<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 JUNE 30, 1999
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 1-12861
------------------------
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:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
- ---------------------------------------------------- ----------------------------------------------------
<S> <C>
Common Stock, no par value New York Stock Exchange
Dusseldorf Stock Exchange
Frankfurt Stock Exchange
</TABLE>
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 / /
Number of shares of Common Stock (no par value) outstanding as of August 12,
1999: 128,414,387.
- --------------------------------------------------------------------------------
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1998
JUNE 30, ------------
1999
-----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Developments in progress:
Land................................................................................ $ 10,456 $ 10,437
Development costs................................................................... 6,725 2,519
Rental Property, at cost:
Land................................................................................ 661,579 702,840
Buildings, leasehold interests and improvements..................................... 3,128,466 3,403,152
Deferred lease costs................................................................ 141,918 143,188
----------- ------------
3,949,144 4,262,136
Less: Accumulated depreciation and amortization..................................... 255,217 286,664
----------- ------------
Total Development and Rental Property............................................. 3,693,927 3,975,472
Assets held for sale.................................................................. 350,016 77,568
Cash and cash equivalents............................................................. 32,756 61,869
Restricted cash....................................................................... 9,738 9,114
Investment in joint ventures.......................................................... 31,878 31,500
Other deferred costs, net of accumulated amortization of $3,694 and $932.............. 43,631 45,572
Deferred tenant receivables........................................................... 65,292 53,489
Tenant and other receivables, net..................................................... 12,497 10,326
Other assets.......................................................................... 23,389 17,074
----------- ------------
Total Assets.......................................................................... $4,263,124 $4,281,984
----------- ------------
----------- ------------
LIABILITIES
Long-term debt, inclusive of $21,078 and $25,031 of unamortized premium............... $1,519,093 $1,532,474
Credit facility....................................................................... 467,500 465,000
Accrued interest...................................................................... 11,085 10,933
Accrued real estate taxes............................................................. 22,636 16,395
Accounts payable and accrued expenses................................................. 38,854 51,454
Distributions payable................................................................. -- 38,163
Unearned revenue and other liabilities................................................ 34,112 23,890
----------- ------------
Total Liabilities..................................................................... 2,093,280 2,138,309
----------- ------------
MINORITY INTEREST
Minority interest in operating partnership............................................ 285,624 283,388
Minority interest in joint ventures................................................... 23,188 23,420
----------- ------------
Total Minority Interest............................................................... 308,812 306,808
----------- ------------
Commitments and contingencies
Redeemable preferred stock; 344,828 shares authorized;
0 shares issued and outstanding..................................................... -- --
STOCKHOLDERS' EQUITY
7% Cumulative convertible preferred stock, $16.50 stated value;
65,000,000 shares authorized; 3,030,303 shares issued and outstanding............... 50,000 50,000
Common stock, no par value; 250,000,000 shares authorized;
128,414,387 shares issued and outstanding........................................... -- --
Paid-in capital....................................................................... 1,793,177 1,788,567
Retained earnings..................................................................... 16,309 --
Accumulated other comprehensive income................................................ 4,267 --
Deferred compensation................................................................. (2,721) (1,700)
----------- ------------
Total Stockholders' Equity............................................................ 1,861,032 1,836,867
----------- ------------
Total Liabilities and Stockholders' Equity............................................ $4,263,124 $4,281,984
----------- ------------
----------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Office and parking rentals............................. $ 152,174 $ 81,357 $ 301,650 $ 156,540
Earnings (loss) in joint ventures...................... 77 (1,763) 382 (2,688)
Interest and other income.............................. 1,378 6,896 3,362 14,194
------------- ------------- ----------- -----------
Total Revenues....................................... 153,629 86,490 305,394 168,046
------------- ------------- ----------- -----------
EXPENSES
Building operating expenses............................ 32,521 16,962 63,598 34,051
Real estate taxes...................................... 18,154 11,689 37,678 22,866
Interest expense....................................... 34,715 15,752 69,073 31,667
Depreciation and amortization.......................... 23,808 16,214 48,893 26,859
General and administrative............................. 6,435 2,958 12,571 5,544
------------- ------------- ----------- -----------
Total Expenses....................................... 115,633 63,575 231,813 120,987
------------- ------------- ----------- -----------
37,996 22,915 73,581 47,059
------------- ------------- ----------- -----------
OTHER EXPENSES
Carrying value in excess of market value of assets held
for sale............................................. (3,753) -- (3,753) --
Loss on sale of real estate assets..................... -- (1,985) -- (2,197)
------------- ------------- ----------- -----------
Total Other expenses................................. (3,753) (1,985) (3,753) (2,197)
------------- ------------- ----------- -----------
MINORITY INTEREST
Minority interest in operating partnership............. (3,864) (510) (8,337) (646)
Minority interest in joint ventures.................... (1,284) (1,168) (2,734) (2,210)
------------- ------------- ----------- -----------
Total Minority interest.............................. (5,148) (1,678) (11,071) (2,856)
------------- ------------- ----------- -----------
Income before cumulative effect of a change in
------------- ------------- ----------- -----------
accounting principle and extraordinary loss............ 29,095 19,252 58,757 42,006
------------- ------------- ----------- -----------
Cumulative effect of a change in accounting principle.... -- -- (630) --
Extraordinary loss....................................... (3,355) -- (3,355) --
------------- ------------- ----------- -----------
Net income............................................... $ 25,740 $ 19,252 $ 54,772 $ 42,006
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Income applicable to preferred stock..................... $ (875) $ (875) $ (1,750) $ (1,750)
------------- ------------- ----------- -----------
Income applicable to common stock........................ $ 24,865 $ 18,377 $ 53,022 $ 40,256
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Income before cumulative effect of a change in accounting
principle and extraordinary loss per common share....... $ 0.22 $ 0.18 $ 0.44 $ 0.42
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Cumulative effect of a change in accounting principle and
extraordinary loss per common share..................... $ (0.03) $ -- $ (0.03) $ --
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Basic income per common share............................ $ 0.19 $ 0.18 $ 0.41 $ 0.42
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Diluted income per common share.......................... $ 0.19 $ 0.18 $ 0.41 $ 0.42
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net income............................................... $ 25,740 $ 19,252 $ 54,772 $ 42,006
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Other comprehensive income:
Unrealized gain on interest rate swaps during the
period............................................... 2,182 -- 4,267 --
------------- ------------- ----------- -----------
Other comprehensive income............................. 2,182 -- 4,267 --
------------- ------------- ----------- -----------
Comprehensive income..................................... $ 27,922 $ 19,252 $ 59,039 $ 42,006
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................ $ 54,772 $ 42,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 47,995 26,921
Deferred compensation amortization.................................................. 739 510
Share of net (income) loss in real estate joint ventures............................ (381) 2,688
Cumulative effect of a change in accounting principle............................... 630 --
Extraordinary loss.................................................................. 3,355 --
Unbilled rental revenue............................................................. (13,692) (6,433)
Increase in accrued interest........................................................ 152 2,904
Minority interest share of income................................................... 11,071 2,856
Loss on sale of real estate assets.................................................. -- 2,197
Carrying value in excess of market value of assets held for sale.................... 3,753 --
Increase in tenant and other receivables and other assets........................... (4,846) (233)
Increase in accounts payable, accrued expenses and other liabilities................ 2,600 7,563
----------- -----------
Total adjustments................................................................... 51,376 38,973
----------- -----------
Net cash provided by operating activities........................................... 106,148 80,979
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property...................................................... (38,366) (195,658)
Repayment of notes receivable......................................................... 134 739
Repayment of mortgage notes receivable................................................ -- 940
Investment in notes receivable........................................................ -- (78,600)
Investments in real estate joint ventures............................................. -- (5,065)
Proceeds from sale of real estate assets.............................................. -- 45,538
----------- -----------
Net cash used in investing activities............................................... (38,232) (232,106)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock offering................................................... -- 262,344
Borrowings under mortgage loans....................................................... 180,000 80,000
Borrowings under credit facility...................................................... 72,000 126,000
Repayments under credit facility...................................................... (69,500) (238,000)
Repayments under mortgage loans....................................................... (189,427) (921)
Proceeds from dividend reinvestment plan.............................................. 1,230 3,771
Debt prepayment costs................................................................. (4,915) --
Increase in restricted cash........................................................... (624) (4,721)
Stock and debt issuance costs......................................................... (1,926) (14,751)
Option exercise....................................................................... 1,827 --
Distributions to minority partners.................................................... (12,739) (3,124)
Distributions to common stockholders.................................................. (72,955) (55,483)
----------- -----------
Net cash (used in) provided by financing activities................................. (97,029) 155,115
----------- -----------
(Decrease) increase in cash and cash equivalents........................................ (29,113) 3,988
Cash and cash equivalents, beginning of period.......................................... 61,869 24,730
----------- -----------
Cash and cash equivalents, end of period................................................ $ 32,756 $ 28,718
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. NATURE OF COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF THE COMPANY'S BUSINESS
Cornerstone Properties Inc. (together with its subsidiaries, "Cornerstone"
or the "Company") is a self-administered equity real estate investment trust
("REIT") which owns, through subsidiaries, interests in 96 Class A office
buildings comprising nearly 21 million rentable square feet, a shopping center,
a hotel and developable land (collectively, the "Properties," and each interest,
a "Property"). The Properties are primarily located in twelve major metropolitan
areas throughout the United States: Atlanta, Boston, Charlotte, suburban
Chicago, Denver, Minneapolis, New York City, Phoenix, San Francisco Bay Area,
Seattle, Southern California and Washington, D.C. and surrounding suburbs. The
Company's strategy is to own Class A office properties in prime Central Business
District locations and major suburban office markets in U.S. metropolitan areas.
Class A office properties are generally considered to be those that have the
most favorable locations and physical attributes, command premium rents and
experience the highest tenant retention rates within their markets. In January
1998, Cornerstone converted its corporate structure into an umbrella limited
partnership REIT ("UPREIT"). Under the UPREIT structure, Cornerstone owns all of
its properties and conducts all of its business through Cornerstone Properties
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), of which the Company is the sole general partner. As of June 30,
1999, Cornerstone owned, directly or indirectly, approximately 86.3% of the
common units of partnership interest ("UPREIT Units") in the Operating
Partnership.
GENERAL
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company 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 ("GAAP") 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 and six month periods presented have been included.
Results for the three and six months ended June 30, 1999 are not necessarily
indicative of results which may be expected for any other interim periods or for
the year as a whole. These condensed consolidated financial statements should 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, the Operating Partnership and
controlled partnerships. The Company has consolidated the following partnerships
because it has a majority interest in the economic benefits and is or has the
right to become the managing general partner at its sole discretion: the
Operating Partnership; 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"); One Ninety One
Peachtree Associates ("191 Peachtree"); Avenue Associates Limited Partnership
("Market Square"); and 120 Montgomery Associates, LLC ("120 Montgomery"). The
Company's
6
<PAGE>
investments in the One Post Property and WCP Services, Inc. are accounted for as
equity investments (see Note 3). All significant intercompany balances and
transactions have been eliminated in consolidation.
ASSETS HELD FOR SALE
Included in Assets held for sale are 12 properties, which are currently held
for sale by the Company. The Properties are valued at approximately $350,016
million, the lower of the carrying amount or the fair value less estimated costs
to sell. The Company has recorded a $3.7 million write down on four of these
assets which represents the difference between the carrying value of these
assets and their expected selling price less costs to sell. The Company
discontinues the recognition of depreciation on the assets when the property is
considered held for sale.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the June
30, 1999 financial statement presentation.
OTHER DEFERRED COSTS
Costs incurred in the underwriting and issuance of long-term debt and
revolving lines of credit are being amortized over the term of the debt. As part
of the acquisition of the DIHC Portfolio (see Note 2), the Company purchased
several management contracts to which Stichting Pensioenfonds Voor de Gezondheid
Geestelijke en Maatschappelijke Belangen ("PGGM") was a party. The price paid
for these contracts is being amortized over four years. Included in Other
Deferred Costs is the purchase price for the intangible management and
development company assets that were acquired as part of the Wilson Acquisition
which are being amortized over a term of ten years (see Note 2).
OTHER ASSETS
The Company records costs incurred for potential investments as Other
Assets. Upon consummation of an investment, the Company capitalizes all such
costs as an adjustment to the purchase price and depreciates these costs over
the useful life of the asset. All such costs are expensed at the time it is
determined that a potential investment will not be consummated. In addition, the
Company expenses all internal acquisition costs.
MINORITY INTEREST
Minority interest in the Operating Partnership relates to the interest in
the Operating Partnership that the Company does not own, which as of June 30,
1999 amounted to 13.7%. The Company allocates income to the minority interest in
the Operating Partnership based on the weighted-average percentage ownership in
the Operating Partnership through the year. Persons who contributed assets to
the Operating Partnership received UPREIT Units, shares of Cornerstone's common
stock (the "Common Stock"), cash or a combination thereof. At the request of a
unitholder, the Company will be obligated to redeem each UPREIT Unit held by
such unitholder for one share of Common Stock or, at the option of the Company,
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 June 30, 1999, the number of issued
and outstanding UPREIT Units held by unitholders other than the Company was
20,333,607 and as of such date, no UPREIT Units have been redeemed for shares of
Common Stock.
Minority interest in real estate joint ventures represents the minority
partner's or venturer's capital account balances in NWC, Third Partnership, 222
Berkeley, 500 Boylston, 191 Peachtree, Market Square and 120 Montgomery. 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
7
<PAGE>
respective partnership and joint venture agreements. Realizability of the debit
balances is continually monitored by calculating pro forma sales proceeds under
the respective agreements.
RECENTLY ISSUED ACCOUNTING STANDARDS
During the first quarter of 1999, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. During 1999, the
Company entered into and subsequently amended swaps that effectively fixed the
rate on $250.0 million of the amount outstanding on the Company's Revolving
Credit Facility at 6.47% for 1999 and 5.41% through the maturity of the swaps in
December 2000. The swaps have been designated as "cash flow hedges" within the
meaning defined in SFAS 133. Per the applicable requirements of SFAS 133, the
swaps were marked to fair value and recorded as assets on the Company's balance
sheet. A corresponding adjustment was posted to a separate component of
stockholder's equity through Other Comprehensive Income as defined in Statement
of Financial Accounting Standards No. 130. These swaps are considered hedges for
federal income tax purposes.
During the first quarter of 1999, the Company also adopted Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP
98-5 requires that certain costs incurred in conjunction with start-up and
organizational activities be expensed. Pursuant to the requirements of SOP 98-5,
the Company has written off all unamortized organizational costs and has
recorded a cumulative effect of a change in accounting principle of $630,044.
In addition, during the first quarter of 1999, the Company adopted Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on whether
the costs of computer software developed or obtained for internal use should be
capitalized or expensed. The adoption of SOP 98-1 did not have a significant
effect on the Company's financial statements.
8
<PAGE>
ESTIMATES AND RISKS
The preparation of financial statements in conformity with GAAP 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 risks, estimates and
assumptions are related to the recoverability and depreciable lives of
investment property, the recoverability of deferred tenant receivables,
unforeseen Year 2000 risks and the qualification of the Company as a REIT.
Actual results could differ from those estimates.
2. PROPERTIES
The following table summarizes Cornerstone's interest in real estate
investments at June 30, 1999:
<TABLE>
<CAPTION>
TOTAL CORNERSTONE
MARKET NAME RENTABLE INTEREST YEAR
PROPERTY SQUARE FEET (A) CONSTRUCTED OCCUPANCY NOTES
- -------------------------------------------------- ------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BOSTON, MASSACHUSETTS
Sixty State Street.............................. 823,014 100.0% 1979 100% B
500 Boylston Street............................. 714,513 91.5% 1988 100% D
222 Berkeley Street............................. 530,884 91.5% 1991 100% D
125 Summer Street............................... 463,691 100.0% 1989 94%
One Memorial Drive.............................. 352,764 100.0% 1985 100% C
------------- -----------
MARKET TOTAL.................................... 2,884,866 99%
SAN MATEO COUNTY, CALIFORNIA
Bayhill (4 buildings)........................... 514,704 100.0% 1982-1987 84% E
Peninsula Office Park (7 buildings)............. 492,044 100.0% 1971-1998 98% E
Seaport Centre.................................. 463,418 100.0% 1988 100% E
Bay Park Plaza (2 buildings).................... 257,058 100.0% 1985-1998 100% E
One Bay Plaza................................... 176,533 100.0% 1979 90% E
Belmont Shores.................................. 141,643 100.0% 1983 97% E
1300 South El Camino............................ 84,441 100.0% 1986 98% E
66 Bovet........................................ 43,968 100.0% 1968 97% E
------------- -----------
MARKET TOTAL.................................... 2,173,809 95%
EAST BAY, CALIFORNIA
Corporate Centre (2 buildings).................. 329,357 100.0% 1985-1987 97% E
ADP Plaza (2 buildings)......................... 299,627 100.0% 1987-1989 99% E
PeopleSoft Plaza................................ 277,502 100.0% 1984 100% E
Norris Tech Center (3 buildings)................ 260,513 100.0% 1984-1990 97% E
Golden Bear Center.............................. 160,587 100.0% 1986 100% E
2700 Ygnacio Valley Road........................ 103,214 100.0% 1984 96% E
Park Plaza...................................... 87,040 100.0% 1986 100% E
1600 South Main................................. 83,277 100.0% 1983 100% E
Foothill Corporate Center....................... 70,355 100.0% 1982 97% E
------------- -----------
MARKET TOTAL.................................... 1,671,472 98%
ATLANTA, GEORGIA
191 Peachtree Street............................ 1,215,288 80.0% 1991 97% D,F
200 Galleria.................................... 432,698 100.0% 1985 95% D
------------- -----------
MARKET TOTAL.................................... 1,647,986 97%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
TOTAL CORNERSTONE
MARKET NAME RENTABLE INTEREST YEAR
PROPERTY SQUARE FEET (A) CONSTRUCTED OCCUPANCY NOTES
- -------------------------------------------------- ------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SEATTLE, WASHINGTON
Washington Mutual Tower (3 buildings)........... 1,154,560 50.0% 1988 99% G
110 Atrium Place................................ 215,172 100.0% 1981 100% E
Island Corporate Center......................... 100,075 100.0% 1987 89% E
------------- -----------
MARKET TOTAL.................................... 1,469,807 99%
SANTA CLARA COUNTY, CALIFORNIA
Pruneyard Office (3 buildings).................. 354,360 100.0% 1971-1999 98% E,H
10 Almaden...................................... 293,526 100.0% 1989 100% E
Pruneyard Shopping Center....................... 252,210 100.0% 1970s 89% E
Embarcadero Place (4 buildings)................. 192,081 100.0% 1984 100% E
Pruneyard Inn................................... 94,500 100.0% 1989 E,I
First American Plaza............................ 82,596 100.0% 1971 96% E
490 California.................................. 24,539 100.0% 1985 100% E
------------- -----------
MARKET TOTAL.................................... 1,293,812 97%
DENVER, COLORADO
One Norwest Center.............................. 1,187,852 100.0% 1983 97%
------------- -----------
MARKET TOTAL.................................... 1,187,852 97%
SAN FRANCISCO, CALIFORNIA
120 Montgomery Street........................... 418,751 66.7% 1955 96% E
One Post........................................ 388,055 50.0% 1969 100% E
201 California Street........................... 240,230 100.0% 1980 100% J
188 Embarcadero................................. 85,183 100.0% 1985 99% E
------------- -----------
MARKET TOTAL.................................... 1,132,219 98%
MINNEAPOLIS, MINNESOTA
Norwest Center.................................. 1,117,439 50.0% 1988 100% K
------------- -----------
MARKET TOTAL.................................... 1,117,439 100%
WASHINGTON, D.C./ALEXANDRIA, VIRGINIA
Market Square (2 buildings)..................... 688,709 70.0% 1990 99% D,L
99 Canal Center................................. 137,945 100.0% 1986 98% D
TransPotomac Plaza 5............................ 96,278 100.0% 1983 92% D
11 Canal Center................................. 70,365 100.0% 1986 96% D
------------- -----------
MARKET TOTAL.................................... 993,297 98%
SUBURBAN CHICAGO, ILLINOIS
Corporate 500 Centre (4 buildings).............. 679,039 100.0% 1986/1990 98% M
One Lincoln Centre.............................. 297,040 100.0% 1986 92%
------------- -----------
MARKET TOTAL.................................... 976,079 96%
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA
West Wilshire (2 buildings)..................... 235,787 100.0% 1960-1976 94% E
Wilshire Palisades.............................. 186,714 100.0% 1981 100% J
Janss Court..................................... 125,709 100.0% 1989 100% E,N
Searise Office Tower............................ 122,292 100.0% 1975 97% E
Commerce Park................................... 94,367 100.0% 1977 78% E,O
429 Santa Monica................................ 82,284 100.0% 1982 67% E
------------- -----------
MARKET TOTAL.................................... 847,153 92%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
TOTAL CORNERSTONE
MARKET NAME RENTABLE INTEREST YEAR
PROPERTY SQUARE FEET (A) CONSTRUCTED OCCUPANCY NOTES
- -------------------------------------------------- ------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ORANGE COUNTY, CALIFORNIA
Bixby Ranch..................................... 277,289 100.0% 1987 98% E
18301 Von Karman................................ 219,508 100.0% 1991 89% E
2677 North Main................................. 213,318 100.0% 1987 91% E
------------- -----------
MARKET TOTAL.................................... 710,115 93%
CHARLOTTE, NORTH CAROLINA
Charlotte Plaza................................. 612,728 100.0% 1982 99% D
------------- -----------
MARKET TOTAL.................................... 612,728 99%
ARIZONA
Gateway (2 buildings)........................... 212,222 100.0% 1984-1985 97% E
Biltmore Lakes.................................. 207,434 100.0% 1982 98% E
Scottsdale Centre............................... 166,382 100.0% 1985 94% E
------------- -----------
MARKET TOTAL.................................... 586,038 96%
SAN DIEGO, CALIFORNIA
Centerside II................................... 287,029 100.0% 1987 88% E
Crossroads...................................... 133,553 100.0% 1983 100% E
------------- -----------
MARKET TOTAL.................................... 420,582 92%
LOS ANGELES, CALIFORNIA
700 North Brand................................. 202,531 100.0% 1981 94% E
Tri-Center Plaza................................ 141,732 100.0% 1990 99% E
Warner Park Center.............................. 57,366 100.0% 1986 100% E
------------- -----------
MARKET TOTAL.................................... 401,629 97%
NEW YORK CITY, NEW YORK
527 Madison Avenue.............................. 215,332 100.0% 1986 100%
Tower 56........................................ 163,633 100.0% 1983 100% P
------------- -----------
MARKET TOTAL.................................... 378,965 100%
CONEJO VALLEY (VENTURA), CALIFORNIA
Westlake Spectrum (2 buildings)................. 118,990 100.0% 1990 88% E
Agoura Hills.................................... 115,265 100.0% 1987 90% E
------------- -----------
MARKET TOTAL.................................... 234,255 89%
OTHER REGIONS
U.S. West (Murray, Utah)........................ 136,608 100.0% 1985 78% E
Exposition Centre (Sacramento, California)...... 72,971 100.0% 1984 70% E
------------- -----------
MARKET TOTAL.................................... 209,579 75%
------------- -----------
TOTAL PORTFOLIO 20,949,682 97%
Minority Interest Adjustment (Q)................ (726,317)
------------- -----------
CORNERSTONE PORTFOLIO........................... 20,223,365 97%
Adjustment For Pruneyard Inn.................... (94,500)
-------------
CORNERSTONE OFFICE PORTFOLIO.................... 20,128,865
-------------
-------------
</TABLE>
- ------------------------
(A) Unless noted below, cash flow and residual proceeds will be distributed
to Cornerstone according to its percentage interest.
11
<PAGE>
(B) On December 31, 1997, the Company purchased the second mortgage on Sixty
State Street. The mortgage is a cash flow mortgage through which all the
economic benefits/risks (subject to the first mortgage) 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 and is consolidated in buildings due to the above factors. The
$78.4 million first mortgage on the Property was originally recorded by
the Company as an $89.6 million liability due to its above-market
interest rate.
The second mortgage, which the Company holds, is collarteralized only by
the improvements on Sixty State Street. Title to the improvements is
owned by Sixty State Street Trust, the ground lessee under a ground lease
that expires on December 28, 2067. The lease payments on the ground lease
are $398,896 per annum throughout the term.
(C) On April 28, 1998, the Company purchased One Memorial Drive in
Cambridge, Massachusetts. The total purchase price for the Property was
approximately $112.5 million, approximately $23.5 million of which was
paid in cash, approximately $29.0 million of which was paid in UPREIT
Units valued at $17.50 per unit and approximately $60.0 million of which
was paid in Common Stock valued at $17.50 per share.
(D) On October 27, 1997, the Company acquired interests in nine Class A
office properties comprising approximately 4.5 million rentable square
feet in Alexandria, Virginia (3 properties), Atlanta (2 properties),
Boston (2 properties), Charlotte and Washington, D.C., as well as an
undeveloped parcel of land in Chicago (collectively, "the DIHC
Portfolio"). The Company acquired the DIHC Portfolio for a purchase price
of approximately $1.06 billion, consisting of approximately 34.2 million
shares of Common Stock valued and recorded at $16.00 per share,
approximately $260.0 million in cash and $250.0 million in promissory
notes. The cash portion of the acquisition was financed with proceeds
from the Company's initial public offering in April 1997 and $54.0
million from its Revolving Credit Facility.
(E) Property was acquired as a result of the Wilson Acquisition in December
1998. After receiving stockholder approval on December 14, 1998, the
Company acquired substantially all of the properties and real estate
operations of William Wilson & Associates and related entities ("WW&A")
(the "Wilson Acquisition"). As part of the Wilson Acquisition, the
Company acquired interests in 69 Class A office Properties, comprising
approximately 9.2 million rentable square feet primarily in the San
Francisco Bay Area and in Southern California, a shopping center
consisting of approximately 252,000 rentable square feet in Santa Clara,
California, a hotel consisting of 94,500 square feet in Santa Clara,
California and 12.8 acres of developable land in the San Francisco Bay
Area.
The Company acquired WW&A for a purchase price of approximately $1.8
billion, consisting of approximately 14.9 million shares of Common Stock
valued at $17.25 per share (recorded at $16.25 per share for GAAP
purposes), approximately 16.2 million UPREIT Units valued at $17.25 per
unit (recorded at $16.25 per unit for GAAP purposes), approximately
$465.0 million in cash and the assumption of approximately $760.0 million
of property and construction related debt (recorded at $773.7 million for
GAAP purposes). The cash portion of the transaction was financed
primarily from the Company's Revolving Credit Facility and the sale of
$200.0 million of Common Stock to PGGM, an approximate 33.6% stockholder
prior to the Wilson Acquisition, priced at $17.25 per share.
(F) While the Company's stated interest in the partnership that owns 191
Peachtree Street is 80.0%, its economic interest is significantly larger
since it has acquired the first mortgage note on the Property in the
amount of $145.0 million, which earns interest at 9.375% and will receive
a priority distribution on its acquired capital base. In 1998, the
partner in the transaction, CH Associates, Ltd., received an annual
Incentive Distribution (as defined) of $250,000, which the
12
<PAGE>
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.
The partnership that owns 191 Peachtree Street leases a portion of the
land upon which the project is located pursuant to a ground lease
agreement. The agreement requires annual payments of $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.
(G) While the Company's stated interest in the partnership that owns
Washington Mutual Tower is 50.0%, its economic interest in the Property
is significantly larger due to priority distributions it receives on its
invested capital base. For the six months ended June 30, 1999, the
Company received 100% of the cash distributions from the partnership that
owns Washington Mutual Tower.
(H) Pruneyard Place construction was completed and occupied on April 1,
1999. The building was entirely pre-leased.
(I) The Pruneyard Inn is a three-story hotel. An expansion was completed in
May 1999, increasing the number of rooms from 118 to 172.
(J) On June 3, 1998, the Company purchased 201 California Street and
Wilshire Palisades. The total purchase price for the Properties was
approximately $121.5 million, approximately $29.5 million of which was
paid in cash, approximately $29.1 million of which was paid in UPREIT
Units valued at $17.50 per unit and approximately $62.9 million of
assumed debt (recorded at $64.6 million for GAAP purposes).
(K) While the Company's stated interest in the partnership that owns Norwest
Center is 50.0%, its economic interest in the Property is significantly
larger due to priority distributions it receives on its invested capital
base. For the six months ended June 30, 1999, the Company's share of
earnings and cash distributions from the partnership that owns Norwest
Center was 74.3%.
(L) During 1998, through a series of transactions, the Company acquired
partnership interests with a stated interest of approximately 70.0% in
the partnerships that own Market Square. The Company's economic interest
is significantly larger since it has acquired the first mortgage note on
the Property in the amount of $181.0 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 $49.0 million at purchase, which accrues
interest at a rate of Prime plus 1.25% and is payable from cash flow,
refinancing or sales proceeds in excess of the first mortgage. During the
six months ended June 30, 1999, the Company received 100% of the cash
flow from the Property. On November 14, 1998, the Company purchased an
additional interest in the partnerships that own Market Square which
enabled it to gain sufficient control in order to consolidate the
investment.
