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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20543
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED June 30, 1999
COMMISSION FILE NO. 1-11706
CARRAMERICA REALTY CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1796339
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1850 K Street, N.W., Washington, D.C. 20006
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(Address or principal executive office) (Zip code)
Registrant's telephone number, including area code (202) 729-7500
--------------
N/A
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Number of shares outstanding of each of the registrant's
classes of common stock, as of August 16, 1999:
Common Stock, par value $.01 per share: 66,798,957 shares
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or such shorter period that the Registrant was
required to file such report) and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
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<PAGE>
Index
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I: Financial Information
- -----------------------------
Item 1. Financial Statements
Condensed consolidated balance sheets of CarrAmerica Realty Corporation and
subsidiaries as of June 30, 1999 (unaudited) and December 31, 1998................................4
Condensed consolidated statements of operations of CarrAmerica Realty
Corporation and subsidiaries for the three months ended June 30, 1999
and 1998 (unaudited)..............................................................................5
Condensed consolidated statements of operations of CarrAmerica Realty
Corporation and subsidiaries for the six months ended June 30, 1999
and 1998 (unaudited)..............................................................................6
Condensed consolidated statements of cash flows of CarrAmerica Realty
Corporation and subsidiaries for the six months ended June 30, 1999
and 1998 (unaudited)..............................................................................7
Notes to condensed consolidated financial statements (unaudited)............................8 to 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................13 to 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................................21
Part II: Other Information
- --------------------------
Item 4. Submission of Matters to a Vote of Security Holders.............................................22
Item 6. Exhibits and Reports on Form 8-K................................................................22
</TABLE>
2
<PAGE>
Part I
------
Item 1. Financial Information
---------------------
The information furnished in the accompanying condensed consolidated
balance sheets, condensed consolidated statements of operations and condensed
consolidated statements of cash flows of CarrAmerica Realty Corporation and
subsidiaries (the Company) reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the aforementioned financial
statements for the interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to the financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
3
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets As Of June 30, 1999 and December 31, 1998
- -------------------------------------------------------------------------------
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Assets
- ------
Rental property:
Land $ 642,109 692,484
Buildings 1,974,079 2,051,734
Tenant improvements 230,589 192,211
Furniture, fixtures and equipment 80,281 57,140
----------- ----------
2,927,058 2,993,569
Less - accumulated depreciation (287,053) (262,458)
----------- ----------
Total rental property 2,640,005 2,731,111
Land held for development 120,846 119,141
Construction in progress 264,935 347,294
Cash and cash equivalents 54,900 36,499
Restricted cash and cash equivalents 29,065 48,640
Accounts and notes receivable 50,284 47,251
Investments 85,954 101,679
Accrued straight-line rents 40,776 39,273
Tenant leasing costs, net 46,899 42,552
Deferred financing costs, net 18,174 19,911
Goodwill, net 239,932 221,570
Prepaid expenses and other assets, net 45,752 38,563
----------- ----------
$ 3,637,522 3,793,484
=========== ==========
Liabilities, Minority Interest, and Stockholders' Equity
- --------------------------------------------------------
Liabilities:
Mortgages and notes payable $ 1,653,551 1,704,359
Accounts payable and accrued expenses 135,807 133,767
Rent received in advance and security deposits 47,540 47,692
----------- ----------
Total liabilities 1,836,898 1,885,818
Minority interest 103,807 93,264
Stockholders' equity:
Preferred Stock, $.01 par value, authorized 35,000,000 shares:
Series A Cumulative Convertible Redeemable Preferred Stock, $.01 par
value, 680,000 shares issued and outstanding with an aggregate
liquidation preference of $17.0 million. 7 7
Series B, C and D Cumulative Redeemable Preferred Stock,
8,800,000 shares issued and outstanding with an aggregate
liquidation preference of $400.0 million. 88 88
Common Stock, $.01 par value, authorized 180,000,000 shares, issued and
outstanding 66,782,756 shares at June 30, 1999 and 71,760,172 shares
at December 31, 1998. 668 718
Additional paid in capital 1,816,466 1,926,057
Accumulated other comprehensive (loss) income (2,263) 463
Cumulative dividends in excess of net income (118,149) (112,931)
---------- ----------
Total stockholders' equity 1,696,817 1,814,402
---------- ----------
$ 3,637,522 3,793,484
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended June 30, 1999 and 1998
- -------------------------------------------------------------------------------
(Unaudited and in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Operating revenue:
Rental revenue:
Minimum base rent $ 101,173 92,689
Recoveries from tenants 13,838 11,639
Parking and other tenant charges 4,227 2,636
---------- ---------
Total rental revenue 119,238 106,964
Executive suites revenue 56,208 34,661
Real estate service revenue 4,947 3,524
---------- ---------
Total operating revenue 180,393 145,149
---------- ---------
Operating expenses:
Property expenses:
Operating expenses 30,808 24,977
Real estate taxes 11,823 9,660
Interest expense 22,119 17,417
Executive suites expenses 51,478 29,567
General and administrative 8,982 8,041
Depreciation and amortization 33,231 26,236
---------- --------
Total operating expenses 158,441 115,898
---------- ---------
Operating income 21,952 29,251
---------- ---------
Other income:
Interest Income 1,290 1,290
Equity in earnings of unconsolidated partnerships 1,136 1,714
---------- ---------
Total other income 2,426 3,004
---------- ---------
Net income before gain on sale of assets
and minority interest 24,378 32,255
Minority Interest (4,449) (2,404)
---------- ---------
Net income before gain on sale of assets 19,929 29,851
Gain on sale of assets, net of income taxes 10,477 256
---------- ---------
Net income 30,406 30,107
Other comprehensive loss - foreign currency translation adjustment (993) --
---------- ---------
Comprehensive income $ 29,413 30,107
========== =========
Basic net income per common share $ 0.32 0.30
========== =========
