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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to ______________
Commission File Number 1-11706
CARRAMERICA REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-1796339
(State of Incorporation) (I.R.S. Employer Identification No.)
1850 K Street, N.W.
Washington, D.C. 20006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 729-7500
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
Title of each class Name of each exchange on which registered
- ------------------- ------------------------------------------
<S> <C>
Common Stock, $0.01 Par Value New York Stock Exchange
Series B Cumulative Redeemable Preferred Stock, $0.01 Par Value New York Stock Exchange
Series C Depositary Cumulative Redeemable Preferred Stock, $0.001 Par Value New York Stock Exchange
Series D Depositary Cumulative Redeemable Preferred Stock, $0.001 Par Value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 2, 2000, the aggregate market value of the 37,913,925 shares of
Common Stock held by non-affiliates of the registrant was approximately $774.9
million, based upon the closing price of $20.4375 on the New York Stock Exchange
composite tape on such date.
Number of shares of Common Stock outstanding as of March 2, 2000.:
67,026,489
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the proxy statement for the
Annual Stockholders Meeting to be held in 2000 are incorporated by reference
into Part III.
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PART 1
Item 1. Business
THE COMPANY
General
CarrAmerica Realty Corporation (the "Company") is a fully integrated,
self-administered and self-managed publicly traded real estate investment trust
("REIT") that focuses primarily on the acquisition, development, ownership and
operation of office properties in select growth markets across the United
States. As of December 31, 1999, the Company owned a greater than 50% interest
in a portfolio of 271 operating office properties, and 22 properties under
construction. These 271 operating properties contain an aggregate of
approximately 23 million square feet of net rentable area and the 22 properties
under construction will contain approximately 1.3 million square feet. The
operating properties owned by the Company as of December 31, 1999 were 97.4%
leased as of that date, with approximately 2,000 tenants.
The Company and its predecessor, The Oliver Carr Company ("OCCO"), have
developed, owned and operated office buildings in the Washington, D.C.
metropolitan area for more than 37 years. In November 1995, the Company
announced a strategic alliance with a wholly-owned subsidiary of Security
Capital U.S. Realty (together with Security Capital U.S. Realty, "SC-USREALTY"),
a European real estate operating company which owns strategic positions in
selected real estate companies in the United States. As of December 31, 1999,
SC-USREALTY owned approximately 42.8% of the outstanding common stock of the
Company.
In addition to its real estate and development activities, the Company
conducts an executive suites business through its affiliates HQ Global
Workplaces, Inc. ("HQ Global"), OmniOffices (UK) Limited ("Omni UK"), and
OmniOffices (Lux) 1929 Holding Company S.A. ("LUX"). On January 20, 2000, the
Company, HQ Global, VANTAS Incorporated ("VANTAS") and Reckson Service
Industries, Inc. d/b/a FrontLine Capital Group ("FrontLine Capital Group")
entered into several agreements pursuant to which a series of transactions will
occur, including (i) the merger of VANTAS with and into HQ Global, (ii) the
acquisition by FrontLine Capital Group of certain shares of common stock of HQ
Global from the Company and other stockholders of HQ Global, and (iii) the
acquisition by HQ Global from the Company of the Company's debt and equity
interests in Omni UK and LUX. Following the completion of these transactions,
FrontLine Capital Group will own a substantial majority of the outstanding stock
of HQ Global, with the Company retaining a minority interest in HQ Global. The
results of the executive suites business are reported as a discontinued
operation.
The Company's experienced staff of over 1,900 employees, including
approximately 450 on-site building employees and approximately 1,200 persons
employed by its executive suite affiliates, provides a broad range of real
estate services. The Company's principal executive offices are located at 1850 K
Street, N.W., Washington, D.C. 20006 and its telephone number is (202) 729-7500.
The Company's web site can be found at www.carramerica.com. The Company was
organized as a Maryland corporation on July 9, 1992.
Business Strategy
The Company's primary business objectives are to achieve long-term
sustainable per share cash flow growth and to maximize stockholder value through
a strategy of (i) acquiring, developing, owning and operating office properties
primarily in markets throughout the United States that exhibit strong, long-term
growth characteristics and (ii) maintaining and enhancing a national operating
system that provides corporate users of office space with a mix of products and
services to meet their workplace needs at both the national and local level.