(M) On January 28, 1998, the Company purchased Corporate 500 Centre in
Deerfield, Illinois. This Property consists of four Class A office
buildings with approximately 679,000 rentable square feet. The
consideration paid for this Property was approximately $135.0 million in
cash and approximately $15.0 million in UPREIT Units valued at $18.50 per
unit, for a total purchase price of approximately $150.0 million. The
Company financed a portion of the purchase price with an $80.0 million
mortgage loan from Bankers Trust Company; this mortgage was subsequently
refinanced in October 1998.
13
<PAGE>
(N) Janss Court is a seven-story, 125,000-square foot Class A mixed-use
building. In addition to 92,000 square feet of retail and office space,
Janss Court offers 32 apartments for a total of 33,000 rentable square
feet of residential space.
(O) The Property is subject to a ground lease agreement. The agreement
requires annual payments of $115,000 through March 31, 2002 and $121,000
from April 1, 2002 through March 31, 2007. The lease payment increases
every ten years thereafter according to a formula based on the Consumer
Price Index. The ground lease expires on March 31, 2041.
(P) On January 5, 1998, the Company purchased for approximately $5.5
million, 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. As a result, all of the cash flow and the residual value of
Tower 56 inure to the Company.
(Q) Rentable square feet includes an adjustment for the interest of a joint
venture or minority partner. Calculations are based on the partners'
percentage interest in the cash flows of the Property.
On March 31, 1998, the Company sold the Dearborn Land (an undeveloped parcel
of land in Chicago that was acquired as part of the acquisition of the DIHC
Portfolio in October 1997) for gross proceeds of approximately $19,000,000,
resulting in a loss of $212,228.
On April 29, 1998, the Company sold the Frick Building, located in
Pittsburgh, Pennsylvania, for gross proceeds of approximately $26,748,000,
resulting in a loss of $2,111,540.
On December 29, 1998, Avenue Associates Limited Partnership sold a
condominium unit in Market Square, located in Washington D.C., for gross
proceeds of $326,154, resulting in a gain of $247,972.
3. INVESTMENT IN REAL ESTATE JOINT VENTURES
Investment in real estate joint ventures represents the Company's two
investments that are accounted for using the equity method of accounting. The
first investment is the Company's 50.0% interest in a co-tenancy agreement with
Crocker Plaza Company for One Post, a 38-story, Class A office tower in San
Francisco, California. The Company and Crocker co-manage and lease the Property.
The second equity investment is the Company's interest in WCP Services, Inc. The
Company owns 1% of the voting common stock and 100% of the non-voting common
stock of WCP Services, Inc. The remaining shares of voting common stock of WCP
Services, Inc. are owned by certain executive officers of the Company. The
Company's ownership of voting and nonvoting common stock together represents a
95% economic interest in the earnings of WCP Services, Inc. WCP Services, Inc.
provides property management, development and tenant construction supervision
services to third parties. WCP Services, Inc. also provides tenant construction
supervision services to tenants in Properties owned by Cornerstone.
14
<PAGE>
4. LONG-TERM DEBT
The following table sets forth certain information regarding the
consolidated debt obligations of the Company as of June 30, 1999, 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 (Dollar amounts in thousands).
<TABLE>
<CAPTION>
PROPERTY AMORTIZATION INTEREST RATE (A) MATURITY DATE 6/30/99 12/31/98
- ------------------------------ ---------------- ------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
One and Two Gateway........... 25 year 6.90% Dec-1999 $ 8,529 $ 8,679
Seaport Centre................ Interest only LIBOR plus 1.50% Dec-1999 58,000 58,000
The Pruneyard................. 24 year LIBOR plus 2.00% Mar-2000 58,974 49,384
Scottsdale Centre............. 25 year 6.90% Jul-2000 7,649 7,745
TransPotomac Plaza 5 and...... Interest only 7.28% Oct-2000 65,000 65,000
Charlotte Plaza (B)
Convertible Promissory Note... Interest only 8.11%max (D) Jan-2001 12,926 12,926
due 2001 (C)
Searise Office Tower.......... 25 year 6.90% Jan-2002 11,737 11,864
West Wilshire Office.......... 25 year 6.90% Jan-2002 17,117 17,301
and Medical
Exposition Centre............. 25 year 6.90% May-2002 5,145 5,200
Wilshire Palisades............ 22 year 6.70% Jul-2002 29,479 29,902
120 Montgomery Street......... 24 year LIBOR plus 1.40% Nov-2002 47,756 46,930
1300 South El Camino.......... 23 year 6.90% Dec-2002 3,954 4,007
125 Summer Street (E)......... Interest only 7.20% Jan-2003 50,000 50,000
(F)
Tower 56 (E).................. 30 year 7.67% May-2003 17,463 17,548
Norris Tech Center............ 25 year LIBOR plus 1.65% Dec-2003 16,239 16,392
Peninsula Office Park 4 (E)... 25 year 6.90% Feb-2004 5,380 5,436
Peninsula Office Park......... 25 year 6.90% Feb-2004 55,616 54,806
1, 3, 5, 6, 8 & 9 (E)
110 Atrium Place.............. 30 year 6.90% Mar-2004 21,689 21,838
Embarcadero Place (E)......... 20 year 6.90% Apr-2004 25,680 26,061
10 Almaden (E)................ 25 year 6.90% Apr-2004 33,550 33,885
527 Madison Avenue and........ Interest only 7.47% Oct-2004 65,000 65,000
One Lincoln Centre (B)
Sixty State Street............ 30 year 6.84% Jan-2005 86,573 87,627
201 California Street......... 30 year 6.70% Mar-2005 32,865 33,071
Island Corporate Center....... 30 year 6.90% Apr-2005 13,239 13,294
Washington Mutual Tower....... Interest only 7.53% Nov-2005 79,100 79,100
Agoura Hills.................. 25 year 6.90% Dec-2005 12,168 12,328
Janss Court................... 30 year 6.90% Dec-2005 18,543 18,723
Norwest Center................ Interest only 8.74% Dec-2005 110,000 110,000
Bayhill 4, 5, 6 & 7........... 25 year 6.90% Dec-2006 58,429 59,071
66 Bovet...................... 22 year 6.90% Apr-2007 3,888 3,939
Market Square (G) and......... Interest only 7.54% Oct-2007 120,000 120,000
200 Galleria (B)
One Norwest Center............ 30 year 6.90% Oct-2008 97,827 98,252
Corporate 500 Centre.......... 25 year 6.66% Nov-2008 89,166 89,765
188 Embarcadero (H)........... 25 year 7.26% Aug-2009 15,700 9,135
Golden Bear Center (H)........ 25 year 7.26% Aug-2009 20,600 15,753
Centerside II (H)............. 25 year 7.26% Aug-2009 24,400 13,818
700 North Brand (H)........... 25 year 7.26% Aug-2009 27,100 18,108
Bixby Ranch (H)............... 25 year 7.26% Aug-2009 28,700 20,243
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PROPERTY AMORTIZATION INTEREST RATE (A) MATURITY DATE 6/30/99 12/31/98
- ------------------------------ ---------------- ------------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
One Memorial (H).............. 25 year 7.26% Aug-2009 63,500 0
Other loans................... Various Various Various 412 597
18301 Von Karman (I).......... -- -- -- -- 10,647
1600 South Main (I)........... -- -- -- -- 5,038
Biltmore Lakes (I)............ -- -- -- -- 11,468
Belmont Shores (I)............ -- -- -- -- 9,839
2677 North Main (I)........... -- -- -- -- 10,774
2700 Ygnacio Valley Road (I).. -- -- -- -- 5,035
Westlake Spectrum (I)......... -- -- -- -- 3,993
Park Plaza (I)................ -- -- -- -- 4,940
Warner Park Center (I)........ -- -- -- -- 5,213
429 Santa Monica (I).......... -- -- -- -- 10,176
Crossroads (I)................ -- -- -- -- 7,339
Westlake Spectrum II (I)...... -- -- -- -- 5,284
Two ADP Plaza (J)............. -- -- -- -- 13,400
Two Corporate Centre (J)...... -- -- -- -- 18,600
------------------- ------------- ------------ ------------
Total Debt.................... 7.18%(K) 5.93 yrs(K) $ 1,519,093 $ 1,532,474
------------ ------------
------------ ------------
</TABLE>
- --------------------------
(A) The interest rate is the stated interest rate (for Cornerstone
originated debt) or the mark to market rate at the time of acquisition
(for debt assumed as part of an acquisition).
(B) The three notes arising from the acquisition of several properties in
the DIHC Portfolio are cross-collateralized, having the effect of forming
a "collateral pool" for the underlying notes.
(C) The lender, Hines Colorado Limited, 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.
(D) Lesser of 30-day LIBOR plus 0.5% or 8.11%.
(E) During June 1999 the Company entered into an agreement to restructure
approximately $220.6 million of the individual property related debt with
Northwestern Mutual Life Insurance Company. The restructuring involves
retiring the individual property related debt and creating a single
$275.0 million loan which will be cross-collateralized by five of the
Company's properties. The loan will have a ten year term and will bear
interest at 7.23%.
(F) Interest only payments through January 1, 2001, with a 25-year
amortization schedule thereafter.
(G) The collateral for this loan is a pledge of the $181.0 million first
mortgage loan on Market Square that the Company purchased from PGGM.
(H) The six notes arising from the restructuring of certain debt with
Prudential Insurance of America and Northwestern Mutual Life Insurance
Company are cross-collateralized, having the effect of forming a
"collateral pool" for the underlying notes.
(I) These 12 notes were prepaid as part of the Prudential Insurance of
America and Northwestern Mutual Life Insurance Company restructuring, see
note (H) above. All the notes had a mark to market interest rate of 6.9%
and maturity dates ranging from April 2000 to March 2003.
(J) On January 4, 1999, in connection with the Wilson Acquisition, the
Company prepaid the notes on Two ADP Plaza and Two Corporate Centre.
(K) Weighted-average interest rate and maturity of the Company's long-term
debt.
The combined aggregate amount of maturities for all long-term borrowings for
1999 through 2003 are $66,529,000, $131,623,000, $12,926,000, $115,188,000 and
$83,702,000, respectively.
16
<PAGE>
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 $550.0 million Revolving Credit Facility with a syndicate
of 17 banks led by Bankers Trust Company, The Chase Manhattan Bank and
NationsBank for acquisitions and general working capital purposes as well as the
issuance of letters of credit (the "Revolving Credit Facility"). The interest
rate on the facility depends on the Company's ratio of total debt to asset value
(as defined) at the time of borrowing and will be at a spread of 1.10% to 1.80%
over the applicable LIBOR or the Prime Rate at the borrower's option. The
letters of credit will be priced at the applicable Eurodollar credit spread. The
Revolving Credit Facility expires on November 3, 2001. As of June 30, 1999,
$467.5 million of the facility was outstanding at a rate of approximately 6.4%.
Of this amount, approximately $250.0 million is fixed with interest rate swaps,
which effectively fix the rate at 6.47%. In addition, at June 30, 1999, there
were two letters of credit totaling $10.5 million ($5.5 million of which is with
Summit Bank) outstanding at a rate of 1.40%. The Revolving Credit Facility
contains certain restrictive covenants including: (i) a limitation on the
Company's dividend to 90.0% of funds from operations and 110.0% of funds
available for distribution, both as defined in the agreement; (ii) the
percentage of total liabilities to total property asset value (as defined)
cannot exceed 60.0%; (iii) the ratio of adjusted EBITDA to interest expense may
not be less than 2.00 to 1.00 through July 1, 1999 and 2.25 to 1.00 thereafter;
(iv) the fixed charge coverage ratio may not be less than 1.75 to 1.00; and (v)
the ratio of total property asset value (as defined) to secured indebtedness may
not be less than 2.22 to 1.00. The above terms reflect an amendment to the
Revolving Credit Facility that occurred during 1999. The amendment allowed the
Company to increase its leverage from 55.0% to 60.0% in (ii) above. The Company
also increased its ability to enter into mortgage debt under (v) above by
decreasing the ratio from 2.5 to 2.22 to 1.00.
17
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company is subject to tenant and
property related claims and other litigation. It is the opinion of management,
after consultation with outside counsel, that the resolution of these claims
will not have a material effect on the financial position, results of operations
or cash flows of the Company.
The Company has entered into an agreement to purchase a 927,000 square-foot
Class A office building, currently under development, in downtown Minneapolis,
Minnesota. Through June 30, 1999, approximately $66.5 million has been spent on
the construction. The project is scheduled to be completed in the year 2000 and
is approximately 40.0% pre-leased. The development is being financed through a
construction loan by U.S. Bank. Upon completion, the Company will retire the
construction loan and acquire the property from the developer for an amount to
be determined by applying a negotiated formula to in-place net operating income.
7. STOCKHOLDERS' EQUITY
The 7% Cumulative Convertible Preferred Stock is convertible into Common
Stock at $16.50 per share at any time after August 4, 2000.
On February 6, 1998, Cornerstone completed a secondary public offering of
14,375,000 shares of Common Stock at a price of $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 (approximately $262.3 million gross proceeds less an underwriting
discount of approximately $13.7 million and expenses of approximately $0.7
million). 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 employees of the Company as of June 30, 1999:
STOCK OPTIONS
<TABLE>
<CAPTION>
OPTIONS GRANTED EXERCISE PRICE OPTIONS OPTIONS OPTIONS
DATE OF GRANT (NO. OF SHARES) (PER SHARE) VESTING EXERCISED FORFEITED EXERCISABLE
- -------------------------- --------------- --------------- ------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
August, 1995.............. 637,500 33.3%/yr, 10yr
$ 14.30 term 75,000 562,500
October, 1995............. 150,000 33.3%/yr, 10yr
$ 14.30 term 10,500 139,500
March, 1997............... 880,000 33.3%/yr, 10yr
$ 14.50 term 52,000 534,666
November, 1997............ 70,000 33.3%/yr, 10yr
$ 18.44 term 0 23,333
February, 1998............ 70,000 33.3%/yr, 10yr
$ 18.13 term 0 23,333
February, 1998............ 595,000 33.3%/yr, 10yr
$ 18.25 term 0 26,667 198,333
March, 1998............... 200,000 33.3%/yr, 10yr
$ 18.25 term 0 133,334 66,666
December, 1998............ 3,000,000 33.3%/yr, 10yr
$ 17.25 term 0 22,933 0
January, 1999............. 20,000 33.3%/yr, 10yr
$ 17.25 term 0 0
February, 1999............ 10,000 33.3%/yr, 10yr
$ 17.25 term 0 0
June, 1999................ 10,000 33.3%/yr, 10yr
$ 17.25 term 0 0
</TABLE>
18
<PAGE>
RESTRICTED STOCK GRANTS
<TABLE>
<CAPTION>
SHARES GRANTED VALUE AT GRANT
DATE OF GRANT (NO. OF SHARES) DATE (PER SHARE) VESTING (A)
- --------------- --------------- ----------------- ---------------------------------------------------------------
<S> <C> <C> <C>
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 $ 16.40 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, 12,500 $ 18.44 The grant will fully vest with respect to 13.333% on June 30,
1997........... 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 and with respect to 86.667% on December 31, 1999.
February, 113,550 $ 15.50 The grant will fully vest on February 1, 2004.
1999...........
</TABLE>
- ------------------------------
(A) Deferred compensation of approximately $6,252,000 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' equity. Regular distributions are paid on restricted stock.
8. STOCKHOLDERS' AND UNITHOLDERS' DISTRIBUTIONS
A cash dividend and Unitholder distribution of $0.30 per share was declared
for the second quarter of 1999 and paid on May 28, 1999, to Common Stockholders
and Unitholders of record as of April 30, 1999.
9. NET INCOME PER COMMON SHARE
The table below sets forth the calculation of net income per common share
for the three and six months ended June 30, 1999 and 1998 (Dollar amounts in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,1999 JUNE 30, 1998
---------------------- ----------------------
BASIC DILUTED BASIC DILUTED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds upon exercise of options................................ $ -- $ 22,045 $ -- $ 40,940
Market price of shares
Average for the respective period.............................. $ -- $ 16.06 $ -- $ 17.58
Treasury shares that could be Repurchased (options).............. -- 1,373 -- 2,329
Option shares outstanding........................................ -- 1,530 -- 2,592
Weighted common stock equivalent shares (excess shares under
option over Treasury shares that could be repurchased).......... -- 157 -- 299
Weighted average common shares Outstanding....................... 128,260 128,260 100,462 100,462
---------- ---------- ---------- ----------
Adjusted weighted average common Shares outstanding.............. 128,260 128,417 100,462 100,761
Net income for the period........................................ $ 25,740 $ 25,740 $ 19,252 $ 19,252
Income applicable to Preferred stock............................. $ (875) $ (875) $ (875) $ (875)
---------- ---------- ---------- ----------
Net income applicable to Common shares........................... $ 24,865 $ 24,865 $ 18,377 $ 18,377
Income per common share.......................................... $ 0.19 $ 0.19 $ 0.18 $ 0.18
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,1999 JUNE 30, 1998
---------------------- ----------------------
BASIC DILUTED BASIC DILUTED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds upon exercise of options................................ $ -- $ 22,045 $ -- $ 40,940
Market price of shares
Average for the respective period.............................. $ -- $ 15.66 $ -- $ 18.00
Treasury shares that could be Repurchased (options).............. -- 1,408 -- 2,274
Option shares outstanding........................................ -- 1,530 -- 2,592
Weighted common stock equivalent shares (excess shares under
option over Treasury shares that could be repurchased).......... -- 122 -- 331
Weighted average common shares Outstanding....................... 128,260 128,260 96,653 96,653
---------- ---------- ---------- ----------
Adjusted weighted average common Shares outstanding.............. 128,260 128,382 96,653 96,984
Net income for the period........................................ $ 54,772 $ 54,772 $ 42,006 $ 42,006
Income applicable to Preferred stock............................. $ (1,750) $ (1,750) $ (1,750) $ (1,750)
---------- ---------- ---------- ----------
Net income applicable to Common shares........................... $ 53,022 $ 53,022 $ 40,256 $ 40,256
Income per common share.......................................... $ 0.41 $ 0.41 $ 0.42 $ 0.42
</TABLE>
The stock options issued in November 1997, February 1998, March 1998,
December 1998 January 1999, February 1999 and June 1999 were not included in the
calculation of diluted earnings per share as such options were anti-dilutive
during the three and six month periods. The 7% Cumulative Preferred Stock issued
in August 1995 and the Convertible Promissory Note due 2001 entered into January
1996 were not included in the calculation of diluted earnings per share as such
instruments were anti-dilutive during the three and six month periods. In
addition, the Company will be obligated to redeem each UPREIT Unit held by such
unitholder for one share of Common Stock or, at the option of the Company, cash
equal to the fair market value of one share of Common Stock at the time of
redemption.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was approximately $72,641,000 and $28,792,000 for the
six months ended June 30, 1999 and 1998, respectively.
NON-CASH INVESTING AND FINANCING ACTIVITIES
On January 5, 1998, the Company purchased for approximately $5.5 million,
the participation rights in the cash flow and residual value of Tower 56 from
the former participants for 307,692 shares of Common Stock.
On January 28, 1998, the Company purchased Corporate 500 Centre. As part of
the total purchase price of approximately $150.0 million, the Company issued
822,794 UPREIT Units valued at $18.50 per unit.
On April 28, 1998, the Company purchased One Memorial Drive, an office tower
in Cambridge, Massachusetts. As part of the total purchase price of
approximately $112.5 million, the Company issued 3,428,571 shares of Common
Stock and 1,657,426 UPREIT Units, both priced at $17.50.
On June 3, 1998, the Company purchased 201 California Street in San
Francisco, California, and Wilshire Palisades in Santa Monica, California. As
part of the total purchase price for the Properties of approximately $121.5
million, the Company assumed $64.6 million in debt and issued 1,665,663 UPREIT
Units priced at $17.50 per unit.
20
<PAGE>
On June 23, 1999, in conjunction with the restructuring of property-related
debt with Prudential Insurance of America and Northwestern Mutual Life Insurance
Company, the Company incurred an extraordinary loss of approximately $3,355,000,
of which approximately $1,560,000 represents the unamortized premium/discounts
associated with various debt instruments that were assumed as part of the Wilson
Acquisition.
11. SEGMENT REPORTING
The Company has one reportable segment--real estate. The Company does not
have any foreign operations. The accounting policies of the segment are the same
as those described in Note 1.
The Company evaluates performance based on net operating income from the
individual properties in the segment. Selected results of operations for the
three and six months ended June 30, 1999 and 1998 and selected asset information
as of June 30, 1999 and December 31, 1998 regarding the Company's operating
segment are as follows (Dollar amounts in thousands):
<TABLE>
<CAPTION>
CORPORATE & COMPANY
TOTAL SEGMENT OTHER(A) TOTAL
------------- ------------ ------------
<S> <C> <C> <C>
TOTAL REVENUES (B):
Three months ended:
June 30, 1999........................................................ $ 153,128 $ 501 $ 153,629
June 30, 1998........................................................ 79,952 6,538 86,490
Six months ended:
June 30, 1999........................................................ 303,914 1,480 305,394
June 30, 1998........................................................ 155,626 12,420 168,046
TOTAL OPERATING AND INTEREST EXPENSE (C):
Three months ended:
June 30, 1999........................................................ $ 52,588 $ 39,237 $ 91,825
June 30, 1998........................................................ 28,651 18,710 47,361
Six months ended:
June 30, 1999........................................................ 104,446 78,474 182,920
June 30, 1998........................................................ 56,917 37,211 94,128
NET OPERATING INCOME (D):
Three months ended:
June 30, 1999........................................................ $ 100,540 $ (38,736) $ 61,804
June 30, 1998........................................................ 51,301 (12,172) 39,129
Six months ended:
June 30, 1999........................................................ 199,468 (76,994) 122,474
June 30, 1998........................................................ 98,709 (24,791) 73,918
TOTAL LONG-LIVED ASSETS (E):
June 30, 1999........................................................ $ 4,141,114 $ 47,780 $ 4,188,894
December 31, 1998.................................................... 4,137,302 54,782 4,192,084
TOTAL ASSETS:
June 30, 1999........................................................ $ 4,148,989 $ 114,135 $ 4,263,124
December 31, 1998.................................................... 4,198,099 83,885 4,281,984
</TABLE>
- ------------------------
(A) Corporate and Other represents all corporate-level items (including interest
income, interest expense and general and administrative expenses) as well as
intercompany eliminations necessary to reconcile to consolidated Company
totals.
21
<PAGE>
(B) Total revenues represents all revenues during the period (including the
Company's earnings (loss) in real estate joint ventures). All interest
income is excluded from the segment amounts and is classified in Corporate
and Other for all periods.
(C) Total operating and interest expense represents the sum of building
operating expenses, real estate taxes, interest expense and general and
administrative expenses. All interest expense (including property level
mortgages) is excluded from the segment amounts and is classified in
Corporate and Other for all periods. Amounts presented exclude depreciation
and amortization of $23,808,000 and $16,214,000 and $48,893,000 and
$26,859,000 for the three and six months ended June 30, 1999 and 1998,
respectively.
(D) Net operating income represents total revenues (as defined in note (B)
above) less total operating and interest expense (as defined in note (C)
above) for the period.
(E) Long-lived assets is composed of total rental property, assets held for
sale, investments in joint ventures, other deferred costs, deferred tenant
receivables and certain other assets.
12. SUBSEQUENT EVENTS
On July 9, 1999, the Company declared a distribution of $0.30 per share/unit
to be paid to all stockholders and unitholders on August 31, 1999 (to
stockholders and unitholders of record as of July 30, 1999).
On August 4, 1999, the Company paid a dividend of $1.155 per share to all
preferred stockholders of record as of July 30, 1999.
22
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Condensed Consolidated
Financial Statements and Notes included herein.
When used in the following discussion, the words "believes", "anticipates",
and similar expressions are intended to identify "forward-looking statements".
The Company intends such forward-looking statements to be covered by the safe
harbor provisions in Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are subject to certain risks and uncertainties, which
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these "forward-looking statements",
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions of these "forward-looking
statements", which may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
Cornerstone's principal source of income is rental revenues received through
its investment in 87 fee simple investments, six real estate partnerships, one
limited liability company, one co-tenancy agreement and one mortgage. NWC
Limited Partnership ("NWC"), Third and University Limited Partnership ("Third
Partnership"), One Ninety One Peachtree Associates ("191 Peachtree"), Two Twenty
Two Berkeley Associates ("222 Berkeley"), Five Hundred Boylston West Venture
("500 Boylston") and Avenue Associates Limited Partnership ("Market Square")
(since November 1, 1998) have been consolidated because Cornerstone has the
majority interest in the economic benefits and is or has the right to become
managing general partner at its sole discretion. 120 Montgomery Associates, LLC
("120 Montgomery") has been consolidated because the Company has the majority
interest in the economic benefits and control of the major decisions of the
limited liability company. The Company has accounted for its investment in
Market Square (from February 1, 1998 through October 31, 1998) and One Post
using the equity method of accounting because it did or does not have sufficient
control of the day to day operations of the investment.
PROPERTY RESULTS. For the three and six months ended June 30, 1999 and
1998, property results can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Office and Parking Rentals............................ $ 152,174 $ 81,357 $ 301,650 $ 156,540
Less:
Building Operating Expenses......................... 32,521 16,962 63,598 34,051
Real Estate Taxes................................... 18,154 11,689 37,678 22,866
Depreciation and Amortization....................... 23,808 16,214 48,893 26,859
------------- ------------- ------------- -------------
Total Operating Expenses.............................. 74,483 44,865 150,169 83,776
------------- ------------- ------------- -------------
Total Property Income................................. $ 77,691 $ 36,492 $ 151,481 $ 72,764
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The increase in property income of $41.2 million for the three months ended
June 30, 1999 as compared to the same period in 1998 was due to $31.2 million
derived from the interests in 69 properties acquired as part of the Wilson
Acquisition on December 16, 1998; $4.1 million from Market Square, which
23
<PAGE>
was consolidated starting November 1998; $2.9 million increase from 60 State
Street due to increased rental rates and other adjustments; $1.8 million from
three properties acquired in the second quarter of 1998 (One Memorial Drive,
$0.3 million; Wilshire Palisades, $0.9 million; and 201 California Street, $0.6
million); and a $1.2 million increase in income from One Norwest Center due to
increased rental rates.
The increase in property income of $78.7 million for the six months ended
June 30, 1999 as compared to the same period in 1998 was due to $60.4 million
derived from the interests in 69 properties acquired as part of the Wilson
Acquisition on December 16, 1998; $8.1 million from Market Square, which was
consolidated starting November 1998; $5.5 million from three properties acquired
in the second quarter of 1998 (Wilshire Palisades, $2.2 million; One Memorial
Drive, $2.1 million; and 201 California Street, $1.2 million); a $1.6 million
increase in income from Washington Mutual Tower due to increased rental rates; a
$1.6 million increase in income from Corporate 500 Centre, which was purchased
at the end of January 1998; a $1.4 million increase in income from One Norwest
Center due to increased rental rates; and a $0.9 million increase caused by
slight variances in property income at the remaining properties. These amounts
were offset by a $0.8 million decrease in income from the Frick Building, which
was sold in April 1998.
EARNINGS (LOSS) IN JOINT VENTURES.
The earnings in joint ventures of $0.1 million and $0.4 million for the
three and six months ended June 30, 1999, respectively, is comprised of the
Company's investments in One Post and WCP Services, Inc., which were acquired as
part of the Wilson Acquisition.
The loss in joint ventures of $1.8 million and $2.7 million for the three
and six months ended June 30, 1998 was due to the acquisition of the partnership
interest in Market Square in January 1998. The investment in Market Square was
accounted for under the equity method of accounting from February 1998 through
October 1998 due to the lack of sufficient control of the day to day operations
of the investment. In November 1998, the Company gained sufficient control of
the investment and began consolidating this investment.
INTEREST AND OTHER INCOME.
Interest and other income decreased to approximately $1.4 million for the
three months ended June 30, 1999 from approximately $6.9 million for the three
months ended June 30, 1998. The decrease was due to a $5.6 million decrease in
interest income from the mortgage loan and "buffer loan" on Market Square, a
$0.3 million decrease in tenant alteration income, and a $0.2 million decrease
in interest earned from short-term investment. These decreases were offset by a
$0.6 million increase in management and other income.
Interest and other income decreased to approximately $3.4 million for the
six months ended June 30, 1999 from approximately $14.2 million for the six
months ended June 30, 1998. The decrease was due to a $10.8 million decrease in
interest income from the mortgage loan and "buffer loan" on Market Square and a
$1.2 million decrease in tenant alteration income. These decreases were offset
by a $1.0 million increase in other income and $0.2 million increase in
management fee income.
INTEREST EXPENSE.
