================================================================================
FORM 10-Q
Securities and Exchange Commission
Washington, DC 20549
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1998
or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______________
to _______________
Commission File Number 0-10421
-----------
CORNERSTONE PROPERTIES INC.
(Exact name of Registrant as specified in its Charter)
Nevada 74-2170858
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation and organization)
126 East 56th Street
New York, New York
(Address of principal executive offices)
10022
(Zip Code)
(212) 605-7100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of Each Exchange on which Registered:
- -------------------- ------------------------------------------
Common Stock, no par value New York Stock Exchange
Dusseldorf Stock Exchange
Frankfurt Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Aggregate market value of registrant's voting Common Stock held by
non-affiliates as of May 13, 1998: $1,838,668,277.
Number of shares of Common Stock outstanding as of May 13, 1998: 101,443,767.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share amounts)
March 31, December 31,
1998 1997
---------- -----------
(Unaudited)
ASSETS
Investments, at cost:
Land $ 271,540 $ 260,542
Buildings, leasehold interests and improvements 1,687,673 1,559,085
Mortgage notes receivable, inclusive of $12,741
and $13,065 of unamortized premium 242,093 240,253
Equity in real estate joint venture 4,140 --
Deferred lease costs 131,180 127,645
---------- -----------
2,336,626 2,187,525
Less: Accumulated depreciation and amortization 240,572 229,652
---------- -----------
Total investments 2,096,054 1,957,873
Cash and cash equivalents 55,196 24,730
Restricted cash 5,524 1,903
Other deferred costs, net of accumulated
amortization of $2,355 and $1,998 5,765 5,728
Deferred tenant receivables 41,636 38,531
Tenant and other receivables, net 9,213 7,584
Notes receivable 1,287 1,652
Other assets 8,403 13,480
---------- -----------
Total Assets $2,223,078 $ 2,051,481
========== ===========
LIABILITIES
Long-term debt, inclusive of $10,878 and
$11,209 of unamortized premium $ 785,399 $ 706,178
Credit facility -- 187,000
Accrued interest payable 6,341 4,134
Accrued real estate taxes payable 18,956 13,401
Accounts payable and accrued expenses 17,051 18,363
Unearned revenue and other liabilities 15,475 10,986
---------- -----------
Total Liabilities 843,222 940,062
========== ===========
MINORITY INTEREST
Minority Interest in operating partnership 10,319 --
Minority Interest in real estate joint ventures 15,115 15,420
---------- -----------
Total Minority Interest 25,434 15,420
Redeemable Preferred Stock; 344,828 shares
authorized; 0 shares issued and outstanding -- --
---------- -----------
STOCKHOLDERS' INVESTMENT
7% Cumulative Convertible Preferred Stock,
$16.50 stated value; 15,000,000 shares authorized;
3,030,303 shares issued and outstanding 50,000 50,000
Common stock, no par value; 250,000,000 shares
authorized; (1998-98,015,196; 1997-83,191,819)
shares issued and outstanding
Paid-in capital 1,306,954 1,048,187
Deferred compensation (2,532) (2,188)
---------- -----------
Total Stockholders' Investment 1,354,422 1,095,999
---------- -----------
Total Liabilities and Stockholders' Investment $2,223,078 $ 2,051,481
========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
Page 2 of 22
<PAGE>
Item 1. Financial Statements (continued)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
-------- --------
Revenues
Office and parking rentals $ 75,183 $ 33,478
Equity in loss of real estate joint venture (925) --
Interest and other income 7,298 1,509
-------- --------
Total Revenues 81,556 34,987
-------- --------
Expenses
Building operating expenses 17,089 7,375
Real estate taxes 11,177 5,663
Interest expense 15,915 7,637
Depreciation and amortization 10,645 6,662
General and administrative 2,586 1,637
-------- --------
Total Expenses 57,412 28,974
-------- --------
24,144 6,013
-------- --------
Other income (expenses)
Loss on sale of land (212) --
Minority interest (1,178) (476)
Net gain on interest rate swaps -- 99
-------- --------
Income before extraordinary item 22,754 5,636
Extraordinary loss -- (26)
-------- --------
Net income $ 22,754 $ 5,610
======== ========
Income applicable to preferred stock $ (875) $ (4,205)
======== ========
Net income applicable to common stock $ 21,879 $ 1,405
======== ========
Income before extraordinary item per common share $ 0.24 $ 0.07
======== ========
Extraordinary loss per common share $ -- $ --
======== ========
Basic net income per common share $ 0.24 $ 0.07
======== ========
Diluted net income per common share $ 0.23 $ 0.07
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
Page 3 of 22
<PAGE>
Item 1. Financial Statements (continued)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,754 $ 5,610
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,689 6,780
Deferred compensation amortization 233 147
Share of net loss in real estate joint venture 925 --
Net gain on interest rate swap -- (99)
Extraordinary loss -- 26
Unbilled rental revenue (2,950) (389)
Increase in accrued interest payable 2,207 510
Minority interest share of income 1,178 476
Loss on sale of land 212 --
Decrease (increase) in tenant and other receivables
and other assets 1,157 (4,672)
Increase in accounts payable, accrued expenses
and other liabilities 8,024 4,101
--------- ---------
Total adjustments 21,675 6,880
--------- ---------
Net cash provided by operating activities 44,429 12,490
--------- ---------
Cash flows from investing activities:
Additions to investment property (140,179) (69,923)
Repayment of notes receivable 365 220
Investments in and advances to real estate joint ventures (5,065) --
Proceeds from land sale 18,790 --
--------- ---------
Net cash used in investing activities (126,089) (69,703)
--------- ---------
Cash flows from financing activities:
Proceeds from common stock offering 262,344 --
Borrowings under mortgage loans 80,000 --
Repayments under credit facility (187,000) --
Repayment of term loan -- (32,500)
Repayments under mortgage loans (448) (271)
Proceeds from dividend reinvestment plan 2,010 3,717
Net payments for swap terminations and prepayment costs -- (188)
Increase in restricted cash (3,621) (2,849)
Stock and debt issuance costs (14,516) (975)
Distributions to minority partners (1,593) (418)
Distributions to preferred stockholders -- (3,330)
Distributions to common stockholders (25,050) (12,366)
--------- ---------
Net cash provided by (used in) financing activities 112,126 (49,180)
--------- ---------
Increase (decrease) in cash and cash equivalents 30,466 (106,393)
Cash and cash equivalents, beginning of period 24,730 114,803
--------- ---------
Cash and cash equivalents, end of period $ 55,196 $ 8,410
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
Page 4 of 22
<PAGE>
Item 1. Financial Statements (continued)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. NATURE OF COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of the Company's Business
Cornerstone Properties Inc. is a self-advised equity real estate
investment trust ("REIT"). On January 20, 1998, Cornerstone Properties Inc.
formed Cornerstone Properties Limited Partnership, an umbrella partnership REIT
("UPREIT" or "Operating Partnership") in which it has the sole general
partnership and limited partnership interests. As part of the UPREIT formation,
substantially all of Cornerstone Properties Inc.'s interests in the Properties
were transferred to the Operating Partnership, a Delaware limited partnership.
Cornerstone Properties Inc. owns directly or indirectly (through its
wholly-owned REIT subsidiary, CORPRO Real Estate Management, Inc.) 99.17% of the
outstanding units of partnership interest ("UPREIT units") in the Operating
Partnership (excluding certain preferred units owned by Cornerstone Properties
Inc.). Cornerstone Properties Inc. and the Operating Partnership are
collectively referred to as "Cornerstone" or the "Company". The Company owns
interests in 19 Class A office properties ("Properties") encompassing
approximately 11 million rentable square feet.
General
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. In
the opinion of management of the Company, all adjustments, consisting only of
normal recurring accruals, necessary to summarize fairly the unaudited results
of operations for the three month period presented have been included. Results
for the three months ended March 31, 1998 are not necessarily indicative of
results which may be expected for any other interim periods or for the year as a
whole. It is suggested that these condensed consolidated financial statements be
read in conjunction with the audited financial statements and notes thereto
included in the Company's latest annual report on Form 10-K.
Principles of Consolidation
The accompanying financial statements include the accounts of Cornerstone,
its wholly-owned qualified REIT subsidiary and controlled partnerships. NWC
Limited Partnership ("NWC"), Third and University Limited Partnership ("Third
Partnership"), Two Twenty Two Berkeley Venture ("222 Berkeley"), Five Hundred
Boylston West Venture ("500 Boylston") and One Ninety One Peachtree Associates
("191 Peachtree") have been consolidated because Cornerstone has a majority
interest in the economic benefits and is or has the right to become managing
general partner at its sole discretion. All significant intercompany balances
and transactions have been eliminated in consolidation.
Real Estate Held for Sale
Included in Investments is the Frick Building located in Pittsburgh, PA,
which was held for sale by the Company as of January 1, 1998. The property is
valued at approximately $27.4 million, which is reflected at the lower of the
carrying amount or fair value less cost to sell.
Page 5 of 22
<PAGE>
Reclassifications
Certain prior period amounts have been reclassified to conform to the
March 31, 1998 financial statement presentation.
Minority Interest
Minority Interest in operating partnership relates to the interest in the
Operating Partnership that is not owned by the Company, which currently amounts
to .83%. Income is allocated to the minority interest based on the weighted
average percentage ownership through the year. Persons contributing assets to
the Operating Partnership received UPREIT Units. The Operating Partnership will,
at the request of a Unitholder, be obligated to redeem each UPREIT Unit held by
such Unitholder for, at the option of the Company, (i) one share of the
Company's common stock (the "Common Stock") or (ii) cash equal to the fair
market value of one share of Common Stock at the time of redemption. Such
redemptions will cause the Company's percentage ownership in the Operating
Partnership to increase. As of March 31, 1998, the number of issued and
outstanding UPREIT Units held by Unitholders other than the Company was 822,794
(.83%) and as of such date, no UPREIT Units have been exchanged for shares of
Common Stock.
Minority Interest in real estate joint ventures represents the Company's
partner's capital account balances in NWC, Third Partnership, 222 Berkeley, 500
Boylston and 191 Peachtree. Debit balances in certain of these capital accounts
originated through special cash distributions in excess of the partner's share
of income in accordance with certain provisions of the respective partnership
agreements. Realizability of the debit balances is continually monitored by
analyzing pro forma sales proceeds calculations, whose terms are specified in
the respective partnership agreements.
Recently Issued Accounting Standards
During 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5") and Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"), which are effective for fiscal years
beginning after December 15, 1998. In addition, the Emerging Issues Task Force
of the Financial Accounting Standards Board released Issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions"
("EITF 97-11").
SOP 98-5 requires that certain costs incurred in conjunction with start-up
activities should be expensed. SOP 98-1 provides guidance on whether the costs
of computer software developed or obtained for internal use should be
capitalized or expensed. EITF 97-11 requires that the internal pre-acquisition
costs of identifying and acquiring operating property be expensed as incurred.
Management believes that, when adopted, SOP 98-5 and SOP 98-1 will not
have a significant impact on the Company's financial statements. EITF 97-11 was
adopted during the first quarter of fiscal 1998 and did not have a material
impact on the Company's financial statements.
During the first quarter of 1998, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). The adoption of SFAS 130 did not
have a significant impact on the Company's financial statements.
Page 6 of 22
<PAGE>
Estimates and Risks
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates and assumptions are related to
the recoverability and depreciable lives of investment property and the
recoverability of deferred tenant receivables. Actual results could differ from
those estimates.
In the ordinary course of business, the Company is in the process of
acquiring new accounting and property management software that will eliminate
year 2000 software concerns at the corporate level. The new software is expected
to be installed by the fourth quarter of 1998. Management is in the process of
completing a survey with all of its property managers to make sure there are no
year 2000 issues at any of the property management firms that manage its
Properties. Currently, Cornerstone is not aware of any year 2000 issues that
would have a material effect on the financial position or results of operations
of the Company.
2. PROPERTIES
The following table summarizes Cornerstone's interest in real estate
investments at March 31, 1998:
<TABLE>
<CAPTION>
Completed/ Net Rentable Ownership
Property Location Acquired square feet % Leased Interest Notes
- -------- -------- -------- ----------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
One Norwest Center ..... Denver, Colorado 1983 1,188,000 99% 100%
Norwest Center ......... Minneapolis, Minnesota 1988 1,118,000 98% 50% A
Washington Mutual
Tower ................ Seattle, Washington 1988 1,155,000 99% 50% B
125 Summer Street ...... Boston, Massachusetts 1989/1995 464,000 99% 100%
Tower 56 ............... New York, New York 1983/1996 162,000 100% 100% C
One Lincoln Centre ..... Oakbrook Terrace, Illinois 1986/1996 297,000 96% 100%
The Frick Building ..... Pittsburgh, Pennsylvania 1902/1996 341,000 89% 100%
527 Madison Avenue ..... New York, New York 1986/1997 216,000 100% 100%
191 Peachtree Street ... Atlanta, Georgia 1991/1997 1,221,000 96% 80% D,E
Market Square .......... Washington, D.C. 1990/1997 689,000 96% 59% F
500 Boylston Street .... Boston, Massachusetts 1988/1997 715,000 100% 91.5% G
222 Berkeley Street .... Boston, Massachusetts 1991/1997 531,000 100% 91.5% G
Charlotte Plaza ........ Charlotte, North Carolina 1982/1997 613,000 98% 100%
200 Galleria ........... Atlanta, Georgia 1985/1997 433,000 95% 100%
11 Canal Center ........ Alexandria, Virginia 1986/1997 70,000 97% 100%
99 Canal Center ........ Alexandria, Virginia 1986/1997 138,000 99% 100%
TransPotomac Plaza 5 ... Alexandria, Virginia 1983/1997 96,000 89% 100%
Sixty State Street ..... Boston, Massachusetts 1979/1997 823,000 98% 100% H,I
Corporate 500
Centre ............... Deerfield, Illinois 1986-90/1998 679,000 98% 100% J
</TABLE>
- --------
(A) While the Company's stated interest in the partnership that owns Norwest
Center is 50%, its economic interest in the Property is significantly
larger due to priority distributions it receives on its invested capital
base. For the three months ended March 31, 1998, the Company's share of
earnings and cash distributions from the partnership that owns Norwest
Center was 81.5%.
(B) While the Company's stated interest in the partnership that owns
Washington Mutual Tower is 50%, its economic interest in the Property is
significantly larger due to priority distributions it receives on its
invested capital base. For the three months ended March 31, 1998, the
Company received 100% of the cash distributions from the partnership that
owns Washington Mutual Tower.
Page 7 of 22
<PAGE>
(C) On January 5, 1998, the Company purchased the remaining participation
rights in the cash flow and residual value of Tower 56 from the former
participants for 307,692 shares of Common Stock. All cash flow and the
residual value of Tower 56 will now inure to the Company.
(D) While the Company's stated interest in the partnership that owns 191
Peachtree Street is 80%, its economic interest is significantly larger
because it has acquired the first mortgage note on the Property in the
amount of $145 million, which earns interest at 9.375% and will receive a
priority distribution on its acquired capital base. In addition, in 1997,
the partner in the transaction, CH Associates, Ltd., received an annual
incentive distribution of $250,000, which it will continue to receive
under the partnership agreement through February 28, 2000, with the
Company receiving the remainder of the cash flow of the Property.
(E) The partnership that owns 191 Peachtree Street has a ground lease
agreement for a portion of the land upon which the project has been
constructed. The agreement requires annual payments of $5,000 through
January 31, 1998, $45,000 through January 31, 2002 and $75,000 through
January 31, 2008. Thereafter, the annual rent increases $2,500 per year
until the expiration date of January 31, 2087. The partnership records
ground rental expense relating to this agreement on a straight-line basis.
The ground lease is renewable for an additional 99 years.
(F) In January 1998, the Company acquired partnership interests with a stated
interest of approximately 59% in the partnerships that own Market Square,
with the option to purchase an additional 1%. The Company's economic
interest is significantly larger because it has acquired the first
mortgage note on the Property in the amount of $181 million, which earns
interest at 9.75% and will receive a priority distribution on its acquired
capital base. In addition, the Company acquired a "buffer loan", with
accrued principal and interest of $46.2 million, which accrues interest at
a rate of 11% per annum and is payable from cash flow, refinancing or
sales proceeds from Market Square in excess of the first mortgage. During
the three months ended March 31, 1998, the Company received 100% of the
cash flow from the Property.
(G) Distributions of cash flow and sales and refinancing proceeds are shared
in proportion to the Company's 91.5% partnership interest and Hines
Interests Limited Partnership's and/or its affiliates' ("Hines") 8.5%
partnership interest.
(H) On December 31, 1997, Cornerstone purchased the second mortgage on Sixty
State Street located in the heart of Boston's Central Business District.
The mortgage is a cash flow mortgage through which all the economic
benefits/risks (subject to the first mortgage) will inure to the Company.
The Company will control all major decisions regarding management and
leasing. The total purchase price for the second mortgage was $131.5
million. The $78.4 million first mortgage on the Property has been
recorded by the Company as an $89.6 million liability due to its
above-market interest rate. Cornerstone will account for the transaction
as an equity investment in real estate.
(I) The second mortgage, which the Company holds, relates only to the
improvements on Sixty State Street in Boston. The ground under Sixty State
Street is leased to the leasehold owner, Marshall Field, through December
28, 2067. The lease payments on the ground lease are $398,896 per annum
throughout the term.
(J) On January 28, 1998, the Company purchased Corporate 500 Centre in
Deerfield, Illinois. Constructed between 1986 and 1990, Corporate 500
Centre consists of four Class A office buildings, comprising approximately
680,000 rentable square feet. The total purchase price of the Property was
approximately $150 million, approximately $15 million of which was paid in
UPREIT Units priced at $18.50 per unit. The Company financed a portion of
the costs to acquire the Property with an $80 million mortgage loan from
Bankers Trust Company at an interest rate of LIBOR plus 100 basis points.
The mortgage loan will mature on July 20, 2002. The Company has also
entered into an interest rate swap agreement with Bankers Trust Company
that has effectively fixed the interest rate on the mortgage loan at
6.63%. This swap is considered a hedge for federal income tax purposes.