The Company's major segments of continuing operations include real
estate property operations and development operations (conducted directly and
through its affiliate CarrAmerica Development, Inc.). Real estate property
operations includes the ownership of commercial real estate. Such operations
comprise approximately 97% of the Company's revenues from continuing operations
and approximately 92% of the Company's assets (including assets held by
CarrAmerica Development, Inc.). Development operations include
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the development of office space and the buildout of tenant space. The Company's
investment in this business represents approximately 7% of the Company's assets
(including assets held by CarrAmerica Development, Inc.) and 1% of the Company's
revenues from continuing operations.
Real Estate Property Operations
Core Markets. The Company has focused its acquisition and development
activity in U.S. markets which generally possess strong long-term growth
characteristics. Within these markets, the Company targets specific submarkets
in which (i) operating costs for businesses are relatively low, (ii) long-term
population and job growth generally are expected to exceed the national average,
(iii) large, well-educated employment pools exist, and (iv) barriers to entry
exist for new supplies of office space. The Company has established a local
presence in each of its existing core markets through its investment activity
and through relationships established by its experienced Market Managing
Directors. The Company's core markets include the following: Atlanta, Austin,
Chicago, Dallas, Denver, Boca Raton, Florida, Orange County/Los Angeles,
Phoenix, Portland, Oregon, Salt Lake City, San Diego, San Francisco Bay Area,
Seattle and metropolitan Washington, D.C.
For each identified core market, the Company has established a set of
general guidelines and physical characteristics to evaluate investment
opportunities. All investment decisions are driven by real estate research,
focusing on variables such as composition of economic base rate, and composition
of job growth and office space supply and demand fundamentals.
As of December 31, 1999 the distribution of the Company's real estate
property operations (on a rentable square foot basis) was as follows: 41% in its
Pacific region, primarily in Seattle and the California markets of Silicon
Valley, Pleasanton, San Mateo, Orange County, Los Angeles and San Diego; 24% in
its Southeast region, primarily in metropolitan Washington, D.C., Atlanta and
Boca Raton, Florida; 13% in its Mountain region, primarily in Salt Lake City,
Denver and Phoenix; and 22% in its Central region, primarily in Chicago, Dallas
and Austin.
Operating Property Acquisitions. In November 1995, the Company
implemented a major initiative to acquire operating office properties in order
to establish the operating platform for its national business strategy. Between
January 1, 1996 and October 31, 1998, the Company acquired 302 operating
properties containing approximately 20.3 million square feet, resulting in an
approximate 550% increase in the total square footage of operating properties in
which the Company has a majority interest. These properties were acquired for an
aggregate purchase price of approximately $2.5 billion. Since October 1998, the
Company has not been focused on acquisitions as a catalyst for growth.
National Operating System. As part of its business strategy, the
Company has developed and will continue to enhance a national operating system
to provide nationally coordinated customer service, marketing and development.
The Company's national operating system consists of three components: (i) a
Market Managing Director Group, currently consisting of 10 Market Managing
Directors focused on developing and maintaining strong local relationships with
the Company's customers and the brokerage community and identifying investment
opportunities for the Company; (ii) a National Services Group, which is
dedicated to marketing the Company's office space to a targeted list of
companies; and (iii) a National Development Group, conducted through an
affiliate, which is responsible for managing the development of office
properties, build-to-suit facilities and business parks. The Company's national
operating system is designed to provide corporate users of office space with a
mix of products and services to meet their workplace needs at both the national
and local levels. The Company believes that through its existing portfolio of
operating properties, property development opportunities and land acquired and
currently held for future development, the Company can generate incremental
demand through the relocation and expansion needs of many of its customers, both
within a single core market and in multiple core markets.
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Market Managing Director Group. The Market Managing Director Group
currently consists of 10 Market Managing Directors who cover the 14 core markets
in which the Company currently owns properties. These Market Managing Directors
are responsible for maximizing the performance of the Company's properties in
their markets and ensuring that the needs of the Company's customers are
consistently being met. Because they meet with the Company's customers on a
regular basis, Market Managing Directors are cognizant of and responsive to
customers' relocation or expansion needs. The Market Managing Directors have
extensive knowledge of local conditions in their respective markets and,
therefore, are invaluable in identifying attractive investment opportunities in
their markets. In addition, through their contact with customers, Market
Managing Directors are well positioned to help the National Services Group
identify customers with new build-to-suit and multi-market requirements.