Interest expense incurred by Cornerstone was $34.7 million and $15.7 million
for the three months ended June 30, 1999 and 1998, respectively. The increase in
interest expense was due to an increase of $11.0 million from the property
mortgages assumed as part of the Wilson Acquisition; an increase of $7.1 million
on the Revolving Credit Facility due to increased borrowings; an increase of
$0.6 million on the 201 California Street and Wilshire Palisades loans due to
these properties being acquired on June 3, 1998; an increase of $0.2 in
amortization of deferred financing costs; an increase of $0.1 million on the
24
<PAGE>
Corporate 500 Centre loan due to the $10.0 million that was added to the
principal balance as a result of the refinancing in October 1998; and an
increase of $0.1 million related to One Memorial Drive, which is included in the
new $180.0 million loan that was completed in May 1999 (see "Mortgage
Indebtedness" below). One Memorial Drive was unencumbered during the three
months ended June 30, 1998. These increases were offset by a $0.1 million
decrease in One Norwest Center interest expense, due to the lower interest rate
negotiated as part of the refinancing of this loan that occurred in September
1998.
Interest expense incurred by Cornerstone was $69.1 million and $31.7 million
for the six months ended June 30, 1999 and 1998, respectively. The increase in
interest expense was due to an increase of $21.6 million from the property
mortgages assumed as part of the Wilson Acquisition; an increase of $13.2
million on the Revolving Credit Facility due to increased borrowings; an
increase of $1.6 million on the 201 California Street and Wilshire Palisades
loans due to these properties being acquired on June 3, 1998; an increase of
$0.7 million on the Corporate 500 Centre loan due mainly to the Property being
acquired on January 28, 1998; an increase of $0.3 in the amortization of
deferred financing costs; an increase of $0.2 million on the DIHC Portfolio
loans due to the sale of the Dearborn land in March 1998; and a $0.1 million
increase in interest expense related to One Memorial Drive (as explained above).
These increases were offset by a $0.3 million decrease in interest on the One
Norwest Center loan due to the refinancing of this loan in September 1998.
GENERAL AND ADMINISTRATIVE.
The aggregate amount of Cornerstone's general and administrative expenses
increased to $6.4 million for the three months ended June 30, 1999 from $3.0
million for the three months ended June 30, 1998. The increase in 1999 from 1998
of $3.4 million is due to the additional employees, space, systems and other
support necessary to manage the substantial growth in the Company since June 30,
1998, especially the increase in employees due to the Wilson Acquisition.
The aggregate amount of Cornerstone's general and administrative expenses
increased to $12.6 million for the six months ended June 30, 1999 from $5.5
million for the six months ended June 30, 1998. The increase in 1999 from 1998
of $7.1 million is due to the additional employees, space, systems and other
support necessary to manage the substantial growth in the Company since June 30,
1998, especially the increase in employees due to the Wilson Acquisition.
CARRYING VALUE IN EXCESS OF MARKET VALUE OF ASSETS HELD FOR SALE.
The Company has 12 properties held for sale which are valued at
approximately $350.0 million, the lower of the carrying amount or the fair value
less estimated cost to sell. The Company has recorded a $3.7 million write down
on four of these assets which represents the difference between the carrying
value of these assets and their expected selling price less costs to sell.
LOSS ON SALE OF REAL ESTATE ASSETS.
On March 31, 1998, the Company sold the Dearborn Land (an undeveloped parcel
of land in Chicago that was acquired as part of the acquisition of the DIHC
Portfolio in October 1997) for gross proceeds of approximately $19.0 million,
resulting in a loss of approximately $0.2 million.
On April 29, 1998, the Company sold the Frick Building, located in
Pittsburgh, Pennsylvania, for gross proceeds of approximately $26.7 million,
resulting in a loss of approximately $2.0 million.
MINORITY INTEREST.
The minority interest increased to $5.1 million for the three months ended
June 30, 1999 from $1.7 million for the three months ended June 30, 1998 due to
the allocation of the Company's income to
25
<PAGE>
the unitholders due to the UPREIT Units issued subsequent to March 1998 for the
purchase of properties as well as part of the Wilson Acquisition.
The minority interest increased to $11.1 million for the six months ended
June 30, 1999 from $2.9 million for the six months ended June 30, 1998 due to
the allocation of the Company's income to the unitholders due to the UPREIT
Units issued subsequent to June 1998 for the purchase of properties as well as
part of the Wilson Acquisition.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE.
During the first quarter of 1999, the Company adopted Statement of Position
98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5
requires that certain costs incurred in conjunction with start-up and
organizational activities be expensed. Pursuant to the requirements of SOP 98-5,
the Company has written off all unamortized organizational costs and has
recorded a cumulative effect of a change in accounting principle of $0.6
million.
EXTRAORDINARY LOSS.
Extraordinary loss represents the net of prepayment fees paid offset by the
unamortized portion of the associated debt premium/discount in connection with
the property debt restructuring that was completed during June 1999 (see
"Mortgage Indebtedness" below).
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW (DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
CASH FLOW PROVIDED BY (USED IN): 1999 1998
- ------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Operating activities..................................................... $ 106,148 $ 80,979
Investing activities..................................................... (38,232) (232,106)
Financing activities..................................................... (97,029) 155,115
Earnings to fixed charges ratio.......................................... 1.73 2.20
</TABLE>
Cash provided by operating activities increased to approximately $106.1
million for the six months ended June 30, 1999 from $81.0 million for the six
months ended June 30, 1998. The increase is primarily due to the cash flows from
the interests in 69 properties acquired since the end of the second quarter of
1998.
Cash used in investing activities decreased to approximately $38.2 million
for the six months ended June 30, 1999 from $232.1 million for the six months
ended June 30, 1998. The decrease was primarily due to the acquisition of
Corporate 500 Centre for $135.0 million, One Memorial Drive for $23.5 million
and 201 California Street and Wilshire Palisades for $28.1 million during the
six months of 1998. Further adding to the decrease was the acquisition of the
partnership interest in Market Square for $5.1 million and a loan receivable of
$78.6 million in 1998. These amounts were offset by $18.8 million and $30.4
million in net proceeds received from the sale of the Dearborn land and the
Frick Building, respectively; an increase in additions to existing properties of
$25.7 million; a $0.9 million decrease in the repayment of mortgage notes
receivable; and a $0.6 million decrease in the repayment of a notes receivable
from a related party (the note was paid off in January 1999).
Cash used in financing activities was $97.0 million during the six months
ended June 30, 1999, whereas $155.1 million of cash was provided by financing
activities for the six months ended June 30, 1998. The net decrease in cash
provided by financing activities of $252.1 million is due to the following: in
the first quarter of 1998, the Company's secondary offering provided net cash of
$247.6 million; mortgage loan repayments increased by $188.5 million; credit
facility borrowings decreased by $54.0 million; distributions
26
<PAGE>
to stockholders increased by $27.1 million; and the proceeds received by the
Company from a dividend reinvestment plan decreased by $2.5 million. These
decreases were offset by an increase in mortgage loan borrowing of $100.0
million; a decrease in credit facility repayments of $168.5 million; a decrease
in restricted cash of $4.1 million; and the Company paid $5.0 million in debt
prepayment costs in the second quarter of 1999.
The ratio of earnings to fixed charges and dividends on preferred stock
decreased to 1.73 at June 30, 1999 from 2.20 at June 30, 1998 due to the
increase in the Company's leverage ratio.
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 and after adjustments for
unconsolidated joint ventures.
Industry analysts generally consider FFO to be an appropriate measure of
performance of a REIT such as Cornerstone. FFO does not represent cash generated
from operating activities in accordance with generally accepted accounting
principles ("GAAP") and, therefore, should not be considered a substitute for
net income as a measure of performance or a substitute for cash flow from
operations as a measure of liquidity calculated in accordance with GAAP.
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 generate earnings from its
recurring operations, after the payment of all administrative costs and interest
expense. For cash flows from operating, financing, and investing activities in
accordance with GAAP see the Condensed Consolidated Statements of Cash Flows
included in the Condensed Consolidated Financial Statements which are part of
this report.
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 June 30, 1999 and 1998 is
approximately $6,602,000 and $3,763,000, respectively, for free and deferred
rental income (after adjustment for minority interest). Included in FFO for the
six months ended June 30, 1999 and 1998 is an increase of approximately
$13,472,000 and $6,909,000, respectively, for free and deferred rental income
(after adjustment for minority interest).
27
<PAGE>
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 and six-month periods
ended June 30, 1999 and 1998, respectively (in thousands):
FUNDS FROM OPERATIONS (1)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income............................................ $ 25,740 $ 19,252 $ 54,772 $ 42,006
NAREIT adjustments:
Depreciation and amortization(2).................... 23,808 16,214 48,893 26,859
Minority adjustments................................ (688) (541) (1,365) (1,008)
Unconsolidated depreciation(3)...................... 374 1,311 747 2,174
Cumulative effect of a change in accounting
principle......................................... -- -- 630 --
Impairment costs.................................... 3,753 -- 3,753 --
Loss on sale of assets.............................. -- 1,985 -- 2,197
Extraordinary losses................................ 3,355 -- 3,355 --
Other adjustments:
Amortization on rent notes.......................... -- 378 -- 746
Severance payments.................................. -- -- 247 --
Minority interest allocated to unitholders.......... 3,864 510 8,337 646
------------- ------------- ------------- -------------
FUNDS FROM OPERATIONS................................. 60,206 39,109 119,369 73,620
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Interest expense on convertible note.................. 176 199 376 404
------------- ------------- ------------- -------------
FUNDS FROM OPERATIONS (ADJUSTED FOR CONVERTIBLE
DEBT)............................................... $ 60,382 $ 39,308 $ 119,745 $ 74,024
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
- ------------------------
(1) 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.
(2) 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. For the three and six months ended
June 30, 1999, depreciation and amortization includes $971,000 and
$1,974,000, respectively, of amortization relating to the intangible
management and development company assets purchased as part of the Wilson
Acquisition.
(3) For the three and six months ended June 30, 1999, the unconsolidated
depreciation adjustment includes $169,000 and $338,000, respectively, of
amortization relating to the intangible management and development company
assets that were acquired as part of the Wilson Acquisition.
The increase in FFO for the three and six month periods ending June 30, 1999
as compared to the same periods in 1998 is primarily due to the acquisition of
interests in 69 properties as part of the Wilson Acquisition and the acquisition
of three additional properties (One Memorial Drive, 201 California Street and
Wilshire Palisades) subsequent to the first quarter of 1998.
28
<PAGE>
CAPITAL STOCK TRANSACTIONS
On May 12, 1999, the Company received proceeds of approximately $1.8 million
and issued an additional 127,000 shares of Common Stock due to the exercise of
certain stock options.
On May 28, 1999, through a dividend reinvestment plan, the Company received
proceeds of approximately $1.2 million and issued an additional 76,603 shares of
Common Stock.
MORTGAGE INDEBTEDNESS
During June 1999, the Company restructured approximately $163.0 million of
property-related debt with Prudential Insurance of America and Northwestern
Mutual Life Insurance Company. The restructuring involved retiring 17 of the
individual property-related debts and creating a single $180.0 million loan
which is cross-collateralized by six of the Company's properties. The loan has a
ten-year term and bears interest at 7.26% per annum.
During June 1999, the Company entered into an agreement to restructure
approximately $220.6 million on six properties with Northwestern Mutual Life
Insurance Company. The restructuring involves retiring the individual property
related debt and creating a single $275.0 million loan which will be cross-
collateralized by five of the Company's properties. The loan will have a ten
year term and will bear interest at 7.23%.
OTHER INDEBTEDNESS
On November 3, 1998, a syndicate of 17 banks led by Bankers Trust Company,
The Chase Manhattan Bank and NationsBank provided the Company with a $550.0
million line of credit for acquisitions and general working capital purposes
(the "Revolving Credit Facility"). The facility is also available for the
issuance of letters of credit. The interest rate on the Revolving Credit
Facility depends on the Company's ratio of total debt to total asset value (as
defined) at the time of borrowing and will be at a spread of 1.10% to 1.80% over
the applicable LIBOR or the Prime Rate at the borrower's option. The letters of
credit will be priced at the applicable Eurodollar credit spread. The Revolving
Credit Facility expires on November 3, 2001. As of June 30, 1999, $467.5 million
of the facility was outstanding at a rate of approximately 6.4%. Of this amount,
approximately $250.0 million is fixed with interest rate swaps, which
effectively fix the rate at 6.47%. These swaps are considered hedges for federal
income tax purposes. In addition, at June 30, 1999, there were two letters of
credit totaling $10.5 million ($5.5 million of which is with Summit Bank)
outstanding at a rate of 1.40%. During 1999, the Revolving Credit Facility was
amended to allow the Company to increase its leverage from 55.0% to 60.0%. The
amendment also increased the Company's ability to enter into mortgage debt by
decreasing the ratio of total property asset value (as defined) to secured
indebtedness from 2.5 to 2.22 to 1.00.
STOCKHOLDERS' AND UNITHOLDERS' DISTRIBUTIONS
Cornerstone intends to distribute at least 95.0% of its taxable income to
maintain its qualification as a REIT. The Company anticipates that cash flow
will exceed taxable income for the foreseeable future. Cornerstone's
distribution policy is to pay distributions based upon cash flow, less prudent
reserves. On December 7, 1998, in connection with the Wilson Acquisition, the
Company declared a distribution of $0.15 per share/unit to all stockholders and
unitholders of record as of December 15, 1998 and a distribution of $0.15 per
share/unit to all stockholders and unitholders of record as of January 29, 1999.
Both distributions were paid on February 26, 1999. The Company paid
distributions of $0.30 per share/unit to all stockholders and unitholders on May
28, 1999 (to stockholders and unitholders of record as of April 30, 1999). On
July 9, 1999, the Company declared a distribution of $0.30 per share/unit to be
paid to all stockholders and unitholders on August 31, 1999 (to stockholders and
unitholders of record as of July 30, 1999).
29
<PAGE>
At the present time, the Company is current in the payment of all preferred
dividends.
LIQUIDITY
At June 30, 1999, the Company had approximately $32.8 million in cash and
cash equivalents and approximately $9.7 million in restricted cash. Restricted
cash includes prepaid rents and security deposits for some of the Company's
office properties and escrow and reserve funds for real estate taxes, property
insurance, capital improvements, tenant improvements and leasing costs. These
funds were established pursuant to certain mortgage and construction financing
arrangements. Cornerstone also had $77.5 million available under its Revolving
Credit Facility 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 that will cover normal operating expenses and pay
distributions to its stockholders and unitholders. Based upon its cash reserves
and other sources of funds, including its $550.0 million Revolving Credit
Facility, management believes Cornerstone has sufficient liquidity to meet its
cash requirements for the remainder of 1999.
30
<PAGE>
OTHER MATTERS
GENERAL
The Company is not aware of any environmental issues at any of its
Properties that would have a material adverse impact on the Company's operating
results or financial condition. 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
During the first quarter of 1999, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction.
During the first quarter of 1999, the Company also adopted SOP 98-5. SOP
98-5 requires that certain costs incurred in conjunction with start-up and
organizational activities be expensed. Pursuant to the requirements of SOP 98-5,
the Company has written off all unamortized organizational costs and has
recorded a cumulative effect of a change in accounting principle of $630,044.
In addition, during the first quarter of 1999, the Company adopted Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on whether
the costs of computer software developed or obtained for internal use should be
capitalized or expensed. The adoption of SOP 98-1 did not have a significant
effect on the Company's financial statements.
YEAR 2000 COMPLIANCE
GENERAL
The Year 2000 compliance issue concerns the inability of computerized
information systems to accurately calculate, store or use a date after December
31, 1999. This could result in a system failure or miscalculations causing
disruptions of operations. The Year 2000 issue affects virtually all companies
and all organizations. Management recognizes the importance of ensuring that its
business and operational systems are not disrupted as a result of Year 2000
issues.
READINESS
Cornerstone Properties Inc. has created a Year 2000 task force to evaluate
and take the appropriate actions regarding Year 2000 compliance. The Company's
plan is divided into three major sections: (i) compliance of information systems
at the corporate offices in New York, Atlanta and San Mateo ("Home Office");
(ii) compliance of information and real estate operating systems at the property
sites ("Properties"); and (iii) assessment of compliance of significant service
providers including third party managers and the buildings they manage, vendors
and customers ("External Agents"). The plan covers the following major tasks:
(i) inventory of all systems; (ii) analysis of inventory including assessment of
risk; (iii) verification of compliance of inventory with vendors; (iv) testing
of critical equipment and processes; and (v) replacement or modification of
systems.
The first section of the plan, Home Office, is complete. The Property and
External Agents sections of the plan are proceeding according to schedule with
expected completions before December 31, 1999. The plan also includes
questionnaires that will be sent to tenants in order to attempt to determine the
effect of Year 2000 on their businesses and ultimately the Company's income
stream.
31
<PAGE>
COST
The total historical and anticipated remaining costs for the Year 2000
remediation are estimated to be immaterial to the Company's financial position
and results of operations. The costs to date consist of recurring systems
upgrades and replacements, insignificant internal staff costs and other expenses
such as telephone and mailing costs. The information and real estate operating
systems that have thus far been identified as non-compliant are at or
approaching the end of their useful lives and have been or will be replaced or
upgraded as a part of the normal operations of the Company.
RISKS AND CONTINGENCY PLANS
The Company does not anticipate significant delays in finalizing the first
two sections of its Year 2000 remediation plan. However, External Agents having
a material relationship with the Company (e.g., property managers, utilities,
financial institutions, governmental agencies, municipalities and major tenants)
may be a potential risk based on their individual Year 2000 preparedness, which
may not be within the Company's reasonable control. The Company is in the
process of identifying, reviewing and logging the Year 2000 preparedness of
critical External Agents.
While the Company is not aware of any matters with regard to its major
tenants which could give rise to a material default, there may be a potential
risk with regard to their Year 2000 preparedness which may be outside the
Company's reasonable control. The Company is currently in the process of
surveying its tenants to try to predetermine the risk of defaults due to Year
2000 issues.
Currently, there has been no indication or expectation of material risks in
the compliance of the first two sections of the plan. Pending unfavorable
results, the Company will determine what course of action and contingencies will
need to be made. There can be no assurance that external Year 2000 issues will
be resolved. Noncompliance of External Agents as well as the Company's major
tenants could have a material adverse impact on the Company's business,
operating results and financial condition.
YEAR 2000 COMPLIANCE DETAIL
HOME OFFICE
I. Inventory of all systems: The Company has inventoried all information
systems at its corporate offices in New York, Atlanta and San Mateo. The
hardware systems primarily consist of desktop and laptop computers,
server computers, printers, phone systems and local area and wide area
network infrastructures. The software applications primarily consist of
commercial off the shelf software ("COTS") products for spreadsheet
analysis, word processing, accounting, cash flow analysis and other
office automation tasks.
II. Analysis of inventory and assessment of risk: The systems inventory has
been analyzed as to its compliance via vendor certifications. All of the
Home Office systems are Year 2000 compliant.
III. Verification of compliance with vendors: The Company has verified
compliance of systems through systems' documentation, mail
correspondences and vendor web sites.
IV. Testing of critical equipment and processes: The Home Office primarily
uses COTS products and does not significantly rely on any proprietary or
customized systems. The Company has performed no testing and has relied
upon vendor certifications and vendor internal testing processes.
V. Replacement or modification of systems: The Company has replaced or
modified non-compliant systems in the ordinary course of business.
PROPERTIES
I. Inventory of all systems: The Company continues to inventory all
information and real estate operating systems at its Properties. The
information systems primarily consist of desktop and laptop computers,
server computers, printers, phone systems, local area and wide area
network
32
<PAGE>
infrastructures, and COTS products for spreadsheet analysis, word
processing, accounting, cash flow analysis and other office automation
tasks. The real estate operating systems primarily consist of heating
ventilation and air conditioning ("HVAC") systems, elevator systems,
electrical systems, fire and life safety systems and security control
systems.
II. Analysis of inventory and assessment of risk: The systems inventory has
been analyzed as to its compliance via vendor certifications.
Substantially all of the information and real estate operating systems
are Year 2000 compliant. Those systems identified as non-compliant will
be upgraded or replaced in the normal course of business by December 31,
1999. A component of the accounting system has been identified as
non-compliant. The Company is on schedule to replace this and all other
accounting and property management systems starting September 1, 1999.
This replacement was planned and is being done in the ordinary course of
business.
III. Verification of compliance with vendors: The Company has verified
compliance of systems through systems' documentation, mail
correspondences and vendor web sites.
IV. Testing of critical equipment and processes: The Properties primarily
use COTS products and do not significantly rely on any proprietary or
customized systems. The Company is in the process of testing real estate
operating systems previously identified as critical to operation. The
testing process will be completed before December 31, 1999.
V. Replacement or modification of systems: The Company has and will
continue to replace or modify non-compliant systems in the ordinary
course of business.
EXTERNAL AGENTS
As part of the Company's Year 2000 compliance plan, significant service
providers, vendors and customers have been identified and steps are being
undertaken to reasonably ascertain their stage of Year 2000 readiness. Through
questionnaires, web sites, interviews, on site visits and other available means,
the Company is assessing the Year 2000 risk of its third party property
managers, financial institutions, significant tenants and other significant
business partners.
Of the External Agents, the Company has focused attention on assessing the
Year 2000 risk of its third party property managers and the associated real
estate operating systems (HVAC systems, elevator systems, electrical systems,
fire and life safety systems and security control systems). Currently, through
the process of surveys, interviews and on site visits, there has been no
indication of material Year 2000 risks at the Company's third-party property
managers. Non-compliant systems will be upgraded or replaced in the normal
course of business before December 31, 1999 or will be addressed with a
contingency plan.
There can be no assurance that external Year 2000 issues will be resolved.
Should non-compliance of External Agents not be discovered, such non-compliance
could have a material adverse impact on the Company's business, operating
results and financial condition. Where possible, the Company will terminate any
vendor relationships should it find any material Year 2000 issues with that
vendor.
DEVELOPMENT PROJECTS
The Company has entered into an agreement to purchase a 927,000 square-foot
Class A office building, currently under development, in downtown Minneapolis,
Minnesota. As of June 30, 1999, approximately $66.5 million has been spent on
the construction. The project is scheduled to be completed in the year 2000 and
is approximately 40.0% pre-leased. The development is being financed through a
construction loan by U.S. Bank. Upon completion, the Company will retire the
construction loan and acquire the property from the developer for an amount to
be determined by applying a negotiated formula to in-place net operating income.
33
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $1.3 billion of the Company's long-term debt bears interest at
fixed rates, and therefore the fair value of these instruments is affected by
changes in market interest rates. The following table presents principal cash
flows (dollar amounts in thousands) based upon expected maturity dates of the
debt obligations and the related weighted-average interest rates by expected
maturity dates for the fixed rate debt. The interest rate on the variable rate
debt as of June 30, 1999 ranged from LIBOR plus 0.5% to LIBOR plus 2.0%.
Annual rates on advances from the Revolving Credit Facility depends on the
Company's ratio of total debt to asset value (as defined) at the time of
borrowing and will be at a spread of 1.10% to 1.80% over the applicable LIBOR or
the Prime Rate at the Company's option. Of the total advances outstanding under
the facility at June 30, 1999, $250.0 million is fixed with interest rate swaps,
which effectively fix the rate at 6.47%.
<TABLE>
<CAPTION>
FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
--------- --------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT:
Fixed rate.................. 8,529 72,649 -- 67,432 67,463 1,109,125 1,325,198 1,454,447
Average interest rate..... 6.90% 7.24% -- 6.81% 7.32% 7.26%
Variable rate............... 58,000 58,974 480,426 47,756 16,239 -- 661,395 661,395
INTEREST RATE SWAPS:
Variable to Fixed........... -- 250,000 -- -- -- -- -- --
Average pay rate(1)....... -- 5.07% -- -- -- -- -- --
Average receive rate(1)... -- 4.99% -- -- -- -- -- --
</TABLE>
- --------------------------
(1) As of June 30, 1999.
34
<PAGE>
PART II--OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
Reference is made to Note 6 to the Condensed Consolidated Financial
Statements, which is specifically incorporated by reference herein.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 12, 1999, through the exercise of certain stock options, the
Company issued 127,000 shares of Common Stock to a senior executive of
the Company and received proceeds of $1,827,000.
On May 28, 1999, through a dividend reinvestment plan available to all
German shareholders, the Company issued 76,603 shares of Common Stock to
such shareholders in lieu of paying cash dividends in the aggregate
amount of $1,230,000. Such shares were issued and sold to persons
outside the United States and were not registered under the Securities
Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 25, 1999. The
following individuals were nominated and elected to serve as directors:
Cecil D. Conlee, Rodney C. Dimock, Blake Eagle, Donald G. Fisher,
Randall A. Hack, Dr. Karl-Ludwig Hermann, Hans C. Mautner, Dr. Lutz
Mellinger, John S. Moody, Craig R. Stapleton, Michael J.G. Topham, Dick
van den Bos, Jan H.W.R. van der Vlist and William Wilson III.
The Stockholders voted as follows on the following matters:
1. Election of Directors. The voting result for each nominee is as
follows:
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
- ------------------------------------------------------------------ ------------ --------------
<S> <C> <C>
Cecil D. Conlee 93,378,279 119,071
Rodney C. Dimock 93,289,490 207,860
Blake Eagle 93,378,279 119,071
Donald G. Fisher 93,378,279 119,071
Randall A. Hack 93,378,279 119,071
Dr. Karl-Ludwig Hermann 93,376,979 120,371
Hans C. Mautner 93,378,279 119,071
Dr. Lutz Mellinger 88,635,860 4,861,490
John S. Moody 93,373,279 124,071
Craig R. Stapleton 93,378,279 119,071
Michael J.G. Topham 93,378,279 119,071
Dick van den Bos 92,077,431 1,419,919
Jan H.W.R. van der Vlist 92,076,931 1,420,419
William Wilson III 93,378,279 119,071
</TABLE>
2. The reappointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for fiscal year 1999 was approved by a count of
93,444,661 votes for, 19,269 votes against and 33,420 votes
abstaining.
For further information regarding the forgoing matters submitted to
stockholder approval, see the Company Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on April 26, 1999.
35
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1) Exhibit 12.1: Statement of Computation of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements
2) For EDGAR filing purposes only, this report contains Exhibit 27,
Financial Data Schedule
3) Exhibit 99.1: Second Quarter 1999 Supplemental Package
(b) Reports on Form 8-K:
1. Form 8-K/A dated March 1, 1999
Item 7 -- Financial Statements, Pro Forma Information and Exhibits. Pro
forma financial statements regarding the Wilson Acquisition as
of and for the period ending September 30, 1998.
2. Form 8-K dated March 24, 1999
Item 5 -- Supplemental information package distributed in conjunction
with the Fourth Quarter 1998 Earnings Release of Cornerstone
Properties Inc.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S> <C> <C>
CORNERSTONE PROPERTIES INC.
(Registrant)
By: /s/ JOHN S. MOODY
-----------------------------------------
John S. Moody
PRESIDENT & CEO
Date: August 16, 1999
By: /s/ KEVIN P. MAHONEY
-----------------------------------------
Kevin P. Mahoney
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: August 16, 1999
</TABLE>
37
<PAGE>
Exhibit 12.1
Statement of Computation of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements for the six month periods ended June 30, 1999
and June 30, 1998
For the six months ended
June 30, 1999 June 30, 1998
------------- -------------
Net income $ 54,772 $ 42,006
Interest expense 69,073 31,667
Amortization of capitalized interest 45 --
--------- ---------
Earnings before interest 123,890 73,673
Interest expense 69,073 31,667
Interest capitalized 679 --
Interest portion of rentals 176 --
Preferred dividends 1,750 1,750
--------- ---------
Fixed charges and preferred stock
dividend requirements 71,678 33,417
Earnings to fixed charges and preferred
stock dividend requirements 1.73 2.20
========= =========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 32,756
<SECURITIES> 0
<RECEIVABLES> 77,789
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 458,652
<PP&E> 3,949,144
<DEPRECIATION> 255,217
<TOTAL-ASSETS> 4,263,124
<CURRENT-LIABILITIES> 72,575
<BONDS> 0
0
50,000
<COMMON> 1,793,177
<OTHER-SE> 17,855
<TOTAL-LIABILITY-AND-EQUITY> 4,263,124
<SALES> 0
<TOTAL-REVENUES> 305,394
<CGS> 0
<TOTAL-COSTS> 231,813
<OTHER-EXPENSES> (14,824)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,073
<INCOME-PRETAX> 58,757
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (3,985)
<NET-INCOME> 54,772
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.41
</TABLE>
<PAGE>
Exhibit 99.1
================================================================================
[LOGO] CORNERSTONE
PROPERTIES
Second Quarter
1999
Supplemental Package
This Supplemental Package contains forward-looking statements within the meaning
of the Federal securities laws. Forward-looking statements are inherently
subject to risks and uncertainties, many of which cannot be predicted with
accuracy, that could cause the actual results, performance or achievements of
Cornerstone to differ materially from those reflected in such forward-looking
statements. Information contained in this Supplemental Package regarding current
and future market conditions is based on Cornerstone's assessment of real estate
markets as of this date and is subject to the uncertainties inherent in such an
assessment. In particular, but not exclusively, national and regional economic
conditions, the rate of new construction, and demand and supply in a given
market will affect leasing activity, projected rents and the cost of lease
renewals.