Page 8 of 22
<PAGE>
On March 31, 1998, the Dearborn Land, an undeveloped parcel of land in Chicago
that was acquired in October 1997 along with nine Class A office properties from
Stichting Pensioenfonds Voor de Gezondheid Geestelijke en Maatschappelijke
Belangen ("PGGM") and Dutch Institutional Holding Company, Inc. ("DIHC"), was
sold for gross proceeds of approximately $18,790,000, resulting in a loss of
$212,228.
3. EQUITY IN REAL ESTATE JOINT VENTURE
During January 1998, the Company purchased a 99% interest in Market Square
Development Investors ("MSDI"). MSDI owns an 85.71% interest in Market Square
Associates ("MSA"), which owns a 70% interest in Avenue Associates Limited
Partnership ("AALP"). AALP owns and operates Market Square. The Company's
investment is accounted for under the equity method. The following table
provides summary level balance sheet and income and expense information as of
March 31, 1998 and for the three months ended March 31, 1998, respectively, for
the MSA entity (in thousands):
1998
--------
Total Assets, primarily investments in real estate $175,431
Total Liabilities, primarily notes payable 232,402
Revenues, primarily office and parking rentals 6,935
Net Loss (2,111)
The amount recorded as equity in loss of real estate joint venture
includes the net loss of MSA from January 30, 1998 through March 31, 1998, plus
adjustments for straight-line rent and interest expense.
4. LONG-TERM DEBT
The following table sets forth certain information regarding the
consolidated debt obligations of the Company as of March 31, 1998, including
mortgage obligations relating to the Properties. All of this debt, with the
exception of the Convertible Promissory Note due 2001, is nonrecourse to the
Company. However, notwithstanding the nonrecourse indebtedness, the lender may
have the right to recover deficiencies from the Company in certain
circumstances, including fraud, misappropriation of funds and environmental
liabilities.
<TABLE>
<CAPTION>
Maturity Prepayment
Property Amortization Interest Rate Date Provisions 3/31/98 12/31/97
- -------- ------------ ------------- ---- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Convertible Promissory
Note due 2001(A) .......... Interest only 8.11% max(B) Jan-2001 Not prepayable $ 12,926,000 $ 12,926,000
One Norwest Center .......... 30 year 7.50 Aug-2001 (C) 96,538,000 96,780,000
Norwest Center .............. Interest only 8.74 Dec-2005 Not prepayable 110,000,000 110,000,000
Washington Mutual Tower ..... Interest only 7.53 Nov-2005 (D) 79,100,000 79,100,000
125 Summer Street ........... Interest only(E) 7.20 Jan-2003 (F) 50,000,000 50,000,000
Tower 56 .................... 30 year 7.67 May-2003 (G) 17,693,000 17,742,000
TransPotomac Plaza 5 and
Charlotte Plaza(H) ........ Interest only 7.28 Oct-2000 Not prepayable 65,000,000 65,000,000
527 Madison Avenue and
One Lincoln Centre(H) ..... Interest only 7.47 Oct-2004 Not prepayable 65,000,000 65,000,000
Market Square(I) and 200
Galleria(H) ............... Interest only 7.54 Oct-2007 Not prepayable 120,000,000 120,000,000
Sixty State Street(J) ....... 30 year 6.84 Jan-2005 (K) 89,142,000 89,630,000
Corporate 500 Centre ........ Interest only 6.63(L) Jul-2002 Prepayable 80,000,000 --
--------------------------
$785,399,000 $706,178,000
</TABLE>
- ------------
(A) The lender, Hines, has the right to convert the note into Common Stock at
a conversion price of $14.30 per share. At maturity, the Company is
entitled to repay the principal of the note with Common Stock priced at
the lesser of $14.30 per share or the then-existing share price.
Page 9 of 22
<PAGE>
(B) Lesser of 30-day LIBOR plus 0.5% or 8.11%.
(C) No prepayment until July 24, 1998. From July 24, 1998 through July 23,
2000, the prepayment fee is the greater of 1% of the outstanding principal
balance or Treasury Yield Maintenance (as defined). Beginning July 24,
2000, the prepayment fee is Treasury Yield Maintenance. The loan may be
repaid at par during the last 90 days of the loan.
(D) No prepayment rights through September 30, 1998. Prepayable thereafter,
with a prepayment fee equal to the greater of: (1) 1.0% of the outstanding
principal balance or (2) Treasury Yield Maintenance (as defined).
Prepayment without fee for the six months prior to the maturity date.
(E) Interest only payments through January 1, 2001, with a 25-year
amortization schedule thereafter.
(F) Beginning July 1, 1999, the prepayment fee is the greater of Treasury
Yield Maintenance (as defined) or 1% of the outstanding principal balance.
Prepayment without fee on or after three months prior to maturity date.
(G) Open to prepayment after December 31, 1999, with a prepayment fee equal to
the greater of 1.0% of the principal balance or Treasury Yield Maintenance
(as defined). Prepayment without fee during the three months prior to the
maturity date.
(H) The four notes arising from the acquisition of several properties from
DIHC are cross-collateralized, having the effect of forming a "collateral
pool" for the underlying notes.
(I) The collateral for this loan is a pledge of the $181 million first
mortgage loan on Market Square which the Company purchased from PGGM.
(J) While the face amount of the loan is $78,420,000, because the interest
rate is 9.5%, the Company has recorded the debt at $89,630,000, which is
the market value of the loan at the time of the closing based upon a
market interest rate for similar quality loans of 6.84%.
(K) Beginning February 1, 2000, the prepayment fee is equal to the greater of
2% of the outstanding principal balance or Treasury Yield Maintenance (as
defined). The 2% maximum is reduced by 0.25% per annum thereafter until it
reaches 1%. The loan is prepayable during the last 90 days.
(L) The interest rate on the loan is LIBOR plus 100 basis points. However, the
Company has entered into an interest rate swap with Bankers Trust Company
that effectively fixes the interest rate at 6.63%.
Since most of the long term debt is property related, there are
restrictive covenants that limit the total amount of indebtedness that can be
placed on individual properties.
5. CREDIT FACILITY
The Company has a $350 million Revolving Credit Facility with Bankers
Trust Company and The Chase Manhattan Bank for acquisitions and general working
capital purposes as well as the issuance of letters of credit. The interest rate
on the line of credit depends on the Company's leverage ratio at the time of
borrowing and will be at a spread of 1.10% to 1.40% over LIBOR or the Prime Rate
at the borrower's option. The letters of credit will be priced at the applicable
Eurodollar credit spread. The line of credit expires on October 27, 2000. As of
March 31, 1998, none of the credit line was outstanding. The line of credit
contains certain restrictive covenants including; (i) a limitation on the
Company's dividend to 90% of funds from operations and 110% of cash available
for distribution; (ii) total liabilities to total property asset value cannot
exceed 55%; (iii) adjusted EBITDA to interest expense may not be less than 2.25
to 1.00; (iv) fixed charge coverage may not be less than 1.75 to 1.00; and (v)
total property asset value to secured indebtedness may not be less than 2.50 to
1.00.
Page 10 of 22
<PAGE>
6. STOCKHOLDERS' INVESTMENT
The 7% Cumulative Convertible Preferred Stock is convertible into Common
Stock at $16.50 per share at any time after August 4, 2000.
On April 21, 1997, Cornerstone completed its initial public offering
("IPO") in the United States of 16.1 million shares of Common Stock at a price
of $14 per share. The Company received net proceeds of approximately $207.8
million ($225.4 million gross proceeds less an underwriting discount of
approximately $14.1 million and expenses of approximately $3.5 million).
On February 6, 1998, Cornerstone completed a secondary public offering of
14,375,000 shares of Common Stock at $18.25 per share. The shares were placed in
the U.S. through a syndicate of seven investment banks led by Merrill Lynch &
Co. Net proceeds to the Company were approximately $247.9 million ($262,343,750
gross proceeds less an underwriting discount of $13,728,125 and expenses of
approximately $750,000). The net proceeds were used to repay outstanding
borrowings under the Revolving Credit Facility and for working capital purposes.
The following tables summarize the stock options and restricted stock
grants for certain officers of the Company as of March 31, 1998:
Stock Options
<TABLE>
<CAPTION>
Options Exercise
Granted Price Options Options
Date of Grant (No. of shares) (per share) Vesting Exercisable Exercised
------------- --------------- ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
June, 1995........ 787,500 $14.30 20%/yr, 10yr term 304,500 10,500
March, 1997....... 880,000 $14.50 20%/yr, 10yr term 0 0
November, 1997.... 70,000 $18.44 20%/yr, 10yr term 0 0
February, 1998.... 70,000 $18.13 20%/yr, 10yr term 0 0
March, 1998....... 200,000 $18.25 20%/yr, 10yr term 0 0
</TABLE>
Restricted Stock Grants
Shares Granted Value at Grant
Date of Grant (No. of shares) Date (per share) Vesting(A)
------------- --------------- ---------------- ----------
August, 1995 167,622 $14.30 The grant will fully vest
with respect to 13.333% on
June 30, 1996, 1997, 1998,
1999 and with respect to
46.668% on June 30, 2000.
March, 1997 100,000 $16.38 The grant will fully vest
with respect to 13.333% on
June 30, 1998, 1999, 2000,
2001 and with respect to
46.668% on June 30, 2002.
November, 1997 12,500 $18.44 The grant will fully vest
with respect to 13.333% on
June 30, 1998, 1999, 2000,
2001 and with respect to
46.668% on June 30, 2002.
March, 1998 12,500 $18.13 The grant will fully vest
with respect to 13.333% on
March 15, 1999, 2000, 2001,
2002 and with respect to
46.668% on March 15, 2003.
March, 1998 19,178 $18.25 The grant will fully vest
with respect to 13.333% on
March 15, 1999, 2000, 2001,
2002 and with respect to
46.668% on March 15, 2003.
- --------
(A) Deferred compensation of approximately $4,842,000 is being amortized
according to the respective amortization schedule for each vesting period
noted above, with the unamortized balance shown as a deduction from
stockholders' investment. Regular dividends are paid on restricted stock.
Page 11 of 22
<PAGE>
7. STOCKHOLDERS' AND UNITHOLDERS' DISTRIBUTIONS
A cash dividend and unitholder distribution of $0.30 per share was
declared for the first quarter of 1998 and paid on February 27, 1998, to Common
Stockholders and Unitholders of record as of January 30, 1998.
8. NET INCOME PER COMMON SHARE
The table below sets forth the calculation of net income per common share
for the three months ended March 31, 1998 and 1997 (Dollar amounts in thousands,
except per share amounts):
March 31,1998 March 31, 1997
----------------- -----------------
Basic Diluted Basic Diluted
----------------- -----------------
Proceeds upon exercise of options $ -- $30,081 $ -- $11,261
Market price of shares
average for the respective period $ -- $ 18.43 $ -- $ 15.97
Treasury shares that could be
repurchased (options) -- 1,632 -- 705
Option shares outstanding -- 1,997 -- 788
Weighted common stock equivalent
shares (Excess shares under option
over Treasury shares that could be
repurchased) -- 363 -- 82
Weighted average common shares
outstanding 92,802 92,802 20,789 20,789
----------------- -----------------
Adjusted weighted average common
shares outstanding 92,802 93,165 20,789 20,872
Net income for the period $22,754 $22,754 $ 5,610 $ 5,610
Income applicable to
preferred stock $ (875) $ (875) $(4,205) $(4,205)
----------------- -----------------
Net income available to
common shares $21,879 $21,879 $ 1,405 $ 1,405
Income per common share $ 0.24 $ 0.23 $ 0.07 $ 0.07
9. SUBSEQUENT EVENTS
On April 28, 1998, the Company purchased One Memorial Drive, a 353,000
square foot office tower in Cambridge, Massachusetts for a total purchase price
of $112,500,000. Consideration for the acquisition included 3,428,571 shares of
Common Stock, 1,542,857 UPREIT units and $25,500,000 of cash.
On April 29, 1998, the Company sold the Frick Building in Pittsburgh, PA,
for approximately $27.4 million.
Page 12 of 22
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
RESULTS OF OPERATIONS
Consolidation
Cornerstone's principal source of income is rental revenues received through its
investment in twelve fee simple properties, six real estate partnerships and
one mortgage. NWC Limited Partnership, Third and University Limited Partnership,
One Ninety One Peachtree Associates, Two Twenty Two Berkeley Venture and Five
Hundred Boylston West Venture have been consolidated because Cornerstone has a
majority interest in the economic benefits and is or has the right to become
managing general partner at its sole discretion. The Company has accounted for
its investment in Market Square Associates using the equity method because it
does not have sufficient control of the day to day operations of the
partnership.
Property Results
For the three months ended March 31, 1998 and 1997, property results can be
summarized as follows (000's):
For the three For the three
months ended months ended
March 31, 1998 March 31, 1997
(000's) (000's)
- --------------------------------------------------------------------------------
Office and Parking Rentals $75,183 $33,478
Less:
Building Operating Expenses 17,089 7,375
Real Estate Taxes 11,177 5,663
Depreciation and Amortization 10,645 6,662
------- -------
Total Operating Expenses 38,911 19,700
------- -------
Total Property Income $36,272 $13,778
======= =======
The increase in property income for the three months ended March 31, 1998 as
compared to the same period in 1997 of $22.5 million was due to the additional
revenues derived from 11 properties acquired since March 31, 1997 ($22.0
million), and an increase in revenues from 527 Madison Avenue because it was
purchased in February 1997 ($0.7 million). These increases were offset by a
slight reduction in property income at the existing properties ($0.2 million).
Equity in Loss of Real Estate Joint Venture
The equity in loss of real estate joint venture of $0.9 million in the first
quarter of 1998 was due to the acquisition of the partnership interest in Market
Square in January 1998.
Interest and Other Income
Interest and other income increased to $7,298,000 for the three months ended
March 31, 1998 from $1,509,000 for the three months ended March 31, 1997. These
amounts primarily consist of interest earned from mortgage note receivable,
short-term investments, note receivable from partner and income from advisory
contracts in 1997. The increase was due to the purchase of the mortgage note on
Market Square in late 1997 ($5.3 million), an
Page 13 of 22
<PAGE>
increase in management and other income ($1.1 million), and lease cancellation
payments ($0.1 million). These amounts were offset by a reduction in interest
income on short-term investments due to the Company having excess cash from its
preferred stock placement that occurred in late 1996 ($0.5 million), and a
reduction due to the expiration of certain advisory contracts in 1997 ($0.2
million).
Interest Expense
Interest expense incurred by Cornerstone relating to its financing activities
was $15,915,000 and $7,637,000 for the three months ended March 31, 1998 and
1997, respectively. The increase in interest expense was due to the interest
expense on the purchase money loans from the DIHC transaction ($4.4 million), an
increase in interest expense on the Revolving Credit Facility ($1.6 million), an
increase in amortization of deferred financing costs ($0.2 million), interest on
the Sixty State Street loan ($1.5 million), and interest on the Corporate 500
Centre loan ($0.9 million). These increases were offset by the Term Loan
interest in the first quarter of 1997, as discussed below ($0.4 million).
Interest Rate Swaps
The Company currently has an $80.0 million interest rate swap outstanding to
protect it from interest rate fluctuations which could affect its floating rate
debt on Corporate 500 Centre. The swap effectively fixes the interest rate on
the $80.0 million loan at 6.63% through its maturity in July 2002. The swap is a
hedge for federal income tax purposes.
General and Administrative Expenses
The aggregate amount of Cornerstone's general and administrative expenses have
increased to $2,586,000 for the three months ended March 31, 1998 from
$1,637,000 for the three months ended March 31, 1997. The increase in 1998 from
1997 of $0.9 million is due to the additional employees, space, systems and
other support necessary to manage the substantial growth in assets of the
Company during the most recent twelve-month period.
Loss on Sale on Land
On March 31, 1998, the Dearborn Land, an undeveloped parcel of land in Chicago
that was acquired in October 1997 along with nine Class A office properties from
Stichting Pensioenfonds Voor de Gezeondheid Geestelijke en Maatschappelijke
Belangen ("PGGM") and Dutch Institutional Holding Company, Inc. ("DIHC"), was
sold for gross proceeds of approximately $18,790,000, resulting in a loss of
$212,228.
Minority Interest
The increase in minority interest to $1.2 million from $476,000 is due to the
allocation of income to the UPREIT unitholders and the purchase of the
partnership interests in 500 Boylston Street, 222 Berkeley Street and 191
Peachtree Street.
Page 14 of 22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow (000's)
<TABLE>
<CAPTION>
Cash flow provided by For the three For the three
(used in): months ended March 31, 1998 months ended March 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating activities $ 44,429 $ 12,490
Investing activities (126,089) (69,703)
Financing activities 112,126 (49,180)
Earnings to fixed charges
ratio 2.30 1.12
</TABLE>
Cash provided by operating activities increased to $44,429,000 for the three
months ended March 31, 1998 from $12,490,000 for the three months ended March
31, 1997. The increase is due to the cash flows from the interests in 11
properties acquired since the end of the first quarter of 1997.
Cash used in investing activities increased to $126,089,000 for the three months
ended March 31, 1998 from $69,703,000 for the three months ended March 31, 1997
due to the acquisition of Corporate 500 Centre for approximately $135.0 million
(net of UPREIT Units), the acquisition of the partnership interest in Market
Square for $5.1 million and other property additions of approximately $4.8
million. These investments were partially offset by the $18.8 million in
proceeds from the sale of the Dearborn Land. During 1997, the Company invested
approximately $67.0 million in 527 Madison Avenue and approximately $2.7 million
in other property investments.
Cash provided by financing activities increased to $112,126,000 for the three
months ended March 31, 1998 as compared to cash used in financing activities of
$49,180,000 as of March 31, 1997. The increase was mainly due to the secondary
offering proceeds of $262.3 million and an increase in mortgage borrowings of
$80.0 million. These amounts were offset by an increase in loan repayments of
$154.5 million, an increase in stock and debt issuance costs of $13.5 million,
an increase in dividends paid of $9.4 million, an increase in distributions to
minority partners of $1.2 million and other adjustments of $2.4 million.
