SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 1
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February, 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.)
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 amends Item 7 of its Current Report on Form 8-K, dated
January 29, 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 125 Summer Street, Tower 56, One Lincoln Centre, the Frick
Building, and 527 Madison Avenue.
(a) Financial Statements
527 Madison Avenue
------------------
1. Report of Ernst & Young LLP, Independent Auditors, dated February
14, 1997.
2. Statement of Revenues and Certain Expenses for the year ended
December 31, 1996.
(b) Pro forma condensed consolidated financial statements (unaudited):
1. Pro forma condensed consolidated statement of operations for the
year ended December 31, 1995 and the nine months ended September
30, 1996.
2. Pro forma condensed consolidated balance sheet as of September
30, 1996.
3. Notes to pro forma condensed consolidated financial statements.
<PAGE>
Statement of Revenues and
Certain Expenses
527 Madison Avenue
Year ended December 31, 1996
with Report of Independent Auditors
<PAGE>
527 Madison Avenue
Statement of Revenues and Certain Expenses
December 31, 1996
Contents
Report of Independent Auditors.........................................1
Statement of Revenues and Certain Expenses.............................2
Notes to Statement of Revenues and Certain Expenses....................3
<PAGE>
Report of Independent Auditors
To the Board of Directors
Cornerstone Properties Inc.
We have audited the Statement of Revenues and Certain Expenses of 527 Madison
Avenue (the Property) as described in Note 2 for the year ended December 31,
1996. The Statement of Revenues and Certain Expenses is the responsibility of
the Property's management. Our responsibility is to express an opinion on the
Statement of Revenues and Certain Expenses 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 Statement of Revenues and Certain Expenses is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement of Revenues and Certain
Expenses. An audit also includes assessing the accounting principles used and
estimates made by management, as well as evaluating the overall presentation of
the Statement of Revenues and Certain Expenses. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement of Revenues and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission described in Note 2 and is not intended to be a complete
presentation of the Property's revenues and expenses.
In our opinion, the Statement of Revenues and Certain Expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses as
described in Note 2 for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
The accompanying statement of revenue and certain expenses for 1995 was not
audited by us and, accordingly, we do not express an opinion on it.
Ernst & Young LLP
February 14, 1997
<PAGE>
527 Madison Avenue
Statement of Revenues and Certain Expenses
Years ended December 31
1996 1995
------------------------------
(Unaudited)
Revenues
Rental income - (Note 3) $10,263,480 $10,874,330
Miscellaneous income 1,541,540 1,349,152
------------------------------
11,805,020 12,223,482
------------------------------
Certain Expenses - (Note 3)
Cleaning 707,294 801,015
Building repairs and maintenance 130,067 108,791
HVAC repairs and maintenance 212,472 223,350
Elevators and escalators repairs and 113,115 130,151
maintenance
Plumbing and electrical repairs and 19,397 8,887
maintenance
Energy 180,909 169,361
Amenities 68,822 63,373
Security and life safety 357,537 346,093
Insurance 45,508 54,989
Direct management expense 150,634 146,364
Professional fees 38,649 10,098
Administrative reimbursement 308,758 303,814
Property taxes 2,184,160 2,213,851
Marketing 994 1,972
Loss on lease terminations 86,540 -
Other 2,130 5,242
------------------------------
4,606,986 4,587,351
------------------------------
Revenues in excess of certain expenses $ 7,198,034 $ 7,636,131
==============================
See accompanying notes.
<PAGE>
527 Madison Avenue
Notes to the Statement of Revenues and Certain Expenses
December 31, 1996
1. Business
The accompanying Statement of Revenue and Certain Expenses relates to the
operations of 527 Madison Avenue (the Property). The Property was acquired on
February 14, 1997 by Cornerstone Properties Inc. ("Cornerstone"). The Property
was previously owned by 527 Madison Holdings, a New York general partnership.
2. Basis of Presentation
The accompanying Statement of Revenues and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission. Accordingly, the financial statement excludes certain
expenses that may not be comparable to those expected to be incurred by
Cornerstone in the proposed future operations of the aforementioned property.
Items excluded consist of depreciation, amortization, interest and certain
non-operating expenses.
The preparation of the Statement of the Revenues and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the Statement
of Revenues and Certain Expenses and accompanying notes. Actual results could
differ from those estimates.
3. Rental Income
Rental income is recognized on a straight-line basis over the terms of the
related leases inclusive of free rent, if any, and lease step-ups. The leases
provide for the reimbursement of real estate taxes and in most cases, provide
for certain operating expenses in excess of base amounts. These reimbursements
and applicable costs have been reflected in the statement of operations as
revenues and expenses, respectively. For the years ended December 31, 1996 and
1995, approximately $545,317 and $(223,241) (unaudited) is netted with income as
a result of straight-lining of rents.
