SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 1, 2000
FRONTLINE CAPITAL GROUP
(Exact name of Registrant as specified in its Charter)
Delaware
(State of Incorporation)
0-30162 11-3383642
(Commission File Number) (IRS Employer Id. Number)
1350 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 931-8000
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
On June 1, 2000, FrontLine Capital Group (the "Company") announced the
completion of the merger of VANTAS Incorporated ("VANTAS"), its majority-owned
subsidiary, with and into HQ Global Workplaces, Inc. ("Old HQ"), an affiliate
of CarrAmerica Realty Corporation ("CarrAmerica") (the "Merger"), with Old HQ
continuing as the surviving corporation under the name HQ Global Workplaces,
Inc. ("New HQ"). Immediately subsequent to the Merger, New HQ merged with and
into HQ Merger Subsidiary, Inc. ("M-Sub"), a wholly-owned subsidiary of HQ
Global Holdings, Inc. ("HQ Holdings") (the "Second Step Merger"), with M-Sub
continuing as the surviving corporation under the name HQ Global Workplaces,
Inc. ("HQ"). Immediately subsequent to the Second Step Merger, HQ became a
wholly-owned subsidiary of HQ Holdings.
HQ is the largest provider of flexible officing solutions in the world,
with more than 2,500 employees, 43,000 clients and over 460 business centers
in 17 countries. The Company currently owns approximately 66% of the
outstanding common stock of HQ Holdings ("HQ Holdings Common Stock"). Such
ownership percentage does not take into account (i) warrants to purchase
approximately 2.1 million shares (subject to increase for anti-dilution) of HQ
Holdings Common Stock issued to the Series A Purchasers referrred to below,
(ii) shares of HQ Holdings Common Stock which may be issued in connection with
the refinancing of the Subordinate Loan referred to below, (iii) any shares of
HQ Holdings Common Stock issuable upon conversion of the Series A Preferred
referred to below (due to the fact that the number of such shares is dependent
upon the timing of the conversion and other factors) or (iv) outstanding
options to purchase shares of HQ Holdings Common Stock.
Upon consummation of the Merger, each issued and outstanding share of
common stock of VANTAS was converted into the right to receive $8.00 in cash,
and each issued and outstanding share of preferred stock of VANTAS was
converted into the right to receive .2569 shares of New HQ common stock. Upon
consummation of the Second Step Merger, each issued and outstanding share of
common stock of New HQ (including the shares issued to VANTAS stockholders in
accordance with the preceding sentence) was converted into the right to
receive one share of HQ Holdings Common Stock.
Prior to the Second Step Merger and pursuant to the terms of the Stock
Purchase Agreement among the Company and CarrAmerica, dated as of January 20,
2000, as amended as of April 29, 2000 and May 31, 2000, the Company purchased
4,130,530 shares of common stock of New HQ from CarrAmerica and certain other
stockholders of Old HQ for an aggregate purchase price of approximately $151.1
million, which, upon consummation of the Second Step Merger, were converted
into an equal number of shares of HQ Holdings Common Stock (as described
above). New HQ also acquired the outstanding debt and equity interests of
CarrAmerica in OmniOffices (UK) Limited and OmniOffices (Lux) 1929 Holding
Company S.A., two companies engaged in the executive office suites business
outside of the United States, for approximately $90.2 million in cash.
Immediately following consummation of the Second Step Merger, the Company
exchanged with HQ Holdings the 4,130,530 shares of HQ Holdings Common Stock it
received upon conversion of its New HQ common stock for approximately 3.7
million newly-issued shares of Series A Convertible Cumulative Preferred Stock
of HQ Holdings ("Series A Preferred") and warrants to purchase up to
approximately 1.66 million shares of HQ Holdings Common Stock (the
"Warrants"), pursuant to the terms of an Exchange Agreement, dated as of May
31, 2000, between the Company and HQ Holdings.
Immediately following the transactions contemplated by the Exchange
Agreement, the Company sold all of the Series A Preferred and Warrants it
received from HQ Holdings under the Exchange Agreement, and HQ Holdings sold
approximately 1.08 million additional shares of Series A Preferred and
Warrants to purchase up to approximately 480,000 shares of HQ Holdings Common
Stock, to a group of investors that included EOP Operating Limited Partnership
(an affiliate of Equity Office Properties Trust), Fortress HQ LLC, Stichting
Pensioenfonds ABP, First Union Real Estate Equity and Mortgage Investments,
CIBC WMC Inc., CIBC Employee Private Equity Fund Partners, AEW Targeted
Securities Fund, L.P., AEW Targeted Securities Fund II, L.P., Blackacre
Capital Partners, L.P. and Paribas North America, Inc. (the "Series A
Purchasers") for an aggregate purchase price of $195 million, pursuant to the
terms of separate purchase agreements between the Company and each Series A
Purchaser.
