<PAGE>
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |-| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|X| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Cornerstone Properties Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
THE FOLLOWING IS A PRESS RELEASE DISSEMINATED BY CORNERSTONE PROPERTIES
INC. ON MARCH 3, 2000.
* * * * *
FOR ADDITIONAL INFORMATION, CONTACT:
Kevin P. Mahoney
Senior Vice President and Chief Financial Officer
212/605-7142
Jennifer R. Wall
Vice President, Investor Relations
212/605-7136, [email protected]
FOR IMMEDIATE RELEASE
- ---------------------
CORNERSTONE PROPERTIES ANNOUNCES FOURTH QUARTER AND YEAR END
------------------------------------------------------------
RESULTS
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FOURTH QUARTER FFO PER DILUTED SHARE OF $0.41;
----------------------------------------------
10.8% GROWTH OVER THE SAME PERIOD IN 1998
-----------------------------------------
NEW YORK, NEW YORK (March 3, 2000) . . . Cornerstone Properties Inc. (NYSE:CPP)
announced today results for the fourth quarter and year ended December 31, 1999.
Funds from operations (FFO) for the fourth quarter totaled $62.8 million, or
$0.41 per share on a diluted basis as compared with $43.3 million, or $0 .37 per
share, on a diluted basis, for the 1998 fourth quarter. This represents a 10.8%
increase in diluted FFO per share. Revenues for the 1999 fourth quarter totaled
$155.5 million, as compared to revenues of $102.4 million for the same period in
1998, a 52% increase. Net income for the 1999 fourth quarter totaled $133.6
million as compared to $22.5 million for the same period in 1998, a 494%
increase. The weighted average number of basic shares and units outstanding
totaled 148,681,127 for the fourth quarter 1999 and 152,617,790 on a diluted
basis.
John S. Moody, Cornerstone Properties' President and Chief Executive Officer,
commented, "These strong results were attributable to strong occupancy growth
and rental rate increases in our California markets. An example of this growth
can be seen in the same-store growth during the year on the properties acquired
in the Wilson merger. Same-store net operating income for these properties for
the fourth quarter of 1999 as compared to the 1999 first quarter grew in excess
of 17%."
Same-store net operating income for the fourth quarter (not including the
Wilson properties) of 1999 increased 0.2% on a GAAP basis and 2.4% on a cash
basis compared to the fourth quarter of 1998. The same-store portfolio, which
consists of 19 buildings acquired on or prior to October 1, 1998, decreased
slightly from 97.6% leased at October 1, 1998 to 97.5% leased at December 31,
1999. The total portfolio at December 31, 1999, was 97% leased.
<PAGE>
For the 12 months ended December 31, 1999, FFO totaled $243.2 million on
revenues of $617.4 million compared with FFO of $156.7 million on revenues of
$359.5 million for the same period in 1998, a 55% increase in FFO and a 72%
increase in revenues. FFO per diluted share for the 12 months ended December 31,
1999 was $1.59 as compared to $1.45 for the same period in 1998, a 9.7%
increase.
Operating margins, defined as rental income less building operating expenses
divided by rental income, increased to 66.4% in the fourth quarter of 1999 as
compared to 65.0% for the fourth quarter of 1998. Operating margins for the 12
months ended December 31, 1999 were 66.2% as compared to 64.1% for the same
period in 1998.
Same-store net operating income for the 12 months ended December 31, 1999 (not
including the Wilson properties) increased 3.6% on a GAAP basis and 4.7% on a
cash basis compared to the 12 months ended December 31, 1998. The same-store
portfolio, which consists of 14 buildings acquired prior to January 1, 1998,
increased from 96.9% leased at January 1, 1998 to 97.2% leased at December 31,
1999.
Leasing activity during the fourth quarter of 1999 totaled approximately 690,000
square feet. The weighted average gross rental rate on leases signed during the
quarter was $33.87 per square foot as compared to $31.91 per square foot for the
average rental rate on expiring leases, a 6.1% increase in rental rates, on a
GAAP basis. Leasing activity for the full year 1999 totaled approximately
2,892,000 square feet. The weighted average gross rental rate on leases signed
during the 12 month period ended December 31, 1999 was $32.67 per square foot as
compared to $27.87 per square foot for the average rental rate on expiring
leases, a 17.2% increase in GAAP rental rates.