National Services Group. The Company established the National Services
Group in 1997. This group is responsible for marketing the Company's properties,
build-to-suit capabilities and the national scope of the Company's operations to
a targeted list of major corporate users. The National Services Group acts as a
primary point of contact for national customers, coordinating all of the office
space the Company offers and giving corporate customers the opportunity to
address their national space requirements efficiently and economically.
National Development Group. The National Development Group is
responsible for developing office properties, build-to-suit facilities and
business parks. These operations are handled by the Company's affiliate,
CarrAmerica Development, Inc. ("CarrAmerica Development"), which has a
development team of over 40 professionals consisting of architects, engineers
and construction professionals located across the United States who have an
average of over 15 years of experience developing office properties. This team
of development professionals oversees every aspect of land planning, building
design, construction and development of office properties, ensuring that all
projects meet the same high standards and uniform specifications in building
design and systems. The Company believes that the National Development Group's
expertise has given the Company a competitive edge in marketing its facilities
and services to customers.
Innovative Strategic Alliances. An increasingly important component of
the Company's business strategy involves establishing alliances with service
providers that offer the Company new opportunities to build value for its
customers and its stockholders. In 1999, the Company entered into two such
alliances. First, the Company joined with other real estate companies to form
Broadband Office, Inc., which provides telecommunications and technology
services to office buildings throughout the country. By contributing access to
its property portfolio, the Company expects to benefit from its ability to
improve choice and service for its customers, as well as from an equity position
in the company. In December 1999, the Company also entered into an alliance with
DukeSolutions, a Duke Energy subsidiary, to implement a comprehensive energy
management program that pioneers creative web-based energy management
strategies. The Company believes that this alliance will significantly reduce
energy costs for its customers.
Asset Optimization. As a component of its business strategy, the
Company may dispose of assets that become inconsistent with its long-term
strategic or return objectives or where market conditions for disposition are
favorable. The Company then redeploys the proceeds of dispositions into other
office properties, the funding of development operations, or in support of other
general corporate needs. Consistent with this strategy, the Company disposed of
63 properties during 1999, containing approximately 3.8 million square feet for
approximately $500 million. The Company recognized a gain of $54.8 million in
conjunction with these transactions. The Company also may consider disposing of
additional properties or interests in properties, some of which may be
significant. The Company, however, has agreed with SC-USREALTY to use its
reasonable efforts to dispose of properties through tax-deferred exchanges (and
the Company also is subject to other similar restrictions with respect to
certain properties owned by the Company's subsidiaries CarrAmerica Realty, L.P.
and Carr Realty, L.P.), which may limit its flexibility in effecting
dispositions. In addition, tax laws applicable to REITs restrict the Company's
ability to dispose of certain properties.
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Development Operations
Development of office properties is an important component of the
Company's growth strategy as attractive acquisition opportunities diminish due
to the influx of capital into the office property market. The Company believes
that long-term investment returns resulting from properties it develops
generally will exceed those from properties it acquires, without the assumption
of significantly increased investment risks. The Company minimizes its
development risk by employing, through CarrAmerica Development, extensively
trained and experienced development personnel, by avoiding the assumption of
entitlement risk in conjunction with land acquisitions and by entering into
guaranteed maximum price (GMP) construction contracts with seasoned and credible
contractors. Most importantly, the Company carefully analyzes the supply and
demand characteristics of a core market before commencing inventory development
in the market. In general, the Company will only undertake inventory development
(which excludes properties under construction that have been substantially
pre-leased) in markets with strong real estate fundamentals, and then the
Company generally will construct office buildings attractive to a wide range of
office users. The Company's research-driven development program enables it to
tailor its development activities in each core market, from inventory
development, build-to-suit projects, and holding land for future development.
During 1999, the Company placed in service approximately 3.3 million square feet
of office properties. The total cost of these development projects was
approximately $530 million and the Company expects that the first year
stabilized unleveraged return of this square footage will be 11.4%. As of
December 31, 1999, the Company (including CarrAmerica Development) had
approximately 1.3 million square feet of office space in 22 development projects
underway which are expected to require a total investment by the Company of
approximately $200.1 million. As of December 31, 1999, $116.0 million, or 58.0%
of the total expected investment, had been expended.
