitions adjusted to reflect
straight line amounts as of January 1, 1998.
(D) To reflect the interest expense for borrowings under the mortgage note
financings secured by the May 1999 acquisition ($52.7 million at 6.43%) and
borrowings under the Company's revolving credit facility ($31.8 million at
6.18%).
(E) To reflect straightline depreciation for the May 1999 Acquisitions
based on an estimated useful life of 40 years.
(F) To reflect the minority shareholders 35% interest in the operating
results of 555 West 57th Street and the minority shareholders 9.2% interest
in the operating partnership.
(G) Basic income per common share is calculated based on 24,192 weighted
average common shares outstanding and diluted income per common share is
calculated based on 24,236 weighted average common shares and common share
equivalents outstanding.
YEAR ENDED DECEMBER 31, 1998
NOTES TO THE PRO FORMA INCOME STATEMENT
(A) To reflect the consolidated statement of operations of SL Green
Realty Corp. for the year December 31, 1998 as reported on the Company's Form
10-K for the year ended December 31, 1998.
(B) To reflect the historical operations of 555 West 57th Street for the
year ended December 31, 1998.
(C) To reflect the combined historical operations of the May 1999
Acquisitions for the year ended December 31, 1998.
(D) Rental income at 555 West 57th Street ($313), 90 Broad Street ($187)
and The Madison Properties ($188) were adjusted to reflect straight line amounts
as of January 1, 1998.
(E) To reflect a 36 month licensing agreement signed in connection with
the acquisition of 555 West 57th Street the acquisition that relates to
approximately 57,000 square feet with annual rent totalling approximately
$1.28 million.
(F) To reflect the interest expense for borrowings under the Company's
revolving credit facility at an assumed interest rate of 6.5% for the
acquisition ($66.7 million) of 555 West 57th Street.
(G) To reflect straightline depreciation for the property located at 555
West 57th Street based on an estimated useful life of 40 years.
(H) To reflect the minority shareholders 35% interest in the operating
results of 555 West 57th Street.
(I) Basic income per common share is calculated based on 19,675 weighted
average common shares outstanding and diluted income per common share is
calculated based 19,739 weighted average common shares and common share
equivalents outstanding.
(J) Interest expense for borrowing under the mortgage note financing
secured by the May 1999 Acquisitions ($52.7 million at 6.75%) and borrowings
under the Company's revolving credit facility ($31.8 million at 6.5%).
(K) To reflect straightline depreciation for the May 1999 Acquisitions
based on an estimated useful life of 40 years.
(L) Represents the minority shareholders 9.2% interest in the operating
partnership.
F-7
<PAGE>
Report of Independent Auditors
To the Board of Directors of
SL Green Realty Corp.
We have audited the statement of revenues and certain expenses of the
property at 90 Broad Street (the "Property"), as described in Note 1, for the
period May 1, 1998 through April 30, 1999. This financial statement is the
responsibility of management of the Property. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of revenues and certain expenses was prepared for
the purposes of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in Form 8-K of SL Green Realty Corp.,
and is not intended to be a complete presentation of the Property's revenues
and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of the Property, as
described in Note 1 for the period May 1, 1998 through April 30, 1999 in
conformity with generally accepted accounting principles.
New York, New York
August 3, 1999
F-8
<PAGE>
90 Broad Street
Statement of Revenues and Certain Expenses
(Dollars in thousands)
Note 1
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1998 THROUGH
APRIL 30, 1999
----------------------
<S> <C>
Revenues
Rental revenue $5,722
Escalations and reimbursement revenue 715
Other income 224
------
Total revenues 6,661
------
Certain Expenses
Property taxes 675
Utilities 891
Cleaning and service contracts 798
Payroll and expenses 458
Management fees 187
Repairs and maintenance 253
Professional fees 6
Insurance 65
Other operating expenses 89
------
Total certain expenses 3,422
------
Revenues in excess of certain expenses $3,239
------
------
</TABLE>
SEE ACCOMPANYING NOTES.
