<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 3, 2000 (Date of earliest event reported)
CORNERSTONE PROPERTIES INC.
(Exact name of Registrant as specified in its charter)
Nevada 1-12861 74-2170858
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Cornerstone Properties Inc.
Tower 56
126 East 56th Street
New York, NY 10022
(Address of principal executive offices)
(212) 605-7100
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
On March 3, 2000, Cornerstone Properties Inc. ("Cornerstone") issued a
Press Release announcing its earnings for the quarter and year ended
December 31, 1999. Simultaneously, Cornerstone posted certain supplementary
materials regarding its financial condition and results of operations as well
as operating data with regard to properties owned by Cornerstone.
The foregoing description is qualified in its entirety by reference to
the complete text of the supplementary materials, a copy of which is filed as
Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference
herein in its entirety.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
EXHIBIT NUMBER EXHIBIT DESCRIPTION
99.1 Text of supplementary materials dated March 3, 2000.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Cornerstone has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNERSTONE PROPERTIES INC.
(Registrant)
Date: March 10, 2000 By: /s/ KEVIN P. MAHONEY
----------------------
Name: Kevin P. Mahoney
Title: Senior Vice President and Chief Financial
Officer
-3-
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
99.1 Text of supplementary materials dated March 3, 2000.
<PAGE>
Exhibit 99.1
[CORNERSTONE PROPERTIES LOGO]
FOURTH QUARTER
1999
SUPPLEMENTAL PACKAGE
THIS SUPPLEMENTAL PACKAGE CONTAINS FORWARDLOOKING STATEMENTS WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. FORWARDLOOKING 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 FORWARDLOOKING
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.
MARCH 3, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
FINANCIAL HIGHLIGHTS
<S> <C>
Key Financial Data 1
Statements of Operations 2
Funds from Operations Statements 3
Balance Sheets 4
Same Store Results and Analysis 5
Joint Venture Information / Net Effective Square Footage 6 -7
Developments 8
Debt Summary 9
Debt Maturity Schedule 10
PORTFOLIO DATA
Regional Summary 11
Summary of MSA's 12
Occupancy Summary 13
25 Largest Tenants 14
Lease Expiration Schedule 15
Rollover of Top 10 Markets 16
Portfolio by SIC Code 17
Office Property Statistics 18 - 19
OFFICE MARKET GRAPHS
Major U.S. Office Market Summary 20
The Company's 20 Largest Markets 21
Company's 20 Largest Markets / Vacancy Rates--Class A vs. All 22
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<PAGE>
KEY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED OR AS OF
-----------------------------------
12/31/98 3/31/99 6/30/99
-------- ------- -------
<S> <C> <C> <C>
SHARES AND UNITS:
Common Shares Outstanding 128,210,784 128,210,784 128,414,387
Units Outstanding 20,333,607 20,333,607 20,333,607
------------ ------------ ------------
Combined Shares and Units 148,544,391 148,544,391 148,747,994
------------ ------------ ------------
Weighted Average--Basic 113,236,128 148,544,391 148,593,864
Weighted Average--Diluted 117,272,225 152,589,283 152,698,711
SHARE PRICE & DIVIDENDS
At the end of the period $ 15.625 $ 14.625 $ 15.875
High during period 16.000 16.500 16.938
Low during period 14.063 14.250 14.250
Dividends declared 0.30 0.30 0.30
MARKET CAPITALIZATION:
Market Value of Common Equity $ 2,321,006 $ 2,172,462 $ 2,361,374
Preferred Equity 50,000 50,000 50,000
Total Debt 1,997,474 1,983,148 1,986,593
------------ ------------ ------------
Total Market Capitalization $ 4,368,480 $ 4,205,610 $ 4,397,967
------------ ------------ ------------
Total Debt / Total Market Capitalization 45.7% 47.2% 45.2%
SELECTED BALANCE SHEET DATA
Book Value of Real Estate Assets (before accum depr) (a) $ 4,371,949 $ 4,392,109 $ 4,299,160
Total Assets 4,281,984 4,282,226 4,263,124
Total Liabilities 2,138,309 2,102,565 2,093,280
Total Minority Interests 306,808 311,369 308,812
Total Shareholders' Equity 1,836,867 1,868,292 1,861,032
SELECTED OPERATING DATA
Total Revenues $ 102,402 $ 151,765 $ 153,629
Net--Straight Line revenue/expense adjustment 4,380 6,980 6,712
Capitalized Interest 29 311 376
Scheduled Principal Payments N/A N/A N/A
Property NOI 65,929 99,636 103,209
Property Operating Margin 65.0% 66.1% 66.5%
General & Administrative Expense 4,226 6,136 6,435
G & A as a percentage of total revenues 4.1% 4.0% 4.2%
EBITDA
EBITDA--(including Joint Ventures) 64,630 95,951 98,042
EBITDA per weighted average share--basic 0.57 0.65 0.66
EBITDA per weighted average share--diluted 0.55 0.63 0.64
RATIOS
Interest Coverage Ratio 3.3 2.7 2.8
Fixed Charge Coverage Ratio 2.6 2.7 2.7
FFO
Funds From Operations--basic (b) 43,285 59,363 60,382
FFO per weighted average share--basic 0.38 0.40 0.41
FFO per weighted average share diluted 0.37 0.39 0.40
FFO payout ratio--diluted 81% 77% 75%
FAD
Funds Available for Distribution (c) 35,262 45,956 46,981
FAD per weighted average share--basic 0.31 0.31 0.32
FAD per weighted average share--diluted 0.30 0.30 0.31
FAD payout ratio--diluted 96% 97% 95%
PORTFOLIO STATISTICS:
Buildings Owned 96 96 96
Total Square Footage (d) 20,250,990 20,224,471 20,223,365
Leased at End of Quarter (d) 95.0% 96.0% 97.0%
Parking Facilities N/A N/A N/A
Number of Spaces N/A N/A N/A
Residential Properties N/A N/A N/A
Number of Units N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED OR AS OF
-----------------------------------
9/30/99 12/31/99
------- --------
<S> <C> <C>
SHARES AND UNITS:
Common Shares Outstanding 129,610,536 129,252,303
Units Outstanding 19,131,785 19,131,785
------------ ------------
Combined Shares and Units 148,742,321 148,384,088
------------ ------------
Weighted Average--Basic 148,648,281 148,681,127
Weighted Average--Diluted 152,792,806 152,617,790
SHARE PRICE & DIVIDENDS
At the end of the period $ 15.250 $ 14.625
High during period 16.063 15.438
Low during period 15.125 13.063
Dividends declared 0.30 0.30
MARKET CAPITALIZATION:
Market Value of Common Equity $ 2,268,320 $ 2,170,117
Preferred Equity 50,000 50,000
Total Debt 1,875,471 1,777,331
------------ ------------
Total Market Capitalization $ 4,193,791 $ 3,997,448
------------ ------------
Total Debt / Total Market Capitalization 44.7% 44.5%
SELECTED BALANCE SHEET DATA
Book Value of Real Estate Assets (before accum depr) (a) $ 4,126,711 $ 4,013,360
Total Assets 4,155,152 4,170,228
Total Liabilities 2,028,923 1,890,636
Total Minority Interests 287,172 307,098
Total Shareholders' Equity 1,839,057 1,972,494
SELECTED OPERATING DATA
Total Revenues $ 156,539 $ 155,515
Net Straight Line revenue/expense adjustment 6,292 5,822
Capitalized Interest 265 499
Scheduled Principal Payments N/A N/A
Property NOI 103,356 102,896
Property Operating Margin 65.9% 66.4%
General & Administrative Expense 7,225 7,210
G & A as a percentage of total revenues 4.6% 4.6%
EBITDA
EBITDA--(including Joint Ventures) 98,516 99,937
EBITDA per weighted average share--basic 0.66 0.67
EBITDA per weighted average share--diluted 0.64 0.65
RATIOS
Interest Coverage Ratio 2.8 2.9
Fixed Charge Coverage Ratio 2.7 2.8
FFO
Funds From Operations--basic (b) 60,587 62,840
FFO per weighted average share--basic 0.41 0.42
FFO per weighted average share diluted 0.40 0.41
FFO payout ratio--diluted 75% 73%
FAD
Funds Available for Distribution (c) 47,718 51,109
FAD per weighted average share--basic 0.32 0.34
FAD per weighted average share--diluted 0.31 0.33
FAD payout ratio--diluted 93% 87%
PORTFOLIO STATISTICS:
Buildings Owned 89 85
Total Square Footage (d) 18,777,068 17,253,102
Leased at End of Quarter (d) 98.0% 97.0%
Parking Facilities N/A N/A
Number of Spaces N/A N/A
Residential Properties N/A N/A
Number of Units N/A N/A
</TABLE>
(a) Includes net book value of assets held for sale as of the balance sheet
date.