August 2, 1999
================================================================================
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to Quarterly Earnings Release
1) Second Quarter 1999
o Balance Sheet
o Income Statement
2) Press Release
3) Quarterly Fact Sheet
4) FFO Calculation
5) Table of Properties and Property Development
6) Top Ten Tenants Schedule
7) Historical Occupancy Schedule
8) Net Rent and Net Effective Rent Schedule
9) Lease Expiration Schedule
10) Tenant Retention Schedule
11) Leasing Costs and Capital Expenditures
12) Debt Schedule
13) Equity Schedule
14) Minority Sharing in Cash Flows and Residual Proceeds
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Balance Sheet
Income Statement
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Developments in progress:
Land $ 10,456 $ --
Development costs 6,725 --
Rental Property, at cost:
Land 661,579 729,323
Buildings, leasehold interests and improvements 3,128,466 3,466,288
Deferred lease costs 141,918 144,838
----------- -----------
3,949,144 4,340,449
Less: Accumulated depreciation and amortization 255,217 288,448
----------- -----------
Total Rental Property 3,693,927 4,052,001
Assets held for sale 350,016 --
Cash and cash equivalents 32,756 61,869
Restricted cash 9,738 9,114
Investment in joint ventures 31,878 31,500
Other deferred costs, net of accumulated amortization of $3,694 and $932 43,631 45,572
Deferred tenant receivables 65,292 53,802
Tenant and other receivables, net 12,497 10,557
Other assets 23,389 17,569
----------- -----------
Total Assets $ 4,263,124 $ 4,281,984
=========== ===========
LIABILITIES
Long-term debt, inclusive of $21,078 and $25,031 of unamortized premium $ 1,519,093 $ 1,532,474
Credit facility 467,500 465,000
Accrued interest 11,085 10,933
Accrued real estate taxes 22,636 16,395
Accounts payable and accrued expenses 38,854 51,454
Distributions payable -- 38,163
Unearned revenue and other liabilities 34,112 23,890
----------- -----------
Total Liabilities 2,093,280 2,138,309
----------- -----------
MINORITY INTEREST
Minority interest in operating partnership 282,888 283,388
Minority interest in joint ventures 25,924 23,420
----------- -----------
Total Minority Interest 308,812 306,808
----------- -----------
Commitments and contingencies
Redeemable preferred stock; 344,828 shares authorized;
0 shares issued and outstanding -- --
STOCKHOLDERS' EQUITY
7% Cumulative convertible preferred stock, $16.50 stated value;
65,000,000 shares authorized; 3,030,303 shares issued and outstanding 50,000 50,000
Common stock, no par value; 250,000,000 shares authorized;
128,414,387 shares issued and outstanding -- --
Paid-in capital 1,793,177 1,788,567
Retained earnings 16,309 --
Accumulated other comprehensive income 4,267 --
Deferred compensation (2,721) (1,700)
----------- -----------
Total Stockholders' Equity 1,861,032 1,836,867
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,263,124 $ 4,281,984
=========== ===========
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Office and parking rentals $ 152,174 $ 81,357 $ 301,650 $ 156,540
Earnings (loss) in joint ventures 77 (1,763) 382 (2,688)
Interest and other income 1,378 6,896 3,362 14,194
--------- --------- --------- ---------
Total Revenues 153,629 86,490 305,394 168,046
--------- --------- --------- ---------
Expenses
Building operating expenses 32,521 16,962 63,598 34,051
Real estate taxes 18,154 11,689 37,678 22,866
Interest expense 34,715 15,752 69,073 31,667
Depreciation and amortization 23,808 16,214 48,893 26,859
General and administrative 6,435 2,958 12,571 5,544
--------- --------- --------- ---------
Total Expenses 115,633 63,575 231,813 120,987
--------- --------- --------- ---------
37,996 22,915 73,581 47,059
--------- --------- --------- ---------
Other expenses
Carrying value in excess of market value of assets
held for sale (3,753) -- (3,753) --
Loss on sale of real estate assets -- (1,985) -- (2,197)
--------- --------- --------- ---------
Total Other expenses (3,753) (1,985) (3,753) (2,197)
--------- --------- --------- ---------
Minority interest
Minority interest in operating partnership (3,864) (510) (8,337) (646)
Minority interest in joint ventures (1,284) (1,168) (2,734) (2,210)
--------- --------- --------- ---------
Total Minority interest (5,148) (1,678) (11,071) (2,856)
--------- --------- --------- ---------
Income before cumulative effect of a change in --------- --------- --------- ---------
accounting principle and extraordinary loss 29,095 19,252 58,757 42,006
--------- --------- --------- ---------
Cumulative effect of a change in accounting principle -- -- (630) --
Extraordinary loss (3,355) -- (3,355) --
--------- --------- --------- ---------
Net income $ 25,740 $ 19,252 $ 54,772 $ 42,006
========= ========= ========= =========
Income applicable to preferred stock $ (875) $ (875) $ (1,750) $ (1,750)
--------- --------- --------- ---------
Income applicable to common stock $ 24,865 $ 18,377 $ 53,022 $ 40,256
========= ========= ========= =========
Income before cumulative effect of a change in accounting
principle and extraordinary loss per common share $ 0.21 $ 0.18 $ 0.44 $ 0.42
========= ========= ========= =========
Cumulative effect of a change in accounting principle
and extraordinary loss per common share $ (0.02) $ -- $ (0.03) $ --
========= ========= ========= =========
Basic income per common share $ 0.19 $ 0.18 $ 0.41 $ 0.42
========= ========= ========= =========
Diluted income per common share $ 0.19 $ 0.18 $ 0.41 $ 0.42
========= ========= ========= =========
</TABLE>
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Press Release
<PAGE>
FOR IMMEDIATE RELEASE
August 2, 1999
FOR ADDITIONAL INFORMATION, CONTACT:
Kevin P. Mahoney Jennifer R. Wall
Chief Financial Officer Investor Relations
(212) 605-7142 (212) 605-7136
CORNERSTONE PROPERTIES INC.
ANNOUNCES 1999 SECOND QUARTER AND FIRST HALF RESULTS
Second Quarter/First Half 1999 Highlights
o FFO per diluted share for the 1999 second quarter increased more than 7.9%
over the 1998 period.
o First half property net operating income rose 88% over the same period in
1998.
o Year-to-date same store net operating income up 4.32% over the same period
in 1998.
o Occupancy increases 40 basis points to 96.8%.
NEW YORK, NEW YORK, August 2, 1999 -- Cornerstone Properties Inc. (NYSE: CPP), a
real estate investment trust, announced today results for its second quarter and
first six months ended June 30, 1999. In the second quarter, funds from
operations (FFO) allocated to shareholders (adjusted for convertible debt)
amounted to $60,382,000, or $0.40 per diluted share calculated on 152,699,000
average diluted total shares outstanding, compared to $39,308,000, or $0.37 per
diluted share on 107,228,000 average diluted total shares outstanding for the
three months ended June 30, 1998. The increase in FFO per diluted share was due
to internal growth and the accretive impact of the Company's acquisitions over
the past twelve months. As defined by NAREIT, funds from operations is net
income excluding expenses from debt restructuring, gains (or losses) on sale of
property, plus depreciation and amortization.
For the six month period ending June 30, 1999, funds from operations (adjusted
for convertible debt) allocated to shareholders amounted to $119,745,000, or
$0.78 per diluted share calculated on 152,660,000 average diluted total shares
outstanding, compared to $74,024,000, or $0.72 per diluted share on 102,458,000
average diluted total shares outstanding for the six months ended June 30, 1998.
The increase in FFO per diluted share for the first half was due to internal
growth and the accretive impact of the Company's acquisitions over the past
twelve months.
<PAGE>
Net operating income before depreciation from Cornerstone Properties' real
estate assets increased 88.4% to $203,606,000 for the six months ended June 30,
1999, from $108,091,000 in the comparable period in 1998. This increase is
mainly due to the acquisition of the Wilson portfolio in December 1998.
Basic and diluted income per share grew to $0.19 for the three month period
ended June 30, 1999 from $0.18 (basic and diluted) for the same period in 1998.
Basic and diluted income for the six months ended June 30, 1999 was $0.41 per
share as compared to $0.42 in the same period in 1998.
John S. Moody, President and CEO of Cornerstone, commented, "We continue to
produce strong earnings that exceed expectations. These results are attributable
to the continued strength of our core markets, strong leasing and integration
that is ahead of schedule. We believe our FFO growth of close to 8% is
especially compelling considering our current dividend yield is at the high end
within our peer group. We believe that over time, due to the quality of our
assets and our conservative lease rollover schedule, our investors will enjoy
`total returns' among the highest in the industry on a risk adjusted basis."
"Same Store" Revenue Growth Continues
The Company achieved year-to-date "same store" net operating income growth of
4.32% at the 18 properties owned over the same period. This increase is due to a
3.83% increase in revenues while expenses increased only 2.94% -- a reflection
of increased rents in the Company's supply-constrained core markets and lower
costs as property management is internalized. Cash basis year-to-date same store
net operating income (not including the effects of straight-line rents) has
increased 5.48%.
Property Management Internalization Continues
The Company continues its plans to internalize property management. In June, the
Company assumed management control at One Lincoln Centre in Suburban Chicago. As
of August 1, the Company internalized management for its two New York City
assets, Tower 56 and 527 Madison, as well as Corporate 500 Centre in Deerfield,
Illinois.
Stephen J. Pilch, Cornerstone Senior Vice President, Director of Management and
Leasing, commented, "In the first six months since merging with William Wilson &
Associates, we've made strong headway in assuming greater management control of
our core assets in Chicago, New York and Boston. To date we've internalized
approximately 3 million square feet of Class A property - a figure that exceeds
our mid-year targets. We are on-track to complete the process in several other
markets by mid-2000 and look forward to receiving the benefits derived from
developing a closer relationship with our clients."
Occupancy trends up to 96.8%
During the second quarter of 1999, the Company leased approximately one million
square feet, increasing occupancy from 96.4% to 96.8% (96.3% to 96.7% when
adjusted for minority interest). Major transactions include approximately
240,000 square feet in Suburban Chicago, over 75,000 square feet at 201
California in San Francisco and over 66,000 square feet at Seaport Centre in
Redwood City, California, which brings this property up to 100% occupancy.
<PAGE>
Prudential/Northwestern Mutual Financing
On June 23, 1999, the Company closed a $180,000,000 multi-asset 10 year mortgage
financing with Prudential and Northwestern Mutual at a rate of 7.26%.
Quarterly Dividend Declared
The Board of Directors declared a regular quarterly dividend of $0.30 per common
share payable on August 31, 1999 for common stockholders of record as of July
30, 1999.
Supplemental Earnings Release is now available at www.cstoneprop.com
The Second Quarter 1999 Supplemental Earnings Release is available in PDF-format
at www.cstoneprop.com (on the Home Page and under Investor Relations).
Cornerstone Properties Inc. is a self-administered equity real estate investment
trust (REIT) investing in Class A office properties in prime locations in major
suburban markets and prime central business districts. The Company, through its
subsidiaries, currently owns interests in 96 Class A office properties
throughout the United States totaling approximately 21 million square feet.
Headquartered in New York City, Cornerstone's stock is traded on the New York
Stock Exchange under the ticker symbol CPP.
This press release contains forward-looking statements within the meaning of the
Federal securities laws. Forward-looking statements are inherently subject to
risks and uncertainties, many of which cannot be predicted with accuracy, that
could cause the actual results, performance or achievements of Cornerstone to
differ materially from those reflected in such forward-looking statements.
Information contained in this press release regarding current and future market
conditions is based on Cornerstone's assessment of real estate markets as of
this date and is subject to the uncertainties inherent in such an assessment. In
particular, but not exclusively, national and regional economic conditions, the
rate of new construction, and demand and supply in a given market will affect
leasing activity, projected rents and the cost of lease renewals.
[Table to Follow]
# # #
For more information on Cornerstone Properties visit Cornerstone Properties' Web
site at http://www.cstoneprop.com
<PAGE>
Cornerstone Properties Inc.
Funds From Operations
June 30, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------
3 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Rental Income(1) $ 155,329 $ 88,744 $ 307,449 $ 169,095
Building Operating Expenses(1) 52,120 31,178 103,843 61,004
------------------------------------------------------------------
Building Net Operating Income 103,209 57,566 203,606 108,091
------------------------------------------------------------------
Corporate General and Administrative(1)(2) (8,343) (2,958) (15,735) (5,544)
Interest and Other Income(1) 3,176 1,584 6,895 5,212
------------------------------------------------------------------
EBITDA 98,042 56,192 194,766 107,759
------------------------------------------------------------------
Interest Expense(1) (35,316) (15,752) (70,279) (31,667)
Minority Adjustments(1) (2,520) (1,709) (5,118) (3,218)
Rent Notes -- 378 -- 746
------------------------------------------------------------------
Funds From Operations 60,206 39,109 119,369 73,620
Interest on Convertible Debt 176 199 376 404
------------------------------------------------------------------
Funds From Operations (Adjusted for convertible debt) $ 60,382 $ 39,308 $ 119,745 $ 74,024
------------------------------------------------------------------
Weighted Average Diluted Shares/Units 152,699 107,228 152,660 102,458
FFO Per Share/Unit (Diluted) $ 0.40 $ 0.37 $ 0.78 $ 0.72
Less: Capital Expenditures Per Share/Unit 0.04 0.02 0.07 $ 0.04
------------------------------------------------------------------
AFFO Per Share/Unit $ 0.36 $ 0.35 $ 0.71 $ 0.69
------------------------------------------------------------------
Funds From Operations $ 60,206 $ 39,109 $ 119,369 $ 73,620
Less: Preferred Dividends (875) (875) (1,750) (1,750)
Less: Recurring Lease Costs and Capital Expenditures(3) (5,748) (1,743) (11,210) (3,628)
Less: Straight Line Rents Adjusted For Minority Interest (6,602) (3,763) (13,472) (6,909)
------------------------------------------------------------------
Funds Available for Distribution $ 46,981 $ 32,728 $ 92,937 $ 61,333
------------------------------------------------------------------
Weighted Average Common Shares and Units Outstanding 148,594 102,963 148,594 98,192
Funds Available for Distribution Per Share/Unit $ 0.32 $ 0.32 $ 0.63 $ 0.62
Distribution Per Share/Unit $ 0.30 $ 0.30 $ 0.60 $ 0.60
</TABLE>
(1) For the three months ended June 30, 1999 rental income has been increased by
$3,155,000, building operating expenses have been increased by $1,444,000,
corporate general and administrative expense has been increased by $1,908,000,
interest and other income has been increased by $1,798,000, interest expense has
been increased by $602,000 and minority adjustments have been increased $548,000
in order to show Cornerstone's equity investments had they been consolidated.
For the three months ended June 30, 1998 rental income has been increased by
$7,386,000, building operating expenses have been increased by $2,526,000 and
interest and other income has been reduced by $5,312,000 in order to show
Cornerstone's equity investments had they been consolidated.
For the six months ended June 30, 1999 rental income has been increased by
$5,799,000, building operating expenses have been increased by $2,566,000,
corporate general and administrative expense has been increased by $3,411,000,
interest and other income has been increased by $3,533,000, interest expense has
been increased by $1,206,000 and minority adjustments have been increased
$1,019,000 in order to show Cornerstone's equity investments had they been
consolidated. For the six months ended June 30, 1998 rental income has been
increased by $12,555,000, building operating expenses have been increased by
$4,087,000 and interest and other income has been reduced by $8,982,000 in order
to show Cornerstone's equity investments had they been consolidated.
(2) Non-recurring merger severance costs of $247,000 have been deducted from
general and administrative expenses.
(3) Based on a five year 1995-1999 average of recurring (non revenue generating)
tenant leasing costs of $8.97 per square foot leased times the five year
(1999-2003) average quarterly lease expiration (adjusted for minority interest)
of 561,896 square feet or $5,040,207, plus a capital expenditure reserve
(adjusted for minority interest) of $0.14 per square foot ($707,818).
Year to date the Company has incurred $12,244,557 in recurring tenant costs
(adjusted for minority interest) in leasing 1,246,040 square feet or a cost of
$9.83 per square foot. Year to date the Company has incurred $1,916,659 in
recurring capital costs (adjusted for minority interest) or $0.19 per square
foot on an annualized basis.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Fact Sheet
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Quarterly Fact Sheet
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
I. 1999 2nd Quarter Results Quarter to Date Year to Date
Operations 1999 1998 1999 1998
-------------------------------------------------------- ---------------------------- ----------------------------
<C> <S> <C> <C> <C> <C>
FFO Per Share $ 0.40 $ 0.37 $ 0.78 $ 0.72
AFFO Per Share $ 0.36 $ 0.35 $ 0.71 $ 0.69
FAD Per Share $ 0.32 $ 0.32 $ 0.63 $ 0.62
FFO Payout Ratio 75% 82% 77% 83%
AFFO Payout Ratio 83% 86% 85% 86%
FAD Payout Ratio 94% 94% 95% 96%
Same Store NOI Growth 2.98% NA 4.32% 1.90%
Cash Same Store NOI Growth (adjusted for S/L rents) 4.37% NA 5.48% NA
EBITDA Interest Coverage 2.78 3.52 2.77 3.35
Fixed Charge Coverage 2.68 3.33 2.68 3.18
Leasing Costs and Capital
(1) Recurring Leasing Costs Per Square Foot Leased $ 10.78 $ 4.20 $ 9.83 $ 5.50
(1) Non-Recurring Leasing Costs Per Square Foot Leased $ 18.95 $ 40.27 $ 20.71 $ 24.48
(1)(2) Recurring Capital Expenditures Per Square Foot $ 0.20 $ 0.14 $ 0.19 $ 0.10
(1)(2) Non-Recurring Capital Expenditures Per Square Foot $ 0.17 $ 0.05 $ 0.12 $ 0.05
Straight Line Rents and Revenues
Expiring Rents $ 26.53 NA $ 25.47 NA
Rents on New leases $ 33.61 NA $ 31.94 NA
----------- -----------
Percentage Increase 27% NA 25% NA
Straight Line Rents $ 6,602,000 $ 3,763,000 $13,472,000 $ 6,909,000
Capitalized Interest $ 376,000 NA $ 687,000 NA
Parking Revenues (included in Office and Parking) $ 7,042,906 $ 5,116,162 $14,050,093 $ 9,975,684
Parking Expense (included in Building Operating Expense) $ 1,116,499 $ 727,070 $ 1,814,840 $ 1,366,000
--------------------------- ---------------------------
Net Parking Income $ 5,926,407 $ 4,389,092 $12,235,253 $ 8,609,684
</TABLE>
(1) Leasing and capital expenditures for 1998 have been restated to reflect
the sale of The Frick Building in April of 1998
(2) Capital expenditures per square foot are reported on an annualized basis
- --------------------------------------------------------------------------------
II. Common Dividends Record Date Payment Date
--------------------------
3rd Quarter 1999 07/30/99 08/31/99
4th Quarter 1999 10/29/99 11/30/99
1st Quarter 2000 01/31/00 02/29/00
2nd Quarter 2000 04/29/00 05/31/00
III. Earnings Release/ Quarterly Conference Call Release Date
--------------------------
3rd Quarter 1999 11/02/99
4th Quarter 1999 02/24/00
1st Quarter 2000 05/02/00
2nd Quarter 2000 08/01/00
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
FFO Calculation
<PAGE>
Cornerstone Properties Inc.
Funds From Operations
June 30, 1999 and 1998
<TABLE>
<CAPTION>
---------------------------------------------------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
---------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Income $ 25,740 $ 19,252 $ 54,772 $ 42,006
NAREIT Adjustments:
Depreciation and Amortization(1) 23,808 16,214 48,893 26,859
Minority Adjustments (688) (541) (1,365) (1,008)
Unconsolidated Depreciation(2) 374 1,311 747 2,174
Cumulative Effect of a Change in
Accounting Principle -- -- 630 --
Impairment Costs 3,753 -- 3,753 --
Loss on Sale of Assets -- 1,985 -- 2,197
Extraordinary Losses 3,355 -- 3,355 --
Other Adjustments:
Amortization on Rent Notes -- 378 -- 746
Severance Payments -- -- 247 --
Minority Interest Allocated to Unitholders 3,864 510 8,337 646
---------------------------------------------------
Funds From Operations $ 60,206 $ 39,109 $ 119,369 $ 73,620
Interest Expense On Convertible Note 176 199 376 404
---------------------------------------------------
Funds From Operations $ 60,382 $ 39,308 $ 119,745 $ 74,024
===================================================
Weighted Average Diluted Shares/Units Outstanding 152,699 107,228 152,660 102,458
FFO Per Share/Unit $ 0.40 $ 0.37 $ 0.78 $ 0.72
===================================================
</TABLE>
(1) For the three months ended June 30, 1999, the depreciation and amortization
adjustment includes $971,000 of amortization relating to the intangible
management and development company assets that were acquired as part of the
Wilson Acquisition.
For the six months ended June 30, 1999, the depreciation and amortization
adjustment includes $1,974,000 of amortization relating to the intangible
management and development company assets that were acquired as part of the
Wilson Acquisition.
(2) For the three months ended June 30, 1999, the unconsolidated depreciation
adjustment includes $169,000 of amortization relating to the intangible
management and development company assets that were acquired as part of the
Wilson Acquisition.
For the six months ended June 30, 1999, the unconsolidated depreciation
adjustment includes $338,000 of amortization relating to the intangible
management and development company assets that were acquired as part of the
Wilson Acquisition.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Table of Properties
Property Development
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Table of Properties
As of June 30, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Remaining
Region Property Total Rentable Cornerstone Year Current Total Avg Term
Name Name Square Feet Interest (1) Constructed Occupancy Leases (in Years)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts
(2) Sixty State Street 823,014 100.0% 1979 100.0% 33 8.3
500 Boylston Street 714,513 91.5% 1988 100.0% 16 5.6
222 Berkeley Street 530,884 91.5% 1991 100.0% 28 6.0
125 Summer Street 463,691 100.0% 1989 94.0% 23 3.6
(3) One Memorial Drive 352,764 100.0% 1985 99.8% 12 5.4
----------- ------------------------
Region Total 2,884,866 99.0% 112 6.1
San Mateo County, California
(4) Bayhill (4 buildings) 514,704 100.0% 1982 - 1987 84.2% 37 4.1
(4) Peninsula Office Park (7 buildings) 492,044 100.0% 1971 - 1998 97.7% 36 5.7
(4) Seaport Centre 463,418 100.0% 1988 100.0% 15 6.6
(4) Bay Park Plaza (2 buildings) 257,058 100.0% 1985 - 1998 100.0% 13 5.7
(4) One Bay Plaza 176,533 100.0% 1979 89.7% 45 2.7
(4) Belmont Shores 141,643 100.0% 1983 96.5% 13 3.5
(4) 1300 South El Camino 84,441 100.0% 1986 97.8% 10 3.5
(4) 66 Bovet 43,968 100.0% 1968 97.3% 17 2.2
----------- ------------------------
Region Total 2,173,809 94.5% 186 5.1
East Bay, California
(4) Corporate Centre (2 buildings) 329,357 100.0% 1985 - 1987 97.4% 57 3.3
(4) ADP Plaza (2 buildings) 299,627 100.0% 1987 - 1989 99.0% 27 3.0
(4) PeopleSoft 277,502 100.0% 1984 100.0% 6 7.5
(4) Norris Tech (3 buildings) 260,513 100.0% 1984 - 1990 96.9% 7 5.5
(4) Golden Bear Center 160,587 100.0% 1986 99.6% 20 4.3
(4) 2700 Ygnacio Valley Road 103,214 100.0% 1984 96.3% 25 2.6
(4) Park Plaza 87,040 100.0% 1986 100.0% 9 4.6
(4) 1600 South Main 83,277 100.0% 1983 100.0% 18 2.5
(4) Foothill Corporate Center 70,355 100.0% 1982 96.7% 21 1.4
----------- ------------------------
Region Total 1,671,472 98.4% 190 4.3
Atlanta, Georgia
(5) 191 Peachtree Street 1,215,288 80.0% 1991 97.3% 33 7.0
200 Galleria 432,698 100.0% 1985 95.0% 56 2.9
----------- ------------------------
Region Total 1,647,986 96.7% 89 6.0
Seattle, Washington
(6) Washington Mutual Tower (3 buildings) 1,154,560 50.0% 1988 99.3% 91 6.4
(4) 110 Atrium Place 215,172 100.0% 1981 100.0% 30 3.6
(4) Island Corporate Center 100,075 100.0% 1987 89.4% 19 3.2
----------- ------------------------
Region Total 1,469,807 98.7% 140 5.8
Santa Clara County, California
(4)(7) Pruneyard Office (3 buildings) 354,360 100.0% 1971 - 1999 98.3% 78 5.1
(4) 10 Almaden 293,526 100.0% 1989 100.0% 23 7.4
(4) Pruneyard Shopping Center 252,210 100.0% 1970s 89.1% 50 7.1
(4) Embarcadero Place (4 buildings) 192,081 100.0% 1984 100.0% 8 3.6
(4)(8) Pruneyard Inn 94,500 100.0% 1989 na na
(4) First American Plaza 82,596 100.0% 1971 95.6% 19 3.7
(4) 490 California 24,539 100.0% 1985 100.0% 3 1.3
----------- ------------------------
Region Total 1,293,812 96.9% 181 5.7
Denver, Colorado
One Norwest Center 1,187,852 100.0% 1983 97.2% 52 7.2
----------- ------------------------
Region Total 1,187,852 97.2% 52 7.2
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Table of Properties
As of June 30, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Remaining
Region Property Total Rentable Cornerstone Year Current Total Avg Term
Name Name Square Feet Interest (1) Constructed Occupancy Leases (in Years)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
San Francisco, California
(4) 120 Montgomery 418,751 66.7% 1955 96.1% 95 3.4
(4) One Post 388,055 50.0% 1969 99.9% 34 6.4
(9) 201 California 240,230 100.0% 1980 100.0% 10 3.5
(4) 188 Embarcadero 85,183 100.0% 1985 98.9% 12 3.6
----------- ------------------------
Region Total 1,132,219 98.4% 151 4.5
Minneapolis, Minnesota
(10) Norwest Center 1,117,439 50.0% 1988 99.7% 30 10.5
----------- ------------------------
Region Total 1,117,439 99.7% 30 10.5
Washington, D.C. / Alexandria, Virginia
(11) Market Square (2 buildings) 688,709 70.0% 1990 98.7% 56 7.3
99 Canal Center 137,945 100.0% 1986 97.6% 18 4.3
TransPotomac Plaza 96,278 100.0% 1983 91.8% 11 6.5
11 Canal Center 70,365 100.0% 1986 95.5% 7 6.9
----------- ------------------------
Region Total 993,297 97.7% 92 6.8
Suburban Chicago, Illinois
(12) Corporate 500 Centre (4 buildings) 679,039 100.0% 1986/1990 97.8% 42 5.8
One Lincoln Centre 297,040 100.0% 1986 92.1% 43 3.6
----------- ------------------------
Region Total 976,079 96.1% 85 5.2
Santa Monica/West Los Angeles, California
(4) West Wilshire (2 buildings) 235,787 100.0% 1960 - 1976 93.9% 51 3.7
(9) Wilshire Palisades 186,714 100.0% 1981 99.5% 14 3.9
(4)(13) Janss Court 125,709 100.0% 1989 100.0% 21 7.0
(4) Searise Office Tower 122,292 100.0% 1975 96.7% 25 5.0
(4) Commerce Park 94,367 100.0% 1977 78.4% 10 5.0
(4) 429 Santa Monica 82,284 100.0% 1982 67.3% 27 2.0
----------- ------------------------
Region Total 847,153 92.1% 148 4.5
Orange County, California
(4) Bixby Ranch 277,289 100.0% 1987 98.1% 48 2.9
(4) 18301 Von Karman 219,508 100.0% 1991 88.7% 33 4.2
(4) 2677 North Main 213,318 100.0% 1987 90.5% 22 3.0
----------- ------------------------
Region Total 710,115 92.9% 103 3.3
Charlotte, North Carolina
Charlotte Plaza 612,728 100.0% 1982 99.2% 47 5.7
----------- ------------------------
Region Total 612,728 99.2% 47 5.7
Arizona
(4) Gateway (2 buildings) 212,222 100.0% 1984 - 1985 97.3% 34 3.1
(4) Biltmore Lakes 207,434 100.0% 1982 98.4% 45 2.9
(4) Scottsdale Centre 166,382 100.0% 1985 91.0% 45 2.9
----------- ------------------------
Region Total 586,038 95.9% 124 3.0
San Diego, California
(4) Centerside II 287,029 100.0% 1987 87.5% 40 3.5
(4) Crossroads 133,553 100.0% 1983 100.0% 11 4.1
----------- ------------------------
Region Total 420,582 91.5% 51 3.7
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Table of Properties
As of June 30, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Remaining
Region Property Total Rentable Cornerstone Year Current Total Avg Term
Name Name Square Feet Interest (1) Constructed Occupancy Leases (in Years)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Los Angeles, California
(4) 700 North Brand 202,531 100.0% 1981 94.1% 18 4.4
(4) Tri-Center Plaza 141,732 100.0% 1990 98.6% 12 4.1
(4) Warner Park Center 57,366 100.0% 1986 100.0% 8 1.5
----------- ------------------------
Region Total 401,629 96.5% 38 3.8
New York City, New York
527 Madison Avenue 215,332 100.0% 1986 99.5% 21 4.6
Tower 56 163,633 100.0% 1983 100.0% 43 2.6
----------- ------------------------
Region Total 378,965 99.7% 64 3.7
Conejo Valley (Ventura), California
(4) Westlake Spectrum (2 buildings) 118,990 100.0% 1990 87.5% 10 2.4
(4) Agoura Hills 115,265 100.0% 1987 89.7% 9 2.8
----------- ------------------------
Region Total 234,255 88.6% 19 2.7
Other Regions
(4) U.S. West (Murray, Utah) 136,608 100.0% 1985 77.6% 15 3.3
(4) Exposition Centre (Sacramento, CA) 72,971 100.0% 1984 70.3% 14 3.1
----------- ------------------------
Region Total 209,579 75.1% 29 3.3
----------- ------------------------
Total Portfolio 20,949,682 96.8% 1,931 5.6
(14) Minority Interest Adjustment (726,317)
----------- -----
Cornerstone Portfolio 20,223,365 96.7%
Adjustment For Pruneyard Inn (94,500)
-----------
Cornerstone Office Portfolio 20,128,865
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Table of Properties
Footnotes
- ----------
(1) Unless noted below, cash flow and residual proceeds will be distributed to
Cornerstone according to its percentage interest.