The following is a schedule by years of minimum future rentals on noncancellable
operating leases at December 31, 1996, exclusive of additional rental income
which will result from escalations:
1997 $10,220,943
1998 9,831,871
1999 8,864,571
2000 8,949,688
2001 8,136,645
Thereafter 17,125,302
===============
$63,129,020
===============
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
INFORMATION PURSUANT TO RULE 3-14 REGULATION S-X
------------------------------------------------
MANAGEMENT ASSESSMENT
Management's assessment of the Properties prior to acquisition includes,
but it 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 shareholders 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 funds generated from operations from
125 Summer Street, Tower 56, One Lincoln Centre, the Frick Building, and 527
Madison Avenue for the year ended December 31, 1995 based on the Statements of
Revenues and Certain Expenses and actual results. 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.
Funds Generated From Operations
For the year ended Decembe 31, 1995
-----------------------------------
125 Summer Street $10,908,000
Tower 56 2,865,000
One Lincoln Centre 4,272,000
Frick Building 2,496,000
527 Madison Avenue 7,636,000
-----------
Total $28,177,000
===========
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet as
of September 30, 1996 reflects the acquisition of One Lincoln Centre, the Frick
Building, and 527 Madison Avenue as if the transactions had occurred on that
date.
The pro forma condensed consolidated statements of operations for the year
ended December 31, 1995 and the nine months ended September 30, 1996 assume the
acquisition of 125 Summer Street, Tower 56, One Lincoln Centre, the Frick
Building, and 527 Madison Avenue as if they had occurred on January 1, 1995.
This pro forma information is based on the historical statements of Cornerstone
after giving effect to the acquisition of these Properties.
The unaudited pro forma condensed consolidated financial statements have
been prepared by Cornerstone Properties Inc. management. The unaudited pro forma
condensed consolidated statement of operations may not be indicative of the
results that would have actually occurred had the acquisitions been made on the
dates indicated. Also, it 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, 1995 and for the year then ended (which are contained in
Cornerstone's Form 10-K for the year ended December 31, 1995) and the unaudited
financial statements as of September 30, 1996 and for the nine months then ended
(which are contained in Cornerstone's Form 10-Q for the period ended September
30, 1996) and the accompanying notes.
<PAGE>
<TABLE>
Cornerstone Properties Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(Unaudited)
(In thousands, except for per share amounts)
<CAPTION>
One
125 Lincoln Frick 527 (1),(2),(3),(4),(5)
As Summer Tower 56 Centre Building Madison Pro Forma
Reported Acqu. Acqu. Acqu Acqu. Acqu. Adj. Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office and Parking Rentals $ 88,548 $ 13,651 $ 6,582 $ 6,789 $ 6,002 $ 12,223 $ -- $ 133,795
Interest and Other Income 3,839 109 7 -- 27 -- (54) 3,928
-------------------------------------------------------------------------------
Total Revenue 92,387 13,760 6,589 6,789 6,029 12,223 (54) 137,723
Operating Expenses 31,530 4,994 3,724 2,517 3,533 4,587 -- 50,885
Interest Expense 29,467 2,999 1,381 -- -- -- -- 33,847
Depreciation Expense 23,877 -- -- -- -- -- 5,944 29,821
Other Expenses 13,225 -- -- -- -- -- -- 13,225
------------------------------------------------------------------------------
Total Expenses 98,099 7,993 5,105 2,517 3,533 4,587 (5,998) 127,778
Minority Interest (3,417) -- -- -- -- -- -- (3,417)
(Loss) Income Before Extraordinary
Item (9,129) 5,767 1,484 4,272 2,496 7,636 (5,998) 6,528
Extraordinary Loss (4,445) -- -- -- -- -- -- (4,445)
-------------------------------------------------------------------------------
Net (Loss) Income $(13,574) $ 5,767 $ 1,484 $ 4,272 $ 2,496 $ 7,636 $(5,998) $ 2,083
===============================================================================
Preferred Dividends $ 1,449 $ 4,106 $ 2,184 $ 5,524 $ 13,263
Loss Before Extraordinary
Item per Share $ (0.66) $ (0.33)
Net Loss per Share $ (0.94) $ (0.55)
Weighted Shares Outstanding 15,910 3,425 1,118 20,453
<FN>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
Cornerstone Properties Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended September 30, 1996
(Unaudited)
(In thousands, except for per share amounts)
<CAPTION>
One
Lincoln Frick 527 (2),(3),(4),(5)
As Tower 56 Centre Building Madison Pro Forma
Reported Acqu. Acqu. Acqu Acqu Adj. Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C>
Office and Parking Rentals $80,687 $ - $ 4,702 $ 4,427 $8,854 $ - $ 98,670
Interest and Other Income 9,477 - - 6 - - 9,483
---------------------------------------------------------
Total Revenue 90,164 - 4,702 4,433 8,854 - 108,153