In connection with the mergers, HQ obtained both (i) a senior secured
loan (the "Senior Loan") in the amount of $225 million with an additional $50
million revolving line of credit and (ii) a subordinate unsecured loan (the
"Subordinate Loan") in the amount of $125 million. The Senior Loan consists of
six separate tranches with maturity dates ranging from June 30, 2002 through
May 31, 2005. Interest accrues on each tranche at per annum rates ranging from
LIBOR plus 3.25% to LIBOR plus 4%. The Subordinate Loan matures on May 31,
2007 and accrues interest at a per annum rate equal to LIBOR plus 6.5%,
subject to increases pursuant to the terms of the Subordinate Loan.
The Board of Directors of HQ Holdings (the "HQ Holdings Board") consists
of thirteen directors, a majority of whom were appointed by the Company. In
addition, Mr. Scott H. Rechler, President of the Company, serves as Chairman
of the HQ Holdings Board.
The description of the Merger and related transactions contained in the
Form 8-K dated January 25, 2000, is incorporated herein by reference. The
information contained in this Form 8-K supplements and amends, and, if
contradictory, supercedes, information contained in the Form 8-K dated January
25, 2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) and (b) Financial Statements and Pro Forma Financial Information
Financial statements and pro forma financial information relating to
the acquisition described in Item 2 have not been included in this report
and will be filed on or before August 15, 2000 (other than those
historical financial statements which were included in the Company's Form
8-K filed March 2, 2000).
(c) Exhibits
10.1 Second Amendment to the Agreement and Plan of Merger by and among
VANTAS Incorporated and the Company, on the one hand, and HQ
Global Workplaces, Inc. and CarrAmerica Realty Corporation, on the
other hand, dated as of May 31, 2000
10.2 Stockholders Agreement by and among the Company, HQ Global
Workplaces, Inc., CarrAmerica Realty Corporation and the other
parties named therein, dated as of June 1, 2000
10.3 Registration Rights Agreement by and among the Company and
CarrAmerica Realty Corporation, dated as of June 1, 2000
10.4 Agreement and Plan of Merger by and among HQ Global Workplaces,
Inc., HQ Global Holdings, Inc. and HQ Merger Subsidiary, Inc.,
dated as of June 1, 2000
10.5 Exchange Agreement by and between the Company and HQ Global
Holdings, Inc., dated as of May 31, 2000
10.6 Indemnification and Escrow Agreement by and among the Company,
CarrAmerica Realty Corporation and the other parties named
therein, dated as of June 1, 2000
10.7 Purchase Agreement by and among the Company, HQ Global Holdings,
Inc. and EOP Operating Limited Partnership, dated as of May 31,
2000
10.8 Purchase Agreement by and among the Company and Fortress HQ LLC,
dated as of May 31, 2000
10.9 Purchase Agreement by and among the Company and Stichting
Pensioenfonds ABP, dated as of May 31, 2000
10.10 Purchase Agreement by and among the Company and First Union Real
Estate Equity and Mortgage Investments, dated as of May 31, 2000
10.11 Purchase Agreement by and among the Company and CIBC WMC Inc.,
dated as of May 31, 2000
10.12 Purchase Agreement by and among the Company and CIBC Employee
Private Equity Fund Partners, dated as of May 31, 2000
10.13 Purchase Agreement by and among the Company and AEW Targeted
Securities Fund, L.P., dated as of May 31, 2000
10.14 Purchase Agreement by and among the Company and AEW Targeted
Securities Fund II, L.P., dated as of May 31, 2000
10.15 Purchase Agreement by and among the Company and Blackacre Capital
Partners, L.P., dated as of May 31, 2000
10.16 Purchase Agreement by and among the Company and Paribas North
America, Inc., dated as of May 31, 2000
10.17 Stockholders Agreement by and among the Company, HQ Global
Holdings, Inc. and certain holders of Series A Preferred Stock of
HQ Global Holdings, Inc. named therein, dated as of May 31, 2000
10.18 Registration Rights Agreement by and between HQ Global Holdings,
Inc. and the investors named therein, dated as of May 31, 2000
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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.
FRONTLINE CAPITAL GROUP
By: /s/ Michael Maturo
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Michael Maturo
Executive Vice President,
Chief Financial Officer and Treasurer
Date: June 16, 2000