Diluted net income per share $ 0.32 0.30
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 1999 and 1998
- -------------------------------------------------------------------------------
(Unaudited and in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Operating revenue:
Rental revenue:
Minimum base rent $ 204,313 178,072
Recoveries from tenants 27,971 23,216
Parking and other tenant charges 8,412 6,005
--------- --------
Total rental revenue 240,696 207,293
Executive suites revenue 105,307 50,309
Real estate service revenue 8,847 6,514
--------- -------
Total operating revenue 354,850 264,116
--------- --------
Operating expenses:
Property expenses:
Operating expenses 60,112 48,191
Real estate taxes 22,864 18,961
Interest expense 45,612 34,578
Executive suites expenses 95,594 43,441
General and administrative 18,291 14,461
Depreciation and amortization 63,633 49,879
--------- --------
Total operating expenses 306,106 209,511
--------- --------
Operating income 48,744 54,605
--------- --------
Other income:
Interest Income 2,605 2,307
Equity in earnings of unconsolidated partnerships 2,631 2,468
Gain on settlement of treasury locks 4,489 --
--------- --------
Total other income 9,725 4,775
--------- --------
Net income before gain on sale of assets, income
taxes and minority interest 58,469 59,380
Income taxes (252) --
Minority Interest (10,168) (10,951)
--------- --------
Net income before gain on sale of assets 48,049 48,429
Gain on sale of assets, net of income taxes 28,532 26,187
--------- --------
Net income 76,581 74,616
Other comprehensive (loss) gain - foreign currency translation adjustment
(2,726) 787
--------- --------
Comprehensive income $ 73,855 75,403
========= ========
Basic net income per common share $ 0.86 0.87
========= ========
Diluted net income per share $ 0.85 0.87
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
- -------------------------------------------------------------------------------
(Unaudited and in thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 76,581 74,616
----------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 63,633 49,879
Minority interest in income 10,168 10,951
Equity in earnings of unconsolidated partnerships (2,631) (2,468)
Gain on sale of assets, net of income taxes (28,532) (26,187)
Loss on write-off of assets 1,281 486
Change in assets and liabilities, net of acquisitions and dispositions:
Increase in accounts and notes receivable (3,033) (8,337)
Increase in accrued straight-line rents (1,503) (217)
Additions to tenant leasing costs (3,997) (6,063)
Decrease (increase) in prepaid expenses and other assets (13,559) 856
Increase in accounts payable and accrued expenses 2,040 23,190
Increase (decrease) in rent received in advance and security deposits (152) 14,362
----------- --------
Total adjustments 23,715 56,452
----------- --------
Net cash provided by operating activities 100,296 131,068
----------- --------
Cash flows from investing activities:
Acquisition and development of executive suites assets (45,747) (165,544)
Acquisition and development of rental property (18,888) (283,157)
Additions to land held for development (14,116) (93,148)
Additions to construction in progress (148,361) (164,669)
Distributions from unconsolidated partnerships 23,220 2,336
Investments in unconsolidated partnerships (4,864) (50,358)
Increase (decrease) in restricted cash and cash equivalents 19,575 (22,032)
Proceeds from sales of rental property 352,699 61,678
----------- --------
Net cash provided (used) by investing activities 163,518 (714,894)
----------- --------
Cash flows from financing activities:
Net proceeds from sales of common and preferred stock -- 335,922
Repurchase of common stock (109,717) --
Net borrowings (repayments) on unsecured credit facility (90,000) 164,500
Proceeds from issuance of unsecured notes -- 200,000
Proceeds from refinance of existing mortgages 46,102 --
Repayment of mortgages payable (6,910) (18,449)
Dividends paid (81,801) (78,376)
Other (361) (4,846)
----------- --------
Net cash provided (used) by financing activities (242,687) 598,751
----------- --------
Foreign currency translation adjustment (2,726) 787
----------- --------
Increase in unrestricted cash and cash equivalents 18,401 15,712
Unrestricted cash and cash equivalents, beginning of the period 36,499 23,845
----------- --------
Unrestricted cash and cash equivalents, end of the period $ 54,900 39,557
=========== ========
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $16,378 and $12,572
for the six months ended June 30, 1999 and 1998, respectively) $ 49,568 30,601
=========== ========
Supplemental disclosure of non-cash investing and financing activities:
During the six months ended June 30, 1998, the Company funded a portion of
the aggregate purchase price of its property acquisitions by assuming $19.0
million of debt and liabilities and by issuing $10.0 million of Units.
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- -------------------------------------------------------------------------------
(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
CarrAmerica Realty Corporation (the "Company") is a
self-administered and self-managed equity real estate
investment trust ("REIT"), organized under the laws of
Maryland, which owns, develops, acquires and operates office
properties. The Company's office properties are located
primarily in 14 suburban markets across the United States.
HQ Global Workplaces, Inc., previously referred to as Omni
Offices, Inc., ("HQ Global") and OmniOffices (UK) Limited
("Omni UK/Europe"), the Company's executive suites affiliates,
are engaged in the business of leasing commercial office space
in the form of executive office suites and providing related
communications technology and business services, including
word processing, desktop publishing, digital color printing,
conference rooms, training facilities and meeting support and
scheduling. HQ Global and Omni UK/Europe offered short-term
leases and service packages at 265 business centers located in
over 80 cities in 17 countries as of June 30, 1999.
(b) Basis of Presentation
The accounts of the Company and its majority-owned/controlled
subsidiaries and affiliates are consolidated in the
accompanying financial statements. The Company uses the equity
method of accounting for its investments in and earnings and
losses of unconsolidated partnerships not controlled by the
Company. Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets
and liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(c) Interim Financial Statements
The information furnished reflects all adjustments, which are,
in the opinion of management, necessary to reflect a fair
presentation of the results for the interim periods, and all
such adjustments are of a normal, recurring nature.
(d) New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities", which requires
that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure
those instruments at fair value. This statement is effective
for all fiscal quarters of fiscal years beginning after June
15, 2000. The Company is evaluating and has not yet determined
the impact of this pronouncement, if any.