The ratio of earnings to fixed charges and dividends on preferred stock
increased to 2.30 times at March 31, 1998 from 1.12 times at March 31, 1997 due
to the substantial reduction of the Company's leverage ratio and the conversion
of the 8% preferred shares into common stock.
Funds From Operations
The Company calculates Funds from Operations ("FFO") based upon guidance from
the National Association of Real Estate Investment Trusts ("NAREIT"). FFO is
defined as net income, excluding gains or losses from debt restructuring and
sales of property, plus depreciation and amortization, after adjustments for
unconsolidated joint ventures. The Company has adjusted 1997 FFO by the net gain
on interest rate swap due to the non-cash nature of this item.
Industry analysts generally consider FFO to be an appropriate measure of
performance of an equity Real Estate Investment Trust ("REIT") such as
Cornerstone. FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and, therefore, should
not be considered a substitute for net income as a measure of performance or for
cash flow from operations as a measure of liquidity calculated in accordance
with generally accepted accounting principles.
The Company believes that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flows from operating
activities, financing activities and investing activities, it provides investors
an understanding of the ability of the Company to incur and service debt and to
make capital expenditures. For cash flows from operating, financing and
investing activities, see the Condensed Consolidated Statements of Cash Flows
included in the Condensed Consolidated Financial Statements which are part of
this report.
Page 15 of 22
<PAGE>
The Company no longer reports free and deferred rental income as an adjustment
to FFO because this is not part of the industry standard. Therefore, included in
FFO for the three months ended March 31, 1998 and 1997 is an an increase of
approximately $3,146,000 and $280,0000, respectively, for free and deferred
rental income (after adjustment for minority interest).
The table below sets forth the adjustments which were made to the net income of
the Company in the calculation of FFO for the three month period ended March 31,
1998 and 1997, respectively (in thousands):
Funds From Operations(A)
---------------------
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
---- ----
Net income $22,754 $ 5,610
NAREIT Adjustments:
Depreciation and amortization(B) 10,645 6,664
Realized/Unrealized gain on swaps 0 (99)
Minority adjustments (467) (370)
Unconsolidated Depreciation 863 0
Loss on land sale 212 0
Extraordinary Losses/Swap Losses 0 26
Other Adjustments:
Amortization on rent notes 368 220
---- ---
Funds From Operations 34,475 12,051
------- -------
Minority Interest Allocated to
Unitholders 136 0
Accrued Preferred Dividend (875) (4,205)
------- -------
Funds From Operations
Available For Common Shares $33,636 $ 7,846
======= =======
(A) Although the Company believes that this table is a full and fair
presentation of the Company's FFO, similarly captioned items may be defined
differently by other REITs, in which case direct comparisons may not be
possible.
(B) The depreciation and amortization adjustment does not include amortization
of deferred financing costs and depreciation of non-real estate assets in
accordance with guidance from NAREIT.
The increase in FFO for the three months ended March 31, 1998 as compared to the
same period in 1997 is due to the acquisition of interests in 11 properties
since the end of the first quarter of 1997.
The Company will seek to continue increasing FFO and the value of its property
portfolio by acquiring additional properties that the Company believes will
produce favorable returns. As part of its ongoing business, the Company
periodically engages in discussions with public and private real estate entities
regarding possible portfolio or asset acquisitions or business combinations.
Capital Stock Transactions
On January 31, 1997, through a dividend reinvestment plan available to its
German stockholders, Cornerstone received proceeds of approximately $3,717,000
and issued an additional 243,907 shares of common stock to stockholders.
Page 16 of 22
<PAGE>
On April 21, 1997, the Company received $225,400,000 gross proceeds from the
public placement of 16,100,000 new shares of common stock at a price of $14.00
per share and listed on the New York Stock Exchange through underwriters led by
Merrill Lynch & Co. The net proceeds were used as partial consideration for the
purchase of the DIHC Portfolio.
On April 30, 1997, through a dividend reinvestment plan available to its German
stockholders, Cornerstone received proceeds of approximately $2.2 million and
issued an additional 141,733 shares of common stock to stockholders.
On July 25, 1997, the 1,148,276 shares of Redeemable Preferred stock outstanding
at the time were converted into 11,482,760 common shares. The contractual
conversion was based upon meeting a $16.00 twenty-day average common share
price.
On July 31, 1997, through a dividend reinvestment plan available to its German
stockholders, Cornerstone received proceeds of approximately $2.6 million and
issued an additional 175,796 shares of common stock to stockholders.
On October 27, 1997, the Company increased the authorized shares from
115,000,000 shares of capital stock, without par value, to 265,000,000 shares of
capital stock, without par value, of which 15,000,000 shares were preferred
stock and 250,000,000 shares were common stock.
On October 28, 1997, as consideration for the acquisition of the DIHC Portfolio,
Cornerstone issued 34,185,500 shares of common stock to DIHC and PGGM as
compensation for the acquisition of interests in nine Class A office buildings
and an undeveloped parcel of land.
On October 31, 1997, through a dividend reinvestment plan available to its
German stockholders, Cornerstone received proceeds of approximately $2,518,000
and issued an additional 134,577 shares of common stock to stockholders.
On February 27, 1998, through a dividend reinvestment plan available to its
German stockholders, Cornerstone received proceeds of approximately $2,010,000
and issued an additional 109,007 shares of common stock to stockholders.
On February 6, 1998, Cornerstone completed a secondary public offering of
14,375,000 shares of Common Stock at $18.25 per share. The shares were placed in
the U.S. through a syndicate of seven investment banks led by Merrill Lynch &
Co. Net proceeds to the Company were approximately $247,866,000 ($262,343,750
gross proceeds less an underwriting discount of $13,728,125 and expenses of
approximately $750,000). The net proceeds were used to repay the Company's
acquisition line of credit and for working capital purposes.
Mortgage Indebtedness
On October 27, 1997, the Company entered into four mortgage loans with PGGM and
its wholly-owned subsidiary DIHC (together "PGGM") as purchase money financing
for the DIHC Portfolio. The mortgages, which are cross-collateralized, encumber
TransPotomac Plaza 5, Charlotte Plaza, 527 Madison Avenue, One Lincoln Centre,
200 Galleria and the first mortgage note on Market Square. These mortgages total
$250.0 million and are interest only with no prepayment rights.
The first loan is a $10.0 million note at 7.28% interest; the interest rate on
the loan increased to 7.28% upon the sale of the Dearborn Land, which occurred
on March 31, 1998. The loan matures in October 2000.
Page 17 of 22
<PAGE>
The second note is a $55.0 million note at 7.28% interest, which matures in
October 2000. Upon repayment of this note and the $10.0 million note described
above, PGGM will release the liens on TransPotomac Plaza 5 and Charlotte Plaza.
The third note is a $65.0 million note at 7.47% interest, which matures in
October 2004. Upon repayment of this note, PGGM will release the liens on 527
Madison Avenue and One Lincoln Centre.
The fourth note is a $120.0 million note at 7.54% interest, which is due in
October 2007. Upon repayment of this note, PGGM will release the liens on Market
Square and 200 Galleria.
On December 31, 1997, the Company purchased the second mortgage on Sixty State
Street in Boston, MA; this mortgage is consolidated on the Company's balance
sheet. The property has a first mortgage in the amount of approximately $78.4
million, which matures in January 2005. The loan requires amortization based on
a 30-year schedule and bears interest at a rate of 9.5%. While the face amount
of the second mortgage is $78.4 million, because the interest rate is 9.5%, the
Company has recorded the debt at $89.6 million, which is the market value of the
loan at the time of the closing based upon a market interest rate for similar
quality loans of 6.84%.
On January 28, 1998, the Company entered into an $80.0 million first mortgage on
Corporate 500 Centre with Bankers Trust Company. The loan bears interest at a
rate of LIBOR plus 1.0% and matures in July 2002. The interest rate on the loan
is fixed at 6.63% through an interest rate swap with Bankers Trust Company.
Other Indebtedness
On August 8, 1995, the existing $32.5 million loan was extended through December
31, 2003 and assigned to Deutsche Bank AG London at an interest rate of 5%. The
term loan had a $32.5 million balance at December 31, 1996. The loan was prepaid
on March 18, 1997, since, under its terms, it was required to be prepaid upon
Cornerstone's initial public offering ("IPO") in the United States. The Company
has no long-term debt maturing until 2000.
On October 27, 1997, the Company entered into a three-year, $350.0 million
acquisition line of credit syndicated by Bankers Trust Company and The Chase
Manhattan Bank. The line bears interest at a rate of LIBOR plus 1.10% to 1.40%
depending on the Company's then current leverage ratio. There were no borrowings
outstanding at March 31, 1998. The line is also available for the issuance of
standby letters of credit.
Stockholders' and Unitholders' Distributions
Cornerstone intends to distribute at least 95% of its taxable income to maintain
its qualification as a REIT. The Company anticipates that FFO will exceed
taxable income for the foreseeable future. Cornerstone's distribution policy is
to pay distributions based upon FFO, less prudent reserves. The Company paid
distributions of $0.30 per share to all stockholders and unitholders on February
27, 1998 (to stockholders and unitholders of record as of January 30, 1998). The
Company declared a dividend of $0.30 per common share, payable to all
stockholders and unitholders of record as of April 30, 1998 on May 29, 1998.
At the present time, the Company is current in the payment of all preferred
dividends.
Liquidity
At March 31, 1998, the Company had $55,196,000 in cash and cash equivalents and
$5,524,000 in restricted cash. Restricted cash is being held by the Mortgage
Servicer for the One Norwest Center and Washington Mutual Tower mortgage loans.
Cornerstone also had available $350.0 million under its working capital line of
credit for general corporate purposes. In addition, Cornerstone anticipates it
will receive distributions from its real estate partnerships, rental income from
its fee owned properties and interest income from its mortgages on a monthly
basis which will be used to cover normal operating expenses and pay
distributions to its stockholders and unitholders. Based upon its cash reserves
and other sources of funds, Cornerstone has sufficient liquidity to meet its
cash requirements for the foreseeable future.
Other Matters
The Company is not aware of any environmental issues at any of its properties.
The Company believes it has sufficient insurance coverage at each of its
properties. A majority of the Company's leases with the majority of its tenants
require the tenants to pay most operating expenses and increases in common area
maintenance expenses, which reduces the Company's exposure to increases in costs
and operating expenses resulting from inflation.
In the ordinary course of business, the Company is in the process of acquiring
new accounting and property management software that will eliminate year 2000
software concerns at the corporate level. The new software is expected to be
installed by the fourth quarter of 1998. Management is in the process of
completing a survey with all of its property managers to make sure there are no
year 2000 issues at any of the property management firms that manage its
properties. Currently, Cornerstone is not aware of any year 2000 issues that
would have a material effect on the financial position, results of operations
and liquidity of the Company.
Page 18 of 22
<PAGE>
During 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5") and Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"), which are effective for fiscal years
beginning after December 15, 1998. In addition, the Emerging Issues Task Force
of the Financial Accounting Standards Board released Issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions"
("EITF 97-11").
SOP 98-5 requires that certain costs incurred in conjunction with start-up
activities should be expensed. SOP 98-1 provides guidance on whether the costs
of computer software developed or obtained for internal use should be
capitalized or expensed. EITF 97-11 requires that the internal pre-acquisition
costs of identifying and acquiring operating property be expensed as incurred.
Management believes that, when adopted, SOP 98-5 and SOP 98-1 will not have a
significant impact on the Company's financial statements. EITF 97-11 was adopted
during the first quarter of fiscal 1998 and did not have a material impact on
the Company's financial statements.
During the first quarter of 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). The adoption of SFAS 130 did not have a
significant impact on the Company's financial statements.
Subsequent Events
On April 28, 1998, the Company purchased One Memorial Drive, a 353,000 square
foot office tower in Cambridge, Massachusetts for a total purchase price of
$112,500,000. Consideration for the acquisition included 3,428,571 shares of
Common Stock, 1,657,426 UPREIT Units and $25,500,000 of cash.
On April 29, 1998, the Company sold the Frick Building in Pittsburgh, PA, for
approximately $27.4 million.
Page 19 of 22
<PAGE>
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 5, 1998, the Company purchased the remaining participation rights in
the cash flow and residual value of Tower 56 from the previous participants for
307,692 shares of Common Stock. At the time of the sale, such shares of Common
Stock were not registered under the Securities Act of 1933, as amended (the
"Securities Act") and were offered and sold to the foregoing shareholders in a
private offering pursuant to Section 4(2) of the Securities Act. Pursuant to
their rights under a registration rights agreement between each of these
shareholders and the Company, these shares were registered under a shelf
registration statement on Form S-F (Registration No. 333-47149) which became
effective on March 10, 1998.
On February 27, 1998, through a dividend reinvestment plan available to all
German shareholders, the Company issued 109,007 shares of Common Stock to such
shareholders in lieu of paying cash dividends in the aggregate amount of
$2,010,000. Such shares were issued and sold to persons outside the United
States and were not registered under the Securities Act.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1) Exhibit 12.1: Statement of Computation of Earnings to Fixed Charges
2) For EDGAR filing purposes only, this report contains Exhibit 27,
Financial Data Schedule
3) Exhibit 99.1: Supplemental Information to Quarterly Earnings Release
(b) Reports on Form 8-K:
1. Form 8-K dated January 14, 1998
Item 2 - Acquisition or Disposition of Assets. Acquisition of Sixty
State Street and Corporate 500 Centre.
Item 7 - Financial Statements and Exhibits. Financial statements
reflecting the acquisition of Sixty State Street and
Corporate 500 Centre. Press release announcing the
acquisition of Sixty State Street and Corporate 500 Centre.
2. Form 8-K dated February 5, 1998
Item 5 - Other Events. Pricing of public offering of 12.5 million
shares of common stock at $18.50 per share.
Item 7 - Financial Statements and Exhibits. Press release announcing
the pricing of a public offering of 12.5 million shares of
common stock at $18.50 per share.
3. Form 8-K dated March 27, 1998
Item 7 - Financial Statements and Exhibits. Supplemental Information
to Fourth Quarter 1997 Earnings Release.
Page 20 of 22
<PAGE>
4. Form 8-K dated March 27, 1998
Item 5 - Other Events. Cornerstone's intent to acquire interests in
two California Properties. Cornerstone's fourth quarter and
fiscal year 1997 results.
Item 7 - Financial Statements and Exhibits. Press releases
announcing Cornerstone's intent to acquire interests in two
California Properties and Cornerstone's fourth quarter and
fiscal year 1997 results.
5. Form 8-K dated April 2, 1998
Item 5 - Other Events. Cornerstone closes Chicago Land sale.
Item 7 - Financial Statements and Exhibits. Press release announcing
Cornerstone's closing of Chicago Land sale.
Page 21 of 22
<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, Chairman and CEO
Date: May 15, 1998
By: /s/ Kevin P. Mahoney
----------------------------------------------
Kevin P. Mahoney, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 1998
Page 22 of 22
Statement of Computation of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements for the three month periods
ended March 31, 1998 and March 31, 1997
For the three months ended
March 31, 1998 March 31, 1997
-------------- --------------
Net income $22,754 $ 5,610
Interest expense 15,915 7,637
-------------- --------------
Earnings before interest 38,669 13,247
Interest expense 15,915 7,637
Preferred dividends 875 4,205
-------------- --------------
Fixed charges 16,790 11,842
Earnings to fixed charges
and preferred stock
dividend requirements 2.30 1.12
============== ==============
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 55,195
<SECURITIES> 0
<RECEIVABLES> 52,136
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 69,933
<PP&E> 1,959,213
<DEPRECIATION> 240,572
<TOTAL-ASSETS> 2,223,078
<CURRENT-LIABILITIES> 42,348
<BONDS> 0
1,306,954
0
<COMMON> 50,000
<OTHER-SE> (2,532)
<TOTAL-LIABILITY-AND-EQUITY> 2,223,078
<SALES> 0
<TOTAL-REVENUES> 81,556
<CGS> 0
<TOTAL-COSTS> 57,412
<OTHER-EXPENSES> 1,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,915
<INCOME-PRETAX> 22,754
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,754
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.23
</TABLE>
Exhibit 99.1
Cornerstone Properties Inc.
