<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-12861
------------------------
CORNERSTONE PROPERTIES INC.
(Exact name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
NEVADA 74-2170858
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation and organization)
</TABLE>
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
November 11, 1999: 129,599,703.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Developments in progress:
Land...................................................... $ 10,132 $ 10,437
Development costs......................................... 9,565 2,519
Rental Property, at cost:
Land...................................................... 652,036 702,840
Buildings, leasehold interests and improvements........... 3,091,308 3,403,152
Deferred lease costs...................................... 149,024 143,188
---------- ----------
3,912,065 4,262,136
Less: Accumulated depreciation and amortization........... 275,678 286,664
---------- ----------
Total Development and Rental Property................... 3,636,387 3,975,472
Assets held for sale........................................ 214,646 77,568
Cash and cash equivalents................................... 36,419 61,869
Restricted cash............................................. 78,430 9,114
Investment in joint ventures................................ 31,450 31,500
Other deferred costs, net of accumulated amortization of
$5,115 and $932........................................... 42,416 45,572
Deferred tenant receivables................................. 71,421 53,489
Tenant and other receivables, net........................... 18,963 10,326
Other assets................................................ 25,020 17,074
---------- ----------
TOTAL ASSETS................................................ $4,155,152 $4,281,984
========== ==========
LIABILITIES
Long-term debt, inclusive of $20,046 and $25,031 of
unamortized premium....................................... $1,501,971 $1,532,474
Credit facility............................................. 373,500 465,000
Accrued interest............................................ 11,044 10,933
Accrued real estate taxes................................... 25,635 16,395
Accounts payable and accrued expenses....................... 44,650 51,454
Distributions payable....................................... 44,619 38,163
Unearned revenue and other liabilities...................... 27,504 23,890
---------- ----------
TOTAL LIABILITIES........................................... 2,028,923 2,138,309
---------- ----------
MINORITY INTEREST
Minority interest in operating partnership.................. 264,082 283,388
Minority interest in joint ventures......................... 23,090 23,420
---------- ----------
TOTAL MINORITY INTEREST..................................... 287,172 306,808
---------- ----------
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;
129,610,536 shares issued and 129,599,703 shares
outstanding............................................... -- --
Paid-in capital............................................. 1,786,776 1,788,567
Accumulated other comprehensive income...................... 4,700 --
Deferred compensation....................................... (2,313) (1,700)
---------- ----------
1,839,163 1,836,867
Treasury stock, 10,833 shares, at cost...................... (106) --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY.................................. 1,839,057 1,836,867
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $4,155,152 $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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Office and parking rentals......................... $153,859 $83,227 $455,509 $239,767
Earnings in joint ventures......................... 304 3,856 686 10,150
Interest and other income.......................... 2,376 1,955 5,738 7,167
-------- ------- -------- --------
TOTAL REVENUES................................... 156,539 89,038 461,933 257,084
-------- ------- -------- --------
EXPENSES
Building operating expenses........................ 34,445 18,896 98,043 52,947
Real estate taxes.................................. 17,930 12,034 55,608 34,900
Interest expense................................... 35,126 16,057 104,199 47,724
Depreciation and amortization...................... 23,600 15,702 72,493 42,561
General and administrative......................... 7,225 3,169 19,796 8,713
-------- ------- -------- --------
TOTAL EXPENSES................................... 118,326 65,858 350,139 186,845
-------- ------- -------- --------
38,213 23,180 111,794 70,239
-------- ------- -------- --------
OTHER INCOME (EXPENSES)
Carrying value in excess of market value of assets
held for sale.................................... 2,461 -- (1,292) --
Gain (loss) on sale of real estate assets.......... 9,132 (127) 9,132 (2,324)
-------- ------- -------- --------
TOTAL OTHER INCOME (EXPENSES).................... 11,593 (127) 7,840 (2,324)
-------- ------- -------- --------
MINORITY INTEREST
Minority interest in operating partnership......... (6,318) (781) (14,655) (1,428)
Minority interest in joint ventures................ (1,221) (1,045) (3,955) (3,254)
-------- ------- -------- --------
TOTAL MINORITY INTEREST.......................... (7,539) (1,826) (18,610) (4,682)
-------- ------- -------- --------
Income before cumulative effect of a change in
accounting principle and extraordinary loss........ 42,267 21,227 101,024 63,233
-------- ------- -------- --------
Cumulative effect of a change in accounting
principle.......................................... -- -- (630) --
Extraordinary loss................................... -- (2,269) (3,355) (2,269)
-------- ------- -------- --------
NET INCOME........................................... $ 42,267 $18,958 $ 97,039 $ 60,964
======== ======= ======== ========
INCOME APPLICABLE TO PREFERRED STOCK................. $ (875) $ (875) $ (2,625) $ (2,625)
-------- ------- -------- --------
INCOME APPLICABLE TO COMMON STOCK.................... $ 41,392 $18,083 $ 94,414 $ 58,339
======== ======= ======== ========
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE AND EXTRAORDINARY LOSS PER
COMMON SHARE....................................... $ 0.32 $ 0.20 $ 0.76 $ 0.62
======== ======= ======== ========
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
AND EXTRAORDINARY LOSS PER COMMON SHARE............ $ -- $ (0.02) $ (0.03) $ (0.02)
======== ======= ======== ========
BASIC INCOME PER COMMON SHARE........................ $ 0.32 $ 0.18 $ 0.73 $ 0.59
======== ======= ======== ========
DILUTED INCOME PER COMMON SHARE...................... $ 0.32 $ 0.18 $ 0.73 $ 0.59
======== ======= ======== ========
</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 MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INCOME................................ $42,267 $18,958 $ 97,039 $60,964
======= ======= ======== =======
Other comprehensive income:
Unrealized gain on interest rate swaps
during the period..................... 433 -- 4,700 --
------- ------- -------- -------
Other comprehensive income.............. 433 -- 4,700 --
------- ------- -------- -------
COMPREHENSIVE INCOME...................... $42,700 $18,958 $101,739 $60,964
======= ======= ======== =======
</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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 97,039 $ 60,964
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 69,943 42,618
Deferred compensation amortization...................... 1,027 787
Net change in real estate joint ventures................ 50 5,001
Cumulative effect of a change in accounting principle... 630 --
Extraordinary loss...................................... 3,355 2,269
Unbilled rental revenue................................. (19,984) (9,332)
Increase in accrued interest............................ 111 3,127
Minority interest share of income....................... 18,610 4,682
Gain (loss) on sale of real estate assets............... (9,132) 2,324
Carrying value in excess of market value of assets held
for sale............................................... 1,292 --
Increase in tenant and other receivables and other
assets................................................. (10,299) (3,777)
Increase in accounts payable, accrued expenses and other
liabilities............................................ 9,869 8,123
-------- --------
Total adjustments....................................... 65,472 55,822
-------- --------
Net cash provided by operating activities............... 162,511 116,786
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property.......................... (58,242) (343,160)
Repayment of notes receivable............................. 134 1,124
Other investments......................................... (1,500) --
Investments in real estate joint ventures................. -- (7,134)
Proceeds from sale of real estate assets net of amounts in
escrow.................................................. 128,333 45,538
======== ========
Net cash provided by (used in) investing activities..... 68,725 (303,632)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock offering....................... -- 262,344
Borrowings under mortgage loans........................... 180,000 82,377
Borrowings under credit facility.......................... 73,000 221,500
Repayments under credit facility.......................... (164,500) (260,500)
Repayments under mortgage loans........................... (205,517) (2,502)
Proceeds from dividend reinvestment plan.................. 2,319 5,247
Debt prepayment costs..................................... (4,915) (1,762)
Increase in restricted cash............................... (566) (3,348)
Stock and debt issuance costs............................. (2,028) (15,610)
Option exercise........................................... 1,827 --
Unitholder redemptions.................................... (1,169) --
Distributions to minority partners........................ (19,989) (5,618)
Distributions to preferred stockholders................... (3,500) (3,500)
Distributions to common stockholders...................... (111,648) (85,946)
======== ========
Net cash (used in) provided by financing activities..... (256,686) 192,682
======== ========
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (25,450) 5,836
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 61,869 24,730
======== ========
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 36,419 $ 30,566
======== ========
</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
SEPTEMBER 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 88 Class A office
buildings comprising nearly 19 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 ten major metropolitan
areas throughout the United States: Atlanta, Boston, suburban Chicago, Denver,
Minneapolis, New York City, San Francisco Bay Area, Seattle, Southern California
and Washington, D.C. and surrounding suburbs. The Company's strategy is to own
and develop Class A office properties in six 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
September 30, 1999, Cornerstone owned, directly or indirectly, approximately
87.1% 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 nine month periods presented have been included.
Results for the three and nine months ended September 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"); 191 Finance Associates, L.P. ("191
Finance"); Avenue Associates Limited Partnership ("Market Square"); and 120
Montgomery Associates,
6
<PAGE>
LLC ("120 Montgomery"). The Company's investments in the One Post Property and
WCP Services, Inc. are accounted for as equity investments (see Note 4). All
significant intercompany balances and transactions have been eliminated in
consolidation.
ASSETS HELD FOR SALE
Included in Assets Held for Sale are eight properties, which are expected to
be sold by the Company within the next year. The Properties are valued at
approximately $214.6 million, the lower of the carrying amount or the fair value
less estimated costs to sell. For the nine months ended September 30, 1999, the
Company has recorded a $1.3 million write down on one of these assets, which
represents the difference between the carrying value of this asset and the
expected selling price less costs to sell. The Company discontinues the
recognition of depreciation and the straight-lining of rental income on the
assets when the property is considered held for sale.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
September 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
September 30, 1999 amounted to 12.9%. 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
September 30, 1999, the number of issued and outstanding UPREIT Units held by
unitholders other than the Company was 19,131,785 and as of such date, 1,125,175
UPREIT Units have been redeemed for shares of Common Stock on a one-for-one
basis and 76,647 UPREIT Units have been redeemed for cash.
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, 191 Finance,
7
<PAGE>
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
respective partnership and joint venture agreements. Realizability of the debit
balances is continually monitored by calculating pro forma sales proceeds under
the respective agreements.
TREASURY STOCK
As of September 30, 1999, the Company reacquired 10,833 shares of restricted
Common Stock, which was accounted for using the cost method.
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 in 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.
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 fair value of real estate held for sale, 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.
8
<PAGE>
2. PROPERTIES
The following table summarizes Cornerstone's interest in real estate
investments at September 30, 1999:
<TABLE>
<CAPTION>
MARKET NAME TOTAL RENTABLE CORNERSTONE YEAR
PROPERTY SQUARE FEET INTEREST (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................... 530,844 91.5% 1991 100% D
125 Summer Street..................... 463,691 100.0% 1989 97%
One Memorial Drive.................... 352,764 100.0% 1985 100% C
---------- ------
MARKET TOTAL.......................... 2,884,826 99%
SAN MATEO COUNTY, CALIFORNIA
Bayhill (4 buildings)................. 514,255 100.0% 1982-1987 99% E
Peninsula Office Park (7 buildings)... 492,044 100.0% 1971-1998 99% 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 96% E
1300 South El Camino.................. 84,441 100.0% 1986 98% E
66 Bovet.............................. 43,968 100.0% 1968 73% E,R
---------- ------
MARKET TOTAL.......................... 2,173,360 98%
EAST BAY, CALIFORNIA
Corporate Centre (2 buildings)........ 329,348 100.0% 1985-1987 97% E
ADP Plaza (2 buildings)............... 299,791 100.0% 1987-1989 99% E
PeopleSoft Plaza...................... 277,562 100.0% 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 98% E
Park Plaza............................ 87,040 100.0% 1986 100% E
1600 South Main....................... 83,277 100.0% 1983 100% E
---------- ------
MARKET TOTAL.......................... 1,601,332 99%
ATLANTA, GEORGIA
191 Peachtree Street.................. 1,215,288 80.0% 1991 97% D,F
200 Galleria.......................... 432,698 100.0% 1985 98% D
---------- ------
MARKET TOTAL.......................... 1,647,986 97%
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............... 100,009 100.0% 1987 93% E
---------- ------
MARKET TOTAL.......................... 1,469,741 99%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
MARKET NAME TOTAL RENTABLE CORNERSTONE YEAR
PROPERTY SQUARE FEET INTEREST (A) CONSTRUCTED OCCUPANCY NOTES
- ----------- -------------- ------------ ----------- --------- --------
<S> <C> <C> <C> <C> <C>
SANTA CLARA COUNTY, CALIFORNIA
Pruneyard Office (3 buildings)........ 355,015 100.0% 1971-1999 99% 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 N/A E,I
First American Plaza.................. 82,954 100.0% 1971 95% E
---------- ------
MARKET TOTAL.......................... 1,270,286 97%
DENVER, COLORADO
One Norwest Center.................... 1,187,852 100.0% 1983 98%
---------- ------
MARKET TOTAL.......................... 1,187,852 98%
SAN FRANCISCO, CALIFORNIA
120 Montgomery Street................. 418,751 66.7% 1955 97% 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 99%
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.................. 96,392 100.0% 1983 98% D
11 Canal Center....................... 70,365 100.0% 1986 96% D
---------- ------
MARKET TOTAL.......................... 993,411 98%
SUBURBAN CHICAGO, ILLINOIS
Corporate 500 Centre (4 buildings).... 679,039 100.0% 1986/1990 99% M
One Lincoln Centre.................... 297,040 100.0% 1986 90%
---------- ------
MARKET TOTAL.......................... 976,079 96%
SANTA MONICA/WEST LOS ANGELES,
CALIFORNIA
West Wilshire (2 buildings)........... 235,787 100.0% 1960-1976 98% 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 100% E
Commerce Park......................... 94,367 100.0% 1977 79% E,O
429 Santa Monica...................... 82,119 100.0% 1982 80% E
---------- ------
MARKET TOTAL.......................... 846,988 95%
ORANGE COUNTY, CALIFORNIA
Bixby Ranch........................... 277,289 100.0% 1987 97% E
18301 Von Karman...................... 219,508 100.0% 1991 89% E
2677 North Main....................... 213,318 100.0% 1987 92% E
---------- ------
MARKET TOTAL.......................... 710,115 93%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
MARKET NAME TOTAL RENTABLE CORNERSTONE YEAR
PROPERTY SQUARE FEET INTEREST (A) CONSTRUCTED OCCUPANCY NOTES
- ----------- -------------- ------------ ----------- --------- --------
<S> <C> <C> <C> <C> <C>
SAN DIEGO, CALIFORNIA
Centerside II......................... 286,949 100.0% 1987 94% E
Crossroads............................ 133,553 100.0% 1983 100% E
---------- ------
MARKET TOTAL.......................... 420,502 96%
LOS ANGELES, CALIFORNIA
700 North Brand....................... 202,531 100.0% 1981 94% E
Warner Park Center.................... 57,366 100.0% 1986 100% E
---------- ------
MARKET TOTAL.......................... 259,897 95%
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 95% E
---------- ------
MARKET TOTAL.......................... 234,255 91%
OTHER REGIONS
U.S. West (Murray, Utah).............. 136,608 100.0% 1985 83% E
Exposition Centre (Sacramento,
California)......................... 72,971 100.0% 1984 70% E
---------- ------
MARKET TOTAL.......................... 209,579 78%
---------- ------
TOTAL PORTFOLIO....................... 19,514,832 98%
Minority Interest Adjustment (Q)...... (693,796)
---------- ------
CORNERSTONE PORTFOLIO................. 18,821,036 98%
Adjustment For Pruneyard Inn.......... (94,500)
----------
CORNERSTONE OFFICE PORTFOLIO.......... 18,726,536
==========
</TABLE>
- ------------------------
(A) Unless noted below, cash flow and residual proceeds will be distributed
to Cornerstone according to its percentage interest.
(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
11
<PAGE>
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. The Company has since
sold the asset in Charlotte, as well as the undeveloped parcel of land in
Chicago.
(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 has since sold seven assets comprising of approximately
823,000 square feet.
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 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 nine months ended September 30, 1999, the
12
<PAGE>
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 nine months ended September 30, 1999, the Company's share
of earnings and cash distributions from the partnership that owns Norwest
Center was 77.2%.
(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
nine months ended September 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.
(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 inures to the Company.
13
<PAGE>
(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.
(R) On October 1, 1999, the Company sold 66 Bovet for gross proceeds of
$9,230,000.
During the third quarter of 1999, the Company sold eight properties for
gross proceeds of $201,725,000 resulting in a net gain of $9,131,980.
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. RESTRICTED CASH
Restricted cash includes 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.
The proceeds from the sales of three properties during 1999 totaling
approximately $68.7 million, are included in restricted cash pursuant to the
terms of Section 1031 of the Internal Revenue Code of 1986, as amended,
"Exchange of property held for productive use or investment."
4. 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 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>
5. LONG-TERM DEBT
The following table sets forth certain information regarding the
consolidated debt obligations of the Company as of September 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 9/30/99 12/31/98
- -------- ----------------- ----------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FIXED RATE
TransPotomac Plaza 5 (B).... Interest Only 7.28% Oct-2000 $ 65,000 $ 65,000
West Wilshire Office and
Medical................... 25 year 6.90% Jan-2002 17,023 17,301
Searise Office Tower........ 25 year 6.90% Jan-2002 11,673 11,864
Exposition Centre........... 25 year 6.90% May-2002 5,113 5,200
Wilshire Palisades.......... 22 year 6.70% Jul-2002 29,264 29,902
1300 South El Camino........ 23 year 6.90% Dec-2002 3,927 4,007
125 Summer Street (C)....... Interest only (D) 7.20% Jan-2003 50,000 50,000
Tower 56 (C)................ 30 year 7.67% May-2003 17,417 17,548
Peninsula Office Park 4
(C)....................... 25 year 6.90% Feb-2004 5,352 5,436
Peninsula Office Park
1,3,5,6,8 & 9 (C)......... 25 year 6.90% Feb-2004 55,479 54,806
110 Atrium Place............ 30 year 6.90% Mar-2004 21,604 21,838
10 Almaden (C).............. 25 year 6.90% Apr-2004 33,385 33,885
Embarcadero Place (C)....... 20 year 6.90% Apr-2004 25,488 26,061
527 Madison Avenue and One
Lincoln Centre (B)........ Interest only 7.47% Oct-2004 65,000 65,000
Sixty State Street.......... 30 year 6.84% Jan-2005 85,971 87,627
201 California Street (C)... 30 year 6.70% Mar-2005 32,767 33,071
Island Corporate Center..... 30 year 6.90% Apr-2005 13,205 13,294
Washington Mutual Tower..... Interest only 7.53% Nov-2005 79,100 79,100
Norwest Center.............. Interest only 8.74% Dec-2005 110,000 110,000
Agoura Hills................ 25 year 6.90% Dec-2005 12,109 12,328
Janss Court................. 30 year 6.90% Dec-2005 18,451 18,723
Bayhill 4,5,6 & 7........... 25 year 6.90% Dec-2006 58,100 59,071
66 Bovet.................... 22 year 6.90% Apr-2007 3,863 3,939
Market Square (E) and 200
Galleria (B).............. Interest only 7.54% Oct-2007 120,000 120,000
One Norwest Center.......... 30 year 6.90% Oct-2008 97,567 98,252
Corporate 500 Centre........ 25 year 6.66% Nov-2008 88,798 89,765
188 Embarcadero (F)......... 25 year 7.26% Aug-2009 15,663 9,135
Centerside II (F)........... 25 year 7.26% Aug-2009 24,342 13,818
700 North Brand (F)......... 25 year 7.26% Aug-2009 27,036 18,108
Golden Bear Center (F)...... 25 year 7.26% Aug-2009 20,551 15,753
Bixby Ranch (F)............. 25 year 7.26% Aug-2009 28,632 20,243
One Memorial Drive (F)...... 25 year 7.26% Aug-2009 63,349 0
---------- ----------
Total Fixed Rate Debt..... 7.24%(G) 6.4 yrs(G) 1,305,229 1,210,075
---------- ----------
VARIABLE RATE
Seaport Centre.............. Interest only LIBOR plus 1.50% Dec-1999 58,000 58,000
The Pruneyard............... 24 year LIBOR plus 2.00% Mar-2000 61,022 49,384
Convertible Promissory Note
due 2001 (H).............. Interest only 8.11%max (I) Jan-2001 12,926 12,926
120 Montgomery Street....... 24 year LIBOR plus 1.40% Nov-2002 48,315 46,930
Norris Tech Center.......... 25 year LIBOR plus 1.65% Dec-2003 16,162 16,392
Other loans................. Various Various Various 317 597
---------- ----------
Total Variable Rate
Debt.................... 6.97%(G) 1.4 yrs(G) 196,742 184,229
---------- ----------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PROPERTY AMORTIZATION INTEREST RATE (A) MATURITY DATE 9/30/99 12/31/98
- -------- ----------------- ----------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REPAID DEBT
18301 Von Karman (J)........ -- -- -- $ -- $ 10,647
1600 South Main (J)......... -- -- -- -- 5,038
Biltmore Lakes (J).......... -- -- -- -- 11,468
Belmont Shores (J).......... -- -- -- -- 9,839
2677 North Main (J)......... -- -- -- -- 10,774
2700 Ygnacio Valley Road
(J)....................... -- -- -- -- 5,035
Westlake Spectrum (J)....... -- -- -- -- 3,993
Park Plaza (J).............. -- -- -- -- 4,940
Warner Park Center (J)...... -- -- -- -- 5,213
429 Santa Monica (J)........ -- -- -- -- 10,176
Crossroads (J).............. -- -- -- -- 7,339
Westlake Spectrum II (J).... -- -- -- -- 5,284
Two ADP Plaza (K)........... -- -- -- -- 13,400
Two Corporate Centre (K).... -- -- -- -- 18,600
One & Two Gateway (L)....... -- -- -- -- 8,679
Scottsdale Gateway (L)...... -- -- -- -- 7,745
---------- ----------
Total Repaid Debt......... -- 138,170
---------- ----------
Total Debt.................. 7.21%(G) 5.7 yrs(G) $1,501,971 $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) During October 1999 the Company restructured approximately
$219.9 million of individual property related debt with Northwestern
Mutual Life Insurance Company. The restructuring involved retiring the
individual property related debt and creating a single $275.0 million
loan which is cross-collateralized by six of the original seven
properties. The loan has a ten year term and bears interest at 7.23%.
Upon closing the loan, the lien on 10 Almaden was released and the
property was added to Cornerstone's unencumbered pool.
(D) Interest only payments through January 1, 2001, with a 25-year
amortization schedule thereafter. This note was restructured as part of
the Northwestern Mutual Life Insurance Company restructuring, see
note (C) above.
(E) 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.
(F) The six notes arising from the restructuring of certain debt with
Prudential Insurance Company of America and Northwestern Mutual Life
Insurance Company are cross-collateralized, having the effect of forming
a "collateral pool" for the underlying notes.
(G) Weighted-average interest rate and maturity of the Company's long-term
debt.
(H) 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.
(I) Lesser of 30-day LIBOR plus 0.5% or 8.11%.
(J) These 12 notes were prepaid as part of the Prudential Insurance Company
of America and Northwestern Mutual Life Insurance Company restructuring,
see note (F) above. All the notes had a mark to market interest rate of
6.9% and maturity dates ranging from April 2000 to March 2003.
(K) On January 4, 1999, in connection with the Wilson Acquisition, the
Company prepaid the notes on Two ADP Plaza and Two Corporate Centre.
