SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 19, 1997
CORNERSTONE PROPERTIES INC.
(Exact name of registrant as specified in its charter)
Nevada 0-10421 74-2170858
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
Cornerstone Properties Inc.
Tower 56
126 East 56th Street
New York, NY 10022
(Address of principal executive offices)
(212) 605-7100
(Registrant's telephone number,
including area code)
The registrant hereby updates Item 7 of its Current Report on Form 8-K, dated
August 21, 1997, as set forth in the pages attached hereto.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
------------------------------------------------------------------
Included herewith are the following financial statements reflecting the
acquisition of One Ninety One Peachtree Tower, Market Square Office
Building, Five Hundred Boylston Street Office Building, Two Twenty Two
Berkeley Street Office Building, Charlotte Office Tower, 200 Galleria,
99 Canal Center, 11 Canal Center, Transpotomac Plaza, Building Five and
the Dearborn Land (the "Properties").
Condensed Consolidated Pro Forma Balance Sheet at September 30, 1997 F-1
Condensed Consolidated Pro Forma Statement of Operations for the nine
months ended September 30, 1997 F-2
Condensed Consolidated Pro Forma Statement of Operations for the year
ended December 31, 1996 F-3
Notes to Condensed Consolidated Pro Forma Financial Statements F-4
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
INFORMATION PURSUANT TO RULE 3-14 OF REGULATION S-X
MANAGEMENT ASSESSMENT
Management's assessment of the Properties 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 conducts engineering
and environmental studies. All factors, when viewed in their entirety, have met
management's acquisition criteria. Management is not aware of any material
factors relating to the acquisitions other than those discussed above.
ESTIMATES OF TAXABLE OPERATING INCOME AND
FUNDS GENERATED FROM OPERATIONS
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 stockholders is equal to at least 95% of real estate
investment trust taxable income and certain other conditions are met.
The following presents an estimate of cash generated from operations from
the Properties for the year ended December 31, 1996 based on the Combined
Statements of Revenues and Certain Operating Expenses. These estimated results
do not purport to present expected results of operations for the Properties in
the future and were prepared on the basis described in the accompanying notes
which should be read in conjunction herewith.
Cash Generated From Operations
For the year ended December 31, 1996
------------------------------------
Revenue in excess of
certain operating
expenses $85,006,000
Straight line rent
adjustment 3,849,000
-----------
Total $88,855,000
===========
<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.
CORNERSTONE PROPERTIES INC.
(Registrant)
By: /s/ John S. Moody.
John S. Moody, President
and Chief Executive Officer
Date: December 19, 1997
By: /s/ Thomas P. Loftus.
Thomas P. Loftus, Vice President
and Controller
(Principal Accounting Officer)
Date: December 19, 1997
By: /s/ Kevin P. Mahoney.
Kevin P. Mahoney, Vice President
and Treasurer
(Principal Financial Officer)
Date: December 19, 1997
<PAGE>
<TABLE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(Amounts in thousands)
(UNAUDITED)
<CAPTION>
(2)
Previously
Historical Reflected Pro Forma
Cornerstone Adjustments Cornerstone
-------------------------- -----------
<S> <C> <C> <C>
Assets
Real estate investments $ 875,714 $ 1,094,870 $ 1,970,584
Less: Accumulated depreciation 219,881 - 219,881
-------------------------- -----------
Real estate investments 655,833 1,094,870 1,750,703
Other assets 316,152 (199,382) 116,770
-------------------------- -----------
Total assets $ 971,985 $ 895,488 $ 1,867,473
========================== ===========
Liabilities
Long term debt $ 366,830 $ 250,000 $ 616,830
Other liabilities 84,528 67,548 152,076
-------------------------- -----------
Total liabilities 451,358 317,548 768,906
-------------------------- -----------
Minority interest (17,356) 30,940 13,584
Redeemable preferred stock - - -
Stockholders' investment 537,983 547,000 1,084,983
-------------------------- -----------
Total Liabilities and stockholders' investment $ 971,985 $ 895,488 $ 1,867,473
========================== ===========
<FN>
F-1
</FN>
</TABLE>
<PAGE>
<TABLE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Amounts in thousands, except per share data)
(UNAUDITED)
<CAPTION>
(3)
Recent Acquisition
(2) 3rd Qtr Update
Previously -----------------------
Historical Reflected Operations Equity in Pro Forma Pro Forma
Cornerstone Adjustments Activity Earnings Adjustments Cornerstone
<S> <C> <C> <C> <C> <C> <C>
Revenues
Office and parking rentals $ 103,237 $ 39,261 $ 27,507 $ (14,249) $ 90 (4) $ 155,846
Equity in earnings of joint ventures - 2,816 - 10,264 (9,313) (5) 3,767
Interest and other income 8,432 13,553 4,253 (425) 4,980 (6) 30,793
------------------------------------------------------------------------------
Total Revenues 111,669 55,630 31,760 (4,410) (4,243) 190,406
------------------------------------------------------------------------------
Expenses
Building operating expenses 40,246 16,471 9,888 (4,410) (112) (7) 62,083
Interest expense 22,395 11,037 - 5,720 (8) 39,152
Depreciation and amortization 20,865 5,728 - 2,793 (9) 29,386
General and administrative 5,134 250 - 125 5,509
------------------------------------------------------------------------------
Total Expenses 88,640 33,486 9,888 (4,410) 8,526 136,130
------------------------------------------------------------------------------
