SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (date of earliest event reported): October 24, 1996
CarrAmerica Realty Corporation
(formerly Carr Realty Corporation)
(Exact name of registrant as specified in its charter)
Maryland 1-11706 52-1796339
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
1700 Pennsylvania Avenue, N.W., Washington, D.C. 20006
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 624-7500
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FORM 8-K
ITEM 1. Changes in Control of Registrant
Not applicable
ITEM 2. Acquisition or Disposition of Assets.
Not applicable.
ITEM 3. Bankruptcy or Receivership.
Not applicable.
ITEM 4. Changes in Registrant's Certifying Accountant.
Not applicable.
ITEM 5. Other Events.
a. New Acquisitions
Silicon Valley
Sunnyvale Research Plaza. In September 1996, the Company acquired three
buildings which comprise Sunnyvale Research Plaza, located in the Sunnyvale
sub-market of Silicon Valley in Northern California. These properties, which
contain approximately 126,000 square feet of office space, were acquired for an
aggregate purchase price of approximately $16 million. Built in 1985, the
buildings are well located on a prominent corner with nearby access to
significant transportation arteries. As of September 1996, the buildings were
100% leased to four tenants.
Southeast Denver
Quebec Centre. In August 1996, the Company acquired three office
buildings which comprise Quebec Centre in suburban southeast Denver, Colorado
for an aggregate purchase price of approximately $7 million. Built in 1982, the
buildings contain
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approximately 107,000 square feet of office space. As of September 1996, the
buildings were 98% leased to approximately 30 tenants.
Greenwood Centre. In July 1996, the Company acquired Greenwood Centre,
a building located in suburban southeast Denver, Colorado, for an aggregate
purchase price of approximately $7 million. Built in 1985, the building contains
approximately 75,000 square feet of office space. As of September 1996, the
building was 94% leased.
Panorama Corporate Center. In August 1996, the Company acquired
Panorama Corporate Center for approximately $17.5 million. The acquisition
includes a 106,000 square foot building currently under construction and options
to acquire additional land which will support the future development of
approximately 800,000 square feet of space.
Southern California
Warner Center Business Park. In July 1996, the Company acquired 12
buildings which comprise the Warner Center Business Park in Woodland Hills,
California, a northwestern suburb of Los Angeles, for an aggregate purchase
price of approximately $51 million. As part of the purchase price, the Company
assumed approximately $26 million in debt that bears interest at an annual rate
of 7.4 % and matures in December 2000. These buildings, which are located in the
Greater San Fernando Valley sub-market, were built from 1981 to 1985, and
contain approximately 343,000 square feet of office space. As of September 1996,
the buildings were 94% leased to major health care and insurance companies and
other tenants.
Katella Corporate Center. In July 1996, the Company acquired Katella
Corporate Center in Cypress, California for an aggregate purchase price of
approximately $7 million. Built in 1982, the building contains 80,000 square
feet of rentable office space. As of September 1996, the building was 93%
leased.
Austin, Texas
Littlefield Portfolio. In August 1996, the Company acquired ten
properties, certain land, and an option to acquire land for future development
in Austin, Texas for an aggregate purchase price of approximately $100 million.
The consideration for this transaction was paid through a combination of cash,
the issuance of limited partnership interests, and the assumption of
approximately $9.7 million in debt which bears interest at an annual rate of
7.375% and matures in March 1999. The ten properties contain approximately
894,000 square feet of space. As of August 31, 1996, the buildings were
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78% leased to approximately 100 tenants. This transaction also included land
which will support the future development of up to approximately 730,000 square
feet of office space and an option to purchase land which will support the
future development of up to approximately 750,000 square feet of office space.
Riata Land. In August 1996, the Company acquired 15.1 acres of land in
Austin, Texas for an aggregate purchase price of $1.6 million. This land will
support the future development of up to 220,000 square feet of office space.
b. Probable Acquisitions
Suburban Atlanta
Peterson Portfolio. The Company and its subsidiaries have entered into
a contract to acquire 10 office properties, consisting of 38 buildings, and one
building currently under construction, all located in suburban Atlanta, Georgia,
and one building located in Boca Raton, Florida as well as the rights to manage
10 properties for third parties under contracts which are cancellable upon 30
days notice, for an aggregate purchase price of approximately $131 million. The
consideration for this transaction will be paid through a combination of cash,
the issuance of 62,696 shares of the Company's common stock, and the assumption
of approximately $22 million in debt that bears interest at an annual rate of
7.2% and matures in January 2006. The 12 properties (the "Peterson Portfolio")
contain approximately 1.6 million square feet of space. As of September 30,
1996, the 11 operating properties were 97% leased and the building under
construction, scheduled to be completed in May 1997, was 58% pre-leased. Seven
of the properties containing approximately 847,000 square feet of space
are located in suburban Atlanta's Northeast sub-market; four of the properties
containing approximately 391,000 square feet of space are located in suburban
Atlanta's Northwest and Central Perimeter sub-markets; one property containing
approximately 165,000 square feet of space is located in suburban Atlanta's
Northlake sub-market; and one property containing approximately 162,000 square
feet of space is located in the East Boca sub-market of Boca Raton, Florida. The
Peterson Portfolio acquisition is subject to certain closing conditions, and
there can be no assurance that this transaction will be consummated. Closing of
this transaction is currently scheduled for late October 1996.
Additional Property Information regarding the Peterson Portfolio.
Because the aggregate book value of the 11 operating properties consisting of 39
buildings and one building under construction that constitute the Peterson
Portfolio would be in excess of 10% of the Company's total assets, assuming,
solely for the purposes of this Form 8-K,
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that the Peterson Portfolio has been acquired by the Company, additional
information regarding the Peterson Portfolio is provided below.
As of September 30, 1996, 97% of the rentable square feet in the 11
operating properties comprising the Peterson Portfolio (1,437,000 square feet)
was leased. The Company has no immediate plans to materially renovate the
Peterson Portfolio, other than for the completion of the development property
and capital expenditures related to the routine maintenance of the properties,
and believes the properties are adequately covered by insurance. Since the
Company has not yet acquired the Peterson Portfolio, the percent leased and
average annualized rent per square foot for the past five years is not
available.
None of the tenants in the 12 properties comprising the Peterson
Portfolio occupy over 10% of the rentable square footage as of September 1996.
The following table sets out a schedule of aggregate lease expirations
for the 11 operating properties consisting of 39 buildings comprising the
Peterson Portfolio (1,437,000 square feet) for leases in effect as of September
1996, assuming no tenants exercise any of their renewal rights or termination
options, for each of the ten years beginning with 1996 and thereafter:
<TABLE>
<CAPTION>
Annual Percentage of
Net Rentable Percentage of Rental Total Annual
Area Subject Total Leased Represented Rental
Year Number of To Expiring Square Footage By Expiring Represented
of Lease Expiring Leases Represented by Leases By Expiring
Expiration Leases (Square Feet) Expiring Leases* (in thousands) Leases
---------- ------ ------------- ---------------- --------------------- -------------
<S> <C> <C> <C> <C>
1996 28 98,500 7.1 % $ 1,421 7.7%
1997 71 261,700 18.8 3,973 21.7
1998 74 437,600 31.5 5,456 29.8
1999 47 204,200 14.7 2,616 14.3
2000 32 134,200 9.7 1,997 10.9
2001 27 156,600 11.3 2,133 11.6
2002 2 9,500 .7 115 .6
2003 7 40,700 2.9 537 2.9
2004 1 20,100 1.4 20 .1
2005 & Thereafter 11 27,100 1.9 75 .4
</TABLE>
* Excludes 47,300 square feet of vacant space.
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The aggregate tax basis of depreciable real property for the 11
operating properties comprising the Peterson Portfolio will be approximately
$105 million. Depreciation will be computed on the Modified Accelerated Cost
Recovery System (MACRS) method over 39 years for Federal income tax purposes.
Personal property with an aggregate tax basis of approximately $25,000 is
expected to be purchased and depreciated on the MACRS method over a period of 5
to 7 years.
The current realty tax rate for the 11 properties located in Atlanta in
the aggregate is $1.438 per $100 of assessed value. The total annual tax at this
rate for 1996 is $1.2 million at an assessed value of $80.7 million for the
properties located in suburban Atlanta. Three of the properties are currently
under appeal for 1996 and 1995. The one property located in Boca Raton, Florida
has an assessed value of $11.3 million. Based on an aggregate tax rate of $2.11
per $100 of assessed value, total annual tax for the Florida property for 1996
will be approximately $240,000.