Supplemental Information to Quarterly Earnings Release
1) First Quarter 1998
o Balance Sheet
o Income Statement
2) First Quarter Press Release
3) Quarterly Fact Sheet
4) Table of Properties
5) Top Ten Tenants Schedule
6) Historical Occupancy Schedule
7) Net Rent and Net Effective Rent Schedule
8) Lease Expiration Schedule
9) Tenant Retention Schedule
10) Leasing Costs and Capital Expenditures
11) Minority Sharing in Cash Flows and Residual Proceeds
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o First Quarter 1998
o Balance Sheet
o Income Statement
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Investments, at cost:
Land $ 271,540 $ 260,542
Buildings, leasehold interests and improvements 1,687,673 1,559,085
Mortgage notes receivable, inclusive of
$12,741 and $13,065 of unamortized premium 242,093 240,253
Equity in real estate joint venture 4,140 --
Deferred lease costs 131,180 127,645
----------- -----------
2,336,626 2,187,525
Less: Accumulated depreciation and amortization 240,572 229,652
----------- -----------
Total investments 2,096,054 1,957,873
Cash and cash equivalents 55,196 24,730
Restricted cash 5,524 1,903
Other deferred costs, net of accumulated
amortization of $2,355 and $1,998 5,765 5,728
Deferred tenant receivables 41,636 38,531
Tenant and other receivables, net 9,213 7,584
Notes receivable 1,287 1,652
Other assets 8,403 13,480
----------- -----------
Total Assets $ 2,223,078 $ 2,051,481
=========== ===========
LIABILITIES
Long-term debt, inclusive of $10,878 and $11,209
of unamortized premium $ 785,399 $ 706,178
Credit facility -- 187,000
Accrued interest payable 6,341 4,134
Accrued real estate taxes payable 18,956 13,401
Accounts payable and accrued expenses 17,051 18,363
Unearned revenue and other liabilities 15,475 10,986
----------- -----------
Total Liabilities 843,222 940,062
----------- -----------
MINORITY INTEREST
Minority Interest in operating partnership 10,319 --
Minority Interest in real estate joint ventures 15,115 15,420
----------- -----------
Total Minority Interest 25,434 15,420
Redeemable Preferred Stock; 344,828 shares
authorized; 0 shares issued and outstanding -- --
----------- -----------
STOCKHOLDERS' INVESTMENT
7% Cumulative Convertible Preferred Stock,
$16.50 stated value; 15,000,000 shares authorized;
3,030,303 shares issued and outstanding 50,000 50,000
Common stock, no par value; 250,000,000 shares
authorized; (1998-98,015,196; 1997-83,191,819) shares
issued and outstanding
Paid-in capital 1,306,954 1,048,187
Deferred compensation (2,532) (2,188)
----------- -----------
Total Stockholders' Investment 1,354,422 1,095,999
----------- -----------
Total Liabilities and Stockholders' Investment $ 2,223,078 $ 2,051,481
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
Page 2 of 14
<PAGE>
Item 1. Financial Statements (continued)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
-------- --------
Revenues
Office and parking rentals $ 75,183 $ 33,478
Equity in loss of real estate joint venture (925) --
Interest and other income 7,298 1,509
-------- --------
Total Revenues 81,556 34,987
-------- --------
Expenses
Building operating expenses 17,089 7,375
Real estate taxes 11,177 5,663
Interest expense 15,915 7,637
Depreciation and amortization 10,645 6,662
General and administrative 2,586 1,637
-------- --------
Total Expenses 57,412 28,974
-------- --------
24,144 6,013
-------- --------
Other income (expenses)
Loss on sale of land (212) --
Minority interest (1,178) (476)
Net gain on interest rate swaps -- 99
-------- --------
Income before extraordinary item 22,754 5,636
Extraordinary loss -- (26)
-------- --------
Net income $ 22,754 $ 5,610
======== ========
Income applicable to preferred stock $ (875) $ (4,205)
======== ========
Net income applicable to common stock $ 21,879 $ 1,405
======== ========
Income before extraordinary item per common share $ 0.24 $ 0.07
======== ========
Extraordinary loss per common share $ -- $ --
======== ========
Basic net income per common share $ 0.24 $ 0.07
======== ========
Diluted net income per common share $ 0.23 $ 0.07
======== ========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
Page 3 of 14
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o First Quarter Press Release
<PAGE>
CORNERSTONE PROPERTIES INC.
126 East 56th Street
New York, NY 10022
(NYSE: CPP)
AT CORNERSTONE PROPERTIES
Kevin P. Mahoney Karin Maas
Chief Financial Officer VP, Investor Relations
(212) 605-7142 (212) 605-7113
AT THE FINANCIAL RELATIONS BOARD
Julie Gottlieb Stephanie Mishra Judith Sylk-Siegel
(General Info) (Analyst Info) (Media Info)
(212) 661-8030 (415) 986-1591 (212) 661-8030
FOR IMMEDIATE RELEASE
May 5, 1998
CORNERSTONE PROPERTIES INC. ANNOUNCES
FIRST QUARTER 1998 RESULTS
New York, NEW YORK (May 5, 1998) -- Cornerstone Properties Inc. (NYSE:CPP), a
real estate investment trust, announced today results for its first quarter
ended March 31, 1998.
- --------------------------------------------------------------------------------
First Quarter 1998 Highlights
o FFO per share for the 1998 first quarter increased more than 5.0% over the
first quarter of 1997.
o Year-to-date property net operating income rose 147% over 1997.
o Completed Secondary Offering in February at $18.25 per share, a 30%
increase over the Company's IPO price ten months earlier.
o Completed first UPREIT transaction with the acquisition of Corporate 500
Centre in Deerfield, Illinois.
o Signed agreements to acquire Wilshire Palisades (Los Angeles) and 201
California Street (San Francisco), which provided entry into California
submarkets.
o Occupancy rate increased to a solid 98%.
o Tenant retention rate increased to 88%.
- --------------------------------------------------------------------------------
Funds from operations (FFO) allocated to shareholders amounted to $34,716,000,
or $0.36 per share calculated on 97,666,000 average diluted total shares
outstanding, compared to $12,243,000, or $0.34 per share on 36,206,000 average
diluted total shares outstanding, for the three months ended March 31, 1997.
This increase in FFO per share was due to the accretive impact of the
acquisition of the DIHC portfolio made on October 27, as well as the acquisition
of 60 State Street in Boston and Corporate 500 Centre in suburban Chicago. As
defined by NAREIT, funds from operations is net income excluding expenses from
debt restructuring, gains (or loss) on sale of property, plus depreciation and
amortization.
(more)
<PAGE>
Cornerstone Properties Announces 1Q98 Results
May 5, 1998
Page 2
Year-to-date net operating income before depreciation from Cornerstone
Properties' real estate assets increased 147% to $50,525,000 for the three
months ended March 31, 1998, from $20,440,000 for the comparable period in 1997.
The increase is due mainly to the Company's acquisition of the nine property
DIHC portfolio in October 1997.
Net income for the first quarter of 1998 grew to $22,754,000, compared to
$5,610,000 in the first quarter of 1997. The increase was driven by increased
property net operating income from acquisitions and internal growth.
John S. Moody, Chairman and CEO said, "During the first quarter of 1998, we
continued to build upon the accomplishments of last year. Our return to the
capital markets in the form of our secondary offering provides us with higher
levels of funding and enhanced our ability to successfully compete for
strategic, accretive acquisitions in premier office buildings in the most
attractive markets. Furthermore, our conversion of the Company to an UPREIT
structure has facilitated close to $400 million in completed or contracted
acquisitions during the first five months of 1998. We believe that Cornerstone's
UPREIT structure will be a major source of future deal flow into the Company's
acquisition pipeline. In addition to completing the acquisition of 60 State
Street and Corporate 500 Centre, we expanded our presence on the West Coast and
moved into the California office market with the acquisition of properties in
Santa Monica and San Francisco."
Mr. Moody concluded, "Cornerstone continues to deliver on the goals we set at
the Company's IPO: to deliver higher risk-adjusted returns to our shareholders,
to maintain our position as one of the pre-eminent owners of premier office
properties, and to be the partner of choice for private and public sellers of
the most desirable real estate assets that meet our stringent investment
criteria."
Quarterly Dividend Declared
The company declared a quarterly dividend of $0.30 per share payable on April
30, 1998 to shareholders of record on May 31, 1998. The company expects to
continue to maintain its quarterly dividend at $0.30 per share for the
foreseeable future in order to bring its FFO payout ratio (currently at 84%) in
line with its peers.
"Same Store" Revenue Growth Continues
The Company achieved year to date "same store" net operating income growth of
1.19% over 1997, despite the rolldown of over 170,000 square feet of space
occupied by Faegre Benson at Norwest Center. Based on current market conditions
this should be the last significant rolldown in rents in the portfolio. The same
store revenue growth for the Company excluding Norwest Center was 3.63% for the
same period.
Leasing Update: Tenant Retention Rate 88% and Overall Occupancy Rate 98%
Tenant retention for 1998 remained strong at 88%, while the portfolio's overall
occupancy rate increased to 98%. The Company has been successful in its goal of
bringing the occupancy rate of its more recently acquired properties up to a
level that is in line with the remainder of the portfolio. Occupancy at One
Lincoln Center has increased to 96% from 91% since its acquisition in 1996.
Occupancy across the DIHC portfolio has increased from 96% to 97%, in the five
months since it was acquired.
<PAGE>
Cornerstone Properties Announces 1Q98 Results
May 5, 1998
Page 3
Cornerstone also announced the extension of a major lease with the prominent law
firm Burns and Levinson at 125 Summer Street in Boston.
Acquisitions
On January 29, 1998, the Company announced the acquisition of Corporate 500
Centre in Deerfield, Illinois, for approximately $151.5 million. The transaction
was Cornerstone's first UPREIT transaction. On February 25, the Company
announced its intention to acquire interests in two California office properties
for approximately $60 million. Wilshire Palisades, totaling 186,320 square feet,
is 97% leased and located in suburban Los Angeles; fully-leased 201 California
Street offers 229,825 square feet of office space and 10,405 square feet of
retail space in San Francisco's financial district. As with the Chicago
transaction, UPREIT units will be part of the consideration.
Cornerstone Properties Inc. is a self-administered equity real estate investment
trust (REIT) investing exclusively in Class A quality office properties in prime
locations in major metropolitan areas and central business districts. The
Company, through its subsidiaries, currently owns 18 Class A quality office
properties throughout the United States totaling 10.6 million rentable square
feet. Headquartered in New York City, the Company's stock is traded on the New
York Stock Exchange under the ticker symbol CPP.
With the exception of the historical information contained in the release, the
matters described herein contain forward-looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve a number of risks,
uncertainties or other factors beyond the Company's control which may cause
material differences in actual results, performance or other expectations. These
factors include, but are not limited to, those detailed in the Company's
registration statement and periodic reports filed with the Securities & Exchange
Commission.
# # #
To receive more information on Cornerstone Properties, Via fax at
no charge, dial 1-800-PRO-INFO and enter ticker symbol CPP,
or visit Cornerstone Properties' web site at www.cstoneprop.com
[Financial Statements follow]
<PAGE>
Cornerstone Properties Announces 1Q98 Results
May 5, 1998
Page 4
CORNERSTONE PROPERTIES INC.
Funds from Operations (in thousands, except per share data)
Three Months Ended
March 31,
1998 1997
---- ----
Rental income(1) $ 80,351 $33,478
Building operating expenses(1) 29,826 13,038
-------- -------
Building net operating income 50,525 20,440
-------- -------
Corporate general and administrative (2,586) (1,613)
Interest and other income 3,628 1,509
-------- -------
EBITDA 51,567 20,336
-------- -------
Interest expense(1) (15,915) (7,543)
Non-real estate depreciation(2) -- (116)
Minority adjustments (1,509) (846)
Norwest tax adjustment -- --
Rent notes 368 220
-------- -------
Funds from operations 34,511 12,051
Interest on convertible debt 205 192
-------- -------
Funds from operations (adjusted
for convertible debt) $ 34,716 $12,243
-------- -------
Weighted average fully
diluted shares 97,666 36,206
FFO per share (fully diluted) $0.36 $0.34
Less: capital expenditures per share 0.02 0.03
----- -----
AFFO per share $0.34 $0.31
Funds from operations 34,511 12,051
Less: preferred dividends (875) (4,205)
Less: recurring lease costs and
capital expenditures(3) (1,885) (1,019)
Less: straight line rents adjusted
for minority interest (3,146) (280)
-------- -------
Funds available for distribution $ 28,605 $ 6,547
-------- -------
Weighted average common
shares and UPREIT
units outstanding (000's) 93,369 20,789
Funds available for distribution
per share $0.31 $0.31
Distribution per share $0.30 $0.30
(1) Property Revenues have been increased by $5,169,000. Property expenses
have been increased by $1,561,000 and interest income has been reduced by
$3,670,000 in order to show the effects of Market Square had the property
been consolidated.
(2) Non-real estate depreciation has been reclassed to the general and
administrative category and finance amortization has been reclassed to
interest expense beginning in the third quarter of 1997.
(3) Based on a five-year 1994-1998 average of recurring (revenue generating)
tenant leasing costs of $7.77 per square foot leased times the five-year
(1998-2002) average quarterly lease expiration, adjusted for minority
interest of 218,638 square feet ($1,699,000), plus a capital expenditure
reserve of $0.07 per square foot, adjusted for minority interest, of
$186,000.
Year to date the Company has incurred $3,427,000 in recurring tenant costs
in leasing 498,000 square feet on a cost of $6.89 per square foot.
Year to date the Comapny has incurred $133,000 in recurring capital costs
of $0.05 per square foot on an annualized basis.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Quarterly Fact Sheet
<PAGE>
Cornerstone Properties Inc.
Quarterly Fact Sheet
- --------------------------------------------------------------------
1998 Common Dividends Record Date Payment Date
3rd Quarter 7/31/98 8/31/98
4th Quarter 10/30/98 11/30/98
1st Quarter 1999 1/29/99 2/26/99
2nd Quarter 1999 4/30/99 5/31/99
- --------------------------------------------------------------------
Earnings Release/ Quarterly
Conference Call
2nd Quarter 8/4/98
3rd Quarter 11/3/98
4th Quarter 2/25/99
1st Quarter 1999 5/4/99
- --------------------------------------------------------------------
Current Quarter
-------------------------------
1st Quarter Results 1998 1997
FFO Per Share $ 0.36 $ 0.34
AFFO Per Share $ 0.34 $ 0.31
FAD Per Share $ 0.31 $ 0.31
FFO Payout Ratio 84% 89%
AFFO Payout Ratio 89% 97%
FAD Payout Ratio 98% 95%
Same Store NOI Growth 1.19% 0.44%
EBITDA Interest Coverage 3.19 2.69
Fixed Charge Coverage 3.02 2.32
- --------------------------------------------------------------------
Recurring Leasing Costs
(Adjusted for minority interest) $3,427,401 $1,772,917
Per Square Foot Leased $ 6.89 $ 5.96
Recurring Capital Expenditures $ 133,353 $ --
Non-Recurring Leasing Cost $1,032,655 $ 670,442
Non-Recurring Capital Expenditures $ 141,897 $ 26,628
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Parking Revenues (included in
Office and Parking) $4,859,522 $1,582,925
Parking Expense (included in
Building Operating Expense) $ 638,930 $ 223,411
Net Parking Income $4,220,592 $1,359,514
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Straight Line Rents $3,146,000 $ 280,000
- --------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Table of Properties
<PAGE>
Cornerstone Properties Inc.
Table of Properties
As of March 31, 1998
<TABLE>
<CAPTION>
Remaining
Company's Number Average
Property Name Year Percent Total Rentable Occupancy of Lease Term Largest
and Location Constructed Interest Square Feet Rate Leases (in Years) Tenant
- ----------------------------- ----------- --------- -------------- --------- ------ ----------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
One Norwest Center 1983 100% 1,188,000 99% 46 8.1 Norwest Bank Denver N.A.
Denver, Colorado Newmont Gold Company
Teletech, Inc.
Norwest Center(1) 1988 50% 1,118,000 98% 32 12.0 Norwest Corporation
Minneapolis, Minnesota Faegre & Benson
KPMG Peat Marwick
Washington Mutual Tower(2)(3) 1988 50% 1,155,000 99% 95 4.7 Perkins Coie
Seattle, Washington Washington Mutual
Karr Tuttle Campbell
125 Summer Street 1989 100% 464,000 99% 27 4.6 Deloitte & Touche
Boston, Massachussetts BTM Capital Corp.
Burns & Levinson
Tower 56(4) 1983 100% 162,000 100% 45 3.4 Cornerstone Properties
New York, New York ICC Associates, L.P.
United Bank of Kuwait
One Lincoln Centre 1986 100% 297,000 96% 43 2.4 Superior Bank FSB
Oakbrook Terrace, IL Microsoft Corporation
Arthur Andersen LLP
The Frick Building(5) 1902 100% 341,000 89% 76 3.8 Meyer, Darragh, Buckler,
Pittsburgh, PA Bebenek & Eck
Allegheny County Courts
527 Madison Avenue 1986 100% 216,000 100% 20 5.4 The Sumitomo Trust & Banking
New York, NY Co., Ltd.
W.P. Stewart Co., Inc.
Hill Samuel New York, Inc.
191 Peachtree Street(6)(7) 1991 80% 1,221,000 96% 37 8.1 Wachovia Bank
Atlanta, Georgia King & Spalding
Powell, Goldstein, Frazer &
Murphy
Market Square(6)(8) 1990 60% 689,000 96% 51 7.1 Fulbright & Jaworski
Washington, D.C. Edison Electric Institute
Reid & Priest
Sherman & Sterling
500 Boylston Street(6)(9) 1988 91.5% 715,000 100% 13 6.1 Massachussetts Financial
Boston, Massachussetts Services
The New England Life
Towers Perrin Forster &
Crosby, Inc.
222 Berkeley Street(6)(9) 1991 91.5% 531,000 100% 28 6.3 Houghton Mifflin
Boston, Massachussetts Saga International Holidays
Oracle Corporation
Charlotte Plaza(6) 1982 100% 613,000 98% 46 6.5 First Union
Charlotte, North Carolina Parker Poe
Midrex
200 Galleria(6) 1985 100% 433,000 95% 57 3.5 Liberty Mutual Group
Atlanta, Georgia Worldspan
Compact Computers
11 Canal Center(6) 1986 100% 70,000 97% 7 8.1 Robbins Gioa
Alexandria, Virginia National Certification
Commission on Acupuncture
and Oriental Medicine
99 Canal Center(6) 1986 100% 138,000 99% 18 3.4 Lowe, Price, LeBlanc & Becker
Alexandria, Virginia Howard, Needles, Tannen &
Bergendoff
National District Attorney's
Association
TransPotomac Plaza 5(6) 1983 100% 96,000 89% 11 5.8 Cities In Schools
Alexandria, Virginia The Onyx Group
Larson & Taylor
Sixty State Street(10) 1979 100% 823,000 98% 41 8.6 Hale & Dorr
Boston, Massachusetts The Pioneer Group, Inc.
ITT/Sheraton
Corporate 500 Centre(11) 1986/1990 100% 679,000 98% 40 6.2 MMI Companies, Inc.
Deerfield, Illinois Fortune Brands
Gaylord Container Corp.
---- ---------- --- --- ---
84% 10,949,000 98% 733 6.9
==== ========== === === ===
</TABLE>
<PAGE>
Cornerstone Properties Inc.
Table of Properties
Footnotes
- ----------
(1) While the Company's stated interest in the partnership which owns Norwest
Center is 50%, its economic interest in the Property is significantly
larger because of priority distributions it receives on its invested
capital base. For the three months ended March 31, 1998, the Company's
share of earnings and cash distributions from the partnership that owns
Norwest Center was 81.5%.
(2) While the Company's stated interest in the partnership which owns
Washington Mutual Tower is 50%, its economic interest in the Property is
significantly larger because of priority distributions it receives on its
invested capital base. For the three months ended March 31, 1998, the
Company received 100% of the cash distributions from the partnership that
owns Washington Mutual Tower.
(3) Includes the Galland and Seneca Buildings.
(4) The Company's headquarters are located at Tower 56.