(b) The White Paper on Funds from Operations ("FFO") approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures.
(c) Funds Available for Distribution ("FAD") is defined as Funds from Operations
minus the average of recurring tenant leasing costs for the last five years
times the five year average quarterly lease expirations adjusted for
minority interest, minus recurring capital expenditures adjusted for
minority interest and straightline rents adjusted for minority interest.
(d) Adjusted for Minority Interest.
1
<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>
2
<PAGE>
CORNERSTONE PROPERTIES INC.
FUNDS FROM OPERATIONS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three Months Three Months Twelve Months Twelve Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Income $ 133,614 $ 22,501 $ 230,653 $ 83,465
NAREIT Adjustments:
Depreciation and Amortization (1) 24,233 16,717 96,726 59,278
Minority Adjustments (759) (705) (2,686) (2,120)
Unconsolidated Depreciation (2) 384 500 1,507 4,054
Cumulative Effect of a Change in
Accounting Principle -- 630 --
Impairment Costs (1,292) -- -- --
(Gain) Loss on Sale of Assets (121,902) (248) (131,034) 2,076
Extraordinary Losses 7,432 2,034 10,787 4,303
Other Adjustments:
Amortization on Rent Notes 398 -- 1,531
Severance Payments 614 478 861 478
Minority Interest Allocated to Unitholders 20,327 1,424 34,982 2,850
--------- --------- --------- ---------
Funds From Operations $ 62,651 $ 43,099 $ 242,426 $ 155,915
Interest Expense On Convertible Note 188 186 745 790
--------- --------- --------- ---------
Funds From Operations $ 62,839 $ 43,285 $ 243,171 $ 156,705
========= ========= ========= =========
Weighted Average Shares/Units Outstanding 148,681 113,236 148,655 103,882
Weighted Average Diluted Shares/Units Outstanding 152,618 117,272 108,052
152,676
FFO Per Share/Unitbasic $ 0.42 $ 0.38 $ 1.64 $ 1.51
========= ========= ========= =========
FFO Per Share/Unitdiluted $ 0.41 $ 0.37 $ 1.59 $ 1.45
========= ========= ========= =========
</TABLE>
(1) For the three months ended December 31, 1999, the depreciation and
amortization adjustment includes $990,000 of amortization relating to the
intangible management and development company assets that were acquired as
part of the Wilson Acquistion. For the twelve months ended December 31,
1999, the depreciation and amortization adjustment includes $3,959,000 of
amortization relating to the intangible management and development company
assets that were acquired as part of the Wilson Acquistion.
(2) For the three months ended December 31, 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 Acquistion. For the twelve months ended December 31,
1999, the unconsolidated depreciation adjustment includes $678,000 of
amortization relating to the intangible management and development company
assets that were acquired as part of the Wilson Acquistion.
3
<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
Longterm 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 -- --
Paidin 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>
4
<PAGE>
SAME STORE RESULTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31, CHANGE
------------------ ------
1999 1998 $ %
------- ------- ------- -----
<S> <C> <C> <C> <C>
Property Revenues (excluding straightline rent adjustment) $82,252 $80,490 $ 1,762 2.2%
Straight-line rent adjustment 3,187 4,294 (1,107) -25.8%
------- ------- ------- -----
Total Property Revenues 85,439 84,784 655 0.8%
------- ------- ------- -----
Real Estate Taxes 11,162 10,686 476 4.5%
Controllable Expenses (a) 18,395 18,320 75 0.4%
------- ------- ------- -----
Total Property Operating Expenses 29,557 29,006 551 1.9%
------- ------- ------- -----
Net Operating Income--GAAP Basis $55,882 $55,778 $ 104 0.2%
======= ======= ======= =====
Operating Margin--GAAP Basis 65.4% 65.8% -0.4%
======= ======= ======= =====
Net Operating Income--Cash Basis $52,695 $51,484 $ 1,211 2.4%
======= ======= ======= =====
Lease Settlements (included in Property Revenues) N/A N/A N/A N/A
Operating Margin (GAAP)--excluding Lease Settlements N/A N/A N/A
Percentage Leased at end(12/31/99)/ start(10/1/98) of period 97.5% 97.6% -0.1%
Office Properties 19
Total Square Footage 9,580,210
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED DECEMBER 31, CHANGE
------------------------------------------
1999 1998 $ %
<S> <C> <C> <C> <C>
Property Revenues (excluding straightline rent adjustment) $253,176 $241,934 $ 11,242 4.6%
Straight-line rent adjustment 9,286 10,910 (1,624) -14.9%
-------- -------- -------- -----
Total Property Revenues 262,462 252,844 9,618 3.8%
-------- -------- -------- -----
Real Estate Taxes 40,532 38,729 1,803 4.7%
Controllable Expenses (a) 53,521 51,610 1,911 3.7%
-------- -------- -------- -----
Total Property Operating Expenses 94,053 90,339 3,714 4.1%
-------- -------- -------- -----
Net Operating Income--GAAP Basis $168,409 $162,505 $ 5,904 3.6%
======== ======== ======== =====
Operating Margin--GAAP Basis 64.2% 64.3% -0.1%
======== ======== ======== =====
Net Operating Income--Cash Basis $159,123 $151,595 $ 7,528 5.0%
======== ======== ======== =====
Lease Settlements (included in Property Revenues) N/A N/A N/A N/A
Operating Margin (GAAP)--excluding Lease Settlements N/A N/A N/A
Percentage Leased at end(12/31/99)/ start(1/1/98) of period 97.2% 96.9% 0.2%
Office Properties 14
Total Square Footage 7,432,754
</TABLE>
(a) Controllable expenses are defined as Operating Expenses excluding real
estate tax expense.
5
<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 twelve months of 1999
were split 74.4% to Cornerstone and 25.6% to S&M. Sales proceeds from Norwest
Center will be split as follows as of December 31, 1999:
1) To Debt $110.0 million
2) To Cornerstone 92.3 million
3) To Cornerstone 9.3 million
4) To Cornerstone 1.0 million
5) To S&M 31.8 million
6) The remaining proceeds will be split 50/50 among the two partners.
Washington Mutual Tower
Under the partnership agreement, cash flow is used first to pay
operating and capital expenditures, then debt service on the mortgage note. The
remaining cash flow is paid first to Cornerstone as a 9.53% preference return on
its capital base of $47.0 million ($4,479,000); next to pay the Preference
Deficit on the second preference return (currently $9.2 million); then to
Cornerstone as an 8% second preference return on its capital base of $100.0
million ($8,000,000). Any remaining cash flow is split 50% to Cornerstone and
50% to 1212 Partnership, Cornerstone's partner. The cumulative Preference
Deficit earns interest at a rate of 8% until it is repaid. 1212 Partnership does
not currently share in the cash flow from Washington Mutual Tower. With regard
to the sale of the building, the Company will receive the first $156.8 million
of proceeds after repayment of the $79.1 million mortgage ($235.9 million in
total proceeds). Any proceeds above this amount will be split 50/50 with
Cornerstone's partners.