The Company also believes that having a significant land inventory to
support future development provides it with a competitive advantage in
responding to customers' needs for office space in markets with low vacancy
rates, barriers to entry for new supplies of office space and increasing rental
rates. In addition to its portfolio of operating properties and projects
currently under development, the Company owned or controlled, as of December 31,
1999, land in 10 of its core markets that is expected to support future
development of up to 4.5 million square feet of office space.
The Company is engaged in the real estate development business directly
and through its affiliate CarrAmerica Development. As of December 31, 1999, the
Company's total investment in CarrAmerica Development was approximately $233.8
million, $26.8 million of which was in the form of an equity investment, $121.5
million of which was in the form of unsecured debt and $85.5 million was in the
form of secured debt.
In order to comply with tax laws applicable to REITs, the Company owns
approximately 95% of the economic interest of CarrAmerica Development, but owns
less than 10% of the voting stock of CarrAmerica Development. Substantially all
of the voting stock of CarrAmerica Development (representing approximately 5% of
the economic interest) is owned by The Oliver Carr Company. Because the Company
does not own a significant portion of the voting stock of CarrAmerica
Development, there are certain risks associated with the Company's investments
in this company. See "Risk Factors -- Our Business Structure Has Certain Risks
Associated With It - Lack of Voting Control Over Some of Our Affiliates."
Acquisitions and Development
During 1999 the Company acquired 5 operating properties and land held
for future development for approximately $47.2 million. The operating properties
contain approximately 205,000 square feet and the land is expected to support
the development of approximately 376,000 square feet of office space. Also
during 1999, the Company developed and placed into service approximately 3.3
million square feet of office space and placed under construction approximately
826,000 square feet of office space.
Discontinued Operations
The executive suites business (HQ Global, OMNI UK, and LUX) typically
involves leasing 20,000 to 30,000 square feet of an office building from an
owner and outfitting that space with 60 to 70 individual offices (known as
office suites) that are leased on a relatively short-term basis (i.e., one year
or less) to customers who
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generally utilize one to three offices at a time. Customers are provided with a
wide array of services, including administrative support services (e.g.,
secretarial, duplicating, fax and receptionist services), conference and
training facilities, video conferencing, travel arrangements and catering
arrangements.
The Company currently owns approximately 95% of the economic interest
of HQ Global, Omni UK and LUX, but owns none of the voting stock of these
companies. The voting stock of HQ Global (representing approximately 5% of the
economic interest) is owned by a limited liability company in which certain
current and former executive officers of the Company and HQ Global are members,
SC-USREALTY and The Oliver Carr Company. Substantially all of the voting stock
of Omni UK and LUX (representing approximately 5% of the economic interest) is
owned by HQ Global. Because the Company does not own any of the voting stock of
these companies, there are certain risks associated with the Company's
investments in these companies. See "Risk Factors -- Our Business Structure Has
Certain Risks Associated With It - Lack of Voting Control Over Some of Our
Affiliates."
On January 20, 2000, the Company, HQ Global, VANTAS and FrontLine
Capital Group entered into several agreements pursuant to which a series of
transactions will occur, including (i) the merger of VANTAS with and into HQ
Global, (ii) the acquisition by FrontLine Capital Group of certain shares of
common stock of HQ Global from the Company and other stockholders of HQ Global,
and (iii) the acquisition by HQ Global from the Company of the Company's debt
and equity interests in Omni UK and Lux. Following the completion of these
transactions, FrontLine Capital Group will own a substantial majority of the
outstanding stock of HQ Global, with the Company retaining a minority interest
in HQ Global. It is anticipated that CarrAmerica's retained minority interest in
HQ Global will be accounted for using the cost method of accounting following
the transaction. The anticipated gain at closing will be included in
Discontinued Operations net of transaction costs.