(5) The Property was substantially renovated in 1988.
(6) Property acquired in the DLHC Acquisition.
(7) While the Company's stated interest in the partnership that owns 191
Peachtree Street is 80%, its economic interest is significantly larger
since it has acquired the first mortgage note on the Property in the
amount of $145 million, which earns interest at 9.375%, and will receive a
priority distribution on its acquired capital base. In addition, in 1997,
the partner in the transaction, CH Associates, Ltd., received an annual
incentive distribution of $250,000 which, the Company expects, it will
continue to receive under the partnership agreement through February 28,
2000, with the Company receiving the remainder of the cash flow of the
property.
(8) In January 1998, the Company acquired partnership interests with a stated
interest of approximately 59% in the partnerships that own Market Square,
with the option to purchase an additional 1%. The Company's economic
interest is significantly larger since it has acquired the first mortgage
note on the Property in the amount of $181 million which earns interest at
9.75%, and will receive a priority distribution on its acquired capital
base. In addition, the Company acquired a "buffer loan", with accrued
principal and interest of $46.2 million, which accrues interest at a rate
of 11% per annum and is payable from cash flow, refinancing or sales
proceeds from Market Square in excess of the first mortgage. During the
three months ended March 31, 1998, the Company received 100% of the cash
flow from the Property.
(9) Distributions of cash flow and sales and refinancing proceeds are shared
in proportion to the Company's 91.5% partnership interest and Hines
Interests Limited Partnership's and/or its affiliates' ("Hines") 8.5%
partnership interest.
(10) On December 31, 1997, the Company purchased the second mortgage on Sixty
State Street located in the heart of Boston's Central Business District.
The mortgage is a cash flow mortgage through which all the economic
benefits/risks (subject to the first mortgage) will inure to the Company.
The Company controls all major decisions regarding management and leasing.
The total purchase price for the second mortgage was $131.5 million. The
$78.4 million first mortgage on the Property has been recorded by the
Company as an $89.6 million liability due to its above-market interest
rate. The Company will account for the transaction as an equity investment
in real estate.
(11) The Property was acquired by the Company in January 1998.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Top Ten Tenants Schedule
<PAGE>
Cornerstone Properties Inc.
Top Ten Tenants Schedule
As of March 31, 1998
The Company's tenants include local, regional, national and international
companies engaged in a wide variety of businesses. The following table sets
forth, as of March 31, 1998, information concerning the ten largest tenants
(ranked by Full Service Straight-Line Rent as of that date) occupying the
Properties. "Full Service Straight-Line Rent" is Straight-Line Rent plus annual
operating expense recoveries. "Straight-Line Rent" means the annual average of
all Actual Rent required to be paid through the term of the lease, calculated in
accordance with GAAP. Full Service Straight-Line Rent does not reflect the cost
of any leasing commissions or tenant improvements.
<TABLE>
<CAPTION>
Full Service
Straight-Line Rent
----------------------
Straight-Line Percent Scheduled Lease
Tenant Rent Recoveries Amount of Total Expiration Date
- ------------------------- ------------- ----------- ------------ -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Norwest Corporation(1)(3) $ 20,725,000 $11,120,000 $ 31,845,000 10% Jan-99 14,000
Mar-99 19,000
Aug-01 7,000
Jul-03 143,000
Oct-04 6,000
Jul-13 402,000
Aug-18 451,000
---------
1,042,000
Massachusetts Financial
Services(1) 9,853,000 4,482,000 14,335,000 4% Feb-03 359,000
Wachovia Bank(1) 8,919,000 3,396,000 12,315,000 4% Dec-08 382,000
Hale & Dorr(1) 7,345,000 3,683,000 11,028,000 3% Jun-13 273,000
King & Spalding(1) 8,031,000 2,605,000 10,636,000 3% Mar-06 305,000
Deloitte & Touche(1) 7,102,000 1,693,000 8,795,000 3% Oct-99 145,000
Jun-08 85,000
---------
230,000
The New England Life(1) 5,170,000 2,736,000 7,906,000 2% Sep-08 218,000
Houghton Mifflin(1) 3,456,000 3,088,000 6,544,000 2% Feb-07 247,000
Fulbright & Jaworski(2) 4,371,000 1,734,000 6,105,000 2% Jun-10 123,000
First Union(2)(4) 5,566,000 196,000 5,762,000 2% Mar-99 50,000
Aug-00 23,000
Mar-01 23,000
Aug-01 46,000
Sep-02 22,000
Aug-08 46,000
Mar-09 23,000
Mar-10 47,000
Mar-11 48,000
Apr-14 4,000
---------
332,000
------------ ----------- ------------
$ 80,538,000 $34,733,000 $115,271,000 36% 3,511,000
============ =========== ============ ==
Total Portfolio $244,397,000 $75,264,000 $319,661,000
============ =========== ============
</TABLE>
<PAGE>
Cornerstone Properties Inc.
Top Ten Tenants Schedule
Footnotes
- ----------
(1) Net Lease.
(2) Gross Lease.
(3) Norwest Corporation includes Norwest Corporation and Norwest Bank Denver
N.A.
(4) The 332,000 square feet of space includes 115,000 square feet currently
leased to another tenant, which will be leased by First Union commencing
September 1, 1998.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Historical Occupancy Schedule
<PAGE>
Cornerstone Properties Inc.
Historical Occupancy Schedule
As of March 31, 1998
Total Bldg.
Sq. Ft. 1994 1995 1996 1997 Q1 1998
------- ---- ---- ---- ---- -------
One Norwest Center 1,188,000 96% 98% 99% 99% 99%
Norwest Center 1,118,000 100% 100% 100% 98% 98%
Washington Mutual Tower 1,155,000 97% 97% 97% 97% 99%
125 Summer Street 464,000 94% 100% 99% 99%
Tower 56 162,000 91% 97% 98% 100%
One Lincoln Centre 297,000 91% 96% 96%
Frick Building 341,000 85% 89% 89%
527 Madison 216,000 96% 100% 100%
191 Peachtree Street 1,221,000 95% 96%
Market Square 689,000 95% 96%
500 Boylston Street 715,000 100% 100%
222 Berkeley Street 531,000 100% 100%
Charlotte Plaza 613,000 94% 98%
200 Galleria 433,000 91% 95%
11 Canal Center 70,000 84% 97%
99 Canal Center 138,000 99% 99%
TransPotomac Plaza 5 96,000 99% 89%
60 State Street 823,000 98% 98%
Corporate 500 Centre 679,000 98%
------------------------------------------------------
10,949,000 98% 98% 97% 97% 98%
======================================================
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Net Rent and Net Effective Rent Schedule
<PAGE>
Cornerstone Properties Inc.
Net Rent and Net Effective Rent Schedule
As of March 31, 1998
The following tables show the average annual Base Rent and the average annual
Net Effective Rent (each as defined below) per square foot occupied for each of
the Properties for the periods presented during which such Property was owned by
the Company. "Base Rent" as used herein means Actual Rent less Recoveries. "Net
Effective Rent" as used herein means (i) Actual Rent determined for each year on
a straight-line basis through the term of the lease, less (ii) the amount of
operating expenses net of Recoveries and the amortization of deferred leasing
costs (tenant improvements, leasing commissions, takeover obligations and other
tenant inducements).
Average Annual Base Rent (per square foot occupied)
Total Bldg.
Sq. Ft. Q1 1998 1997 1996 1995 1994
------- ------- ---- ---- ---- ----
One Norwest Center 1,188,000 $ 12.25 $ 12.46 $ 12.08 $ 11.78 $ 11.61
Norwest Center 1,118,000 $ 18.72 $ 18.29 $ 17.94 $ 17.82 $ 17.25
Washington Mutual Tower 1,155,000 $ 15.82 $ 15.77 $ 15.98 $ 16.17 $ 15.27
125 Summer Street 464,000 $ 23.69 $ 21.27 $ 23.24 $ 22.48
Tower 56 162,000 $ 20.11 $ 22.76 $ 20.45
One Lincoln Centre 297,000 $ 20.57 $ 19.60 $ 18.56
Frick Building 341,000 $ 10.23 $ 10.50 $ 11.24
527 Madison 216,000 $ 31.38 $ 36.55 $ 35.47
191 Peachtree Street 1,221,000 $ 20.73 $ 21.07
Market Square 689,000 $ 27.46
500 Boylston Street 715,000 $ 26.06 $ 25.89
222 Berkeley Street 531,000 $ 16.81 $ 16.68
Charlotte Plaza 613,000 $ 11.38 $ 9.35
200 Galleria 433,000 $ 14.48 $ 12.92
11 Canal Center 70,000 $ 15.58 $ 14.11
99 Canal Center 138,000 $ 16.16 $ 14.49
TransPotomac Plaza 5 96,000 $ 12.32 $ 12.55
60 State Street 823,000 $ 15.01
Corporate 500 Centre 679,000 $ 22.05
---------- -------------------------------------------
Wtd Avg Occ - Portfolio 10,949,000 $ 18.38 $ 17.46 $ 16.99 $ 16.06 $ 14.65
========== ===========================================
Average Annual Net Effective Rents (per square foot occupied)
Total Bldg.
Sq. Ft. Q1 1998 1997 1996 1995 1994
------- ------- ---- ---- ---- ----
One Norwest Center 1,188,000 $ 11.40 $ 11.66 $ 10.80 $ 10.56 $ 10.25
Norwest Center 1,118,000 $ 17.38 $ 17.23 $ 17.43 $ 17.31 $ 17.00
Washington Mutual Tower 1,155,000 $ 12.28 $ 12.02 $ 11.80 $ 11.83 $ 11.03
125 Summer Street 464,000 $ 20.61 $ 20.00 $ 22.27 $ 23.33
Tower 56 162,000 $ 20.90 $ 21.56 $ 21.17
One Lincoln Centre 297,000 $ 20.15 $ 19.76 $ 19.70
Frick Building 341,000 $ 9.62 $ 10.47 $ 11.69
527 Madison 216,000 $ 34.16 $ 36.89 $ 30.99
191 Peachtree Street 1,221,000 $ 23.90 $ 24.26
Market Square 689,000 $ 28.39
500 Boylston Street 715,000 $ 26.21 $ 26.08
222 Berkeley Street 531,000 $ 17.01 $ 18.08
Charlotte Plaza 613,000 $ 11.48 $ 9.76
200 Galleria 433,000 $ 14.76 $ 13.52
11 Canal Center 70,000 $ 16.30 $ 14.72
99 Canal Center 138,000 $ 16.56 $ 15.00
TransPotomac Plaza 5 96,000 $ 16.91 $ 14.29
60 State Street 823,000 $ 19.13
Corporate 500 Centre 679,000 $ 23.69
---------- -------------------------------------------
Wtd Avg Occ - Portfolio 10,949,000 $ 18.59 $ 17.28 $ 15.43 $ 14.37 $ 12.69
========== ===========================================
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Lease Expiration Schedule
<PAGE>
Lease Expiration Schedule
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of March 31, 1998.
<TABLE>
<CAPTION>
Q2-Q4
PROPERTY 1998 1999 2000 2001
- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
One Norwest Center(1) Square feet expiring(3) 30,000 sf 61,000 sf 145,000 sf 55,000 sf
Straight-Line rent(4) $ 224,000 $ 568,000 $ 1,222,000 $ 592,000
Straight-Line rent per sq. ft. $ 7.47 $ 9.31 $ 8.43 $ 10.76
Recoveries(5) $ 183,000 $ 377,000 $ 891,000 $ 341,000
Full service St-Line rent(6) $ 407,000 $ 945,000 $ 2,113,000 $ 933,000
Full service St-Line rent per sq. ft. $ 13.57 $ 15.49 $ 14.57 $ 16.96
% Full service St-Lined rent 1.83% 4.25% 9.49% 4.19%
Asking market rent per sq. ft.(7) $ 22.00
No. of tenant leases expiring(8) 4 5 9 6
Norwest Center(1) Square feet expiring 37,000 sf 53,000 sf 104,000 sf 5,000 sf
Straight-Line rent $ 350,000 $ 785,000 $ 1,655,000 $ 82,000
Straight-Line rent per sq. ft. $ 9.46 $ 14.81 $ 15.91 $ 16.40
Recoveries $ 543,000 $ 748,000 $ 1,589,000 $ 72,000
Full service St-Line rent $ 893,000 $ 1,533,000 $ 3,244,000 $ 154,000
Full service St-Line rent per sq. ft. $ 24.14 $ 28.92 $ 31.19 $ 30.80
% Full service St-Lined rent 2.27% 3.90% 8.25% 0.39%
Asking market rent per sq. ft. $ 35.00
No. of tenant leases expiring 11 4 4 2
Washington Mutual Tower(2) Square feet expiring 118,000 sf 175,000 sf 46,000 sf 53,000 sf
Straight-Line rent $ 2,530,000 $ 3,208,000 $ 763,000 $1,157,000
Straight-Line rent per sq. ft. $ 21.44 $ 18.33 $ 16.59 $ 21.83
Recoveries $ 148,000 $ 146,000 $ 37,000 $ 35,000
Full service St-Line rent $ 2,678,000 $ 3,354,000 $ 800,000 $1,192,000
Full service St-Line rent per sq. ft. $ 22.69 $ 19.17 $ 17.39 $ 22.49
% Full service St-Lined rent 10.50% 13.15% 3.14% 4.67%
Asking market rent per sq. ft. $ 33.00
No. of tenant leases expiring 33 24 9 11
125 Summer Street(2) Square feet expiring 5,000 sf 171,000 sf 33,000 sf 3,000 sf
Straight-Line rent $ 114,000 $ 5,847,000 $ 1,105,000 $ 38,000
Straight-Line rent per sq. ft. $ 22.80 $ 34.19 $ 33.48 $ 12.67
Recoveries $ 34,000 $ 1,243,000 $ 136,000 $ 38,000
Full service St-Line rent $ 148,000 $ 7,090,000 $ 1,241,000 $ 76,000
Full service St-Line rent per sq. ft. $ 29.60 $ 41.46 $ 37.61 $ 25.33
% Full service St-Lined rent 0.90% 42.97% 7.52% 0.46%
Asking market rent per sq. ft. $ 41.00
No. of tenant leases expiring 6 5 6 2
Tower 56(2) Square feet expiring 10,000 sf 27,000 sf 17,000 sf 45,000 sf
Straight-Line rent $ 386,000 $ 1,192,000 $ 690,000 $1,878,000
Straight-Line rent per sq. ft. $ 38.60 $ 44.15 $ 40.59 $ 41.73
Recoveries $ 8,000 $ 15,000 $ 1,000 $ 16,000
Full service St-Line rent $ 394,000 $ 1,207,000 $ 691,000 $1,894,000
Full service St-Line rent per sq. ft. $ 39.40 $ 44.70 $ 40.65 $ 42.09
% Full service St-Lined rent 5.45% 16.71% 9.57% 26.22%
Asking market rent per sq. ft. $ 54.00
No. of tenant leases expiring 4 7 7 11
One Lincoln Centre(1) Square feet expiring 48,000 sf 48,000 sf 93,000 sf 3,000 sf
Straight-Line rent $ 983,000 $ 803,000 $ 1,968,000 $ 54,000
Straight-Line rent per sq. ft. $ 20.48 $ 16.73 $ 21.16 $ 18.00
Recoveries $ 326,000 $ 445,000 $ 727,000 $ 26,000
Full service St-Line rent $ 1,309,000 $ 1,248,000 $ 2,695,000 $ 80,000
Full service St-Line rent per sq. ft. $ 27.27 $ 26.00 $ 28.98 $ 26.67
% Full service St-Lined rent 16.08% 15.33% 33.10% 0.98%
Asking market rent per sq. ft. $ 30.00
No. of tenant leases expiring 10 8 13 1
Frick Building(2) Square feet expiring 12,000 sf 39,000 sf 74,000 sf 44,000 sf
Straight-Line rent $ 255,000 $ 815,000 $ 1,502,000 $ 832,000
Straight-Line rent per sq. ft. $ 21.25 $ 20.90 $ 20.30 $ 18.91
Recoveries $ 24,000 $ 18,000 $ 23,000 $ --
Full service St-Line rent $ 279,000 $ 833,000 $ 1,525,000 $ 832,000
Full service St-Line rent per sq. ft. $ 23.25 $ 21.36 $ 20.61 $ 18.91
% Full service St-Lined rent 4.48% 13.37% 24.47% 13.35%
Asking market rent per sq. ft. $ 22.00
No. of tenant leases expiring 10 17 19 9
<CAPTION>
PROPERTY 2002 2003 2004 2005
- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
One Norwest Center(1) Square feet expiring(3) 122,000 sf 159,000 sf 118,000 sf
Straight-Line rent(4) $ 1,137,000 $ 2,290,000 $ 1,339,000
Straight-Line rent per sq. ft. $ 9.32 $ 14.40 $ 11.35
Recoveries(5) $ 753,000 $ 1,004,000 $ 731,000
Full service St-Line rent(6) $ 1,890,000 $ 3,294,000 $ 2,070,000
Full service St-Line rent per sq. ft. $ 15.49 $ 20.72 $ 17.54
% Full service St-Lined rent 8.49% 14.80% 9.30%
Asking market rent per sq. ft.(7)
No. of tenant leases expiring(8) 12 4 2
Norwest Center(1) Square feet expiring 53,000 sf 178,000 sf 127,000 sf
Straight-Line rent $ 455,000 $ 2,725,000 $ 2,233,000
Straight-Line rent per sq. ft. $ 8.58 $ 15.31 $ 17.58
Recoveries $ 782,000 $ 2,751,000 $ 1,923,000
Full service St-Line rent $ 1,237,000 $ 5,476,000 $ 4,156,000
Full service St-Line rent per sq. ft. $ 23.34 $ 30.76 $ 32.72
% Full service St-Lined rent 3.15% 13.93% 10.57%
Asking market rent per sq. ft.