6
<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.
Cornerstone receives the remaining cash flow until such time as its cumulative
undistributed preferred return ($15.3 million as of 12/31/99) 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 December 31, 1999:
1) To Debt $ 1.8 million
2) To Cornerstone (as partial holder
Of the debt) $156.7 million
3) To Cornerstone for its undistributed
preferred return $ 15.3 million
4) To Cornerstone for its priority capital
contribution $145.0 million
500 Boylston and 222 Berkeley Street
Distributions of cash flows and sales proceeds are shared in proportion
to Cornerstone's 91.5% partnership interest and Hines' 8.5% partnership
interest.
One Post Street, San Francisco
Distributions of cash flows and sales proceeds are shared in proportion
to Cornerstone's 50.0% interest and McKesson Corporation's 50.0% interest. This
property is accounted for using the equity method of accounting.
120 Montgomery Street, San Francisco
Distributions of cash flows and sales proceeds are shared in proportion
to Cornerstone's 66.7% partnership interest and Sansome Partners III, L.P.'s
33.3% partnership
interest.
7
<PAGE>
DEVELOPMENTS
(As of 12/31/99)
<TABLE>
<CAPTION>
COSTS
INCURRED TOTAL CURRENT
ESTIMATED PLACED IN NUMBER OF SQUARE AS OF ESTIMATED PERCENTAGE
(DOLLARS IN THOUSANDS SERVICE DATE (A) LOCATION BUILDINGS FEET 12/31/99 COSTS (A) LEASED
- --------------------- ---------------- -------- --------- ---- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
WHOLLYOWNED
Seaport Plaza (b) 4Q/00 Redwood City, CA 1 160,000 $ 17,029 $ 40,100 100%
Concar (c) 3Q/01 San Mateo, CA 2 200,000 1,598 52,300 0%
Parkside Towers (d) 4Q/01 Foster City, CA 2 398,000 38,437 132,300 41%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
TOTAL 758,000 $ 57,064 $ 224,700 43%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
TAKE OUTPROJECTS
US Banc Corp Center (e) 2Q/00 Minneapolis, MN 1 929,000 $ 168 $ 168,000 79%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
TOTAL 929,000 $ 168 $ 168,000 79%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
JOINT VENTURES
One Powell (f) 3Q/01 San Francisco, CA 1 79,000 $ 65 $ 25,900 0%
Ferry Building (g) 3Q/02 San Francisco, CA 1 216,000 2,766 57,400 0%
Larkspur Landing (h) 2Q/03 Larkspur, CA 3 168,000 498 43,300 0%
First and Howard (i) TBD San Francisco, CA 4 1,169,000 2,571 365,000 0%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
TOTAL 1,632,000 $ 5,900 $ 491,600 0%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
GRAND TOTAL/WEIGHTED AVERAGE 3,319,000 $ 63,132 $ 884,300 32%
- ---------------------------- ----- ----------------- --- ---------- --------- --------- ---
</TABLE>
<TABLE>
<CAPTION>
COST INCURRED AS OF
BALANCE SHEET RECONCILIATION 12/31/99
- ---------------------------- --------
<S> <C>
WhollyOwned Developments $57,064
Take OutProjects 168
Joint Ventures 5,900
- ---------------------------- --------
Developments in process $63,132
- ---------------------------- --------
</TABLE>
(a) The Estimated Placed in Service date represents the date the certificate of
occupancy has been or is anticipated to be obtained. Subsequent to obtaining the
certificate of occupancy, the property will undergo a lease up period, if it is
not 100% prleased. The Total Estimated Costs include amounts attributable to
tenanting the property.
(b) 100% preleased to a public software company for a twelve year lease term.
(c) 69year ground lease with a participation feature. The completion costs above
assume an imputed land value of $7.5 million.
(d) Project features 381,000 rsf office, 17,000 rsf retail, three levels of
parking and a oneacre park. Lease for remaining space is out for signature with
the same public software company that has previously leased 41% of the project.
(e) Presale with the Ryan Companies.
(f) Bank of America to retain a 10% ownership in the asset, which includes
46,800 s.f. of retail space.
(g) 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.
(h) 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 thencurrent rent and paying Campus its share of the value in
excess of costs.
(i) The First & Howard urban campus will consist of 4 separate buildings. Each
of the phases will involve one or two JV partners. The Cornerstone weighted
average ownership of the entire project is anticipated to be 68%.
8
<PAGE>
DEBT SUMMARY
(As of 12/31/99)
(Dollars in thousands)
<TABLE>
<CAPTION>
ALL IN/ PRINCIPAL MATURITY DUE AT MATURITY
PROPERTY EFFECTIVE RATE BALANCE DATE MATURITY IN YEARS
- ------------------------------------------------------------ -------------- --------- -------- -------- --------
SECURED MORTGAGE DEBT
<S> <C> <C> <C> <C> <C>
TransPotomac Plaza 7.28% 65,000 Oct00 65,000
West Wilshire Office and Medical 7.54% 16,727 Jan02 16,090
Searise Office Tower 7.54% 11,470 Jan02 11,052
Exposition Centre 8.00% 4,958 May02 4,760
Wilshire Palisades 6.70% 28,201 Jul02 26,658
110 Atrium Place 7.68% 20,936 Mar04 19,821
527 Madison Avenue and One Lincoln Centre 7.47% 65,000 Oct04 65,000
Sixty State Street 6.84% 76,993 Jan05 72,267
Island Corporate Center 6.70% 13,255 Apr05 12,275
Washington Mutual Tower 7.53% 79,100 Nov05 79,100
Janss Court 8.69% 16,906 Dec05 15,575
Norwest Center 8.74% 110,000 Dec05 110,000
Agoura Hills 7.70% 11,564 Dec05 9,504
Bayhill 4,5,6 & 7 8.35% 53,734 Dec06 45,878
Market Square and 200 Galleria 7.54% 120,000 Oct07 120,000
Corporate 500 Centre 6.66% 88,424 Nov08 70,314
188 Embarcadero 7.26% 15,606 Aug09 12,397
Centerside II 7.26% 24,254 Aug09 19,266
700 North Brand 7.26% 26,937 Aug09 21,397
Golden Bear Center 7.26% 20,476 Aug09 16,265
Bixby Ranch 7.26% 28,528 Aug09 22,661
One Memorial 7.26% 63,119 Aug09 50,138
Peninsula Office Park 1,3,4,5,6,8 & 9 7.23% 88,128 Nov09 70,026
Embarcadero Place A,B,C,D 7.23% 38,148 Nov09 30,313
201 California Street 7.23% 44,504 Nov09 35,363
Tower 56 7.23% 25,024 Nov09 19,884
125 Summer Street 7.23% 78,844 Nov09 62,649
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
SECURED--FIXED 7.44% 1,235,836 1,103,653 7.1
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
SECURED--VARIABLE
Seaport Centre LIBOR plus 1.50% 6.89% 58,000 Dec00 58,000
The Pruneyard LIBOR plus 2.00% 7.39% 60,947 Mar00 60,947
Convertible Promissory Note due 2001 (a) 8.11%max 5.89% 12,926 Jan01 12,926
120 Montgomery LIBOR plus 1.40% 6.79% 48,160 Nov02 46,342
Norris Tech Center LIBOR plus 1.65% 7.04% 16,066 Dec03 14,818
Other loans Various Various 245 Various 245
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
SECURED--VARIABLE 7.03% 196,344 193,278 1.4
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
TOTAL SECURED DEBT 7.38% 1,432,180 1,296,931 6.4
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
Libor + 140 bp
plus facility
fee of 40bp on
unused portion
$550.0 Million Line of Credit of Line of Credit 6.66% 329,000 Nov01 329,000
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
TOTAL LINES OF CREDIT--VARIABLE 6.66% 329,000 329,000 1.9
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
TOTAL CONSOLIDATED DEBT--FIXED 7.44% $ 1,235,836 $ 1,103,653 7.1
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
TOTAL CONSOLIDATED DEBT--VARIABLE 6.84% $ 525,344 $ 522,278 1.7
============================================================ ========== ============= ======= ========= ========
Net premium on mark to market adjustment 16,151
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
TOTAL CONSOLIDATED DEBT 7.15% $ 1,777,331 $ 1,625,931 5.5
- ------------------------------------------------------------ ---------- ------------- ------- --------- --------
One Post 7.44% 17,050 Dec02 16,112
============================================================ ========== ============= ======= ========= ========
COMPANY'S PRO RATA SHARE OF UNCONSOLIDATED JOINT VENTURE DEBT 7.44% $ 17,050 $ 16,112 2.9
============================================================ ========== ============= ======= ========= ========
TOTAL CONSOLIDATED AND UNCONSOLIDATED PRORATA SHARE OF JOINT
VENTURE DEBT 7.29% $ 1,794,381 $ 1,642,043 5.5
============================================================ ========== ============= ======= ========= ========
</TABLE>
(a) Note is unsecured.