Silicon Valley
NELO/Orchard Portfolio. The Company has entered into a contract to
acquire eight office properties consisting of 21 buildings in the North San Jose
sub-market of Silicon Valley in northern California for an aggregate purchase
price of approximately $120 million. As part of the purchase price, the Company
will assume approximately $41 million in debt that bears interest at an annual
rate of 10.25% and matures in 2001. The properties, which were built from 1979
to 1985, contain an aggregate of approximately one million square feet of office
space. As of September 1996, the NELO/Orchard Portfolio was 97% leased. The
properties are located in the North First Street Corridor near the San Jose
airport and have excellent access from the major highways. In addition, the
properties are in the same general area as the Company's properties at Sunnyvale
Research Plaza. The NELO/Orchard Portfolio acquisition is subject to certain
closing conditions, and there can be no assurance that this transaction will be
consummated. Closing of the transaction is currently scheduled for November
1996.
Additional Property Information regarding the NELO/Orchard Portfolio.
Because the aggregate book value of the eight properties consisting of 21
buildings that constitute the NELO/Orchard Portfolio would be in excess of 10%
of the Company's total assets, assuming, solely for the purposes of this Form
8-K, that the NELO/Orchard Portfolio has been acquired by the Company,
additional information regarding the NELO/Orchard Portfolio is provided below.
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As of September 1996, 100% of the rentable square feet of the eight
projects totaling 21 buildings that constitute the NELO/Orchard Portfolio
(1,014,200 square feet) was leased. The Company has no immediate plans to
renovate the NELO/Orchard Portfolio, other than for the routine maintenance of
the properties, and believes the properties are adequately covered by insurance.
Since the Company has not yet acquired the NELO/Orchard Portfolio, the percent
leased and average annualized rent per square foot for the past five years is
not available.
Two tenants in the eight properties consisting of 21 buildings
constituting the NELO/Orchard Portfolio (1,014,200 square feet) each occupy over
10% of the rentable square footage. Boston Scientific, a manufacturer of medical
technology, has entered into two leases with rent commencement dates in November
1996 and January 1997. In January 1997, Boston Scientific will occupy
approximately 159,600 square feet or 15.7% of the aggregate rentable square
footage of the NELO/Orchard Portfolio. Boston Scientific's leases will expire in
December 2006. Boston Scientific's rent per square foot per annum will be $10.44
(triple net) with respect to 79,800 square feet and $8.40 (triple net) with
respect to the remaining 79,800 square feet. Boston Scientific has an option to
renew for 5 years with 120 days notice at the greater of the current base rent
or the then prevailing fair market value. In addition, it has a right of first
negotiation on any vacant space in one of the buildings it occupies. Clarify,
Inc., a software company specializing in customer service applications, will, in
early November 1996, occupy approximately 139,200 square feet or 13.7% of the
aggregate rentable square footage of the NELO/Orchard Portfolio under three
leases which expire in May 1998 with respect to 38,800 square feet and in
November 2001 with respect to the remaining 100,400 square feet. The lease of
100,400 square feet will commence in November 1996. Clarify, Inc.'s rent per
square foot per annum will be $8.52 (triple net) with respect to 38,800 square
feet and $16.80 (triple net) with respect to the remaining 100,400 square feet.
On the leases covering 38,800 square feet, Clarify, Inc. has a right of first
refusal on 13,680 square feet. In addition, under the 38,800 square foot lease,
Clarify, Inc. has an option to renew for 3 years at the greater of the current
monthly rent or the then prevailing fair market value. In addition, there is a
termination option upon 120 days notice which upon exercise would require the
payment of a termination fee of $4,905 for each month terminated.
The following table sets out a schedule of aggregate lease expirations
for the eight office properties consisting of 21 buildings that constitute the
NELO/Orchard Portfolio (1,014,200 square feet) for leases in effect as of August
1996, assuming no tenants exercise any of their renewal rights or termination
options, for each of the ten years beginning with 1996 and thereafter:
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<TABLE>
<CAPTION>
Annual Percentage of
Net Rentable Percentage of Rental Total Annual
Area Subject Total Leased Represented Rental
Year Number of To Expiring Square Footage By Expiring Represented
of Lease Expiring Leases Represented by Leases By Expiring
Expiration Leases (Square Feet) Expiring Leases (in thousands) Leases
---------- ------ ------------- ---------------- -------------- ------
<S> <C> <C> <C> <C> <C>
1996 4 21,400 2.1 % $ 212,200 1.9
1997 9 71,500 7.0 688,500 6.3
1998 8 94,900 9.3 879,100 8.0
1999 14 169,000 16.7 1,717,300 15.7
2000 6 271,600 26.8 2,649,000 24.1
2001 9 197,600 19.5 2,695,800 24.6
2002 -- -- -- -- --
2003 1 14,100 1.4 134,200 1.2
2004 -- -- -- -- --
2005 & Thereafter 3 174,100 17.2 1,994,300 18.2
</TABLE>
The aggregate tax basis of depreciable real property for the eight
projects totaling 21 buildings that constitute the NELO/Orchard Portfolio
(1,014,200) in the aggregate will be approximately $74 million. Depreciation
will be computed on the Modified Accelerated Cost Recovery System (MACRS) method
over 39 years for Federal income tax purposes. No personal property is expected
to be purchased in connection with the NELO/Orchard Portfolio.
The current range of realty tax rates for the eight projects totaling
21 buildings that constitute the NELO/Orchard Portfolio in the aggregate is
$1.09 to $1.35 per $100 of assessed value. The total annual tax for the
NELO/Orchard Portfolio at these rates for 1996 is $.8 million at an assessed
value of $70.2 million.
Suburban Dallas
The Greyhound Building. The Company has entered into a contract to
acquire the Greyhound Building, a six-story office building located in suburban
north Dallas, Texas, for an aggregate purchase price of approximately $9
million. The building, which was built in 1982, contains approximately 93,000
square feet of office space and is located in the Quorum/North Dallas
sub-market. As of August 1996, the property was 100% leased to Greyhound Lines,
Inc. The closing of this transaction is subject to certain closing
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conditions, and there can be no assurance that this transaction will be
consummated. Closing of the transaction is currently scheduled for November
1996.
Cedar Maple Plaza. The Company has entered into a letter of intent to
acquire three office buildings which comprise Cedar Maple Plaza in suburban
Dallas, Texas, for an aggregate purchase price of approximately $13 million. The
buildings, which were built in 1985, contain approximately 113,000 square feet
of office space and are located in the Oaklawn/Turtle Creek sub-market near an
abundance of restaurant and other retail establishments. As of July 1996, the
property was 91.8% leased to 27 tenants. The closing of this transaction is
subject to certain closing conditions, and there can be no assurance that this
transaction will be consummated. Closing of the transaction is currently
scheduled for November 1996.
Suburban Phoenix
Camelback Lakes Corporate Center. The Company has entered into a letter
of intent to acquire two buildings, one retail building, and a fee interest in a
ground lease, which comprise Camelback Lakes Corporate Center in suburban
Phoenix, Arizona, for an aggregate purchase price of approximately $27 million.
The buildings, which were built in 1983, contain approximately 207,000 square
feet of rentable office space and are located in the Camelback Corridor
sub-market. As of September 1996, the buildings were 92% leased to 28 tenants.
The closing of this transaction is subject to certain closing conditions, and
there can be no assurance that this transaction will be consummated. Closing of
the transaction is currently scheduled for December 1996.
Pointe Corridor Centre IV. The Company has entered into a contract to
acquire Pointe Corridor Centre IV, an office building in suburban Phoenix,
Arizona, for an aggregate purchase price of approximately $15 million. The
building, which was built in 1990, contains approximately 179,000 square feet of
office space and is located in the Squaw Peak sub-market. As of September 1996,
the property was 96% leased to 13 tenants. The building is located near the
Squaw Peak Parkway and Interstate 17, major transportation arteries in the
Phoenix metropolitan area. The closing of this transaction is subject to certain
closing conditions, and there can be no assurance that this transaction will be
consummated. Closing of the transaction is currently scheduled for November
1996.
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Land Held for Development
As part of the Company's strategy to establish critical mass in each of
its markets, the Company is also acquiring land suitable for future development.