In connection with the HQ Global/VANTAS transaction, it is contemplated
that CarrAmerica will enter into various agreements at closing, including (i) a
stockholders agreement, which will provide CarrAmerica with certain rights with
respect to its ongoing equity interest in HQ Global, and will impose certain
obligations on CarrAmerica in connection therewith, and (ii) an indemnification
and escrow agreement which will provide CarrAmerica with certain rights in the
event certain representations and warranties regarding the operations of VANTAS
turn out to be incorrect (subject to a number of limitations), and will impose
certain obligations on CarrAmerica in the event certain representations and
warranties regarding the operations of HQ Global, HQ UK or LUX turn out to be
incorrect (subject to a number of limitations). In connection with these
indemnity obligations, CarrAmerica has agreed to indemnify FrontLine Capital
Group and certain existing directors of HQ Global against any losses incurred in
connection with the pending litigation involving two minority stockholders of HQ
Global referred to in Item 3 below.
If the proposed transactions are consummated, certain limitations will
be imposed on the continuing HQ Global enterprise to help avoid jeopardizing the
Company's status as a real estate investment trust. First, HQ Global will agree
to elect to be treated as a "taxable REIT subsidiary" under the Internal Revenue
Code so long as the Company continues to be taxed as a REIT and retains a
threshold interest in HQ Global. Second, through January 1, 2001, HQ Global will
not engage in various transactions that would result in the Company owning more
than 10% of the voting securities of HQ Global. Third, through July 2002, HQ
Global will not engage in certain transactions that would cause the Company to
fail to meet one of the asset tests applicable to REITs. Finally, HQ Global will
agree not to undertake any transaction that would result in recognition by the
Company of more than $25 million of taxable income or gain in 2000 (other than
the transaction contemplated by the merger agreement) or more than $75 million
of taxable income or gain in 2001. HQ Global also will agree to provide advance
notice of transactions that would trigger a significant amount of gain for the
Company through 2003.
Closing of the VANTAS transaction is scheduled to occur on or prior to
April 30, 2000. The proposed transaction is subject to satisfaction of a number
of conditions. There can be no assurance that the proposed transaction will be
consummated.
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Financing Activity
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 of approximately $147 million, in what is commonly known as a
"forward equity sale" transaction. In connection with that transaction, the
Company entered into an agreement with Merrill Lynch under which the parties
agreed to adjust the number of shares of common stock issued to Merrill Lynch
(or the aggregate purchase price paid for such shares) based upon the proceeds
received by Merrill Lynch upon a resale of the shares in April 1999 in relation
to the amount originally paid by Merrill Lynch ($150 million), plus a forward
accretion component and less dividends paid on the shares. The Company settled
this agreement with cash payments in October 1998 and March 1999, and the
5,000,000 shares were returned to the Company and cancelled.
The Company and one of its affiliates entered into a joint venture with
J.P. Morgan & Co. to purchase and develop 1201 F Street in downtown Washington,
D.C. J.P. Morgan & Co. has become a 65% joint venture partner in the partnership
that owns the property and has committed to provide its pro-rata share of the
required expected capital of $71.8 million. In addition, Bank of America and
Mass Mutual have provided or agreed to provide construction financing and
permanent financing for this project.
In March 1999, the Company closed on a refinancing of the loans secured
by 1255 23rd Street, 1730 Pennsylvania Avenue and International Square
properties, all of which are located in downtown Washington, D.C., which
refinancing increased the aggregate principal amount of the loan by $41.1
million to approximately $222.0 million, extended the term approximately six
years and adjusted the interest rates to one global fixed interest rate of
8.12%. In July 1999, the Company replaced the mortgage on 1775 Pennsylvania
Avenue in downtown Washington, D.C. with a $12.0 million, 10-year loan which
will bear interest at a fixed rate of 7.63% which resulted in net proceeds to
the Company of $6.0 million.
In addition, during the second quarter of 1999, the Company refinanced
one loan totaling $15.0 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.
Forward-Looking Statements
Certain statements contained herein constitute "forward-looking
statements" with 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.
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Directors of the Company
The directors of the Company are divided into three classes, with
approximately one-third of the directors elected by the stockholders annually.
The Board of Directors of the Company currently consists of the following
persons:
Oliver T. Carr, Jr., 74, has been Chairman of the Board of Directors of
the Company since February 1993. He also served as Chief Executive Officer of
the Company from 1993 to 1997. Mr. Carr's term as a director of the Company
expires at the 2002 Annual Meeting of Stockholders. Mr. Carr founded The Oliver
Carr Company in 1962 and since that time has been its Chairman of the Board and
a director. In addition, Mr. Carr has served as President of The Oliver Carr
Company since February 1993. He was Chairman of the Board of Trustees of The
George Washington University until May 1995. Mr. Carr is the father of Thomas A.