(e) Per Share Data and Dividends
The following is a reconciliation of the numerators and
denominators of the basic and diluted EPS computations for net
income:
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, 1999 Ended June 30, 1998
--------------------------------------------------------------------
Income Per Income Per
(000's) Shares Share (000's) Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $21,568 66,779 $0.32 $21,222 70,722 $0.30
Effect of Dilutive Securities:
Stock Options -- 362 -- 173
Diluted EPS $21,568 67,141 $0.32 $21,222 70,895 $0.30
======= ====== ======= ======
</TABLE>
Net income has been reduced by preferred stock dividends of $8,838 and $8,885
for the three month periods ended June 30, 1999 and 1998, respectively.
8
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, 1999 Ended June 30, 1998
--------------------------------------------------------------------
Income Per Income Per
(000's) Shares Share (000's) Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $58,998 68,927 $0.86 $56,940 65,389 $0.87
Effect of Dilutive Securities:
Stock Options -- 295 (0.01) -- 192
Diluted EPS $58,998 69,222 $0.85 $56,940 65,581 $0.87
======= ====== ======= ======
</TABLE>
Net income has been reduced by preferred stock dividends
of $17,583 and $17,676 for the six month periods ended
June 30, 1999 and 1998, respectively.
The effects of stock options, units and Series A Preferred
Stock are not included in the computation of diluted EPS for a
given period if their effect is antidilutive.
(f) Reclassifications
Certain reclassifications of prior period amounts have been
made to conform to the current period's presentation.
(2) Hedging Transactions
In 1998, the Company entered into forward treasury agreements in order
to hedge against the impact that interest rate fluctuations would have
on debt instruments the Company planned to issue in the future. At
December 31, 1998, the Company determined that these agreements no
longer represented effective hedges and recorded a loss of $13.7
million in anticipation of terminating the agreements. In February
1999, the Company settled these contracts for $9.2 million in cash and
recorded a gain of $4.5 million.
(3) Common Stock
In April 1998, the Company sold 5,000,000 shares of common stock to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
resulting in net proceeds to the Company of approximately $147 million,
in what is commonly know as a "forward equity sale" transaction. In
1998, the Company paid Merrill Lynch $39.3 million and in March 1999
the Company settled this agreement with a final payment of $109.7
million, at which time the 5,000,000 shares were repurchased by the
Company and cancelled.
(4) Gain on Sale of Assets
The Company has disposed of certain assets that are inconsistent with
its long-term strategic or return objectives or where market conditions
for sale are favorable. During the six months ended June 30, 1999, the
Company disposed of 51 operating office properties recognizing gains
totaling $28.5 million, net of $13.7 million in taxes.
9
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
- -------------------------------------------------------------------------------
(5) Subsequent Events
Since June 30,1999, the Company sold 4 operating office properties for
$32.9 million, resulting in a net after tax gain of $2.7 million.
The properties were located in Dallas, Texas and Orange County,
California.
(6) Segment Information
The Company's reportable operating segments are real estate property
operations, executive office suites operations and development
operations. Other business activities and operating segments that are
not reportable are included in other operations.
The Company's operating segments' performances are measured using funds
from operations. Funds from operations represent net income before
minority interest and extraordinary items, excluding depreciation and
amortization on real estate assets and the executive suites business,
losses associated with the executive office suites centers under
development, deferred taxes and gain on sale of assets.
<TABLE>
<CAPTION>
(In millions) For the three months ended
June 30, 1999
---------------------------------------------------------------------------
Executive
Real Estate Office
Property Suites Development Other
Operations Operations Operations Operations Total
---------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Operating revenue $ 119.2 56.2 -- 5.0 $ 180.4
Segment expense 42.6 48.3 0.8 8.3 100.0
------------- ------------- -------------- ------------ ----------
Net segment revenue (expense) 76.6 7.9 (0.8) (3.3) 80.4
Interest expense 12.6 2.3 (8.4) 15.6 22.1
Other income, net 0.1 0.3 -- 1.7 2.1
------------- ------------- -------------- ------------ ----------
Funds from operations $ 64.1 5.9 7.6 (17.2) 60.4
============= ============= ============== ============ ----------
Adjustments:
Depreciation and amortization (33.2)
Other, net (2.8)
----------
Net income before gain on sale of
assets and minority interest $ 24.4
==========
</TABLE>
10
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In millions) For the three months ended
June 30, 1998
---------------------------------------------------------------------------
Executive
Real Estate Office
Property Suites Development Other
Operations Operations Operations Operations Total
---------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Operating revenue $ 107.0 34.7 -- 3.4 $ 145.1
Segment expense 34.6 28.6 0.6 7.3 71.1
------------ ----------- ------------- ------------ -------------
Net segment revenue (expense) 72.4 6.1 (0.6) (3.9) 74.0
Interest expense 15.0 0.6 (7.2) 9.0 17.4
Other income (expense), net 0.4 (1.1) - 3.8 3.1
------------ ----------- ------------- ------------ -------------
Funds from operations $ 57.8 4.4 6.6 (9.1) 59.7
============ =========== ============= ============ -------------
Adjustments:
Depreciation and amortization (25.9)
Other, net (1.5)
==============
Net income before gain on sale of
assets and minority interest
$ 32.3
==============
</TABLE>
11
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In millions) For the six months ended
June 30, 1999
---------------------------------------------------------------------------
Executive
Real Estate Office
Property Suites Development Other
Operations Operations Operations Operations Total
---------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Operating revenue $ 240.7 105.3 -- 8.9 $ 354.9
Segment expense 83.0 88.1 1.7 16.6 189.4
------------- ------------- -------------- ------------ --------------
Net segment revenue (expense) 157.7 17.2 (1.7) (7.7) 165.5
Interest expense 24.7 4.5 (16.4) 32.8 45.6
Other income (expense), net 0.4 0.6 -- 2.9 3.9
------------- ------------- -------------- ------------ --------------
Funds from operations $ 133.4 13.3 14.7 (37.6) 123.8
============= ============= ============== ============ --------------
Adjustments:
Depreciation and amortization (62.8)
Gain on settlement of treasury
locks 4.5
Other, net (7.0)
--------------
Net income before gain on sale of
assets, income taxes and minority
interest $ 58.5
==============
</TABLE>
<TABLE>
<CAPTION>
(In millions) For the six months ended
June 30, 1998
---------------------------------------------------------------------------
Executive
Real Estate Office
Property Suites Development Other
Operations Operations Operations Operations Total
---------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Operating revenue $ 207.3 50.3 -- 6.5 $ 264.1
Segment expense 67.2 41.9 1.1 13.3 123.5
------------- ------------- -------------- ------------ --------------
Net segment revenue (expense) 140.1 8.4 (1.1) (6.8) 140.6
Interest expense 23.3 1.6 (12.6) 22.3 34.6
Other income (expense), net 0.7 (0.9) -- 4.4 4.2
------------- ------------- -------------- ------------- --------------
Funds from operations $ 117.5 5.9 11.5 (24.7) 110.2
============= ============= ============== ============ --------------
Adjustments:
Depreciation and amortization (48.9)
Other, net (1.9)
==============
Net income before gain on sale of
assets, income taxes and minority
interest $ 59.4
==============
</TABLE>
12
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is primarily based on the Condensed
Consolidated Financial Statements of CarrAmerica Realty Corporation and its
subsidiaries (the "Company") as of June 30, 1999 and December 31, 1998, and for
the three and six months ended June 30, 1999 and 1998. The comparability of the
periods is significantly impacted by acquisitions completed, development
properties placed in service and dispositions made during 1999 and 1998. As of
June 30, 1998, the Company owned 277 properties. This number was reduced to 258
at June 30, 1999.