9
<PAGE>
DEBT MATURITY SCHEDULE ( EXCLUDES SCHEDULED PRINCIPAL PAYMENTS)
(As of 12/31/99)
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005 2006 2007
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SECURED DEBT
<C> <C> <C>
The Pruneyard $ 60,947
TransPotomac Plaza $ 65,000
Seaport Centre $ 58,000
Other loans $ 245
West Wilshire Office and Medical $ 16,090
Searise Office Tower $ 11,052
Exposition Centre $ 4,760
Wilshire Palisades $ 26,658
120 Montgomery $ 46,342
One Post $ 16,112
Norris Tech Center $ 14,818
110 Atrium Place $ 19,821
527 Madison Avenue and One Lincoln Centre $ 65,000
Sixty State Street $ 72,267
Island Corporate Center $ 12,275
Washington Mutual Tower $ 79,100
Janss Court $ 15,575
Norwest Center $ 110,000
Agoura Hills $ 9,504
Bayhill 4,5,6 & 7 $ 45,878
Market Square and 200 Galleria $ 120,000
Corporate 500 Centre
188 Embarcadero
Centerside II
700 North Brand
Golden Bear Center
Bixby Ranch
One Memorial
Peninsula Office Park 1,3,4,5,6,8 & 9
Embarcadero Place A,B,C,D
201 California Street
Tower 56
125 Summer Street
--------- --------- ---------- --------- --------- --------- -------- ---------
TOTAL SECURED DEBT 184,192 121,014 14,818 84,821 298,721 45,878 120,000
--------- --------- ---------- --------- --------- --------- -------- ---------
UNSECURED DEBT
Convertible Promissory Note due 2001 $ 12,926
$550.0 Million Line of Credit $ 329,000
--------- --------- ---------- --------- --------- --------- -------- ---------
TOTAL UNSECURED DEBT $ 341,926
--------- --------- ---------- --------- --------- --------- -------- ---------
TOTAL DEBT $ 184,192 $ 341,926 $ 121,014 $ 14,818 $ 84,821 $ 298,721 $ 45,878 $ 120,000
--------- --------- ---------- --------- --------- --------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
2008 2009 TOTAL
---- ---- -----
SECURED DEBT
<S> <C> <C> <C>
The Pruneyard
TransPotomac Plaza
Seaport Centre
Other loans
West Wilshire Office and Medical
Searise Office Tower
Exposition Centre
Wilshire Palisades
120 Montgomery
One Post
Norris Tech Center
110 Atrium Place
527 Madison Avenue and One Lincoln Centre
Sixty State Street
Island Corporate Center
Washington Mutual Tower
Janss Court
Norwest Center
Agoura Hills
Bayhill 4,5,6 & 7
Market Square and 200 Galleria
Corporate 500 Centre $ 70,314
188 Embarcadero $ 12,397
Centerside II $ 19,266
700 North Brand $ 21,397
Golden Bear Center $ 16,265
Bixby Ranch $ 22,661
One Memorial $ 50,138
Peninsula Office Park 1,3,4,5,6,8 & 9 $ 70,026
Embarcadero Place A,B,C,D $ 30,313
201 California Street $ 35,363
Tower 56 $ 19,884
125 Summer Street $ 62,649
-------- --------- -----------
TOTAL SECURED DEBT 70,314 360,359 $ 1,300,117
-------- --------- -----------
UNSECURED DEBT
Convertible Promissory Note due 2001
$550.0 Million Line of Credit
-------- --------- -----------
TOTAL UNSECURED DEBT $ 341,926
-------- --------- -----------
TOTAL DEBT $ 70,314 $ 360,359 $ 1,642,043
-------- --------- -----------
</TABLE>
10
<PAGE>
PORTFOLIO DATA
<PAGE>
REGIONAL SUMMARY
(As of 12/31/99)
<TABLE>
<CAPTION>
Square Feet % Square Feet % NOI MSA's
----------- ------------- ----- -----
<S> <C> <C> <C> <C>
ALL PROPERTIES 17,981,409 16
CBD 8,519,005 47.4% 53.8%
Suburban 9,462,404 52.6% 46.2%
</TABLE>
REGIONAL DISTRIBUTION BASED ON NOI AND SQUARE FEET
(As of 12/31/99)
<TABLE>
<CAPTION>
CBD Suburban All Properties
--------------------------- ---------------------------- -----------------------------
% Square % Square % Square
Square Feet Feet % NOI Square Feet Feet % NOI Square Feet Feet % NOI
----------- -------- ----- ----------- -------- ----- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northeast 3,599,736 20.0% 26.1% 657,466 3.7% 4.1% 4,257,202 23.7% 30.2%
Central 0 0.0% 0.0% 976,079 5.4% 5.0% 976,079 5.4% 5.0%
Pacific 1,431,982 8.0% 6.8% 6,944,372 38.6% 33.7% 8,376,354 46.6% 40.6%
West 2,271,999 12.6% 13.2% 451,789 2.5% 1.7% 2,723,788 15.1% 14.9%
Southeast 1,215,288 6.8% 7.6% 432,698 2.4% 1.6% 1,647,986 9.2% 9.3%
--------- ---- ---- ------- ---- ---- --------- ----- -----
TOTAL 8,519,005 47.4% 53.8% 9,462,404 52.6% 46.2% 17,981,409 100.0% 100.0%
--------- ---- ---- ------- ---- ---- --------- ----- -----
</TABLE>
[PIE CHART]
11
<PAGE>
REGIONAL SUMMARY OF MSAS
(As of 12/31/99)
<TABLE>
<CAPTION>
MSA STATE # BUILDINGS SQUARE FEET % SQUARE FEET % NOI
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 San Francisco CA 19 3,040,481 16.9% 16.9%
2 Boston MA 5 2,884,826 16.0% 20.1%
3 Atlanta GA 2 1,647,986 9.2% 9.3%
4 Oakland CA 12 1,601,849 8.9% 6.1%
5 Seattle WA 5 1,469,741 8.2% 7.8%
6 San Jose CA 10 1,188,229 6.6% 6.8%
7 Minneapolis MN 1 1,117,439 6.2% 6.8%
8 Los Angeles CA 9 1,108,009 6.2% 6.0%
9 Washington D.C. DC,VA 5 993,411 5.5% 7.0%
10 Chicago IL 5 976,079 5.4% 5.0%
11 Orange County CA 3 710,115 3.9% 2.7%
12 San Diego CA 2 420,502 2.3% 1.2%
13 New York NY 2 378,965 2.1% 3.1%
14 Ventura CA 3 234,198 1.3% 0.9%
15 Salt Lake City UT 1 136,608 0.8% 0.3%
16 Sacremento CA 1 72,971 0.4% 0.1%
--------------------------------------------------------------------------------------------------------------
Total 85 17,981,409 100% 100%
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
OCCUPANCY SUMMARY
(as of 12/31/99)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY BY REGION
- ----------------------------------------------------------------------------------------------------------------------------------
SQUARE FOOTAGE PERCENTAGE
OCCUPIED LEASED VACANT TOTAL OCCUPIED LEASED VACANT TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Central 898,799 37,266 40,014 976,079 92.1% 3.8% 4.1% 100.0%