F-9
<PAGE>
90 Broad Street
Notes to Statement of Revenues and Certain Expenses
(Dollars in thousands)
April 30, 1999
1. BASIS OF PRESENTATION
Presented herein is the statement of revenues and certain expenses related to
the operations of the property, located at 90 Broad Street, in the borough of
Manhattan in New York City, (the "Property").
The accompanying financial statement has been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange
Commission for the acquisition of real estate properties. Accordingly, the
financial statement exclude certain expenses that may not be comparable to
those expected to be incurred by SL Green Operating Partnership LP ("SL
Green") in the proposed future operations of the Property. Items excluded
consist of interest, amortization and depreciation.
On August 2, 1999, SL Green and Morgan Stanley Real Estate Fund III, LP and
its affiliates ("MSREF") entered into a joint venture agreement. As part of
the arrangement, SL Green has contributed the Property in exchange for a 35%
interest in the joint venture. In addition, SL Green has been appointed the
operating member of the joint venture and will also be the managing agent for
the Property.
2. USE OF ESTIMATES
The preparation of financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
3. REVENUE RECOGNITION
The Property is leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts so recognized over amounts due pursuant to the
underlying leases amounted to approximately $656 for the period May 1, 1998
through April 30, 1999.
4. CONCENTRATION OF REVENUE
Approximately 22% of the Property's revenue for the period May 1, 1998
through April 30, 1999 was derived from MTB Banking Corporation.
F-10
<PAGE>
90 Broad Street
Notes to Statement of Revenues and Certain Expenses (continued)
(Dollars in thousands)
April 30, 1999
5. RELATED PARTY TRANSACTIONS
The Property paid Tower Realty Operating Partnership (the seller and then
99% owner of 90 Broad Street) management fees at 3% of gross billings and
leasing commissions of approximately $187 and $9, respectively, for the
period ended May 1, 1998 through April 30, 1999.
The Property paid Tower Equities Management, Inc. (the seller and then 95%
owned affiliate of Tower Realty Operating Partnership) janitorial services of
approximately $367, for the period ended May 1, 1998 through April 30, 1999.
6. LEASE AGREEMENTS
The Property is being leased to tenants under operating leases with term
expiration dates ranging from 1999 to 2010. The minimum rental amounts due
under the leases are generally subject to scheduled fixed increases. The
leases generally also require that the tenants reimburse the Property for
increases in certain operating costs and real estate taxes above their base
year costs. Approximate future minimum rents to be received over the next
five years and thereafter for non-cancelable operating leases as of April 30,
1999 (exclusive of renewal option periods) are as follows:
<TABLE>
<S> <C>
1999 $5,698
2000 5,664
2001 5,192
2002 4,914
2003 4,180
Thereafter 10,345
-------
$35,993
-------
-------
</TABLE>
F-11
<PAGE>
Report of Independent Auditors
To the Board of Directors of
SL Green Realty Corp.
We have audited the combined statement of revenues and certain expenses of
the properties at 286 Madison Avenue, 290 Madison Avenue and 292 Madison
Avenue (the "Madison Properties" or "Properties") as described in Note 1, for
the year ended December 31, 1998. This combined financial statement is the
responsibility of management of the Properties. Our responsibility is to
express an opinion on this combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statement. An audit also includes assessing the accounting principles used
and the significant estimates made by management, as well as evaluating the
overall combined financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purposes of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in Form 8-K of SL Green
Realty Corp., and is not intended to be a complete presentation of the
Properties' revenues and certain expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of the
Properties, as described in Note 1 for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.