As of September 30, 1996, the Company owned land and options to acquire land in
three of its target markets: southeast Denver; Austin, Texas; and suburban
Chicago. In the aggregate, this land (including land subject to purchase
options) will support future development of up to 3.2 million square feet of
office space.
c. Markets
As a result of the new acquisitions described herein, the Company now
owns properties in the following markets: Northern California - San Francisco's
East Bay and the Silicon Valley; suburban Chicago; southeast Denver; suburban
Seattle; Southern California - Orange County and the Greater San Fernando
Valley; metropolitan Washington, D.C., including downtown Washington, D.C., and
suburban Northern Virginia and Maryland; and Austin, Texas. Each of the suburban
markets in which the Company owns properties exhibits strong growth
characteristics.
Assuming that the Company consummates the transactions described herein
as "Probable", the Company will enter four new markets: suburban Atlanta;
southern Florida; suburban Dallas; and suburban Phoenix. Atlanta has
historically had above-average employment growth due to a concentration of high
technology services and an advantageous location for regional trade in the
fast-growing southeastern United States. The southern Florida market has
experienced above-average employment growth primarily as a result of growth in
the service sector of the economy. The large Dallas metropolitan area has a
broad economic base of above-average growth industries and a skilled labor
force, and is considered to be a regional trade center. The Phoenix metropolitan
area has both a diverse economy, in terms of the broad array of types of jobs,
and a stable economy, exhibiting strong growth characteristics.
d. Historical Financial Statements
Attached hereto as Exhibit 99.1 are historical summaries of operating
revenue and expenses for the six months ended June 30, 1996 (unaudited) and for
the year ended December 31, 1995 (audited) for the following properties: the
Peterson Properties Portfolio, the NELO/Orchard Portfolio, Sunnyvale Research
Plaza and Camelback Lakes Corporate Center. In accordance with Rule 3-14 of
Regulation S-X, financial statements with respect to the listed properties are
being filed because the Company has either (a)
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already acquired the properties and the book value of the properties,
individually by project or in the aggregate, are significant, or (b) deemed the
acquisition to be probable and the book value of the properties, individually by
project or in the aggregate, are significant.
e. Financing Activity
On October 18, 1996, the Company's unsecured, revolving credit
agreement with Morgan Guaranty Trust of New York, as lead bank, was modified to
provide for an increase in borrowings from up to $215 million to up to $325
million. The Company intends to use the line of credit to finance acquisitions
and future office property development activities, and capital expenditures and
to fund working capital needs.
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ITEM 6. Resignations of Registrant's Directors.
Not applicable.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements.
Attached hereto as Exhibit 99.1 are the following financial
statements:
(i) Historical Summaries of Operating Revenue and Expenses for
the Peterson Properties Portfolio for the six months ended June 30, 1996 and for
the year ended December 31, 1995, with accompanying notes and Independent
Auditors' Report.
(ii) Historical Summaries of Operating Revenue and Expenses
for the NELO/Orchard Portfolio for the six months ended June 30, 1996 and for
the year ended December 31, 1995, with accompanying notes and Independent
Auditors' Report.
(iii) Historical Summaries of Operating Revenue and Expenses
for Sunnyvale Research Portfolio for the six months ended June 30, 1996 and for
the year ended December 31, 1995, with accompanying notes and Independent
Auditors' Report.
(iv) Historical Summaries of Operating Revenue and Expenses
for Camelback Lakes for the six months ended June 30, 1996 and for the year
ended December 31, 1995, with accompanying notes and Independent Auditors'
Report.
(b) Pro forma financial information.
Attached hereto are the following pro forma financials:
(i) Pro forma condensed consolidated balance sheet as of June
30, 1996.
(ii) Pro forma condensed consolidated statements of operations
for the six months ended June 30, 1996 and the year ended December 31, 1995.
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(c) Exhibits
Exhibit
Number
------
10.1 First Amendment to Amended and Restated Revolving
Credit Agreement
99.1 Financial Statements
(i) Historical Summaries of Operating Revenue and
Expenses for the Peterson Properties Portfolio for the six
months ended June 30, 1996 and for the year ended December 31,
1995, with accompanying notes and Independent Auditors'
Report.
(ii) Historical Summaries of Operating Revenue and
Expenses for the NELO/Orchard Portfolio for the six months
ended June 30, 1996 and for the year ended December 31, 1995,
with accompanying notes and Independent Auditors' Report.
(iii) Historical Summaries of Operating Revenue and
Expenses for Sunnyvale Research Portfolio for the six months
ended June 30, 1996 and for the year ended December 31, 1995,
with accompanying notes and Independent Auditors' Report.
(iv) Historical Summaries of Operating Revenue and
Expenses for Camelback Lakes for the six months ended June 30,
1996 and for the year ended December 31, 1995, with
accompanying notes and Independent Auditors' Report.
ITEM 8. Change in Fiscal Year.
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.
Date: October ___, 1996
CARRAMERICA REALTY CORPORATION
By: /s/ Brian K. Fields
-------------------------------
Brian K. Fields
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number
------
10.1 First Amendment to Amended and Restated Revolving
Credit Agreement
99.1 Financial Statements
(i) Historical Summaries of Operating Revenue and
Expenses for the Peterson Properties Portfolio for the six
months ended June 30, 1996 and for the year ended December 31,
1995, with accompanying notes and Independent Auditors'
Report.
(ii) Historical Summaries of Operating Revenue and
Expenses for the NELO/Orchard Portfolio for the six months
ended June 30, 1996 and for the year ended December 31, 1995,
with accompanying notes and Independent Auditors' Report.
(iii) Historical Summaries of Operating Revenue and
Expenses for Sunnyvale Research Portfolio for the six months
ended June 30, 1996 and for the year ended December 31, 1995,
with accompanying notes and Independent Auditors' Report.
(iv) Historical Summaries of Operating Revenue and
Expenses for Camelback Lakes for the six months ended June 30,
1996 and for the year ended December 31, 1995, with
accompanying notes and Independent Auditors' Report.
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FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Amendment") is made as of October 18, 1996, by among CARRAMERICA REALTY
CORPORATION ("Carr"), CARR REALTY, L.P. ("Carr LP"; Carr and Carr LP each, a
"Borrower" and collectively, the "Borrowers"), CARRAMERICA REALTY, L.P.
("CarrAmerica LP"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Bank and as
Lead Agent for the Banks, COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH, as
Bank and as Co-Agent for the Banks, NATIONSBANK, N.A., as Bank and as Co-Agent
for the Banks, WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED, as Bank and as
Co-Agent for the Banks (collectively, the "Co-Agents") and the BANKS listed on
the signature pages hereof (the "Banks").
RECITALS:
A. Borrowers, CarrAmerica LP, the Lead Agent, the Co-Agents and the Banks
have entered into that certain Amended and Restated Revolving Credit Agreement,
dated as of August 23, 1996 (the "Credit Agreement").
B. Borrowers, CarrAmerica LP, the Lead Agent, the Co-Agents and the Banks now
desire to amend the Credit Agreement to increase the Tranche A Loan Amount, upon
the terms and conditions set forth herein.
D. Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
NOW THEREFORE, in consideration of the foregoing, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, CarrAmerica LP, the
Lead Agent, the Co-Agents and the Banks hereby agree to amend the Credit
Agreement as follows:
1. Amendments.
(a) Section 2.1 of the Credit Agreement is hereby deleted in its entirety and
the following inserted in lieu thereof:
"SECTION 2.1. Commitments to Lend. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make the Tranche A Loans to Carr
and CarrAmerica LP and participate in Letters of Credit issued by the Fronting
Bank on behalf of Carr or CarrAmerica LP pursuant to this Section from time to
time, but, together with the Tranche B Loans, not more frequently than twice
monthly, during the Term in amounts such that the aggregate principal amount of
Tranche A Loans by such Bank at any one time outstanding together with such
Bank's pro rata share of Letter of
<PAGE>
Credit Usage with respect to Carr and CarrAmerica LP shall not exceed the amount
of its Tranche A Commitment. The aggregate amount of Tranche A Loans to be made
hereunder, together with the Letter of Credit Usage with respect to Carr and
CarrAmerica LP, shall not exceed Two Hundred Fifty-One Million Dollars
($251,000,000) (the "Tranche A Loan Amount"). Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make the Tranche B Loans to
Carr LP and Carr and participate in Letters of Credit issued by the Fronting
Bank on behalf of Carr LP pursuant to this Section from time to time, but,
together with the Tranche A Loans, not more frequently than twice monthly,
during the Term in amounts such that the aggregate principal amount of Tranche B
Loans by such Bank at any one time outstanding, together with such Bank's pro
rata share of Letter of Credit Usage with respect to Carr LP, shall not exceed
the amount of its Tranche B Commitment. The aggregate amount of Tranche B Loans
to be made hereunder, together with the Letter of Credit Usage with respect to
Carr LP, shall not exceed Seventy-Four Million Dollars ($74,000,000) (the
"Tranche B Loan Amount"). Each Borrowing under this sub section (a) shall be in
an aggregate principal amount of at least $2,500,000, or an integral multiple of
$1,000,000 in excess thereof (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 3.2(c)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Subject to the limitations set forth herein, any amounts repaid may be
reborrowed. Notwithstanding anything to the contrary, the number of new
Borrowings shall be limited to two Borrowings per month."