No. of tenant leases expiring 3 2 3
Washington Mutual Tower(2) Square feet expiring 106,000 sf 196,000 sf 294,000 sf 14,000 sf
Straight-Line rent $ 2,320,000 $ 3,999,000 $ 7,112,000 $ 275,000
Straight-Line rent per sq. ft. $ 21.89 $ 20.40 $ 24.19 $ 19.64
Recoveries $ 61,000 $ 267,000 $ 510,000 $ 5,000
Full service St-Line rent $ 2,381,000 $ 4,266,000 $ 7,622,000 $ 280,000
Full service St-Line rent per sq. ft. $ 22.46 $ 21.77 $ 25.93 $ 20.00
% Full service St-Lined rent 9.34% 16.73% 29.89% 1.10%
Asking market rent per sq. ft.
No. of tenant leases expiring 7 5 4 1
125 Summer Street(2) Square feet expiring 128,000 sf 24,000 sf 10,000 sf
Straight-Line rent $ 3,367,000 $ 469,000 $ 275,000
Straight-Line rent per sq. ft. $ 26.30 $ 19.54 $ 27.50
Recoveries $ 186,000 $ 262,000 $ 19,000
Full service St-Line rent $ 3,553,000 $ 731,000 $ 294,000
Full service St-Line rent per sq. ft. $ 27.76 $ 30.46 $ 29.40
% Full service St-Lined rent 21.53% 4.43% 1.78%
Asking market rent per sq. ft.
No. of tenant leases expiring 4 2 1
Tower 56(2) Square feet expiring 33,000 sf 15,000 sf 17,000 sf
Straight-Line rent $ 1,615,000 $ 705,000 $ 690,000
Straight-Line rent per sq. ft. $ 48.94 $ 47.00 $ 40.59
Recoveries $ 6,000 $ 10,000 $ 12,000
Full service St-Line rent $ 1,621,000 $ 715,000 $ 702,000
Full service St-Line rent per sq. ft. $ 49.12 $ 47.67 $ 41.29
% Full service St-Lined rent 22.44% 9.90% 9.72%
Asking market rent per sq. ft.
No. of tenant leases expiring 9 4 3
One Lincoln Centre(1) Square feet expiring 81,000 sf 14,000 sf
Straight-Line rent $ 1,751,000 $ 243,907
Straight-Line rent per sq. ft. $ 21.62 $ 17.42
Recoveries $ 741,000 $ 74,000
Full service St-Line rent $ 2,492,000 $ 317,907
Full service St-Line rent per sq. ft. $ 30.77 $ 22.71
% Full service St-Lined rent 30.61% 3.90%
Asking market rent per sq. ft.
No. of tenant leases expiring 7 4
Frick Building(2) Square feet expiring 37,000 sf 61,000 sf 11,000 sf
Straight-Line rent $ 685,000 $ 1,175,000 $ 195,000
Straight-Line rent per sq. ft. $ 18.51 $ 19.26 $ 17.73
Recoveries $ 1,000 $ 19,000 $ --
Full service St-Line rent $ 686,000 $ 1,194,000 $ 195,000
Full service St-Line rent per sq. ft. $ 18.54 $ 19.57 $ 17.73
% Full service St-Lined rent 11.01% 19.16% 3.13%
Asking market rent per sq. ft.
No. of tenant leases expiring 11 6 1
<CAPTION>
2008
and
PROPERTY 2006 2007 Beyond Total
- -------- ---- ---- ------ -----
<S> <C> <C> <C> <C> <C>
One Norwest Center(1) Square feet expiring(3) 76,000 sf 407,000 sf 1,173,000 sf
Straight-Line rent(4) $ 1,119,000 $ 6,432,000 $14,923,000
Straight-Line rent per sq. ft. $ 14.72 $ 15.80 $ 12.72
Recoveries(5) $ 478,000 $ 2,579,000 $ 7,337,000
Full service St-Line rent(6) $ 1,597,000 $ 9,011,000 $22,260,000
Full service St-Line rent per sq. ft. $ 21.01 $ 22.14 $ 18.98
% Full service St-Lined rent 7.17% 40.48% 100.00%
Asking market rent per sq. ft.(7)
No. of tenant leases expiring(8) 2 2 46
Norwest Center(1) Square feet expiring 16,000 sf 527,000 sf 1,100,000 sf
Straight-Line rent $ 318,000 $13,738,000 $22,341,000
Straight-Line rent per sq. ft. $ 19.88 $ 26.07 $ 20.31
Recoveries $ 246,000 $ 8,325,000 $16,979,000
Full service St-Line rent $ 564,000 $22,063,000 $39,320,000
Full service St-Line rent per sq. ft. $ 35.25 $ 41.87 $ 35.75
% Full service St-Lined rent 1.43% 56.11% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 2 32
Washington Mutual Tower(2) Square feet expiring 138,000 sf 1,140,000 sf
Straight-Line rent $ 2,653,000 $24,017,000
Straight-Line rent per sq. ft. $ 19.22 $ 21.07
Recoveries $ 276,000 $ 1,485,000
Full service St-Line rent $ 2,929,000 $25,502,000
Full service St-Line rent per sq. ft. $ 21.22 $ 22.37
% Full service St-Lined rent 11.49% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 95
125 Summer Street(2) Square feet expiring 85,000 sf 459,000 sf
Straight-Line rent $ 2,129,000 $13,344,000
Straight-Line rent per sq. ft. $ 25.05 $ 29.07
Recoveries $ 1,238,000 $ 3,156,000
Full service St-Line rent $ 3,367,000 $16,500,000
Full service St-Line rent per sq. ft. $ 39.61 $ 35.95
% Full service St-Lined rent 20.41% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 27
Tower 56(2) Square feet expiring 164,000 sf
Straight-Line rent $ 7,156,000
Straight-Line rent per sq. ft. $ 43.63
Recoveries $ 68,000
Full service St-Line rent $ 7,224,000
Full service St-Line rent per sq. ft. $ 44.05
% Full service St-Lined rent 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 45
One Lincoln Centre(1) Square feet expiring 287,000 sf
Straight-Line rent $ 5,802,907
Straight-Line rent per sq. ft. $ 20.22
Recoveries $ 2,339,000
Full service St-Line rent $ 8,141,907
Full service St-Line rent per sq. ft. $ 28.37
% Full service St-Lined rent 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 43
Frick Building(2) Square feet expiring 25,000 sf 303,000 sf
Straight-Line rent $ 661,000 $ 6,120,000
Straight-Line rent per sq. ft. $ 26.44 $ 20.20
Recoveries $ 27,000 $ 112,000
Full service St-Line rent $ 688,000 $ 6,232,000
Full service St-Line rent per sq. ft. $ 27.52 $ 20.57
% Full service St-Lined rent 11.04% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 3 76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Q2-Q4
PROPERTY 1998 1999 2000 2001 2002
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
No. 527 Madison(2) Square feet expiring 22,000 sf 2,000 sf 9,000 sf 79,000 sf
Straight-Line rent $1,146,000 $ 108,000 $ 380,000 $ 4,511,000
Straight-Line rent per sq. ft. $ 52.09 $ 54.00 $ 42.22 $ 57.10
Recoveries $ 123,000 $ 9,000 $ $ 459,000
Full service St-Line rent $1,269,000 $ 117,000 $ 380,000 $ 4,970,000
Full service St-Line rent per sq. ft. $ 57.68 $ 58.50 $ 42.22 $ 62.91
% Full service St-Lined rent 10.52% 0.97% 3.15% 41.21%
Asking market rent per sq. ft. $ 53.00
No. of tenant leases expiring 5 1 2 1
191 Peachtree Street(1) Square feet expiring 19,000 sf 2,000 sf 10,000 sf 142,000 sf 41,000 sf
Straight-Line rent $ 139,000 $ 23,000 $ 127,000 $ 2,688,000 $ 641,000
Straight-Line rent per sq. ft. $ 7.32 $ 11.50 $ 12.70 $ 18.93 $ 15.63
Recoveries $ 130,000 $ 10,000 $ 87,000 $ 1,234,000 $ 340,000
Full service St-Line rent $ 269,000 $ 33,000 $ 214,000 $ 3,922,000 $ 981,000
Full service St-Line rent per sq. ft. $ 14.16 $ 16.50 $ 21.40 $ 27.62 $ 23.93
% Full service St-Lined rent 0.72% 0.09% 0.57% 10.48% 2.62%
Asking market rent per sq. ft. $ 26.00
No. of tenant leases expiring 5 1 5 7 5
Market Square(2) Square feet expiring 57,000 sf 7,000 sf 50,000 sf 92,000 sf 10,000 sf
Straight-Line rent $1,892,000 $ 158,000 $ 1,414,000 $ 3,572,000 $ 318,000
Straight-Line rent per sq. ft. $ 33.19 $ 22.57 $ 28.28 $ 38.83 $ 31.80
Recoveries $ 25,000 $ -- $ 345,000 $ 638,000 $ 12,000
Full service St-Line rent $1,917,000 $ 158,000 $ 1,759,000 $ 4,210,000 $ 330,000
Full service St-Line rent per sq. ft. $ 33.63 $ 22.57 $ 35.18 $ 45.76 $ 33.00
% Full service St-Lined rent 6.67% 0.55% 6.12% 14.66% 1.15%
Asking market rent per sq. ft. $ 44.00
No. of tenant leases expiring 5 3 7 8 4
500 Boylston(1) Square feet expiring 73,000 sf 16,000 sf
Straight-Line rent $2,438,000 $ 300,000
Straight-Line rent per sq. ft. $ 33.40 $ 18.75
Recoveries $ 896,000 $ 83,000
Full service St-Line rent $3,334,000 $ 383,000
Full service St-Line rent per sq. ft. $ 45.67 $ 23.94
% Full service St-Lined rent 12.16% 1.40%
Asking market rent per sq. ft. $ 42.00
No. of tenant leases expiring 4 3
222 Berkeley Street(1) Square feet expiring 18,000 sf 50,000 sf 70,000 sf 114,000 sf
Straight-Line rent $ 337,000 $ 839,000 $ 1,980,000 $ 2,190,000
Straight-Line rent per sq. ft. $ 18.72 $ 16.78 $ 28.29 $ 19.21
Recoveries $ 182,000 $ 627,000 $ 773,000 $ 1,392,000
Full service St-Line rent $ 519,000 $1,466,000 $ 2,753,000 $ 3,582,000
Full service St-Line rent per sq. ft. $ 28.83 $ 29.32 $ 39.33 $ 31.42
% Full service St-Lined rent 3.24% 9.15% 17.19% 22.36%
Asking market rent per sq. ft. $ 42.00
No. of tenant leases expiring 5 5 6 7
Charlotte Plaza(2) Square feet expiring 29,000 sf 33,000 sf 53,000 sf 69,000 sf 75,000 sf
Straight-Line rent $ 465,000 $ 648,000 $ 961,000 $ 1,176,000 $ 1,377,000
Straight-Line rent per sq. ft. $ 16.03 $ 19.64 $ 18.13 $ 17.04 $ 18.36
Recoveries $ 15,000 $ 6,000 $ 10,000 $ 12,000 $ 19,000
Full service St-Line rent $ 480,000 $ 654,000 $ 971,000 $ 1,188,000 $ 1,396,000
Full service St-Line rent per sq. ft. $ 16.55 $ 19.82 $ 18.32 $ 17.22 $ 18.61
% Full service St-Lined rent 4.36% 5.94% 8.81% 10.78% 12.67%
Asking market rent per sq. ft. $ 22.00
No. of tenant leases expiring 9 6 4 1 11
200 Galleria(2) Square feet expiring 38,000 sf 24,000 sf 68,000 sf 56,000 sf 157,000 sf
Straight-Line rent $ 731,000 $ 488,000 $ 1,427,000 $ 1,158,000 $ 3,320,000
Straight-Line rent per sq. ft. $ 19.24 $ 20.33 $ 20.99 $ 20.68 $ 21.15
Recoveries $ 33,000 $ 18,000 $ 59,000 $ 17,000 $ 155,000
Full service St-Line rent $ 764,000 $ 506,000 $ 1,486,000 $ 1,175,000 $ 3,475,000
Full service St-Line rent per sq. ft. $ 20.11 $ 21.08 $ 21.85 $ 20.98 $ 22.13
% Full service St-Lined rent 8.50% 5.63% 16.53% 13.07% 38.67%
Asking market rent per sq. ft. $ 27.00
No. of tenant leases expiring 11 4 14 12 9
<CAPTION>
PROPERTY 2003 2004 2005 2006 2007
- -------- ---- ---- ---- ---- ----
<S> <C>
No. 527 Madison(2) Square feet expiring 29,000 sf 8,000 sf* 6,000 sf 27,000 sf 33,000 sf
Straight-Line rent $ 1,162,000 $ 1,140,000 $ 277,000 $ 1,119,000 $ 1,613,000
Straight-Line rent per sq. ft. $ 40.07 $ 142.50 $ 46.17 $ 41.44 $ 48.88
Recoveries $ -- $ 6,000 $ -- $ -- $ 7,000
Full service St-Line rent $ 1,162,000 $ 1,146,000 $ 277,000 $ 1,119,000 $ 1,620,000
Full service St-Line rent per sq. ft. $ 40.07 $ 143.25 $ 46.17 $ 41.44 $ 49.09
% Full service St-Lined rent 9.64% 9.50% 2.30% 9.28% 13.43%
Asking market rent per sq. ft.
No. of tenant leases expiring 3 1 1 4 2
191 Peachtree Street(1) Square feet expiring 3,000 sf 34,000 sf 17,000 sf 432,000 sf
Straight-Line rent $ 49,000 $ 762,000 $ 292,000 $11,964,000
Straight-Line rent per sq. ft. $ 16.33 $ 22.41 $ 17.18 $ 27.69
Recoveries $ 13,000 $ 251,000 $ 143,000 $ 3,752,000
Full service St-Line rent $ 62,000 $ 1,013,000 $ 435,000 $15,716,000
Full service St-Line rent per sq. ft. $ 20.67 $ 29.79 $ 25.59 $ 36.38
% Full service St-Lined rent 0.17% 2.71% 1.16% 41.99%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 3 5 3
Market Square(2) Square feet expiring 17,000 sf 33,000 sf 174,000 sf 47,000 sf 10,000 sf
Straight-Line rent $ 637,000 $ 1,193,000 $ 6,154,000 $ 1,695,000 $ 363,000
Straight-Line rent per sq. ft. $ 37.47 $ 36.15 $ 35.37 $ 36.06 $ 36.30
Recoveries $ 103,000 $ 197,000 $ 1,881,000 $ 764,000 $ 6,000
Full service St-Line rent $ 740,000 $ 1,390,000 $ 8,035,000 $ 2,459,000 $ 369,000
Full service St-Line rent per sq. ft. $ 43.53 $ 42.12 $ 46.18 $ 52.32 $ 36.90
% Full service St-Lined rent 2.58% 4.84% 27.97% 8.56% 1.28%
Asking market rent per sq. ft.
No. of tenant leases expiring 4 4 4 2 3
500 Boylston(1) Square feet expiring 400,000 sf 10,000 sf 3,000 sf
Straight-Line rent $10,682,000 $ 129,000 $ 98,000
Straight-Line rent per sq. ft. $ 26.71 $ 12.90 $ 32.67
Recoveries $ 4,849,000 $ 121,000 $ 30,000
Full service St-Line rent $15,531,000 $ 250,000 $ 128,000
Full service St-Line rent per sq. ft. $ 38.83 $ 25.00 $ 42.67
% Full service St-Lined rent 56.65% 0.91% 0.47%
Asking market rent per sq. ft.
No. of tenant leases expiring 3 1 1
222 Berkeley Street(1) Square feet expiring 260,000 sf
Straight-Line rent $ 3,758,000
Straight-Line rent per sq. ft. $ 14.45
Recoveries $ 3,234,000
Full service St-Line rent $ 6,992,000
Full service St-Line rent per sq. ft. $ 26.89
% Full service St-Lined rent 43.65%
Asking market rent per sq. ft.
No. of tenant leases expiring 3
Charlotte Plaza(2) Square feet expiring 20,000 sf 111,000 sf 11,000 sf 1,000 sf 10,000 sf
Straight-Line rent $ 354,000 $ 2,267,000 $ 231,000 $ 24,000 $ 214,000
Straight-Line rent per sq. ft. $ 17.70 $ 20.42 $ 21.00 $ 24.00 $ 21.40
Recoveries $ 15,000 $ 30,000 $ -- $ -- $ --
Full service St-Line rent $ 369,000 $ 2,297,000 $ 231,000 $ 24,000 $ 214,000
Full service St-Line rent per sq. ft. $ 18.45 $ 20.69 $ 21.00 $ 24.00 $ 21.40
% Full service St-Lined rent 3.35% 20.85% 2.10% 0.22% 1.94%
Asking market rent per sq. ft.
No. of tenant leases expiring 3 3 1 1 1
200 Galleria(2) Square feet expiring 54,000 sf 3,000 sf 11,000 sf
Straight-Line rent $ 1,232,000 $ 75,000 $ 262,000
Straight-Line rent per sq. ft. $ 22.81 $ 25.00 $ 23.82
Recoveries $ $ $ 12,000
Full service St-Line rent $ 1,232,000 $ 75,000 $ 274,000
Full service St-Line rent per sq. ft. $ 22.81 $ 25.00 $ 24.91
% Full service St-Lined rent 13.71% 0.83% 3.05%
Asking market rent per sq. ft.