During the fourth quarter Cornerstone Properties closed or announced the
following transactions:
o Exited Denver market through the sale of One Norwest Center
for $208.5 million. Also sold two smaller California
properties which brought the total proceeds for the Company's
1999 disposition program to over $495 million.
o Acquired a six-acre development project in San Mateo County,
California for $36 million. The land is entitled for the
development of 381,000 rentable square feet of Class A office
space, 17,400 square feet of street level retail space, 1,364
parking spaces and a one-acre landscaped park.
Supplemental financial information will be available at our website before the
close of business today. Please note that the Company's supplemental information
has been revised in order to allow for easier analysis when comparing
Cornerstone's results to those of EOP.
Cornerstone Properties is a fully-integrated real estate investment trust (REIT)
with a full range of development, acquisition, management and leasing
capabilities. On February 11, 2000, Cornerstone announced that it entered into
an agreement and plan of merger with Equity Office Properties Trust (NYSE:EOP).
(See release at www.cstoneprop.com/news). The Company currently owns 84 Class A
office properties throughout the U.S. totaling over 17 million square feet and
has an additional $884 million of projects under development. The properties are
located in the major suburban markets and central business districts of Seattle,
Northern and Southern California, Minneapolis, Chicago, Boston, New York,
Washington, D.C. and Atlanta. For more information visit the Cornerstone
Properties website at http://www.cstoneprop.com/.
<PAGE>
To sign up for our press release e-mail list, go to
http://www.cstoneprop.com/e-mail.
Investors should read the joint proxy statement/prospectus regarding the
proposed merger with Equity Office Properties Trust when it becomes available
because it will contain important information. Investors may obtain a free copy
of the joint proxy statement/prospectus when it is available from the SEC
website at www.sec.gov. The joint proxy statement/prospectus may also be
obtained for free by directing a request to Cornerstone Properties Inc., Tower
56, 126 East 56th Street, New York, NY 10022, Attn: Corporate Secretary,
telephone: (212) 605-7100.
The identity of persons who, under SEC rules, may be considered "participants in
the solicitation" in connection with the proposed merger, and a description of
their ownership interests in Cornerstone, is available in a filing on Schedule
14A made by Cornerstone on February 18, 2000, and available on the SEC website
or at the address above.
<PAGE>
CORNERSTONE PROPERTIES INC.
FUNDS FROM OPERATIONS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED 12 MONTHS ENDED 12 MONTHS ENDED
12/31/99 12/31/98 12/31/99 12/31/98
-----------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Rental Income (1) $ 155,069 $ 101,393 $ 619,394 $ 361,385
Building Operating Expenses (1) 52,173 35,464 209,536 129,832
-----------------------------------------------------------------
Building Net Operating Income 102,896 65,929 409,858 231,553
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Corporate General and Administrative (1) (2) (7,909) (4,011) (32,421) (12,724)
Interest and Other Income (1) 4,949 2,712 15,781 9,879
-----------------------------------------------------------------
EBITDA 99,936 64,630 393,218 228,708
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Interest Expense (1) (34,156) (19,861) (140,161) (67,585)
Minority Adjustments (1) (3,129) (2,068) (10,631) (6,739)
Rent Notes - 398 - 1,531
-----------------------------------------------------------------
Funds From Operations 62,651 43,099 242,426 155,915
Interest on Convertible Debt 188 186 745 790
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Funds From Operations (Adjusted for
convertible debt) $ 62,839 $ 43,285 $ 243,171 $ 156,705
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Weighted Average Shares/Units 148,681 113,236 148,655 103,882