(b) Section 3.3(b) of the Credit Agreement is hereby deleted in its entirety
and the following inserted in lieu thereof:
"(b) The Borrowers shall submit to the Lead Agent and the Banks as provided
in subsection (c) below the materials set forth below (the "Due Diligence
Package") relating to each potential New Acquisition or Real Property Asset to
be added to the Borrowing Base Properties. The Due Diligence Package shall
include (i) a description of the Real Property Asset or New Acquisition, (ii)
two years of historical cash flow operating statements, if available, (iii) five
years of cash flow projections (including capital expenditures), (iv) the credit
history of each existing tenant which occupies more than 50% of such Real
Property Asset or New Acquisition, (v) upon the request of the Lead Agent, a map
and site plan, including an existing Survey of the property dated not more than
twelve (12) months prior to such submission, (vi) copies of all lease agreements
with each existing tenant which occupies more than 50% of such Real Property
Asset or New Acquisition and lease abstracts thereof, (vii) an environmental
report in compliance with Section 3.1(q), (viii) a satisfactory engineer's
inspection report, (ix) an estoppel certificate from each tenant which occupies
50% or more of the Real Property Asset or New Acquisition, (x) evidence of
compliance with zoning and other local laws, (xi) a satisfactory Title
Commitment and (xii) a final investment memorandum prepared by Carr in
connection with the New Acquisition or Real Property Asset, including a current
rent roll for such Real Property Asset or New Acquisition. The applicable
Borrower shall permit the Lead Agent at all reasonable times and upon reasonable
prior notice to make an inspection of such New Acquisition or Real Property
Asset."
<PAGE>
(c) The Commitment of each Bank set forth on the signature pages of the
Credit Agreement is hereby deleted in its entirety and the Commitment of each
Bank set forth on the signature pages of this Amendment shall be inserted in
lieu thereof.
2. Conditions. The effectiveness of this Amendment shall be subject to the
satisfaction of each of the following conditions precedent and each of the
Borrowers and CarrAmerica LP hereby represent and warrant that each of the
following is true and correct in all material respects on and as of the date
hereof:
(a) Carr and CarrAmerica LP shall have executed and delivered to the Lead
Agent a Tranche A Note and a Tranche B Note for the account of each Bank dated
on or before the date hereof complying with the provisions of Section 2.4 of the
Credit Agreement;
(b) the Borrowers and CarrAmerica LP shall have executed and delivered to the
Lead Agent a duly executed original of this Amendment;
(c) the Borrowers shall have paid to the Lead Agent for the account of the
Banks an upfront fee equal to .25% of the amount by which each Banks' Commitment
is increased hereby;
(d) the Borrowers and CarrAmerica LP shall have taken all actions required to
authorize the execution and delivery of this Agreement and the other Loan
Documents and the performance thereof by the Borrowers and CarrAmerica LP;
(e) Lead Agent shall have received an opinion of Hogan & Hartson L.L.P., with
respect to certain matters of New York, Delaware and Maryland law, acceptable to
the Lead Agent, the Banks and their counsel;
(f) the Borrowers and CarrAmerica LP shall have delivered to the Lead Agent
such additional documenta tion as the Lead Agent may reasonably request;
(g) no law, regulation, order, judgment or decree of any Governmental
Authority shall, and the Lead Agent shall not have received any notice that
litigation is pending or threatened which is likely to (i) enjoin, prohibit or
restrain the making of the Loans on or after the date hereof or (ii) impose or
result in the imposition of a Material Adverse Effect;
(h) no Event of Default, or event that with notice and the passage of time
would become an Event of Default, shall have occurred and be continuing on and
as of the date hereof before and after giving effect to this Amendment;
(i) all of the representations and warranties of the Borrowers and
CarrAmerica LP contained in the Credit Agreement shall be true and correct in
all material respects on and as of the date hereof; and
<PAGE>
(j) there shall have been paid to the Lead Agent all fees due and payable on
or before the date hereof and all expenses due and payable on or before the date
hereof, including, without limitation, reasonable attorneys' fees and expenses,
and other costs and expenses incurred in connection with this Amendment.
3. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute but one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
4. No Other Modifications. Except as expressly amended hereby, the Credit
Agreement shall continue unmodified and remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
above written.
CARRAMERICA REALTY CORPORATION
By: /s/ Brian K. Fields
------------------------
Name: Brian K. Fields
Title: Chief Financial Officer
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telecopy number: (202) 638-0102
CARR REALTY, L.P.
By: CarrAmerica Realty Corporation,
General Partner
By: /s/ Brian K. Fields
---------------------------
Name: Brian K. Fields
Title: Chief Financial Officer
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telecopy No: (202)638-0102
CARRAMERICA REALTY, L.P.
By: CarrAmerica Realty GP Holdings,
Inc., General Partner
By: /s/ Brian K. Fields
--------------------------
Name: Brian K. Fields
Title: Chief Financial Officer
1700 Pennsylvania Avenue, NW
Washington, D.C. 20006
Telecopy No: (202)638-0102
<PAGE>
Commitments
$70,000,000.00 MORGAN GUARANTY TRUST COMPANY
- -------------- OF NEW YORK
By: /s/ Timothy O'Donovan
---------------------
Name: Timothy O'Donovan
Title: Vice President
$50,000,000.00 WELLS FARGO BANK, N.A., a national banking
- -------------- association, as successor in interest to Wells
Fargo Realty Advisors Funding, Inc., a Colorado
corporation
By: /s/ E.F. Shay, III
------------------
Name: E.F. Shay, III
Title: Vice President
$50,000,000.00 NATIONSBANK, N.A.
- --------------
By: /s/ Ronald L. Morris
--------------------
Name: Ronald L. Morris
Title: Executive Vice President
$50,000,000.00 COMMERZBANK AKTIENGESELLSCHAFT,
- -------------- NEW YORK BRANCH
By: /s/ Douglas P. Traynor
----------------------
Name: Douglas P. Traynor
Title: Vice President
By: /s/ David M. Schwarz
--------------------
Name: David M. Schwarz
Title: Vice President
$35,000,000.00 PNC BANK NATIONAL ASSOCIATION
- --------------
By: /s/ Connie Bond Stuart
----------------------
Name: Connie Bond Stuart
Title: Vice President
<PAGE>
$35,000,000.00 BANK OF AMERICA ILLINOIS
- --------------
By: /s/ Robert P. McKenney
----------------------
Name: Robert P. McKenney
Title: Vice President
$35,000,000.00 BAYERISCHE HYPOTHEKEN-UND WECHSEL-
- -------------- BANK AKTIENGESELLSCHAFT
By: /s/ Stephen Melidones
---------------------
Name: Stephen G. Melidones
Title: Assistant Vice President
By: /s/ George Gnad
---------------
Name: George Gnad
Title: Vice President
<PAGE>
Total Commitments
- -----------------
$325,000,000.00 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Lead Agent
By: /s/ Timothy O'Donovan
------------------------
Name: Timothy O'Donovan
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Michael Errichetti
Telephone number: (212) 648-8127
Telecopy number: (212) 648-5336
Domestic and Euro-Currency
Lending Office:
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19173-2107
Attention: Nancy K. Dunbar
Telecopy number: (302) 634-4222
THE PETERSON PROPERTIES' PORTFOLIO
Consolidated Statements of Operating Revenue and Expenses
Six Months Ended June 30, 1996 (Unaudited)
and the Year Ended December 31, 1995
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
CarrAmerica Realty Corporation:
We have audited the accompanying consolidated statement of operating revenue and
expenses, as defined in note 1, of The Peterson Properties' Portfolio for the
year ended December 31, 1995. The consolidated statement of operating revenue
and expenses is the responsibility of management of Peterson Properties. Our
responsibility is to express an opinion on the consolidated statement of
operating revenue and expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated statement of operating revenue and
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
statement of operating revenue and expenses. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated statement of
operating revenue and expenses. We believe that our audit provides a reasonable
basis for our opinion.