Operating Expenses 31,726 - 1,947 2,405 3,455 - 39,533
Interest Expense 23,715 - - - - - 23,715
Depreciation Expense 18,281 - - - - 2,497 20,778
Other Expenses 4,589 - - - - - 4,589
---------------------------------------------------------
Total Expenses 78,311 - 1,947 2,405 3,455 2,497 88,615
Minority Interest (1,017) - - - - - (1,017)
(Loss) Income Before
Extraordinary Item 10,836 - 2,755 2,028 5,399 (2,497) 18,521
Extraordinary Loss (3,786) - - - - - (3,786)
-------------------------------------------------------------
Net (Loss) Income $ 7,050 $ - $ 2,755 $ 2,028 $ 5,399 $ (2,497) $14,735
=============================================================
Preferred Dividends $ 2,625 $ 3,080 $ 1,638 $ 4,143 $11,486
Income Before Extraordinary
Item per Share $ 0.40 $ 0.35
Net Income per Share $ 0.22 $ 0.16
Weighted Shares Outstanding 20,344 20,344
<FN>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
<TABLE>
Cornerstone Properties Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 1996
(Unaudited)
(In thousands)
<CAPTION>
(2),(3),(4),(5)
Pro Forma
As Reported Adjustments Pro Forma
<S> <C> <C> <C>
Assets:
Investment Property $ 528,277 $ 144,718 $672,995
Cash and Cash Equivalents 19,519 - 19,519
Tenant and Note Receivables 41,091 - 41,091
Other Assets 12,711 - 12,711
--------------------------------
Total Assets $ 601,598 $ 144,718 $746,316
================================
Liabilities:
Long-Term Debt $ 400,405 $ - $400,405
Other Liabilities 27,819 - 27,819
---------------------------------
428,224 - 428,224
Minority Interest (16,899) - (16,899)
Redeemable Preferred Stock - 144,718 144,718
Shareholders' Equity 190,273 - 190,273
--------------------------------
Total Liabilities and
Shareholders' Equity $ 601,598 $144,718 $746,316
================================
<FN>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
(1) 125 SUMMER STREET
-----------------
For the pro forma condensed consolidated statement of operations as of
December 31, 1995, 125 Summer Street pro forma adjustments are based on the
following:
The $105,000,000 purchase price and related acquisition and stock
issuance costs were funded by issuing common shares at $14.30/shr and
by obtaining a $20,000,000 bridge loan.
Depreciation expense on the building has been calculated on a
straight-line basis over 40 years.
(2) TOWER 56 PRO FORMA NOTES
------------------------
Tower 56 was acquired through foreclosure on two mortgage notes which were
purchased on December 19, 1995. Accordingly, there were no pro forma adjustments
recorded in the pro forma condensed consolidated statement of operations for the
nine months ended September 30, 1996 or the pro forma condensed consolidated
balance sheet as of September 30, 1996 for Tower 56. Actual activity for these
dates has been reflected in the "As Reported" column in the respective
statements.
For the pro forma condensed consolidated statement of operations for the
year ended December 31, 1995, Tower 56 pro forma adjustments are based on the
following:
The $32,780,000 purchase price and related acquisition and stock issuance
costs were funded by issuing common shares at $14.30/shr and by obtaining
$18,000,000 in financing.
The interest rate on the $18,000,000 in financing is 7.67% with 30 year
principal amortization. $100,000 in finance costs are being amortized
over 7 years.
Depreciation expense on the building has been calculated on a
straight-line basis over 40 years.
Interest income from the mortgage notes for 1995 has been eliminated.
(3) ONE LINCOLN CENTRE PRO FORMA NOTES
----------------------------------
For the pro forma condensed consolidated financial statements, One Lincoln
Centre pro forma adjustments are based on the following:
The $49,950,000 purchase price and related acquisition and stock issuance
costs were funded by issuing 8% cumulative preferred stock.
Depreciation expense on the building has been calculated on a
straight-line basis over 40 years.
(4) FRICK BUILDING PRO FORMA NOTES
------------------------------
For the pro forma condensed consolidated financial statements, the Frick
Building pro forma adjustments are based on the following:
The $26,500,000 purchase price and related acquisition and stock issuance
costs were funded by issuing 8% cumulative preferred stock.
Depreciation expense on the building has been calculated on a
straight-line basis over 40 years.
(5) 527 MADISON PRO FORMA NOTES
---------------------------
For the pro forma condensed consolidated financial statements, 527 Madison
pro forma adjustments are based on the following:
The $67,000,000 purchase price and related acquisition costs were funded
by issuing 8% cumulative preferred stock.
Depreciation expense on the building has been calculated on a
straight-line basis over 40 years.
<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: February 24, 1997
By: /s/ Thomas P. Loftus
Thomas P. Loftus, Vice President and
Controller
(Principal Financial Officer)
Date: February 24, 1997
