SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 1995
CORNERSTONE PROPERTIES INC.
(Exact name of registrant as specified in its charter)
Nevada 0-10421 74-2170858
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
31 West 52nd Street
Suite 1600
New York, NY 10019
(Address of principal executive offices)
(212) 474-7100
(Registrant's telephone number,
including area code)
ARICO America Realestate Investment Company
(Former name)
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K, dated
November 1, 1995, as set forth in the pages attached hereto:
Item 7: Financial Statements and Exhibits.
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.
CORNERSTONE PROPERTIES INC.
(Registrant)
By: /s/ John S. Moody
--------------------------------------------------
John S. Moody,President and Chief Executive Officer
By: /s/ Thomas P. Loftus
--------------------------------------------------
Thomas P. Loftus, Vice President and Controller
(Principal Financial Officer)
Date: December 1995
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
A. Financial Statements
Included herewith are the following financial statements reflecting
the acquisition of 125 Summer Street (the "Building").
1. Report of David Berdon & Co. LLP, Independent Certified Public
Accountants, dated November 30, 1995.
2. Historical summary of revenues and certain operating expenses for 125
Summer Street for the year ended December 31, 1994.
3. Estimates of taxable operating income and funds generated from
operations for 125 Summer Street (unaudited), and related Notes.
4. Pro forma condensed financial statements (unaudited):
(a) Pro forma condensed statements of income for the nine months
ended September 30, 1995 and the twelve months ended December 31,
1994.
(b) Pro forma condensed balance sheet at September 30, 1995.
(c) Notes to pro forma condensed financial statements.
<PAGE>
Cornerstone Properties Inc.
31 West 52nd Street, Suite 1600
New York, NY 10019
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses of 125 Summer Street ("Historical Summary") for the year
ended December 31, 1994. This Historical Summary is the responsibility of the
Building's management. Our responsibility is to express an opinion on the
Historical Summary 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 Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 2, and is not intended to be a complete presentation of the
Building's revenue and expenses. In our opinion, the Historical Summary referred
to above presents fairly, in all material respects, the gross income and direct
operating expenses described in Note 2 of 125 Summer Street for the year ended
December 31, 1994, in conformity with generally accepted accounting principles.
DAVID BERDON & CO., LLP
Certified Public Accountants
New York, New York
November 30, 1995
<PAGE>
125 SUMMER STREET
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1994
GROSS INCOME (Note 3):
Base rent $11,704,603
Escalation income 737,622
Parking 679,242
Tenant services 108,383
----------
TOTAL GROSS INCOME $13,229,850
DIRECT OPERATING EXPENSES (Note 2):
Taxes and licenses $2,549,231
Utilities 747,827
Cleaning 491,483
Leasing 101,720
Administrative 294,502
Management fee 368,061
HVAC 332,924
Security 273,897
Insurance 65,738
General building 128,771
Garage 34,542
Elevators 118,576
Landscaping 33,912
---------
TOTAL DIRECT OPERATING EXPENSES $5,541,184
The accompanying notes are an integral part of this summary.
<PAGE>
125 SUMMER STREET
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
NOTE 1 - NATURE OF BUSINESS
125 Summer Street (the "Building") is an office building located in
Boston, Massachusetts. The Building has approximately 464,000 square
feet of office and retail space with an underground parking garage
containing 292 parking spaces.
NOTE 2 - BASIS OF PRESENTATION
Cornerstone Properties, Inc. purchased the Building in November 1995.
The accompanying Historical Summary has been prepared for the purpose
of complying with Regulation S-X, Rule 3-14 of the Securities and
Exchange Commission ("SEC"), which requires certain information with
respect to real estate operations acquired to be included with certain
filings with the SEC. This Historical Summary includes the historical
gross income and direct operating expenses of the Building, exclusive
of the following income and expenses, which may not be comparable to
the proposed future operations of the Building: (a) interest income;
(b) interest expense on existing mortgages and borrowings; (c)
depreciation and amortization; and (d) provision for income taxes.
NOTE 3 - RENTAL INCOME
The Building's operations consist of leasing commercial office space to
various tenants. Rental income from leases is recognized on a
straight-line basis over the terms of the respective leases. Escalation
revenue represent operating expenses, including real estate taxes,
billed to the tenants and are recognized in the period the expenses are
incurred.
All leases are classified as operating leases and expire at various
dates prior to 2003. The following is a schedule by years of future
minimum rents on noncancelable operating leases as of December 31,
1994:
1995 $13,571,000
1996 $13,489,000
1997 $9,908,000
1998 $9,142,000
1999 $8,892,000
Thereafter $2,346,000
(continued)
<PAGE>
125 SUMMER STREET
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
NOTE 3 - RENTAL INCOME (Continued)
During the year ended December 31, 1994, four tenants accounted for
approximately 72% (ranging from 26% to 12%) of the total gross income
recognized in the Historical Summary.