Carr, the Company's current President and Chief Executive Officer, and Robert O.
Carr, the President of Carr Urban Development, Inc. Mr. Carr is a member of the
Investment Committee and the Executive Committee of the Board of Directors.
Thomas A. Carr, 41, has been President and a director of the Company
since February 1993. Mr. Carr's term as a director of the Company expires at the
2001 Annual Meeting of Stockholders. In May 1997, Mr. Carr was appointed Chief
Executive Officer of the Company, at which time he resigned as Chief Operating
Officer of the Company, a position he had held since April 1995. Prior to such
time, Mr. Carr was the Company's Chief Financial Officer from February 1993 to
April 1995. Mr. Carr is a director of The Oliver Carr Company. Mr. Carr holds a
Masters in Business Administration degree from Harvard Business School, and a
Bachelor of Arts degree from Brown University. Mr. Carr is a member of the
National Association of Real Estate Investment Trusts, the Young Presidents
Organization, Federal City Council and the International Development Research
Council. Mr. Carr is the son of Oliver T. Carr, Jr. and the brother of Mr.
Robert O. Carr. Mr. Carr is a member of the Investment Committee and the
Executive Committee of the Board of Directors. In addition, Mr. Carr is a member
of management's Operating Committee and Investment Committee.
Ronald Blankenship, 50, has been a director of the Company since
August 1998. Mr. Blankenship's term as a director of the Company expires at the
2000 Annual Meeting of Stockholders and he has been renominated for election by
the stockholders at that meeting to serve another three-year term. Mr.
Blankenship was nominated to the Board as a designee of SC-USREALTY, a major
stockholder of the Company. Mr. Blankenship has been the Vice Chairman and Chief
Operating Officer of Security Capital Group Incorporated since May 1998.
Previously, Mr. Blankenship was Managing Director of Security Capital Group
Incorporated from March 1991 to May 1998. Mr. Blankenship is a director of
Security Capital Group Incorporated and Storage USA, Inc. He received his B.B.A.
from the University of Texas at Austin. Mr. Blankenship is a member of the
Executive Compensation Committee of the Board of Directors.
Andrew F. Brimmer, 73, has been a director of the Company since
February 1993. Dr. Brimmer's term as a director of the Company expires at the
2002 Annual Meeting of Stockholders. He has been President of Brimmer & Company,
Inc., an economic and financial consulting firm, since 1976. Dr. Brimmer is the
Wilmer D. Barrett Professor of Economics at the University of Massachusetts--
Amherst. He also serves as a director of BlackRock Investment Income Trust, Inc.
(and other funds), Borg-Warner Automotive, Inc., and Airborne Express. From 1995
to 1998, Dr. Brimmer served as chairman of the District of Columbia Financial
Control Board. He also was a member of the Board of Governors of the Federal
Reserve System from 1966 through 1974. Dr. Brimmer received a B.A. degree and a
masters degree in economics from the University of Washington and a Ph.D. in
economics from Harvard University. Dr. Brimmer is a member of the Audit
Committee of the Board of Directors.
A. James Clark, 72, has been a director of the Company since February
1993. Mr. Clark's term as a director of the Company expires at the 2000 Annual
Meeting of Stockholders and he has been renominated for election by the
stockholders at that meeting to serve another three-year term. He has been
Chairman of the Board and President of Clark Enterprises, Inc., a Bethesda,
Maryland-based company involved in real estate, communications, and commercial
and residential construction, since 1972. Mr. Clark is a member of the
University of Maryland Board of Visitors and Foundation, and is a Trustee
Emeritus of the Johns Hopkins University and the Johns Hopkins Board of
Medicine. He is also a member of the PGA Tour Golf Course Properties Advisory
Board and an advisory director of Potomac Electric Power Company. Mr. Clark is a
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graduate of the University of Maryland. Mr. Clark is a member of the Investment
Committee, the Executive Committee, the Executive Compensation Committee, and
the Nominating Committee of the Board of Directors.