(2) On December 31, 1997, the Company purchased the second mortgage on Sixty
State Street. 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.
(3) The Property was acquired by the Company in April 1998.
(4) Property acquired as a result of the Wilson acquisition in December 1998.
(5) 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. The partner in the
transaction, CH Associates, Ltd., receives 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.
(6) 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 quarter ended June 30, 1999, the Company
received 100% of the cash distributions from the partnership that owns
Washington Mutual Tower.
(7) Pruneyard Place construction was completed and occupied on April 1, 1999.
The building was entirely pre-leased.
(8) The Pruneyard Inn is a three-story hotel. A 25,000 square foot expansion
was completed in May 1999, increasing the number of rooms from 118 to 172.
(9) The Property was acquired by the Company in June 1998.
(10) 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 quarter ended June 30, 1999, the Company's share of
earnings and cash distributions from the partnership that owns Norwest
Center was 74.3%.
(11) During 1998, through a series of transactions, the Company acquired
partnership interests with a stated interest of approximately 70% in the
partnerships that own Market Square. 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 $49.0 million at purchase, 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 quarter
ended June 30, 1999, the Company received 100% of the cash flow from the
Property.
(12) The Property was acquired by the Company in January 1998.
(13) Janss Court is a seven-story, 125,000 square foot Class A mixed-use
building. Along with 92,000 square feet of retail and office space, Janss
Court offers 32 apartments for a total of 33,000 rentable square feet of
residential space.
(14) Rentable square feet include an adjustment for the interest of a joint
venture or minority partner. Calculations are based on the partners'
percentage interest in the cash flows of the property.
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Property Development Summary
As of June 30, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Projected Actual Projected Leasing Expected
Asset Size Start Complete Total Cost Cost to Date Cost to Complete Status Return (9)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1) PruneYard Inn 54 rooms 12/97 6/99 $ 4,800,000 $ 3,844,334 $ 955,666 na 21.8%
Campbell, CA
(2) Piper Jaffray Center 930,000 4/98 6/00 $163,776,000 $ 0 $163,776,000 40.0% 9.0%
Minneapolis, MN
(3) Seaport Plaza 160,000 8/99 12/00 $ 40,100,000 $11,908,431 $ 28,191,570 0.0% 12.9%
Redwood City, CA
(4) First and Howard 1,100,000 4/00 tbd $346,500,000 $ 0 $346,500,000 0.0% 10.5%
San Francisco, CA
(5) Concar 200,000 4/00 7/01 $ 46,000,000 $ 1,290,494 $ 44,709,507 0.0% 12.4%
San Mateo, CA
(6) One Powell 79,000 5/00 7/01 $ 24,000,000 $ 0 $ 24,000,000 0.0% 11.0%
San Francisco, CA
(7) Ferry Building 216,000 1/01 7/02 $ 57,400,000 $ 0 $ 57,400,000 0.0% 12.1%
San Francisco, CA
(8) Larkspur Landing 168,000 2/02 4/03 $ 43,300,000 $ 138,222 $ 43,161,778 0.0% 10.7%
Larkspur, CA
--------- ------------------------------------------------------
Total 2,853,000 $725,876,000 $17,181,480 $708,694,520 13.0%
</TABLE>
Notes:
(1) Additional hotel rooms added to existing 118 room hotel.
(2) Pre-sale with the Ryan Companies. 40% pre-leased to Piper Jaffray and the
Ryan Companies.
(3) Signed Letter of Intent with a public software company for 100% of project
and a twelve year lease term.
(4) The First & Howard urban campus will consist of 4 separate buildings. Each
of the phases will involve one or two JV partners. Marketing of this CBD
campus will be targeted to growth businesses such as software, media and
business services. The Cornerstone weighted average ownership of the
entire project is anticipated to be 68%.
(5) 69-year ground lease with a participation feature. The completion costs
above assumes an imputed land value of $7.5 million.
(6) Bank of America to retain a 10% ownership in the asset, which includes
46,800 s.f. of retail space.
(7) Ferry Building is a 65 year master lease that provides for a 50%
participation to the Port after receipt by Cornerstone of an 11% return on
equity.
(8) Larkspur Landing is a joint venture project with Campus Properties which
will include two office buildings, a hotel and a shared parking facility.
The joint venture expects to sell off the hotel portion of the property.
Campus will receive a promoted share of the cash flow above a cumulative
preferred return to equity. After 5 years, Cornerstone has the option to
acquire Campus' position by capitalizing the then-current rent and paying
Campus its share of the value in excess of costs.
(9) Before any partnership cash flow splits
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Top Ten Tenants Schedule
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Top Ten Tenants Schedule
As of June 30, 1999
- --------------------------------------------------------------------------------
The Company's tenants include local, regional, and international companies
engaged in a wide variety of businesses. The following table sets forth, as of
June 30, 1999, information concerning the ten largest tenants (ranked by Full
Service Straight-Line Rent, adjusted for the interest of a joint venture or
minority partner, 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>
Straight-Line Expense Full Service Percent Scheduled Rentable
Tenant Rent Recoveries Straight-Line Rent of Total Expiration Square Feet
--------------------------------- ------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
(1)(3)(4) Norwest Corporation [Wells Fargo] $ 18,509,292 $ 9,475,953 $ 27,985,245 5% Aug-01 7,200
Oct-01 1,796
Jan-02 12,898
Feb-03 12,601
Jul-03 143,103
Aug-04 29,810
Oct-04 13,660
Jul-13 401,735
Aug-18 335,287
----------
958,090
(1)(4) Massachusetts Financial Services 9,015,212 4,378,355 13,393,567 2% Feb-03 328,540
(1) Hale & Dorr 8,596,109 4,454,436 13,050,545 2% Feb-04 1,066
Jun-13 318,435
----------
319,501
(1) Wachovia Bank 9,061,416 3,276,000 12,337,416 2% Sep-03 7,730
Dec-08 380,442
----------
388,172
(1) King & Spalding 8,168,292 2,744,076 10,912,368 2% Mar-06 314,443
(1) Deloitte & Touche 6,126,432 2,710,866 8,837,298 2% Oct-99 129,614
Jun-08 84,947
----------
214,561
(1)(4) The New England Life 4,730,952 2,656,627 7,387,579 1% Aug-07 4,085
Sep-08 194,969
----------
199,054
(2) Perkins Coie 6,678,717 540,058 7,218,775 1% Jul-03 6,811
Jul-04 23,775
Dec-11 209,541
----------
240,127
(2) First Union 6,263,184 151,824 6,415,008 1% Jun-00 27,210
Aug-00 22,884
Mar-01 22,520
Aug-01 46,097
Feb-02 23,421
Sep-02 22,366
Mar-04 23,190
Aug-08 46,072
Mar-09 23,105
Mar-10 46,768
Mar-11 47,542
Apr-14 3,905
----------
355,080
(1)(4) Houghton Mifflin 3,161,276 2,995,724 6,157,000 1% Feb-07 225,883
-------------------------------------------------------- ----------
Total Top 10 Tenants $ 80,310,882 $ 33,383,919 $ 113,694,801 20% 3,543,451
======================================================== ==========
-----------------------------------------------
(4) Total Portfolio $ 478,269,603 $ 103,882,153 $ 582,151,757 19,460,156
=============================================== ==========
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Top Ten Tenants Schedule
Footnotes
- ----------
(1) Net Lease.
(2) Gross Lease.
(3) Norwest Corporation [Wells Fargo] includes all space associated with
Norwest Corporation, Norwest Bank Denver N.A. and Wells Fargo Bank.
(4) Straight-Line Rent and rentable square feet include an adjustment for the
interest of a joint venture or minority partner. Calculations are based on
the partners' 1999 percentage participation in the cash flows of the
property. Note: Supplemental packages prior to the Fourth Quarter 1998
package did not include an adjustment for minority interest in the
schedule of Top Ten Tenants.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Historical Occupancy Schedule
<PAGE>
Cornerstone Properties Inc.
Historical Occupancy Schedule
As of June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region Total Rentable
Name Square Feet 1995 1996 1997 1998 1999
--------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts 2,884,866 94% 100% 99% 99% 99%
San Mateo County, California 2,173,809 -- -- -- 88% 95%
East Bay, California 1,671,472 -- -- -- 96% 98%
Atlanta, Georgia 1,647,986 -- -- 94% 97% 97%
Seattle, Washington 1,469,807 97% 97% 97% 99% 99%
(1) Santa Clara County, California 1,199,312 -- -- -- 99% 97%
Denver, Colorado 1,187,852 98% 99% 99% 97% 97%
San Francisco, California 1,132,219 -- -- -- 98% 98%
Minneapolis, Minnesota 1,117,439 100% 100% 98% 100% 100%
Washington, D.C./Alexandria, Virginia 993,297 -- -- 95% 96% 98%
Suburban Chicago, Illinois 976,079 -- 91% 96% 95% 96%
Santa Monica/West Los Angeles, California 847,153 -- -- -- 92% 92%
Orange County, California 710,115 -- -- -- 82% 93%
Charlotte, North Carolina 612,728 -- -- 94% 99% 99%
Arizona 586,038 -- -- -- 94% 96%
San Diego, California 420,582 -- -- -- 95% 91%
Los Angeles, California 401,629 -- -- -- 95% 97%
New York City, New York 378,965 91% 96% 99% 96% 100%
Conejo Valley (Ventura), California 234,255 -- -- -- 94% 89%
(2) Other Regions 209,579 -- -- -- 79% 75%
----------- ------------------------------------------------------------
(3) TOTAL PORTFOLIO 20,855,182 98% 98% 97% 96% 97%
</TABLE>
(1) The rentable area associated with the Pruneyard Inn (94,500sf) is not
included in the occupancy calculation.
(2) Other Regions include the U.S. West building in Murray, Utah and the
Exposition Centre in Sacramento, CA.
(3) 1996 and 1997 occupancy has been restated to reflect the 1998 sale of the
Frick Building.
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Net Rent and Net Effective Rent Schedule
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Net Rent Schedule
As of June 30, 1999
- --------------------------------------------------------------------------------
The following tables show the average annual Net Rent (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. "Net Rent" as used herein means
actual billed rent less Recoveries. Recoveries includes base stops in gross
leases. Amounts do not include the properties acquired as a result of the Wilson
acquisition on 12/16/98 and held for 16 days during the period ended 12/31/98.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region Occupied YTD
Name Square Feet 1995 1996 1997 1998 1999
------------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts 2,856,044 $22.48 $23.24 $21.78 $21.22 $20.82
San Mateo County, California 2,055,076 -- -- -- -- $21.49
East Bay, California 1,645,087 -- -- -- -- $13.62
Atlanta, Georgia 1,593,994 -- -- $18.93 $19.17 $18.18
Seattle, Washington 1,451,065 $16.17 $15.98 $15.77 $15.83 $15.83
(1) Santa Clara County, California 1,162,151 -- -- -- -- $17.73
Denver, Colorado 1,154,456 $11.78 $12.08 $12.46 $12.54 $12.62
San Francisco, California 1,114,372 -- -- -- $11.57 $15.10
Minneapolis, Minnesota 1,114,320 $17.82 $17.94 $18.29 $18.91 $19.33
Washington, D.C./Alexandria, Virginia 970,186 -- -- $13.80 $22.60 $21.88
Suburban Chicago, Illinois 937,871 -- $18.56 $19.60 $20.84 $17.65
Santa Monica/West Los Angeles, California 780,510 -- -- -- $24.36 $19.14
Orange County, California 659,767 -- -- -- -- $12.73
Charlotte, North Carolina 607,762 -- -- $ 9.35 $ 9.66 $11.48
Arizona 561,998 -- -- -- -- $11.07
San Diego, California 384,652 -- -- -- -- $10.25
Los Angeles, California 387,688 -- -- -- -- $16.02
New York City, New York 377,992 -- $28.98 $30.60 $27.80 $27.87
Conejo Valley (Ventura), California 207,580 -- -- -- -- $14.55
(2) Other Regions 157,351 -- -- -- -- $11.16
----------- ------------------------------------------------------
(3) TOTAL PORTFOLIO 20,179,922 $16.06 $17.42 $17.74 $18.77 $17.41
</TABLE>
(1) The rentable area associated with the Pruneyard Inn (94,500sf) is not
included in the occupancy calculation.
(2) Other Regions include the U.S. West building in Murray, Utah and the
Exposition Centre in Sacramento, CA.
(3) 1996 and 1997 amounts has been restated to reflect the 1998 sale of the
Frick Building.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Net Effective Rent Schedule
As of June 30, 1999
- --------------------------------------------------------------------------------
The following tables show the average annual Net Effective Rent (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. "Net Effective
Rent" as used herein means (i) rent determined for each year on a straight-line
basis through the term of the lease, less (ii) Recoveries and the amortization
of deferred leasing costs (tenant improvements, leasing commissions, and other
tenant inducements). Recoveries includes base stops in gross leases. Amounts do
not include the properties acquired as a result of the Wilson acquisition on
12/16/98 and held for 16 days during the period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region Occupied YTD
Name Square Feet 1995 1996 1997 1998 1999
------------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts 2,856,044 $23.33 $22.27 $21.95 $22.56 $21.88
San Mateo County, California 2,055,076 -- -- -- -- $24.07
East Bay, California 1,645,087 -- -- -- -- $14.52
Atlanta, Georgia 1,593,994 -- -- $21.44 $21.52 $19.95
Seattle, Washington 1,451,065 $11.83 $11.80 $12.02 $15.10 $16.14
(1) Santa Clara County, California 1,162,151 -- -- -- -- $20.21
Denver, Colorado 1,154,456 $10.56 $10.80 $11.66 $11.96 $12.93
San Francisco, California 1,114,372 -- -- -- $11.73 $15.70
Minneapolis, Minnesota 1,114,320 $17.31 $17.43 $17.23 $17.73 $18.81
Washington, D.C./Alexandria, Virginia 970,186 -- -- $14.72 $24.40 $24.73
Suburban Chicago, Illinois 937,871 -- $19.70 $19.76 $21.65 $18.51
Santa Monica/West Los Angeles, California 780,510 -- -- -- $26.04 $20.12
Orange County, California 659,767 -- -- -- -- $13.25
Charlotte, North Carolina 607,762 -- -- $ 9.76 $10.00 $11.70
Arizona 561,998 -- -- -- -- $11.90
San Diego, California 384,652 -- -- -- -- $11.81
Los Angeles, California 387,688 -- -- -- -- $17.22
New York City, New York 377,992 -- $26.75 $30.27 $28.45 $27.32
Conejo Valley (Ventura), California 207,580 -- -- -- -- $15.00
(2) Other Regions 157,351 -- -- -- -- $11.94
---------- --------------------------------------------------
(3) TOTAL PORTFOLIO 20,179,922 $14.37 $15.71 $17.55 $19.50 $18.54
</TABLE>
(1) The rentable area associated with the Pruneyard Inn (94,500sf) is not
included in the occupancy calculation.
(2) Other Regions include the U.S. West building in Murray, Utah and the
Exposition Centre in Sacramento, CA.
(3) 1996 and 1997 amounts has been restated to reflect the 1998 sale of the
Frick Building.
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Lease Expiration Schedule
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Portfolio - All Properties Total (7) Square feet expiring (1) 847,108 sf 1,665,814 sf 1,912,234 sf
Full service St-Line rent (2) $ 23,113,506 $ 41,448,426 $ 56,387,361
Minority Interest Adjustment (3) Square feet expiring (1) 19,099 sf 55,523 sf 26,165 sf
Full service St-Line rent (2) $ 517,142 $ 1,532,020 $ 757,869
Cornerstone Portfolio Square feet expiring (1) (3) 828,009 sf 1,610,291 sf 1,886,069 sf
Full service St-Line rent (2) (3) $ 22,596,363 $ 39,916,406 $ 55,629,492
Full service St-Line rent per sq. ft. $ 27.29 $ 24.79 $ 29.49
% Full service St-Lined rent 3.88% 6.86% 9.56%
No. of tenant leases expiring (4) 198 301 302
Asking market rent per sq. ft. (5) $34.89
Operating Expenses per sq. ft. (6) $10.24
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Boston, Massachusetts Square feet expiring (1) 139,194 sf 66,773 sf 133,571 sf
Full service St-Line rent (2) $ 6,182,742 $ 2,390,978 $ 5,269,432
Minority Interest Adjustment (3) Square feet expiring (1) 23 sf 1,379 sf 5,664 sf
Full service St-Line rent (2) $ 274 $ 49,108 $ 238,621
Cornerstone Portfolio Square feet expiring (1) (3) 139,171 sf 65,394 sf 127,907 sf
Full service St-Line rent (2) (3) $ 6,182,468 $ 2,341,870 $ 5,030,811
Full service St-Line rent per sq. ft. $ 44.42 $ 35.81 $ 39.33
% Full service St-Lined rent 6.09% 2.31% 4.96%
No. of tenant leases expiring (4) 5 7 15
Asking market rent per sq. ft. (5) $50.68
Operating Expenses per sq. ft. (6) $13.70
- -----------------------------------------------------------------------------------------------------------------------------------
San Mateo County, California Square feet expiring (1) 118,063 sf 162,713 sf 108,288 sf
Full service St-Line rent (2) $ 2,929,859 $ 4,248,159 $ 3,390,493
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 118,063 sf 162,713 sf 108,288 sf
Full service St-Line rent (2) (3) $ 2,929,859 $ 4,248,159 $ 3,390,493
Full service St-Line rent per sq. ft. $ 24.82 $ 26.11 $ 31.31
% Full service St-Lined rent 4.14% 6.00% 4.79%
No. of tenant leases expiring (4) 21 25 21
Asking market rent per sq. ft. (5) $37.47
Operating Expenses per sq. ft. (6) $8.75
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Portfolio - All Properties Total (7) 2,757,745 sf 3,253,660 sf 2,146,817 sf 790,808 sf 1,065,459 sf
$ 72,090,320 $ 103,378,099 $ 64,582,404 $ 27,221,599 $ 34,840,027
Minority Interest Adjustment (3) 60,414 sf 161,228 sf 67,540 sf 7,041 sf 638 sf
$ 1,620,680 $ 5,314,306 $ 2,247,805 $ 239,012 $ 14,682
Cornerstone Portfolio 2,697,331 sf 3,092,432 sf 2,079,277 sf 783,767 sf 1,064,821 sf
$ 70,469,640 $ 98,063,792 $ 62,334,599 $ 26,982,587 $ 34,825,345
$ 26.13 $ 31.71 $ 29.98 $ 34.43 $ 32.71
12.11% 16.85% 10.71% 4.63% 5.98%
315 332 202 64 42
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Boston, Massachusetts 474,685 sf 610,855 sf 228,127 sf 31,849 sf 35,537 sf
$ 15,496,263 $ 23,851,421 $ 7,761,388 $ 959,361 $ 1,165,222
Minority Interest Adjustment (3) 9,655 sf 39,401 sf 1,367 sf sf sf
$ 333,774 $ 1,595,053 $ 44,116 $ -- $ --
Cornerstone Portfolio 465,030 sf 571,454 sf 226,760 sf 31,849 sf 35,537 sf
$ 15,162,489 $ 22,256,368 $ 7,717,273 $ 959,361 $ 1,165,222
$ 32.61 $ 38.95 $ 34.03 $ 30.12 $ 32.79
14.94% 21.93% 7.61% 0.95% 1.15%
20 20 16 3 2
- -------------------------------------------------------------------------------------------------------------------------------
San Mateo County, California 216,167 sf 281,784 sf 323,854 sf 207,219 sf 224,379 sf
$ 6,992,659 $ 10,793,381 $ 11,824,475 $ 7,880,456 $ 7,486,829
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 216,167 sf 281,784 sf 323,854 sf 207,219 sf 224,379 sf
$ 6,992,659 $ 10,793,381 $ 11,824,475 $ 7,880,456 $ 7,486,829
$ 32.35 $ 38.30 $ 36.51 $ 38.03 $ 33.37
9.87% 15.24% 16.70% 11.13% 10.57%
31 27 25 10 5
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- ------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Portfolio - All Properties Total (7) 1,394,988 sf 1,454,955 sf 2,890,334 sf 20,179,922 sf 20,855,182 sf
$ 41,203,677 $ 47,054,959 $ 94,169,718 $ 605,490,095
Minority Interest Adjustment (3) 150,743 sf 25,237 sf 146,138 sf 719,766 sf 726,317 sf
$ 4,243,532 $ 935,865 $ 5,915,425 $ 23,338,338
Cornerstone Portfolio 1,244,245 sf 1,429,718 sf 2,744,196 sf 19,460,156 sf 20,128,865 sf
$ 36,960,145 $ 46,119,094 $ 88,254,294 $ 582,151,757
$ 29.70 $ 32.26 $ 32.16 $ 29.92
6.35% 7.92% 15.16% 100.00%
46 38 91 1,931
- ------------------------------------------------------------------------------------------- ---------------------------------
- ------------------------------------------------------------------------------------------- ---------------------------------
Boston, Massachusetts 380,892 sf 218,826 sf 535,735 sf 2,856,044 sf 2,884,866 sf
$ 12,118,430 $ 8,313,052 $ 21,900,564 $ 105,408,854
Minority Interest Adjustment (3) 26,057 sf 18,600 sf 3,696 sf 105,843 sf 105,859 sf
$ 793,920 $ 706,609 $ 173,799 $ 3,935,275
Cornerstone Portfolio 354,835 sf 200,226 sf 532,039 sf 2,750,201 sf 2,779,007 sf
$ 11,324,510 $ 7,606,443 $ 21,726,766 $ 101,473,580
$ 31.91 $ 37.99 $ 40.84 $ 36.90
11.16% 7.50% 21.41% 100.00%
15 2 7 112
- ------------------------------------------------------------------------------------------- ---------------------------------
San Mateo County, California 89,286 sf 206,046 sf 117,277 sf 2,055,076 sf 2,173,809 sf
$ 3,290,241 $ 7,914,478 $ 4,073,138 $ 70,824,166
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 89,286 sf 206,046 sf 117,277 sf 2,055,076 sf 2,173,809 sf
$ 3,290,241 $ 7,914,478 $ 4,073,138 $ 70,824,166
$ 36.85 $ 38.41 $ 34.73 $ 34.46
4.65% 11.17% 5.75% 100.00%
2 7 12 186
- ------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East Bay, California Square feet expiring (1) 105,758 sf 239,560 sf 196,500 sf
Full service St-Line rent (2) $ 2,208,165 $ 4,929,872 $ 5,268,802
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 105,758 sf 239,560 sf 196,500 sf
Full service St-Line rent (2) (3) $ 2,208,165 $ 4,929,872 $ 5,268,802
Full service St-Line rent per sq. ft. $ 20.88 $ 20.58 $ 26.81
% Full service St-Lined rent 5.76% 12.86% 13.74%
No. of tenant leases expiring (4) 30 36 41
Asking market rent per sq. ft. (5) $27.29
Operating Expenses per sq. ft. (6) $8.34
- ----------------------------------------------------------------------------------------------------------------------------------
Atlanta, Georgia Square feet expiring (1) 18,543 sf 68,137 sf 201,435 sf
Full service St-Line rent (2) $ 353,508 $ 1,417,692 $ 5,133,648
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 18,543 sf 68,137 sf 201,435 sf
Full service St-Line rent (2) (3) $ 353,508 $ 1,417,692 $ 5,133,648
Full service St-Line rent per sq. ft. $ 19.06 $ 20.81 $ 25.49
% Full service St-Lined rent 0.75% 3.01% 10.92%
No. of tenant leases expiring (4) 2 19 19
Asking market rent per sq. ft. (5) $28.30
Operating Expenses per sq. ft. (6) $8.15
- ----------------------------------------------------------------------------------------------------------------------------------
Seattle, Washington Square feet expiring (1) 44,337 sf 74,169 sf 88,230 sf
Full service St-Line rent (2) $ 937,178 $ 1,575,020 $ 1,946,244
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 44,337 sf 74,169 sf 88,230 sf
Full service St-Line rent (2) (3) $ 937,178 $ 1,575,020 $ 1,946,244
Full service St-Line rent per sq. ft. $ 21.14 $ 21.24 $ 22.06
% Full service St-Lined rent 2.28% 3.83% 4.73%
No. of tenant leases expiring (4) 12 13 16
Asking market rent per sq. ft. (5) $35.92
Operating Expenses per sq. ft. (6) $8.41
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
East Bay, California 319,117 sf 150,016 sf 125,451 sf 65,497 sf 110,770 sf
$ 7,358,635 $ 3,489,623 $ 3,231,820 $ 1,664,334 $ 1,743,573
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 319,117 sf 150,016 sf 125,451 sf 65,497 sf 110,770 sf
$ 7,358,635 $ 3,489,623 $ 3,231,820 $ 1,664,334 $ 1,743,573
$ 23.06 $ 23.26 $ 25.76 $ 25.41 $ 15.74
19.19% 9.10% 8.43% 4.34% 4.55%
30 23 13 2 2
- -------------------------------------------------------------------------------------------------------------------------------
Atlanta, Georgia 185,230 sf 88,700 sf 58,629 sf 21,508 sf 452,089 sf
$ 4,137,516 $ 2,222,400 $ 1,683,036 $ 547,872 $ 15,691,056
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 185,230 sf 88,700 sf 58,629 sf 21,508 sf 452,089 sf
$ 4,137,516 $ 2,222,400 $ 1,683,036 $ 547,872 $ 15,691,056
$ 22.34 $ 25.06 $ 28.71 $ 25.47 $ 34.71
8.80% 4.73% 3.58% 1.17% 33.37%
12 14 10 5 4
- -------------------------------------------------------------------------------------------------------------------------------
Seattle, Washington 248,170 sf 370,245 sf 213,701 sf 34,127 sf 8,087 sf
$ 5,800,499 $ 14,308,202 $ 5,849,053 $ 504,925 $ 210,681
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 248,170 sf 370,245 sf 213,701 sf 34,127 sf 8,087 sf
$ 5,800,499 $ 14,308,202 $ 5,849,053 $ 504,925 $ 210,681
$ 23.37 $ 38.65 $ 27.37 $ 14.80 $ 26.05
14.10% 34.79% 14.22% 1.23% 0.51%
20 47 17 7 2
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- ------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
East Bay, California 116,772 sf 206,116 sf 9,530 sf 1,645,087 sf 1,671,472 sf
$ 2,590,660 $ 5,856,346 $ -- $ 38,341,829
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 116,772 sf 206,116 sf 9,530 sf 1,645,087 sf 1,671,472 sf
$ 2,590,660 $ 5,856,346 $ -- $ 38,341,829
$ 22.19 $ 28.41 $ -- $ 23.31
6.76% 15.27% 0.00% 100.00%
5 1 7 190
- ------------------------------------------------------------------------------------------- ---------------------------------
Atlanta, Georgia sf 495,739 sf 3,984 sf 1,593,994 sf 1,647,986 sf
$ -- $ 15,839,172 $ -- $ 47,025,900
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio sf 495,739 sf 3,984 sf 1,593,994 sf 1,647,986 sf
$ -- $ 15,839,172 $ -- $ 47,025,900
$ -- $ 31.95 $ -- $ 29.50
0.00% 33.68% 0.00% 100.00%
0 4 0 89