Weighted Average Diluted Shares/Units 152,618 117,272 152,676 108,052
FFO PER SHARE/UNIT (BASIC) $ 0.42 $ 0.38 $ 1.64 $ 1.51
FFO PER SHARE/UNIT (DILUTED) $ 0.41 $ 0.37 $ 1.59 $ 1.45
Less: Capital Expenditures Per Share/Unit 0.03 0.02 0.14 $ 0.08
-----------------------------------------------------------------
AFFO Per Share/Unit $ 0.38 $ 0.35 $ 1.45 $ 1.37
-----------------------------------------------------------------
Funds From Operations $ 62,651 $ 43,099 $ 242,425 $ 155,915
Less: Preferred Dividends (875) (875) (3,500) (3,500)
Less: Recurring Lease Costs and
Capital Expenditures (3) (5,115) (2,811) (21,872) (8,501)
Less: Straight Line Rents Adjusted For
Minority Interest (5,552) (4,151) (25,290) (14,543)
-----------------------------------------------------------------
Funds Available for Distribution $ 51,109 $ 35,262 $ 191,764 $ 129,371
-----------------------------------------------------------------
Weighted Average Common Shares and Units
Outstanding 148,681 113,236 148,655 103,882
Funds Available for Distribution Per Share/Unit $ 0.34 $ 0.31 $ 1.29 $ 1.25
Distribution Per Share/Unit $ 0.30 $ 0.30 $ 1.20 $ 1.20
</TABLE>
(1) For the three months ended December 31, 1999 rental income has been
increased by $3,169,000, building operating expenses have been increased by
$1,639,000, corporate general and administrative expense has been increased by
$1,313,000, interest and other income has been increased by $1,546,000, interest
expense has been increased by $597,000 and minority adjustments have been
increased $570,000 in order to show Cornerstone's equity investments had they
been consolidated. For the three months ended December 31, 1998 rental income
has been increased by $2,645,000, building operating expenses have been
increased by $888,000, corporate general and administrative expense has been
increased by $263,000, interest and other income has been increased by $328,000
and interest expense has been increased by $52,000 in order to show
Cornerstone's equity investments had they been consolidated.
For the twelve months ended December 31, 1999 rental income has been
increased by $11,985,000, building operating expenses have been increased by
$5,352,000, corporate general and administrative expense has been increased by
$6,276,000, interest and other income has been increased by $6,640,000, interest
expense has been increased by $2,402,000 and minority adjustments have been
increased $2,190,000 in order to show Cornerstone's equity investments had they
been consolidated. For the twelve months ended December 31, 1998 rental income
has been increased by $22,870,000, building operating expenses have been
increased by $7,409,000, corporate general and administrative has been increased
by $263,000, interest and other income has been increased by $328,000 and
interest expense has been increased by $52,000 in order to show Cornerstone's
equity investments had they been consolidated.
(2) Non-recurring merger severance costs of $614,000 and $861,000 have been
deducted from general and administrative expenses for the three and twelve
months ended December 31, 1999, respectively. Non-recurring severance costs of
$478,000 have been deducted from general and administrative expenses for the
three and twelve months ended December 31, 1998.
(3) Based on a five year 1995-1999 average of recurring (non revenue generating)
tenant leasing costs of $9.65 per square foot leased times the five year
(2000-2004) average quarterly lease expiration (adjusted for minority interest)
of 454,055 square feet or $4,381,631, plus a capital expenditure reserve
(adjusted for minority interest) of $0.17 per square foot ($733,257).
Year to date the Company has incurred $25,246,616 in recurring tenant costs
(adjusted for minority interest) in leasing 2,322,790 square feet or a cost of
$10.87 per square foot. Year to date the Company has incurred $3,932,405 in
recurring capital costs (adjusted for minority interest) or $0.23 per square
foot on an annualized basis.