The Company's reportable operating segments are real estate property
operations, executive office suites operations and development operations. Other
business activities and operating segments that are not reportable are included
in other operations.
This information should be read in conjunction with the accompanying
condensed consolidated financial statements and notes thereto. These condensed
consolidated financial statements include all adjustments, which are, in the
opinion of management, necessary to reflect a fair statement of the periods
presented, and all such adjustments are of a normal, recurring nature.
RESULTS OF OPERATIONS - Three Months Ended June 30, 1999 and 1998
Real Estate Property Operations
Total real estate property operating revenue increased $12 million, or
11%, to $119 million for the three months ended June 30, 1999, compared to $107
million for the three months ended June 30, 1998. This increase resulted from
development properties placed in service and same store rental growth which
exceeded the loss of rental revenue due to dispositions. Same store operating
income grew by 9% over the same period in 1998, primarily as a result of a 7%
increase in rental revenue. The occupancy rate for same store properties grew to
96.2% for the second quarter of 1999 from 95.5% for the second quarter of 1998.
Real estate property operating expenses increased $8 million primarily
as a result of property acquisitions and development properties placed in
service. Same store operating expenses increased by $1 million or 4% over the
second quarter of 1998. Interest expense decreased by $2.4 million.
Executive Office Suites Operations
Executive office suites operating revenue increased by $22 million to
$56 million in the second quarter of 1999. Rental income increased by $14
million and other services and interest income increased by $8 million over the
second quarter of 1998 as a result of additional centers in operation from
acquisitions and development of new centers. Services provided to customers
include communications technology, word processing, desktop publishing, digital
color printing, conference rooms, training centers and meeting support and
scheduling.
Operating expenses increased by $20 million, or 69%, primarily due to
the addition of new centers. Interest expense increased $2 million in the second
quarter of 1999.
Development Operations
Development operating expenses increased $0.2 million to $0.8 million
for the second quarter of 1999. Interest costs capitalized related to
construction in progress increased $1.2 million to $8.4 million as a result of
increased development expenditures and carrying costs.
Other Operations
Operating revenues increased $1.6 million for the three months ended
June 30, 1999 compared to the same period in 1998 primarily from increases in
management and leasing fee income.
13
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Other operations expenses increased $1 million primarily as a result of
Year 2000 Compliance expenditures.
Interest expense increased from $9 million for the three months ended
June 30, 1998 to $15.6 million for the comparable period in 1999. This increase
resulted primarily from an additional $150 million of Senior Unsecured Notes
outstanding during the quarter ended June 30, 1999 and additional borrowings on
the Company's unsecured line of credit.
RESULTS OF OPERATIONS - Six Months Ended June 30, 1999 and 1998
Real Estate Property Operations
Total real estate property operating revenue increased $33 million, or
16%, to $240 million for the six months ended June 30, 1999 as the effect of
development properties placed in service and same store rental growth exceeded
the loss of rental revenue due to dispositions. Same store operating income grew
by 7% over the same period of 1998, primarily as a result of a 5% increase in
rental revenue. The same store occupancy rate grew to 96.0% from 95.6% for the
same period of 1998.
Real estate operating expenses increased $16 million primarily as a
result of development properties placed in service. Same store operating
expenses increased by $1 million or 2% over the same period of 1998. Interest
expense increased $1 million over the first six months of 1998.
Executive Office Suites Operations
Executive office suites operating revenue increased by $55 million to
$105 million for the first six months of 1999 over the comparable period of
1998. Rental income increased by $36 million and other services and interest
income increased by $19 million as a result of additional centers in operation
from acquisitions and development of new centers. Operating expenses increased
$46 million, comparable to the rate of increase of executive suites revenues.
Interest expense increased from $1.6 million in 1998 to $4.5 million in 1999 as
a result of higher borrowing levels under the HQ Global unsecured line of
credit.
Development Operations
Development operating expenses increased $0.6 million to $1.7 million.
Interest costs capitalized related to construction in progress increased $3.8
million as a result of increased construction starts since the second quarter of
1998.
Other Operations
Operating revenues increased $2.4 million for the three months ended
June 30, 1999 compared to the same period in 1998 primarily from increases in
management and leasing fee income.
Other operations expenses increased $3.3 million primarily as a result
of Year 2000 Compliance expenditures that are not expected to recur in future
years.