- ------------------------------------------------------------------------------------------- ---------------------------------
Seattle, Washington 137,888 sf 366 sf 231,745 sf 1,451,065 sf 1,469,807 sf
$ 3,384,388 $ 9,842 $ 6,603,422 $ 41,129,455
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 137,888 sf 366 sf 231,745 sf 1,451,065 sf 1,469,807 sf
$ 3,384,388 $ 9,842 $ 6,603,422 $ 41,129,455
$ 24.54 $ 26.89 $ 28.49 $ 28.34
8.23% 0.02% 16.06% 100.00%
1 1 4 140
- ------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Santa Clara County, California (7) Square feet expiring (1) 30,837 sf 105,876 sf 169,514 sf
Full service St-Line rent (2) $ 886,433 $ 2,879,549 $ 4,884,450
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 30,837 sf 105,876 sf 169,514 sf
Full service St-Line rent (2) (3) $ 886,433 $ 2,879,549 $ 4,884,450
Full service St-Line rent per sq. ft. $ 28.75 $ 27.20 $ 28.81
% Full service St-Lined rent 2.48% 8.06% 13.66%
No. of tenant leases expiring (4) 16 40 34
Asking market rent per sq. ft. (5) $36.82
Operating Expenses per sq. ft. (6) $8.87
- -----------------------------------------------------------------------------------------------------------------------------------
Denver, Colorado Square feet expiring (1) 35,092 sf 121,233 sf 60,785 sf
Full service St-Line rent (2) $ 555,139 $ 1,847,978 $ 1,049,018
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 35,092 sf 121,233 sf 60,785 sf
Full service St-Line rent (2) (3) $ 555,139 $ 1,847,978 $ 1,049,018
Full service St-Line rent per sq. ft. $ 15.82 $ 15.24 $ 17.26
% Full service St-Lined rent 2.46% 8.19% 4.65%
No. of tenant leases expiring (4) 10 6 7
Asking market rent per sq. ft. (5) $27.30
Operating Expenses per sq. ft. (6) $6.50
- -----------------------------------------------------------------------------------------------------------------------------------
San Francisco, California Square feet expiring (1) 100,719 sf 80,491 sf 92,181 sf
Full service St-Line rent (2) $ 2,927,734 $ 1,939,105 $ 2,155,799
Minority Interest Adjustment (3) Square feet expiring (1) 18,045 sf 25,877 sf 18,511 sf
Full service St-Line rent (2) $ 504,137 $ 614,868 $ 453,332
Cornerstone Portfolio Square feet expiring (1) (3) 82,674 sf 54,614 sf 73,670 sf
Full service St-Line rent (2) (3) $ 2,423,597 $ 1,324,237 $ 1,702,467
Full service St-Line rent per sq. ft. $ 29.32 $ 24.25 $ 23.11
% Full service St-Lined rent 10.03% 5.48% 7.05%
No. of tenant leases expiring (4) 23 19 17
Asking market rent per sq. ft. (5) $41.52
Operating Expenses per sq. ft. (6) $12.04
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Santa Clara County, California (7) 78,576 sf 193,888 sf 134,649 sf 21,642 sf 52,249 sf
$ 2,367,326 $ 7,209,617 $ 4,403,824 $ 747,082 $ 1,582,561
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 78,576 sf 193,888 sf 134,649 sf 21,642 sf 52,249 sf
$ 2,367,326 $ 7,209,617 $ 4,403,824 $ 747,082 $ 1,582,561
$ 30.13 $ 37.18 $ 32.71 $ 34.52 $ 30.29
6.62% 20.17% 12.32% 2.09% 4.43%
24 24 18 4 5
- ---------------------------------------------------------------------------------------------------------------------------------
Denver, Colorado 138,702 sf 182,284 sf 138,948 sf sf sf
$ 2,174,053 $ 3,569,775 $ 2,703,710 $ -- $ --
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 138,702 sf 182,284 sf 138,948 sf sf sf
$ 2,174,053 $ 3,569,775 $ 2,703,710 $ -- $ --
$ 15.67 $ 19.58 $ 19.46 $ -- $ --
9.63% 15.81% 11.98% 0.00% 0.00%
15 6 5 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
San Francisco, California 118,757 sf 289,362 sf 100,975 sf 50,032 sf 1,915 sf
$ 3,269,241 $ 8,594,606 $ 4,391,406 $ 2,095,754 $ 44,046
Minority Interest Adjustment (3) 37,421 sf 69,083 sf 20,984 sf 2,201 sf 638 sf
$ 973,634 $ 2,000,478 $ 711,798 $ 76,990 $ 14,682
Cornerstone Portfolio 81,336 sf 220,280 sf 79,991 sf 47,832 sf 1,277 sf
$ 2,295,608 $ 6,594,128 $ 3,679,609 $ 2,018,764 $ 29,364
$ 28.22 $ 29.94 $ 46.00 $ 42.21 $ 23.00
9.50% 27.29% 15.23% 8.35% 0.12%
25 42 12 6 1
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- --------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Santa Clara County, California (7) 2,780 sf 33,908 sf 338,232 sf 1,162,151 sf 1,199,312 sf
$ 88,963 $ 676,440 $ 10,022,325 $ 35,748,571
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 2,780 sf 33,908 sf 338,232 sf 1,162,151 sf 1,199,312 sf
$ 88,963 $ 676,440 $ 10,022,325 $ 35,748,571
$ 32.00 $ 19.95 $ 29.63 $ 30.76
0.25% 1.89% 28.04% 100.00%
1 4 11 181
- --------------------------------------------------------------------------------------------- ---------------------------------
Denver, Colorado 75,677 sf sf 401,735 sf 1,154,456 sf 1,187,852 sf
$ 1,621,691 $ -- $ 9,052,248 $ 22,573,613
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 75,677 sf sf 401,735 sf 1,154,456 sf 1,187,852 sf
$ 1,621,691 $ -- $ 9,052,248 $ 22,573,613
$ 21.43 $ -- $ 22.53 $ 19.55
7.18% 0.00% 40.10% 100.00%
2 0 1 52
- ----------------------------------------------------------------------------------------------------------------------------------
San Francisco, California 249,373 sf 19,911 sf 10,656 sf 1,114,372 sf 1,132,219 sf
$ 6,899,223 $ 687,766 $ 291,138 $ 33,295,818
Minority Interest Adjustment (3) 124,687 sf 6,637 sf 3,795 sf 327,878 sf 333,611 sf
$ 3,449,611 $ 229,255 $ 102,674 $ 9,131,459
Cornerstone Portfolio 124,687 sf 13,274 sf 6,862 sf 786,495 sf 798,608 sf
$ 3,449,611 $ 458,511 $ 188,463 $ 24,164,358
$ 27.67 $ 34.54 $ 27.47 $ 30.72
14.28% 1.90% 0.78% 100.00%
1 1 4 151
- --------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minneapolis, Minnesota Square feet expiring (1) 4,014 sf 110,115 sf 7,752 sf
Full service St-Line rent (2) $ 49,595 $ 3,381,548 $ 256,785
Minority Interest Adjustment (3) Square feet expiring (1) 1,030 sf 28,267 sf 1,990 sf
Full service St-Line rent (2) $ 12,731 $ 868,043 $ 65,917
Cornerstone Portfolio Square feet expiring (1) (3) 2,984 sf 81,848 sf 5,762 sf
Full service St-Line rent (2) (3) $ 36,864 $ 2,513,505 $ 190,869
Full service St-Line rent per sq. ft. $ 12.36 $ 30.71 $ 33.13
% Full service St-Lined rent 0.12% 8.45% 0.64%
No. of tenant leases expiring (4) 4 3 4
Asking market rent per sq. ft. (5) $33.60
Operating Expenses per sq. ft. (6) $15.70
- -----------------------------------------------------------------------------------------------------------------------------------
Washington, D.C. / Alexandria, Virginia Square feet expiring (1) 20,509 sf 60,423 sf 81,396 sf
Full service St-Line rent (2) $ 406,644 $ 1,998,940 $ 3,150,056
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 20,509 sf 60,423 sf 81,396 sf
Full service St-Line rent (2) (3) $ 406,644 $ 1,998,940 $ 3,150,056
Full service St-Line rent per sq. ft. $ 19.83 $ 33.08 $ 38.70
% Full service St-Lined rent 1.11% 5.46% 8.61%
No. of tenant leases expiring (4) 11 11 13
Asking market rent per sq. ft. (5) $38.91
Operating Expenses per sq. ft. (6) $12.37
- -----------------------------------------------------------------------------------------------------------------------------------
Suburban Chicago, Illinois Square feet expiring (1) 37,656 sf 90,151 sf 56,373 sf
Full service St-Line rent (2) $ 1,084,731 $ 2,744,812 $ 1,872,643
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 37,656 sf 90,151 sf 56,373 sf
Full service St-Line rent (2) (3) $ 1,084,731 $ 2,744,812 $ 1,872,643
Full service St-Line rent per sq. ft. $ 28.81 $ 30.45 $ 33.22
% Full service St-Lined rent 3.97% 10.04% 6.85%
No. of tenant leases expiring (4) 8 14 10
Asking market rent per sq. ft. (5) $28.72
Operating Expenses per sq. ft. (6) $9.14
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Minneapolis, Minnesota 51,959 sf 205,473 sf 176,039 sf 18,856 sf sf
$ 1,220,380 $ 6,695,659 $ 5,811,811 $ 631,174 $ --
Minority Interest Adjustment (3) 13,338 sf 52,745 sf 45,189 sf 4,840 sf sf
$ 313,272 $ 1,718,776 $ 1,491,892 $ 162,022 $ --
Cornerstone Portfolio 38,621 sf 152,728 sf 130,850 sf 14,016 sf sf
$ 907,108 $ 4,976,883 $ 4,319,919 $ 469,151 $ --
$ 23.49 $ 32.59 $ 33.01 $ 33.47 $ --
3.05% 16.73% 14.52% 1.58% 0.00%
3 3 10 1 0
- ----------------------------------------------------------------------------------------------------------------------------------
Washington, D.C. / Alexandria, Virginia 59,327 sf 60,016 sf 44,173 sf 188,151 sf 68,929 sf
$ 1,467,241 $ 1,812,158 $ 1,692,940 $ 8,138,820 $ 3,326,592
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 59,327 sf 60,016 sf 44,173 sf 188,151 sf 68,929 sf
$ 1,467,241 $ 1,812,158 $ 1,692,940 $ 8,138,820 $ 3,326,592
$ 24.73 $ 30.19 $ 38.33 $ 43.26 $ 48.26
4.01% 4.95% 4.63% 22.25% 9.09%
8 8 7 6 3
- ----------------------------------------------------------------------------------------------------------------------------------
Suburban Chicago, Illinois 99,911 sf 207,335 sf 65,677 sf sf 17,848 sf
$ 2,799,844 $ 6,139,109 $ 1,862,970 $ -- $ 487,221
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 99,911 sf 207,335 sf 65,677 sf sf 17,848 sf
$ 2,799,844 $ 6,139,109 $ 1,862,970 $ -- $ 487,221
$ 28.02 $ 29.61 $ 28.37 $ -- $ 27.30
10.24% 22.45% 6.81% 0.00% 1.78%
15 19 9 0 3
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- --------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Minneapolis, Minnesota sf sf 540,112 sf 1,114,320 sf 1,117,439 sf
$ -- $ -- $ 21,967,088 $ 40,014,040
Minority Interest Adjustment (3) sf sf 138,647 sf 286,046 sf 286,847 sf
$ -- $ -- $ 5,638,952 $ 10,271,604
Cornerstone Portfolio sf sf 401,465 sf 828,274 sf 830,592 sf
$ -- $ -- $ 16,328,137 $ 29,742,436
$ -- $ -- $ 40.67 $ 35.91
0.00% 0.00% 54.90% 100.00%
0 0 2 30
- --------------------------------------------------------------------------------------------- ---------------------------------
Washington, D.C. / Alexandria, Virginia 69,661 sf 36,561 sf 281,040 sf 970,186 sf 993,297 sf
$ 1,878,660 $ 1,187,340 $ 11,522,128 $ 36,581,518
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 69,661 sf 36,561 sf 281,040 sf 970,186 sf 993,297 sf
$ 1,878,660 $ 1,187,340 $ 11,522,128 $ 36,581,518
$ 26.97 $ 32.48 $ 41.00 $ 37.71
5.14% 3.25% 31.50% 100.00%
6 6 13 92
- --------------------------------------------------------------------------------------------- ---------------------------------
Suburban Chicago, Illinois 89,129 sf 110,201 sf 163,590 sf 937,871 sf 976,079 sf
$ 2,413,008 $ 3,606,461 $ 4,332,312 $ 27,343,110
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 89,129 sf 110,201 sf 163,590 sf 937,871 sf 976,079 sf
$ 2,413,008 $ 3,606,461 $ 4,332,312 $ 27,343,110
$ 27.07 $ 32.73 $ 26.48 $ 29.15
8.82% 13.19% 15.84% 100.00%
4 2 1 85
- --------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Santa Monica/West Los Angeles, California Square feet expiring (1) 33,388 sf 81,190 sf 96,060 sf
Full service St-Line rent (2) $ 852,692 $ 2,085,876 $ 4,050,858
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 33,388 sf 81,190 sf 96,060 sf
Full service St-Line rent (2) (3) $ 852,692 $ 2,085,876 $ 4,050,858
Full service St-Line rent per sq. ft. $ 25.54 $ 25.69 $ 42.17
% Full service St-Lined rent 3.66% 8.95% 17.39%
No. of tenant leases expiring (4) 16 28 22
Asking market rent per sq. ft. (5) $33.52
Operating Expenses per sq. ft. (6) $11.71
- -----------------------------------------------------------------------------------------------------------------------------------
Orange County, California Square feet expiring (1) 57,814 sf 98,426 sf 93,529 sf
Full service St-Line rent (2) $ 1,357,238 $ 2,487,018 $ 2,064,270
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 57,814 sf 98,426 sf 93,529 sf
Full service St-Line rent (2) (3) $ 1,357,238 $ 2,487,018 $ 2,064,270
Full service St-Line rent per sq. ft. $ 23.48 $ 25.27 $ 22.07
% Full service St-Lined rent 8.72% 15.97% 13.26%
No. of tenant leases expiring (4) 14 16 14
Asking market rent per sq. ft. (5) $26.70
Operating Expenses per sq. ft. (6) $8.65
- -----------------------------------------------------------------------------------------------------------------------------------
Charlotte, North Carolina Square feet expiring (1) 8,711 sf 53,325 sf 70,116 sf
Full service St-Line rent (2) $ 7,200 $ 983,772 $ 1,257,312
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 8,711 sf 53,325 sf 70,116 sf
Full service St-Line rent (2) (3) $ 7,200 $ 983,772 $ 1,257,312
Full service St-Line rent per sq. ft. $ 0.83 $ 18.45 $ 17.93
% Full service St-Lined rent 0.07% 9.17% 11.72%
No. of tenant leases expiring (4) 3 5 3
Asking market rent per sq. ft. (5) $24.15
Operating Expenses per sq. ft. (6) $6.90
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Santa Monica/West Los Angeles, California 179,692 sf 69,820 sf 57,600 sf 68,209 sf 14,454 sf
$ 4,859,643 $ 1,927,696 $ 1,579,755 $ 1,898,591 $ 505,595
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 179,692 sf 69,820 sf 57,600 sf 68,209 sf 14,454 sf
$ 4,859,643 $ 1,927,696 $ 1,579,755 $ 1,898,591 $ 505,595
$ 27.04 $ 27.61 $ 27.43 $ 27.83 $ 34.98
20.86% 8.27% 6.78% 8.15% 2.17%
19 20 12 10 4
- -----------------------------------------------------------------------------------------------------------------------------------
Orange County, California 196,180 sf 82,875 sf 31,610 sf 20,089 sf 22,911 sf
$ 4,541,399 $ 2,002,416 $ 746,839 $ 463,857 $ 606,905
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 196,180 sf 82,875 sf 31,610 sf 20,089 sf 22,911 sf
$ 4,541,399 $ 2,002,416 $ 746,839 $ 463,857 $ 606,905
$ 23.15 $ 24.16 $ 23.63 $ 23.09 $ 26.49
29.17% 12.86% 4.80% 2.98% 3.90%
27 17 4 2 2
- -----------------------------------------------------------------------------------------------------------------------------------
Charlotte, North Carolina 74,711 sf 38,762 sf 142,111 sf 17,787 sf 1,222 sf
$ 1,384,308 $ 744,072 $ 2,495,760 $ 318,456 $ 23,652
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 74,711 sf 38,762 sf 142,111 sf 17,787 sf 1,222 sf
$ 1,384,308 $ 744,072 $ 2,495,760 $ 318,456 $ 23,652
$ 18.53 $ 19.20 $ 17.56 $ 17.90 $ 19.36
12.91% 6.94% 23.27% 2.97% 0.22%
11 7 7 2 1
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- --------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Santa Monica/West Los Angeles, California 60,460 sf 44,688 sf 74,949 sf 780,510 sf 847,153 sf
$ 2,759,430 $ 1,357,144 $ 1,420,677 $ 23,297,958
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 60,460 sf 44,688 sf 74,949 sf 780,510 sf 847,153 sf
$ 2,759,430 $ 1,357,144 $ 1,420,677 $ 23,297,958
$ 45.64 $ 30.37 $ 18.96 $ 29.85
11.84% 5.83% 6.10% 100.00%
3 6 8 148
- --------------------------------------------------------------------------------------------- ---------------------------------
Orange County, California sf 11,000 sf 45,333 sf 659,767 sf 710,115 sf
$ -- $ 275,482 $ 1,024,573 $ 15,569,997
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio sf 11,000 sf 45,333 sf 659,767 sf 710,115 sf
$ -- $ 275,482 $ 1,024,573 $ 15,569,997
$ -- $ 25.04 $ 22.60 $ 23.60
0.00% 1.77% 6.58% 100.00%
0 1 6 103
- --------------------------------------------------------------------------------------------- ---------------------------------
Charlotte, North Carolina 9,889 sf 71,593 sf 119,535 sf 607,762 sf 612,728 sf
$ 217,560 $ 1,331,436 $ 1,960,104 $ 10,723,632
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 9,889 sf 71,593 sf 119,535 sf 607,762 sf 612,728 sf
$ 217,560 $ 1,331,436 $ 1,960,104 $ 10,723,632
$ 22.00 $ 18.60 $ 16.40 $ 17.64
2.03% 12.42% 18.28% 100.00%
1 3 4 47
- --------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arizona Square feet expiring (1) 37,841 sf 74,645 sf 136,805 sf
Full service St-Line rent (2) $ 846,878 $ 1,454,919 $ 3,194,788
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 37,841 sf 74,645 sf 136,805 sf
Full service St-Line rent (2) (3) $ 846,878 $ 1,454,919 $ 3,194,788
Full service St-Line rent per sq. ft. $ 22.38 $ 19.49 $ 23.35
% Full service St-Lined rent 7.06% 12.13% 26.63%
No. of tenant leases expiring (4) 6 27 30
Asking market rent per sq. ft. (5) $23.77
Operating Expenses per sq. ft. (6) $8.89
- -----------------------------------------------------------------------------------------------------------------------------------
San Diego, California Square feet expiring (1) 15,582 sf 13,539 sf 39,388 sf
Full service St-Line rent (2) $ 340,632 $ 274,544 $ 635,750
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 15,582 sf 13,539 sf 39,388 sf
Full service St-Line rent (2) (3) $ 340,632 $ 274,544 $ 635,750
Full service St-Line rent per sq. ft. $ 21.86 $ 20.28 $ 16.14
% Full service St-Lined rent 4.52% 3.65% 8.44%
No. of tenant leases expiring (4) 5 5 7
Asking market rent per sq. ft. (5) $23.77
Operating Expenses per sq. ft. (6) $7.75
- -----------------------------------------------------------------------------------------------------------------------------------
Los Angeles, California Square feet expiring (1) 12,008 sf 64,867 sf 78,716 sf
Full service St-Line rent (2) $ 334,783 $ 1,878,609 $ 2,026,470
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 12,008 sf 64,867 sf 78,716 sf
Full service St-Line rent (2) (3) $ 334,783 $ 1,878,609 $ 2,026,470
Full service St-Line rent per sq. ft. $ 27.88 $ 28.96 $ 25.74
% Full service St-Lined rent 3.22% 18.07% 19.49%
No. of tenant leases expiring (4) 3 7 8
Asking market rent per sq. ft. (5) $25.06
Operating Expenses per sq. ft. (6) $9.65
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arizona 103,206 sf 119,477 sf 66,022 sf 9,258 sf 7,050 sf
$ 2,167,934 $ 2,580,739 $ 1,394,722 $ 191,161 $ 163,882
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 103,206 sf 119,477 sf 66,022 sf 9,258 sf 7,050 sf
$ 2,167,934 $ 2,580,739 $ 1,394,722 $ 191,161 $ 163,882
$ 21.01 $ 21.60 $ 21.13 $ 20.65 $ 23.25
18.07% 21.52% 11.63% 1.59% 1.37%
26 19 11 1 1
- ----------------------------------------------------------------------------------------------------------------------------------
San Diego, California 44,536 sf 156,690 sf 112,860 sf sf sf
$ 855,061 $ 3,095,564 $ 2,329,274 $ -- $ --
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 44,536 sf 156,690 sf 112,860 sf sf sf
$ 855,061 $ 3,095,564 $ 2,329,274 $ -- $ --
$ 19.20 $ 19.76 $ 20.64 $ -- $ --
11.35% 41.11% 30.93% 0.00% 0.00%
7 15 10 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Los Angeles, California 42,729 sf 26,000 sf 80,096 sf sf 11,834 sf
$ 990,062 $ 649,496 $ 2,021,842 $ -- $ 407,092
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 42,729 sf 26,000 sf 80,096 sf sf 11,834 sf
$ 990,062 $ 649,496 $ 2,021,842 $ -- $ 407,092
$ 23.17 $ 24.98 $ 25.24 $ -- $ 34.40
9.52% 6.25% 19.44% 0.00% 3.92%
4 5 6 0 1
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- -------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
Arizona sf sf 7,694 sf 561,998 sf 586,038 sf
$ -- $ -- $ -- $ 11,995,024
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio sf sf 7,694 sf 561,998 sf 586,038 sf
$ -- $ -- $ -- $ 11,995,024
$ -- $ -- $ -- $ 21.34
0.00% 0.00% 0.00% 100.00%
0 0 3 124
- -------------------------------------------------------------------------------------------- ---------------------------------
San Diego, California sf sf 2,057 sf 384,652 sf 420,582 sf
$ -- $ -- $ -- $ 7,530,826
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio sf sf 2,057 sf 384,652 sf 420,582 sf
$ -- $ -- $ -- $ 7,530,826
$ -- $ -- $ -- $ 19.58
0.00% 0.00% 0.00% 100.00%
0 0 2 51
- -------------------------------------------------------------------------------------------- ---------------------------------
Los Angeles, California 68,751 sf sf 2,687 sf 387,688 sf 401,629 sf
$ 2,089,600 $ -- $ -- $ 10,397,954
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 68,751 sf sf 2,687 sf 387,688 sf 401,629 sf
$ 2,089,600 $ -- $ -- $ 10,397,954
$ 30.39 $ -- $ -- $ 26.82
20.10% 0.00% 0.00% 100.00%
2 0 2 38
- -------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Lease Expiration Schedule
- --------------------------------------------------------------------------------
The following table sets forth certain categories of information relating to
lease expirations for all of the Properties owned as of June 30, 1999.
<TABLE>
<CAPTION>
Q3 - Q4
REGION NAME CATEGORY 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City, New York Square feet expiring (1) 12,021 sf 26,517 sf 127,306 sf
Full service St-Line rent (2) $ 557,340 $ 1,231,926 $ 7,219,637
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 12,021 sf 26,517 sf 127,306 sf
Full service St-Line rent (2) (3) $ 557,340 $ 1,231,926 $ 7,219,637
Full service St-Line rent per sq. ft. $ 46.36 $ 46.46 $ 56.71
% Full service St-Lined rent 2.82% 6.23% 36.51%
No. of tenant leases expiring (4) 4 9 13
Asking market rent per sq. ft. (5) $56.00
Operating Expenses per sq. ft. (6) $22.20
- -----------------------------------------------------------------------------------------------------------------------------------
Conejo Valley (Ventura), California Square feet expiring (1) 3,004 sf 64,748 sf 9,174 sf
Full service St-Line rent (2) $ 62,181 $ 1,530,548 $ 218,000
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 3,004 sf 64,748 sf 9,174 sf
Full service St-Line rent (2) (3) $ 62,181 $ 1,530,548 $ 218,000
Full service St-Line rent per sq. ft. $ 20.70 $ 23.64 $ 23.76
% Full service St-Lined rent 1.30% 32.01% 4.56%
No. of tenant leases expiring (4) 2 6 1
Asking market rent per sq. ft. (5) $24.31
Operating Expenses per sq. ft. (6) $8.03
- -----------------------------------------------------------------------------------------------------------------------------------
Other Regions Square feet expiring (1) 12,017 sf 8,916 sf 65,115 sf
Full service St-Line rent (2) $ 232,834 $ 167,560 $ 1,342,905
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 12,017 sf 8,916 sf 65,115 sf
Full service St-Line rent (2) (3) $ 232,834 $ 167,560 $ 1,342,905
Full service St-Line rent per sq. ft. $ 19.38 $ 18.79 $ 20.62
% Full service St-Lined rent 7.44% 5.35% 42.90%
No. of tenant leases expiring (4) 3 5 7
Asking market rent per sq. ft. (5) $19.35
Operating Expenses per sq. ft. (6) $7.37
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
REGION NAME 2002 2003 2004 2005 2006
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New York City, New York 48,569 sf 50,590 sf 41,213 sf 11,566 sf 27,074 sf
$ 2,485,855 $ 2,165,719 $ 2,704,127 $ 616,071 $ 1,173,698
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 48,569 sf 50,590 sf 41,213 sf 11,566 sf 27,074 sf
$ 2,485,855 $ 2,165,719 $ 2,704,127 $ 616,071 $ 1,173,698
$ 51.18 $ 42.81 $ 65.61 $ 53.27 $ 43.35
12.57% 10.95% 13.67% 3.12% 5.94%
12 8 8 2 5
- ----------------------------------------------------------------------------------------------------------------------------------
Conejo Valley (Ventura), California 70,168 sf 36,919 sf 2,085 sf 12,126 sf 9,111 sf
$ 1,569,494 $ 878,836 $ 31,807 $ 269,825 $ 221,423
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 70,168 sf 36,919 sf 2,085 sf 12,126 sf 9,111 sf
$ 1,569,494 $ 878,836 $ 31,807 $ 269,825 $ 221,423
$ 22.37 $ 23.80 $ 15.26 $ 22.25 $ 24.30
32.82% 18.38% 0.67% 5.64% 4.63%
3 3 1 1 1
- ----------------------------------------------------------------------------------------------------------------------------------
Other Regions 7,353 sf 32,569 sf 2,997 sf 12,892 sf sf
$ 152,905 $ 647,607 $ 61,846 $ 293,862 $ --
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ -- $ --
Cornerstone Portfolio 7,353 sf 32,569 sf 2,997 sf 12,892 sf sf
$ 152,905 $ 647,607 $ 61,846 $ 293,862 $ --
$ 20.79 $ 19.88 $ 20.64 $ 22.79 $ --
4.88% 20.69% 1.98% 9.39% 0.00%
3 5 1 2 0
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 and
REGION NAME 2007 2008 Beyond Total NRA
- -------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
New York City, New York 32,929 sf sf 207 sf 377,992 sf 378,965 sf
$ 1,620,918 $ -- $ -- $ 19,775,291
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 32,929 sf sf 207 sf 377,992 sf 378,965 sf
$ 1,620,918 $ -- $ -- $ 19,775,291
$ 49.22 $ -- $ -- $ 52.32
8.20% 0.00% 0.00% 100.00%
2 0 1 64
- -------------------------------------------------------------------------------------------- ---------------------------------
Conejo Valley (Ventura), California sf sf 245 sf 207,580 sf 234,255 sf
$ -- $ -- $ -- $ 4,782,115
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio sf sf 245 sf 207,580 sf 234,255 sf
$ -- $ -- $ -- $ 4,782,115
$ -- $ -- $ -- $ 23.04
0.00% 0.00% 0.00% 100.00%
0 0 1 19
- -------------------------------------------------------------------------------------------- ---------------------------------
Other Regions 11,501 sf sf 3,991 sf 157,351 sf 209,579 sf
$ 230,905 $ -- $ -- $ 3,130,424
Minority Interest Adjustment (3) sf sf sf sf sf
$ -- $ -- $ -- $ --
Cornerstone Portfolio 11,501 sf sf 3,991 sf 157,351 sf 209,579 sf
$ 230,905 $ -- $ -- $ 3,130,424
$ 20.08 $ -- $ -- $ 19.89
7.38% 0.00% 0.00% 100.00%
1 0 2 29
- -------------------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
Cornerstone Properties Inc.