The accompanying consolidated statement of operating revenue and expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and is not intended to be a complete
presentation of the revenue and expenses of The Peterson Properties' Portfolio.
In our opinion, the consolidated statement of operating revenue and expenses
referred to above presents fairly, in all material respects, the operating
revenue and expenses defined in note 1 of The Peterson Properties' Portfolio for
the year ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
September 27, 1996
<PAGE>
THE PETERSON PROPERTIES' PORTFOLIO
Consolidated Statements of Operating Revenue and Expenses
For the Six Months ended June 30, 1996 (Unaudited)
and the Year ended December 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
Operating revenue:
Building rental $ 8,734 16,290
Recovery of operating expenses 1,279 2,315
Other 57 137
------------- --------------
Total operating revenue 10,070 18,742
------------- --------------
Operating expenses:
Repairs and maintenance 827 1,514
Janitorial 493 960
Landscaping 157 350
Security 106 202
Utilities 1,271 2,307
Administrative 181 325
Management fees 398 722
Leasing commissions 44 84
Real estate taxes 748 1,356
Insurance 49 104
Marketing 73 177
------------- --------------
Total operating expenses 4,347 8,101
------------- --------------
Operating revenue in excess of
operating expenses $ 5,723 10,641
============= =============
</TABLE>
See accompanying notes to the consolidated statements of operating revenue and
expenses.
- 2 -
<PAGE>
THE PETERSON PROPERTIES' PORTFOLIO
Notes to the Consolidated Statements of Operating Revenue and Expenses
For the Six Months ended June 30, 1996 (Unaudited)
and the Year ended December 31, 1995
(dollars in thousands)
(1) Summary of Significant Accounting Policies
(a) Description of the Property
The Peterson Properties' Portfolio consists of 11 properties
consisting of thirty-nine buildings located in the suburban Atlanta,
Georgia area and one property in Boca Raton, Florida. The office
properties range in size from 80,000 to 191,000 square feet available
for lease. The buildings were constructed from 1982 to 1989. Peterson
Properties serves as both the property manager and the asset manager
for each of the respective buildings.
(b) Basis of Presentation
The accompanying consolidated statements of operating revenue and
expenses are not representative of the actual operations for the
periods presented as certain expenses, which may not be comparable to
those expected to be incurred by CarrAmerica Realty Corporation in
the proposed future operations of the property, have been excluded.
Interest income has been excluded from revenue, and interest,
depreciation and amortization, and other costs not directly related
to the future operations of The Peterson Properties' Portfolio have
been excluded from expenses. Management is not aware of any other
material factors relating to The Peterson Properties' Portfolio that
would cause the consolidated statements of operating revenue and
expenses to not be indicative of future operating results of the
buildings.
(c) Revenue Recognition
Revenue from rental operations is recognized straight-line over the
terms of the respective leases.
(d) Interim Unaudited Financial Information
The accompanying unaudited financial information for the six months
ended June 30, 1996 has been prepared consistent with the rules and
regulations of the Securities and Exchange Commission governing the
preparation of the amounts for the year ended December 31, 1995.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations, although management believes that the
disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the
consolidated statement of operating revenue and expenses for the
six-month period ended June 30, 1996, have been included. The results
of operations for the six-month period ended June 30, 1996 are not
necessarily indicative of the results for the full year.
(Continued)
- 3 -
<PAGE>
THE PETERSON PROPERTIES' PORTFOLIO
Notes to the Consolidated Statements of Operating Revenue and Expenses
(dollars in thousands)
(2) Pro Forma Taxable Operating Results and
Cash Available from Operations (Unaudited)
The unaudited pro forma table reflects the taxable operating results and
cash available from operations of The Peterson Properties' Portfolio for
the twelve-month period ended June 30, 1996, as adjusted for certain
items which can be factually supported. For purposes of presenting pro
forma net taxable operating income, revenue is recognized when it is
either collectible under the lease terms or collected. Tax depreciation
for the building is computed on the modified accelerated cost recovery
system method over a 39-year life. This statement does not purport to
forecast actual operating results for any period in the future.
Pro forma operating revenue in excess of
operating expenses (exclusive of interest,
depreciation, and amortization expense) $ 11,034
Less estimated depreciation expense 2,692
-----
Pro forma taxable operating income $ 8,342
=====
Pro forma cash available from operations $ 11,034
======
- 4 -
<PAGE>
CAMELBACK LAKES
Historical Summaries
of Operating Revenue and Expenses
Six Months Ended June 30, 1996 (Unaudited)
and Year Ended December 31, 1995
(with Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
CarrAmerica Realty Corporation:
We have audited the accompanying historical summary of operating revenue and
expenses, as defined in note 2(a), of Camelback Lakes for the year ended
December 31, 1995. This historical summary is the responsibility of the
management of Camelback Lakes. Our responsibility is to express an opinion on
the historical summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the historical summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the historical summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the historical summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying historical summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and is
not intended to be a complete presentation of the revenue and expenses of
Camelback Lakes.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the operating revenue and expenses described in note 2(a) of
Camelback Lakes for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Washington, DC
October 15, 1996
<PAGE>
CAMELBACK LAKES
Historial Summaries
of Operating Revenue and Expenses
For the six months ended June 30, 1996 (Unaudited)
and the year ended December 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Six months Year
ended ended
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Operating revenue:
Rental revenue $ 1,230 1,560
Recovery of operating expenses 17 33
Other 3 -
----------- --------
Total operating revenue 1,250 1,593
----------- --------
Operating expenses:
Cleaning 51 71
Utilities 102 195
Repairs and maintenance 67 112
General operating 68 125
Administrative 79 156
Property management fees 18 38
Insurance 7 14
Real estate taxes 154 351
----------- --------
Total operating expenses 546 1,062
----------- --------
Operating revenue in excess of operating expenses $ 704 531
=========== ========
</TABLE>
<PAGE>
CAMELBACK LAKES
Notes to the Historical Summaries of Operating Revenue and Expenses
Six months ended June 30, 1996 (unaudited)
and year ended December 31, 1995
(dollars in thousands)
(1) Description of the Property
Camelback Lakes consists of two office buildings, a retail
building, and a fee position in a ground lease under a hotel.
Camelback Lakes is located in Phoenix, Arizona and contains
approximately 207,000 square feet of office and retail space
available for lease. At June 30, 1996, Camelback Lakes was
approximately 83 percent leased. The buildings were constructed
in 1983.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying historical summaries of operating revenue and
expenses are not representative of the actual operations for the
periods presented as certain revenues and expenses, which may
not be comparable to those expected to be incurred by
CarrAmerica Realty Corporation in the proposed future operations
of the buildings, have been excluded. Interest income has been
excluded from revenue, and interest, depreciation and
amortization, and other costs not directly related to the future
operations of Camelback Lakes have been excluded from expenses.
Management is not aware of any material factors relating to
Camelback Lakes that would cause the historical summaries of
operating revenue and expenses to not be indicative of future
operating results of the buildings.
(b) Revenue Recognition
Rental revenue from rental operations is recognized
straight-line over the terms of the respective leases.
(c) Interim Unaudited Financial Information
The accompanying unaudited financial information for the six
months ended June 30,1996 has been prepared consistent with the
rules and regulations of the Securities and Exchange Commission
governing the preparation of the amounts for the year ended
December 31, 1995. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
although management believes that the disclosures are adequate
to make the information presented not misleading. In the opinion
of management, all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the historical
summaries of operating revenue and expenses for the six months
ended June 30, 1996, have been included. The results of
operations for the six-month period ended June 30, 1996 are not
necessarily indicative of the results for the full year.