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Office and parking rentals $ 151,900 $ 98,748 $ 607,409 $ 338,515
Earnings in joint ventures 212 1,270 898 11,420
Interest and other income 3,403 2,384 9,141 9,551
------------ ------------ ------------- -------------
TOTAL REVENUES 155,515 102,402 617,448 359,486
------------ ------------ ------------- -------------
EXPENSES
Building operating expenses 34,587 22,716 132,630 75,663
Real estate taxes 15,946 11,860 71,554 46,760
Interest expense 33,560 19,809 137,759 67,533
Depreciation and amortization 24,233 16,717 96,726 59,278
General and administrative 7,210 4,226 27,006 12,939
------------ ------------ ------------- -------------
TOTAL EXPENSES 115,536 75,328 465,675 262,173
------------ ------------ ------------- -------------
39,979 27,074 151,773 97,313
------------ ------------ ------------- -------------
OTHER INCOME (EXPENSES)
Carrying value in excess of market value of assets
held for sale 1,292 - - -
Gain (loss) on sale of real estate assets 121,902 248 131,034 (2,076)
------------ ------------ ------------- -------------
TOTAL OTHER INCOME (EXPENSES) 123,194 248 131,034 (2,076)
------------ ------------ ------------- -------------
MINORITY INTEREST
Minority interest in operating partnership (20,327) (1,422) (34,982) (2,850)
Minority interest in joint ventures (1,800) (1,365) (5,755) (4,619)
------------ ------------ ------------- -------------
TOTAL MINORITY INTEREST (22,127) (2,787) (40,737) (7,469)
------------ ------------ ------------- -------------
Income before cumulative effect of a change in accounting principle ------------ ------------ ------------- -------------
and extraordinary loss 141,046 24,535 242,070 87,768
------------ ------------ ------------- -------------
Cumulative effect of a change in accounting principle - - (630) -
Extraordinary loss (7,432) (2,034) (10,787) (4,303)
------------ ------------ ------------- -------------
NET INCOME $ 133,614 $ 22,501 $ 230,653 $ 83,465
============ ============ ============= =============
INCOME APPLICABLE TO PREFERRED STOCK $ (875) $ (875) $ (3,500) $ (3,500)
------------ ------------ ------------- -------------
INCOME APPLICABLE TO COMMON STOCK $ 132,739 $ 21,626 $ 227,153 $ 79,965
============ ============ ============= =============
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE AND EXTRAORDINARY LOSS PER COMMON SHARE $ 1.08 $ 0.22 $ 1.85 $ 0.84
============ ============ ============= =============
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
AND EXTRAORDINARY LOSS PER COMMON SHARE $ (0.06) $ (0.02) $ (0.09) $ (0.04)
============ ============ ============= =============
BASIC INCOME PER COMMON SHARE $ 1.02 $ 0.20 $ 1.76 $ 0.80
============ ============ ============= =============
DILUTED INCOME PER COMMON SHARE $ 1.00 $ 0.20 $ 1.74 $ 0.80
============ ============ ============= =============
</TABLE>
<PAGE>
CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Developments in progress:
Land $ 46,132 $ 10,437
Development costs 17,000 2,519
Rental Property, at cost:
Land 646,852 702,840
Buildings, leasehold interests and improvements 3,084,466 3,403,152
Deferred lease costs 157,015 143,188
----------- -----------
3,951,465 4,262,136
Less: Accumulated depreciation and amortization 290,998 286,664
----------- -----------
Total Development and Rental Property 3,660,467 3,975,472
Assets held for sale 62,185 77,568
Cash and cash equivalents 19,679 61,869
Restricted cash 222,043 9,114
Investment in joint ventures 31,725 31,500
Other deferred costs, net of accumulated amortization of $7,092 and $999 42,655 47,807
Deferred tenant receivables 77,243 53,489
Tenant and other receivables, net 14,725 10,326
Other assets 39,506 14,839
----------- -----------
TOTAL ASSETS $ 4,170,228 $ 4,281,984
=========== ===========
LIABILITIES
Long-term debt, inclusive of $16,149 and $25,031 of unamortized premium $ 1,448,331 $ 1,532,474
Credit facility 329,000 465,000
Accrued interest 10,961 10,933
Accrued real estate taxes 16,457 16,395
Accounts payable and accrued expenses 45,006 51,454
Distributions payable - 38,163
Unearned revenue and other liabilities 40,881 23,890
----------- -----------
TOTAL LIABILITIES 1,890,636 2,138,309
----------- -----------
MINORITY INTEREST
Minority interest in operating partnership 284,566 283,388
Minority interest in joint ventures 22,532 23,420
----------- -----------
TOTAL MINORITY INTEREST 307,098 306,808
----------- -----------
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 129,252,303 shares outstanding - -
Paid-in capital 1,786,479 1,788,567
Retained earnings 133,614 -
Accumulated other comprehensive income 9,424 -
Deferred compensation (2,012) (1,700)
----------- -----------
1,977,505 1,836,867
Treasury stock, 358,233 shares, at cost (5,011) -
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,972,494 1,836,867
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,170,228 $ 4,281,984
=========== ===========
</TABLE>