Lease Expiration Schedule
Footnotes
- ----------
(1) The total square footage expiring in any particular year.
(2) Full Service 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 plus the annualized
recovery of operating expenses.
(3) Full Service Straight-line rent and square feet expiring include an
adjustment for the interest of a joint venture or minority partner.
Calculations are based on the partners' 1999 percentage participation in
the cash flows of the property.
(4) The number of tenant leases expiring in each year.
(5) Asking market rent is the average initially quoted rent to prospective
tenants in each building. All market rents shown are on full service
basis.
(6) Operating Expenses are the projected recoverable expenses quoted to
prospective tenants in each building.
(7) The rentable area associated with the Pruneyard Inn (94,500 sf) is not
included in the portfolio NRA.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Tenant Retention Schedule
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Tenant Retention Schedule
As of June 30, 1999
- --------------------------------------------------------------------------------
The attached table sets forth the Company's tenant retention on expiring leases
since January 1, 1995. 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>
1995 1996
------------------------------ -------------------------------
sq ft sq ft sq ft sq ft
Region retained expired ret % retained expired ret %
- --------------------------------------- ------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts -- -- -- 95,816 96,658 99%
San Mateo County, California -- -- -- -- -- --
East Bay, California -- -- -- -- -- --
Atlanta, Georgia -- -- -- -- -- --
Seattle, Washington 29,547 44,742 66% 86,956 106,250 82%
Santa Clara County, California -- -- -- -- -- --
Denver, Colorado 64,627 71,364 91% 43,601 72,903 60%
San Francisco, California -- -- -- -- -- --
Minneapolis, Minnesota 22,762 23,792 96% 4,336 9,777 44%
Washington, D.C./Alexandria, Virginia -- -- -- -- -- --
Suburban Chicago, Illinois -- -- -- -- -- --
Santa Monica/West Los Angeles, CA -- -- -- -- -- --
Orange County, California -- -- -- -- -- --
Charlotte, North Carolina -- -- -- -- -- --
Arizona -- -- -- -- -- --
San Diego, California -- -- -- -- -- --
Los Angeles, California -- -- -- -- -- --
New York City, New York -- -- -- 46,003 53,762 86%
Conejo Valley (Ventura), California -- -- -- -- -- --
Other Regions -- -- -- -- -- --
------------------------------ -------------------------------
(1) TOTAL PORTFOLIO 116,936 139,898 84% 276,712 339,350 82%
<CAPTION>
1997 1998
------------------------------ ----------------------------------
sq ft sq ft sq ft sq ft
Region retained expired ret % retained expired ret %
- --------------------------------------- ------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts 41,252 65,223 63% 482,864 523,936 92%
San Mateo County, California -- -- -- 1,730 9,757 18%
East Bay, California -- -- -- -- 17,601 0%
Atlanta, Georgia 10,672 21,725 49% 65,397 177,393 37%
Seattle, Washington 182,194 207,738 88% 394,746 417,094 95%
Santa Clara County, California -- -- -- -- -- --
Denver, Colorado 266,021 313,612 85% 78,144 106,249 74%
San Francisco, California -- -- -- -- 311 0%
Minneapolis, Minnesota 205,749 234,260 88% 101,382 114,447 89%
Washington, D.C./Alexandria, Virginia -- 8,889 0% 128,611 169,699 76%
Suburban Chicago, Illinois 35,320 42,099 84% 75,006 178,898 42%
Santa Monica/West Los Angeles, CA -- -- -- 15,975 18,897 85%
Orange County, California -- -- -- 1,149 12,801 9%
Charlotte, North Carolina 2,974 6,390 47% 35,239 59,158 60%
Arizona -- -- -- 991 991 100%
San Diego, California -- -- -- -- -- --
Los Angeles, California -- -- -- -- -- --
New York City, New York 43,007 71,266 60% 37,448 52,025 72%
Conejo Valley (Ventura), California -- -- -- -- -- --
Other Regions -- -- -- 12,343 25,870 48%
------------------------------ ----------------------------------
(1) TOTAL PORTFOLIO 787,189 971,202 81% 1,431,025 1,885,127 76%
<CAPTION>
1999 YTD TOTAL
---------------------------------- ----------------------------------
sq ft sq ft sq ft sq ft
Region retained expired ret % retained expired ret %
- --------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston, Massachusetts 24,829 24,829 100% 644,761 710,646 91%
San Mateo County, California 94,118 217,765 43% 95,848 227,522 42%
East Bay, California 72,338 84,089 86% 72,338 101,690 71%
Atlanta, Georgia 10,332 23,421 44% 86,401 222,539 39%
Seattle, Washington 79,857 94,685 84% 773,300 870,509 89%
Santa Clara County, California 40,645 133,769 30% 40,645 133,769 30%
Denver, Colorado 9,877 13,119 75% 462,270 577,247 80%
San Francisco, California 142,565 156,518 91% 142,565 156,829 91%
Minneapolis, Minnesota 42,476 42,476 100% 376,705 424,752 89%
Washington, D.C./Alexandria, Virginia 6,699 43,020 16% 135,310 221,608 61%
Suburban Chicago, Illinois 231,332 275,895 84% 341,658 496,892 69%
Santa Monica/West Los Angeles, CA 95,621 121,048 79% 111,596 139,945 80%
Orange County, California 4,386 21,356 21% 5,535 34,157 16%
Charlotte, North Carolina 26,362 31,165 85% 64,575 96,713 67%
Arizona 24,279 43,904 55% 25,270 44,895 56%
San Diego, California 20,524 40,076 51% 20,524 40,076 51%
Los Angeles, California 2,032 4,064 50% 2,032 4,064 50%
New York City, New York 23,341 27,289 86% 149,799 204,342 73%
Conejo Valley (Ventura), California 17,562 19,964 88% 17,562 19,964 88%
Other Regions 9,245 41,759 22% 21,588 67,629 32%
---------------------------------- ---------------------------------
(1) TOTAL PORTFOLIO 978,420 1,460,211 67% 3,590,282 4,795,788 75%
</TABLE>
(1) 1996 and 1997 retention has been restated to reflect the 1998
sale of the Frick Building.
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Leasing Costs and Capital Expenditures
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Non-Revenue Generating Capital
(Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
------------------------------------------------ -----------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Portfolio Total
(2) Weighted Average Square Footage Owned 10,028,573 sf 11,085,545 sf 5,121,760 sf 3,832,635 sf
Capital Expenditures $ 1,917,814 $ 1,671,684 $ 487,956 $ 518,632
Minority Interest Adjustment $ 1,156 $ -- $ 2,195 $ --
-----------------------------------------------------------------
Total Cornerstone Share $ 1,916,659 $ 1,671,684 $ 485,761 $ 518,632
Total Per Square Foot $ 0.19 $ 0.15 $ 0.09 $ 0.14
(2) Total Square Feet Leased 1,246,040 sf 1,768,939 sf 958,815 sf 376,197 sf
Total Tenant Lease Costs $12,530,933 $15,876,813 $ 7,127,582 $ 4,344,926
Minority Interest Adjustment $ 286,376 $ -- $ -- $ --
-----------------------------------------------------------------
Total Cornerstone Share $12,244,557 $15,876,813 $ 7,127,582 $ 4,344,926
Total Per Square Foot $ 9.83 $ 8.98 $ 7.43 $ 11.55
<CAPTION>
Region 1995 Total / Average
------------------------------------------------ -------------------------------
<S> <C> <C>
(1) Portfolio Total
(2) Weighted Average Square Footage Owned 3,290,776 sf 6,671,858 sf
Capital Expenditures $ -- $ 919,217
Minority Interest Adjustment $ -- $ 670
-----------
-----------
Total Cornerstone Share $ -- $ 918,547
Total Per Square Foot $ -- $ 0.14
(2) Total Square Feet Leased 154,819 sf 4,504,810 sf
Total Tenant Lease Costs $ 576,381 $40,456,635
Minority Interest Adjustment $ -- $ 57,275
-----------
-----------
Total Cornerstone Share $ 576,381 $40,399,360
Total Per Square Foot $ 3.72 $ 8.97
</TABLE>
(1) 1996 and 1997 leasing and capital costs have been restated to reflect the
1998 sale of the Frick Building.
(2) Square Footage Owned and Leased have been adjusted for minority interest
partners.
- --------------------------------------------------------------------------------
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>
<S> <C> <C> <C> <C>
Boston, Massachusetts
Weighted Average Square Footage Owned 1,378,083 sf 2,666,317 sf 672,069 sf 463,691 sf
Capital Expenditures $ 77,565 $ 476,741 $ 53,185 $ 518,632
Minority Interest Adjustment $ 638 $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 76,928 $ 476,741 $ 53,185 $ 518,632
Total Per Square Foot $ 0.06 $ 0.18 $ 0.08 $ 1.12
Total Square Feet Leased 29,061 sf 506,584 sf 68,110 sf 117,794 sf
Total Tenant Lease Costs $ 102,340 $ 6,935,065 $ 1,349,047 $ 2,158,339
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 102,340 $ 6,935,065 $ 1,349,047 $ 2,158,339
Total Per Square Foot $ 3.52 $ 13.69 $ 19.81 $ 18.32
San Mateo County, California
Weighted Average Square Footage Owned 1,077,971 sf 95,295 sf sf sf
Capital Expenditures $ 703,305 $ 81,080 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 703,305 $ 81,080 $ -- $ --
Total Per Square Foot $ 0.65 $ 0.85 $ -- $ --
Total Square Feet Leased 174,754 sf 1,730 sf sf sf
Total Tenant Lease Costs $ 2,052,152 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 2,052,152 $ -- $ -- $ --
Total Per Square Foot $ 11.74 $ -- $ -- $ --
East Bay, California
Weighted Average Square Footage Owned 828,867 sf 73,386 sf sf sf
Capital Expenditures $ 139,234 $ 13,500 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 139,234 $ 13,500 $ -- $ --
Total Per Square Foot $ 0.17 $ 0.18 $ -- $ --
Total Square Feet Leased 93,623 sf sf sf sf
Total Tenant Lease Costs $ 602,989 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 602,989 $ -- $ -- $ --
Total Per Square Foot $ 6.44 $ -- $ -- $ --
<CAPTION>
<S> <C> <C>
Boston, Massachusetts
Weighted Average Square Footage Owned 77,494 sf 1,051,531 sf
Capital Expenditures $ -- $ 225,225
Minority Interest Adjustment $ -- $ 128
--------------------------------
Total Cornerstone Share $ -- $ 225,097
Total Per Square Foot $ -- $ 0.21
Total Square Feet Leased sf 721,549 sf
Total Tenant Lease Costs $ -- $10,544,791
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $10,544,791
Total Per Square Foot $ -- $ 14.61
San Mateo County, California
Weighted Average Square Footage Owned sf 234,653 sf
Capital Expenditures $ -- $ 156,877
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 156,877
Total Per Square Foot $ -- $ 0.67
Total Square Feet Leased sf 176,484 sf
Total Tenant Lease Costs $ -- $ 2,052,152
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 2,052,152
Total Per Square Foot $ -- $ 11.63
East Bay, California
Weighted Average Square Footage Owned sf 180,451 sf
Capital Expenditures $ -- $ 30,547
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 30,547
Total Per Square Foot $ -- $ 0.17
Total Square Feet Leased sf 93,623 sf
Total Tenant Lease Costs $ -- $ 602,989
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 602,989
Total Per Square Foot $ -- $ 6.44
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Non-Revenue Generating Capital
(Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Atlanta, Georgia
Weighted Average Square Footage Owned 817,220 sf 1,647,986 sf 297,992 sf sf
Capital Expenditures $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased 18,121 sf 170,672 sf 13,269 sf sf
Total Tenant Lease Costs $ 281,459 $ 1,280,053 $ 269,265 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 281,459 $ 1,280,053 $ 269,265 $ --
Total Per Square Foot $ 15.53 $ 7.50 $ 20.29 $ --
Seattle, Washington
Weighted Average Square Footage Owned 728,863 sf 1,168,321 sf 1,154,560 sf 1,154,560 sf
Capital Expenditures $ 16,297 $ 59,337 $ 21,922 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 16,297 $ 59,337 $ 21,922 $ --
Total Per Square Foot $ 0.02 $ 0.05 $ 0.02 $ --
Total Square Feet Leased 85,285 sf 432,547 sf 208,875 sf 124,474 sf
Total Tenant Lease Costs $ 448,732 $ 2,177,172 $ 1,204,606 $ 793,361
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 448,732 $ 2,177,172 $ 1,204,606 $ 793,361
Total Per Square Foot $ 5.26 $ 5.03 $ 5.77 $ 6.37
Santa Clara County, California
Weighted Average Square Footage Owned 641,589 sf 56,510 sf sf sf
Capital Expenditures $ 454,151 $ 36,389 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 454,151 $ 36,389 $ -- $ --
Total Per Square Foot $ 0.71 $ 0.64 $ -- $ --
Total Square Feet Leased 80,154 sf sf sf sf
Total Tenant Lease Costs $ 671,873 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 671,873 $ -- $ -- $ --
Total Per Square Foot $ 8.38 $ -- $ -- $ --
Denver, Colorado
Weighted Average Square Footage Owned 589,044 sf 1,187,752 sf 1,187,752 sf 1,187,752 sf
Capital Expenditures $ -- $ -- $ 102,000 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ 102,000 $ --
Total Per Square Foot $ -- $ -- $ 0.09 $ --
Total Square Feet Leased 13,024 sf 85,110 sf 308,697 sf 81,445 sf
Total Tenant Lease Costs $ 25,000 $ 201,233 $ 1,823,664 $ 1,009,006
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 25,000 $ 201,233 $ 1,823,664 $ 1,009,006
Total Per Square Foot $ 1.92 $ 2.36 $ 5.91 $ 12.39
San Francisco, California
Weighted Average Square Footage Owned 396,022 sf 163,815 sf sf sf
Capital Expenditures $ 56,576 $ 12,773 $ -- $ --
Minority Interest Adjustment $ 518 $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 56,058 $ 12,773 $ -- $ --
Total Per Square Foot $ 0.14 $ 0.08 $ -- $ --
Total Square Feet Leased 122,088 sf sf sf sf
Total Tenant Lease Costs $ 2,025,597 $ -- $ -- $ --
Minority Interest Adjustment $ 275,971 $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 1,749,626 $ -- $ -- $ --
Total Per Square Foot $ 14.33 $ -- $ -- $ --
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Atlanta, Georgia
Weighted Average Square Footage Owned sf 552,640 sf
Capital Expenditures $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
Total Square Feet Leased sf 202,062 sf
Total Tenant Lease Costs $ -- $ 1,830,777
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 1,830,777
Total Per Square Foot $ -- $ 9.06
Seattle, Washington
Weighted Average Square Footage Owned 1,154,560 sf 1,072,173 sf
Capital Expenditures $ -- $ 19,511
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 19,511
Total Per Square Foot $ -- $ 0.02
Total Square Feet Leased 53,894 sf 905,075 sf
Total Tenant Lease Costs $ 290,971 $ 4,914,842
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ 290,971 $ 4,914,842
Total Per Square Foot $ 5.40 $ 5.43
Santa Clara County, California
Weighted Average Square Footage Owned sf 139,620 sf
Capital Expenditures $ -- $ 98,108
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 98,108
Total Per Square Foot $ -- $ 0.70
Total Square Feet Leased sf 80,154 sf
Total Tenant Lease Costs $ -- $ 671,873
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 671,873
Total Per Square Foot $ -- $ 8.38
Denver, Colorado
Weighted Average Square Footage Owned 1,187,752 sf 1,068,010 sf
Capital Expenditures $ -- $ 20,400
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 20,400
Total Per Square Foot $ -- $ 0.02
Total Square Feet Leased 75,939 sf 564,215 sf
Total Tenant Lease Costs $ 141,135 $ 3,200,038
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ 141,135 $ 3,200,038
Total Per Square Foot $ 1.86 $ 5.67
San Francisco, California
Weighted Average Square Footage Owned sf 111,967 sf
Capital Expenditures $ -- $ 13,870
Minority Interest Adjustment $ -- $ 104
--------------------------------
Total Cornerstone Share $ -- $ 13,766
Total Per Square Foot $ -- $ 0.12
Total Square Feet Leased sf 122,088 sf
Total Tenant Lease Costs $ -- $ 2,025,597
Minority Interest Adjustment $ -- $ 275,971
--------------------------------
Total Cornerstone Share $ -- $ 1,749,626
Total Per Square Foot $ -- $ 14.33
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Non-Revenue Generating Capital
(Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minneapolis, Minnesota
Weighted Average Square Footage Owned 411,883 sf 870,970 sf 870,970 sf 870,970 sf
Capital Expenditures $ -- $ -- $ 10,974 $ --
Minority Interest Adjustment $ -- $ -- $ 2,195 $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ 8,779 $ --
Total Per Square Foot $ -- $ -- $ 0.01 $ --
Total Square Feet Leased 31,572 sf 125,966 sf 212,795 sf 6,629 sf
Total Tenant Lease Costs $ 40,532 $ 513,054 $ 569,103 $ 42,237
Minority Interest Adjustment $ 10,405 $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 30,127 $ 513,054 $ 569,103 $ 42,237
Total Per Square Foot $ 0.95 $ 4.07 $ 2.67 $ 6.37
Washington, D.C. / Alexandria, Virginia
Weighted Average Square Footage Owned 492,566 sf 989,999 sf 177,548 sf sf
Capital Expenditures $ -- $ 75,218 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ 75,218 $ -- $ --
Total Per Square Foot $ -- $ 0.08 $ -- $ --
Total Square Feet Leased 48,814 sf 151,775 sf sf sf
Total Tenant Lease Costs $ 1,677,908 $ 3,291,744 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 1,677,908 $ 3,291,744 $ -- $ --
Total Per Square Foot $ 34.37 $ 21.69 $ -- $ --
Suburban Chicago, Illinois
Weighted Average Square Footage Owned 484,028 sf 923,873 sf 297,067 sf 43,136 sf
Capital Expenditures $ -- $ (61,733) $ 154,646 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ (61,733) $ 154,646 $ --
Total Per Square Foot $ -- $ (0.07) $ 0.52 $ --
Total Square Feet Leased 278,163 sf 149,705 sf 42,826 sf 3,652 sf
Total Tenant Lease Costs $ 2,749,257 $ 447,825 $ 287,758 $ 2,859
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 2,749,257 $ 447,825 $ 287,758 $ 2,859
Total Per Square Foot $ 9.88 $ 2.99 $ 6.72 $ 0.78
Santa Monica/West Los Angeles, California
Weighted Average Square Footage Owned 420,095 sf 137,348 sf sf sf
Capital Expenditures $ 3,727 $ 293,641 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 3,727 $ 293,641 $ -- $ --
Total Per Square Foot $ 0.01 $ 2.14 $ -- $ --
Total Square Feet Leased 111,625 sf 19,106 sf sf sf
Total Tenant Lease Costs $ 730,928 $ 111,078 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 730,928 $ 111,078 $ -- $ --
Total Per Square Foot $ 6.55 $ 5.81 $ -- $ --
Orange County, California
Weighted Average Square Footage Owned 352,139 sf 31,096 sf sf sf
Capital Expenditures $ 38,475 $ 897 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 38,475 $ 897 $ -- $ --
Total Per Square Foot $ 0.11 $ 0.03 $ -- $ --
Total Square Feet Leased 9,068 sf 1,149 sf sf sf
Total Tenant Lease Costs $ 39,237 $ 9,192 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 39,237 $ 9,192 $ -- $ --
Total Per Square Foot $ 4.33 $ 8.00 $ -- $ --
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Minneapolis, Minnesota
Weighted Average Square Footage Owned 870,970 sf 779,153 sf
Capital Expenditures $ -- $ 2,195
Minority Interest Adjustment $ -- $ 439
--------------------------------
Total Cornerstone Share $ -- $ 1,756
Total Per Square Foot $ -- $ 0.00
Total Square Feet Leased 24,986 sf 401,948 sf
Total Tenant Lease Costs $ 144,275 $ 1,309,201
Minority Interest Adjustment $ -- $ 10,405
--------------------------------
Total Cornerstone Share $ 144,275 $ 1,298,796
Total Per Square Foot $ 5.77 $ 3.23
Washington, D.C. / Alexandria, Virginia
Weighted Average Square Footage Owned sf 332,023 sf
Capital Expenditures $ -- $ 15,044
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 15,044
Total Per Square Foot $ -- $ 0.05
Total Square Feet Leased sf 200,589 sf
Total Tenant Lease Costs $ -- $ 4,969,652
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 4,969,652
Total Per Square Foot $ -- $ 24.78
Suburban Chicago, Illinois
Weighted Average Square Footage Owned sf 349,621 sf
Capital Expenditures $ -- $ 18,583
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 18,583
Total Per Square Foot $ -- $ 0.05
Total Square Feet Leased sf 474,346 sf
Total Tenant Lease Costs $ -- $ 3,487,699
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 3,487,699
Total Per Square Foot $ -- $ 7.35
Santa Monica/West Los Angeles, California
Weighted Average Square Footage Owned sf 111,489 sf
Capital Expenditures $ -- $ 59,474
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 59,474
Total Per Square Foot $ -- $ 0.53
Total Square Feet Leased sf 130,731 sf
Total Tenant Lease Costs $ -- $ 842,006
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 842,006
Total Per Square Foot $ -- $ 6.44
Orange County, California
Weighted Average Square Footage Owned sf 76,647 sf
Capital Expenditures $ -- $ 7,874
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 7,874
Total Per Square Foot $ -- $ 0.10
Total Square Feet Leased sf 10,217 sf
Total Tenant Lease Costs $ -- $ 48,429
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 48,429
Total Per Square Foot $ -- $ 4.74
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Non-Revenue Generating Capital
(Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charlotte, North Carolina
Weighted Average Square Footage Owned 303,846 sf 612,728 sf 110,795 sf sf
Capital Expenditures $ -- $ 5,086 $ 15,039 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ 5,086 $ 15,039 $ --
Total Per Square Foot $ -- $ 0.01 $ 0.14 $ --
Total Square Feet Leased 28,484 sf 59,318 sf 9,139 sf sf
Total Tenant Lease Costs $ 184,233 $ 519,787 $ 154,044 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 184,233 $ 519,787 $ 154,044 $ --
Total Per Square Foot $ 6.47 $ 8.76 $ 16.86 $ --
Arizona
Weighted Average Square Footage Owned 290,611 sf 25,608 sf sf sf
Capital Expenditures $ 63,905 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 63,905 $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased 33,721 sf sf sf sf
Total Tenant Lease Costs $ 219,632 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 219,632 $ -- $ -- $ --
Total Per Square Foot $ 6.51 $ -- $ -- $ --
San Diego, California
Weighted Average Square Footage Owned 208,563 sf 18,450 sf sf sf
Capital Expenditures $ 21,046 $ 20,145 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 21,046 $ 20,145 $ -- $ --
Total Per Square Foot $ 0.10 $ 1.09 $ -- $ --
Total Square Feet Leased 24,204 sf 991 sf sf sf
Total Tenant Lease Costs $ 138,392 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 138,392 $ -- $ -- $ --
Total Per Square Foot $ 5.72 $ -- $ -- $ --
Los Angeles, California
Weighted Average Square Footage Owned 199,164 sf 17,689 sf sf sf
Capital Expenditures $ 32,929 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 32,929 $ -- $ -- $ --
Total Per Square Foot $ 0.17 $ -- $ -- $ --
Total Square Feet Leased 2,032 sf 2,917 sf sf sf
Total Tenant Lease Costs $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
New York City, New York
Weighted Average Square Footage Owned 187,925 sf 378,965 sf 353,007 sf 112,526 sf
Capital Expenditures $ 221,985 $ 658,610 $ 130,190 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 221,985 $ 658,610 $ 130,190 $ --
Total Per Square Foot $ 1.18 $ 1.74 $ 0.37 $ --
-------------------------------------------------------------------
Total Square Feet Leased 41,190 sf 49,026 sf 95,104 sf 42,203 sf
Total Tenant Lease Costs $ 512,943 $ 390,610 $ 1,470,095 $ 339,124
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 512,943 $ 390,610 $ 1,470,095 $ 339,124
Total Per Square Foot $ 12.45 $ 7.97 $ 15.46 $ 8.04
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Charlotte, North Carolina
Weighted Average Square Footage Owned sf 205,474 sf
Capital Expenditures $ -- $ 4,025
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 4,025
Total Per Square Foot $ -- $ 0.02
Total Square Feet Leased sf 96,941 sf
Total Tenant Lease Costs $ -- $ 858,064
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 858,064
Total Per Square Foot $ -- $ 8.85
Arizona
Weighted Average Square Footage Owned sf 63,244 sf
Capital Expenditures $ -- $ 12,781
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 12,781
Total Per Square Foot $ -- $ 0.20
Total Square Feet Leased sf 33,721 sf
Total Tenant Lease Costs $ -- $ 219,632
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 219,632
Total Per Square Foot $ -- $ 6.51
San Diego, California
Weighted Average Square Footage Owned sf 45,403 sf
Capital Expenditures $ -- $ 8,238
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 8,238
Total Per Square Foot $ -- $ 0.18
Total Square Feet Leased sf 25,195 sf
Total Tenant Lease Costs $ -- $ 138,392
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 138,392
Total Per Square Foot $ -- $ 5.49
Los Angeles, California
Weighted Average Square Footage Owned sf 43,371 sf
Capital Expenditures $ -- $ 6,586
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 6,586
Total Per Square Foot $ -- $ 0.15
Total Square Feet Leased sf 4,949 sf
Total Tenant Lease Costs $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
New York City, New York
Weighted Average Square Footage Owned sf 206,485 sf
Capital Expenditures $ -- $ 202,157
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 202,157
Total Per Square Foot $ -- $ 0.98
--------------------------------
Total Square Feet Leased sf 227,523 sf
Total Tenant Lease Costs $ -- $ 2,712,772
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 2,712,772
Total Per Square Foot $ -- $ 11.92
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Non-Revenue Generating Capital
(Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Conejo Valley (Ventura), California
Weighted Average Square Footage Owned 116,165 sf 10,269 sf sf sf
Capital Expenditures $ 10,156 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 10,156 $ -- $ -- $ --
Total Per Square Foot $ 0.09 $ -- $ -- $ --
Total Square Feet Leased 11,812 sf sf sf sf
Total Tenant Lease Costs $ 27,730 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 27,730 $ -- $ -- $ --
Total Per Square Foot $ 2.35 $ -- $ -- $ --
Other Regions
Weighted Average Square Footage Owned 103,928 sf 9,168 sf sf sf
Capital Expenditures $ 78,463 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 78,463 $ -- $ -- $ --
Total Per Square Foot $ 0.75 $ -- $ -- $ --
Total Square Feet Leased 9,245 sf 12,343 sf sf sf
Total Tenant Lease Costs $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Conejo Valley (Ventura), California
Weighted Average Square Footage Owned sf 25,287 sf
Capital Expenditures $ -- $ 2,031
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 2,031
Total Per Square Foot $ -- $ 0.08
Total Square Feet Leased sf 11,812 sf
Total Tenant Lease Costs $ -- $ 27,730
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 27,730
Total Per Square Foot $ -- $ 2.35
Other Regions
Weighted Average Square Footage Owned sf 22,619 sf
Capital Expenditures $ -- $ 15,693
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 15,693
Total Per Square Foot $ -- $ 0.69
Total Square Feet Leased sf 21,588 sf
Total Tenant Lease Costs $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Revenue Generating Capital
(Non-Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
------------------------------------------------ -----------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) Portfolio Total
(2) Weighted Average Square Footage Owned 10,028,573 sf 11,085,545 sf 5,121,760 sf 3,832,635 sf
Capital Expenditures $ 1,216,598 $ 1,483,545 $ 367,262 $ 25,500
Minority Interest Adjustment $ 33,264 $ 8,490 $ -- $ --
-----------------------------------------------------------------
Total Cornerstone Share $ 1,183,334 $ 1,475,055 $ 367,262 $ 25,500
Total Per Square Foot $ 0.12 $ 0.13 $ 0.07 $ 0.01
(2) Total Square Feet Leased 368,402 sf 198,025 sf 83,682 sf 188,709 sf
Total Tenant Lease Costs $ 7,707,377 $ 4,452,292 $ 690,658 $ 1,196,934
Minority Interest Adjustment $ 76,273 $ -- $ -- $ --
-----------------------------------------------------------------
Total Cornerstone Share $ 7,631,104 $ 4,452,292 $ 690,658 $ 1,196,934
Total Per Square Foot $ 20.71 $ 22.48 $ 8.25 $ 6.34
<CAPTION>
Region 1995 Total / Average
------------------------------------------------ --------------------------------
<S> <C> <C>
(1) Portfolio Total
(2) Weighted Average Square Footage Owned 3,290,776 sf 6,671,858 sf
Capital Expenditures $ 135,194 $ 645,620
Minority Interest Adjustment $ -- $ 8,351
--------------------------------
Total Cornerstone Share $ 135,194 $ 637,269
Total Per Square Foot $ 0.04 $ 0.10
(2) Total Square Feet Leased sf 838,818 sf
Total Tenant Lease Costs $ -- $14,047,261
Minority Interest Adjustment $ -- $ 15,255
--------------------------------
Total Cornerstone Share $ -- $14,032,006
Total Per Square Foot $ -- $ 16.73
</TABLE>
(1) 1996 and 1997 leasing and capital costs have been restated to reflect the
1998 sale of the Frick Building.