Northeast 4,085,305 41,043 130,854 4,257,202 96.0% 1.0% 3.1% 100.0%
Southeast 1,604,354 8,148 35,484 1,647,986 97.4% 0.5% 2.2% 100.0%
Southwest - - - - n/a n/a n/a n/a
West 2,644,123 19,650 60,015 2,723,788 97.1% 0.7% 2.2% 100.0%
Pacific 7,927,666 86,680 267,508 8,281,854 95.7% 1.0% 3.2% 100.0%
TOTAL (1) 17,160,247 192,787 533,875 17,886,909 95.9% 1.1% 3.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
SUMMARY CBD VS SUBURBAN
- -----------------------------------------------------------------------------------------------------------------------------------
SQUARE FOOTAGE PERCENTAGE
OCCUPIED LEASED VACANT TOTAL OCCUPIED LEASED VACANT TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBD 8,233,304 66,104 219,597 8,519,005 96.6% 0.8% 2.6% 100.0%
Suburban 8,926,943 126,683 314,278 9,367,904 95.3% 1.4% 3.4% 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL (1) 17,160,247 192,787 533,875 17,886,909 95.9% 1.1% 3.0% 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes Pruneyard Inn square footage of 94,500 square feet
13
<PAGE>
10 LARGEST TENANTS BASED ON ANNUALIZED BASE RENT
(as of 12/31/99)
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PERCENTAGE OF
TENANT (a) NUMBER OF WEIGHTED AVERAGE PORTFOLIO AGGREGATE AGGREGATE
BUILDINGS REMAINING LEASE ANNUALIZED RENTABLE OCCUPIED
TERM IN MONTHS (b) RENT (c) SQUARE FEET SQUARE FEET
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Norwest Corporation [Wells Fargo] 4 181 2.8% 795,424 4.6%
Massachusetts Financial Services 1 38 2.4% 328,540 1.9%
Hale & Dorr 1 162 2.4% 319,501 1.9%
Wachovia Bank 1 108 2.2% 380,442 2.2%
King & Spalding 1 118 2.0% 314,443 1.8%
The New England Life 2 331 1.3% 199,054 1.2%
Perkins Coie 1 132 1.2% 240,127 1.4%
Houghton Mifflin 1 86 1.1% 225,883 1.3%
PeopleSoft Corporation 1 105 1.0% 210,940 1.2%
McKesson 1 157 0.6% 132,476 0.8%
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL \ WEIGHTED AVERAGE (b) 123 17.2% 3,146,830 18.3%
===================================================================================================================================
</TABLE>
(a) Actual tenant may be a susidiary of, or an entity affiliated with, the named
tenant.
(b) Weighted Average calculation based on aggregate rentable square
footage occupied by each tenant.
(c) Annualized Rent is the monthly contractual base rent under existing leases
as of December 31, 1999 multiplied by 12.
14
<PAGE>
LEASE EXPIRATION (2)
(as of 12/31/99)
<TABLE>
<CAPTION>
2000 AND
MONTH TO MONTH 2001 2002 2003 2004
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION TOTALS Square Feet (1) 80,970 49,850 97,110 213,608 51,825
% Square Feet (2) 8.3% 5.1% 9.9% 21.9% 5.3%
Annualized Rent (3) 2,253,772 1,687,984 2,961,215 6,204,791 1,415,529
Number of Leases 14 10 15 21 8
Rent Per Square Foot $ 27.83 $ 33.86 $ 30.49 $ 29.05 $ 27.31
- ----------------------------------------------------------------------------------------------------------------------------------
NORTHEAST REGION TOTALS Square Feet (1) 87,437 373,255 545,046 365,022 323,547
% Square Feet (2) 2.1% 8.8% 12.8% 8.6% 7.6%
Annualized Rent (3) 3,250,895 18,313,294 19,806,301 11,960,067 12,402,884
Number of Leases 30 43 40 41 37
Rent Per Square Foot $ 37.18 $ 49.06 $ 36.34 $ 32.77 $ 38.33
- ----------------------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION TOTALS Square Feet (1) 66,086 156,555 172,869 88,700 68,847
% Square Feet (2) 4.0% 9.5% 10.5% 5.4% 4.2%
Annualized Rent (3) 1,343,120 3,839,761 3,729,017 2,173,371 1,839,882
Number of Leases 18 17 11 14 12
Rent Per Square Foot $ 20.32 $ 24.53 $ 21.57 $ 24.50 $ 26.72
- ----------------------------------------------------------------------------------------------------------------------------------
SOUTHWEST REGION TOTALS Square Feet (1) - - - - -
% Square Feet (2) 0.0% 0.0% 0.0% 0.0% 0.0%
Annualized Rent (3) - - - - -
Number of Leases - - - - -
Rent Per Square Foot $ - $ - $ - $ - $ -
- ----------------------------------------------------------------------------------------------------------------------------------
WEST REGION TOTALS Square Feet (1) 189,901 160,389 290,002 567,617 416,243
% Square Feet (2) 7.0% 5.9% 10.6% 20.8% 15.3%
Annualized Rent (3) 5,708,005 3,432,520 6,814,984 14,620,273 12,376,997
Number of Leases 37 26 27 35 32
Rent Per Square Foot $ 30.06 $ 21.40 $ 23.50 $ 25.76 $ 29.74
- ----------------------------------------------------------------------------------------------------------------------------------
PACIFIC REGION TOTALS Square Feet (1) 832,072 850,257 1,250,943 1,201,684 1,049,810
% Square Feet (2) 10.0% 10.3% 15.1% 14.5% 12.7%
Annualized Rent (3) 27,610,649 31,925,063 41,346,023 34,848,581 37,117,719
Number of Leases 177 149 187 172 137
Rent Per Square Foot $ 33.18 $ 37.55 $ 33.05 $ 29.00 $ 35.36
- ----------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TOTALS Square Feet (1) 1,256,466 1,590,306 2,355,970 2,436,631 1,910,272
% Square Feet (2) 7.0% 8.9% 13.2% 13.6% 10.7%
Annualized Rent (3) 40,166,442 59,198,623 74,657,540 69,807,083 65,153,011
Number of Leases 276 245 280 283 226
Rent Per Square Foot $ 31.97 $ 37.22 $ 31.69 $ 28.65 $ 34.11
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2009 AND
2005 2006 2007 2008 BEYOND TOTALS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION TOTALS 7,177 17,848 107,429 110,201 162,781 898,799
0.7% 1.8% 11.0% 11.3% 16.7% 92.1%
201,824 426,152 2,874,154 3,357,300 3,449,772 24,832,494
2 3 5 2 1 81
$ 28.12 $ 23.88 $ 26.75 $ 30.47 $ 21.19 $ 27.63
- ------------------------------------------------------------------------------------------------------------------