No. of tenant leases expiring 5 1 1
<CAPTION>
2008
and
PROPERTY Beyond Total
- -------- ------ -----
<S> <C> <C> <C>
No. 527 Madison(2) Square feet expiring 215,000 sf
Straight-Line rent $11,456,000
Straight-Line rent per sq. ft. $ 53.28
Recoveries $ 604,000
Full service St-Line rent $12,060,000
Full service St-Line rent per sq. ft. $ 56.09
% Full service St-Lined rent 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 20
191 Peachtree Street(1) Square feet expiring 467,000 sf 1,167,000 sf
Straight-Line rent $10,707,000 $27,392,000
Straight-Line rent per sq. ft. $ 22.93 $ 23.47
Recoveries $ 4,072,000 $10,032,000
Full service St-Line rent $14,779,000 $37,424,000
Full service St-Line rent per sq. ft. $ 31.65 $ 32.07
% Full service St-Lined rent 39.49% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 2 37
Market Square(2) Square feet expiring 166,000 sf 663,000 sf
Straight-Line rent $ 5,501,000 $22,897,000
Straight-Line rent per sq. ft. $ 33.14 $ 34.54
Recoveries $ 1,858,000 $ 5,829,000
Full service St-Line rent $ 7,359,000 $28,726,000
Full service St-Line rent per sq. ft. $ 44.33 $ 43.33
% Full service St-Lined rent 25.62% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 7 51
500 Boylston(1) Square feet expiring 213,000 sf 715,000 sf
Straight-Line rent $ 5,102,000 $18,749,000
Straight-Line rent per sq. ft. $ 23.95 $ 26.22
Recoveries $ 2,688,000 $ 8,667,000
Full service St-Line rent $ 7,790,000 $27,416,000
Full service St-Line rent per sq. ft. $ 36.57 $ 38.34
% Full service St-Lined rent 28.41% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 13
222 Berkeley Street(1) Square feet expiring 19,000 sf 531,000 sf
Straight-Line rent $ 472,000 $ 9,576,000
Straight-Line rent per sq. ft. $ 24.84 $ 18.03
Recoveries $ 233,000 $ 6,441,000
Full service St-Line rent $ 705,000 $16,017,000
Full service St-Line rent per sq. ft. $ 37.11 $ 30.16
% Full service St-Lined rent 4.40% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 2 28
Charlotte Plaza(2) Square feet expiring 189,000 sf 601,000 sf
Straight-Line rent $ 3,001,000 $10,718,000
Straight-Line rent per sq. ft. $ 15.88 $ 17.83
Recoveries $ 191,000 $ 298,000
Full service St-Line rent $ 3,192,000 $11,016,000
Full service St-Line rent per sq. ft. $ 16.89 $ 18.33
% Full service St-Lined rent 28.98% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 6 46
200 Galleria(2) Square feet expiring 411,000 sf
Straight-Line rent $ 8,693,000
Straight-Line rent per sq. ft. $ 21.15
Recoveries $ 294,000
Full service St-Line rent $ 8,987,000
Full service St-Line rent per sq. ft. $ 21.87
% Full service St-Lined rent 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Q2-Q4
PROPERTY 1998 1999 2000 2001 2002
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
11 Canal Center(2) Square feet expiring 3,000 sf 2,000 sf 2,000 sf 5,000 sf
Straight-Line rent $ 67,000 $ 40,000 $ 37,000 $ 120,000
Straight-Line rent per sq. ft. $ 22.33 $ 20.00 $ 18.50 $ 24.00
Recoveries $ -- $ 1,000 $ -- $ --
Full service St-Line rent $ 67,000 $ 41,000 $ 37,000 $ 120,000
Full service St-Line rent per sq. ft. $ 22.33 $ 20.50 $ 18.50 $ 24.00
% Full service St-Lined rent 4.00% 2.45% 2.21% 7.17%
Asking market rent per sq. ft. $ 27.00
No. of tenant leases expiring 1 1 1 1
99 Canal Center(2) Square feet expiring 4,000 sf 5,000 sf 27,000 sf 61,000 sf 22,000 sf
Straight-Line rent $ 54,000 $ 78,000 $ 567,000 $ 1,569,000 $ 555,000
Straight-Line rent per sq. ft. $ 13.50 $ 15.60 $ 21.00 $ 25.72 $ 25.23
Recoveries $ -- $ 6,000 $ 13,000 $ 80,000 $ 18,000
Full service St-Line rent $ 54,000 $ 84,000 $ 580,000 $ 1,649,000 $ 573,000
Full service St-Line rent per sq. ft. $ 13.50 $ 16.80 $ 21.48 $ 27.03 $ 26.05
% Full service St-Lined rent 1.59% 2.48% 17.09% 48.60% 16.89%
Asking market rent per sq. ft. $ 27.00
No. of tenant leases expiring 2 2 2 5 2
Transpotomac Plaza(2) Square feet expiring 3,000 sf 2,000 sf 2,000 sf 15,000 sf 26,000 sf
Straight-Line rent $ 73,000 $ 43,000 $ 33,000 $ 275,000 $ 518,000
Straight-Line rent per sq. ft. $ 24.33 $ 21.50 $ 16.50 $ 18.33 $ 19.92
Recoveries $ -- $ -- $ -- $ -- $ 1,000
Full service St-Line rent $ 73,000 $ 43,000 $ 33,000 $ 275,000 $ 519,000
Full service St-Line rent per sq. ft. $ 24.33 $ 21.50 $ 16.50 $ 18.33 $ 19.96
% Full service St-Lined rent 4.15% 2.44% 1.88% 15.63% 29.49%
Asking market rent per sq. ft. $ 24.00
No. of tenant leases expiring 1 1 1 1 2
60 State Street(2) Square feet expiring 26,000 sf 34,000 sf 3,000 sf 29,000 sf 153,000 sf
Straight-Line rent $ 593,000 $ 809,000 $ 74,000 $ 872,000 $ 3,306,000
Straight-Line rent per sq. ft. $ 22.81 $ 23.79 $ 24.67 $ 30.07 $ 21.61
Recoveries $ 141,000 $ 117,000 $ 7,000 $ 51,000 $ 1,629,000
Full service St-Line rent $ 734,000 $ 926,000 $ 81,000 $ 923,000 $ 4,935,000
Full service St-Line rent per sq. ft. $ 28.23 $ 27.24 $ 27.00 $ 31.83 $ 32.25
% Full service St-Lined rent 2.72% 3.43% 0.30% 3.42% 18.27%
Asking market rent per sq. ft. $ 44.00
No. of tenant leases expiring 5 9 1 3 6
Corporate 500(1) Square feet expiring 52,000 sf 8,000 sf 34,000 sf 39,000 sf 68,000 sf
Straight-Line rent $ 1,130,000 $ 386,000 $ 752,000 $ 1,010,000 $ 1,413,000
Straight-Line rent per sq. ft. $ 21.73 $ 48.25 $ 22.12 $ 25.90 $ 20.78
Recoveries $ 335,000 $ 60,000 $ 275,000 $ 301,000 $ 374,000
Full service St-Line rent $ 1,465,000 $ 446,000 $ 1,027,000 $ 1,311,000 $ 1,787,000
Full service St-Line rent per sq. ft. $ 28.17 $ 55.75 $ 30.21 $ 33.62 $ 26.28
% Full service St-Lined rent 7.71% 2.35% 5.41% 6.90% 9.41%
Asking market rent per sq. ft. $ 32.00
No. of tenant leases expiring 9 3 4 5 6
-------------------------------------------------------------------------------------------------------------
All Properties Total Square feet expiring(3) 601,000 sf 760,000 sf 770,000 sf 862,000 sf 1,231,000 sf
Straight-Line rent(4) $13,840,000 $17,165,000 $ 14,680,000 $23,481,000 $ 25,088,000
Straight-Line rent per sq. ft. $ 23.03 $ 22.59 $ 19.06 $ 27.24 $ 20.38
Recoveries(5) $ 3,146,000 $ 3,928,000 $ 4,201,000 $ 4,093,000 $ 6,470,000
Full service St-Line rent(6) $16,986,000 $21,093,000 $ 18,881,000 $27,574,000 $ 31,558,000
Full service St-Line rent per sq. ft. $ 28.26 $ 27.75 $ 24.52 $ 31.99 $ 25.64
% Full service St-Lined rent 5.31% 6.60% 5.91% 8.63% 9.87%
Asking market rent per sq. ft.(7) $ 33.29
No. of tenant leases expiring(8) 139 109 108 92 106
<CAPTION>
PROPERTY 2003 2004 2005 2006 2007
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
11 Canal Center(2) Square feet expiring 14,000 sf 42,000 sf
Straight-Line rent $ 366,000 $ 1,042,000
Straight-Line rent per sq. ft. $ 26.14 $ 24.81
Recoveries $ -- $ --
Full service St-Line rent $ 366,000 $ 1,042,000
Full service St-Line rent per sq. ft. $ 26.14 $ 24.81
% Full service St-Lined rent 21.88% 62.28%
Asking market rent per sq. ft.
No. of tenant leases expiring 2 1
99 Canal Center(2) Square feet expiring 16,000 sf
Straight-Line rent $ 400,000
Straight-Line rent per sq. ft. $ 25.00
Recoveries $ 11,000
Full service St-Line rent $ 411,000
Full service St-Line rent per sq. ft. $ 25.69
% Full service St-Lined rent 12.11%
Asking market rent per sq. ft.
No. of tenant leases expiring 4
Transpotomac Plaza(2) Square feet expiring 8,000 sf 18,000 sf
Straight-Line rent $ 179,000 $ 432,000
Straight-Line rent per sq. ft. $ 22.38 $ 24.00
Recoveries $ -- $ --
Full service St-Line rent $ 179,000 $ 432,000
Full service St-Line rent per sq. ft. $ 22.38 $ 24.00
% Full service St-Lined rent 10.17% 24.55%
Asking market rent per sq. ft.
No. of tenant leases expiring 2 2
60 State Street(2) Square feet expiring 90,000 sf 96,000 sf 36,000 sf 32,000 sf
Straight-Line rent $ 2,061,000 $ 2,853,000 $ 1,085,000 $ 695,000
Straight-Line rent per sq. ft. $ 22.90 $ 29.72 $ 30.14 $ 21.72
Recoveries $ 159,000 $ 517,000 $ 57,000 $ 31,000
Full service St-Line rent $ 2,220,000 $ 3,370,000 $ 1,142,000 $ 726,000
Full service St-Line rent per sq. ft. $ 24.67 $ 35.10 $ 31.72 $ 22.69
% Full service St-Lined rent 8.22% 12.48% 4.23% 2.69%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 8 2 3
Corporate 500(1) Square feet expiring 132,000 sf 14,000 sf 136,000 sf 43,000 sf
Straight-Line rent $ 2,800,000 $ 275,000 $ 3,132,000 $ 924,000
Straight-Line rent per sq. ft. $ 21.21 $ 19.64 $ 23.03 $ 21.49
Recoveries $ 1,069,000 $ 115,000 $ 1,059,000 $ 288,000
Full service St-Line rent $ 3,869,000 $ 390,000 $ 4,191,000 $ 1,212,000
Full service St-Line rent per sq. ft. $ 29.31 $ 27.86 $ 30.82 $ 28.19
% Full service St-Lined rent 20.36% 2.05% 22.06% 6.38%
Asking market rent per sq. ft.
No. of tenant leases expiring 7 1 1 2
-------------------------------------------------------------------------------------------------------------
All Properties Total Square feet expiring(3) 1,408,000 sf 884,000 sf 246,000 sf 706,000 sf 690,000 sf
Straight-Line rent(4) $ 30,983,907 $20,442,000 $ 7,870,000 $19,599,000 $13,572,000
Straight-Line rent per sq. ft. $ 22.01 $ 23.12 $ 31.99 $ 27.76 $ 19.67
Recoveries(5) $ 10,606,000 $ 4,413,000 $ 2,048,000 $ 5,890,000 $ 4,377,000
Full service St-Line rent(6) $ 41,589,907 $24,855,000 $ 9,918,000 $25,489,000 $17,949,000
Full service St-Line rent per sq. ft. $ 29.54 $ 28.12 $ 40.32 $ 36.10 $ 26.01
% Full service St-Lined rent 13.01% 7.78% 3.10% 7.97% 5.62%
Asking market rent per sq. ft.(7)
No. of tenant leases expiring(8) 58 37 15 15 24
<CAPTION>
2008
and
PROPERTY Beyond Total
- -------- ------ -----
<S> <C> <C> <C>
11 Canal Center(2) Square feet expiring 68,000 sf
Straight-Line rent $ 1,672,000
Straight-Line rent per sq. ft. $ 24.59
Recoveries $ 1,000
Full service St-Line rent $ 1,673,000
Full service St-Line rent per sq. ft. $ 24.60
% Full service St-Lined rent 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 7
99 Canal Center(2) Square feet expiring 2,000 sf 137,000 sf
Straight-Line rent $ 42,000 $ 3,265,000
Straight-Line rent per sq. ft. $ 21.00 $ 23.83
Recoveries $ -- $ 128,000
Full service St-Line rent $ 42,000 $ 3,393,000
Full service St-Line rent per sq. ft. $ 21.00 $ 24.77
% Full service St-Lined rent 1.24% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 18
Transpotomac Plaza(2) Square feet expiring 9,000 sf 83,000 sf
Straight-Line rent $ 206,000 $ 1,759,000
Straight-Line rent per sq. ft. $ 22.89 $ 21.19
Recoveries $ -- $ 1,000
Full service St-Line rent $ 206,000 $ 1,760,000
Full service St-Line rent per sq. ft. $ 22.89 $ 21.20
% Full service St-Lined rent 11.70% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 1 11
60 State Street(2) Square feet expiring 308,000 sf 807,000 sf
Straight-Line rent $ 7,932,000 $ 20,280,000
Straight-Line rent per sq. ft. $ 25.75 $ 25.13
Recoveries $ 4,020,000 $ 6,729,000
Full service St-Line rent $ 11,952,000 $ 27,009,000
Full service St-Line rent per sq. ft. $ 38.81 $ 33.47
% Full service St-Lined rent 44.25% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 3 41
Corporate 500(1) Square feet expiring 108,000 sf 634,000 sf
Straight-Line rent $ 2,414,000 $ 14,236,000
Straight-Line rent per sq. ft. $ 22.35 $ 22.45
Recoveries $ 888,000 $ 4,764,000
Full service St-Line rent $ 3,302,000 $ 19,000,000
Full service St-Line rent per sq. ft. $ 30.57 $ 29.97
% Full service St-Lined rent 17.38% 100.00%
Asking market rent per sq. ft.
No. of tenant leases expiring 2 40
-------------------------------------------------------------------
All Properties Total Square feet expiring(3) 2,500,000 sf 10,658,000 sf
Straight-Line rent(4) $ 57,676,000 $244,396,907
Straight-Line rent per sq. ft. $ 23.07 $ 22.93
Recoveries(5) $ 26,092,000 $ 75,264,000
Full service St-Line rent(6) $ 83,768,000 $319,660,907
Full service St-Line rent per sq. ft. $ 33.51 $ 29.99
% Full service St-Lined rent 26.21% 100.00%
Asking market rent per sq. ft.(7)
No. of tenant leases expiring(8) 30 733
</TABLE>
* Includes 4,605 square feet of retail space leased to the Gap at a base
rent of $1,001,028 and recoveries of $5,524, totalling to a full service
rent of $1,006,552.
<PAGE>
Cornerstone Properties Inc.
Lease Expiration Schedule
Footnotes
- ----------
(1) Net Lease building.
(2) Gross Lease building.
(3) The total square footage expiring in any particular year.
(4) Straight-line rent is the annual average of all lease payments required to
be made through the term of the lease as required under Generally Accepted
Accounting Principles.
(5) The actual recovery of operating expenses annualized as of March 31, 1998
in net lease buildings and the recovery of operating expense escalations
annualized in gross lease buildings.
(6) Full Service Straight-Line Rent is Straight-Line Rent plus recoveries.
(7) Asking market rent is the average initially quoted rent to prospective
tenants in each building. All market rents shown are on full service
basis.
(8) The number of tenant leases expiring in each year.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Tenant Retention Schedule
<PAGE>
Cornerstone Properties Inc.
Tenant Retention Schedule
As of March 31, 1998
The attached table sets forth the Company's tenant retention on expiring leases
since January 1, 1994. The analysis is based upon the percentage of expiring
leases in the applicable building with a tenant or subtenant being retained in
the expiring space, or an existing tenant expanding into the expiring space. A
tenant's lease is added to the retention schedule at the time a lease extension
is signed with the tenant, or the tenant notifies the Company of an option being
exercised.