3
<PAGE>
(3) Pro Forma Taxable Operating Results and Cash Available from Operations
(Unaudited)
The unaudited pro forma table reflects the taxable operating results
and cash available from operations of Camelback Lakes for the twelve
months ended June 30, 1996, as adjusted for certain items which can be
factually supported. For purposes of presenting pro forma net taxable
operating income, revenue is recognized when it is either collectible
under the lease terms or collected. Tax depreciation for the building
is computed on the modified accelerated cost recovery system method
over a 39-year life.
This statement does not purport to forecast actual operating results
for any period in the future.
<TABLE>
<CAPTION>
<S> <C>
Pro forma net operating income (exclusive of
depreciation and amortization expense) $ 221
Less - estimated depreciation and amortization expense 440
---
Pro forma operating deficit for tax purposes $ (219)
=====
Pro forma cash available from operations $ 221
===
</TABLE>
4
<PAGE>
THE NELO/ORCHARD PORTFOLIO
Historical Summaries
of Operating Revenue and Expenses
Six Months Ended June 30, 1996 (Unaudited)
and Year Ended December 31, 1995
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
CarrAmerica Realty Corporation:
We have audited the accompanying historical summary of operating revenue and
expenses, as defined in note 2(a), of The NELO/Orchard Portfolio for the year
ended December 31, 1995. This historical summary is the responsibility of
management of The NELO/Orchard Portfolio. Our responsibility is to express an
opinion on the historical summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the historical summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the historical summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the historical summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying historical summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and is
not intended to be a complete presentation of the revenue and expenses of The
NELO/Orchard Portfolio.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the operating revenue and expenses described in note 2(a) of
The NELO/Orchard Portfolio for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
September 25, 1996
<PAGE>
THE NELO/ORCHARD PORTFOLIO
Historical Summaries of Operating Revenue and Expenses
For the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Six months Year
ended ended
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Operating revenue:
Building rental $ 4,414 8,164
Recovery of operating expenses 1,306 2,228
Other 6 15
-------- -------
Total operating revenue 5,726 10,407
-------- -------
Operating expenses:
Maintenance 400 1,039
Utilities 104 314
Real estate taxes 418 799
Insurance 385 551
Management fees 178 331
General operating 22 90
Administrative 48 178
-------- -------
Total operating expenses 1,555 3,302
-------- -------
Operating revenue in excess of operating expenses $ 4,171 7,105
======== =======
</TABLE>
See accompanying notes to historical summaries of operating revenue and
expenses.
<PAGE>
THE NELO/ORCHARD PORTFOLIO
Notes to the Historical Summaries of Operating Revenue and Expenses
Six months ended June 30, 1996 (unaudited)
and year ended December 31, 1995
(dollars in thousands)
(1) Description of the Property
The NELO/Orchard Portfolio consists of 21 buildings located in San Jose,
California containing approximately 1,014,000 square feet of office and R
& D space available for lease. The buildings were constructed from 1979
to 1985. At December 31, 1995, The NELO/Orchard Portfolio was 83% leased.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying historical summaries of operating revenue and
expenses are not representative of the actual operations for the
periods presented as certain revenues and expenses, which may not
be comparable to those expected to be incurred by CarrAmerica
Realty Corporation in the proposed future operations of the
property, have been excluded. Interest income has been excluded
from revenue, and interest, depreciation and amortization, and
other costs not directly related to the future operations of The
NELO/Orchard Portfolio have been excluded from expenses.
In accordance with current California tax law, management expects
that real estate taxes will be reassessed upon transfer of
ownership based on the properties' purchase price. Management is
not aware of any other material factors relating to The
NELO/Orchard Portfolio that would cause the historical summaries of
operating revenue and expenses to not be indicative of future
operating results of the buildings.
(b) Revenue Recognition
Revenue from rental operations is recognized straight-line over
the terms of the respective leases.
(c) Interim Unaudited Financial Information
The accompanying unaudited financial information for the six months
ended June 30, 1996 has been prepared consistent with the rules and
regulations of the Securities and Exchange Commission governing the
amounts for the year ended December 31, 1995. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures
are adequate to make the information presented not misleading. In
the opinion of management, all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the
historical summary of operating revenue and expenses for the six
months ended June 30, 1996 have been included. The results of
operations for the six-month period ended June 30, 1996 are not
necessarily indicative of the results for the full year.
(Continued)
<PAGE>
(3) Pro Forma Taxable Operating Results and Cash Available from Operations
(Unaudited)
The unaudited pro forma table reflects the taxable operating results and
cash available from operations of The NELO/Orchard Portfolio for the 12
months ended June 30, 1996, as adjusted for certain items which can be
factually supported. For purposes of presenting pro forma net taxable
operating income, revenue is recognized when it is either collectible
under the lease terms or collected. Tax depreciation for the building is
computed on the modified accelerated cost recovery system method over a
39-year life. This statement does not purport to forecast actual
operating results for any period in the future.
<TABLE>
<CAPTION>
<S> <C>
Pro forma net operating income (exclusive of depreciation and
amortization expense) $ 7,214
Less estimated depreciation and amortization expense 1,836
-------
Pro forma taxable operating income $ 5,378
=======
Pro forma cash available from operations $ 7,214
=======
</TABLE>
<PAGE>
THE SUNNYVALE PORTFOLIO
Historical Summaries
of Operating Revenue and Expenses
Six Months Ended June 30, 1996 (Unaudited)
and Year Ended December 31, 1995
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
CarrAmerica Realty Corporation:
We have audited the accompanying historical summary of operating revenue and
expenses, as defined in note 2(a), of The Sunnyvale Portfolio for the year ended
December 31, 1995. This historical summary is the responsibility of the
management of The Sunnyvale Portfolio. Our responsibility is to express an
opinion on the historical summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the historical summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the historical summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the historical summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying historical summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and is
not intended to be a complete presentation of the revenue and expenses of The
Sunnyvale Portfolio.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the operating revenue and expenses described in note 2(a) of
The Sunnyvale Portfolio for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Washington, DC
October 11, 1996
<PAGE>
THE SUNNYVALE PORTFOLIO
Historical Summaries of Operating Revenue and Expenses
For the six months ended June 30, 1996 (unaudited)
and the year ended December 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Six months Year
ended ended
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Operating revenue:
Building rental $ 794 1,580
Recovery of operating expenses 232 383
-------- -------
Total operating revenue 1,026 1,963
-------- -------
Operating expenses:
Maintenance 92 150
Utilities 59 128
Real estate taxes 62 114
Insurance 34 65
Management fees 26 45
General operating 3 11
Administrative 13 20
-------- -------
Total operating expenses 289 533
-------- -------
Operating revenue in excess of operating expenses $ 737 1,430
======== =======
</TABLE>
See accompanying notes to historical summaries of operating revenue and
expenses.
<PAGE>
THE SUNNYVALE PORTFOLIO
Notes to the Historical Summaries of Operating Revenue and Expenses
Six months ended June 30, 1996 (unaudited)
and year ended December 31, 1995
(dollars in thousands)
(1) Description of the Property
The Sunnyvale Portfolio consists of 3 buildings located in the area
known as Silicon Valley, California containing approximately
126,000 square feet of office space available for lease. The
buildings were constructed in 1985. At June 30, 1996, The Sunnyvale
Portfolio was 100% leased.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying historical summaries of operating revenue and
expenses are not representative of the actual operations for the
periods presented as certain revenue and expenses, which may not be
comparable to those expected to be incurred by CarrAmerica Realty
Corporation in the future operations of the property, have been
excluded. Interest income has been excluded from revenue, and
interest, depreciation and amortization, and other costs not
directly related to the future operations of The Sunnyvale
Portfolio have been excluded from expenses.
In accordance with current California tax law, management expects
that real estate taxes will be reassessed upon transfer of
ownership based on the properties' purchase price. Management is
not aware of any other material factors relating to The Sunnyvale
Portfolio that would cause the historical summaries of operating
revenue and expenses to not be indicative of future operating
results of the buildings.
(b) Revenue Recognition
Revenue from rental operations is recognized straight-line over
the terms of the respective leases.
(c) Interim Unaudited Financial Information
The accompanying unaudited financial information for the six months
ended June 30,1996 has been prepared consistent with the rules and
regulations of the Securities and Exchange Commission governing the
preparation of the amounts for the year ended December 31, 1995.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although management believes that the
disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, necessary to present
fairly the historical summary of operating revenue and expenses for
the six months ended June 30, 1996 have been included. The results
of operations for the six-month period ended June 30, 1996 are not
necessarily indicative of the results for the full year.