NORTHEAST REGION TOTALS 304,484 137,363 484,961 278,976 1,185,214 4,085,305
7.2% 3.2% 11.4% 6.6% 27.8% 96.0%
12,113,187 5,823,427 19,945,157 7,859,464 41,029,022 152,503,700
16 11 24 11 28 281
$ 39.78 $ 42.39 $ 41.13 $ 28.17 $ 34.62 $ 37.33
- ------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION TOTALS 25,392 503,585 - 495,736 26,584 1,604,354
1.5% 30.6% 0.0% 30.1% 1.6% 97.4%
595,463 15,906,521 - 13,607,902 522,985 43,558,023
6 4 - 4 2 88
$ 23.45 $ 31.59 $ - $ 27.45 $ 19.67 $ 27.15
- ------------------------------------------------------------------------------------------------------------------
SOUTHWEST REGION TOTALS - - - - - -
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
- - - - - -
- - - - - -
$ - $ - $ - $ - $ - $ -
- ------------------------------------------------------------------------------------------------------------------
WEST REGION TOTALS 72,122 13,471 149,389 366 784,623 2,644,123
2.6% 0.5% 5.5% 0.0% 28.8% 97.1%
1,967,164 351,287 3,615,293 9,842 27,918,762 76,815,126
13 4 2 1 8 185
$ 27.28 $ 26.08 $ 24.20 $ 26.89 $ 35.58 $ 29.05
- ------------------------------------------------------------------------------------------------------------------
PACIFIC REGION TOTALS 453,316 497,436 585,407 554,594 652,147 7,927,666
5.5% 6.0% 7.1% 6.7% 7.9% 95.7%
13,764,469 12,717,534 20,163,461 16,649,689 16,453,032 252,596,220
49 29 15 22 56 993
$ 30.36 $ 25.57 $ 34.44 $ 30.02 $ 25.23 $ 31.86
- ------------------------------------------------------------------------------------------------------------------
PORTFOLIO TOTALS 862,491 1,169,703 1,327,186 1,439,873 2,811,349 17,160,247
4.8% 6.5% 7.4% 8.0% 15.7% 95.9%
28,642,107 35,224,921 46,598,065 41,484,197 89,373,573 550,305,562
86 51 46 40 95 1,628
$ 33.21 $ 30.11 $ 35.11 $ 28.81 $ 31.79 $ 32.07
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total net rentable square feet represented by expiring leases.
(2) Percentage of total net rentable feet represented by expiring leases.
(3) Annualized Rent is the monthly contractual rent under existing leases as
of December 31, 1999 multiplied by 12. This amount reflects total base
rent before any rent abatements, but includes expense reimbursements.
Total rent abatements for leases in effect as of December 31, 1999 for the
12 months ending December 31, 2000 are approximately $7.0 million.
15
<PAGE>
ROLLOVER OF TOP 10 MARKETS BASED ON ANNUALIZED RENT
(as of 12/31/99)
<TABLE>
<CAPTION>
EXPIRATION YEAR
------------------------------------------------
2000 2001 2002 TOTAL
------------------------------------------------
PERCENTAGE OF TOTAL PORTFOLIO RENT EXPIRING
------------------------------------------------
<S> <C> <C> <C> <C>
Boston, MA 0.09% 1.45% 2.99% 4.53%
San Francisco, CA 0.91% 0.72% 1.71% 3.35%
Atlanta, GA 0.25% 0.72% 0.70% 1.67%
Seattle, WA 0.34% 0.38% 1.04% 1.76%
Washington DC 0.29% 0.60% 0.18% 1.06%
Minneapolis, MN 0.56% 0.06% 0.17% 0.79%
San Jose, CA 0.38% 0.88% 0.49% 1.75%
Oakland, CA 2.19% 2.71% 3.05% 7.96%
Los Angeles, CA 0.72% 1.09% 1.05% 2.85%
Chicago, IL 0.42% 0.32% 0.56% 1.30%
</TABLE>
16
<PAGE>
PORTFOLIO BY SIC CODE
(As of 12/31/99)
<TABLE>
<CAPTION>
PERCENT OF TOTAL
SIC CODE STANDARD INDUSTRIAL CLASSIFICATION OCCUPIED SQUARE FEET OCCUPIED PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
73 Business Services 2,415,263 14.1%
81 Legal Services 2,969,877 17.3%
60 Financial Institutions 1,895,294 11.0%
48 Communications 410,585 2.4%
87 Engineering & Management/ Consulting Services 1,474,532 8.6%
62 Securities & Commodities Brokers 1,822,850 10.6%
63 Insurance Carriers 1,495,508 8.7%
91 Government 122,408 0.7%
13 Oil & Gas 39,724 0.2%
65 Real Estate 468,222 2.7%
72 Retail/Personal Services 22,236 0.1%
64 Insurance Agents & Related Services 97,944 0.6%
50 Wholesale goods 719,265 4.2%
47 Transportation 106,353 0.6%
35 Equipment Manufacturing 310,141 1.8%
20 Food & Beverage 468,652 2.7%
27 Publishing 445,109 2.6%
82 Educational Services 109,991 0.6%
15 Construction 20,300 0.1%
80 Health Services 219,851 1.3%
08 Forestry - 0.0%
83 Social Services 39,018 0.2%
Various Other 1,487,124 8.7%
- ------------------------------------------------------------------------------------------------------------
SQUARE FEET OCCUPIED BY TENANTS AT 12/31/99 17,160,247 100%
============================================================================================================
</TABLE>
17
<PAGE>
OFFICE PROPERTY STATISTICS
(as of 12/31/99)
<TABLE>
<CAPTION>
Percent of Total
Approximate Portfolio
PRIMARY MARKET Number of Year Built Rentable Square Rentable Percent
Buildings /Renovated Feet Square Feet Occupied
SUB MARKET
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION
CHICAGO
LAKE COUNTY
Corporate 500 Centre (k) 4 1986/1990 679,039 3.8% 98.9%
OAK BROOK
One Lincoln Centre 1 1986 297,040 1.7% 76.6%
- --------------------------------------------------------------------------------------------------------------------------------
CENTRAL REGION TOTAL/WEIGHTED AVERAGE 5 976,079 5.5% 92.1%
- --------------------------------------------------------------------------------------------------------------------------------
NORTHEAST REGION
BOSTON
EAST CAMBRIDGE
One Memorial Drive (b) 1 1985 352,764 2.0% 99.8%
FINANCIAL DISTRICT
125 Summer Street 1 1989 463,691 2.6% 67.5%
Sixty State Street (a) 1 1979 823,014 4.6% 99.9%
BACK BAY
500 Boylston Street 1 1988 714,513 4.0% 100.1%
222 Berkeley Street 1 1991 530,844 3.0% 99.8%
NEW YORK
PARK/LEXINGTON
Tower 56 1 1983 163,633 0.9% 99.2%
MADISON AVENUE
527 Madison Avenue 1 1986 215,332 1.2% 99.5%
WASHINGTON D.C.