Interest expense increased from $22 million for the six months ended
June 30, 1998 to $33 million for the comparable period in 1999. This increase
resulted primarily from an additional $150 million of Senior Unsecured Notes
outstanding during the quarter ended June 30, 1999 and additional borrowings on
the Company's unsecured line of credit.
14
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company seeks to create and maintain a capital structure that will
enable it to diversify its capital sources and thereby allow the Company to
obtain additional capital from a number of different sources, including
additional equity offerings of common and/or preferred stock, public and private
debt financings, and, where appropriate, asset dispositions. Management believes
that the Company will have access to the capital resources necessary to expand
and develop its business, to fund its operating and administrative expenses, to
continue debt service obligations, to pay dividends in accordance with REIT
requirements, to acquire additional properties and land as market conditions
permit, and to pay for construction in progress in both the short and long term.
The Company's debt and preferred stock offerings have been rated by
three rating agencies. Duff & Phelps Credit Rating Co. (DCR) and Standard &
Poors (S&P) have each assigned their BBB rating to senior unsecured debt
offerings of the Company and their BBB- rating to cumulative preferred stock
offerings of the Company. As of June 30, 1999, Moody's Investor Service
(Moody's) has assigned its Baa3 rating to senior unsecured debt offerings of the
Company and its Ba2 rating to cumulative preferred stock offerings of the
Company.
The Company's total indebtedness at June 30, 1999 was aproximately $1.7
billion, of which $392.5 million, or 24%, bears a LIBOR-based floating interest
rate. Currently, the unsecured credit facilities bear interest at 90 basis
points over 30 day LIBOR on the $450.0 million facility and the $200.0 million
facility. The Company's mortgages payable fixed rate indebtedness bears an
effective weighted average interest rate of 8.1% at June 30, 1999 and has a
weighted average term to maturity of 7.3 years. Based upon the Company's total
market capitalization at June 30, 1999 of $3.9 billion (the common stock price
was $25.00 per share; the total shares of common stock, convertible preferred
stock and Units outstanding was 73,958,000 and the aggregate liquidation value
of the cumulative redeemable preferred stock was $400.0 million), the Company's
debt represented 42% of its total market capitalization. As of August 13, 1999,
the Company had $400.5 million outstanding under the unsecured credit
facilities, leaving $240.2 million available under these unsecured credit
facilities.
Rental revenue, executive suites revenue and real estate service
revenue have been the principal sources of routine capital to fund the Company's
operating expenses, debt service and routine capital expenditures. The Company
and its affiliates also require capital to invest in their existing portfolio of
operating assets for major capital projects such as large-scale renovations and
tenant related capital expenditures, such as tenant improvements and allowances
and leasing commissions. The Company believes that these sources of revenue will
continue to provide the funds necessary for these expenditures.
Additionally, the Company and its affiliates (including CarrAmerica
Development) will require a substantial amount of capital for development
projects currently underway and planned for the future. As of June 30, 1999, the
Company had approximately 2.9 million square feet of office space in 35
development projects under construction which are expected to require a total
investment by the Company of approximately $437 million. As of June 30, 1999,
the Company had expended $330 million, or 76 percent of the total expected
investment. In addition, CarrAmerica Development has made commitments of $29
million for two additional development projects that will start construction in
the third quarter of 1999.
HQ Global and Omni/UK Europe are also developing 41 executive office
suite centers. The total cost to complete these projects is approximately $54.0
million, of which approximately $31 million had been expended as of June 30,
1999. In addition, HQ Global and Omni UK/Europe will periodically consider
acquisitions of existing executive office suite centers. Future cash needs for
expansion of HQ Global are expected to be met by cash flow from operations and
draws on the HQ Global line of credit facility. Future cash needs of Omni
UK/Europe are expected to be met primarily through third party financings or
through debt or equity investments by the Company.
The Company recently announced that, subject to market conditions and
approval by the HQ Global Services, Inc. board of directors, HQ Global is
planning an initial public offering of its common stock. As part of the public
offering, expected to be completed by the end of 1999, the Company expects that
its interest in the executive suites business would be reduced, and that its 95%
equity interest in HQ Global Services, Inc. would be reduced to approximately
40-60% of the total equity capital of HQ Global. Any public offering by HQ
Global will be made only by means of a prospectus.
15
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Prior to the second quarter of 1998, the Company met its capital
requirements primarily by accessing the public equity and debt capital markets.
As a general matter, conditions in the public equity and debt capital markets
for most REITs have not been favorable since that time. In response to these
unfavorable conditions, the Company has curtailed its acquisition program and
satisfied its cash needs through the disposition of selected assets, the
refinancing of selected assets, prudent use of joint ventures that reduce the
Company's investment requirement and utilization of the Company's existing
credit facilities.
During the second quarter of 1999, the Company disposed of 27 operating
properties, generating net proceeds of $103 million. As of August 17, 1999, the
Company has two projects under contract for sale which are projected to produce
net proceeds of $41 million and two other projects under letter of intent for
sale that would produce additional net proceeds of $73 million. Due to
uncertainties in the disposition process, there can be no assurance that these
sales will close or that they will achieve the expected net proceeds.
In addition, during the second quarter of 1999, the Company refinanced
one loan totaling $15 million at a rate of 7.13% secured by two properties
located in Orange County, California, which resulted in net proceeds to the
Company of $4.9 million.
In March 1999, the Company settled all obligations outstanding under
its forward equity transaction with Merrill Lynch, Pierce, Fenner & Smith
Incorporated. The Company made a final payment of approximately $109.7 million,
in addition to the $39.3 million paid in 1998, to settle the transaction. The
5,000,000 shares originally issued in the transaction in April 1998 were
repurchased by the Company and cancelled.
As a result of the Company's disposition and refinancing efforts, the
Company believes that funding is available for all capital requirements for the
remainder of 1999, including firm commitments for development projects. The
Company expects to continue to rely on asset dispositions, asset refinancings,
joint ventures and access to its credit facilities to fund capital requirements
for the foreseeable future.