(Continued)
<PAGE>
(3) Pro Forma Taxable Operating Results and Cash Available from Operations
(Unaudited)
The unaudited pro forma table reflects the taxable operating results and
cash available from operations of The Sunnyvale Portfolio for the 12
months ended June 30, 1996, as adjusted for certain items which can be
factually supported. For purposes of presenting pro forma net taxable
operating income, revenue is recognized when it is either collectible
under the lease terms or collected. Tax depreciation for the building is
computed on the modified accelerated cost recovery system method over a
39-year life. This statement does not purport to forecast actual
operating results for any period in the future.
<TABLE>
<CAPTION>
<S> <C>
Pro forma net operating income (exclusive of depreciation and
amortization expense) $ 1,192
Less estimated depreciation and amortization expense 287
----------
Pro forma taxable operating income $ 905
==========
Pro forma cash available from operations $ 1,192
==========
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following tables set forth unaudited pro forma financial
information for the Company as of and for the six months ended June 30, 1996 and
for the year ended December 31, 1995 after giving effect to (i) the acquisition
of office properties and land that have been consummated since the beginning of
the periods presented and the acquisition of other office properties and land
that the Company expects to consummate in the near future, (ii) the sale of
shares of common stock to USRealty in April 1996 (iii) completion of the
Offering and Concurrent US Realty Purchase, (iv) completion of the Series A
Preferred Stock Offering, and (v) the repayment of draws on the Company's line
of credit with offering proceeds.
The unaudited Pro Forma Condensed Consolidated Balance Sheet is
presented as if the following transactions had been consummated on June 30,
1996: (a) the purchase of the Warner Center Business Park; (b) the purchase of
the Littlefield Portfolio; (c) the purchase of Riata Land; (d) the purchase of
Katella Corporate Center; (e) the purchase of Greenwood Centre; (f) the purchase
of Panorama Corporate Center; (g) the purchase of Quebec Centre; (h) the
purchase of the Sunnyvale Research Plaza; (i) the purchase of the Peterson
Portfolio; (j) the purchase of the NELO/Orchard Portfolio; (k) the purchase of
the Greyhound Building; (l) the purchase of Pointe Corridor Centre IV; (m) the
purchase of the Camelback Lakes Corporate Center; (n) the purchase of Cedar
Maple Plaza; (o) the Offering and the Concurrent USRealty Purchase; (p) the
Series A Preferred Stock Offering; and (q) the repayment of draws on the
Company's line of credit with offering proceeds.
The unaudited Pro Forma Condensed Consolidated Statements of Operations
are presented as if the following transactions had been consummated as of the
beginning of the respective periods: (a) the purchase of One Rock Spring Plaza;
(b) the purchase of Tycon Courthouse; (c) the purchase of additional partnership
interests in Square 24 Associates, the partnership owning the office property
located at 2445 M Street, Washington, D.C.; (d) the purchase of the Scenic
Business Park; (e) the purchase of the Harbor Corporate Park; (f) the purchase
of AT&T Center; (g) the purchase of Reston Quadrangle; (h) the purchase of
Harlequin Plaza North and South and Quebec Court I and II; (i) the purchase of
The Quorum; (j) the purchase of the Parkway North Center; (k) the purchase of
the Redmond East Business Campus; (l) the purchase of the Plaza PacifiCare
Building; (m) the purchase of Parkway One; (n) the purchase of Norwood Tower;
(o) the purchase of the Warner Center Business Park; (p) the purchase of the
Littlefield Portfolio; (q) the purchase of Riata Land; (r) the purchase of
Katella Corporate Center; (s) the purchase of Greenwood Centre; (t) the purchase
of Panorama Corporate Center; (u) the purchase of Quebec Centre; (v) the
purchase of the Sunnyvale Research Plaza; (w) the purchase of the Peterson
Portfolio; (x) the purchase of the NELO/Orchard Portfolio; (y) the purchase of
the Greyhound Building; (z) the purchase of Pointe Corridor Centre IV; (aa) the
purchase of the Camelback Lakes Corporate Center; (bb) the purchase of Cedar
Maple Plaza; (cc) the sale of shares of common stock to USRealty in April 1996;
(dd) the Offering and the Concurrent USRealty Purchase; (ee) the Series A
Preferred Stock Offering; and (ff) the repayment of draws on the Company's line
of credit with offering proceeds.
In management's opinion, all material adjustments necessary to reflect
the transactions described above are presented in the pro forma adjustments
columns, which are further described in the notes to the unaudited pro forma
financial information.
The unaudited Pro Forma Condensed Consolidated Balance Sheet and the
unaudited Pro Forma Condensed Consolidated Statements of Operations should be
read in conjunction with the Consolidated Financial Statements of the
<PAGE>
Company and Notes thereto. The unaudited Pro Forma Condensed Consolidated
Balance Sheet is not necessarily indicative of what the actual financial
position would have been at June 30, 1996, had the aforementioned transactions
occurred on such date, nor does it purport to represent the future financial
position of the Company. The unaudited Pro Forma Condensed Consolidated
Statements of Operations are not necessarily indicative of what actual results
of operations of the Company would have been assuming the aforementioned
transactions had been consummated as of the beginning of the respective periods,
nor do they purport to represent the results of operations for future periods.
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------------
Acquired Probable
Historical (A) Properties (B) Acquisitions (C)
---------------- ----------------- --------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Rental property, net $ 732,573 $ 177,645 (1) $ 312,624 (5)
Development property 9,605 21,911 (1) 5,579 (5)
Restricted and unrestricted cash 21,656 - -
Other assets 74,833 8,155 (1) -
--------------- ---------------- ------------------
Total assets $ 838,667 $ 207,711 $ 318,203
=============== ================ ==================
LIABILITIES
Mortgages and notes payable $ 452,993 $ 187,588 (2) $ 313,382 (6)
Other liabilities 14,540 2,510 (3) 3,321 (6)
--------------- ---------------- ------------------
Total liabilities 467,533 190,098 316,703
Minority interest 34,498 17,613 (4) -
--------------- ---------------- ------------------
STOCKHOLDERS' EQUITY
Common stock 252 - 1 (7)
Additional paid-in capital 372,070 - 1,499 (7)
Dividends paid in excess of earnings (35,686) - -
--------------- ---------------- ------------------
Total stockholders' equity 336,636 - 1,500
--------------- ---------------- ------------------
Total liabilities and stockholders' equity $ 838,667 $ 207,711 $ 318,203
=============== ================ ==================
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------
Offering and Series A
Concurrent USRealty Preferred Stock Pro Forma
Purchase (D) Offering (E) Consolidated
----------------- ---------------- -------------------
(In thousands)
<S> <C> <C> <C>
ASSETS
Rental property, net $ - $ - $ 1,222,842
Development property - - 37,095
Restricted and unrestricted cash - - 21,656
Other assets - - 82,988
-------------- ------------- --------------
Total assets $ - $ - $ 1,364,581
============== ============= ==============
LIABILITIES
Mortgages and notes payable $ (216,298) $ (42,915) $ 694,750
Other liabilities - - 20,371
-------------- ------------- --------------
Total liabilities (216,298) (42,915) 715,121
Minority interest - - 52,111
-------------- ------------- --------------
STOCKHOLDERS' EQUITY
Common stock 103 17 373
Additional paid-in capital 216,195 42,898 632,662
Dividends paid in excess of earnings - - (35,686)
-------------- ------------- --------------
Total stockholders' equity 216,298 42,915 597,349
-------------- ------------- --------------
Total liabilities and stockholders' equity $ - $ - $ 1,364,581
============== ============= ==============
</TABLE>
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
June 30, 1996
(Unaudited)
Adjustments (dollars in thousands):
(A) Reflects the Company's historical consolidated balance sheet as of June 30,
1996.