Rental revenue of $56,700 was earned in 1994 from an affiliate of the
building's owner.
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
INFORMATION PURSUANT TO RULE 3-14 REGULATION S-X
Part I MANAGEMENT ASSESSMENT
Management's assessment of the Building prior to acquisition includes, but
is not limited to, the quality of the tenant base, regional demographics, the
competitive environment, operating expenses and local property taxes. In
addition, the physical aspect of the Properties, location, condition and quality
of design and construction are evaluated. Management also always conducts Phase
I and other specific environmental tests. All factors, when viewed in their
entirety, have met management's acquisition criteria. Management is not aware of
any material factors relating to the acquisition other than those discussed
above.
Part II ESTIMATES OF TAXABLE OPERATING INCOME AND FUNDS GENERATED FROM
OPERATIONS FROM 125 SUMMER STREET.
a. The following presents an estimate of taxable net income and funds
generated from operations from 125 Summer Street for the year ended
December 31, 1994 based on the Historical Summary of Revenues and Certain
Operating Expenses. These estimated results do not purport to present
expected results of operations for the Building in the future and were
prepared on the basis described in the accompanying notes which should be
read in conjunction herewith.
ESTIMATES OF TAXABLE OPERATING INCOME (000 omitted)
- -------------------------------------
Operating income before depreciation expense $ 7,689
Plus:
Deferred rental revenue recognition 4,109
Less:
Estimated depreciation 2,408
--------
Estimated taxable operating income $ 9,390
=======
ESTIMATES OF FUNDS GENERATED FROM OPERATIONS
Estimated taxable operating income $ 9,390
Add:
Estimated depreciation 2,408
--------
Estimate of funds generated $11,798
=======
b. Estimated taxable income for Cornerstone Properties Inc. (including
acquired Building) for the year ended December 31, 1994 is approximately
the same as Pro Forma net income reported on the Pro Forma Condensed
Statement of Income (Unaudited).
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO ESTIMATES OF TAXABLE OPERATING INCOME AND FUNDS
GENERATED FROM OPERATIONS FOR 125 SUMMER STREET.
Basis of Presentation
1. Estimated depreciation was based upon an allocation of the purchase
price to land (20%) and building (80%) with the depreciation being
taken over a 35 year life using the straight line method.
2. No income taxes have been provided because Cornerstone Properties
Inc. is taxed as a real estate investment trust under the provisions
of the Internal Revenue Code. Accordingly, Cornerstone does not pay
Federal income tax whenever income distributed to shareholders is
equal to at least 95% of real estate investment trust taxable income
and certain other conditions are met.
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet at
September 30, 1995 reflects the acquisition of 125 Summer Street as if the
transaction had occurred on that date.
The pro forma condensed consolidated statements of income for the year
ended December 31, 1994 and the nine months ended September 30, 1995 assume the
acquisition of this Building as if it had occurred on January 1, 1994. This pro
forma information is based on the historical statements of Cornerstone after
giving effect to the acquisition of this Building.
The unaudited pro forma condensed consolidated financial statements have
been prepared by Cornerstone Properties Inc. management. The unaudited pro forma
condensed consolidated statements of income may not be indicative of the results
that would have actually occurred had the acquisition been made on the date
indicated. Also, they may not be indicative of the results that may be achieved
in the future. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with Cornerstone's audited statements
as of December 31, 1994 and for the year then ended (which are contained in
Cornerstone's Form 10-K for the year ended December 31, 1994) and the unaudited
financial statements as of September 30, 1995 and for the nine months then ended
(which are contained in Cornerstone's Form 10-Q for the period ended September
30, 1995) and the accompanying notes.