New York, New York
August 3, 1999
F-12
<PAGE>
Madison Properties
Combined Statements of Revenues and Certain Expenses
(Dollars in thousands)
Note 1
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
------------------- ------------------
(Unaudited)
<S> <C> <C>
Revenues
Rental revenue $8,191 $1,931
Escalations and reimbursement revenue 1,575 356
Other income 34 5
------------------- ------------------
Total revenues 9,800 2,292
------------------- ------------------
Certain Expenses
Property taxes 1,673 422
Utilities 846 215
Cleaning and service contracts 1,461 377
Payroll and expenses 228 49
Management fees 290 70
Repairs and maintenance 616 181
Professional fees 79 4
Insurance 35 8
Other operating expenses 80 15
------------------- ------------------
Total certain expenses 5,308 1,341
------------------- ------------------
Revenues in excess of certain expenses $4,492 $ 951
------------------- ------------------
------------------- ------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-13
<PAGE>
Madison Properties
Notes to Combined Statements of Revenues and Certain Expenses
(Dollars in thousands)
December 31, 1998
1. BASIS OF PRESENTATION
Presented herein is the combined statement of revenues and certain expenses
related to the operations of the properties, located at 286 Madison Avenue,
290 Madison Avenue and 292 Madison Avenue, in the borough of Manhattan in New
York City, (the "Properties").
The accompanying combined financial statement have been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for the acquisition of real estate properties.
Accordingly, the combined financial statement exclude certain expenses that
may not be comparable to those expected to be incurred by SL Green Operating
Partnership LP ("SL Green"), in the proposed future operations of the
Properties. Items excluded consist of interest, amortization and depreciation.
The Madison Properties is not a legal entity but rather a combination of real
estate properties under common ownership and controlled by Tower Realty
Operating Partnership. The Madison Properties are organized as limited
partnerships and all significant intercompany transactions and balances have
been eliminated in combination.
2. USE OF ESTIMATES
The preparation of combined financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. REVENUE RECOGNITION
The Properties are leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. The excess of amounts so recognized over amounts due pursuant to the
underlying leases amounted to approximately $134 for the year ended December
31, 1998. For the three months ended March 31, 1999, amounts due pursuant to
the underlying leases exceeded amounts so recognized by $29 (unaudited).
4. CONCENTRATION OF REVENUE
Approximately 20% and 24% of the Properties' revenue for the year ended
December 31, 1998 and March 31, 1999, respectively, was derived from
TBWA/Chiat Day, Inc.
F-14
<PAGE>
Madison Properties
Notes to Combined Statements of Revenues and Certain Expenses (continued)
(Dollars in thousands)
December 31, 1998
5. RELATED PARTY TRANSACTIONS
The Properties paid Tower Realty Operating Partnership, (the seller and then
99% owner of the Properties' management fees at 3% of gross billings and
leasing commissions of approximately $290 and $22, respectively, for the year
ended December 31, 1998.
The Properties paid Tower Equities Management, Inc. (the seller and then 95%
owned affiliate of Tower Realty Operating Partnership) janitorial services of
approximately $194, for the year ended December 31, 1998.
6. LEASE AGREEMENTS
The Properties are being leased to tenants under operating leases with term
expiration dates ranging from 1999 to 2012. The minimum rental amounts due
under the leases are generally subject to scheduled fixed increases. The
leases generally also require that the tenants reimburse the Properties for
increases in certain operating costs and real estate taxes above their base
year costs. Approximate future minimum rents to be received over the next
five years and thereafter for non-cancelable operating leases as of December
31, 1998 (exclusive of renewal option periods) are as follows:
<TABLE>
<S> <C>
1999 $ 8,167
2000 7,850
2001 7,189
2002 6,296
2003 5,224
Thereafter 11,418
-------
$46,144
-------
-------
</TABLE>
F-15
<PAGE>
Madison Properties
Notes to Combined Statements of Revenues and Certain Expenses (continued)
(Dollars in thousands)
December 31, 1998
7. INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statement for the three months ended March 31, 1999 is
unaudited, however, in the opinion of management all adjustments, (consisting
solely of normal recurring adjustments), necessary for a fair presentation of
the financial statement for the interim period have been included. The
results of the interim period are not necessarily indicative of the results
to be obtained for a full fiscal year.
F-16