CBD
Market Square (j) 2 1990 688,709 3.9% 99.3%
ALEXANDRIA/OLD TOWN
11 Canal Center 1 1986 70,365 0.4% 95.5%
99 Canal Center 1 1986 137,945 0.8% 97.6%
TransPotomac Plaza 1 1983 96,392 0.5% 93.8%
- --------------------------------------------------------------------------------------------------------------------------------
NORTHEAST REGION TOTAL/WEIGHTED AVERAGE 12 4,257,202 23.8% 96.0%
- --------------------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION
ATLANTA
CBD
191 Peachtree Street (d) 1 1991 1,215,288 6.8% 97.7%
NORTHEAST
200 Galleria 1 1985 432,698 2.4% 96.4%
- --------------------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION TOTAL/WEIGHTED AVERAGE 2 1,647,986 9.2% 97.4%
- --------------------------------------------------------------------------------------------------------------------------------
WEST REGION
MINNEAPOLIS
MINNEAPOLIS CBD
Norwest Center (i) 1 1988 1,117,439 6.2% 100.0%
SALT LAKE CITY
CENTRAL VALLEY EAST
U.S. West (c) 1 1985 136,608 0.8% 76.0%
SEATTLE
BELLEVUE CBD
110 Atrium Place (c) 1 1981 215,172 1.2% 100.0%
CBD
Washington Mutual Tower (e) 3 1988 1,154,560 6.5% 96.6%
I-90 CORRIDOR
Island Corporate Center (c) 1 1987 100,009 0.6% 92.7%
- --------------------------------------------------------------------------------------------------------------------------------
WEST REGION TOTAL/WEIGHTED AVERAGE 7 2,723,788 15.2% 97.1%
- --------------------------------------------------------------------------------------------------------------------------------
PACIFIC REGION
LOS ANGELES
BRENTWOOD
West Wilshire (c) 2 1960 - 1976 235,787 1.3% 94.4%
GLENDALE
700 North Brand (c) 1 1981 202,531 1.1% 94.2%
SANTA MONICA
429 Santa Monica (c) 1 1982 83,243 0.5% 85.2%
Commerce Park (c) 1 1977 94,367 0.5% 78.5%
Janss Court (c)(l) 1 1989 125,709 0.7% 100.0%
Searise Office Tower (c) 1 1975 122,292 0.7% 100.0%
Wilshire Palisades (h) 1 1981 186,714 1.0% 99.5%
WESTWOOD
Warner Park Center (c) 1 1986 57,366 0.3% 100.0%
OAKLAND
BERKELEY
Golden Bear Center (c) 1 1986 160,587 0.9% 98.9%
CONCORD
Corporate Centre (c) 2 1985 - 1987 329,348 1.8% 95.5%
PLEASANTON
Park Plaza (c) 1 1986 87,040 0.5% 100.0%
PeopleSoft (c) 1 1984 277,562 1.6% 100.0%
SAN RAMON
Norris Tech (c) 3 1984 - 1990 260,513 1.5% 96.3%
ADP Plaza (c) 2 1987 - 1989 300,308 1.7% 95.2%
WALNUT CREEK DOWNTOWN
1600 South Main (c) 1 1983 83,277 0.5% 98.0%
YGNACIO VALLEY
2700 Ygnacio Valley Road (c) 1 1984 103,214 0.6% 98.2%
ORANGE COUNTY
AIRPORT
18301 Von Karman (c) 1 1991 219,508 1.2% 85.7%
TOWN & COUNTRY
2677 North Main (c) 1 1987 213,318 1.2% 86.8%
UNCLASSIFIED WEST ORANGE COUNTY
Bixby Ranch (c) 1 1987 277,289 1.6% 95.4%
SACREMENTO
POINT WEST/TRIBUTE
Exposition Centre (c) 1 1984 72,971 0.4% 70.3%
SAN DIEGO
MISSION VALLEY
<CAPTION>
Percent of
Portfolio Annualized Rent
PRIMARY MARKET Annualized Rent Annualized Number of Per Occupied
(000's)(a) Rent Leases Square Foot (a)
SUB MARKET
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CENTRAL REGION
CHICAGO
LAKE COUNTY
Corporate 500 Centre (k) 18,555 3.4% 42 $27.64
OAK BROOK
One Lincoln Centre 6,278 1.1% 39 $27.59
- ------------------------------------------------------------------------------------------------------------------------
CENTRAL REGION TOTAL/WEIGHTED AVERAGE 24,833 4.5% 81 $27.63
- ------------------------------------------------------------------------------------------------------------------------
NORTHEAST REGION
BOSTON
EAST CAMBRIDGE
One Memorial Drive (b) 12,751 2.3% 12 $36.21
FINANCIAL DISTRICT
125 Summer Street 12,247 2.2% 20 $39.12
Sixty State Street (a) 30,149 5.5% 33 $36.68
BACK BAY
500 Boylston Street 20,602 3.7% 30 $28.80
222 Berkeley Street 18,576 3.4% 30 $35.06
NEW YORK
PARK/LEXINGTON
Tower 56 7,752 1.4% 42 $47.73
MADISON AVENUE
527 Madison Avenue 12,226 2.2% 21 $57.09
WASHINGTON D.C.
CBD
Market Square (j) 29,597 5.4% 57 $43.26
ALEXANDRIA/OLD TOWN
11 Canal Center 1,817 0.3% 6 $27.05
99 Canal Center 3,626 0.7% 18 $26.93
TransPotomac Plaza 2,270 0.4% 12 $25.11
- ------------------------------------------------------------------------------------------------------------------------
NORTHEAST REGION TOTAL/WEIGHTED AVERAGE 151,613 27.6% 281 $37.11
- ------------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION
ATLANTA
CBD
191 Peachtree Street (d) 34,317 6.2% 31 $28.90
NORTHEAST
200 Galleria 9,241 1.7% 57 $22.16
- ------------------------------------------------------------------------------------------------------------------------
SOUTHEAST REGION TOTAL/WEIGHTED AVERAGE 43,558 7.9% 88 $27.15
- ------------------------------------------------------------------------------------------------------------------------
WEST REGION
MINNEAPOLIS
MINNEAPOLIS CBD
Norwest Center (i) 40,302 7.3% 35 $36.07
SALT LAKE CITY
CENTRAL VALLEY EAST
U.S. West (c) 1,920 0.3% 17 $18.51
SEATTLE
BELLEVUE CBD
110 Atrium Place (c) 4,855 0.9% 30 $22.56
CBD
Washington Mutual Tower (e) 28,132 5.1% 82 $25.23
I-90 CORRIDOR
Island Corporate Center (c) 2,124 0.4% 21 $22.92
- ------------------------------------------------------------------------------------------------------------------------
WEST REGION TOTAL/WEIGHTED AVERAGE 77,333 14.1% 185 $29.25
- ------------------------------------------------------------------------------------------------------------------------
PACIFIC REGION
LOS ANGELES
BRENTWOOD
West Wilshire (c) 5,195 0.9% 51 $23.35
GLENDALE
700 North Brand (c) 5,237 1.0% 19 $27.46
SANTA MONICA
429 Santa Monica (c) 1,828 0.3% 34 $25.77
Commerce Park (c) 1,390 0.3% 9 $18.77
Janss Court (c)(l) 3,468 0.6% 21 $27.59
Searise Office Tower (c) 3,639 0.7% 27 $29.76
Wilshire Palisades (h) 8,046 1.5% 14 $43.33
WESTWOOD
Warner Park Center (c) 1,766 0.3% 7 $30.78
OAKLAND
BERKELEY
Golden Bear Center (c) 5,237 1.0% 19 $32.98
CONCORD
Corporate Centre (c) 3,057 0.6% 56 $9.72
PLEASANTON
Park Plaza (c) 1,763 0.3% 9 $20.25
PeopleSoft (c) 7,120 1.3% 5 $25.65
SAN RAMON
Norris Tech (c) 4,255 0.8% 7 $16.96
ADP Plaza (c) 43,885 8.0% 23 $153.52
WALNUT CREEK DOWNTOWN
1600 South Main (c) 1,951 0.4% 17 $23.91
YGNACIO VALLEY
2700 Ygnacio Valley Road (c) 1,936 0.4% 27 $19.10
ORANGE COUNTY
AIRPORT
18301 Von Karman (c) 4,728 0.9% 32 $25.14
TOWN & COUNTRY