(2) Square Footage Owned and Leased have been adjusted for minority interest
partners.
- --------------------------------------------------------------------------------
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>
<S> <C> <C> <C> <C>
Boston, Massachusetts
Weighted Average Square Footage Owned 1,378,083 sf 2,666,317 sf 672,069 sf 463,691 sf
Capital Expenditures $ 20,220 $ 4,238 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 20,220 $ 4,238 $ -- $ --
Total Per Square Foot $ 0.01 $ 0.00 $ -- $ --
Total Square Feet Leased 1,404(9) sf sf 33,136 sf
Total Tenant Lease Costs $ 14,040 $ -- $ -- $ 369,727
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 14,040 $ -- $ -- $ 369,727
Total Per Square Foot $ 10.00 $ -- $ -- $ 11.16
San Mateo County, California
Weighted Average Square Footage Owned 1,077,971 sf 95,295 sf sf sf
Capital Expenditures $ 107,103 $ 4,053 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 107,103 $ 4,053 $ -- $ --
Total Per Square Foot $ 0.10 $ 0.04 $ -- $ --
Total Square Feet Leased 133,140 sf 3,752 sf sf sf
Total Tenant Lease Costs $ 2,954,635 $ 29,116 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 2,954,635 $ 29,116 $ -- $ --
Total Per Square Foot $ 22.19 $ 7.76 $ -- $ --
East Bay, California
Weighted Average Square Footage Owned 828,867 sf 73,386 sf sf sf
Capital Expenditures $ 298,868 $ 31,633 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 298,868 $ 31,633 $ -- $ --
Total Per Square Foot $ 0.36 $ 0.43 $ -- $ --
Total Square Feet Leased 28,501 sf 1,333 sf sf sf
Total Tenant Lease Costs $ 311,871 $ 13,330 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 311,871 $ 13,330 $ -- $ --
Total Per Square Foot $ 10.94 $ 10.00 $ -- $ --
<CAPTION>
<S> <C> <C>
Boston, Massachusetts
Weighted Average Square Footage Owned 77,494 sf 1,051,531 sf
Capital Expenditures $ -- $ 4,892
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 4,892
Total Per Square Foot $ -- $ 0.00
Total Square Feet Leased sf 34,540 sf
Total Tenant Lease Costs $ -- $ 383,767
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 383,767
Total Per Square Foot $ -- $ 11.11
San Mateo County, California
Weighted Average Square Footage Owned sf 234,653 sf
Capital Expenditures $ -- $ 22,231
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 22,231
Total Per Square Foot $ -- $ 0.09
Total Square Feet Leased sf 136,892 sf
Total Tenant Lease Costs $ -- $ 2,983,751
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 2,983,751
Total Per Square Foot $ -- $ 21.80
East Bay, California
Weighted Average Square Footage Owned sf 180,451 sf
Capital Expenditures $ -- $ 66,100
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 66,100
Total Per Square Foot $ -- $ 0.37
Total Square Feet Leased sf 29,834 sf
Total Tenant Lease Costs $ -- $ 325,201
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 325,201
Total Per Square Foot $ -- $ 10.90
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Revenue Generating Capital
(Non-Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Atlanta, Georgia
Weighted Average Square Footage Owned 817,220 sf 1,647,986 sf 297,992 sf sf
Capital Expenditures $ 206,812 $ 586,718 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 206,812 $ 586,718 $ -- $ --
Total Per Square Foot $ 0.25 $ 0.36 $ -- $ --
Total Square Feet Leased 1,299 sf 60,834 sf 2,139 sf sf
Total Tenant Lease Costs $ 45,220 $ 1,919,820 $ 24,132 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 45,220 $ 1,919,820 $ 24,132 $ --
Total Per Square Foot $ 34.81 $ 31.56 $ 11.28 $ --
Seattle, Washington
Weighted Average Square Footage Owned 728,863 sf 1,168,321 sf 1,154,560 sf 1,154,560 sf
Capital Expenditures $ 107,374 $ 212,549 $ 88,401 $ 25,500
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 107,374 $ 212,549 $ 88,401 $ 25,500
Total Per Square Foot $ 0.15 $ 0.18 $ 0.08 $ 0.02
Total Square Feet Leased 638 sf sf 69,727 sf 146,517 sf
Total Tenant Lease Costs $ 357 $ -- $ 404,988 $ 643,235
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 357 $ -- $ 404,988 $ 643,235
Total Per Square Foot $ 0.56 $ -- $ 5.81 $ 4.39
Santa Clara County, California
Weighted Average Square Footage Owned 641,589 sf 56,510 sf sf sf
Capital Expenditures $ 207,801 $ 86,662 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 207,801 $ 86,662 $ -- $ --
Total Per Square Foot $ 0.32 $ 1.53 $ -- $ --
Total Square Feet Leased 34,178 sf 6,614 sf sf sf
Total Tenant Lease Costs $ 434,182 $ 66,140 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 434,182 $ 66,140 $ -- $ --
Total Per Square Foot $ 12.70 $ 10.00 $ -- $ --
Denver, Colorado
Weighted Average Square Footage Owned 589,044 sf 1,187,752 sf 1,187,752 sf 1,187,752 sf
Capital Expenditures $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased sf 1,497 sf sf sf
Total Tenant Lease Costs $ -- $ 24,169 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ 24,169 $ -- $ --
Total Per Square Foot $ -- $ 16.14 $ -- $ --
San Francisco, California
Weighted Average Square Footage Owned 396,022 sf 163,815 sf sf sf
Capital Expenditures $ 112,816 $ 21,786 $ -- $ --
Minority Interest Adjustment $ 33,264 $ 8,490 $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 79,552 $ 13,296 $ -- $ --
Total Per Square Foot $ 0.20 $ 0.08 $ -- $ --
Total Square Feet Leased 9,071 sf 20,678 sf sf sf
Total Tenant Lease Costs $ 228,818 $ 501,187 $ -- $ --
Minority Interest Adjustment $ 76,273 $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 152,545 $ 501,187 $ -- $ --
Total Per Square Foot $ 16.82 $ 24.24 $ -- $ --
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Atlanta, Georgia
Weighted Average Square Footage Owned sf 552,640 sf
Capital Expenditures $ -- $ 158,706
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 158,706
Total Per Square Foot $ -- $ 0.29
Total Square Feet Leased sf 64,272 sf
Total Tenant Lease Costs $ -- $ 1,989,172
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 1,989,172
Total Per Square Foot $ -- $ 30.95
Seattle, Washington
Weighted Average Square Footage Owned 1,154,560 sf 1,072,173 sf
Capital Expenditures $ 135,194 $ 113,804
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ 135,194 $ 113,804
Total Per Square Foot $ 0.12 $ 0.11
Total Square Feet Leased sf 216,882 sf
Total Tenant Lease Costs $ -- $ 1,048,580
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 1,048,580
Total Per Square Foot $ -- $ 4.83
Santa Clara County, California
Weighted Average Square Footage Owned sf 139,620 sf
Capital Expenditures $ -- $ 58,893
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 58,893
Total Per Square Foot $ -- $ 0.42
Total Square Feet Leased sf 40,792 sf
Total Tenant Lease Costs $ -- $ 500,322
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 500,322
Total Per Square Foot $ -- $ 12.27
Denver, Colorado
Weighted Average Square Footage Owned 1,187,752 sf 1,068,010 sf
Capital Expenditures $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
Total Square Feet Leased sf 1,497 sf
Total Tenant Lease Costs $ -- $ 24,169
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 24,169
Total Per Square Foot $ -- $ 16.14
San Francisco, California
Weighted Average Square Footage Owned sf 111,967 sf
Capital Expenditures $ -- $ 26,920
Minority Interest Adjustment $ -- $ 8,351
--------------------------------
Total Cornerstone Share $ -- $ 18,570
Total Per Square Foot $ -- $ 0.17
Total Square Feet Leased sf 29,749 sf
Total Tenant Lease Costs $ -- $ 730,005
Minority Interest Adjustment $ -- $ 76,273
--------------------------------
Total Cornerstone Share $ -- $ 653,732
Total Per Square Foot $ -- $ 21.98
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Revenue Generating Capital
(Non-Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minneapolis, Minnesota
Weighted Average Square Footage Owned 411,883 sf 870,970 sf 870,970 sf 870,970 sf
Capital Expenditures $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased sf sf sf sf
Total Tenant Lease Costs $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Washington, D.C. / Alexandria, Virginia
Weighted Average Square Footage Owned 492,566 sf 989,999 sf 177,548 sf sf
Capital Expenditures $ 24,619 $ 139,501 $ 216,984 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 24,619 $ 139,501 $ 216,984 $ --
Total Per Square Foot $ 0.05 $ 0.14 $ 1.22 $ --
Total Square Feet Leased 8,874 sf 32,227 sf sf sf
Total Tenant Lease Costs $ 164,649 $ 1,146,914 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 164,649 $ 1,146,914 $ -- $ --
Total Per Square Foot $ 18.55 $ 35.59 $ -- $ --
Suburban Chicago, Illinois
Weighted Average Square Footage Owned 484,028 sf 923,873 sf 297,067 sf 43,136 sf
Capital Expenditures $ 57,050 $ -- $ 61,877 $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 57,050 $ -- $ 61,877 $ --
Total Per Square Foot $ 0.12 $ -- $ 0.21 $ --
Total Square Feet Leased 4,500 sf 34,637 sf 11,816 sf 1,941 sf
Total Tenant Lease Costs $ 145,159 $ 495,310 $ 261,538 $ 9,706
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 145,159 $ 495,310 $ 261,538 $ 9,706
Total Per Square Foot $ 32.26 $ 14.30 $ 22.13 $ 5.00
Santa Monica/West Los Angeles, California
Weighted Average Square Footage Owned 420,095 sf 137,348 sf sf sf
Capital Expenditures $ 21,474 $ 12,980 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 21,474 $ 12,980 $ -- $ --
Total Per Square Foot $ 0.05 $ 0.09 $ -- $ --
Total Square Feet Leased 14,680 sf sf sf sf
Total Tenant Lease Costs $ 438,330 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 438,330 $ -- $ -- $ --
Total Per Square Foot $ 29.86 $ -- $ -- $ --
Orange County, California
Weighted Average Square Footage Owned 352,139 sf 31,096 sf sf sf
Capital Expenditures $ 13,695 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 13,695 $ -- $ -- $ --
Total Per Square Foot $ 0.04 $ -- $ -- $ --
Total Square Feet Leased 89,858 sf 1,311 sf sf sf
Total Tenant Lease Costs $ 2,460,199 $ 6,555 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 2,460,199 $ 6,555 $ -- $ --
Total Per Square Foot $ 27.38 $ 5.00 $ -- $ --
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Minneapolis, Minnesota
Weighted Average Square Footage Owned 870,970 sf 779,153 sf
Capital Expenditures $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
Total Square Feet Leased sf sf
Total Tenant Lease Costs $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
Washington, D.C. / Alexandria, Virginia
Weighted Average Square Footage Owned sf 332,023 sf
Capital Expenditures $ -- $ 76,221
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 76,221
Total Per Square Foot $ -- $ 0.23
Total Square Feet Leased sf 41,101 sf
Total Tenant Lease Costs $ -- $ 1,311,563
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 1,311,563
Total Per Square Foot $ -- $ 31.91
Suburban Chicago, Illinois
Weighted Average Square Footage Owned sf 349,621 sf
Capital Expenditures $ -- $ 23,785
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 23,785
Total Per Square Foot $ -- $ 0.07
Total Square Feet Leased sf 52,894 sf
Total Tenant Lease Costs $ -- $ 911,713
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 911,713
Total Per Square Foot $ -- $ 17.24
Santa Monica/West Los Angeles, California
Weighted Average Square Footage Owned sf 111,489 sf
Capital Expenditures $ -- $ 6,891
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 6,891
Total Per Square Foot $ -- $ 0.06
Total Square Feet Leased sf 14,680 sf
Total Tenant Lease Costs $ -- $ 438,330
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 438,330
Total Per Square Foot $ -- $ 29.86
Orange County, California
Weighted Average Square Footage Owned sf 76,647 sf
Capital Expenditures $ -- $ 2,739
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 2,739
Total Per Square Foot $ -- $ 0.04
Total Square Feet Leased sf 91,169 sf
Total Tenant Lease Costs $ -- $ 2,466,754
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 2,466,754
Total Per Square Foot $ -- $ 27.06
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Revenue Generating Capital
(Non-Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charlotte, North Carolina
Weighted Average Square Footage Owned 303,846 sf 612,728 sf 110,795 sf sf
Capital Expenditures $ 16,363 $ 375,043 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 16,363 $ 375,043 $ -- $ --
Total Per Square Foot $ 0.05 $ 0.61 $ -- $ --
Total Square Feet Leased sf 28,587 sf sf sf
Total Tenant Lease Costs $ -- $ 163,143 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ 163,143 $ -- $ --
Total Per Square Foot $ -- $ 5.71 $ -- $ --
Arizona
Weighted Average Square Footage Owned 290,611 sf 25,608 sf sf sf
Capital Expenditures $ 4,374 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 4,374 $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased 18,805 sf 1,124 sf sf sf
Total Tenant Lease Costs $ 242,532 $ 1,124 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 242,532 $ 1,124 $ -- $ --
Total Per Square Foot $ 12.90 $ 1.00 $ -- $ --
San Diego, California
Weighted Average Square Footage Owned 208,563 sf 18,450 sf sf sf
Capital Expenditures $ 0 $ 422 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 0 $ 422 $ -- $ --
Total Per Square Foot $ 0.00 $ 0.02 $ -- $ --
Total Square Feet Leased 985 sf 5,431 sf sf sf
Total Tenant Lease Costs $ 8,904 $ 85,484 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 8,904 $ 85,484 $ -- $ --
Total Per Square Foot $ 9.04 $ 15.74 $ -- $ --
Los Angeles, California
Weighted Average Square Footage Owned 199,164 sf 17,689 sf sf sf
Capital Expenditures $ 0 $ 7,960 $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ 7,960 $ -- $ --
Total Per Square Foot $ -- $ 0.45 $ -- $ --
Total Square Feet Leased 2,440 sf sf sf sf
Total Tenant Lease Costs $ 20,994 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 20,994 $ -- $ -- $ --
Total Per Square Foot $ 8.60 $ -- $ -- $ --
New York City, New York
Weighted Average Square Footage Owned 187,925 sf 378,965 sf 353,007 sf 112,526 sf
Capital Expenditures $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased sf sf sf 7,115 sf
Total Tenant Lease Costs $ -- $ -- $ -- $ 174,266
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ 174,266
Total Per Square Foot $ -- $ -- $ -- $ 24.49
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Charlotte, North Carolina
Weighted Average Square Footage Owned sf 205,474 sf
Capital Expenditures $ -- $ 78,281
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 78,281
Total Per Square Foot $ -- $ 0.38
Total Square Feet Leased sf 28,587 sf
Total Tenant Lease Costs $ -- $ 163,143
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 163,143
Total Per Square Foot $ -- $ 5.71
Arizona
Weighted Average Square Footage Owned sf 63,244 sf
Capital Expenditures $ -- $ 875
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 875
Total Per Square Foot $ -- $ 0.01
Total Square Feet Leased sf 19,929 sf
Total Tenant Lease Costs $ -- $ 243,656
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 243,656
Total Per Square Foot $ -- $ 12.23
San Diego, California
Weighted Average Square Footage Owned sf 45,403 sf
Capital Expenditures $ -- $ 84
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 84
Total Per Square Foot $ -- $ 0.00
Total Square Feet Leased sf 6,416 sf
Total Tenant Lease Costs $ -- $ 94,388
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 94,388
Total Per Square Foot $ -- $ 14.71
Los Angeles, California
Weighted Average Square Footage Owned sf 43,371 sf
Capital Expenditures $ -- $ 1,592
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 1,592
Total Per Square Foot $ -- $ 0.04
Total Square Feet Leased sf 2,440 sf
Total Tenant Lease Costs $ -- $ 20,994
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 20,994
Total Per Square Foot $ -- $ 8.60
New York City, New York
Weighted Average Square Footage Owned sf 206,485 sf
Capital Expenditures $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
Total Square Feet Leased sf 7,115 sf
Total Tenant Lease Costs $ -- $ 174,266
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 174,266
Total Per Square Foot $ -- $ 24.49
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Revenue Generating Capital
(Non-Recurring Capital)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Region 1999 YTD 1998 1997 1996
- ---------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Conejo Valley (Ventura), California
Weighted Average Square Footage Owned 116,165 sf 10,269 sf sf sf
Capital Expenditures $ -- $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ -- $ -- $ -- $ --
Total Per Square Foot $ -- $ -- $ -- $ --
Total Square Feet Leased 9,111 sf sf sf sf
Total Tenant Lease Costs $ 109,332 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 109,332 $ -- $ -- $ --
Total Per Square Foot $ 12.00 $ -- $ -- $ --
Other Regions
Weighted Average Square Footage Owned 103,928 sf 9,168 sf sf sf
Capital Expenditures $ 18,029 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 18,029 $ -- $ -- $ --
Total Per Square Foot $ 0.17 $ -- $ -- $ --
Total Square Feet Leased 10,918 sf sf sf sf
Total Tenant Lease Costs $ 128,155 $ -- $ -- $ --
Minority Interest Adjustment $ -- $ -- $ -- $ --
-------------------------------------------------------------------
Total Cornerstone Share $ 128,155 $ -- $ -- $ --
Total Per Square Foot $ 11.74 $ -- $ -- $ --
<CAPTION>
Region 1995 Total / Average
- ---------------------------------------------------- --------------------------------
<S> <C> <C>
Conejo Valley (Ventura), California
Weighted Average Square Footage Owned sf 25,287 sf
Capital Expenditures $ -- $ --
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ --
Total Per Square Foot $ -- $ --
Total Square Feet Leased sf 9,111 sf
Total Tenant Lease Costs $ -- $ 109,332
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 109,332
Total Per Square Foot $ -- $ 12.00
Other Regions
Weighted Average Square Footage Owned sf 22,619 sf
Capital Expenditures $ -- $ 3,606
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 3,606
Total Per Square Foot $ -- $ 0.16
Total Square Feet Leased sf 10,918 sf
Total Tenant Lease Costs $ -- $ 128,155
Minority Interest Adjustment $ -- $ --
--------------------------------
Total Cornerstone Share $ -- $ 128,155
Total Per Square Foot $ -- $ 11.74
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Debt Schedule
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Debt Schedule
June 30, 1999
- --------------------------------------------------------------------------------
The following table sets forth certain information regarding the consolidated
debt obligations of the Company as of June 30, 1999, 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
Property Amortization Interest Rate (A) Date 6/30/99
- --------------------------------------------- ------------------ ----------------- -------- ---------------
<S> <C> <C> <C> <C>
One and Two Gateway 25 year 6.90% Dec-99 8,529,000
Seaport Centre Interest only LIBOR plus 1.50% Dec-99 58,000,000
The Pruneyard 24 year LIBOR plus 2.00% Mar-00 58,974,000
Scottsdale Centre 25 year 6.90% Jul-00 7,649,000
TransPotomac Plaza and Charlotte Plaza (B) Interest only 7.28% Oct-00 65,000,000
Convertible Promissory Note due 2001 (C) Interest only 8.11%max (D) Jan-01 12,926,000
West Wilshire Office and Medical 25 year 6.90% Jan-02 17,117,000
Searise Office Tower 25 year 6.90% Jan-02 11,737,000
Exposition Centre 25 year 6.90% May-02 5,145,000
Wilshire Palisades 22 year 6.70% Jul-02 29,479,000
120 Montgomery 24 year LIBOR plus 1.40% Nov-02 47,756,000
1300 South El Camino 23 year 6.90% Dec-02 3,954,000
125 Summer Street Interest only (E) 7.20% Jan-03 50,000,000
Tower 56 30 year 7.67% May-03 17,463,000
Norris Tech Center 25 year LIBOR plus 1.65% Dec-03 16,239,000
Peninsula Office Park 4 25 year 6.90% Feb-04 5,380,000
Peninsula Office Park 1,3,5,6,8 & 9 25 year 6.90% Feb-04 55,616,000
110 Atrium Place 30 year 6.90% Mar-04 21,689,000
10 Almaden 25 year 6.90% Apr-04 33,550,000
Embarcadero Place 20 year 6.90% Apr-04 25,680,000
527 Madison Avenue and One Lincoln Centre (B) Interest only 7.47% Oct-04 65,000,000
Sixty State Street 30 year 6.84% Jan-05 86,573,000
201 California Street 30 year 6.70% Mar-05 32,865,000
Island Corporate Center 30 year 6.90% Apr-05 13,239,000
Washington Mutual Tower Interest only 7.53% Nov-05 79,100,000
Norwest Center Interest only 8.74% Dec-05 110,000,000
Agoura Hills 25 year 6.90% Dec-05 12,168,000
Janss Court 30 year 6.90% Dec-05 18,543,000
Bayhill 4,5,6 & 7 25 year 6.90% Dec-06 58,429,000
66 Bovet 22 year 6.90% Apr-07 3,888,000
Market Square (F) and 200 Galleria (B) Interest only 7.54% Oct-07 120,000,000
One Norwest Center 30 year 6.90% Oct-08 97,827,000
Corporate 500 Centre 25 year 6.66% Nov-08 89,166,000
188 Embarcadero (G) 25 year 7.26% Aug-09 15,700,000
Centerside II (G) 25 year 7.26% Aug-09 24,400,000
700 North Brand (G) 25 year 7.26% Aug-09 27,100,000
Golden Bear Center (G) 25 year 7.26% Aug-09 20,600,000
Bixby Ranch (G) 25 year 7.26% Aug-09 28,700,000
One Memorial (G) 25 year 7.26% Aug-09 63,500,000
Other loans Various Various Various 412,000
---------------- ------- ---------------
Total Cornerstone Debt before adjustments 7.18%(H) 5.93(H) $ 1,519,093,000
Adjustments:
One Post 25 year 6.90% Dec-02 17,393,000
120 Montgomery 24 year LIBOR plus 1.40% Nov-02 (26,340,300)
Norwest Center Interest only 8.74% Dec-05 (28,237,000)
---------------- ------- ---------------
Total Cornerstone Share of Debt 7.16%(H) 5.93(H) $ 1,481,908,700
================ ======= ===============
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Debt Schedule
June 30, 1999
(A) The interest rate is the stated interest rate (for Cornerstone-originated
debt) or the mark to market rate at the time of acquisition (for debt
assumed as part of a property acquisition).
(B) The three notes arising from the acquisition of several properties from
PGGM are cross-collateralized, having the effect of forming a "collateral
pool" for the underlying notes.
(C) 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.
(D) Lesser of 30-day LIBOR plus 0.5% or 8.11%.
(E) Interest only payments through January 1, 2001, with a 25-year
amortization schedule thereafter.
(F) The collateral for this loan is a pledge of the $181.0 million first
mortgage loan on Market Square that the Company purchased from PGGM.
(G) The six notes arising from the restructuring of certain debt with
Prudential and Northwestern Mutual Life are cross-collateralized, having
the effect of forming a "collateral pool" for the underlying notes.
(H) Weighted-average interest rate and maturity of the Company's long-term
debt.
The combined aggregate amount of maturities for all long-term borrowings for
1999 through 2003 are $66,529,000, $131,623,000, $12,926,000, $115,188,000 and
$83,702,000, respectively.
Revolving Credit Facility
The Company has a $550.0 million Revolving Credit Facility with a syndicate of
17 banks led by Bankers Trust Company, The Chase Manhattan Bank and NationsBank
for acquisitions and general working capital purposes as well as the issuance of
letters of credit (the "Revolving Credit Facility"). The interest rate on the
facility depends on the Company's ratio of total debt to asset value (as
defined) at the time of borrowing and will be at a spread of 1.10% to 1.80% over
the applicable LIBOR or the Prime Rate at the borrower's option. The letters of
credit will be priced at the applicable Eurodollar credit spread. The Revolving
Credit Facility expires on November 3, 2001. As of June 30, 1999, $467.5 million
of the facility was outstanding at a rate of approximately 6.4%. Of this amount,
approximately $250.0 million is fixed with interest rate swaps, which
effectively fixes the rate at 6.47%. In addition, at June 30, 1999, there were
two letters of credit totaling $10.5 million ($5.5 million of which is with
Summit Bank) outstanding at a rate of 1.40%. The Revolving Credit Facility
contains certain restrictive covenants including: (i) a limitation on the
Company's dividend to 90.0% of funds from operations and 110.0% of funds
available for distribution, both as defined in the agreement; (ii) the
percentage of total liabilities to total property asset value (as defined)
cannot exceed 60.0%; (iii) the ratio of adjusted EBITDA to interest expense may
not be less than 2.00 to 1.00 through July 1, 1999 and 2.25 to 1.00 thereafter;
(iv) fixed charge coverage may not be less than 1.75 to 1.00; and (v) the ratio
of total property asset value (as defined) to secured indebtedness may not be
less than 2.22 to 1.00.
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Equity Schedule
<PAGE>
- --------------------------------------------------------------------------------
Cornerstone Properties Inc.
Equity Activity Schedule
As of June 30, 1999
- --------------------------------------------------------------------------------
The following table shows the equity activity that has occurred since January 1,
1998 and the calculation of diluted Common shares and Units outstanding:
<TABLE>
<CAPTION>
Item Date Description Number of Shares/Units
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock
01/01/98 Beginning balance 83,191,819
01/05/98 Tower 56 residual value acquisition 307,692
02/02/98 Public secondary equity offering 14,375,000
02/17/98 Management stock grants 12,500
02/27/98 Dividend reinvestment 109,007
03/02/98 Management stock grants 19,178
04/28/98 One Memorial Drive acquisition 3,428,571
05/29/98 Dividend reinvestment 98,487
08/31/98 Dividend reinvestment 94,610
11/30/98 Dividend reinvestment 95,300
12/16/98 PGGM investment 11,594,203
12/16/98 Wilson Acquisition 14,884,417
05/12/99 Management option exercise 127,000
05/28/99 Dividend reinvestment 76,603
------------
128,414,387
------------
Outside Upreit Units
01/01/98 Beginning balance --
01/29/98 Corporate 500 Centre acquisition 822,794
04/28/98 One Memorial Drive acquisition 1,657,426
06/03/98 201 California Street and Wilshire Palisades acquisition 1,665,663
12/16/98 Wilson Acquisition 16,187,724
------------
20,333,607
------------
Dilutive Issues
Convertible Preferred Stock 3,030,303
Convertible Promissory Note 903,914
Dilutive effect of "in the money" options 132,664
------------
4,066,881
------------
------------
06/30/99 Total diluted common shares and units outstanding 152,814,875
============
Year to date weighted average diluted common
shares and units outstanding 152,660,745
============
Quarter to date weighted average diluted common
shares and units outstanding 152,698,711
============
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to
Quarterly Earnings Release
Minority Sharing in Cash Flows and
Residual Proceeds
<PAGE>
Minority Sharing in Cash Flows and Residual Proceeds
Seven 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 six months of 1999 were split 74.3% to
Cornerstone and 25.7% to S&M. Sales proceeds from Norwest Center will be split
as follows as of June 30, 1999:
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 23.0 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 $10.2 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 Partnership, Cornerstone's partner. The cumulative Preference Deficit earns
interest at a rate of 8% until it is repaid. 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 $157.2 million of proceeds
after repayment of the $79.1 million mortgage ($236.3 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 Street
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 ($161.8 million as of 6/30/99) has been reimbursed. Excess cash
flow will be split 80% to Cornerstone and 20% to CH Associates, Ltd. Sales
proceeds from 191 Peachtree Street will be split as follows as of June 30, 1999:
1) To Debt $ 1.8 million
2) To Cornerstone (as partial holder
of the debt) $157.8 million
3) To Cornerstone for its undistributed
preferred return $ 16.8 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.
One Post Street, San Francisco
Distributions of cash flows and sales proceeds are shared in proportion to
Cornerstone's 50.0% interest and McKesson Corporation's 50.0% interest. This
property is accounted for using the equity method of accounting.
120 Montgomery Street, San Francisco
Distributions of cash flows and sales proceeds are shared in proportion to
Cornerstone's 66.7% partnership interest and Sansome Partners III, L.P.'s 33.3%
partnership interest.