Net cash provided by operating activities was $100 million for the six
months ended June 30, 1999, compared to $131 million for the six months ended
June 30, 1998. The decrease in net cash provided by operating activities
resulted primarily from an increase in prepaid assets related to acquisition of
executive suites centers. The Company's investing activities provided $164
million for the six months ended June 30, 1999 compared to the Company's
investing activities using $715 million for the six months ended June 30, 1998.
The Company's investment activities included sales of office buildings,
acquisitions of executive office suites businesses (through HQ Global and
OmniUK/Europe), and land acquired for future development and additions to
construction in progress. Net of proceeds from the sales of rental property, the
Company's investing activities used cash of $189 million and $777 million for
the six months ended June 30, 1999 and 1998, respectively. Included in this, the
Company invested approximately $19 million in improvements to existing real
estate assets for the six months ended June 30, 1999 and $283 million in
acquisitions and improvements for the comparable period of 1998.
Net of dividends to the Company's stockholders, the Company's financing
activities used net cash of $161 million for the six months ended June 30, 1999
compared to net cash provided of $677 million for the six months ended June 30,
1998. During the six months ended June 30, 1999, the Company repurchased
5,000,000 common shares issued in its forward equity sale transaction for $109.7
million. Proceeds from the sale of rental properties were used to fund this
transaction and to repay amounts on the unsecured credit facility. For the six
months ended June 30, 1999, the Company's net repayments on its unsecured credit
facility were approximately $90 million.
The Company's dividends are paid quarterly. Amounts accumulated for
distribution are primarily invested by the Company in short-term investments
that are collateralized by securities of the United States Government or certain
of its agencies.
16
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Year 2000 Compliance
The Year 2000 issue results from a programming convention in which
computer programs use two digits rather than four to define the applicable year.
Software and hardware may recognize a date using "00" as the year 1900, rather
than the year 2000. Such an inability of computer programs to recognize a year
that begins with "20" could result in business or building system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including, among other things, a temporary inability to process
transactions, send invoices or engage in other normal business activities.
The Company has undertaken a comprehensive program to address the Year
2000 issue. In the second quarter of 1998, the Company expanded its program and
appointed a Year 2000 Steering Committee to manage centrally its Year 2000
compliance program (known internally as "Project 2000"). The Steering Committee
includes representatives of senior level management representing a wide array of
the organization and is charged with overseeing the Company's comprehensive
action plan designed to address Year 2000 issues.
During the second quarter of 1998, the Company's Steering Committee
engaged the independent consulting firm of Computer Technology Associates, Inc.
("CTA") to serve as the Project Manager for Project 2000. During the first
quarter of 1999 and after completion of the assessment phase, CTA's role as
Project Manager was modified and the Company designated two full-time employees
as the Project Managers to oversee the remainder of Project 2000. As of the end
of the second quarter, the Company ended its engagement of CTA and does not
anticipate the need to use its services during the remainder of Project 2000.
Project 2000 is organized into two areas of concentration: (i) Property
Operations Embedded Systems and (ii) Internal Business Operations Technology.
The Property Operations segment of the program focuses primarily on equipment
and systems present in the Company's operating properties that may contain
embedded microprocessor technology (such as elevators and HVAC systems). The
Internal Business Operations segment focuses primarily on the Company's
information technology, operating systems (such as billing, accounting and
financial reporting systems) and certain systems of the Company's major vendors
and material service providers. As described below, Project 2000 involves (i)
the assessment of the Year 2000 problems that may affect the Company, (ii) the
development of remedies to address the problems discovered in the assessment
phase, (iii) the testing of such remedies and (iv) the preparation of
contingency plans to deal with the potential failure of important and critical
systems.
Assessment. During the course of its assessment phase, the Company
identified substantially all of the major components of its property and
business operations systems which may be vulnerable to the Year 2000 issue. In
terms of Property Operations, the Company has conducted a comprehensive
inventory of all the buildings' systems and equipment. Systems were risk ranked
(1-3) based upon each system's importance to the properties' operations. Those
systems classified as level 2 or 3 (the highest levels of importance) were
compared to CTA's existing embedded systems database to determine the status of
Year 2000 compliance if it was not already known by the Company. If relevant
information was not contained in the existing database, the system was then
identified for processing through vendor management coordinated by CTA. Vendor
management involved concentrated communication with the vendor in an attempt to
determine the status of a systems Year 2000 compliance and any available
remedies. As of the fourth quarter of 1998, inventory of the Company's then
existing operating properties was complete. Assessment of property operations
was complete as of the end of the first quarter of 1999.
In terms of Internal Business Operations Technology, team leaders have
been selected from each business unit and market office to assist in identifying
software, hardware and external interfaces which may be vulnerable to Year 2000
issues. Inventorying of both core business units and all market offices was
substantially completed by the end of the fourth quarter of 1998. A routine
application upgrade of the Company's primary billing and accounting software was
complete as of the end of the first quarter of 1999. The vendor of the software
has received the Information Technology Association of America (ITAA) 2000
Certification and represents that the system is Year 2000 ready, and the Company
expects to test the system during the third quarter of 1999. In addition, the
Company continued to communicate with other significant hardware, software and
other material services providers and requested them to provide the Company with
detailed, written information concerning existing or anticipated Year 2000
compliance of their systems insofar as the systems relate to such parties'
17
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
business activities with the Company. Relying upon information received from its
service providers, the Company rated the providers as favorable or unfavorable
as to their Year 2000 compliance. Based upon these ratings the Company is
developing contingencies and identifying back up vendors in the event any
significant provider should fail to be Year 2000 compliant. The Company expects
to continue to communicate with these vendors throughout 1999.