(L) These two notes were prepaid on September 15, 1999, in conjunction with
the sale of these properties.
The combined aggregate amount of maturities for all long-term borrowings for
1999 through 2003 are $58,000,000, $126,022,000, $12,926,000, $115,315,000 and
$83,579,000, respectively.
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.
16
<PAGE>
6. 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 1.40%
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 September 30, 1999,
$373.5 million of the facility was outstanding at a rate of approximately 6.8%.
Of this amount, approximately $250.0 million is fixed with interest rate swaps,
which effectively fix the rate at 6.47%. In addition, at September 30, 1999, a
letter of credit with Summit Bank in the amount of $5.5 million was 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.
7. 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 adverse 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 September 30, 1999, approximately $81.9 million has been
spent on the construction. The project is scheduled to be completed in the year
2000 and is approximately 75.0% 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.
8. 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.
17
<PAGE>
The following tables summarize the stock options and restricted stock grants
for certain employees of the Company as of September 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 $14.30 33.3%/yr, 10yr term 75,000 0 562,500
October, 1995........... 150,000 $14.30 33.3%/yr, 10yr term 10,500 0 139,500
March, 1997............. 880,000 $14.50 33.3%/yr, 10yr term 52,000 0 534,666
November, 1997.......... 70,000 $18.44 33.3%/yr, 10yr term 0 0 23,333
February, 1998.......... 70,000 $18.13 33.3%/yr, 10yr term 0 46,667 23,333
February, 1998.......... 595,000 $18.25 33.3%/yr, 10yr term 0 26,668 198,333
March, 1998............. 200,000 $18.25 33.3%/yr, 10yr term 0 133,334 66,666
December, 1998.......... 3,000,000 $17.25 33.3%/yr, 10yr term 0 34,433 0
January, 1999........... 20,000 $17.25 33.3%/yr, 10yr term 0 0 0
February, 1999.......... 10,000 $17.25 33.3%/yr, 10yr term 0 0 0
June, 1999.............. 10,000 $17.25 33.3%/yr, 10yr term 0 0 0
</TABLE>
RESTRICTED STOCK GRANTS
<TABLE>
<CAPTION>
VALUE AT GRANT SHARES INITIALLY SHARES FORFEITED SHARES OUTSTANDING SHARES VESTED
DATE OF GRANT DATE (PER SHARE) GRANTED (NO. OF SHARES) (NO. OF SHARES) (NO. OF SHARES) (NO. OF SHARES)
- ------------- ---------------- ----------------------- ---------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
August, 1995......... $14.30 186,713 19,091 167,622 80,487
March, 1997.......... $16.40 100,000 0 100,000 26,666
November, 1997....... $18.44 12,500 0 12,500 3,333
March, 1998.......... $18.13 12,500 10,833 1,667 1,667
March, 1998.......... $18.25 19,178 0 19,178 2,557
February, 1999....... $15.50 113,500 1,000 112,500 1,400
<CAPTION>
VESTING (A)
DATE OF GRANT SEE NOTES
- ------------- -----------
<S> <C>
August, 1995......... (B)
March, 1997.......... (C)
November, 1997....... (D)
March, 1998.......... (E)
March, 1998.......... (F)
February, 1999....... (G)
</TABLE>
- ------------------------
(A) Deferred compensation of approximately $6,100,000 is being amortized
according to the respective amortization schedule for each vesting period
noted below, with the unamortized balance shown as a deduction from
stockholders' equity. Regular distributions are paid on restricted stock.
(B) 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.
(C) 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.
(D) 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.
(E) 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.
(F) The initial grant was to vest with respect to 13.333% on March 15, 1999,
2000, 2001, 2002 and with respect to 46.668% on March 15, 2003. Pursuant
to the terms of a separation agreement, the vesting with respect to
16,621 shares will be accelerated to fully vest on December 31, 1999.
18
<PAGE>
(G) The grant will fully vest on February 1, 2004. Pursuant to the terms of
certain separation agreements, the vesting with respect to 1,400 shares
was accelerated to fully vest on July 1, 1999.
9. STOCKHOLDERS' AND UNITHOLDERS' DISTRIBUTIONS
A distribution of $0.30 per share/unit was declared for the third quarter of
1999 and paid on August 31, 1999, to Common 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.
On September 28, 1999, the Company declared a distribution for the fourth
quarter, payable on November 30, 1999, of $0.30 per share/unit to all Common
Stockholders and Unitholders of record as of October 29, 1999.
10. NET INCOME PER COMMON SHARE
The table below sets forth the calculation of net income per common share
for the three and nine months ended September 30, 1999 and 1998 (Dollar amounts
in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 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................... $ -- $ 15.47 $ -- $ 15.91
Treasury shares that could be repurchased (options)... -- 1,425 -- 2,573
Option shares outstanding............................. -- 1,530 -- 2,592
Weighted common stock equivalent shares (excess shares
under option over Treasury shares that could be
repurchased)........................................ -- 105 -- 157
Convertible preferred stock........................... -- 3,030
Convertible debt shares............................... -- 904 -- --
Weighted average common shares outstanding............ 129,179 129,179 101,574 101,574
-------- ------- -------- -------
Adjusted weighted average common shares outstanding... 129,179 133,218 101,574 101,731
Net income for the period............................. $ 42,267 $42,267 $ 18,958 $18,958
Interest on convertible debt.......................... $ -- $ 182 $ -- $ --
Income applicable to Preferred stock.................. $ (875) $ -- $ (875) $ (875)
-------- ------- -------- -------
Net income applicable to Common shares................ $ 41,392 $42,449 $ 18,083 $18,083
Income per common share............................... $ 0.32 $ 0.32 $ 0.18 $ 0.18
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------------
SEPTEMBER 30, 1999 SEPTEMBER 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.................... $ -- $ 15.59 $ -- $ 17.29
Treasury shares that could be repurchased (options).... -- 1,414 -- 2,368
Option shares outstanding.............................. -- 1,530 -- 2,592
Weighted common stock equivalent shares (excess shares
under option over Treasury shares that could be
repurchased)......................................... -- 116 -- 276
Convertible debt shares................................ -- 904 -- --
Weighted average common shares outstanding............. 128,570 128,570 98,312 98,312
-------- ------- ------- -------
Adjusted weighted average common shares outstanding.... 128,570 129,590 98,312 98,588
Net income for the period.............................. $ 97,039 $97,039 $60,964 $60,964
Interest on convertible debt........................... $ -- $ 558 $ -- $ --
Income applicable to Preferred stock................... $ (2,625) $(2,625) $(2,625) $(2,625)
-------- ------- ------- -------
Net income applicable to Common shares................. $ 94,414 $94,972 $58,339 $58,339
Income per common share................................ $ 0.73 $ 0.73 $ 0.59 $ 0.59
</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 nine month periods. The conversion of the 7% Cumulative
Preferred Stock issued in August 1995 was not included in the calculation of
diluted earnings per share for the nine months as such instruments were
anti-dilutive during the period. 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. As of September 30, 1999,
1,125,175 UPREIT Units have been redeemed for shares of Common Stock on a
one-for-one basis and 76,647 UPREIT Units have been redeemed for cash.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was approximately $107,620,000 and $46,481,000 for
the nine months ended September 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
20
<PAGE>
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.
On September 25, 1998, in conjunction with the refinancing of the One
Norwest Center mortgage, the Company incurred an extraordinary loss of $507,022,
which represented the unamortized deferred financing costs on the previous One
Norwest Center mortgage at the time of the refinancing.
During the first quarter of 1999, pursuant to the requirements of SOP 98-5
(as defined in Note 1), the Company wrote off all unamortized organizational
costs and recorded a cumulative effect of a change in accounting principle of
$630,044.
On February 1, 1999, the Company issued 113,500 shares of restricted stock
valued at $15.50 per share to certain employees of the Company. Refer to Note 8
for the vesting of this grant.
On June 23, 1999, in conjunction with the restructuring of property-related
debt with Prudential Insurance Company 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.
On July 1, 1999, 1,000 shares of restricted Common Stock issued to certain
employees of the Company were forfeited as a result of their separation from the
Company.
On July 30, 1999, 562,588 UPREIT Units were redeemed for shares of Common
Stock on a one-for-one basis.
On August 3, 1999, 562,587 UPREIT Units were redeemed for shares of Common
Stock on a one-for-one basis.
On August 17, 1999, the Company reacquired 10,833 shares of restricted
Common Stock as a result of the forfeiture of these shares by a certain employee
of the Company.
For the nine months ended September 30, 1999, the Company has recorded a
$1.3 million write-down on one of the assets held for sale which represents the
difference between the carrying value of this asset and the expected selling
price less costs to sell.
12. 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 nine months ended September 30, 1999 and
21
<PAGE>
1998 and selected asset information as of September 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:
September 30, 1999..................................... $ 154,918 $ 1,621 $ 156,539
September 30, 1998..................................... 82,021 7,017 89,038
Nine months ended:
September 30, 1999..................................... 458,832 3,101 461,933
September 30, 1998..................................... 237,647 19,437 257,084
TOTAL OPERATING AND INTEREST EXPENSE (C):
Three months ended:
September 30, 1999..................................... $ 51,973 $ 42,753 $ 94,726
September 30, 1998..................................... 30,927 19,229 50,156
Nine months ended:
September 30, 1999..................................... 156,419 121,227 277,646
September 30, 1998..................................... 87,844 56,440 144,284
NET OPERATING INCOME (D):
Three months ended:
September 30, 1999..................................... $ 102,945 $ (41,132) $ 61,813
September 30, 1998..................................... 51,094 (12,212) 38,882
Nine months ended:
September 30, 1999..................................... 302,413 (118,126) 184,287
September 30, 1998..................................... 149,803 (37,003) 112,800
TOTAL LONG-LIVED ASSETS (E):
September 30, 1999..................................... $3,798,301 $ 79,453 $3,877,754
December 31, 1998...................................... 4,137,302 54,782 4,192,084
TOTAL ASSETS:
September 30, 1999..................................... $3,938,787 $ 216,365 $4,155,152
December 31, 1998...................................... 4,198,099 83,885 4,281,984
</TABLE>
22
<PAGE>
- ------------------------
(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.
(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 $23,600,000 and $15,702,000 and
$72,493,000 and $42,561,000 for the three and nine months ended
September 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, investments in
joint ventures, other deferred costs, deferred tenant receivables and
certain other assets.
23
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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,
including the risks discussed under the caption "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, 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 81 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 nine months ended September 30, 1999
and 1998, property results can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Office and Parking Rentals................ $153,859 $ 83,227 $455,509 $239,767
Less:
Building Operating Expenses............. 34,445 18,896 98,043 52,947
Real Estate Taxes....................... 17,930 12,034 55,608 34,900
Depreciation and Amortization........... 23,600 15,702 72,493 42,561
-------- -------- -------- --------
Total Operating Expenses.................. 75,975 46,632 226,144 130,408
-------- -------- -------- --------
Total Property Income..................... $ 77,884 $ 36,595 $229,365 $109,359
======== ======== ======== ========
</TABLE>
The increase in property income of $41.3 million for the three months ended
September 30, 1999 as compared to the same period in 1998 was due to
$31.6 million derived from the interests in 69 properties acquired as part of
the Wilson Acquisition on December 16, 1998; $4.3 million from Market Square,
which
24
<PAGE>
was consolidated starting November 1998; $5.4 million related to the properties
held during both periods resulting primarily from increased leasing activity,
increased rental rates and a reduction in depreciation due to fully depreciated
leasing costs as well as the discontinued recording of depreciation on
properties held for sale.
The increase in property income of $120.0 million for the nine months ended
September 30, 1999 as compared to the same period in 1998 was due to
$92.0 million derived from the interests in 69 properties acquired as part of
the Wilson Acquisition on December 16, 1998; $12.3 million from Market Square,
which was consolidated starting November 1998; $6.4 million from three
properties acquired in the second quarter of 1998 (Wilshire Palisades,
$2.3 million; One Memorial Drive, $2.6 million; and 201 California Street,
$1.5 million); $9.3 million related to the properties held during both periods
resulting primarily from increased leasing activity, increased rental rates and
a reduction in depreciation due to fully depreciated leasing costs as well as
the discontinued recording of depreciation on properties held for sale.
EARNINGS IN JOINT VENTURES.
The earnings in joint ventures of $0.3 million and $0.7 million for the
three and nine months ended September 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 earnings in joint ventures of $3.9 million and $10.2 million for the
three and nine months ended September 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 increased to approximately $2.4 million for the
three months ended September 30, 1999 from approximately $2.0 million for the
three months ended September 30, 1998. The increase was due to a $0.6 million
increase in management fee income, a $0.5 million increase in other income and a
$0.3 million increase in interest earned from short-term investments. These
increases were offset by a $0.8 million decrease in tenant alteration income and
a $0.2 million dollar decrease in lease cancellation income.
Interest and other income decreased to approximately $5.7 million for the
nine months ended September 30, 1999 from approximately $7.2 million for the
nine months ended September 30, 1998. The decrease was due to a $1.8 million
decrease in interest income from the mortgage loan and "buffer loan" on Market
Square, a $2.0 million decrease in tenant alteration income and a $0.2 million
decrease in lease cancellation income. These decreases were offset by a
$1.4 million increase in other income, a $0.8 million increase in management fee
income and a $0.3 million increase in interest earned from short-term
investments.
INTEREST EXPENSE.
Interest expense incurred by Cornerstone was $35.1 million and
$16.1 million for the three months ended September 30, 1999 and 1998,
respectively. The increase in interest expense was due to an increase of
$10.5 million from the property mortgages assumed as part of the Wilson
Acquisition; an increase of $7.0 million on the Revolving Credit Facility due to
increased borrowings; and an increase of $1.2 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 September 30, 1998; adding to the
increase was an increase of $0.1 in amortization of deferred financing costs; an
increase of $0.1 million on the Corporate 500 Centre loan due to the
25
<PAGE>
$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 on the 201
California Street loan.
Interest expense incurred by Cornerstone was $104.2 million and
$47.7 million for the nine months ended September 30, 1999 and 1998,
respectively. The increase in interest expense was due to an increase of
$32.1 million from the property mortgages assumed as part of the Wilson
Acquisition; an increase of $20.3 million on the Revolving Credit Facility due
to increased borrowings; a $1.3 million increase in interest expense related to
One Memorial Drive (as explained above); an increase of $0.8 million on the
Corporate 500 Centre loan due mainly to the Property being acquired on
January 28, 1998; an increase of $1.7 million on the 201 California Street and
Wilshire Palisades loans due to these properties being acquired on June 3, 1998;
an increase of $0.4 in the amortization of deferred financing costs; and an
increase of $0.2 million on the DIHC Portfolio loans due to the sale of the
Dearborn land in March 1998. These increases were offset by a $0.2 million
decrease in interest on the One Norwest Center loan due to the refinancing of
this loan in September 1998 and a $0.1 million decrease in interest on the Sixty
State Street loan.
GENERAL AND ADMINISTRATIVE.
The aggregate amount of Cornerstone's general and administrative expenses
increased to $7.2 million for the three months ended September 30, 1999 from
$3.2 million for the three months ended September 30, 1998. The increase in 1999
from 1998 of $4.0 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 $19.8 million for the nine months ended September 30, 1999 from
$8.7 million for the nine months ended September 30, 1998. The increase in 1999
from 1998 of $11.1 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 recorded a $2.5 million adjustment in carrying value in
excess of market value for the three months ended September 30, 1999 due to the
recognition of loss on the sale of three of the four sale properties which
accounted for the $3.7 million write down as of June 30, 1999.
The Company has eight properties held for sale as of September 30, 1999
which are valued at approximately $214.6 million, the lower of the carrying
amount or the fair value less estimated cost to sell. The Company has recorded a
$1.3 million write down on one of these assets which represents the difference
between the carrying value of this asset and the expected selling price less
costs to sell.
GAIN (LOSS) ON SALE OF REAL ESTATE ASSETS.
During the third quarter of 1999, the Company sold eight properties for
gross proceeds of approximately $201.7 million, resulting in a net gain of
$9.1 million.
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 $2.1 million.
26
<PAGE>
MINORITY INTEREST IN OPERATING PARTNERSHIP.
The minority interest in operating partnership increased to $6.3 million for
the three months ended September 30, 1999 from $0.8 million for the three months
ended September 30, 1998 due to the minority unitholder's share of the
partnership increasing from 3.9% to 12.9%.
The minority interest in operating partnership increased to $14.7 million
for the nine months ended September 30, 1999 from $1.4 million for the nine
months ended September 30, 1998 due to the minority unitholder's share of the
partnership increasing from 3.9% to 12.9%.
MINORITY INTEREST IN JOINT VENTURES.
The minority interest in joint ventures increased to $1.2 million for the
three months ended September 30, 1999 from $1.0 million for the three months
ended September 30, 1998 due to the increased income at the joint venture
properties which effects the allocation of minority interest to the Company's
joint venture partners.
The minority interest in joint ventures increased to $3.9 million for the
nine months ended September 30, 1999 from $3.2 million for the nine months ended
September 30, 1998 due to the increased income at the joint venture properties
which effects the allocation of minority interest to the Company's joint venture
partners.
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 NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
CASH FLOW PROVIDED BY (USED IN): SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
- -------------------------------- ------------------------- -------------------------
<S> <C> <C>
Operating activities............................. $ 162,511 $ 116,786
Investing activities............................. 68,725 (303,632)
Financing activities............................. (256,686) 192,682
Earnings to fixed charges ratio.................. 1.86 2.16
</TABLE>
Cash provided by operating activities increased to approximately $162.5
million for the nine months ended September 30, 1999 from $116.8 million for the
nine months ended September 30, 1998. The increase is primarily due to the cash
flows from the interests in 69 properties acquired since the end of the third
quarter of 1998.
Cash provided by investing activities was approximately $68.7 million for
the nine months ended September 30, 1999 whereas $303.6 million was used for the
nine months ended September 30, 1998. The net increase in cash provided by
investing activities of $372.3 million is primarily due to the following:
27
<PAGE>
during the nine months ended September 30, 1998 the Company purchased 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, incurred
$141.0 million in deferred cost as well as $15.5 million in other additions
whereas the Company incurred $58.2 million in additions to existing properties
for the same period in 1999; and during the nine months ended September 30,
1999, the Company sold eight properties for proceeds net of escrow amounts of
$128.3 million whereas the Company sold two real estate investments for proceeds
of $45.5 million during the same period in 1998. Further adding to the increase
was the net change in the investment in Market Square of approximately
$7.1 million during 1998. These amounts were offset by a decrease of $1.0 in the
repayment of a notes receivable from a related party (the note was paid off in
January 1999) and an addition in other investments of $1.5 million made during
1999.
Cash used in financing activities was $256.7 million during the nine months
ended September 30, 1999, whereas $192.7 million of cash was provided by
financing activities for the nine months ended September 30, 1998. The net
increase in cash used in financing activities of $449.4 million is due to the
following: in the first quarter of 1998, the Company's secondary offering
provided net cash of $262.3 million; mortgage loan repayments increased by
$203.0 million; credit facility borrowings decreased by $148.5 million; an
increase of $3.1 million in debt prepayment costs; a decrease of $2.9 million in
proceeds from the dividend reinvestment plan; an increase of $1.2 million in
unitholder redemption; an increase of $14.4 million in distributions to minority
partners; and an increase of $25.7 million in distributions to common
stockholders. These increases in the use of cash were offset by an increase in
mortgage loan borrowings of $97.6 million; a decrease in credit facility
repayments of $96.0 million; a decrease of $2.7 million in restricted cash; a
decrease in stock and debt issuance costs of $13.6 million; and an increase from
proceeds received from options exercised of $1.8 million.
The ratio of earnings to fixed charges and dividends on preferred stock
decreased to 1.86 at September 30, 1999 from 2.16 at September 30, 1998 due
mainly 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.
Included in FFO for the three months ended September 30, 1999 and 1998 is
approximately $6,266,000 and $3,483,000, respectively, for free and deferred
rental income (after adjustment for minority interest). Included in FFO for the
nine months ended September 30, 1999 and 1998 is an increase of approximately
$19,738,000 and $10,392,000, respectively, for free and deferred rental income
(after adjustment for minority interest).
28
<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 nine-month periods
ended September 30, 1999 and 1998, respectively (in thousands):
FUNDS FROM OPERATIONS (1)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net income................. $42,267 $18,958 $ 97,039 $ 60,964
NAREIT adjustments:
Depreciation and
amortization(2)........ 23,600 15,702 72,493 42,561
Minority adjustments..... (562) (407) (1,927) (1,415)
Unconsolidated
depreciation(3)........ 376 1,380 1,123 3,554
Cumulative effect of a
change in accounting
principle.............. -- -- 630 --
Impairment costs......... (2,461) -- 1,292 --
(Gain) loss on sale of
assets................. (9,132) 127 (9,132) 2,324
Extraordinary losses..... -- 2,269 3,355 2,269
Other adjustments:
Amortization on rent
notes.................. -- 387 -- 1,133
Severance payments....... -- -- 247 --
Minority interest
allocated to
unitholders............ 6,318 780 14,655 1,426
------- ------- -------- --------
FUNDS FROM OPERATIONS...... 60,406 39,196 179,775 112,816
Interest expense on
convertible note......... 181 200 557 604
------- ------- -------- --------
FUNDS FROM OPERATIONS
(ADJUSTED FOR CONVERTIBLE
DEBT).................... $60,587 $39,396 $180,332 $113,420
======= ======= ======== ========
</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 nine months ended
September 30, 1999, depreciation and amortization includes $995,000 and
$2,969,000, respectively, of amortization relating to the intangible
management and development company assets purchased as part of the Wilson
Acquisition.
(3) For the three and nine months ended September 30, 1999, the unconsolidated
depreciation adjustment includes $170,000 and $508,000, 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 nine month periods ending
September 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
29
<PAGE>
Wilson Acquisition and the acquisition of three additional properties (One
Memorial Drive, 201 California Street and Wilshire Palisades) during 1998.
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.
On July 30, 1999, through the redemption of UPREIT Units on a one-for-one
basis, the Company issued an additional 562,588 shares of Common Stock.
On August 3, 1999, through the redemption of UPREIT Units on a one-for-one
basis, the Company issued an additional 562,587 shares of Common Stock.
On August 17, 1999, the Company reacquired 10,833 shares of restricted
Common Stock as a result of the forfeiture of these shares by a certain employee
of the Company.
On August 31, 1999, through a dividend reinvestment plan, the Company
received proceeds of approximately $1.1 million and issued an additional 70,974
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.
On October 6, 1999, the Company restructured approximately $219.9 million of
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 was cross-collateralized by
six of the original seven properties. The loan has a ten-year term and bears
interest at 7.23%. Upon closing the loan, the lien on 10 Almaden was released
and the property was added to Cornerstone's unencumbered pool.
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 1.40% 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 September 30, 1999,
$373.5 million of the facility was outstanding at a rate of approximately 6.8%.
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 September 30, 1999, there was a
letter of credit totaling $5.5 million 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.
30
<PAGE>
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).
The Company paid distributions of $0.30 per share/unit to all stockholders and
unitholders on August 31, 1999 (to stockholders and unitholders of record as of
July 30, 1999). On September 28, 1999, the Company declared a distribution for
the fourth quarter, payable on November 30, 1999, of $0.30 per share/unit to all
Common Stockholders and Unitholders of record as of October 29, 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.
At the present time, the Company is current in the payment of all preferred
dividends.