2677 North Main (c) 3,753 0.7% 22 $20.27
UNCLASSIFIED WEST ORANGE COUNTY
Bixby Ranch (c) 6,499 1.2% 48 $24.57
SACREMENTO
POINT WEST/TRIBUTE
Exposition Centre (c) 1,076 0.2% 14 $20.98
SAN DIEGO
MISSION VALLEY
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Percent of Total
Approximate Portfolio
PRIMARY MARKET Number of Year Built Rentable Square Rentable Percent
Buildings /Renovated Feet Square Feet Occupied
SUB MARKET
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Centerside II (c) 1 1987 286,949 1.6% 92.6%
Crossroads (c) 1 1983 133,553 0.7% 100.0%
SAN FRANCISCO
BURLINGAME
Bay Park Plaza (c) 2 1985 - 1998 257,058 1.4% 100.0%
One Bay Plaza (c) 1 1979 176,533 1.0% 99.1%
FINANCIAL DISTRICT
120 Montgomery (c) 1 1955 420,310 2.3% 92.3%
188 Embarcadero (c) 1 1985 85,183 0.5% 98.9%
201 California (h) 1 1980 240,230 1.3% 90.8%
One Post (c) 1 1969 391,450 2.2% 99.0%
REDWOOD CITY
Seaport Centre (c) 1 1988 463,418 2.6% 100.0%
SAN BRUNO
Bayhill (c) 4 1982 - 1987 514,255 2.9% 96.3%
SAN MATEO
Peninsula Office Park (c) 7 1971 - 1998 492,044 2.8% 97.6%
SAN JOSE
CBD
10 Almaden (c) 1 1989 294,809 1.6% 100.0%
CAMPBELL
Pruneyard Inn (c)(g) 1 1989 na na na
Pruneyard Office (c)(f) 3 1971 - 1999 354,629 2.0% 95.4%
Pruneyard Shopping Center (c) 1 1970s 252,210 1.4% 90.3%
PALO ALTO
Embarcadero Place (c) 4 1984 192,081 1.1% 100.0%
VENTURA
CONEJO VALLEY
Agoura Hills (c) 1 1987 115,208 0.6% 99.8%
Westlake Spectrum (c) 2 1990 118,990 0.7% 97.2%
- -------------------------------------------------------------------------------------------------------------------------------
PACIFIC REGION TOTAL/WEIGHTED AVERAGE 59 8,281,854 46.3% 95.7%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Total/Weighted Average 85 17,886,909 100.0% 95.9%
===============================================================================================================================
<CAPTION>
Percent of
Portfolio Annualized Rent
PRIMARY MARKET Annualized Rent Annualized Number of Per Occupied
(000's)(a) Rent Leases Square Foot (a)
SUB MARKET
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Centerside II (c) 4,813 0.9% 43 $18.12
Crossroads (c) 2,341 0.4% 11 $17.53
SAN FRANCISCO
BURLINGAME
Bay Park Plaza (c) 7,633 1.4% 12 $29.69
One Bay Plaza (c) 4,372 0.8% 48 $24.99
FINANCIAL DISTRICT
120 Montgomery (c) 11,214 2.0% 84 $28.91
188 Embarcadero (c) 3,378 0.6% 10 $40.10
201 California (h) 8,425 1.5% 9 $38.62
One Post (c) 10,762 2.0% 32 $27.77
REDWOOD CITY
Seaport Centre (c) 16,521 3.0% 15 $35.65
SAN BRUNO
Bayhill (c) 14,421 2.6% 45 $29.13
SAN MATEO
Peninsula Office Park (c) 17,810 3.2% 38 $37.07
SAN JOSE
CBD
10 Almaden (c) 7,933 1.4% 23 $26.91
CAMPBELL
Pruneyard Inn (c)(g) na na na na
Pruneyard Office (c)(f) 10,532 1.9% 82 $31.12
Pruneyard Shopping Center (c) 4,913 0.9% 51 $21.56
PALO ALTO
Embarcadero Place (c) 6,839 1.2% 8 $35.60
VENTURA
CONEJO VALLEY
Agoura Hills (c) 2,388 0.4% 11 $20.77
Westlake Spectrum (c) 2,657 0.5% 10 $22.97
- ---------------------------------------------------------------------------------------------------------------------------
PACIFIC REGION TOTAL/WEIGHTED AVERAGE 252,779 46.0% 993 $31.89
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Total/Weighted Average 550,115 100.0% 1,628 $32.06
===========================================================================================================================
</TABLE>
(a) 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.
(b) The Property was acquired by the Company in April 1998.
(c) Property acquired as a result of the Wilson acquisition in December 1998.
(d) 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.
(e) 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.
(f) Pruneyard Place construction was completed and occupied on April 1, 1999.
The building was entirely preleased.
(g) The Pruneyard Inn is a 94,500 sf threestory hotel. A 25,000 square foot
expansion was completed in May 1999, increasing the number of rooms from
118 to 172.
(h) The Property was acquired by the Company in June 1998.
(i) 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%.
(j) 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.
(k) The Property was acquired by the Company in January 1998.
(l) Janss Court is a sevenstory, 125,000 square foot Class A mixeduse 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.
19
<PAGE>
OFFICE MARKET GRAPHS
<PAGE>
THE 54 MAJOR U.S. OFFICE MARKETS
COMPLETIONS, NET ABSORPTION* AND VACANCY RATES
[CHART]
SOURCE: CB COMMERCIAL REAL ESTATE GROUP, INC./TORTO WHEATON RESEARCH AS OF 4TH
QUARTER 1999
* CB Commercial Real Estate Group, Inc. / Torto Wheaton Research defines net
absorption as the net change in multitenant occupied stock, in square feet,
during that period.
20
<PAGE>
THE COMPANY'S 10 LARGEST MARKETS
NET ABSORPTION *, COMPLETIONS AND VACANCY RATES
[CHART]
SOURCE: CB COMMERCIAL REAL ESTATE GROUP, INC./TORTO WHEATON RESEARCH AS OF 4TH
QUARTER 1999
* CB Commercial Real Estate Group, Inc. / Torto Wheaton Research defines net
absorption as the net change in multitenant occupied stock, in square feet,
during that period.
21
<PAGE>
FOR THE COMPANY'S 10 LARGEST MARKETS
VACANCY RATES OF CLASS A OFFICE SPACE
COMPARED TO VACANCY RATES FOR ALL OFFICE SPACE
<TABLE>
<CAPTION>
Direct Vacancy Rate for Class A Direct Vacancy Rate for All CPP's Direct Vacancy Rate for
Office Space* Office Space* Office Space
------------------------------- --------------------------- -----------------------------
<S> <C> <C> <C>
Boston, MA 5.6% 5.9% 4.3%
San Francisco, CA 3.0% 3.0% 2.0%
Atlanta, GA 9.0% 10.4% 2.2%
Seattle, WA 3.1% 3.8% 1.8%
Washington DC 4.6% 5.3% 0.6%
Minneapolis, MN 6.5% 7.7% 0.0%
San Jose, CA 6.5% 5.4% 2.5%
Oakland, CA 7.8% 7.9% 2.1%
Los Angeles, CA 14.8% 14.4% 5.1%
Chicago, IL 7.8% 9.5% 4.1%
- ------------------------------------------------------------------------------------------------------------------
All 10 Markets 7.8% 8.0% 2.6%
==================================================================================================================
</TABLE>
Markets ordered based on CPP Net Operating Income
*Data through December 31, 1999. CB Commercial Real Estate Group, Inc. / Torto
Wheaton Research.
22