Remediation and Testing Phase. Based upon the results of its assessment
efforts, the Company has initiated remediation and testing activities. The
Company completed remediation on important and critical systems by the end of
the second quarter of 1999. Selective validation testing of these systems is
scheduled to be completed during the third quarter of 1999. The activities
conducted during the remediation and testing phase are intended to provide
assurance from both the Property Operation and the Internal Business
perspectives that critical and important applications, systems and equipment
will be substantially Year 2000 compliant on a timely basis. In this phase, the
Company first evaluates applications, systems and equipment. If a potential Year
2000 problem is identified, the Company takes steps to attempt to remediate the
problem and, where applicable, tests to confirm that the remediating changes are
effective and have not adversely affected the functionality of that application.
After the various applications, system components and equipment have undergone
remediation and testing phases, the Company, where applicable, will conduct
integrated testing for the purpose of demonstrating functional integrated
systems operations.
Contingency Plans. The Company continues to update its contingency
plans to handle its most reasonably likely worst case Year 2000 scenarios, which
it is in the process of continuing to identify. The Company intends to complete
its determination of worst case scenarios after it has received and analyzed
responses to substantially all of the inquiries it has made of third parties.
The Company expects to complete contingency plans by the end of the third
quarter of 1999.
Costs Related to the Year 2000 Issue. As of June 30, 1999, the Company
has incurred approximately $4.2 million in costs for its Year 2000 program. The
Company currently estimates that it will incur additional costs, which are not
expected to exceed approximately $0.7 million, to complete its Year 2000
compliance work. The Company believes that a portion of these costs may be
recoverable from tenants but has not determined at this time the extent to which
such recovery can be realized.
Risks Related to the Year 2000 Issue. Although the Company's Year 2000
efforts are intended to minimize the adverse effects of the Year 2000 issue on
the Company's business and operations, the actual effects of the Year 2000 issue
and the success or failure of the Company's efforts described above cannot be
known until the year 2000. Failure by the Company and its major vendors, other
material service providers and material clients to address adequately their
respective Year 2000 issues in a timely manner (insofar as such issues relate to
the Company's business) could have a material adverse effect on the Company's
business, results of operations and financial condition.
18
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Funds From Operations
The Company believes that funds from operations is helpful to investors as
a measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of the ability of the Company to incur and
service debt, to make capital expenditures and to fund other cash needs. In
accordance with the final National Association of Real Estate Investment Trusts
(NAREIT) White Paper on funds from operations as approved by the Board of
Governors of NAREIT on March 3, 1995, funds from operations represents net
income (loss) (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring or sales of
property, plus depreciation and amortization of assets uniquely significant to
the real estate industry and after adjustments for unconsolidated partnerships
and joint ventures are calculated to reflect funds from operations on the same
basis. The Company calculates its funds from operations by combining the funds
from operations from its real estate operations, calculated in accordance with
NAREIT's definition of funds from operations, and the earnings before
depreciation, amortization and deferred taxes ("EBDADT") of the Company's
executive suites business, excluding operating losses from centers under
development. The Company's funds from operations may not be comparable to funds
from operations reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. Funds from operations does not
represent net income or cash flow generated from operating activities in
accordance with generally accepted accounting principles and, as such, should
not be considered an alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity or the Company's ability
to make distributions.
The following table provides the calculation of the Company's Funds From
Operations:
<TABLE>
<CAPTION>
(In thousands) Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income before minority interest $ 34,855 $ 32,511 $ 86,749 $ 85,567
Adjustments to derive funds from operations:
Add:
Depreciation and amortization 33,185 25,869 62,798 48,924
Losses associated with executive suites centers under
development 3,134 1,049 7,472 1,542
Deferred taxes (62) -- 65 --
Deduct:
Minority interests' (non Unitholders) share of depreciation,
amortization and net income (236) (84) (284) (194)
Gain on settlement of treasury locks -- -- (4,489) --
(Gain) loss on sale of assets, net of income taxes (10,477) 324 (28,532) (25,607)
-------- -------- ------- --------
Funds from Operations before allocations to the minority
Unitholders 60,399 59,669 123,779 110,232
Less: Funds from operations allocable to the minority Unitholders (4,372) (4,183) (8,538) (7,888)
-------- -------- -------- --------
Funds from operations allocable to CarrAmerica Realty Corporation 56,027 55,486 115,241 102,344
Less: Preferred stock dividends (8,838) (8,885) (17,583) (17,676)
-------- -------- -------- --------
Funds from operations attributable to common shareholders $ 47,189 $ 46,601 $ 97,658 $ 84,668
======== ======== ======== ========
</TABLE>
19
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company and its affiliates or
industry results to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: national and local economic,
business and real estate conditions that will, among other things, affect demand
for office properties, availability and creditworthiness of tenants, the level
of lease rents and the availability of financing for both tenants and the
Company, adverse changes in the real estate markets, including, among other
things, competition with other companies, risks of real estate acquisition and
development (including the failure of pending acquisitions to close and pending
developments to be completed on time and within budget), actions, strategies and
performance of affiliates that the Company may not control, governmental actions
and initiatives, and environmental/safety requirements.
20
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes in the Company's market risk have occurred since the
filing of the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
21
<PAGE>
Part II
OTHER INFORMATION
- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of it's stockholders on May 6, 1999, the
stockholders elected Mr. Ronald Blankenship and Mr. Timothy
Howard as directors for terms expiring at the 2000 annual
meeting. Dr. Andrew Brimmer, Mr. Oliver Carr and Mr. William
Sanders are elected directors for terms expiring at the 2002
meeting. There were 71,760,759 shares of the Company's common
stock eligible to be voted and each nominee received at least
55,540,342 votes or 97% affirmative votes.
In addition, the stockholders voted to increase the number of
shares authorized for issuance under 1997 Stock Option and
Incentive Plan (40,633,035 affirmative votes, 16,095,646
negative votes), to extend eligibility under the 1997 Stock
Option and Incentive Plan to non-employee directors
(50,142,453 affirmative votes and 6,576,420 negative votes)
and to increase the number of options issued annually to
continuing non-employee directors under the 1995 Non-Employee
Director's Stock Option Plan (51,495,985 affirmative votes and
5,216,118 negative votes).