LIQUIDITY
At September 30, 1999, the Company had approximately $36.4 million in cash
and cash equivalents and approximately $78.4 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. Restricted cash also includes the proceeds from the sale
of three properties during 1999 totaling approximately $68.7 million which are
restricted pursuant to the terms of Section 1031 of the Internal Revenue Code of
1986, as amended, "Exchange of property held for productive use or investment."
Cornerstone also had $176.5 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.
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 including earthquake insurance where
necessary. 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
31
<PAGE>
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 data involving date after
December 31, 1999. This could result in a system failure or miscalculations
causing disruptions of operations. 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. 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 two sections of the plan, Home Office and Properties, are
complete. Section three of the plan, External Agents, is complete, but we will
continue to monitor our External Agents' Year 2000 readiness. We believe we will
experience no material adverse effects as a result of Year 2000. However, as
discussed below there are certain risks related particularly to External Agents.
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, immaterial internal staff costs and other expenses
such as telephone and mailing costs. The information and real estate operating
systems that were identified as non-compliant are at or approaching the end of
their useful lives and were replaced or upgraded as a part of the normal
operations of the Company.
RISKS
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. External Agents having a material relationship with the Company
(e.g., property managers, utilities, financial institutions, governmental
agencies, municipalities
32
<PAGE>
and major tenants) are a potential risk based on their individual Year 2000
preparedness, which may not be within the Company's reasonable control.
We are not aware of any matters with regard to External Agents which could
give rise to a material default. However, non-compliance of External Agents
including major tenants could have a material adverse impact on the Company's
business, operating results and financial condition.
CONTINGENCY PLANS
The Company developed contingency plans to address any unexpected Year 2000
non-compliance. The contingency plans primarily relate to real estate operating
systems and providing continuous service to tenants. Plans include providing
on-site management and engineering staff continuously from December 31, 1999
through the first days of 2000. This on-site staff will address any unexpected
issues by manually operating real estate operating systems.
Even with contingency planning, the Company cannot guarantee an
uncontrollable event such as a utility company outage, will not occur. In the
event of a utility company outage all buildings (including ours) will experience
the effects one way or another. In addition, the Company is aware of the view
that the Year 2000 problem, if not adequately corrected, may cause a global
economic crisis. We believe that such an event is unlikely, but an occurrence
might have a material adverse impact on our operations. We cannot quantify the
financial impact of such a scenario.
YEAR 2000 COMPLIANCE DETAIL
Home Office
I. Inventory of all systems: The Company 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. Management
believes 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 inventoried 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
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.
33
<PAGE>
II. Analysis of inventory and assessment of risk: The systems inventory was
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 were upgraded or
replaced. The Company replaced a previously identified, non-compliant
property accounting system on September 1, 1999. This replacement was
planned and was done in the ordinary course of business.
III. Verification of compliance with vendors and major tenants: The Company
verified compliance of systems through systems' documentation, mail
correspondences and vendor web sites. The Company surveyed major
tenants to verify compliance. All tenants were surveyed in regard to
building access requirements from December 31,1999 through January 2,
2000.
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 tested real estate operating systems
previously identified as critical to operation.
V. Replacement or modification of systems: The Company replaced and
modified 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 were undertaken
to reasonably ascertain their stage of Year 2000 readiness. Through
questionnaires, web sites, interviews, on site visits and other available means,
the Company assessed 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 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.
There can be no assurance that external Year 2000 issues will be identified
and resolved prior to Year 2000. 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 September 30, 1999, approximately $89.1 million has been spent
on the construction. The project is scheduled to be completed in the year 2000
and is approximately 75.0% 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.
SUBSEQUENT EVENT
On October 1, 1999, the Company sold 66 Bovet for gross proceeds of
approximately $9.2 million.
34
<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 September 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 September 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................ -- 65,000 -- 67,000 67,417 1,105,812 1,305,229 $1,300,437
Average interest rate... -- 7.28% -- 6.81% 7.32% 7.26%
Variable rate............. 58,000 61,022 386,426 48,315 16,162 317 570,242 570,242
INTEREST RATE SWAPS:
Variable to Fixed......... -- 250,000 -- -- -- -- -- --
Average pay rate (1).... -- 5.07% -- -- -- -- -- --
Average receive rate
(1)................... -- 5.38% -- -- -- -- -- --
</TABLE>
- ------------------------
(1) As of September 30, 1999.
35
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Note 7 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 only to
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.
On July 30, 1999, through the redemption of UPREIT Units on a one-for-one
basis, the Company issued an additional 562,588 shares of Common Stock.
On August 3, 1999, through the redemption of UPREIT Units on a one-for-one
basis, the Company issued an additional 562,587 shares of Common Stock.
On August 17, 1999, the Company reacquired 10,833 shares of restricted
Common Stock as a result of the forfeiture of these shares by a certain employee
of the Company.
On August 31, 1999, through a dividend reinvestment plan available only to
German shareholders, the Company issued 70,974 shares of Common Stock to such
shareholders in lieu of paying cash dividends in the aggregate amount of
$1,088,000. Such shares were issued and sold to persons outside the United
States and were not registered under the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1) Exhibit 12.1: Statement of Computation of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements
2) For EDGAR filing purposes only, this report contains Exhibit 27,
Financial Data Schedule
3) Exhibit 99.1: Third 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 Financial 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: November 15, 1999
By: /s/ KEVIN P. MAHONEY
-----------------------------------------
Kevin P. Mahoney, Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: November 15, 1999
</TABLE>
37
<PAGE>
Exhibit 12.1
Statement of Computation of Earnings to Fixed Charges and Preferred
Stock Dividend Requirements for the nine month periods ended
September 30, 1999 and September 30, 1998
<TABLE>
<CAPTION>
For the nine months ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Net income $ 97,039 $ 60,964
Interest expense 104,199 47,724
Amortization of capitalized interest 45 --
---------- ----------
Earnings before interest 201,283 108,688
Interest expense 104,199 47,724
Interest capitalized 952 --
Interest portion of rentals 263 --
Preferred dividends 2,625 2,625
---------- ----------
Fixed charges and preferred stock
dividend requirements 108,039 50,349
Earnings to fixed charges and preferred
stock dividend requirements 1.86 2.16
---------- ----------
---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 36,419
<SECURITIES> 0
<RECEIVABLES> 90,384
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 391,962
<PP&E> 3,912,065
<DEPRECIATION> 275,678
<TOTAL-ASSETS> 4,155,152
<CURRENT-LIABILITIES> 125,948
<BONDS> 0
0
50,000
<COMMON> 1,786,776
<OTHER-SE> 2,281
<TOTAL-LIABILITY-AND-EQUITY> 4,155,152
<SALES> 0
<TOTAL-REVENUES> 481,833
<CGS> 0
<TOTAL-COSTS> 360,139
<OTHER-EXPENSES> (10,770)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,199
<INCOME-PRETAX> 101,024
<INCOME-TAX> 0
<INCOME-CONTINUING> 101,024
<DISCONTINUED> 0
<EXTRAORDINARY> (3,555)
<CHANGES> (630)
<NET-INCOME> 97,039
<EPS-BASIC> 0.73
<EPS-DILUTED> 0.73
</TABLE>
<PAGE>
Exhibit 99.1
[LOGO] CORNERSTONE PROPERTIES
THIRD 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.
NOVEMBER 1, 1999
<PAGE>
Cornerstone Properties Inc.
Supplemental Information to Quarterly Earnings Release
I. Third Quarter 1999
- Balance Sheet
- Income Statement
II. Press Release
III. Quarterly Fact Sheet
IV. FFO Calculation
V. Table of Properties and Property Development
VI. Top Ten Tenants Schedule
VII. Historical Occupancy Schedule
VIII. Net Rent and Net Effective Rent Schedule
IX. Lease Expiration Schedule
X. Tenant Retention Schedule
XI. Leasing Costs and Capital Expenditures
XII. Debt Schedule
XIII. Equity Schedule
XIV. Minority Sharing in Cash Flows and Residual Proceeds
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
BALANCE SHEET
INCOME STATEMENT
<PAGE>
REVISED AS OF NOVEMBER 15, 1999
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Developments in progress:
Land............................................... $10,132 $10,437
Development costs.................................. 9,565 2,519
Rental Property, at cost:
Land............................................... 652,036 702,840
Buildings, leasehold interests and improvements.... 3,091,308 3,403,152
Deferred lease costs............................... 149,024 143,188
---------- ----------
3,912,065 4,262,136
Less: Accumulated depreciation and amortization.... 275,678 286,664
---------- ----------
Total Development and Rental Property 3,636,387 3,975,472
Assets held for sale................................. 214,646 77,568
Cash and cash equivalents............................ 36,419 61,869
Restricted cash...................................... 78,430 9,114
Investment in joint ventures......................... 31,450 31,500
Other deferred costs, net of accumulated
amortization of $5,115 and $932................... 42,416 45,572
Deferred tenant receivables.......................... 71,421 53,489
Tenant and other receivables, net.................... 18,963 10,326
Other assets......................................... 25,020 17,074
---------- ----------
TOTAL ASSETS......................................... $4,155,152 $4,281,984
---------- ----------
LIABILITIES
Long-term debt, inclusive of $20,046 and
$25,031 of unamortized premium.................... $1,501,971 $1,532,474
Credit facility...................................... 373,500 465,000
Accrued interest..................................... 11,044 10,933
Accrued real estate taxes............................ 25,635 16,395
Accounts payable and accrued expenses................ 44,650 51,454
Distributions payable................................ 44,619 38,163
Unearned revenue and other liabilities............... 27,504 23,890
---------- ----------
TOTAL LIABILITIES.................................... 2,028,923 2,138,309
---------- ----------
MINORITY INTEREST
Minority interest in operating partnership........... 264,082 283,388
Minority interest in joint ventures.................. 23,090 23,420
---------- ----------
TOTAL MINORITY INTEREST.............................. 287,172 306,808
---------- ----------
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; 129,610,536 shares issued and
129,599,703 shares outstanding.................. -- --
Paid-in capital..................................... 1,786,776 1,788,567
Accumulated other comprehensive income.............. 4,700 --
Deferred compensation............................... (2,313) (1,700)
---------- ----------
1,839,163 1,836,867
Treasury stock, 10,833 shares, at cost.............. (106) --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY.......................... 1,839,057 1,836,867
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $4,155,152 $4,281,984
</TABLE>
Section I - Page 1
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTMEBER 30, 1999 AND
1998 (Dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Office and parking rentals $ 153,859 $ 83,227 $ 455,509 $ 239,767
Earnings in joint ventures 304 3,856 686 10,150
Interest and other income 2,376 1,955 5,738 7,167
------------- ------------- ------------- -------------
TOTAL REVENUES 156,539 89,038 461,933 257,084
------------- ------------- ------------- -------------
EXPENSES
Building operating expenses 34,445 18,896 98,043 52,947
Real estate taxes 17,930 12,034 55,608 34,900
Interest expense 35,126 16,057 104,199 47,724
Depreciation and amortization 23,600 15,702 72,493 42,561
General and administrative 7,225 3,169 19,796 8,713
------------- ------------- ------------- -------------
TOTAL EXPENSES 118,326 65,858 350,139 186,845
------------- ------------- ------------- -------------
38,213 23,180 111,794 70,239
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSES)
Carrying value in excess of market
value of assets held for sale 2,461 - (1,292) -
Gain (loss) on sale of real estate assets 9,132 (127) 9,132 (2,324)
------------- ------------- ------------- -------------
TOTAL OTHER INCOME (EXPENSES) 11,593 (127) 7,840 (2,324)
------------- ------------- ------------- -------------
MINORITY INTEREST
Minority interest in operating partnership (6,318) (781) (14,655) (1,428)
Minority interest in joint ventures (1,221) (1,045) (3,955) (3,254)
------------- ------------- ------------- -------------
TOTAL MINORITY INTEREST (7,539) (1,826) (18,610) (4,682)
------------- ------------- ------------- -------------
Income before cumulative effect of a change
in accounting principle and extraordinary loss 42,267 21,227 101,024 63,233
------------- ------------- ------------- -------------
Cumulative effect of a change in accounting principle - - (630) -
Extraordinary loss - (2,269) (3,355) (2,269)
------------- ------------- ------------- -------------
NET INCOME $ 42,267 $ 18,958 $ 97,039 $ 60,964
============= ============= ============= =============
INCOME APPLICABLE TO PREFERRED STOCK $ (875) $ (875) $ (2,625) $ (2,625)
------------- ------------- ------------- -------------
INCOME APPLICABLE TO COMMON STOCK $ 41,392 $ 18,083 $ 94,414 $ 58,339
============= ============= ============= =============
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE AND EXTRAORDINARY LOSS PER COMMON SHARE $ 0.32 $ 0.20 $ 0.76 $ 0.62
============= ============= ============= =============
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
AND EXTRAORDINARY LOSS PER COMMON SHARE $ - $ (0.02) $ (0.03) $ (0.02)
============= ============= ============= =============
BASIC INCOME PER COMMON SHARE $ 0.32 $ 0.18 $ 0.73 $ 0.59
============= ============= ============= =============
DILUTED INCOME PER COMMON SHARE $ 0.32 $ 0.18 $ 0.73 $ 0.59
============= ============= ============= =============
</TABLE>
Section 1 - Page 2
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
PRESS RELEASE
<PAGE>
FOR IMMEDIATE RELEASE
November 1, 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 THIRD QUARTER AND NINE MONTHS RESULTS
THIRD QUARTER AND YEAR-TO-DATE 1999 HIGHLIGHTS
- - FFO per diluted share for the 1999 third quarter increased approximately
11% over the 1998 period.
- - Year-to-date same store net operating income up 4.54% over the same period
in 1998.
- - Year-to-date FFO per share increased over 9.3% as compared to the same
period in 1998.
- - Occupancy increased to 97.6% from 96.8%.
- - Sales of nine non-core properties totaling over $200 million in the
Charlotte, Phoenix, Northern and Southern California markets.
- - The company signed an agreement with Allied Riser Communications to provide
state of the art data, voice, and video capabilities to tenants.
NEW YORK, NEW YORK (NOVEMBER 1, 1999) -- Cornerstone Properties Inc. (NYSE:
CPP), a real estate investment trust, announced today results for its third
quarter and nine months ended September 30, 1999. Funds from operations (FFO)
allocated to shareholders (adjusted for convertible debt) amounted to
$60,587,000 or $0.40 per share calculated on 152,793,000 average diluted total
shares outstanding, compared to $39,396,000, or $0.36 per diluted share on
109,931,000 average diluted total shares outstanding for the three months ended
September 30, 1998. Revenues for the 1999 quarter were $156,539,000 compared to
$89,038,000 in the 1998 third quarter. Net income for the third quarter of 1999
grew to $42,267,000 compared to $18,958,000 in the third quarter of 1998. The
increase in FFO per share was due to the accretive impact of the Company's
acquisitions over the past twelve months and internal growth. 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.
Year-to-date FFO allocated to shareholders (adjusted for convertible debt)
amounted to $180,332,000 or $1.18 per share calculated on 152,698,000 average
diluted total shares outstanding, compared to $113,420,000, or $1.08 per diluted
share on 104,940,000 average diluted total shares outstanding for the nine
months ended September 30, 1998. Year-to-date net operating income before
depreciation from Cornerstone Properties' real estate assets increased 85.2% to
$306,692,000 for the nine months ended September 30, 1999, from $165,624,000 for
the comparable period in 1998. Revenues for the 1999 nine months were
$461,933,000
<PAGE>
compared to $257,084,000 in 1998. Year-to-date net income increased to
$97,039,000 compared to $60,964,000 for 1998.
John S. Moody, President and CEO said, "Cornerstone Properties' third quarter
results continue to reflect the benefits of Cornerstone's current business plan.
While the public markets continue to constrain access to capital for REITs, the
Company continues to increase shareholder value through the disposition of
non-core assets, accretive development and focus on its core markets. Over 70%
of our portfolio is situated in the top five office markets per a recent survey
in Emerging Trends, as measured by growth and constraints in new supply. We
continue to see strong absorption, increasing rental rates and reduced vacancy
in these markets."
QUARTERLY DIVIDEND DECLARED
The Company declared a quarterly dividend of $0.30 per share payable on November
30, 1999 to shareholders of record as of October 29, 1999.
"SAME STORE" REVENUE GROWTH CONTINUES
The Company achieved year to date "same store" net operating income growth of
4.54% over 1998 at the 20 properties owned over the same period. This increase
is due to a 3.76% increase in revenues while expenses increased only 2.76% and
reflects the strengthening of fundamentals in the Company's core markets.
LEASING UPDATE: TENANT RETENTION RATE 70% AND OVERALL OCCUPANCY RATE 97.6%
During the third quarter of 1999, strong leasing in several core markets
provided the catalyst to increase occupancy from 96.8% to 97.6% at a 70%
year-to-date tenant retention ratio. The San Mateo County and West Los Angeles
assets had the highest occupancy gains. San Mateo County increased 3.9% to 98.4%
and West Los Angeles increased 2.8% to 94.9%.
SALE OF NON-CORE PROPERTIES
Thus far in 1999, a total of nine non-core properties totaling more than
$200,000,000 were sold in the Phoenix, Charlotte, Northern and Southern
California markets. Cornerstone Properties has now withdrawn completely from
Charlotte and Phoenix -- markets which did not fit the Cornerstone model of high
demand growth and supply constraint. Properties sold in the Northern and
Southern California markets, while in strong sub-markets, do not fit the current
Cornerstone investment criteria in terms of size and quality.
John S. Moody, commented, "These sales are consistent with a focus on core
assets in core markets and our increasing focus on improving our return on
invested assets. We anticipate completing another $300 million in sales by
year-end and will continue to direct the proceeds to debt reduction, funding of
our development pipeline and new acquisitions."
<PAGE>
AGREEMENT SIGNED WITH ALLIED RISER COMMUNICATIONS
Cornerstone announced during the third quarter the signing of a non-exclusive
agreement with Allied Riser Communications Corp. (ARC) to provide high capacity,
high performance telecommunications services to its tenants. ARC offerings to
Cornerstone's 1900-plus tenants will include ultra high-speed internet access,
advanced conference-calling services, video links to computer screens and other
enhanced telecommunications services. As part of the ARC/Cornerstone
arrangement, Cornerstone will receive warrants for shares of common stock in
ARC. Cornerstone will also participate in the revenues ARC generates in
Cornerstone's buildings, through a revenue sharing program. Additionally,
Cornerstone has made a $1.5 million equity investment in ARC.
The Cornerstone Properties Third Quarter Supplemental Package is available
online at www.cstoneprop.com.
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 central business districts. The Company, through its
subsidiaries, currently owns interests in 89 Class A office properties
throughout the United States totaling approximately 19 million square feet.
Cornerstone's common 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 AND 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.
[Tables 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
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------
3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Rental Income (1) $ 156,876 $ 90,897 $ 464,325 $ 259,992
Building Operating Expenses (1) 53,520 33,364 157,363 94,368
------------------------------------------------------------------------
Building Net Operating Income 103,356 57,533 306,962 165,624
------------------------------------------------------------------------
Corporate General and Administrative (1) (2) (8,777) (3,169) (24,512) (8,713)
Interest and Other Income (1) 3,937 1,955 10,832 7,167
------------------------------------------------------------------------
EBITDA 98,515 56,319 293,282 164,078
------------------------------------------------------------------------
Interest Expense (1) (35,726) (16,057) (106,005) (47,724)
Minority Adjustments (1) (2,384) (1,453) (7,502) (4,671)
Rent Notes - 387 - 1,133
------------------------------------------------------------------------
Funds From Operations 60,406 39,196 179,775 112,816
Interest on Convertible Debt 181 200 557 604
Funds From Operations (Adjusted for
------------------------------------------------------------------------
convertible debt) $ 60,587 $ 39,396 $ 180,332 $ 113,420
------------------------------------------------------------------------
Weighted Average Diluted Shares/Units 152,793 109,931 152,698 104,940
FFO PER SHARE/UNIT (DILUTED) $ 0.40 $ 0.36 $ 1.18 $ 1.08
Less: Capital Expenditures Per Share/Unit 0.04 0.02 0.11 $ 0.05
------------------------------------------------------------------------
AFFO Per Share/Unit $ 0.36 $ 0.34 $ 1.07 $ 1.04
------------------------------------------------------------------------
Funds From Operations $ 60,406 $ 39,196 $ 179,775 $ 112,816
Less: Preferred Dividends (875) (875) (2,625) (2,625)
Less: Recurring Lease Costs and
Capital Expenditures (3) (5,547) (2,062) (16,757) (5,690)
Less: Straight Line Rents Adjusted For
Minority Interest (6,266) (3,483) (19,738) (10,392)
------------------------------------------------------------------------
Funds Available for Distribution $ 47,718 $ 32,776 $ 140,655 $ 94,109
------------------------------------------------------------------------
Weighted Average Common Shares and Units
Outstanding 148,648 105,720 148,648 100,729
Funds Available for Distribution Per Share/Unit $ 0.32 $ 0.31 $ 0.95 $ 0.93
Distribution Per Share/Unit $ 0.30 $ 0.30 $ 0.90 $ 0.90
</TABLE>
(1) For the three months ended September 30, 1999 rental income has been
increased by $3,017,000 building operating expenses have been increased by
$1,146,000, corporate general and administrative expense has been increased by
$1,553,000, interest and other income has been increased by $1,560,000, interest
expense has been increased by $599,000 and minority adjustments have been
increased $602,000 in order to show Cornerstone's equity investments had they
been consolidated. For the three months ended September 30, 1998 rental income
has been increased by $7,670,000 and building operating expenses have been
increased by $2,434,000 in order to show Cornerstone's equity investments had
they been consolidated.
For the nine months ended September 30, 1999 rental income has been
increased by $8,816,000, building operating expenses have been increased by
$3,712,000, corporate general and administrative expense has been increased by
$4,963,000, interest and other income has been increased by $5,093,000, interest
expense has been increased by $1,806,000 and minority adjustments have been
increased $1,620,000 in order to show Cornerstone's equity investments had they
been consolidated. For the nine months ended September 30, 1998 rental income
has been increased by $20,225,000 and building operating expenses have been
increased by $6,521,000 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 $9.25 per square foot leased times the five year
(1999-2003) average quarterly lease expiration (adjusted for minority interest)
of 528,615 square feet or $4,889,689, plus a capital expenditure reserve
(adjusted for minority interest) of $0.14 per square foot ($657,197).
Year to date the Company has incurred $17,762,292 in recurring tenant costs
(adjusted for minority interest) in leasing 1,732,437 square feet or a cost of
$10.25 per square foot. Year to date the Company has incurred $2,367,641 in
recurring capital costs (adjusted for minority interest) or $0.17 per square
foot on an annualized basis.
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
FACT SHEET
<PAGE>
REVISED AS OF NOVEMBER 15, 1999
CORNERSTONE PROPERTIES INC.