Other income (expenses)
Net gain (loss) on interest rate swap 99 - - - 99
Minority Interest (1,408) (1,000) - (609) (10) (3,017)
------------------------------------- --------------------------
Income (loss) before extraordinary loss $ 21,720 $ 21,144 $ 21,872 $ (13,378) $ 51,358
===================================== ===========================
Extraordinary Loss (54) - - - (54)
Net Income (Loss) $ 21,666 $ 21,144 $ 21,872 $ (13,378) $ 51,304
===================================== ===========================
Preferred Dividends 9,285 (6,660) - 2,625
Income available for Common Stockholders $ 12,381 $ 27,804 $ 21,872 $ (13,378) $ 48,679
===================================== ===========================
Income Before Extraordinary
Loss per Share $ 0.37 $ 0.59
========= ========
Net Income per Share $ 0.37 $ 0.59
========= ========
Weighted Shares Outstanding 33,494 82,792
========= ========
<FN>
F-2
</FN>
</TABLE>
<PAGE>
<TABLE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Amounts in thousands, except per share data)
(UNAUDITED)
<CAPTION>
(1) (2)
Previously Previously
Historical Reflected Reflected Pro Forma
Cornerstone* Adjustment Adjustment Cornerstone
--------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Office and parking rentals $ 111,494 $ 22,098 $ 74,359 $ 207,951
Equity in earnings of joint ventures - - 6,832 6,832
Interest and other income 5,414 (374) 32,901 37,941
-------------------------------------------------------
Total Revenues 116,908 21,724 114,092 252,724
-------------------------------------------------------
Expenses
Building operating expenses 44,188 9,505 30,353 84,046
Interest expense 31,735 (1,625) 22,881 52,991
Depreciation and amortization 24,316 3,028 11,171 38,515
General and administrative 6,407 - 500 6,907
-------------------------------------------------------
Total Expenses 106,646 10,908 64,905 182,459
-------------------------------------------------------
Other income (expenses)
Net gain (loss) on interest rate swap 4,278 - - 4,278
Minority Interest (1,519) - (1,986) (3,505)
-------------------------------------------------------
Income (loss) before extraordinary loss $ 13,021 $ 10,816 $ 47,201 $ 71,038
=======================================================
Extraordinary Loss (3,925) - - (3,925)
Net Income (Loss) $ 9,096 $ 10,816 $ 47,201 $ 67,113
=======================================================
Preferred Dividends 5,153 11,667 (13,320) 3,500
Income available for Common Stockholders 3,943 $ (851) $ 60,521 $ 63,613
=======================================================
Income Before Extraordinary
Loss per Share $ 0.39 $ 0.82
========== ==========
Net Income per Share $ 0.19 $ 0.77
========== ==========
Weighted Shares Outstanding 20,411 14,000 47,771 82,182
========== ==========
<FN>
* Certain prior period amounts have been reclassified to conform to the September 30, 1997
financial statement presentation.
F-3
</FN>
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated pro forma statements of operations are
presented as if the Property Acquisition, the Company's offering of Common Stock
in April 1997, the sale and conversion of Cornerstone's 8% Preferred Stock and
8% Preferred Stock, Series A, the Company's repayment of a $32.5 million term
loan from Deutsche Bank and the acquisition of two properties in New York City,
the property in Oakbrook Terrace, Illinois and the property in Pittsburgh had
occurred as of January 1, 1996. The unaudited condensed consolidated pro forma
balance sheet is presented as if the Property Acquisition had occurred at
September 30, 1997. The pro forma condensed consolidated financial statements
are not necessarily indicative of results of operations or the consolidated
financial position that would have resulted had the aforementioned transactions
been consummated at the dates indicated.
(1)Represents the adjustments for Cornerstone's Offering of Common Stock in
April 1997, the sale of the Company's 8% Cumulative Convertible Preferred
Stock and 8% Cumulative Convertible Preferred Stock, Series A, the Company's
repayment of a $32.5 million term loan from Deutsche Bank and the acquisition
of One Lincoln Centre, The Frick Building and 527 Madison Avenue previously
reflected in Prospectus Supplement dated April 15, 1997.
(2)Represents the adjustments for the Property Acquisition previously reflected
in the Proxy Statement dated September 23, 1997.
(3)Represents the third quarter 1997 income statement activity and equity in
earnings of the Property Acquisition.
(4)Represents the third quarter 1997 straight line rent adjustment for the
consolidated properties of the Property Acquisition.
(5)Represents the third quarter 1997 straight line rent for the non
consolidated properties ($969,500), the third quarter 1997 depreciation of
the non consolidated properties (-$2,487,500) and the third quarter 1997
mortgage interest expense on the non consolidated properties (-$7,794,500)
(6)Represents the third quarter 1997 mortgage interest income from the non
consolidated properties ($7,794,500) and the third quarter 1997 interest
earned on the Company's Offering of Common Stock in April 1997 (-$2,815,000).
(7)Represents the third quarter 1997 asset management fees paid by certain
Property Acquisition properties to the Company, which are eliminated.
(8)Represents the third quarter 1997 interest expense related to the Property
Acquisition ($5,720,250).
(9)Represents the third quarter 1997 depreciation adjustment for the
consolidated properties of the Property Acquisition.
(10) Represents the third quarter 1997 Property Acquisition minority interest in
net operating income, straight line rent and depreciation.
F-4