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
10.1 Second Amendment to CarrAmerica Realty Corporation
1995 Non-Employee Director Option Plan.
10.2 Fourth Amendment to CarrAmerica Realty Corporation
1997 Stock Option and Incentive Plan.
27 Financial Data Schedule - Six Months Ended June 30,
1999.
(b.) Reports on Form 8-K
a. Current Report on Form 8-K filed on May 7, 1999
regarding certain supplemental data included in the
Company's press release dated May 7, 1999.
22
<PAGE>
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 thereunto duly authorized.
CARRAMERICA REALTY CORPORATION
/s/ Thomas A. Carr
- -----------------------------------------------
Thomas A. Carr, President and
Chief Executive Officer
/s/ Richard F. Katchuk
- -----------------------------------------------
Richard F. Katchuk, Chief Financial Officer
/s/ Stephen E. Riffee
- -----------------------------------------------
Stephen E. Riffee, Principal Accounting Officer
Date: August 16, 1999
23
<PAGE>
Exhibit Index
-------------
Exhibit Description
- ------- -----------
Page
----
10.1 Second Amendment to CarrAmerica Realty Corporation 1995 25
Non-Employee Director Option Plan.
10.2 Fourth Amendment to CarrAmerica Realty Corporation 1997 26
Stock Option and Incentive Plan.
27 Financial Data Schedule - Six Months Ended June 30, 1999. 27
24
Exhibit 10.1
SECOND AMENDMENT TO
CARRAMERICA REALTY CORPORATION
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
CarrAmerica Realty Corporation, a Maryland corporation (the
"Company"), hereby certifies as follows:
1. The Company deems it appropriate to execute this
certificate to evidence adoption of an amendment to its 1995 Non-Employee
Director Stock Option Plan (the "Plan") that increased the number of options
issued annually to continuing non-employee directors under the Plan from 5,000
to 7,500 (the "Amendment").
2. The Board of Directors of the Company authorized and
approved the Amendment, subject to approval of the Company's stockholders, and
directed that the Amendment be submitted to the stockholders for approval.
3. The Amendment was submitted to the stockholders for
approval at the annual meeting of stockholders of the Company held on May 6,
1999, and was approved by the stockholders.
4. Section 4.7 of the Plan therefore has been amended,
effective as of May 6, 1999, and now reads as follows:
"7. GRANTS OF OPTIONS.
On the Effective Date, each Director then serving on the
Board shall receive an Option to purchase 3,000 shares of Stock. Each Director
whose Commencement of Service is at any time thereafter shall be granted an
Option, as of the date of the Director's Commencement of Service, to purchase
3,000 shares of Stock. Thereafter, subject to the availability of shares of
Stock, immediately following each annual election of Directors, each Director
then serving as a Director on the Board, other than a Director who is first
elected to the Board at such annual election of Directors, shall be granted an
Option to purchase 7,500 shares of Stock."
IN WITNESS WHEREOF, the Company has caused this
certificate to be signed by the undersigned, a duly authorized officer of the
Company, as of May 6, 199.
CarrAmerica Realty Corporation
By: /s/ Linda A. Madrid
--------------------------
Linda A. Madrid
Managing Director
Attest: /s/ Ann Marie Pulsch
------------------------
Ann Marie Pulsch
Assistant Secretary
Exhibit 10.2
FOURTH AMENDMENT TO
CARRAMERICA REALTY CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN
CarrAmerica Realty Corporation, a Maryland corporation (the
"Company"), hereby certifies as follows:
1. The Company deems it appropriate to execute this
certificate to evidence adoption of an amendment to its 1997 Stock Option and
Incentive Plan (the "Plan") that increased the number of shares of common stock
available for issuance pursuant to grants under the Plan from 7,200,000 to
10,000,000 (the "Amendment").
2. The Board of Directors of the Company adopted the
Amendment, determined that the Amendment should be submitted to the Company's
stockholders for approval, and directed that the Amendment be submitted to the
stockholders for approval at the next annual meeting of stockholders.
3. The Amendment was submitted to the stockholders for
approval at the annual meeting of stockholders of the Company held on May 6,
1999, and was approved by the stockholders.
4. Section 4 of the Plan therefore has been amended, effective
as of May 6, 1999, and now reads as follows:
"4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 16 hereof, the
number of shares of Stock available for issuance under the Plan shall be
10,000,000. Stock issued or to be issued under the Plan shall be authorized but
unissued shares. If any shares covered by a Grant are not purchased or are
forfeited, or if a Grant otherwise terminates without delivery of any Stock
subject thereto, then the number of shares of Stock counted against the
aggregate number of shares available under the Plan with respect to such Grant
shall, to the extent of any such forfeiture or termination, again be available
for making Grants under the Plan."
IN WITNESS WHEREOF, the Company has caused this certificate to
be signed by the undersigned, a duly authorized officer of the Company, as of
May 6, 1999.
CarrAmerica Realty Corporation
By: /s/ Linda A. Madrid
--------------------------
Linda A. Madrid
Managing Director
Attest: /s/ Ann Marie Pulsch
------------------------
Ann Marie Pulsch
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEET AS OF JUNE 30, 1999 AND FROM CARRAMERICA REALTY CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1999
</LEGEND>
<CIK> 0000893577
<NAME> CARRAMERICA REALTY CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1.000
<CASH> 83,965
<SECURITIES> 0
<RECEIVABLES> 50,639
<ALLOWANCES> 355
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,927,058
<DEPRECIATION> 287,053
<TOTAL-ASSETS> 3,637,522
<CURRENT-LIABILITIES> 0
<BONDS> 1,653,551
0
95
<COMMON> 668
<OTHER-SE> 1,696,054
<TOTAL-LIABILITY-AND-EQUITY> 3,637,522
<SALES> 0
<TOTAL-REVENUES> 354,850
<CGS> 0
<TOTAL-COSTS> 306,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 355
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 58,469
<INCOME-TAX> 252
<INCOME-CONTINUING> 48,049
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,581
<EPS-BASIC> 0.86
<EPS-DILUTED> 0.85
</TABLE>