QUARTERLY FACT SHEET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
I. 1999 3RD QUARTER RESULTS Quarter to Date Year to Date
OPERATIONS 1999 1998 1999 1998
------------------------------------------------------------------ ------------------------- ---------------------------
<S> <C> <C> <C> <C>
FFO Per Share $ 0.40 $ 0.36 $ 1.18 $ 1.08
AFFO Per Share $ 0.36 $ 0.34 $ 1.07 $ 1.04
FAD Per Share $ 0.32 $ 0.31 $ 0.95 $ 0.93
FFO Payout Ratio 75% 84% 76% 83%
AFFO Payout Ratio 83% 88% 84% 87%
FAD Payout Ratio 94% 97% 95% 97%
Same Store NOI Growth 5.00% NA 4.54% 3.51%
Cash Same Store NOI Growth (adjusted for S/L rents) 4.95% NA 5.24% NA
EBITDA Interest Coverage 2.76 3.52 2.77 3.39
Fixed Charge Coverage 2.67 3.33 2.68 3.21
LEASING COSTS AND CAPITAL
(1)Recurring Leasing Costs Per Square Foot Leased $ 10.71 $ 21.42 $ 10.25 $ 9.35
(1)Non-Recurring Leasing Costs Per Square Foot Leased $ 21.02 $ 20.35 $ 21.37 $ 30.02
(1)(2)Recurring Capital Expenditures Per Square Foot $ 0.12 $ 0.29 $ 0.17 $ 0.16
(1)(2)Non-Recurring Capital Expenditures Per Square Foot $ 0.16 $ 0.02 $ 0.14 $ 0.02
STRAIGHT LINE RENTS AND REVENUES
Expiring Rents $26.93 NA $26.11 NA
Rents on New leases $32.48 NA $32.46 NA
---------- -----------
Percentage Increase 21% NA 24% NA
Straight Line Rents $6,266,000 $3,483,000 $19,738,000 $10,392,000
Capitalized Interest $ 265,000 NA $ 952,000 NA
Parking Revenues (included in Office and Parking) $6,843,217 $5,116,162 $20,893,310 $15,194,491
Parking Expense (included in Building Operating Expense) $1,232,263 $ 727,070 $3,047,103 $2,098,710
------------------------- ---------------------------
Net Parking Income $5,610,954 $4,389,092 $17,846,207 $13,095,781
</TABLE>
(1)Leasing and capital expenditures have been restated to reflect
assets sold.
(2)Capital expenditures per square foot are reported on an
annualized basis
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
II. COMMON DIVIDENDS Record Date Payment Date
---------------------------------------
<S> <C> <C>
4th Quarter 1999 10/29/99 11/30/99
1st Quarter 2000 01/31/00 02/29/00
2nd Quarter 2000 04/28/00 05/31/00
3rd Quarter 2000 07/31/00 08/31/00
</TABLE>
<TABLE>
<CAPTION>
III. EARNINGS RELEASE/ QUARTERLY CONFERENCE CALL Release Date
--------------------
<S> <C>
4th Quarter 1999 02/24/00
1st Quarter 2000 05/02/00
2nd Quarter 2000 08/01/00
3rd Quarter 2000 11/07/00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Section III - Page 1
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
FFO CALCULATION
<PAGE>
CORNERSTONE PROPERTIES INC.
FUNDS FROM OPERATIONS
SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Income $ 42,267 $ 18,958 $ 97,039 $ 60,964
NAREIT Adjustments:
Depreciation and Amortization (1) 23,600 15,702 72,493 42,561
Minority Adjustments (562) (407) (1,927) (1,415)
Unconsolidated Depreciation (2) 376 1,380 1,123 3,554
Cumulative Effect of a Change in
Accounting Principle - - 630 -
Impairment Costs (2,461) - 1,292 -
(Gain) Loss on Sale of Assets (9,132) 127 (9,132) 2,324
Extraordinary Losses - 2,269 3,355 2,269
Other Adjustments:
Amortization on Rent Notes - 387 - 1,133
Severance Payments - - 247 -
Minority Interest Allocated to Unitholders 6,318 780 14,655 1,426
---------------------------------------------------------------
Funds From Operations $ 60,406 $ 39,196 $ 179,775 $ 112,816
Interest Expense On Convertible Note 181 200 557 604
---------------------------------------------------------------
Funds From Operations $ 60,587 $ 39,396 $ 180,332 $ 113,420
---------------------------------------------------------------
---------------------------------------------------------------
Weighted Average Diluted Shares/Units Outstanding 152,793 109,931 152,698 104,940
FFO Per Share/Unit $ 0.40 $ 0.36 $ 1.18 $ 1.08
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
(1) For the three months ended September 30, 1999, the depreciation and
amortization adjustment includes $995,000 of amortization relating to the
intangible management and development company assets that were acquired as part
of the Wilson Acquisition.
For the nine months ended September 30, 1999, the depreciation and
amortization adjustment includes $2,969,000 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 September 30, 1999, the unconsolidated
depreciation adjustment includes $170,000 of amortization relating to the
intangible management and development company assets that were acquired as part
of the Wilson Acquisition.
For the nine months ended September 30, 1999, the unconsolidated
depreciation adjustment includes $508,000 of amortization relating to the
intangible management and development company assets that were acquired as part
of the Wilson Acquisition.
Section IV - Page 1
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
TABLE OF PROPERTIES
PROPERTY DEVELOPMENT
<PAGE>
CORNERSTONE PROPERTIES INC.
TABLE OF PROPERTIES
AS OF SEPTEMBER 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 8.0
500 Boylston Street 714,513 91.5% 1988 100.0% 16 5.4
222 Berkeley Street 530,844 91.5% 1991 99.9% 30 5.8
125 Summer Street 463,691 100.0% 1989 97.2% 22 3.9
(3)One Memorial Drive 352,764 100.0% 1985 99.8% 12 5.2
--------- --------------------------
REGION TOTAL 2,884,826 99.5% 113 6.0
SAN MATEO COUNTY, CALIFORNIA
(4)Bayhill (4 buildings) 514,255 100.0% 1982 - 1987 99.1% 45 4.4
(4)Peninsula Office Park (7 buildings) 492,044 100.0% 1971 - 1998 99.2% 35 5.6
(4)Seaport Centre 463,418 100.0% 1988 100.0% 15 6.4
(4)Bay Park Plaza (2 buildings) 257,058 100.0% 1985 - 1998 100.0% 13 5.4
(4)One Bay Plaza 176,533 100.0% 1979 89.7% 45 2.7
(4)Belmont Shores 141,643 100.0% 1983 95.8% 13 4.1
(4)1300 South El Camino 84,441 100.0% 1986 97.8% 10 3.7
--------- --------------------------
REGION TOTAL 2,129,392 98.4% 176 5.1
EAST BAY, CALIFORNIA
(4)Corporate Centre (2 buildings) 329,348 100.0% 1985 - 1987 97.1% 58 3.2
(4)ADP Plaza (2 buildings) 299,791 100.0% 1987 - 1989 99.4% 26 2.8
(4)PeopleSoft 277,562 100.0% 1984 100.0% 5 7.9
(4)Norris Tech (3 buildings) 260,513 100.0% 1984 - 1990 96.9% 7 5.3
(4)Golden Bear Center 160,587 100.0% 1986 99.6% 20 4.3
(4)2700 Ygnacio Valley Road 103,214 100.0% 1984 98.2% 26 2.5
(4)Park Plaza 87,040 100.0% 1986 100.0% 9 4.3
(4)1600 South Main 83,277 100.0% 1983 100.0% 18 2.2
--------- --------------------------
REGION TOTAL 1,601,332 98.6% 169 4.4
ATLANTA, GEORGIA
(5)191 Peachtree Street 1,215,288 80.0% 1991 97.2% 32 6.8
200 Galleria 432,698 100.0% 1985 98.3% 58 3.3
--------- --------------------------
REGION TOTAL 1,647,986 97.4% 90 5.9
SEATTLE, WASHINGTON
(6)Washington Mutual Tower (3 buildings) 1,154,560 50.0% 1988 99.1% 83 5.8
(4)110 Atrium Place 215,172 100.0% 1981 100.0% 30 3.4
(4)Island Corporate Center 100,009 100.0% 1987 92.7% 20 3.5
------------- --------------------------
REGION TOTAL 1,469,741 98.8% 133 5.3
SANTA CLARA COUNTY, CALIFORNIA
(4)(7)Pruneyard Office (3 buildings) 355,015 100.0% 1971 - 1999 98.7% 79 5.1
(4)10 Almaden 293,526 100.0% 1989 100.0% 23 7.4
(4)Pruneyard Shopping Center 252,210 100.0% 1970s 88.9% 50 7.0
(4)Embarcadero Place (4 buildings) 192,081 100.0% 1984 100.0% 8 3.3
(4)(8)Pruneyard Inn 94,500 100.0% 1989 na na na
(4)First American Plaza 82,954 100.0% 1971 95.2% 19 3.5
------------- --------------------------
REGION TOTAL 1,270,286 96.9% 179 5.6
</TABLE>
Section V - Page 1
<PAGE>
CORNERSTONE PROPERTIES INC.
TABLE OF PROPERTIES
AS OF SEPTEMBER 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>
DENVER, COLORADO
One Norwest Center 1,187,852 100.0% 1983 97.5% 53 7.0
------------- --------------------------
REGION TOTAL 1,187,852 97.5% 53 7.0
SAN FRANCISCO, CALIFORNIA
(4)120 Montgomery 418,751 66.7% 1955 96.5% 91 3.3
(4)One Post 388,055 50.0% 1969 99.9% 34 6.1
(9)201 California 240,230 100.0% 1980 100.0% 10 4.2
(4)188 Embarcadero 85,183 100.0% 1985 98.9% 11 3.9
------------- --------------------------
REGION TOTAL 1,132,219 98.6% 146 4.5
MINNEAPOLIS, MINNESOTA
(10)Norwest Center 1,117,439 50.0% 1988 99.7% 31 10.4
------------- --------------------------
REGION TOTAL 1,117,439 99.7% 31 10.4
WASHINGTON, D.C. / ALEXANDRIA, VIRGINIA
(11)Market Square (2 buildings) 688,709 70.0% 1990 98.7% 56 7.0
99 Canal Center 137,945 100.0% 1986 97.6% 18 4.1
TransPotomac Plaza 96,392 100.0% 1983 98.1% 12 6.3
11 Canal Center 70,365 100.0% 1986 95.5% 7 6.6
------------- --------------------------
REGION TOTAL 993,411 98.3% 93 6.5
SUBURBAN CHICAGO, ILLINOIS
(12)Corporate 500 Centre (4 buildings) 679,039 100.0% 1986/1990 99.0% 43 5.5
One Lincoln Centre 297,040 100.0% 1986 90.1% 40 3.7
------------- --------------------------
REGION TOTAL 976,079 96.3% 83 5.0
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA
(4)West Wilshire (2 buildings) 235,787 100.0% 1960 - 1976 97.8% 54 3.6
(9)Wilshire Palisades 186,714 100.0% 1981 99.5% 14 4.1
(4)(13)Janss Court 125,709 100.0% 1989 100.0% 21 6.8
(4)Searise Office Tower 122,292 100.0% 1975 100.0% 27 4.8
(4)Commerce Park 94,367 100.0% 1977 78.5% 9 5.0
(4)429 Santa Monica 82,119 100.0% 1982 79.7% 30 2.3
------------- --------------------------
REGION TOTAL 846,988 94.9% 155 4.4
ORANGE COUNTY, CALIFORNIA
(4)Bixby Ranch 277,289 100.0% 1987 96.6% 48 2.7
(4)18301 Von Karman 219,508 100.0% 1991 88.7% 33 4.0
(4)2677 North Main 213,318 100.0% 1987 92.3% 22 2.8
------------- --------------------------
REGION TOTAL 710,115 92.9% 103 3.1
SAN DIEGO, CALIFORNIA
(4)Centerside II 286,949 100.0% 1987 94.0% 43 3.3
(4)Crossroads 133,553 100.0% 1983 100.0% 11 3.8
------------- --------------------------
REGION TOTAL 420,502 95.9% 54 3.5
LOS ANGELES, CALIFORNIA
(4)700 North Brand 202,531 100.0% 1981 94.1% 18 4.1
(4)Warner Park Center 57,366 100.0% 1986 100.0% 7 1.3
------------- --------------------------
REGION TOTAL 259,897 95.4% 25 3.5
</TABLE>
Section V- Page 2
<PAGE>
CORNERSTONE PROPERTIES INC.
TABLE OF PROPERTIES
AS OF SEPTEMBER 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>
NEW YORK CITY, NEW YORK
527 Madison Avenue 215,332 100.0% 1986 99.5% 21 4.3
Tower 56 163,633 100.0% 1983 100.0% 43 2.3
----------- -------------------------
REGION TOTAL 378,965 99.7% 64 3.5
CONEJO VALLEY (VENTURA), CALIFORNIA
(4)Westlake Spectrum (2 buildings) 118,990 100.0% 1990 87.5% 10 2.2
(4)Agoura Hills 115,265 100.0% 1987 94.8% 10 2.7
----------- -------------------------
REGION TOTAL 234,255 91.1% 20 2.5
OTHER REGIONS
(4)U.S. West (Murray, Utah) 136,608 100.0% 1985 82.7% 18 3.0
(4)Exposition Centre (Sacramento, CA) 72,971 100.0% 1984 70.3% 14 2.8
----------- -------------------------
REGION TOTAL 209,579 78.4% 32 3.0
----------- -------------------------
TOTAL PORTFOLIO 19,470,864 97.6% 1,719 5.5
(14)Minority Interest Adjustment (693,796)
----------- --------
CORNERSTONE PORTFOLIO 18,777,068 97.6%
Adjustment For Pruneyard Inn (94,500)
-----------
CORNERSTONE OFFICE PORTFOLIO 18,682,568
</TABLE>
Section V - Page 3
<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 77.2%.
(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 September 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.
Section V- Page 4
<PAGE>
CORNERSTONE PROPERTIES INC.
PROPERTY DEVELOPMENT SUMMARY
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION PROJECTED ACTUAL PROJECTED LEASING EXPECTED
ASSET SIZE START COMPLETE TOTAL COST COST TO DATE COST TO COMPLETE STATUS RETURN (8)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1)Piper Jaffray Center 929,000 4/98 6/00 $168,000,000 $0 $168,000,000 75.0% 9.3%
Minneapolis, MN
(2)Seaport Plaza 160,000 8/99 12/00 $40,100,000 $13,785,445 $26,314,555 100.0% 12.9%
Redwood City, CA
(3)First and Howard 1,169,000 6/00 tbd $365,000,000 $2,005,384 $362,994,616 0.0% 10.9%
San Francisco, CA
(4)Concar 200,000 4/00 7/01 $52,300,000 $1,510,140 $50,789,860 0.0% 13.6%
San Mateo, CA
(5)One Powell 79,000 11/00 7/01 $25,900,000 $0 $25,900,000 0.0% 11.0%
San Francisco, CA
(6)Ferry Building 216,000 1/01 7/02 $57,400,000 $2,010,404 $55,389,596 0.0% 13.2%
San Francisco, CA
(7)Larkspur Landing 168,000 4/02 4/03 $43,300,000 $385,679 $42,914,321 0.0% 10.7%
Larkspur, CA
------------ --------------------------------------------------------------
TOTAL 2,921,000 $752,000,000 $19,697,053 $732,302,947 29.3%
</TABLE>
NOTES:
(1) Pre-sale with the Ryan Companies. 75% pre-leased with an additional 5%
expected in the final stages of negotiation.
(2) 100% pre-leased to a public software company for a twelve year lease term.
(3) 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%.
(4) 69-year ground lease with a participation feature. The completion costs
above assumes an imputed land value of $7.5 million.
(5) Bank of America to retain a 10% ownership in the asset, which includes
46,800 s.f. of retail space.
(6) 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.
(7) 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.
(8) Initial stabilized cash on cash return, before any partnership cash flow
splits.
Section V - Page 5
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
TOP TEN TENANTS SCHEDULE
<PAGE>
CORNERSTONE PROPERTIES INC.
TOP TEN TENANTS SCHEDULE
AS OF SEPTEMBER 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
September 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
TENANT RENT RECOVERIES STRAIGHT-LINE RENT OF TOTAL
------------------------------------------ ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1)(3)(4)Norwest Corporation [Wells Fargo] $ 18,509,292 $ 9,475,953 $ 27,985,245 5%
(1)(4)Massachusetts Financial Services 9,015,212 4,378,355 13,393,567 2%
(1)Hale & Dorr 8,596,109 4,454,436 13,050,545 2%
(1)Wachovia Bank 8,919,324 3,270,696 12,190,020 2%
(1)King & Spalding 8,168,292 2,744,076 10,912,368 2%
(1)Deloitte & Touche 6,126,432 2,710,866 8,837,298 2%
(1)(4)The New England Life 4,730,952 2,656,627 7,387,579 1%
(2)Perkins Coie 6,678,717 540,058 7,218,775 1%
(1)(4)Houghton Mifflin 3,161,276 2,995,724 6,157,000 1%
(2)PeopleSoft Corporation 5,991,579 - 5,991,579 1%
----------------------------------------------------------------------------
TOTAL TOP 10 TENANTS $ 79,897,185 $ 33,226,791 $ 113,123,976 20%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
--------------------------------------------------------------
(4)TOTAL PORTFOLIO $ 454,163,575 $ 102,816,629 $ 556,980,203
--------------------------------------------------------------
--------------------------------------------------------------
SCHEDULED RENTABLE
TENANT EXPIRATION SQUARE FEET
------------------------------------------ -----------------------------------
<S> <C> <C>
(1)(3)(4)Norwest Corporation [Wells Fargo] 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 Feb-03 328,540
(1)Hale & Dorr Feb-04 1,066
Jun-13 318,435
----------
319,501
(1)Wachovia Bank Dec-08 380,442
(1)King & Spalding Mar-06 314,443
(1)Deloitte & Touche Oct-99 129,614
Jun-08 84,947
----------
214,561
(1)(4)The New England Life Aug-07 4,085
Sep-08 194,969
----------
199,054
(2)Perkins Coie Jul-03 6,811
Jul-04 23,775
Dec-11 209,541
----------
240,127
(1)(4)Houghton Mifflin Feb-07 225,883
(2)PeopleSoft Corporation Jun-00 210,940
--------------------
TOTAL TOP 10 TENANTS 3,391,581
--------------------
--------------------
--------------------
(4)TOTAL PORTFOLIO 18,228,531
--------------------
--------------------
</TABLE>
Section VI - Page 1
<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.
Section VI - Page 2
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
HISTORICAL OCCUPANCY SCHEDULE
<PAGE>
CORNERSTONE PROPERTIES INC.
HISTORICAL OCCUPANCY SCHEDULE
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
REGION TOTAL RENTABLE
NAME SQUARE FEET 1995 1996 1997
--------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C>
Boston, Massachusetts 2,884,826 94% 100% 99%
San Mateo County, California 2,129,392 -- -- --
East Bay, California 1,601,332 -- -- --
Atlanta, Georgia 1,647,986 -- -- 94%
Seattle, Washington 1,469,741 97% 97% 97%
(1)Santa Clara County, California 1,175,786 -- -- --
Denver, Colorado 1,187,852 98% 99% 99%
San Francisco, California 1,132,219 -- -- --
Minneapolis, Minnesota 1,117,439 100% 100% 98%
Washington, D.C./Alexandria, Virginia 993,411 -- -- 95%
Suburban Chicago, Illinois 976,079 -- 91% 96%
Santa Monica/West Los Angeles, California 846,988 -- -- --
Orange County, California 710,115 -- -- --
San Diego, California 420,502 -- -- --
Los Angeles, California 259,897 -- -- --
New York City, New York 378,965 91% 96% 99%
Conejo Valley (Ventura), California 234,255 -- -- --
(2)Other Regions 209,579 -- -- --
--------------------- --------------------------------------------
(3)TOTAL PORTFOLIO 19,376,364 98% 98% 97%
------------------------------------------------------------------------------------------
REGION
NAME 1998 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
Boston, Massachusetts 99% 100%
San Mateo County, California 88% 98%
East Bay, California 96% 99%
Atlanta, Georgia 97% 97%
Seattle, Washington 99% 99%
(1)Santa Clara County, California 99% 97%
Denver, Colorado 97% 97%
San Francisco, California 98% 99%
Minneapolis, Minnesota 100% 100%
Washington, D.C./Alexandria, Virginia 96% 98%
Suburban Chicago, Illinois 95% 96%
Santa Monica/West Los Angeles, California 92% 95%
Orange County, California 82% 93%
San Diego, California 95% 96%
Los Angeles, California 95% 95%
New York City, New York 96% 100%
Conejo Valley (Ventura), California 94% 91%
(2)Other Regions 79% 78%
-----------------------------
(3)TOTAL PORTFOLIO 95% 98%
</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) Historical occupancy has been restated to reflect assets sold.
Section VII - Page 1
<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 SEPTEMBER 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
NAME SQUARE FEET 1995 1996 1997
-------------------------------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C>
Boston, Massachusetts 2,870,576 $22.48 $23.24 $21.78
San Mateo County, California 2,094,842 -- -- --
East Bay, California 1,579,540 -- -- --
Atlanta, Georgia 1,605,952 -- -- $18.93
Seattle, Washington 1,451,697 $16.17 $15.98 $15.77
(1)Santa Clara County, California 1,139,198 -- -- --
Denver, Colorado 1,157,959 $11.78 $12.08 $12.46
San Francisco, California 1,115,993 -- -- --
Minneapolis, Minnesota 1,114,320 $17.82 $17.94 $18.29
Washington, D.C./Alexandria, Virginia 976,308 -- -- $13.80
Suburban Chicago, Illinois 939,667 -- $18.56 $19.60
Santa Monica/West Los Angeles, California 803,721 -- -- --
Orange County, California 659,586 -- -- --
San Diego, California 403,286 -- -- --
Los Angeles, California 247,988 -- -- --
New York City, New York 377,992 -- $28.98 $30.60
Conejo Valley (Ventura), California 213,429 -- -- --
(2)Other Regions 164,311 -- -- --
--------------------- ---------------------------------------------
(3)TOTAL PORTFOLIO 18,916,365 $16.06 $17.42 $18.40
REGION YTD
NAME 1998 1999
-------------------------------------------------------------------------------
<S> <C> <C>
Boston, Massachusetts $21.22 $21.91
San Mateo County, California -- $21.86
East Bay, California -- $13.34
Atlanta, Georgia $19.17 $18.71
Seattle, Washington $15.83 $15.97
(1)Santa Clara County, California -- $17.88
Denver, Colorado $12.54 $12.46
San Francisco, California $11.57 $15.79
Minneapolis, Minnesota $18.91 $19.15
Washington, D.C./Alexandria, Virginia $22.60 $22.69
Suburban Chicago, Illinois $20.84 $18.03
Santa Monica/West Los Angeles, California $24.36 $18.12
Orange County, California -- $13.89
San Diego, California -- $10.08
Los Angeles, California -- $18.38
New York City, New York $27.80 $28.93
Conejo Valley (Ventura), California -- $14.76
(2)Other Regions -- $10.17
---------------------------
(3)TOTAL PORTFOLIO $19.29 $18.18
</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) Amounts have been restated to reflect assets sold.
Section VIII - Page 1
<PAGE>
CORNERSTONE PROPERTIES INC.