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(In thousands, except for per share amounts)
AS HISTORICAL PRO FORMA
REPORTED ACQUISITION(8) ADJUSTMENTS(2) PRO FORMA
OFFICE AND PARKING
RENTALS $ 64,211 $ 12,340 $ 76,551
INTEREST AND OTHER
INCOME 2,707 100 (776)(6) 2,031
-------------------------------------------------
66,918 12,440 (776) 78,582
OPERATING EXPENSES 22,196 4,259 26,455
INTEREST EXPENSE 22,033 1,134(3,4) 23,167
DEPRECIATION EXPENSE 16,787 1,806(3,5) 18,593
OTHER EXPENSES 3,515 3,515
-------------------------------------------------
64,531 4,259 2,940 71,730
MINORITY INTEREST 2,557 2,557
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM (170) 8,181 (3,716) 4,295
EXTRAORDINARY LOSS (4,527) (4,527)
---------------------------------------------------
NET (LOSS) INCOME $ (4,697) $ 8,181 $ (3,716) $ (232)
==================================================
(LOSS) INCOME
BEFORE EXTRAORDINARY
ITEM PER SHARE(7) $ (0.05) $ 0.19
NET LOSS PER SHARE(7) $ (0.36) $ (0.04)
AVERAGE SHARES
OUTSTANDING(7) 14,561 19,566
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(In thousands, except for per share amounts)
AS HISTORICAL PRO FORMA
REPORTED ACQUISITION ADJUSTMENTS(2) PRO FORMA
OFFICE AND PARKING
RENTALS $ 83,557 $ 13,122 $ 96,679
INTEREST AND OTHER
INCOME 2,017 108 2,125
-------------------------------------------------
85,574 13,230 98,804
OPERATING EXPENSES 29,991 5,541 35,532
INTEREST EXPENSE 30,792 1,512(3,4) 32,304
DEPRECIATION EXPENSE 23,432 2,408(3,5) 25,840
OTHER EXPENSES 3,869 3,869
-------------------------------------------------
88,084 5,541 3,920 97,545
MINORITY INTEREST 3,899 3,899
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM (6,409) 7,689 (3,920) (2,640)
EXTRAORDINARY LOSS (581) (581)
---------------------------------------------------
NET (LOSS) INCOME $ (6,990) $ 7,689 $ (3,920) $ (3,221)
==================================================
LOSS
BEFORE EXTRAORDINARY
ITEM PER SHARE(7) $ (0.48) $ (0.13)
NET LOSS PER SHARE(7) $ (0.53) $ (0.16)
AVERAGE SHARES
OUTSTANDING(7) 13,241 19,566
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(UNAUDITED)
(In Thousands)
PRO FORMA
AS REPORTED ADJUSTMENTS(1) PRO FORMA
ASSETS:
INVESTMENT PROPERTY $ 401,986 $ 105,300 $ 507,286
CASH, CASH EQUIVALENTS 87,976 (80,624) 7,352
TENANT AND NOTE RECEIVABLES 39,919 39,919
OTHER ASSETS 9,622 (4,584) 5,038
--------- --------- ---------
TOTAL ASSETS $ 539,503 $ 20,092 $ 559,595
========= ========= =========
LIABILITIES:
LONG-TERM DEBT $ 319,600 $ 20,000 $ 339,600
OTHER LIABILITIES 21,768 92 21,860
--------- --------- ---------
341,368 20,092 361,460
MINORITY INTEREST (6,664) (6,664)
SHAREHOLDERS' EQUITY 204,799 204,799
--------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 539,503 $ 20,092 $ 559,595
========= ========= =========
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Represents the acquisition of 125 Summer Street from cash obtained from a
common stock offering (See Note 7)) and a $20 million bridge loan.
Adjustments to other assets reflects the remittance of an earnest deposit
($5 million) and the acquisition of prepaid taxes ($416,000). The adjustment
to other liabilities reflects the assumption of security deposit
liabilities.
2. These adjustments to the Pro Forma Condensed Consolidated Statements of
Income (Unaudited) have the effect of reflecting the results for the year
ended December 31, 1994 and the nine months ended September 30, 1995 as if
the Building had been acquired on January 1, 1994.
3. Pro Forma Adjustments to the Pro Forma Condensed Consolidated Statement of
Income (Unaudited) for the year ended December 31, 1994 and the nine months
ended September 30, 1995 includes adjustments to interest and depreciation
expense to give effect of the acquisition of the Building as if it had been
acquired on January 1, 1994. (See Notes 4 and 5.)
4. Pro Forma Adjustments to the Pro Forma Condensed Consolidated Statements of
Income (Unaudited) for the year ended December 31, 1994 and the nine months
ended September 30, 1995 include interest expense for the borrowing of funds
to pay the purchase price of the acquisition. The interest rate used for
calculating the cost of borrowed funds for the year ended December 31, 1994
and the nine months ended September 30, 1995 was 7.56%.
5. Estimated depreciation was based upon a preliminary allocation of the
purchase price to land (20%) and building (80%) with the depreciation being
taken over a 35 year life using the straight line method.
6. Represents interest income from the common stock proceeds (See Note 7) has
been eliminated for the nine months ended September 30, 1995. Had the common
stock proceeds been invested in 125 Summer Street at January 1, 1995, this
income resulting from commercial paper investment would not have been
earned.
7. On August 4, 1995, Cornerstone received $90,447,500 gross proceeds from the
placement of 6,325,000 new shares of common stock. These proceeds were used
for the acquisition of 125 Summer Street. In calculating pro forma earnings
per share for the Pro Forma Condensed Statements of Income (Unaudited) for
the year ended December 31, 1994 and the nine months ended September 30,
1995, the 6,325,000 of new shares are weighted as if they were outstanding
for the full periods, respectively. Additionally, for the nine months ended
September 30, 1995, the dividends in arrears applicable to preferred stock
have been deducted from the net loss in computing earnings per share.
8. Represents the actual unaudited amounts recorded by the previous owner for
the nine months ended September 30, 1995.