<TABLE>
<CAPTION>
1994 1995 1996 1997
------------------------ ------------------------ ------------------------ --------------------------
sq ft sq ft sq ft sq ft sq ft sq ft sq ft sq ft
retained expir. ret % retained expir. ret % retained expir. ret % retained expir. ret %
------------------------ ------------------------ ------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Norwest 93,962 94,981 99% 64,627 71,364 91% 43,601 72,903 60% 266,021 313,612 85%
Norwest 16,293 26,317 62% 22,762 23,792 96% 4,336 9,777 44% 205,749 234,260 88%
WMT 127,334 153,645 83% 29,547 44,742 66% 86,956 106,250 82% 182,194 207,738 88%
125 Summer 95,816 96,658 99% 41,252 62,218 66%
Tower 56 46,003 53,762 86% 37,027 50,679 73%
One Lincoln Centre 35,320 42,099 84%
Frick Building 99,570 115,743 86%
527 Madison 5,980 20,587 29%
191 Peachtree Street -- -- --
Market Square -- -- --
500 Boylston Street -- 3,005 0%
222 Berkeley Street -- -- --
Charlotte Plaza 2,974 6,390 47%
200 Galleria 10,672 21,725 49%
11 Canal Center -- 8,889 0%
99 Canal Center -- -- -
TransPotomac Plaza 5 -- -- -
60 State Street -- -- -
Corporate 500 Centre -- -- -
------------------------ ------------------------ ------------------------ --------------------------
Weighted 237,589 274,943 86% 116,936 139,898 84% 276,712 339,350 82% 886,759 1,086,945 82%
</TABLE>
YTD 1998 (Q1)
------------------------
sq ft sq ft
retained expir. ret %
------------------------
One Norwest 23,097 26,829 86%
Norwest 43,401 50,312 86%
WMT 86,211 86,211 100%
125 Summer 92,588 94,729 98%
Tower 56 10,737 10,737 100%
One Lincoln Centre 13,007 16,434 79%
Frick Building 2,994 5,893 51%
527 Madison 344 344 100%
191 Peachtree Street 3,739 3,739 100%
Market Square 11,837 11,837 100%
500 Boylston Street -- -- --
222 Berkeley Street 7,697 7,697 100%
Charlotte Plaza 29,565 29,565 100%
200 Galleria 26,493 26,493 100%
11 Canal Center -- -- --
99 Canal Center -- 1,760 0%
TransPotomac Plaza 5 6,745 17,185 39%
60 State Street -- -- --
Corporate 500 Centre 4,657 23,274 20%
------------------------
Weighted 363,112 413,039 88%
Five year total 84.1%
=====
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Leasing Costs and Capital Expenditures
<PAGE>
Incremental Revenue Generating Leasing Costs and Capital Expenditures
- --------------------------------------------------------------------------------
The following table shows Historical Incremental Revenue Generating Leasing
Costs, which are the leasing costs (tenant improvements and leasing commissions)
required to lease (i) first generation space on development properties and (ii)
space which was vacant at the time of the acquisition of a property which will
increase the overall return on the property. Additionally, the table shows
Historical Incremental Revenue Generating Capital Expenditures, which are
Capital Expenditures expended to increase the profitability of the building
either through the generation of higher earnings capability, or by improving
building system efficiency, thus producing lower operating expenses
prospectively.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD 1998 1997 1996 1995 1994 Total
<S> <C> <C> <C> <C> <C> <C>
One Norwest Center
Total Tenant Lease Costs 17,216 -- -- -- -- 17,216
Total Square Feet Leased 1,497 -- -- -- -- 1,497
Total Per Square Foot 11.50 -- -- -- -- 11.50
Capital Expenditures -- -- -- -- -- --
Norwest Center
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
Washington Mutual Tower
Total Tenant Lease Costs -- 404,988 643,235 -- -- 1,048,223
Total Square Feet Leased -- 69,727 146,517 -- -- 216,244
Total Per Square Foot -- 5.81 4.39 -- -- 4.85
Capital Expenditures -- 88,401 25,500 135,194 102,567 351,662
125 Summer Street
Total Tenant Lease Costs -- -- 369,727 -- -- 369,727
Total Square Feet Leased -- -- 33,136 -- -- 33,136
Total Per Square Foot -- -- 11.16 -- -- 11.16
Capital Expenditures -- -- -- -- -- --
Tower 56
Total Tenant Lease Costs -- -- 174,266 -- -- 174,266
Total Square Feet Leased -- -- 7,115 -- -- 7,115
Total Per Square Foot -- -- 24.49 -- -- 24.49
Capital Expenditures -- -- -- -- -- --
One Lincoln Centre
Total Tenant Lease Costs 121,588 261,538 9,706 -- -- 392,832
Total Square Feet Leased 6,021 11,816 1,941 -- -- 19,778
Total Per Square Foot 20.19 22.13 5.00 -- -- 19.86
Capital Expenditures 25,298 61,877 -- -- -- 87,175
Frick Building
Total Tenant Lease Costs 5,351 457,688 -- -- -- 463,039
Total Square Feet Leased 597 25,353 -- -- -- 25,950
Total Per Square Foot 8.96 18.05 -- -- -- 17.84
Capital Expenditures 3,753 88,073 -- -- -- 91,826
527 Madison Avenue
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
191 Peachtree Street
Total Tenant Lease Costs 48,070 -- -- -- -- 48,070
Total Square Feet Leased 4,467 -- -- -- -- 4,467
Total Per Square Foot 10.76 -- -- -- -- 10.76
Capital Expenditures -- -- -- -- -- --
Market Square
Total Tenant Lease Costs 446,660 -- -- -- -- 446,660
Total Square Feet Leased 10,054 -- -- -- -- 10,054
Total Per Square Foot 44.43 -- -- -- -- 44.43
Capital Expenditures -- -- -- -- -- --
500 Boylston Street
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
</TABLE>
<PAGE>
Incremental Revenue Generating Leasing Costs and Capital Expenditures
- --------------------------------------------------------------------------------
The following table shows Historical Incremental Revenue Generating Leasing
Costs, which are the leasing costs (tenant improvements and leasing commissions)
required to lease (i) first generation space on development properties and (ii)
space which was vacant at the time of the acquisition of a property which will
increase the overall return on the property. Additionally, the table shows
Historical Incremental Revenue Generating Capital Expenditures, which are
Capital Expenditures expended to increase the profitability of the building
either through the generation of higher earnings capability, or by improving
building system efficiency, thus producing lower operating expenses
prospectively.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD 1998 1997 1996 1995 1994 Total
<S> <C> <C> <C> <C> <C> <C>
222 Berkeley Street
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
Charlotte Plaza
Total Tenant Lease Costs 120,398 -- -- -- -- 120,398
Total Square Feet Leased 26,820 -- -- -- -- 26,820
Total Per Square Foot 4.49 -- -- -- -- 4.49
Capital Expenditures 81,354 -- -- -- -- 81,354
200 Galleria
Total Tenant Lease Costs 65,279 24,132 -- -- -- 89,411
Total Square Feet Leased 6,515 2,139 -- -- -- 8,654
Total Per Square Foot 10.02 11.28 -- -- -- 10.33
Capital Expenditures -- -- -- -- -- --
11 Canal Center
Total Tenant Lease Costs 183,125 -- -- -- -- 183,125
Total Square Feet Leased 8,889 -- -- -- -- 8,889
Total Per Square Foot 20.60 -- -- -- -- 20.60
Capital Expenditures 10,480 102,986 -- -- -- 113,466
99 Canal Center
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures 21,012 51,419 -- -- -- 72,431
TransPotomac Plaza 5
Total Tenant Lease Costs 24,968 -- -- -- -- 24,968
Total Square Feet Leased 4,453 -- -- -- -- 4,453
Total Per Square Foot 5.61 -- -- -- -- 5.61
Capital Expenditures -- 62,579 -- -- -- 62,579
60 State Street
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
Corporate 500 Centre
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
Minority Interest*
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
Total Cornerstone Portfolio
Total Tenant Lease Costs 1,032,655 1,148,346 1,196,934 -- -- 3,377,935
Total Square Feet Leased 69,313 109,035 188,709 -- -- 367,057
Total Per Square Foot Leased 14.90 10.53 6.34 -- -- 9.20
Capital Expenditures 141,897 455,335 25,500 135,194 102,567 860,493
Weighted Average Square
Footage Owned** 2,571,000 5,348,000 3,895,680 3,263,769 3,239,636 18,318,085
Total Per Square Foot 0.06 0.09 0.01 0.04 0.03 0.05
</TABLE>
* Adjustments for minority interests at Norwest Center (18.5%), 500 Boylston
(8.5%) and 222 Berkeley (8.5%)
** Square footage owned is adjusted for minority interests as described above
<PAGE>
Non Incremental Revenue Generating Leasing Costs and Capital Expenditures
- --------------------------------------------------------------------------------
The following table shows Historical Non-Incremental Revenue Generating Leasing
Costs, which are the leasing costs (tenant improvements and leasing
commissions), in total and on a per square foot basis, to re-lease expiring
leases or renew or extend existing leases. The Company believes that its ability
to renew and extend existing tenants at a high percentage has substantially
reduced its overall leasing costs on a per square foot basis. Additionally, the
table shows Historical Non-Incremental Revenue Generating Capital Expenditures,
which are Capital Expenditures expended to maintain a property in a Class A
manner and do not give rise to additional earnings capacity, but rather allow
the property to maintain its competitive position within its market. The Company
believes that its focus on continuing high level of maintenance of its assets
has greatly reduced the amount of Capital Expenditures required at its
buildings.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD 1998 1997 1996 1995 1994 Total
<S> <C> <C> <C> <C> <C> <C>
One Norwest Center
Total Tenant Lease Costs 84,707 1,823,664 1,009,006 141,135 540,444 3,598,956
Total Square Feet Leased 23,097 308,697 81,445 75,939 117,966 607,144
Total Per Square Foot 3.67 5.91 12.39 1.86 4.58 5.93
Capital Expenditures -- 102,000 -- -- -- 102,000
Norwest Center
Total Tenant Lease Costs 69,567 569,103 42,237 144,275 30,193 855,375
Total Square Feet Leased 45,990 212,795 6,629 24,986 26,939 317,339
Total Per Square Foot 1.51 2.67 6.37 5.77 1.12 2.70
Capital Expenditures -- 10,974 -- -- -- 10,974
Washington Mutual Tower
Total Tenant Lease Costs 945,450 1,204,606 793,361 290,971 1,065,962 4,300,350
Total Square Feet Leased 105,726 208,875 124,474 53,894 151,051 644,020
Total Per Square Foot 8.94 5.77 6.37 5.40 7.06 6.68
Capital Expenditures 3,579 21,922 -- -- 50,801 76,302
125 Summer Street
Total Tenant Lease Costs 810,217 1,314,489 2,158,339 -- -- 4,283,045
Total Square Feet Leased 95,436 65,105 117,794 -- -- 278,335
Total Per Square Foot 8.49 20.19 18.32 -- -- 15.39
Capital Expenditures -- 53,185 518,632 -- -- 571,817
Tower 56
Total Tenant Lease Costs 217,374 724,025 339,124 -- -- 1,280,523
Total Square Feet Leased 13,915 65,283 42,203 -- -- 121,401
Total Per Square Foot 15.62 11.09 8.04 -- -- 10.55
Capital Expenditures -- 43,538 -- -- -- 43,538
One Lincoln Centre
Total Tenant Lease Costs 42,003 287,758 2,859 -- -- 332,620
Total Square Feet Leased 13,014 42,826 3,652 -- -- 59,492
Total Per Square Foot 3.23 6.72 0.78 -- -- 5.59
Capital Expenditures 8,318 154,646 -- -- -- 162,964
Frick Building
Total Tenant Lease Costs 49,859 1,170,443 -- -- -- 1,220,302
Total Square Feet Leased 2,994 105,609 -- -- -- 108,603
Total Per Square Foot 16.65 11.08 -- -- -- 11.24
Capital Expenditures -- 31,468 14,219 -- -- 45,687
527 Madison Avenue
Total Tenant Lease Costs 47,835 746,070 -- -- -- 793,905
Total Square Feet Leased 344 29,821 -- -- -- 30,165
Total Per Square Foot 139.06 25.02 -- -- -- 26.32
Capital Expenditures 68,764 86,652 -- -- -- 155,416
191 Peachtree Street
Total Tenant Lease Costs 292,797 96,023 -- -- -- 388,820
Total Square Feet Leased 85,094 2,597 -- -- -- 87,691
Total Per Square Foot 3.44 36.97 -- -- -- 4.43
Capital Expenditures -- -- -- -- -- --
Market Square
Total Tenant Lease Costs 137,371 -- -- -- -- 137,371
Total Square Feet Leased 11,837 -- -- -- -- 11,837
Total Per Square Foot 11.61 -- -- -- -- 11.61
Capital Expenditures -- -- -- -- -- --
500 Boylston Street
Total Tenant Lease Costs -- 34,558 -- -- -- 34,558
Total Square Feet Leased -- 3,005 -- -- -- 3,005
Total Per Square Foot -- 11.50 -- -- -- 11.50
Capital Expenditures -- -- -- -- -- --
</TABLE>
<PAGE>
Non Incremental Revenue Generating Leasing Costs and Capital Expenditures
- --------------------------------------------------------------------------------
The following table shows Historical Non-Incremental Revenue Generating Leasing
Costs, which are the leasing costs (tenant improvements and leasing
commissions), in total and on a per square foot basis, to re-lease expiring
leases or renew or extend existing leases. The Company believes that its ability
to renew and extend existing tenants at a high percentage has substantially
reduced its overall leasing costs on a per square foot basis. Additionally, the
table shows Historical Non-Incremental Revenue Generating Capital Expenditures,
which are Capital Expenditures expended to maintain a property in a Class A
manner and do not give rise to additional earnings capacity, but rather allow
the property to maintain its competitive position within its market. The Company
believes that its focus on continuing high level of maintenance of its assets
has greatly reduced the amount of Capital Expenditures required at its
buildings.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YTD 1998 1997 1996 1995 1994 Total
<S> <C> <C> <C> <C> <C> <C>
222 Berkeley Street
Total Tenant Lease Costs 46,182 -- -- -- -- 46,182
Total Square Feet Leased 7,697 -- -- -- -- 7,697
Total Per Square Foot 6.00 -- -- -- -- 6.00
Capital Expenditures -- -- -- -- -- --
Charlotte Plaza
Total Tenant Lease Costs 25,126 154,044 -- -- -- 179,170
Total Square Feet Leased 29,565 9,139 -- -- -- 38,704
Total Per Square Foot 0.85 16.86 -- -- -- 4.63
Capital Expenditures 5,086 15,039 -- -- -- 20,125
200 Galleria
Total Tenant Lease Costs 325,392 173,242 -- -- -- 498,634
Total Square Feet Leased 35,192 10,672 -- -- -- 45,864
Total Per Square Foot 9.25 16.23 -- -- -- 10.87
Capital Expenditures 37,470 -- -- -- -- 37,470
11 Canal Center
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
99 Canal Center
Total Tenant Lease Costs 25,626 -- -- -- -- 25,626
Total Square Feet Leased 1,760 -- -- -- -- 1,760
Total Per Square Foot 14.56 -- -- -- -- 14.56
Capital Expenditures -- -- -- -- -- --
TransPotomac Plaza 5
Total Tenant Lease Costs 78,267 -- -- -- -- 78,267
Total Square Feet Leased 6,745 -- -- -- -- 6,745
Total Per Square Foot 11.60 -- -- -- -- 11.60
Capital Expenditures -- -- -- -- -- --
60 State Street
Total Tenant Lease Costs -- -- -- -- -- --
Total Square Feet Leased -- -- -- -- -- --
Total Per Square Foot -- -- -- -- -- --
Capital Expenditures -- -- -- -- -- --
Corporate 500 Centre
Total Tenant Lease Costs 246,423 -- -- -- -- 246,423
Total Square Feet Leased 28,511 -- -- -- -- 28,511
Total Per Square Foot 8.64 -- -- -- -- 8.64
Capital Expenditures 10,136 -- -- -- -- 10,136
Minority Interest*
Total Tenant Lease Costs 16,795 123,622 9,208 30,442 5,978 186,046
Total Square Feet Leased 9,162.40 44,382 1,372 5,172 5,576 65,665
Total Per Square Foot 1.83 2.79 6.71 5.89 1.07 2.83
Capital Expenditures -- 2,272 -- -- -- 2,272
Total Cornerstone Portfolio
Total Tenant Lease Costs 3,427,401 8,174,403 4,335,718 545,939 1,630,621 18,114,081
Total Square Feet Leased 497,755 1,020,042 374,825 149,647 290,380 2,332,648
Total Per Square Foot Leased 6.89 8.01 11.57 3.65 5.62 7.77
Capital Expenditures 133,353 517,152 532,851 -- 50,801 1,234,157
Weighted Average Square
Footage Owned** 2,571,000 5,348,000 3,895,680 3,263,769 3,239,636 18,318,085
Total Per Square Foot 0.05 0.10 0.14 -- 0.02 0.07
</TABLE>
* Adjustments for minority interests at Norwest Center (18.5%), 500 Boylston
(8.5%) and 222 Berkeley (8.5%)
** Square footage owned is adjusted for minority interests as described above
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
o Minority Sharing in Cash Flows and
Residual Proceeds
<PAGE>
Minority Sharing in Cash Flows and Residual Proceeds
Five of the Company's properties are held in partnerships which allow the
Company's partners to participate in the cash flows of their respective
properties. The following discussion provides the details of partner's
participation in the cash flow of each of the respective properties.
Norwest Center
Under the partnership agreement, cash flow is used first to pay operating
and capital expenditures, then debt service on the mortgage note. The remaining
cash flow is paid first to Cornerstone, as a 7% cumulative preference return on
its capital base of $92.3 million ($6,461,000), and then any remaining cash flow
is split 50% to Cornerstone and 50% to their partner, Sixth & Marquette Limited
Partnership ("S&M"). Should cash flow be insufficient to pay the preference
return ("Preference Deficit"), it will accumulate and earn interest at 7%. Any
Preference Deficit will be paid as the first priority payment after debt
service. Cash flow and earnings for the first three months of 1998 were split
81.5% to Cornerstone and 18.5% to S&M. Sales proceeds from Norwest Center will
be split as follows as of March 31, 1998:
1) To debt $110.0 million
2) To Cornerstone 92.3 million
3) To Cornerstone 9.3 million
4) To Cornerstone 1.0 million
5) To S&M 19.3 million
6) The remaining proceeds will be split 50/50 among the two partners.
Washington Mutual Tower
Under the partnership agreement, cash flow is used first to pay operating
and capital expenditures, then debt service on the mortgage note. The remaining
cash flow is paid first to Cornerstone as a 9.53% preference return on its
capital base of $47.0 million ($4,479,000); next to pay the Preference Deficit
on the second preference return (currently $8.7 million); then to Cornerstone as
an 8% second preference return on its capital base of $100.0 million
($8,000,000). Any remaining cash flow is split 50% to Cornerstone and 50% to
1212. The cumulative Preference Deficit earns interest at a rate of 8% until it
is repaid. Cornerstone's partner, 1212 Partnership, does not currently share in
the cash flow from Washington Mutual Tower. With regard to the sale of the
building, the Company will receive the first $155.7 million of proceeds after
repayment of the $79.1 million mortgage ($234.8 million in total proceeds). Any
proceeds above this amount will be split 50/50 with Cornerstone's partners.
<PAGE>
Minority Sharing in Cash Flows and Residual Proceeds (continued)
191 Peachtree
Under the partnership agreement, cash flow is used first to pay operating
and capital expenditures, then debt service on the mortgage note. In addition,
the partner in the transaction, CH Associates, Ltd., will receive an annual
incentive distribution of $250,000 which Cornerstone expects it will receive
under the partnership agreement through February 28, 2000. Cornerstone receives
the remaining cash flow until such time as its cumulative undistributed
preferred return ($12.1 million as of 3/31/98) has been reimbursed. Excess cash
flow will be split 80% to Cornerstone and 20% to CH Associates, Ltd. Sales
proceeds from 191 Peachtree will be split as follows as of March 31, 1998:
1) To Debt $ 1.6 million
2) To Cornerstone (as partial holder
of the debt) $161.1 million
3) To Cornerstone for its undistributed
preferred return $ 12.1 million
4) To Cornerstone for its priority capital
Contribution $145.0 million
500 Boylston and 222 Berkeley Street
Distributions of cash flows and sales proceeds are shared in proportion to
Cornerstone's 91.5% partnership interest and Hines' 8.5 % partnership interest.