NET EFFECTIVE RENT SCHEDULE
AS OF SEPTEMBER 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
NAME SQUARE FEET 1995 1996 1997
-------------------------------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C>
Boston, Massachusetts 2,870,576 $23.33 $22.27 $21.95
San Mateo County, California 2,094,842 -- -- --
East Bay, California 1,579,540 -- -- --
Atlanta, Georgia 1,605,952 -- -- $21.44
Seattle, Washington 1,451,697 $11.83 $11.80 $12.02
(1)Santa Clara County, California 1,139,198 -- -- --
Denver, Colorado 1,157,959 $10.56 $10.80 $11.66
San Francisco, California 1,115,993 -- -- --
Minneapolis, Minnesota 1,114,320 $17.31 $17.43 $17.23
Washington, D.C./Alexandria, Virginia 976,308 -- -- $14.72
Suburban Chicago, Illinois 939,667 -- $19.70 $19.76
Santa Monica/West Los Angeles, California 803,721 -- -- --
Orange County, California 659,586 -- -- --
San Diego, California 403,286 -- -- --
Los Angeles, California 247,988 -- -- --
New York City, New York 377,992 -- $26.75 $30.27
Conejo Valley (Ventura), California 213,429 -- -- --
(2)Other Regions 164,311 -- -- --
--------------------- ----------------------------------------------
(3)TOTAL PORTFOLIO 18,916,365 $14.37 $15.71 $18.17
REGION YTD
NAME 1998 1999
-------------------------------------------------------------------------------
<S> <C> <C>
Boston, Massachusetts $22.56 $23.37
San Mateo County, California -- $24.57
East Bay, California -- $14.24
Atlanta, Georgia $21.52 $20.90
Seattle, Washington $15.10 $16.58
(1)Santa Clara County, California -- $20.16
Denver, Colorado $11.96 $12.48
San Francisco, California $11.73 $16.51
Minneapolis, Minnesota $17.73 $20.14
Washington, D.C./Alexandria, Virginia $24.40 $25.90
Suburban Chicago, Illinois $21.65 $19.13
Santa Monica/West Los Angeles, California $26.04 $18.96
Orange County, California -- $14.40
San Diego, California -- $11.44
Los Angeles, California -- $19.02
New York City, New York $28.45 $29.50
Conejo Valley (Ventura), California -- $15.24
(2)Other Regions -- $10.91
--------------------------
(3)TOTAL PORTFOLIO $20.04 $19.59
</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) Amounts have been restated to reflect assets sold.
Section VIII - Page 2
<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 September 30, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Q4
Region Name Category 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PORTFOLIO--ALL PROPERTIES TOTAL (7) Square feet expiring (1) 553,651 sf 1,389,530 sf 1,710,276 sf 2,563,766 sf
Full service St-Line rent (2) $16,166,958 $ 35,187,697 $ 52,727,051 $ 68,132,653
Minority Interest Adjustment (3) Square feet expiring (1) $ 13,104 sf 45,950 sf 29,756 sf 57,222 sf
Full service St-Line rent (2) $ 315,095 $ 1,303,361 $ 905,394 $ 1,523,423
Cornerstone Portfolio Square feet expiring (1) (3) 540,547 sf 1,343,580 sf 1,680,520 sf 2,506,544 sf
Full service St-Line rent (2)(3) $15,851,864 $ 33,884,337 $ 51,821,657 $ 66,609,231
Full service St-Line rent per sq. ft. $ 29.33 $ 25.22 $ 30.84 $ 26.57
% Full service St-Lined rent 2.85% 6.08% 9.30% 11.96%
No. of tenant leases expiring (4) 132 255 263 293
Asking market rent per sq. ft. (5) $36.68
Operating Expenses per sq. ft. (6) $10.45
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BOSTON, MASSACHUSETTS Square feet expiring (1) 139,721 sf 6,749 sf 163,645 sf 454,922 sf
Full service St-Line rent (2) $ 6,196,591 $ 406,316 $ 6,636,072 $ 14,769,865
Minority Interest Adjustment (3) Square feet expiring (1) 68 sf 242 sf 8,221 sf 7,975 sf
Full service St-Line rent (2) $ 1,452 $ 16,823 $ 354,786 $ 272,030
Cornerstone Portfolio Square feet expiring (1) (3) 139,653 sf 6,507 sf 155,424 sf 446,947 sf
Full service St-Line rent (2) (3) $ 6,195,140 $ 389,493 $ 6,281,286 $ 14,497,835
Full service St-Line rent per sq. ft. $ 44.36 $ 59.86 $ 40.41 $ 32.44
% Full service St-Lined rent 6.02% 0.38% 6.10% 14.09%
No. of tenant leases expiring (4) 6 3 17 20
Asking market rent per sq. ft. (5) $50.86
Operating Expenses per sq. ft. (6) $14.23
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SAN MATEO COUNTY, CALIFORNIA Square feet expiring (1) 76,787 sf 151,360 sf 91,752 sf 213,463 sf
Full service St-Line rent (2) $ 1,901,106 $ 3,972,502 $ 2,961,737 $ 6,976,604
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 76,787 sf 151,360 sf 91,752 sf 213,463 sf
Full service St-Line rent (2) (3)$ 1,901,106 $ 3,972,502 $ 2,961,737 $ 6,976,604
Full service St-Line rent per sq. ft. $ 24.76 $ 26.25 $ 32.28 $ 32.68
% Full service St-Lined rent 2.59% 5.42% 4.04% 9.51%
No. of tenant leases expiring (4) 15 19 18 33
Asking market rent per sq. ft. (5) $40.30
Operating Expenses per sq. ft. (6) $8.72
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Region Name Category 2003 2004 2005 2006
- ------------------------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PORTFOLIO--ALL PROPERTIES TOTAL (7) Square feet expiring (1) 3,073,314 sf 2,037,930 sf 890,923 sf 1,089,878 sf
Full service St-Line rent (2) $ 93,894,322 $ 64,285,056 $ 31,446,235 $ 35,714,897
Minority Interest Adjustment (3) Square feet expiring (1) 158,055 sf 66,253 sf 6,492 sf sf
Full service St-Line rent (2) $ 5,213,180 $ 2,211,191 $ 220,645 $ --
Cornerstone Portfolio Square feet expiring (1) (3) 2,915,259 sf 1,971,677 sf 884,431 sf 1,089,878 sf
Full service St-Line rent (2)(3) $ 88,681,142 $ 62,073,864 $ 31,225,590 $ 35,714,897
Full service St-Line rent per sq. ft. $ 30.42 $ 31.48 $ 35.31 $ 32.77
% Full service St-Lined rent 15.92% 11.14% 5.61% 6.41%
No. of tenant leases expiring (4) 281 209 71 45
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
BOSTON, MASSACHUSETTS Square feet expiring (1) 610,558 sf 228,127 sf 93,555 sf 35,537 sf
Full service St-Line rent (2) $ 23,851,122 $ 7,761,388 $ 3,283,925 $ 1,165,222
Minority Interest Adjustment (3) Square feet expiring (1) 39,375 sf 1,367 sf sf sf
Full service St-Line rent (2) $ 1,595,027 $ 44,116 $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 571,183 sf 226,760 sf 93,555 sf 35,537 sf
Full service St-Line rent (2) (3) $ 22,256,094 $ 7,717,273 $ 3,283,925 $ 1,165,222
Full service St-Line rent per sq. ft. $ 38.96 $ 34.03 $ 35.10 $ 32.79
% Full service St-Lined rent 21.63% 7.50% 3.19% 1.13%
No. of tenant leases expiring (4) 19 16 5 2
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SAN MATEO COUNTY, CALIFORNIA Square feet expiring (1) 271,186 sf 363,142 sf 240,493 sf 249,794 sf
Full service St-Line rent (2) $ 10,351,608 $ 13,251,798 $ 9,282,840 $ 8,342,921
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 271,186 sf 363,142 sf 240,493 sf 249,794 sf
Full service St-Line rent (2) (3) $ 10,351,608 $ 13,251,798 $ 9,282,840 $ 8,342,921
Full service St-Line rent per sq. ft. $ 38.17 $ 36.49 $ 38.60 $ 33.40
% Full service St-Lined rent 14.11% 18.07% 12.66% 11.38%
No. of tenant leases expiring (4) 22 29 11 7
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
2009 and
Region Name Category 2007 2008 Beyond
- ------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C>
PORTFOLIO--ALL PROPERTIES TOTAL (7) Square feet expiring (1) 1,371,808 sf 1,411,835 sf 2,823,454 sf
Full service St-Line rent (2) $ 40,809,618 $ 46,865,420 $ 94,091,009
Minority Interest Adjustment (3) Square feet expiring (1) 149,916 sf 27,242 sf 133,844 sf
Full service St-Line rent (2) $ 4,246,051 $ 1,021,288 $ 5,381,085
Cornerstone Portfolio Square feet expiring (1) (3) 1,221,892 sf 1,384,593 sf 2,689,610 sf
Full service St-Line rent (2)(3) $ 36,563,567 $ 45,844,131 $ 88,709,924
Full service St-Line rent per sq. ft. $ 29.92 $ 33.11 $ 32.98
% Full service St-Lined rent 6.56% 8.23% 15.93%
No. of tenant leases expiring (4) 44 37 89
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
BOSTON, MASSACHUSETTS Square feet expiring (1) 371,161 sf 242,415 sf 524,186 sf
Full service St-Line rent (2) $ 12,148,070 $ 9,318,034 $ 21,366,755
Minority Interest Adjustment (3) Square feet expiring (1) 25,230 sf 20,605 sf 2,715 sf
Full service St-Line rent (2) $ 796,440 $ 792,033 $ 128,425
Cornerstone Portfolio Square feet expiring (1) (3) 345,931 sf 221,810 sf 521,471 sf
Full service St-Line rent (2) (3) $ 11,351,631 $ 8,526,002 $ 21,238,330
Full service St-Line rent per sq. ft. $ 32.81 $ 38.44 $ 40.73
% Full service St-Lined rent 11.03% 8.29% 20.64%
No. of tenant leases expiring (4) 14 4 7
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SAN MATEO COUNTY, CALIFORNIA Square feet expiring (1) 89,286 sf 206,046 sf 141,533 sf
Full service St-Line rent (2) $ 3,290,241 $ 7,914,478 $ 5,092,649
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 89,286 sf 206,046 sf 141,533 sf
Full service St-Line rent (2) (3) $ 3,290,241 $ 7,914,478 $ 5,092,649
Full service St-Line rent per sq. ft. $ 36.85 $ 38.41 $ 35.98
% Full service St-Lined rent 4.49% 10.79% 6.94%
No. of tenant leases expiring (4) 2 7 13
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ----------------------------------------------------------------------------------------------------------------
Region Name Category Total NRA
- ------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C>
PORTFOLIO--ALL PROPERTIES TOTAL (7) Square feet expiring (1) 18,916,365 sf 19,376,364 sf
Full service St-Line rent (2) $ 579,320,916
Minority Interest Adjustment (3) Square feet expiring (1) 687,834 sf 693,796 sf
Full service St-Line rent (2) $ 22,340,713
Cornerstone Portfolio Square feet expiring (1) (3) 18,228,531 sf 18,682,568 sf
Full service St-Line rent (2)(3) $ 556,980,203
Full service St-Line rent per sq. ft. $ 30.56
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 1,719
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
BOSTON, MASSACHUSETTS Square feet expiring (1) 2,870,576 sf 2,884,826 sf
Full service St-Line rent (2) $ 106,903,361
Minority Interest Adjustment (3) Square feet expiring (1) 105,797 sf 105,855 sf
Full service St-Line rent (2) $ 4,001,130
Cornerstone Portfolio Square feet expiring (1) (3) 2,764,779 sf 2,778,971 sf
Full service St-Line rent (2) (3) $ 102,902,231
Full service St-Line rent per sq. ft. $ 37.22
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 113
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
SAN MATEO COUNTY, CALIFORNIA Square feet expiring (1) 2,094,842 sf 2,129,392 sf
Full service St-Line rent (2) $ 73,338,484
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 2,094,842 sf 2,129,392 sf
Full service St-Line rent (2) (3) $ 73,338,484
Full service St-Line rent per sq. ft. $ 35.01
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 176
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Section IX - Page 1
<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 September 30, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Q4
Region Name Category 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EAST BAY, CALIFORNIA Square feet expiring (1) 45,255 sf 202,254 sf 187,923 sf 327,748 sf
Full service St-Line rent (2) $ 965,727 $ 4,190,407 $ 5,090,105 $ 7,567,323
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 45,255 sf 202,254 sf 187,923 sf 327,748 sf
Full service St-Line rent (2) (3) $ 965,727 $ 4,190,407 $ 5,090,105 $ 7,567,323
Full service St-Line rent per sq. ft. $ 21.34 $ 20.72 $ 27.09 $ 23.09
% Full service St-Lined rent 2.59% 11.25% 13.67% 20.32%
No. of tenant leases expiring (4) 17 30 34 31
Asking market rent per sq. ft. (5) $28.42
Operating Expenses per sq. ft. (6) $8.33
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ATLANTA, GEORGIA Square feet expiring (1) 4,372 sf 68,318 sf 195,833 sf 188,578 sf
Full service St-Line rent (2) $ 37,776 $ 1,431,905 $ 5,004,444 $ 4,220,799
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 4,372 sf 68,318 sf 195,833 sf 188,578 sf
Full service St-Line rent (2) (3) $ 37,776 $ 1,431,905 $ 5,004,444 $ 4,220,799
Full service St-Line rent per sq. ft. $ 8.64 $ 20.96 $ 25.55 $ 22.38
% Full service St-Lined rent 0.08% 3.02% 10.55% 8.90%
No. of tenant leases expiring (4) 1 19 18 13
Asking market rent per sq. ft. (5) $28.30
Operating Expenses per sq. ft. (6) $8.15
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SEATTLE, WASHINGTON Square feet expiring (1) 28,828 sf 71,676 sf 89,739 sf 246,244 sf
Full service St-Line rent (2) $ 642,435 $ 1,533,997 $ 1,982,581 $ 5,791,707
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 28,828 sf 71,676 sf 89,739 sf 246,244 sf
Full service St-Line rent (2) (3) $ 642,435 $ 1,533,997 $ 1,982,581 $ 5,791,707
Full service St-Line rent per sq. ft. $ 22.29 $ 21.40 $ 22.09 $ 23.52
% Full service St-Lined rent 1.78% 4.25% 5.50% 16.06%
No. of tenant leases expiring (4) 5 23 16 21
Asking market rent per sq. ft. (5) $37.87
Operating Expenses per sq. ft. (6) $8.41
- ------------------------------------------------------------------------- -------------------------------------------------------
Region Name Category 2003 2004 2005 2006
- ------------------------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EAST BAY, CALIFORNIA Square feet expiring (1) 150,369 sf 134,793 sf 65,497 sf 110,770 sf
Full service St-Line rent (2) $ 3,496,172 $ 3,456,799 $ 1,664,334 $ 1,743,573
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 150,369 sf 134,793 sf 65,497 sf 110,770 sf
Full service St-Line rent (2) (3) $ 3,496,172 $ 3,456,799 $ 1,664,334 $ 1,743,573
Full service St-Line rent per sq. ft. $ 23.25 $ 25.65 $ 25.41 $ 15.74
% Full service St-Lined rent 9.39% 9.28% 4.47% 4.68%
No. of tenant leases expiring (4) 22 17 2 2
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
ATLANTA, GEORGIA Square feet expiring (1) 88,700 sf 58,629 sf 21,508 sf 452,089 sf
Full service St-Line rent (2) $ 2,222,400 $ 1,683,036 $ 547,872 $ 15,691,056
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 88,700 sf 58,629 sf 21,508 sf 452,089 sf
Full service St-Line rent (2) (3) $ 2,222,400 $ 1,683,036 $ 547,872 $ 15,691,056
Full service St-Line rent per sq. ft. $ 25.06 $ 28.71 $ 25.47 $ 34.71
% Full service St-Lined rent 4.69% 3.55% 1.16% 33.09%
No. of tenant leases expiring (4) 14 10 5 4
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SEATTLE, WASHINGTON Square feet expiring (1) 370,245 sf 221,344 sf 40,374 sf 13,471 sf
Full service St-Line rent (2) $ 8,933,056 $ 6,053,458 $ 786,988 $ 349,003
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 370,245 sf 221,344 sf 40,374 sf 13,471 sf
Full service St-Line rent (2) (3) $ 8,933,056 $ 6,053,458 $ 786,988 $ 349,003
Full service St-Line rent per sq. ft. $ 24.13 $ 27.35 $ 19.49 $ 25.91
% Full service St-Lined rent 24.77% 16.78% 2.18% 0.97%
No. of tenant leases expiring (4) 29 20 9 4
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------
2009 and
Region Name Category 2007 2008 Beyond
- ------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C>
EAST BAY, CALIFORNIA Square feet expiring (1) 134,401 sf 211,000 sf 9,530 sf
Full service St-Line rent (2) $ 3,067,679 $ 5,993,261 $ --
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 134,401 sf 211,000 sf 9,530 sf
Full service St-Line rent (2) (3) $ 3,067,679 $ 5,993,261 $ --
Full service St-Line rent per sq. ft. $ 22.82 $ 28.40 $ --
% Full service St-Lined rent 8.24% 16.10% 0.00%
No. of tenant leases expiring (4) 6 1 7
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
ATLANTA, GEORGIA Square feet expiring (1) sf 495,739 sf 32,186 sf
Full service St-Line rent (2) $ -- $ 15,839,172 $ 735,427
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) sf 495,739 sf 32,186 sf
Full service St-Line rent (2) (3) $ -- $ 15,839,172 $ 735,427
Full service St-Line rent per sq. ft. $ -- $ 31.95 $ 22.85
% Full service St-Lined rent 0.00% 33.41% 1.55%
No. of tenant leases expiring (4) 0 4 2
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
SEATTLE, WASHINGTON Square feet expiring (1) 137,888 sf 366 sf 231,522 sf
Full service St-Line rent (2) $ 3,384,388 $ 9,842 $ 6,603,422
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 137,888 sf 366 sf 231,522 sf
Full service St-Line rent (2) (3) $ 3,384,388 $ 9,842 $ 6,603,422
Full service St-Line rent per sq. ft. $ 24.54 $ 26.89 $ 28.52
% Full service St-Lined rent 9.38% 0.03% 18.31%
No. of tenant leases expiring (4) 1 1 4
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ----------------------------------------------------------------------------------------------------------------
Region Name Category Total NRA
- ------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C>
EAST BAY, CALIFORNIA Square feet expiring (1) 1,579,540 sf 1,601,332 sf
Full service St-Line rent (2) $ 37,235,380
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 1,579,540 sf 1,601,332 sf
Full service St-Line rent (2) (3) $ 37,235,380
Full service St-Line rent per sq. ft. $ 23.57
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 169
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ATLANTA, GEORGIA Square feet expiring (1) 1,605,952 sf 1,647,986 sf
Full service St-Line rent (2) $ 47,413,887
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 1,605,952 sf 1,647,986 sf
Full service St-Line rent (2) (3) $ 47,413,887
Full service St-Line rent per sq. ft. $ 29.52
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 90
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
SEATTLE, WASHINGTON Square feet expiring (1) 1,451,697 sf 1,469,741 sf
Full service St-Line rent (2) $ 36,070,877
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 1,451,697 sf 1,469,741 sf
Full service St-Line rent (2) (3) $ 36,070,877
Full service St-Line rent per sq. ft. $ 24.85
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 133
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
</TABLE>
Section IX - Page 2
<PAGE>
CORNERSTONE PROPERTIES INC.
LEASE EXPIRATION SCHEDULE
The following table sets forth certain categories of information relating to
lease expiration for all of the Properties owned as of September 30, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Region Q4
Name Category 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SANTA CLARA COUNTY, CALIFORNIA (7) Square feet expiring (1) 12,634 sf 106,311 sf 169,514 sf 83,756 sf
Full service St-Line rent (2) $ 375,944 $ 2,882,025 $ 4,884,450 $ 2,555,214
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 12,634 sf 106,311 sf 169,514 sf 83,756 sf
Full service St-Line rent (2) (3) $ 375,944 $ 2,882,025 $ 4,884,450 $ 2,555,214
Full service St-Line rent per sq. ft. $ 29.76 $ 27.11 $ 28.81 $ 30.51
% Full service St-Lined rent 1.08% 8.30% 14.07% 7.36%
No. of tenant leases expiring (4) 8 38 34 29
Asking market rent per sq. ft. (5) $38.06
Operating Expenses per sq. ft. (6) $8.82
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
DENVER, COLORADO Square feet expiring (1) 35,092 sf 121,319 sf 60,785 sf 140,723 sf
Full service St-Line rent (2) $ 555,139 $ 1,848,816 $ 1,049,018 $ 2,235,980
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 35,092 sf 121,319 sf 60,785 sf 140,723 sf
Full service St-Line rent (2) (3) $ 555,139 $ 1,848,816 $ 1,049,018 $ 2,235,980
Full service St-Line rent per sq. ft. $ 15.82 $ 15.24 $ 17.26 $ 15.89
% Full service St-Lined rent 2.45% 8.16% 4.63% 9.86%
No. of tenant leases expiring (4) 10 6 7 15
Asking market rent per sq. ft. (5) $29.40
Operating Expenses per sq. ft. (6) $6.69
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SAN FRANCISCO, CALIFORNIA Square feet expiring (1) 47,287 sf 78,013 sf 95,963 sf 118,757 sf
Full service St-Line rent (2) $1,425,142 $ 1,877,580 $ 2,272,296 $ 3,269,241
Minority Interest Adjustment (3) Square feet expiring (1) 12,122 sf 25,051 sf 19,772 sf 37,421 sf
Full service St-Line rent (2) $ 302,355 $ 594,360 $ 492,164 $ 973,634
Cornerstone Portfolio Square feet expiring (1) (3) 35,165 sf 52,962 sf 76,192 sf 81,336 sf
Full service St-Line rent (2) (3) $1,122,787 $ 1,283,220 $ 1,780,132 $ 2,295,608
Full service St-Line rent per sq. ft. $ 31.93 $ 24.23 $ 23.36 $ 28.22
% Full service St-Lined rent 4.51% 5.16% 7.16% 9.23%
No. of tenant leases expiring (4) 14 18 19 25
Asking market rent per sq. ft. (5) $43.57
Operating Expenses per sq. ft. (6) $12.04
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Region
Name Category 2003 2004 2005 2006
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SANTA CLARA COUNTY, CALIFORNIA (7) Square feet expiring (1) 193,302 sf 122,994 sf 21,642 sf 52,249 sf
Full service St-Line rent (2) $ 7,191,851 $ 3,715,418 $ 747,082 $ 1,582,561
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 193,302 sf 122,994 sf 21,642 sf 52,249 sf
Full service St-Line rent (2) (3) $ 7,191,851 $ 3,715,418 $ 747,082 $ 1,582,561
Full service St-Line rent per sq. ft. $ 37.21 $ 30.21 $ 34.52 $ 30.29
% Full service St-Lined rent 20.71% 10.70% 2.15% 4.56%
No. of tenant leases expiring (4) 23 21 4 5
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DENVER, COLORADO Square feet expiring (1) 182,284 sf 140,344 sf sf sf
Full service St-Line rent (2) $ 3,569,775 $ 2,737,144 $ -- $ --
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 182,284 sf 140,344 sf sf sf
Full service St-Line rent (2) (3) $ 3,569,775 $ 2,737,144 $ -- $ --
Full service St-Line rent per sq. ft. $ 19.58 $ 19.50 $ -- $ --
% Full service St-Lined rent 15.75% 12.07% 0.00% 0.00%
No. of tenant leases expiring (4) 6 6 0 0
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SAN FRANCISCO, CALIFORNIA Square feet expiring (1) 286,529 sf 159,472 sf 50,032 sf sf
Full service St-Line rent (2) $ 8,493,548 $ 6,722,337 $ 2,095,754 $ --
Minority Interest Adjustment (3) Square feet expiring (1) 71,914 sf 24,820 sf 2,201 sf sf
Full service St-Line rent (2) $ 2,094,221 $ 844,308 $ 76,990 $ --
Cornerstone Portfolio Square feet expiring (1) (3) 214,615 sf 134,652 sf 47,832 sf sf
Full service St-Line rent (2) (3) $ 6,399,327 $ 5,878,030 $ 2,018,764 $ --
Full service St-Line rent per sq. ft. $ 29.82 $ 43.65 $ 42.21 $ --
% Full service St-Lined rent 25.73% 23.63% 8.12% 0.00%
No. of tenant leases expiring (4) 43 15 6 0
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Region 2009 and
Name Category 2007 2008 Beyond
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SANTA CLARA COUNTY, CALIFORNIA (7) Square feet expiring (1) 2,780 sf 33,908 sf 340,108 sf
Full service St-Line rent (2) $ 88,963 $ 676,440 $ 10,022,325
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 2,780 sf 33,908 sf 340,108 sf
Full service St-Line rent (2) (3) $ 88,963 $ 676,440 $ 10,022,325
Full service St-Line rent per sq. ft. $ 32.00 $ 19.95 $ 29.47
% Full service St-Lined rent 0.26% 1.95% 28.86%
No. of tenant leases expiring (4) 1 4 12
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DENVER, COLORADO Square feet expiring (1) 75,677 sf sf 401,735 sf
Full service St-Line rent (2) $ 1,621,691 $ -- $ 9,052,248
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 75,677 sf sf 401,735 sf
Full service St-Line rent (2) (3) $ 1,621,691 $ -- $ 9,052,248
Full service St-Line rent per sq. ft. $ 21.43 $ -- $ 22.53
% Full service St-Lined rent 7.15% 0.00% 39.93%
No. of tenant leases expiring (4) 2 0 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
SAN FRANCISCO, CALIFORNIA Square feet expiring (1) 249,373 sf 19,911 sf 10,656 sf
Full service St-Line rent (2) $ 6,899,223 $ 687,766 $ 291,138
Minority Interest Adjustment (3) Square feet expiring (1) 124,687 sf 6,637 sf 3,795 sf
Full service St-Line rent (2) $ 3,449,611 $ 229,255 $ 102,674
Cornerstone Portfolio Square feet expiring (1) (3) 124,687 sf 13,274 sf 6,862 sf
Full service St-Line rent (2) (3) $ 3,449,611 $ 458,511 $ 188,463
Full service St-Line rent per sq. ft. $ 27.67 $ 34.54 $ 27.47
% Full service St-Lined rent 13.87% 1.84% 0.76%
No. of tenant leases expiring (4) 1 1 4
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Region
Name Category Total NRA
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SANTA CLARA COUNTY, CALIFORNIA (7) Square feet expiring (1) 1,139,198 sf 1,175,786 sf
Full service St-Line rent (2) $ 34,722,275
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 1,139,198 sf 1,175,786 sf
Full service St-Line rent (2) (3) $ 34,722,275
Full service St-Line rent per sq. ft. $ 30.48
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 179
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
DENVER, COLORADO Square feet expiring (1) 1,157,959 sf 1,187,852 sf
Full service St-Line rent (2) $ 22,669,812
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 1,157,959 sf 1,187,852 sf
Full service St-Line rent (2) (3) $ 22,669,812
Full service St-Line rent per sq. ft. $ 19.58
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 53
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
SAN FRANCISCO, CALIFORNIA Square feet expiring (1) 1,115,993 sf 1,132,219 sf
Full service St-Line rent (2) $ 34,034,025
Minority Interest Adjustment (3) Square feet expiring (1) 328,418 sf 333,611 sf
Full service St-Line rent (2) $ 9,159,572
Cornerstone Portfolio Square feet expiring (1) (3) 787,575 sf 798,608 sf
Full service St-Line rent (2) (3) $ 24,874,452
Full service St-Line rent per sq. ft. $ 31.58
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 146
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Section IX - Page 3
<PAGE>
CORNERSTONE PROPERTIES INC.