(B) Reflects the following pro forma adjustments related to the acquired
properties:
(1) total acquisition costs of $207,711 ($51,184 related to Warner Center
Business Park, $100,179 related to the Littlefield Portfolio, $1,600
related to Riata Land, $6,959 related to Katella Corporate Center,
$6,910 related to Greenwoood Centre, $17,529 related to the
development property and the options to purchase the land known as
Panorama Corporate Center, $7,079 related to Quebec Centre, and
$16,271 related to the Sunnyvale Research Plaza);
(2) the assumption of existing debt ($26,001 related to Warner Center
Business Park and $9,694 related to the Littlefield Portfolio) and a
draw on the Company's line of credit of $151,893;
(3) the assumption of accounts payable and accrued expenses existing as
the time of acquisition totaling $2,510; and
(4) the value of 346,444 Class B and 539,593 non-dividend paying Class C
Units of CarrAmerica Realty, L.P. issued in connection with the
purchase of the Littlefield Portfolio.
(C) Reflects the following pro forma adjustments related to the anticipated
effects of probable acquisitions:
(5) total acquisition costs of $318,203 ($130,000 related to the Peterson
Portfolio, $124,090 related to the NELO/Orchard Portfolio, $9,350
related to the Greyhound Building, $15,100 related to Pointe Corridor
Center IV, $26,900 related to Camelback Lakes Corporate Center, and
$12,763 related to Cedar Maple Plaza); and
(6) the assumption of existing debt ($44,210 related to the acquisition of
the NELO/Orchard Portfolio and $22,000 related to the acquisition of the
Peterson Portfolio) and a draw on the Company's line of credit of
$250,493; and
(7) the issuance of 62,696 shares of Common Stock, in connection with the
purchase of the Peterson Portfolio.
(D) Reflects the effects of a public common stock offering and issuance of
7,475,000 shares of common stock (the "Offering") and the concurrent
purchase of 2,785,714 shares of Common Stock directly from the Company (the
"Concurrent US Realty Purchase") by a wholly-owned subsidary of Security
Capital U.S. Realty ("US Realty") at the price of $22.00 per share.
Transaction costs of $9,438 were incurred. The Company used all of the
proceeds to pay down its line of credit.
(E) Reflects the issuance of 1,740,000 shares of Series A Preferred Stock at $25
per share. Transaction costs of $585 were incurred. The Company expects to
use all of the proceeds to pay down its line of credit.
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(Unaudited)
For the six months ended June 30, 1996
Pro Forma Adjustments
<TABLE>
<CAPTION>
Offering and
Concurrent Series A
Acquired Probable USRealty Preferred Stock Pro Forma
Historical (A) Properties (B) Acquisitions (C) Purchase (D) Offering (E) Consolidated
-------------- -------------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate operating revenue:
Rental revenue $58,133 $29,920 (1) $19,445 (6) $ - $ - $107,498
Real estate service income 5,631 - - - - 5,631
---------- ------------ ----------- --------- ---------- -----------
Total revenues 63,764 29,920 19,445 - - 113,129
---------- ------------ ----------- --------- ---------- -----------
Real estate operating expenses:
Property operating expenses 19,459 9,500 (4) 6,541 (8) - - 35,500
Interest expense 13,946 11,339 (2) 11,662 (9) (8,111) (1,609) 27,227
General and administrative 6,659 959 (1) 411 (6) - - 8,029
Depreciation and amortization 14,099 7,096 (3) 3,797 (7) - - 24,992
---------- ------------ ----------- --------- ---------- -----------
Total operating expenses 54,163 28,894 22,411 (8,111) (1,609) 95,748
---------- ------------ ----------- --------- ---------- -----------
Real estate operating income 9,601 1,026 (2,966) 8,111 1,609 17,381
Other operating income (expense) 1,077 4 (1) - (6) - - 1,081
---------- ------------ ----------- --------- ---------- -----------
Income before minority interest 10,678 1,030 (2,966) 8,111 1,609 18,462
---------- ------------ ----------- --------- ---------- -----------
Minority interest (2,602) (497)(5) - - - ( 3,099)
---------- ------------ ----------- --------- ---------- -----------
Income from continuing operations $8,076 $ 533 ($2,966) $8,111 $1,609 $15,363
========== ============ =========== ========== ========== ===========
Earnings per common share (F) $0.46 $0.41
========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the year ended December 31, 1995
Pro Forma Adjustments
Offering and
Concurrent Series A
Acquired Probable USRealty Preferred Stock Pro Forma
Historical (A) Properties (B) Acquisitions (C) Purchase (D) Offering (E) Consolidated
-------------- -------------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate operating revenue:
Rental revenue $89,539 $84,847 (1) $36,006 (6) $ - $ - $210,392
Real estate service income 11,315 - - - - 11,315
--------- --------- --------- --------- --------- ----------
Total revenues 100,854 84,847 36,006 - - 221,707
--------- --------- --------- --------- --------- ----------
Real estate operating expenses:
Property operating expenses 31,579 25,211 (4) 12,703 (8) - - 69,493
Interest expense 21,873 28,421 (2) 24,288 (9) (16,882) (3,349) 54,351
General and administrative 10,711 1,896 (1) 858 (6) - - 13,465
Depreciation and amortization 18,495 22,539 (3) 7,590 (7) - - 48,624
--------- --------- --------- --------- --------- ----------
Total operating expenses 82,658 78,067 45,439 (16,882) (3,349) 185,933
--------- --------- --------- --------- --------- ----------
Real estate operating income 18,196 6,780 (9,433) 16,882 3,349 35,774
Other operating income (expense) (912) 19 (1) 62 (6) - - (831)
--------- --------- --------- --------- --------- ----------
Income before minority interest 17,284 6,799 (9,371) 16,882 3,349 34,943
--------- --------- --------- --------- --------- ----------
Minority interest (5,217) (764) (5) - - - (5,981)
--------- --------- --------- --------- --------- ----------
-
Income from continuing operations $12,067 $ 6,035 ($9,371) $16,882 $3,349 $28,962
========= ========= ========= ========= ========= ==========
Earnings per common share (F) $0.90 $0.76
========= ==========
</TABLE>
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Six Months Ended June 30, 1996 and the Year Ended December 31, 1995
(Unaudited)
Adjustments (dollars in thousands):
(A) Reflects the Company's historical consolidated statements of operations for
the six months ended June 30, 1996 and the year ended December 31, 1995.
(B) Pro forma adjustments for the purchases of the acquired properties reflect:
(1) the historical operating activity of the properties acquired;
(2) the additional interest expense on the line of credit ($8,727 of
interest costs net of $821 capitalized for the six months ended June 30,
1996 and $18,486 of interest costs net of $906 capitalized in 1995) and
interest expense on debt assumed in certain acquisitions ($3,433 for the
six months ended June 30, 1996 and $10,841 in 1995);
(3) the depreciation expense for the acquisitions based on the new
accounting basis for the rental property acquired;
(4) the historical operating activity of the rental property ($10,525 for
the six months ended June 30, 1996 and $27,646 in 1995) reduced by the
elimination of management fee expenses that are no longer incurred by
the Company upon purchase of the properties ($1,025 for the six months
ended June 30, 1996 and $2,435 in 1995); and
(5) the minority interest share of earnings.
(C) Pro forma adjustments for the probable acquisitions reflect:
(6) the historical operating activity of the properties to be acquired;
(7) the depreciation expense for the probable acquisitions based on the new
accounting basis for the rental property to be acquired;
(8) the historical operating activity of the rental property to be acquired
($7,032 for the six months ended June 30, 1996 and $13,648 in 1995)
reduced by the elimination of management fee expenses that will not be
incurred by the Company upon purchase of the properties ($491 for the
six months ended June 30, 1996 and $945 in 1995); and
(9) the additional interest expense on the line of credit ($9,393 of
interest costs net of $209 capitalized for the six months ended June 30,
1996 and $19,550 of interest costs net of $218 capitalized in 1995) and
interest expense on the debt to be assumed in the probable acquisitions
($2,478 for the six months ended June 30, 1996 and $4,956 in 1995).
(D) Pro forma adjustment reflects the reduction in interest expense associated
with the pay down of the line of credit with the proceeds from the Offering
and Concurrent USRealty Purchase.
(E) Pro forma adjustment reflects the reduction in interest expense associated
with the pay down of the line of credit with the proceeds from the Series A
Preferred Stock Offering.
(F) Based upon 41,095,808 and 41,005,493 pro forma shares of Common Stock
outstanding and common stock equivalents on a weighted average basis during
the six months ended June 30, 1996 and the year ended December 31, 1995,
respectively. Net income and weighted average shares outstanding have been
adjusted for certain minority interests which have a dilutive effect on
earnings per share.