LEASE EXPIRATION SCHEDULE
The following table sets forth certain categories of information relating to
lease expiration for all of the Properties owned as of September 30, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Q4
Region Name Category 1999 2000 2001 2002
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MINNEAPOLIS, MINNESOTA Square feet expiring (1) 4,014 sf 90,759 sf 7,752 sf 51,959 sf
Full service St-Line rent (2) $ 49,595 $ 3,041,205 $ 256,785 $ 1,220,380
Minority Interest Adjustment (3) Square feet expiring (1) 914 sf 20,657 sf 1,764 sf 11,826 sf
Full service St-Line rent (2) $ 11,288 $ 692,178 $ 58,444 $ 277,758
Cornerstone Portfolio Square feet expiring (1) (3) 3,100 sf 70,102 sf 5,988 sf 40,133 sf
Full service St-Line rent (2) (3) $ 38,307 $ 2,349,027 $ 198,341 $ 942,622
Full service St-Line rent per sq. ft. $ 12.36 $ 33.51 $ 33.13 $ 23.49
% Full service St-Lined rent 0.12% 7.54% 0.64% 3.03%
No. of tenant leases expiring (4) 4 3 4 3
Asking market rent per sq. ft. (5) $33.60
Operating Expenses per sq. ft. (6) $15.02
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
WASHINGTON, D.C./ALEXANDRIA, VIRGINIA Square feet expiring (1) 15,948 sf 60,423 sf 83,876 sf 59,327 sf
Full service St-Line rent (2) $ 302,040 $ 1,998,940 $ 3,216,269 $ 1,467,241
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 15,948 sf 60,423 sf 83,876 sf 59,327 sf
Full service St-Line rent (2) (3) $ 302,040 $ 1,998,940 $ 3,216,269 $ 1,467,241
Full service St-Line rent per sq. ft. $ 18.94 $ 33.08 $ 38.35 $ 24.73
% Full service St-Lined rent 0.82% 5.44% 8.75% 3.99%
No. of tenant leases expiring (4) 9 11 14 8
Asking market rent per sq. ft. (5) $38.91
Operating Expenses per sq. ft. (6) $12.37
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SUBURBAN CHICAGO, ILLINOIS Square feet expiring (1) 26,268 sf 90,610 sf 57,221 sf 101,820 sf
Full service St-Line rent (2) $ 745,359 $ 2,730,854 $ 1,898,623 $ 2,854,694
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 26,268 sf 90,610 sf 57,221 sf 101,820 sf
Full service St-Line rent (2) (3) $ 745,359 $ 2,730,854 $ 1,898,623 $ 2,854,694
Full service St-Line rent per sq. ft. $ 28.38 $ 30.14 $ 33.18 $ 28.04
% Full service St-Lined rent 2.72% 9.98% 6.94% 10.43%
No. of tenant leases expiring (4) 4 12 11 16
Asking market rent per sq. ft. (5) $28.45
Operating Expenses per sq. ft. (6) $9.25
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Region Name Category 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MINNEAPOLIS, MINNESOTA Square feet expiring (1) 205,473 sf 176,039 sf 18,856 sf sf
Full service St-Line rent (2) $ 6,695,659 $ 5,811,811 $ 631,174 $ --
Minority Interest Adjustment (3) Square feet expiring (1) 46,766 sf 40,066 sf 4,292 sf sf
Full service St-Line rent (2) $ 1,523,932 $ 1,322,768 $ 143,655 $ --
Cornerstone Portfolio Square feet expiring (1) (3) 158,707 sf 135,973 sf 14,564 sf sf
Full service St-Line rent (2) (3) $ 5,171,727 $ 4,489,043 $ 487,519 $ --
Full service St-Line rent per sq. ft. $ 32.59 $ 33.01 $ 33.47 $ --
% Full service St-Lined rent 16.60% 14.41% 1.56% 0.00%
No. of tenant leases expiring (4) 3 10 1 0
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
WASHINGTON, D.C./ALEXANDRIA, VIRGINIA Square feet expiring (1) 60,016 sf 44,287 sf 196,240 sf 68,929 sf
Full service St-Line rent (2) $ 1,812,158 $ 1,695,652 $ 8,333,012 $ 3,326,592
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 60,016 sf 44,287 sf 196,240 sf 68,929 sf
Full service St-Line rent (2) (3) $ 1,812,158 $ 1,695,652 $ 8,333,012 $ 3,326,592
Full service St-Line rent per sq. ft. $ 30.19 $ 38.29 $ 42.46 $ 48.26
% Full service St-Lined rent 4.93% 4.62% 22.68% 9.05%
No. of tenant leases expiring (4) 8 7 8 3
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SUBURBAN CHICAGO, ILLINOIS Square feet expiring (1) 207,335 sf 65,677 sf 9,968 sf 17,848 sf
Full service St-Line rent (2) $ 6,139,109 $ 1,862,970 $ 292,430 $ 487,221
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ -- $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 207,335 sf 65,677 sf 9,968 sf 17,848 sf
Full service St-Line rent (2) (3) $ 6,139,109 $ 1,862,970 $ 292,430 $ 487,221
Full service St-Line rent per sq. ft. $ 29.61 $ 28.37 $ 29.34 $ 27.30
% Full service St-Lined rent 22.44% 6.81% 1.07% 1.78%
No. of tenant leases expiring (4) 19 9 2 3
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
2000 and
Region Name Category 2007 2008 Beyond
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MINNEAPOLIS, MINNESOTA Square feet expiring (1) sf sf 559,468 sf
Full service St-Line rent (2) $ -- $ -- $ 22,627,355
Minority Interest Adjustment (3) Square feet expiring (1) sf sf 127,335 sf
Full service St-Line rent (2) $ -- $ -- $ 5,149,986
Cornerstone Portfolio Square feet expiring (1) (3) sf sf 432,133 sf
Full service St-Line rent (2) (3) $ -- $ -- $ 17,477,369
Full service St-Line rent per sq. ft. $ -- $ -- $ 40.44
% Full service St-Lined rent 0.00% 0.00% 56.10%
No. of tenant leases expiring (4) 0 0 3
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
WASHINGTON, D.C./ALEXANDRIA, VIRGINIA Square feet expiring (1) 69,661 sf 36,561 sf 281,040 sf
Full service St-Line rent (2) $ 1,878,660 $ 1,187,340 $ 11,522,128
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 69,661 sf 36,561 sf 281,040 sf
Full service St-Line rent (2) (3) $ 1,878,660 $ 1,187,340 $ 11,522,128
Full service St-Line rent per sq. ft. $ 26.97 $ 32.48 $ 41.00
% Full service St-Lined rent 5.11% 3.23% 31.36%
No. of tenant leases expiring (4) 6 6 13
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SUBURBAN CHICAGO, ILLINOIS Square feet expiring (1) 89,129 sf 110,201 sf 163,590 sf
Full service St-Line rent (2) $ 2,413,008 $ 3,606,461 $ 4,332,312
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ -- $ -- $ --
Cornerstone Portfolio Square feet expiring (1) (3) 89,129 sf 110,201 sf 163,590 sf
Full service St-Line rent (2) (3) $ 2,413,008 $ 3,606,461 $ 4,332,312
Full service St-Line rent per sq. ft. $ 27.07 $ 32.73 $ 26.48
% Full service St-Lined rent 8.82% 13.18% 15.83%
No. of tenant leases expiring (4) 4 2 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Region Name Category Total NRA
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MINNEAPOLIS, MINNESOTA Square feet expiring (1) 1,114,320 sf 1,117,439 sf
Full service St-Line rent (2) $ 40,333,964
Minority Interest Adjustment (3) Square feet expiring (1) 253,619 sf 254,329 sf
Full service St-Line rent (2) $ 9,180,010
Cornerstone Portfolio Square feet expiring (1) (3) 860,701 sf 863,110 sf
Full service St-Line rent (2) (3) $ 31,153,953
Full service St-Line rent per sq. ft. $ 36.20
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 31
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
WASHINGTON, D.C./ALEXANDRIA, VIRGINIA Square feet expiring (1) 976,308 sf 993,411 sf
Full service St-Line rent (2) $ 36,740,032
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 976,308 sf 993,411 sf
Full service St-Line rent (2) (3) $ 36,740,032
Full service St-Line rent per sq. ft. $ 37.63
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 93
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
SUBURBAN CHICAGO, ILLINOIS Square feet expiring (1) 939,667 sf 976,079 sf
Full service St-Line rent (2) $ 27,363,039
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ --
Cornerstone Portfolio Square feet expiring (1) (3) 939,667 sf 976,079 sf
Full service St-Line rent (2) (3) $ 27,363,039
Full service St-Line rent per sq. ft. $ 29.12
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 83
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Section IX - Page 4
<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 September 30, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Q4
Region Name Category 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA Square feet expiring (1) 24,624 sf 78,021 sf 94,728 sf 183,355 sf
Full service St-Line rent (2) $ 622,343 $ 2,010,961 $ 4,014,095 $ 4,955,180
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 24,624 sf 78,021 sf 94,728 sf 183,355 sf
Full service St-Line rent (2) (3) $ 622,343 $ 2,010,961 $ 4,014,095 $ 4,955,180
Full service St-Line rent per sq. ft. $ 25.27 $ 25.77 $ 42.37 $ 27.03
% Full service St-Lined rent 2.59% 8.37% 16.71% 20.63%
No. of tenant leases expiring (4) 13 28 21 21
Asking market rent per sq. ft. (5) $34.41
Operating Expenses per sq. ft. (6) $11.71
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
ORANGE COUNTY, CALIFORNIA Square feet expiring (1) 46,226 sf 101,550 sf 93,529 sf 199,475 sf
Full service St-Line rent (2) $1,049,341 $ 2,553,346 $ 2,064,270 $ 4,628,387
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 46,226 sf 101,550 sf 93,529 sf 199,475 sf
Full service St-Line rent (2) (3) $1,049,341 $ 2,553,346 $ 2,064,270 $ 4,628,387
Full service St-Line rent per sq. ft. $ 22.70 $ 25.14 $ 22.07 $ 23.20
% Full service St-Lined rent 6.75% 16.43% 13.28% 29.78%
No. of tenant leases expiring (4) 11 16 14 28
Asking market rent per sq. ft. (5) $27.23
Operating Expenses per sq. ft. (6) $8.65
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SAN DIEGO, CALIFORNIA Square feet expiring (1) 16,633 sf 13,745 sf 39,388 sf 46,706 sf
Full service St-Line rent (2) $ 364,595 $ 276,438 $ 635,750 $ 907,141
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 16,633 sf 13,745 sf 39,388 sf 46,706 sf
Full service St-Line rent (2) (3) $ 364,595 $ 276,438 $ 635,750 $ 907,141
Full service St-Line rent per sq. ft. $ 21.92 $ 20.11 $ 16.14 $ 19.42
% Full service St-Lined rent 4.63% 3.51% 8.07% 11.52%
No. of tenant leases expiring (4) 6 4 7 8
Asking market rent per sq. ft. (5) $23.77
Operating Expenses per sq. ft. (6) $7.75
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Region Name Category 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA Square feet expiring (1) 69,820 sf 78,787 sf 76,085 sf 18,261 sf
Full service St-Line rent (2) $ 1,927,696 $ 2,229,394 $ 2,108,977 $ 617,629
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 69,820 sf 78,787 sf 76,085 sf 18,261 sf
Full service St-Line rent (2) (3) $ 1,927,696 $ 2,229,394 $ 2,108,977 $ 617,629
Full service St-Line rent per sq. ft. $ 27.61 $ 28.30 $ 27.72 $ 33.82
% Full service St-Lined rent 8.02% 9.28% 8.78% 2.57%
No. of tenant leases expiring (4) 20 17 11 6
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
ORANGE COUNTY, CALIFORNIA Square feet expiring (1) 86,291 sf 33,182 sf 20,089 sf 22,911 sf
Full service St-Line rent (2) $ 2,093,624 $ 780,606 $ 463,857 $ 606,905
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 86,291 sf 33,182 sf 20,089 sf 22,911 sf
Full service St-Line rent (2) (3) $ 2,093,624 $ 780,606 $ 463,857 $ 606,905
Full service St-Line rent per sq. ft. $ 24.26 $ 23.52 $ 23.09 $ 26.49
% Full service St-Lined rent 13.47% 5.02% 2.98% 3.91%
No. of tenant leases expiring (4) 18 5 2 2
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SAN DIEGO, CALIFORNIA Square feet expiring (1) 158,206 sf 126,573 sf sf sf
Full service St-Line rent (2) $ 3,061,031 $ 2,631,836 $ - $ -
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 158,206 sf 126,573 sf sf sf
Full service St-Line rent (2) (3) $ 3,061,031 $ 2,631,836 $ - $ -
Full service St-Line rent per sq. ft. $ 19.35 $ 20.79 $ - $ -
% Full service St-Lined rent 38.86% 33.41% 0.00% 0.00%
No. of tenant leases expiring (4) 15 12 0 0
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
2009 and
Region Name Category 2007 2008 Beyond
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA Square feet expiring (1) 60,460 sf 44,688 sf 74,892 sf
Full service St-Line rent (2) $ 2,759,430 $ 1,357,144 $ 1,420,677
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 60,460 sf 44,688 sf 74,892 sf
Full service St-Line rent (2) (3) $ 2,759,430 $ 1,357,144 $ 1,420,677
Full service St-Line rent per sq. ft. $ 45.64 $ 30.37 $ 18.97
% Full service St-Lined rent 11.49% 5.65% 5.91%
No. of tenant leases expiring (4) 3 6 9
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
ORANGE COUNTY, CALIFORNIA Square feet expiring (1) sf 11,000 sf 45,333 sf
Full service St-Line rent (2) $ - $ 275,482 $ 1,024,573
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) sf 11,000 sf 45,333 sf
Full service St-Line rent (2) (3) $ - $ 275,482 $ 1,024,573
Full service St-Line rent per sq. ft. $ - $ 25.04 $ 22.60
% Full service St-Lined rent 0.00% 1.77% 6.59%
No. of tenant leases expiring (4) 0 1 6
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
SAN DIEGO, CALIFORNIA Square feet expiring (1) sf sf 2,035 sf
Full service St-Line rent (2) $ - $ - $ -
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) sf sf 2,035 sf
Full service St-Line rent (2) (3) $ - $ - $ -
Full service St-Line rent per sq. ft. $ - $ - $ -
% Full service St-Lined rent 0.00% 0.00% 0.00%
No. of tenant leases expiring (4) 0 0 2
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Region Name Category Total NRA
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA Square feet expiring (1) 803,721 sf 846,988 sf
Full service St-Line rent (2) $ 24,023,527
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ -
Cornerstone Portfolio Square feet expiring (1) (3) 803,721 sf 846,988 sf
Full service St-Line rent (2) (3) $ 24,023,527
Full service St-Line rent per sq. ft. $ 29.89
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 155
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
ORANGE COUNTY, CALIFORNIA Square feet expiring (1) 659,586 sf 710,115 sf
Full service St-Line rent (2) $ 15,540,390
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ -
Cornerstone Portfolio Square feet expiring (1) (3) 659,586 sf 710,115 sf
Full service St-Line rent (2) (3) $ 15,540,390
Full service St-Line rent per sq. ft. $ 23.56
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 103
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
SAN DIEGO, CALIFORNIA Square feet expiring (1) 403,286 sf 420,502 sf
Full service St-Line rent (2) $ 7,876,792
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ -
Cornerstone Portfolio Square feet expiring (1) (3) 403,286 sf 420,502 sf
Full service St-Line rent (2) (3) $ 7,876,792
Full service St-Line rent per sq. ft. $ 19.53
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 54
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Section IX - Page 5
<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 September 30, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Q4
Region Name Category 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOS ANGELES, CALIFORNIA Square feet expiring (1) 3,131 sf 52,383 sf 68,367 sf 18,385 sf
Full service St-Line rent (2) $ 86,534 $ 1,607,683 $ 1,804,019 $ 457,940
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 3,131 sf 52,383 sf 68,367 sf 18,385 sf
Full service St-Line rent (2) (3) $ 86,534 $ 1,607,683 $ 1,804,019 $ 457,940
Full service St-Line rent per sq. ft. $ 27.64 $ 30.69 $ 26.39 $ 24.91
% Full service St-Lined rent 1.22% 22.67% 25.44% 6.46%
No. of tenant leases expiring (4) 1 5 6 3
Asking market rent per sq. ft. (5) $27.16
Operating Expenses per sq. ft. (6) $9.46
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NEW YORK CITY, NEW YORK Square feet expiring (1) 12,021 sf 26,517 sf 127,306 sf 48,569 sf
Full service St-Line rent (2) $ 557,340 $ 1,231,926 $ 7,219,637 $ 2,485,855
Minority Interest Adjustment (3) Square feet expiring (1) sf 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 48,569 sf
Full service St-Line rent (2) (3) $ 557,340 $ 1,231,926 $ 7,219,637 $ 2,485,855
Full service St-Line rent per sq. ft. $ 46.36 $ 46.46 $ 56.71 $ 51.18
% Full service St-Lined rent 2.82% 6.22% 36.47% 12.56%
No. of tenant leases expiring (4) 4 9 13 12
Asking market rent per sq. ft. (5) $57.75
Operating Expenses per sq. ft. (6) $22.44
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CONEJO VALLEY (VENTURA), CALIFORNIA Square feet expiring (1) 2,793 sf 59,622 sf 14,300 sf 70,168 sf
Full service St-Line rent (2) $ 57,116 $ 1,407,770 $ 327,817 $ 1,569,494
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 2,793 sf 59,622 sf 14,300 sf 70,168 sf
Full service St-Line rent (2) (3) $ 57,116 $ 1,407,770 $ 327,817 $ 1,569,494
Full service St-Line rent per sq. ft. $ 20.45 $ 23.61 $ 22.92 $ 22.37
% Full service St-Lined rent 1.16% 28.70% 6.68% 32.00%
No. of tenant leases expiring (4) 1 5 2 3
Asking market rent per sq. ft. (5) $25.21
Operating Expenses per sq. ft. (6) $8.03
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Region Name Category 2003 2004 2005 2006
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOS ANGELES, CALIFORNIA Square feet expiring (1) 11,082 sf 34,025 sf sf 11,834 sf
Full service St-Line rent (2) $ 318,317 $ 1,002,915 $ - $ 407,092
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 11,082 sf 34,025 sf sf 11,834 sf
Full service St-Line rent (2) (3) $ 318,317 $ 1,002,915 $ - $ 407,092
Full service St-Line rent per sq. ft. $ 28.72 $ 29.48 $ - $ 34.40
% Full service St-Lined rent 4.49% 14.14% 0.00% 5.74%
No. of tenant leases expiring (4) 3 4 0 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
NEW YORK CITY, NEW YORK Square feet expiring (1) 50,590 sf 41,213 sf 11,566 sf 27,074 sf
Full service St-Line rent (2) $ 2,165,719 $ 2,698,624 $ 644,303 $ 1,173,698
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 50,590 sf 41,213 sf 11,566 sf 27,074 sf
Full service St-Line rent (2) (3) $ 2,165,719 $ 2,698,624 $ 644,303 $ 1,173,698
Full service St-Line rent per sq. ft. $ 42.81 $ 65.48 $ 55.71 $ 43.35
% Full service St-Lined rent 10.94% 13.63% 3.25% 5.93%
No. of tenant leases expiring (4) 8 8 2 5
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
CONEJO VALLEY (VENTURA), CALIFORNIA Square feet expiring (1) 38,759 sf 6,305 sf 12,126 sf 9,111 sf
Full service St-Line rent (2) $ 923,870 $ 128,023 $ 269,825 $ 221,423
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 38,759 sf 6,305 sf 12,126 sf 9,111 sf
Full service St-Line rent (2) (3) $ 923,870 $ 128,023 $ 269,825 $ 221,423
Full service St-Line rent per sq. ft. $ 23.84 $ 20.30 $ 22.25 $ 24.30
% Full service St-Lined rent 18.83% 2.61% 5.50% 4.51%
No. of tenant leases expiring (4) 4 2 1 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
2009 and
Region Name Category 2007 2008 Beyond
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOS ANGELES, CALIFORNIA Square feet expiring (1) 47,562 sf sf 1,219 sf
Full service St-Line rent (2) $ 1,406,442 $ - $ -
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 47,562 sf sf 1,219 sf
Full service St-Line rent (2) (3) $ 1,406,442 $ - $ -
Full service St-Line rent per sq. ft. $ 29.57 $ - $ -
% Full service St-Lined rent 19.83% 0.00% 0.00%
No. of tenant leases expiring (4) 1 0 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
NEW YORK CITY, NEW YORK Square feet expiring (1) 32,929 sf sf 207 sf
Full service St-Line rent (2) $ 1,620,918 $ - $ -
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 32,929 sf sf 207 sf
Full service St-Line rent (2) (3) $ 1,620,918 $ - $ -
Full service St-Line rent per sq. ft. $ 49.22 $ - $ -
% Full service St-Lined rent 8.19% 0.00% 0.00%
No. of tenant leases expiring (4) 2 0 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
CONEJO VALLEY (VENTURA), CALIFORNIA Square feet expiring (1) sf sf 245 sf
Full service St-Line rent (2) $ - $ - $ -
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf
Full service St-Line rent (2) $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) sf sf 245 sf
Full service St-Line rent (2) (3) $ - $ - $ -
Full service St-Line rent per sq. ft. $ - $ - $ -
% Full service St-Lined rent 0.00% 0.00% 0.00%
No. of tenant leases expiring (4) 0 0 1
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Region Name Category Total NRA
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LOS ANGELES, CALIFORNIA Square feet expiring (1) 247,988 sf 259,897 sf
Full service St-Line rent (2) $ 7,090,942
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ -
Cornerstone Portfolio Square feet expiring (1) (3) 247,988 sf 259,897 sf
Full service St-Line rent (2) (3) $ 7,090,942
Full service St-Line rent per sq. ft. $ 28.59
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 25
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
NEW YORK CITY, NEW YORK Square feet expiring (1) 377,992 sf 378,965 sf
Full service St-Line rent (2) $ 19,798,020
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ -
Cornerstone Portfolio Square feet expiring (1) (3) 377,992 sf 378,965 sf
Full service St-Line rent (2) (3) $ 19,798,020
Full service St-Line rent per sq. ft. $ 52.38
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 64
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
CONEJO VALLEY (VENTURA), CALIFORNIA Square feet expiring (1) 213,429 sf 234,255 sf
Full service St-Line rent (2) $ 4,905,339
Minority Interest Adjustment (3) Square feet expiring (1) sf sf
Full service St-Line rent (2) $ -
Cornerstone Portfolio Square feet expiring (1) (3) 213,429 sf 234,255 sf
Full service St-Line rent (2) (3) $ 4,905,339
Full service St-Line rent per sq. ft. $ 22.98
% Full service St-Lined rent 100.00%
No. of tenant leases expiring (4) 20
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Section IX - Page 6
<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 September 30, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Q4
Region Name Category 1999 2000 2001 2002
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER REGIONS Square feet expiring (1) 12,017 sf 9,900 sf 68,655 sf 9,811 sf
Full service St-Line rent (2) $ 232,834 $ 185,026 $ 1,409,083 $ 199,607
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 12,017 sf 9,900 sf 68,655 sf 9,811 sf
Full service St-Line rent (2) (3) $ 232,834 $ 185,026 $ 1,409,083 $ 199,607
Full service St-Line rent per sq. ft. $ 19.38 $ 18.69 $ 20.52 $ 20.35
% Full service St-Lined rent 7.14% 5.67% 43.21% 6.12%
No. of tenant leases expiring (4) 3 6 8 4
Asking market rent per sq. ft. (5) $19.22
Operating Expenses per sq. ft. (6) $7.37
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Region Name Category 2003 2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER REGIONS Square feet expiring (1) 32,569 sf 2,997 sf 12,892 sf sf
Full service St-Line rent (2) $ 647,607 $ 61,846 $ 293,862 $ -
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 32,569 sf 2,997 sf 12,892 sf sf
Full service St-Line rent (2) (3) $ 647,607 $ 61,846 $ 293,862 $ -
Full service St-Line rent per sq. ft. $ 19.88 $ 20.64 $ 22.79 $ -
% Full service St-Lined rent 19.86% 1.90% 9.01% 0.00%
No. of tenant leases expiring (4) 5 1 2 0
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
2009 and
Region Name Category 2007 2008 Beyond Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER REGIONS Square feet expiring (1) 11,501 sf sf 3,969 sf 164,311 sf
Full service St-Line rent (2) $ 230,905 $ - $ - $ 3,260,770
Minority Interest Adjustment (3) Square feet expiring (1) sf sf sf sf
Full service St-Line rent (2) $ - $ - $ - $ -
Cornerstone Portfolio Square feet expiring (1) (3) 11,501 sf sf 3,969 sf 164,311 sf
Full service St-Line rent (2) (3) $ 230,905 $ - $ - $ 3,260,770
Full service St-Line rent per sq. ft. $ 20.08 $ - $ - $ 19.85
% Full service St-Lined rent 7.08% 0.00% 0.00% 100.00%
No. of tenant leases expiring (4) 1 0 2 32
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------
Region Name Category NRA
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER REGIONS Square feet expiring (1) 209,579 sf
Full service St-Line rent (2)
Minority Interest Adjustment (3) Square feet expiring (1) sf
Full service St-Line rent (2)
Cornerstone Portfolio Square feet expiring (1) (3) 209,579 sf
Full service St-Line rent (2) (3)
Full service St-Line rent per sq. ft.
% Full service St-Lined rent
No. of tenant leases expiring (4)
Asking market rent per sq. ft. (5)
Operating Expenses per sq. ft. (6)
- ---------------------------------------------------------------------------------------------
</TABLE>
Section IX - Page 7
<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 SEPTEMBER 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 - - -- - - --
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%
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 784,215 964,812 81% 1,394,795 1,824,978 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 71,471 71,471 100% 691,403 757,288 91%
San Mateo County, California 165,061 305,690 54% 166,791 315,447 53%
East Bay, California 131,713 143,231 92% 131,713 160,832 82%
Atlanta, Georgia 30,105 45,370 66% 106,174 244,488 43%
Seattle, Washington 97,469 124,584 78% 790,912 900,408 88%
Santa Clara County, California 57,885 158,425 37% 57,885 158,425 37%
Denver, Colorado 22,959 26,201 88% 475,352 590,329 81%
San Francisco, California 195,881 232,295 84% 195,881 232,606 84%
Minneapolis, Minnesota 42,476 61,832 69% 376,705 444,108 85%
Washington, D.C./Alexandria, Virginia 9,179 47,581 19% 137,790 226,169 61%
Suburban Chicago, Illinois 264,218 315,446 84% 374,544 536,443 70%
Santa Monica/West Los Angeles, CA 113,652 143,694 79% 129,627 162,591 80%
Orange County, California 23,090 50,107 46% 24,239 62,908 39%
San Diego, California 23,091 42,665 54% 23,091 42,665 54%
Los Angeles, California 1,152 1,152 100% 1,152 1,152 100%
New York City, New York 23,341 27,289 86% 149,799 204,342 73%
Conejo Valley (Ventura), California 22,688 25,090 90% 22,688 25,090 90%
Other Regions 9,245 41,759 22% 21,588 67,629 32%
------------------------------------- -------------------------------------
(1)TOTAL PORTFOLIO 1,304,676 1,863,882 70% 3,877,334 5,132,920 76%
</TABLE>
(1) Historical retention has been restated to reflect assets sold.
<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>
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL /
REGION 1999 YTD 1998 1997 1996 1995 AVERAGE
------------------------------------ ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(1) PORTFOLIO TOTAL
(2)Weighted Average Square
Footage Owned 14,044,218 sf 10,447,209 sf 5,010,965 sf 3,832,635 sf 3,290,776 sf 7,325,161 sf
Capital Expenditures $ 2,371,445 $ 1,666,598 $ 472,917 $ 518,632 $ - $ 1,005,918
Minority Interest Adjustment $ 3,804 $ - $ 2,195 $ - $ - $ 1,200
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 2,367,641 $ 1,666,598 $ 470,722 $ 518,632 $ - $ 1,004,719
Total Per Square Foot $ 0.17 $ 0.16 $ 0.09 $ 0.14 $ - $ 0.14
(2)Total Square Feet Leased 1,732,437 sf 1,709,621 sf 949,676 sf 376,197 sf 154,819 sf 4,922,750 sf
Total Tenant Lease Costs $ 18,414,091 $ 15,357,026 $ 6,973,538 $ 4,344,926 $ 576,381 $ 45,665,962
Minority Interest Adjustment $ 651,799 $ - $ - $ - $ - $ 130,360
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 17,762,292 $ 15,357,026 $ 6,973,538 $ 4,344,926 $ 576,381 $ 45,535,602
Total Per Square Foot $ 10.25 $ 8.98 $ 7.34 $ 11.55 $ 3.72 $ 9.25
</TABLE>
(1) Historical leasing and capital costs have been restated to reflect asset
sales.
(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 expanded 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>
<S> <C> <C> <C> <C> <C> <C>
BOSTON, MASSACHUSETTS
Weighted Average Square Footage Owned 2,078,518 sf 2,666,317 sf 672,069 sf 463,691 sf 77,494 sf 1,191,618 sf
Capital Expenditures $ 78,658 $ 476,741 $ 53,185 $ 518,632 $ - $ 225,443
Minority Interest Adjustment $ 638 $ - $ - $ - $ - $ 128
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 78,020 $ 476,741 $ 53,185 $ 518,632 $ - $ 225,316
Total Per Square Foot $ 0.04 $ 0.18 $ 0.08 $ 1.12 $ - $ 0.19
Total Square Feet Leased 90,767 sf 506,584 sf 68,110 sf 117,794 sf sf 783,255 sf
Total Tenant Lease Costs $ 1,255,295 $ 6,935,065 $ 1,349,047 $ 2,158,339 $ - $ 11,697,746
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 1,255,295 $ 6,935,065 $ 1,349,047 $ 2,158,339 $ - $ 11,697,746
Total Per Square Foot $ 13.83 $ 13.69 $ 19.81 $ 18.32 $ - $ 14.93
SAN MATEO COUNTY, CALIFORNIA
Weighted Average Square Footage Owned 1,592,669 sf 95,295 sf sf sf sf 337,593 sf
Capital Expenditures $ 850,899 $ 81,080 $ - $ - $ - $ 186,396
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 850,899 $ 81,080 $ - $ - $ - $ 186,396
Total Per Square Foot $ 0.53 $ 0.85 $ - $ - $ - $ 0.55
Total Square Feet Leased 278,883 sf 1,730 sf sf sf sf 280,613 sf
Total Tenant Lease Costs $ 2,849,951 $ - $ - $ - $ - $ 2,849,951
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 2,849,951 $ - $ - $ - $ - $ 2,849,951
Total Per Square Foot $ 10.22 $ - $ - $ - $ - $ 10.16
EAST BAY, CALIFORNIA
Weighted Average Square Footage Owned 1,197,709 sf 73,386 sf sf sf sf 254,219 sf
Capital Expenditures $ 145,269 $ 13,500 $ - $ - $ - $ 31,754
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 145,269 $ 13,500 $ - $ - $ - $ 31,754
Total Per Square Foot $ 0.12 $ 0.18 $ - $ - $ - $ 0.12
Total Square Feet Leased 154,381 sf sf sf sf sf 154,381 sf
Total Tenant Lease Costs $ 1,152,507 $ - $ - $ - $ - $ 1,152,507
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 1,152,507 $ - $ - $ - $ - $ 1,152,507
Total Per Square Foot $ 7.47 $ - $ - $ - $ - $ 7.47
</TABLE>
Section XI - Page 1
<PAGE>
CORNERSTONE PROPERTIES INC.
NON-REVENUE GENERATING CAPITAL
(RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ATLANTA, GEORGIA
Weighted Average Square Footage Owned 1,232,603 sf 1,647,986 sf 297,992 sf sf sf 635,716 sf
Capital Expenditures $ - $ - $ - $ - $ - $ -
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ - $ - $ -
Total Per Square Foot $ - $ - $ - $ - $ - $ -
Total Square Feet Leased 52,028 sf 170,672 sf 13,269 sf sf sf 235,969 sf
Total Tenant Lease Costs $ 1,403,980 $ 1,280,053 $ 269,265 $ - $ - $ 2,953,298
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 1,403,980 $ 1,280,053 $ 269,265 $ - $ - $ 2,953,298
Total Per Square Foot $ 26.99 $ 7.50 $ 20.29 $ - $ - $ 12.52
SEATTLE, WASHINGTON
Weighted Average Square Footage Owned 1,099,286 sf 1,168,321 sf 1,154,560 sf 1,154,560 sf 1,154,560 sf 1,146,257 sf
Capital Expenditures $ (8,611) $ 59,337 $ 21,922 $ - $ - $ 14,530
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ (8,611) $ 59,337 $ 21,922 $ - $ - $ 14,530
Total Per Square Foot $ (0.01) $ 0.05 $ 0.02 $ - $ - $ 0.01
Total Square Feet Leased 114,797 sf 432,547 sf 208,875 sf 124,474 sf 53,894 sf 934,587 sf
Total Tenant Lease Costs $ 615,051 $ 2,177,172 $ 1,204,606 $ 793,361 $ 290,971 $ 5,081,161
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 615,051 $ 2,177,172 $ 1,204,606 $ 793,361 $ 290,971 $ 5,081,161
Total Per Square Foot $ 5.36 $ 5.03 $ 5.77 $ 6.37 $ 5.40 $ 5.44
SANTA CLARA COUNTY, CALIFORNIA
Weighted Average Square Footage Owned 950,104 sf 56,510 sf sf sf sf 201,323 sf
Capital Expenditures $ 627,455 $ 36,389 $ - $ - $ - $ 132,769
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 627,455 $ 36,389 $ - $ - $ - $ 132,769
Total Per Square Foot $ 0.66 $ 0.64 $ - $ - $ - $ 0.66
Total Square Feet Leased 130,044 sf sf sf sf sf 130,044 sf
Total Tenant Lease Costs $ 1,038,520 $ - $ - $ - $ - $ 1,038,520
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 1,038,520 $ - $ - $ - $ - $ 1,038,520
Total Per Square Foot $ 7.99 $ - $ - $ - $ - $ 7.99
DENVER, COLORADO
Weighted Average Square Footage Owned 888,448 sf 1,187,752 sf 1,187,752 sf 1,187,752 sf 1,187,752 sf 1,127,891 sf
Capital Expenditures $ - $ - $ 102,000 $ - $ - $ 20,400
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ 102,000 $ - $ - $ 20,400
Total Per Square Foot $ - $ - $ 0.09 $ - $ - $ 0.02
Total Square Feet Leased 29,609 sf 85,110 sf 308,697 sf 81,445 sf 75,939 sf 580,800 sf
Total Tenant Lease Costs $ 58,804 $ 201,233 $ 1,823,664 $ 1,009,006 $ 141,135 $ 3,233,842
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 58,804 $ 201,233 $ 1,823,664 $ 1,009,006 $ 141,135 $ 3,233,842
Total Per Square Foot $ 1.99 $ 2.36 $ 5.91 $ 12.39 $ 1.86 $ 5.57
SAN FRANCISCO, CALIFORNIA
Weighted Average Square Footage Owned 597,315 sf 163,815 sf sf sf sf 152,226 sf
Capital Expenditures $ 90,315 $ 12,773 $ - $ - $ - $ 20,618
Minority Interest Adjustment $ 3,166 $ - $ - $ - $ - $ 633
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 87,149 $ 12,773 $ - $ - $ - $ 19,984
Total Per Square Foot $ 0.15 $ 0.08 $ - $ - $ - $ 0.13
Total Square Feet Leased 186,338 sf sf sf sf sf 186,338 sf
Total Tenant Lease Costs $ 3,101,452 $ - $ - $ - $ - $ 3,101,452
Minority Interest Adjustment $ 532,438 $ - $ - $ - $ - $ 532,438
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 2,569,014 $ - $ - $ - $ - $ 2,569,014
Total Per Square Foot $ 13.79 $ - $ - $ - $ - $ 13.79
</TABLE>
Section XI - Page 2
<PAGE>
CORNERSTONE PROPERTIES INC.
NON-REVENUE GENERATING CAPITAL
(RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MINNEAPOLIS, MINNESOTA
Weighted Average Square Footage Owned 645,559 sf 870,970 sf 870,970 sf 870,970 sf 870,970 sf 825,888 sf
Capital Expenditures $ - $ - $ 10,974 $ - $ - $ 2,195
Minority Interest Adjustment $ - $ - $ 2,195 $ - $ - $ 439
-------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ 8,779 $ - $ - $ 1,756
Total Per Square Foot $ - $ - $ 0.01 $ - $ - $ 0.00
Total Square Feet Leased 47,759 sf 125,966 sf 212,795 sf 6,629 sf 24,986 sf 418,135 sf
Total Tenant Lease Costs $ 524,432 $ 513,054 $ 569,103 $ 42,237 $ 144,275 $ 1,793,101
Minority Interest Adjustment $ 119,361 $ - $ - $ - $ - $ 119,361
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 405,071 $ 513,054 $ 569,103 $ 42,237 $ 144,275 $ 1,673,740
Total Per Square Foot $ 8.48 $ 4.07 $ 2.67 $ 6.37 $ 5.77 $ 4.00
WASHINGTON, D.C. / ALEXANDRIA, VIRGINIA
Weighted Average Square Footage Owned 743,017 sf 989,999 sf 177,548 sf sf sf 382,113 sf
Capital Expenditures $ - $ 75,218 $ - $ - $ - $ 15,044
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ 75,218 $ - $ - $ - $ 15,044
Total Per Square Foot $ - $ 0.08 $ - $ - $ - $ 0.04
Total Square Feet Leased 59,383 sf 151,775 sf sf sf sf 211,158 sf
Total Tenant Lease Costs $ 1,773,003 $ 3,291,744 $ - $ - $ - $ 5,064,747
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 1,773,003 $ 3,291,744 $ - $ - $ - $ 5,064,747
Total Per Square Foot $ 29.86 $ 21.69 $ - $ - $ - $ 23.99
SUBURBAN CHICAGO, ILLINOIS
Weighted Average Square Footage Owned 730,054 sf 923,873 sf 297,067 sf 43,136 sf sf 398,826 sf
Capital Expenditures $ 48,044 $ (61,733 $ 154,646 $ - $ - $ 28,191
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 48,044 $ (61,733 $ 154,646 $ - $ - $ 28,191
Total Per Square Foot $ 0.07 $ (0.07 $ 0.52 $ - $ - $ 0.07
Total Square Feet Leased 319,510 sf 149,705 sf 42,826 sf 3,652 sf sf 515,693 sf
Total Tenant Lease Costs $ 2,929,800 $ 447,825 $ 287,758 $ 2,859 $ - $ 3,668,242
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 2,929,800 $ 447,825 $ 287,758 $ 2,859 $ - $ 3,668,242
Total Per Square Foot $ 9.17 $ 2.99 $ 6.72 $ 0.78 $ - $ 7.11
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA
Weighted Average Square Footage Owned 633,501 sf 137,348 sf sf sf sf 154,170 sf
Capital Expenditures $ 47,015 $ 293,641 $ - $ - $ - $ 68,131
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 47,015 $ 293,641 $ - $ - $ - $ 68,131
Total Per Square Foot $ 0.07 $ 2.14 $ - $ - $ - $ 0.44
Total Square Feet Leased 136,776 sf 19,106 sf sf sf sf 155,882 sf
Total Tenant Lease Costs $ 898,691 $ 111,078 $ - $ - $ - $ 1,009,769
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 898,691 $ 111,078 $ - $ - $ - $ 1,009,769
Total Per Square Foot $ 6.57 $ 5.81 $ - $ - $ - $ 6.48
ORANGE COUNTY, CALIFORNIA
Weighted Average Square Footage Owned 531,127 sf 31,096 sf sf sf sf 112,445 sf
Capital Expenditures $ 93,853 $ 897 $ - $ - $ - $ 18,950
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 93,853 $ 897 $ - $ - $ - $ 18,950
Total Per Square Foot $ 0.18 $ 0.03 $ - $ - $ - $ 0.17
Total Square Feet Leased 32,856 sf 1,149 sf sf sf sf 34,005 sf
Total Tenant Lease Costs $ 94,215 $ 9,192 $ - $ - $ - $ 103,407
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 94,215 $ 9,192 $ - $ - $ - $ 103,407
Total Per Square Foot $ 2.87 $ 8.00 $ - $ - $ - $ 3.04
</TABLE>
Section XI - Page 3
<PAGE>
CORNERSTONE PROPERTIES INC.
NON-REVENUE GENERATING CAPITAL
(RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SAN DIEGO, CALIFORNIA
Weighted Average Square Footage Owned 314,512 sf 18,450 sf sf sf sf 66,592 sf
Capital Expenditures $ 21,046 $ 20,145 $ - $ - $ - $ 8,238
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 21,046 $ 20,145 $ - $ - $ - $ 8,238
Total Per Square Foot $ 0.07 $ 1.09 $ - $ - $ - $ 0.12
Total Square Feet Leased 28,941 sf 991 sf sf sf sf 29,932 sf
Total Tenant Lease Costs $ 152,714 $ - $ - $ - $ - $ 152,714
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 152,714 $ - $ - $ - $ - $ 152,714
Total Per Square Foot $ 5.28 $ - $ - $ - $ - $ 5.10
LOS ANGELES, CALIFORNIA
Weighted Average Square Footage Owned 194,389 sf 17,689 sf sf sf sf 42,416 sf
Capital Expenditures $ 7,960 $ - $ - $ - $ - $ 1,592
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 7,960 $ - $ - $ - $ - $ 1,592
Total Per Square Foot $ 0.04 $ - $ - $ - $ - $ 0.04
Total Square Feet Leased 1,152 sf 2,917 sf sf sf sf 4,069 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 283,445 sf 378,965 sf 353,007 sf 112,526 sf sf 225,589 sf
Capital Expenditures $ 267,810 $ 658,610 $ 130,190 $ - $ - $ 211,322
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 267,810 $ 658,610 $ 130,190 $ - $ - $ 211,322
Total Per Square Foot $ 0.94 $ 1.74 $ 0.37 $ - $ - $ 0.94
Total Square Feet Leased 41,190 sf 49,026 sf 95,104 sf 42,203 sf sf 227,523 sf
Total Tenant Lease Costs $ 511,971 $ 390,610 $ 1,470,095 $ 339,124 $ - $ 2,711,800
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 511,971 $ 390,610 $ 1,470,095 $ 339,124 $ - $ 2,711,800
Total Per Square Foot $ 12.43 $ 7.97 $ 15.46 $ 8.04 $ - $ 11.92
CONEJO VALLEY (VENTURA), CALIFORNIA
Weighted Average Square Footage Owned 175,210 sf 10,269 sf sf sf sf 37,096 sf
Capital Expenditures $ 22,682 $ - $ - $ - $ - $ 4,536
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 22,682 $ - $ - $ - $ - $ 4,536
Total Per Square Foot $ 0.13 $ - $ - $ - $ - $ 0.12
Total Square Feet Leased 18,778 sf sf sf sf sf 18,778 sf
Total Tenant Lease Costs $ 53,707 $ - $ - $ - $ - $ 53,707
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 53,707 $ - $ - $ - $ - $ 53,707
Total Per Square Foot $ 2.86 $ - $ - $ - $ - $ 2.86
OTHER REGIONS
Weighted Average Square Footage Owned 156,754 sf 9,168 sf sf sf sf 33,184 sf
Capital Expenditures $ 79,050 $ - $ - $ - $ - $ 15,810
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 79,050 $ - $ - $ - $ - $ 15,810
Total Per Square Foot $ 0.50 $ - $ - $ - $ - $ 0.48
Total Square Feet Leased 9,245 sf 12,343 sf sf sf sf 21,588 sf
Total Tenant Lease Costs $ - $ - $ - $ - $ - $ -
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
-------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ - $ - $ -
Total Per Square Foot $ - $ - $ - $ - $ - $ -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Section XI - Page 4
<PAGE>
CORNERSTONE PROPERTIES INC.
REVENUE GENERATING CAPITAL
(NON-RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(1) PORTFOLIO TOTAL
(2) Weighted Average Square
Footage Owned 14,044,218 sf 10,447,209 sf 5,010,965 sf 3,832,635 sf 3,290,776 sf 7,325,161 sf
Capital Expenditures $ 2,119,850 $ 1,108,502 $ 367,262 $ 25,500 $ 135,194 $ 751,262
Minority Interest Adjustment $ 197,524 $ 8,490 $ - $ - $ - $ 41,203
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 1,922,326 $ 1,100,012 $ 367,262 $ 25,500 $ 135,194 $ 710,059
Total Per Square Foot $ 0.14 $ 0.11 $ 0.07 $ 0.01 $ 0.04 $ 0.10
(2) Total Square Feet Leased 438,205 sf 168,314 sf 83,682 sf 188,709 sf sf 878,910 sf
Total Tenant Lease Costs $ 9,463,554 $ 4,288,025 $ 690,658 $ 1,196,934 $ - $ 15,639,171
Minority Interest Adjustment $ 97,932 $ - $ - $ - $ - $ 19,586
-------------------------------------------------------------------------------------
Total Cornerstone Share $ 9,365,622 $ 4,288,025 $ 690,658 $ 1,196,934 $ - $ 15,619,585
Total Per Square Foot $ 21.37 $ 25.48 $ 8.25 $ 6.34 $ - $ 17.77
</TABLE>
(1) Historical leasing and capital costs have been restated to reflect asset
sales.
(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> <C> <C>
BOSTON, MASSACHUSETTS
Weighted Average Square Footage Owned 2,078,518 sf 2,666,317 sf 672,069 sf 463,691 sf 77,494 sf 1,191,618 sf
Capital Expenditures $ 108,908 $ 4,238 $ - $ - $ - $ 22,629
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 108,908 $ 4,238 $ - $ - $ - $ 22,629
Total Per Square Foot $ 0.05 $ 0.00 $ - $ - $ - $ 0.02
Total Square Feet Leased 1,404 sf sf sf 33,136 sf sf 34,540 sf
Total Tenant Lease Costs $ 14,040 $ - $ - $ 369,727 $ - $ 383,767
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 14,040 $ - $ - $ 369,727 $ - $ 383,767
Total Per Square Foot $ 10.00 $ - $ - $ 11.16 $ - $ 11.11
SAN MATEO COUNTY, CALIFORNIA
Weighted Average Square Footage Owned 1,592,669 sf 95,295 sf sf sf sf 337,593 sf
Capital Expenditures $ 106,520 $ 4,053 $ - $ - $ - $ 22,115
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 106,520 $ 4,053 $ - $ - $ - $ 22,115
Total Per Square Foot $ 0.07 $ 0.04 $ - $ - $ - $ 0.07
Total Square Feet Leased 198,847 sf 3,752 sf sf sf sf 202,599 sf
Total Tenant Lease Costs $ 4,438,713 $ 29,116 $ - $ - $ - $ 4,467,829
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 4,438,713 $ 29,116 $ - $ - $ - $ 4,467,829
Total Per Square Foot $ 22.32 $ 7.76 $ - $ - $ - $ 22.05
EAST BAY, CALIFORNIA
Weighted Average Square Footage Owned 1,197,709 sf 73,386 sf sf sf sf 254,219 sf
Capital Expenditures $ 389,045 $ 31,633 $ - $ - $ - $ 84,136
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 389,045 $ 31,633 $ - $ - $ - $ 84,136
Total Per Square Foot $ 0.32 $ 0.43 $ - $ - $ - $ 0.33
Total Square Feet Leased 29,514 sf 1,333 sf sf sf sf 30,847 sf
Total Tenant Lease Costs $ 344,070 $ 13,330 $ - $ - $ - $ 357,400
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 344,070 $ 13,330 $ - $ - $ - $ 357,400
Total Per Square Foot $ 11.66 $ 10.00 $ - $ - $ - $ 11.59
</TABLE>
Section XI - Page 5
<PAGE>
CORNERSTONE PROPERTIES INC.
REVENUE GENERATING CAPITAL
(NON-RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ATLANTA, GEORGIA
Weighted Average Square Footage Owned 1,232,603 sf 1,647,986 sf 297,992 sf sf sf 635,716 sf
Capital Expenditures $ 193,186 $ 586,718 $ - $ - $ - $ 155,981
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 193,186 $ 586,718 $ - $ - $ - $ 155,981
Total Per Square Foot $ 0.16 $ 0.36 $ - $ - $ - $ 0.25
Total Square Feet Leased 1,299 sf 60,834 sf 2,139 sf sf sf 64,272 sf
Total Tenant Lease Costs $ 45,220 $ 1,919,820 $ 24,132 $ - $ - $ 1,989,172
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 45,220 $ 1,919,820 $ 24,132 $ - $ - $ 1,989,172
Total Per Square Foot $ 34.81 $ 31.56 $ 11.28 $ - $ - $ 30.95
SEATTLE, WASHINGTON
Weighted Average Square Footage Owned 1,099,286 sf 1,168,321 sf 1,154,560 sf 1,154,560 sf1,154,560 sf 1,146,257 sf
Capital Expenditures $ 97,558 $ 212,549 $ 88,401 $ 25,500 $ 135,194 $ 111,840
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 97,558 $ 212,549 $ 88,401 $ 25,500 $ 135,194 $ 111,840
Total Per Square Foot $ 0.09 $ 0.18 $ 0.08 $ 0.02 $ 0.12 $ 0.10
Total Square Feet Leased 638 sf sf 69,727 sf 146,517 sf sf 216,882 sf
Total Tenant Lease Costs $ 357 $ - $ 404,988 $ 643,235 $ - $ 1,048,580
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 357 $ - $ 404,988 $ 643,235 $ - $ 1,048,580
Total Per Square Foot $ 0.56 $ - $ 5.81 $ 4.39 $ - $ 4.83
SANTA CLARA COUNTY, CALIFORNIA
Weighted Average Square Footage Owned 950,104 sf 56,510 sf sf sf sf 201,323 sf
Capital Expenditures $ 242,597 $ 86,662 $ - $ - $ - $ 65,852
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 242,597 $ 86,662 $ - $ - $ - $ 65,852
Total Per Square Foot $ 0.26 $ 1.53 $ - $ - $ - $ 0.33
Total Square Feet Leased 14,882 sf 6,614 sf sf sf sf 21,496 sf
Total Tenant Lease Costs $ 366,451 $ 66,140 $ - $ - $ - $ 432,591
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 366,451 $ 66,140 $ - $ - $ - $ 432,591
Total Per Square Foot $ 24.62 $ 10.00 $ - $ - $ - $ 20.12
DENVER, COLORADO
Weighted Average Square Footage Owned 888,448 sf 1,187,752 sf 1,187,752 sf 1,187,752 sf1,187,752 sf 1,127,891 sf
Capital Expenditures $ - $ - $ - $ - $ - $ -
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ - $ - $ -
Total Per Square Foot $ - $ - $ - $ - $ - $ -
Total Square Feet Leased sf 1,497 sf sf sf sf 1,497 sf
Total Tenant Lease Costs $ - $ 24,169 $ - $ - $ - $ 24,169
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ 24,169 $ - $ - $ - $ 24,169
Total Per Square Foot $ - $ 16.14 $ - $ - $ - $ 16.14
SAN FRANCISCO, CALIFORNIA
Weighted Average Square Footage Owned 597,315 sf 163,815 sf sf sf sf 152,226 sf
Capital Expenditures $ 748,707 $ 21,786 $ - $ - $ - $ 154,099
Minority Interest Adjustment $ 197,524 $ 8,490 $ - $ - $ - $ 41,203
------------------------------------------------------------------------------------
Total Cornerstone Share $ 551,183 $ 13,296 $ - $ - $ - $ 112,896
Total Per Square Foot $ 0.92 $ 0.08 $ - $ - $ - $ 0.74
Total Square Feet Leased 10,422 sf 20,678 sf sf sf sf 31,100 sf
Total Tenant Lease Costs $ 293,796 $ 501,187 $ - $ - $ - $ 794,983
Minority Interest Adjustment $ 97,932 $ - $ - $ - $ - $ 97,932
------------------------------------------------------------------------------------
Total Cornerstone Share $ 195,864 $ 501,187 $ - $ - $ - $ 697,051
Total Per Square Foot $ 18.79 $ 24.24 $ - $ - $ - $ 22.41
</TABLE>
Section XI - Page 6
<PAGE>
CORNERSTONE PROPERTIES INC.
REVENUE GENERATING CAPITAL
(NON-RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MINNEAPOLIS, MINNESOTA
Weighted Average Square Footage Owned 645,559 sf 870,970 sf 870,970 sf 870,970 sf 870,970 sf 825,888 sf
Capital Expenditures $ - $ - $ - $ - $ - $ -
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ - $ - $ -
Total Per Square Foot $ - $ - $ - $ - $ - $ -
Total Square Feet Leased sf sf 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 743,017 sf 989,999 sf 177,548 sf sf sf 382,113 sf
Capital Expenditures $ 24,619 $ 139,501 $ 216,984 $ - $ - $ 76,221
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 24,619 $ 139,501 $ 216,984 $ - $ - $ 76,221
Total Per Square Foot $ 0.03 $ 0.14 $ 1.22 $ - $ - $ 0.20
Total Square Feet Leased 8,988 sf 32,227 sf sf sf sf 41,215 sf
Total Tenant Lease Costs $ 181,129 $ 1,146,914 $ - $ - $ - $ 1,328,043
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 181,129 $ 1,146,914 $ - $ - $ - $ 1,328,043
Total Per Square Foot $ 20.15 $ 35.59 $ - $ - $ - $ 32.22
SUBURBAN CHICAGO, ILLINOIS
Weighted Average Square Footage Owned 730,054 sf 923,873 sf 297,067 sf 43,136 sf sf 398,826 sf
Capital Expenditures $ 154,925 $ - $ 61,877 $ - $ - $ 43,360
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 154,925 $ - $ 61,877 $ - $ - $ 43,360
Total Per Square Foot $ 0.21 $ - $ 0.21 $ - $ - $ 0.11
Total Square Feet Leased 9,389 sf 34,637 sf 11,816 sf 1,941 sf sf 57,783 sf
Total Tenant Lease Costs $ 145,159 $ 495,310 $ 261,538 $ 9,706 $ - $ 911,713
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 145,159 $ 495,310 $ 261,538 $ 9,706 $ - $ 911,713
Total Per Square Foot $ 15.46 $ 14.30 $ 22.13 $ 5.00 $ - $ 15.78
SANTA MONICA/WEST LOS ANGELES, CALIFORNIA
Weighted Average Square Footage Owned 633,501 sf 137,348 sf sf sf sf 154,170 sf
Capital Expenditures $ 21,438 $ 12,980 $ - $ - $ - $ 6,884
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 21,438 $ 12,980 $ - $ - $ - $ 6,884
Total Per Square Foot $ 0.03 $ 0.09 $ - $ - $ - $ 0.04
Total Square Feet Leased 21,444 sf sf sf sf sf 21,444 sf
Total Tenant Lease Costs $ 511,164 $ - $ - $ - $ - $ 511,164
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 511,164 $ - $ - $ - $ - $ 511,164
Total Per Square Foot $ 23.84 $ - $ - $ - $ - $ 23.84
ORANGE COUNTY, CALIFORNIA
Weighted Average Square Footage Owned 531,127 sf 31,096 sf sf sf sf 112,445 sf
Capital Expenditures $ 13,695 $ - $ - $ - $ - $ 2,739
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 13,695 $ - $ - $ - $ - $ 2,739
Total Per Square Foot $ 0.03 $ - $ - $ - $ - $ 0.02
Total Square Feet Leased 94,640 sf 1,311 sf sf sf sf 95,951 sf
Total Tenant Lease Costs $ 2,460,334 $ 6,555 $ - $ - $ - $ 2,466,889
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 2,460,334 $ 6,555 $ - $ - $ - $ 2,466,889
Total Per Square Foot $ 26.00 $ 5.00 $ - $ - $ - $ 25.71
</TABLE>
Section XI - Page 7
<PAGE>
CORNERSTONE PROPERTIES INC.
REVENUE GENERATING CAPITAL
(NON-RECURRING CAPITAL)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REGION 1999 YTD 1998 1997 1996 1995 TOTAL/AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SAN DIEGO, CALIFORNIA
Weighted Average Square Footage Owned 314,512 sf 18,450 sf sf sf sf 66,592 sf
Capital Expenditures $ 0 $ 422 $ - $ - $ - $ 84
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 0 $ 422 $ - $ - $ - $ 84
Total Per Square Foot $ 0.00 $ 0.02 $ - $ - $ - $ 0.00
Total Square Feet Leased 14,698 sf 5,431 sf sf sf sf 20,129 sf
Total Tenant Lease Costs $ 287,873 $ 85,484 $ - $ - $ - $ 373,357
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 287,873 $ 85,484 $ - $ - $ - $ 373,357
Total Per Square Foot $ 19.59 $ 15.74 $ - $ - $ - $ 18.55
LOS ANGELES, CALIFORNIA
Weighted Average Square Footage Owned 194,389 sf 17,689 sf sf sf sf 42,416 sf
Capital Expenditures $0 $ 7,960 $ - $ - $ - $ 1,592
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ 7,960 $ - $ - $ - $ 1,592
Total Per Square Foot $ - $ 0.45 $ - $ - $ - $ 0.04
Total Square Feet Leased 809 sf sf sf sf sf 809 sf
Total Tenant Lease Costs $ 20,994 $ - $ - $ - $ - $ 20,994
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 20,994 $ - $ - $ - $ - $ 20,994
Total Per Square Foot $ 25.95 $ - $ - $ - $ - $ 25.95
NEW YORK CITY, NEW YORK
Weighted Average Square Footage Owned 283,445 sf 378,965 sf 353,007 sf 112,526 sf sf 225,589 sf
Capital Expenditures $ - $ - $ - $ - $ - $ -
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ - $ - $ -
Total Per Square Foot $ - $ - $ - $ - $ - $ -
Total Square Feet Leased sf sf sf 7,115 sf sf 7,115 sf
Total Tenant Lease Costs $ - $ - $ - $ 174,266 $ - $ 174,266
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ 174,266 $ - $ 174,266
Total Per Square Foot $ - $ - $ - $ 24.49 $ - $ 24.49
CONEJO VALLEY (VENTURA), CALIFORNIA
Weighted Average Square Footage Owned 175,210 sf 10,269 sf sf sf sf 37,096 sf
Capital Expenditures $ - $ - $ - $ - $ - $ -
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ - $ - $ - $ - $ - $ -
Total Per Square Foot $ - $ - $ - $ - $ - $ -
Total Square Feet Leased 13,331 sf sf sf sf sf 13,331 sf
Total Tenant Lease Costs $ 186,240 $ - $ - $ - $ - $ 186,240
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 186,240 $ - $ - $ - $ - $ 186,240
Total Per Square Foot $ 13.97 $ - $ - $ - $ - $ 13.97
OTHER REGIONS
Weighted Average Square Footage Owned 156,754 sf 9,168 sf sf sf sf 33,184 sf
Capital Expenditures $ 18,652 $ - $ - $ - $ - $ 3,730
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 18,652 $ - $ - $ - $ - $ 3,730
Total Per Square Foot $ 0.12 $ - $ - $ - $ - $ 0.11
Total Square Feet Leased 17,900 sf sf sf sf sf 17,900 sf
Total Tenant Lease Costs $ 168,015 $ - $ - $ - $ - $ 168,015
Minority Interest Adjustment $ - $ - $ - $ - $ - $ -
------------------------------------------------------------------------------------
Total Cornerstone Share $ 168,015 $ - $ - $ - $ - $ 168,015
Total Per Square Foot $ 9.39 $ - $ - $ - $ - $ 9.39
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Section XI - Page 8
<PAGE>
CORNERSTONE PROPERTIES INC.
SUPPLEMENTAL INFORMATION TO
QUARTERLY EARNINGS RELEASE
DEBT SCHEDULE
<PAGE>
CORNERSTONE PROPERTIES INC.
Debt Schedule
September 30, 1999
- --------------------------------------------------------------------------------
The following table sets forth certain information regarding the consolidated
debt obligations of the Company as of September 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 9/30/99
- ---------------------------------------------- ----------------- ----------------- ------------ ------------------
<S> <C> <C> <C> <C>
FIXED RATE
TransPotomac Plaza (B) Interest only 7.28% Oct-00 65,000,000
West Wilshire Office and Medical 25 year 6.90% Jan-02 17,023,000
Searise Office Tower 25 year 6.90% Jan-02 11,673,000
Exposition Centre 25 year 6.90% May-02 5,113,000
Wilshire Palisades 22 year 6.70% Jul-02 29,264,000
1300 South El Camino 23 year 6.90% Dec-02 3,927,000
125 Summer Street Interest only (C) 7.20% Jan-03 50,000,000
Tower 56 30 year 7.67% May-03 17,417,000
Peninsula Office Park 4 25 year 6.90% Feb-04 5,352,000
Peninsula Office Park 1,3,5,6,8 & 9 25 year 6.90% Feb-04 55,479,000
110 Atrium Place 30 year 6.90% Mar-04 21,604,000
10 Almaden 25 year 6.90% Apr-04 33,385,000
Embarcadero Place 20 year 6.90% Apr-04 25,488,000
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 85,971,000
201 California Street 30 year 6.70% Mar-05 32,767,000
Island Corporate Center 30 year 6.90% Apr-05 13,205,000
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 12,109,000
Janss Court 30 year 6.90% Dec-05 18,451,000
Bayhill 4,5,6 & 7 25 year 6.90% Dec-06 58,100,000
66 Bovet 22 year 6.90% Apr-07 3,863,000
Market Square (D) and 200 Galleria (B) Interest only 7.54% Oct-07 120,000,000
One Norwest Center 30 year 6.90% Oct-08 97,567,000
Corporate 500 Centre 25 year 6.66% Nov-08 88,798,000
188 Embarcadero (E) 25 year 7.26% Aug-09 15,663,000
Centerside II (E) 25 year 7.26% Aug-09 24,342,000
700 North Brand (E) 25 year 7.26% Aug-09 27,036,000
Golden Bear Center (E) 25 year 7.26% Aug-09 20,551,000
Bixby Ranch (E) 25 year 7.26% Aug-09 28,632,000
One Memorial (E) 25 year 7.26% Aug-09 63,349,000
----------------
Total Fixed Rate Debt 7.24% (F) 6.4 (F) 1,305,229,000
VARIABLE RATE
Seaport Centre Interest only LIBOR plus 1.50% Dec-99 58,000,000
The Pruneyard 24 year LIBOR plus 2.00% Mar-00 61,022,000
Convertible Promissory Note due 2001 (G) Interest only 8.11%max (H) Jan-01 12,926,000
120 Montgomery 24 year LIBOR plus 1.40% Nov-02 48,315,000
Norris Tech Center 25 year LIBOR plus 1.65% Dec-03 16,162,000
Other loans Various Various Various 317,000
----------------
Total Variable Rate Debt 6.97% (F) 1.4 (F) 196,742,000
----------------
Total Cornerstone Debt before adjustments 7.21% (F) 5.7 (F) $ 1,501,971,000
Adjustments:
One Post 25 year 6.90% Dec-02 17,307,000
120 Montgomery 24 year LIBOR plus 1.40% Nov-02 (16,088,895)
Norwest Center Interest only 8.74% Dec-05 (25,036,000)
-----------------
Total Adjustments (23,817,895)
Total Cornerstone Share of Debt 7.18% (F) 5.7 (F) $ 1,478,153,105
================
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC.
DEBT SCHEDULE
SEPTEMBER 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) Interest only payments through January 1, 2001, with a 25-year
amortization schedule thereafter.
(D) 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.
(E) 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.
(F) Weighted-average interest rate and maturity of the Company's long-term
debt.
(G) 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.
(H) Lesser of 30-day LIBOR plus 0.5% or 8.11%.
The combined aggregate amount of maturities for all long-term borrowings for
1999 through 2003 are $58,000,000, $126,022,000, $12,926,000, $115,315,000 and
$83,579,000, 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 September 30, 1999, $373.5
million of the facility was outstanding at a rate of approximately 6.8%. Of this
amount, approximately $250.0 million is fixed with interest rate swaps, which
effectively fixes the rate at 6.47%. In addition, at September 30, 1999, a
letter of credit with Summit Bank in the amount of $5.5 million was 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 SEPTEMBER 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>
NUMBER OF
ITEM DATE DESCRIPTION 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
07/30/99 Unitholder redemption 562,588
08/03/99 Unitholder redemption 562,587
08/31/99 Dividend reinvestment 70,974
---------------
Total 129,610,536
---------------
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
07/30/99 Unitholder redemption (562,588)
08/03/99 Unitholder redemption (562,587)
09/09/99 Unitholder redemption (76,647)
---------------
Total 19,131,785
---------------
DILUTIVE ISSUES
Convertible Preferred Stock 3,030,303
Convertible Promissory Note 903,914
Dilutive effect of "in the money" options 115,978
---------------
4,050,195
---------------
09/30/99 Total diluted common shares and units outstanding 152,792,516
===============
Year to date weighted average diluted common
shares and units outstanding 152,697,882
===============
Quarter to date weighted average diluted common
shares and units outstanding 152,792,806
===============
</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 nine months of 1999 were split 77.2% to
Cornerstone and 22.8% to S&M. Sales proceeds from Norwest Center will be split
as follows as of September 30, 1999:
<TABLE>
<S> <C> <C>
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 20.2 million
6) The remaining proceeds will be split
50/50 among the two partners.
</TABLE>
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 $9.6 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 $156.6 million of proceeds
after repayment of the $79.1 million mortgage ($235.7 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 ($163.6 million as of 9/30/99) 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 September 30,
1999:
<TABLE>
<S> <C> <C>
1) To Debt $ 1.8 million
2) To Cornerstone (as partial holder
of the debt) $ 157.2 million
3) To Cornerstone for its undistributed
preferred return $ 18.6 million
4) To Cornerstone for its priority capital
contribution $ 145.0 million
</TABLE>
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.