Timothy Howard, 51, has been a director of the Company since August
1998. Mr. Howard's term as a director of the Company expires at the 2000 Annual
Meeting of Stockholders and he has been renominated for election by the
stockholders at that meeting to serve another three-year term. Mr. Howard has
been the Executive Vice President and Chief Financial Officer of Fannie Mae
since 1990. From 1988 to 1990, Mr. Howard was Executive Vice President -Asset
Management of Fannie Mae. Mr. Howard has held positions of increasing
responsibility with Fannie Mae since beginning with the company in 1982. Mr.
Howard received his Bachelor of Science and Masters in Economics degrees from
UCLA. Mr. Howard is a member of the Audit Committee and the Executive
Compensation Committee of the Board of Directors.
Caroline S. McBride, 46, has been a director of the Company since July
1996. Ms. McBride's term as a director of the Company expires at the 2001 Annual
Meeting of Stockholders. Ms. McBride was nominated to the Board of Directors as
a designee of SC-USREALTY. Since June 1996, Ms. McBride has been a Managing
Director of the Capital Division of Security Capital Group. From June 1996 to
July 1997, Ms. McBride was Managing Director of Security Global Capital
Management Group. Prior thereto, from July 1978 to May 1996, Ms. McBride was
with IBM, where she was director of private market investments for the IBM
Retirement Fund from 1994 to 1996 and director of real estate investments for
the IBM Retirement Fund from 1992 to 1994. Ms. McBride is on the Board of
Directors of Storage USA, Inc., BelmontCorp, CWS Communities Trust and the Real
Estate Research Institute. Ms. McBride received her Masters in Business
Administration degree from New York University and a Bachelor of Arts degree
from Middlebury College. Ms. McBride is a member of the Investment Committee of
the Board of Directors.
William D. Sanders, 58, has been a director of the Company since May
1996. Mr. Sanders' term as a director of the Company expires at the 2002 Annual
Meeting of Stockholders. Mr. Sanders was nominated to the Board as a designee of
SC-USREALTY. He is the founder and Chairman of Security Capital Group, an
affiliate of SC-USREALTY. Mr. Sanders retired on December 31, 1989 as Chief
Executive Officer of LaSalle Partners Limited, a firm he founded in 1968. Mr.
Sanders is on the Board of Directors of Security Capital European Realty,
SC-USREALTY, and Storage USA, Inc. Mr. Sanders is a former trustee and member of
the executive committee of the University of Chicago and a former trustee fellow
of Cornell University. Mr. Sanders received his Bachelor of Science degree from
Cornell University. Mr. Sanders is a member of the Nominating Committee of the
Board of Directors.
Wesley S. Williams, Jr., 57, has been a director of the Company since
February 1993. Mr. Williams' term as a director of the Company expires at the
2001 Annual Meeting of Stockholders. Mr. Williams has been a partner of the law
firm of Covington & Burling, Washington, D.C., since 1975. He was adjunct
professor of real estate finance law at Georgetown University Law Center from
1971 to 1973 and is a contributing author to several texts on banking law and on
real estate finance and investment. Mr. Williams is on the Editorial Advisory
Board of the District of Columbia Real Estate Reporter. Mr. Williams serves as a
director of Blackstar Communications, Inc.; Blackstar LLC; and the Federal
Reserve Bank of Richmond, Virginia. Mr. Williams is Co-Chairman of the Board of
Directors and Co-CEO of The Lockhart Caribbean Corporation and its real estate,
insurance, consumer finance, internet services, and media subsidiaries. Mr.
Williams is a member of the Executive Committee of the Board of Trustees of Penn
Mutual Life Insurance Company, of which he is the Senior Trustee. Mr. Williams
received B.A. and J.D. degrees from Harvard University, an M.A. degree from the
Fletcher School of Law and Diplomacy and an LL.M. from Columbia University. Mr.
Williams is a member of the Audit Committee and Executive Compensation Committee
of the Board of Directors.
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Executive Officers and Certain Key Employees of the Company
As of December 31, 1999, the Company's executive officers and key
employees (including certain executive officers and key employees of HQ Global
Workplaces, Inc., CarrAmerica Development, Inc. and other affiliates of the
Company), were as follows:
Kent C. Gregory, 49, has been the Company's Managing Director--National
Services since July 1997. Prior to that time, Mr. Gregory had been employed by
Opus, a real estate services company, since 1991, serving as Senior Vice
President of National Accounts. He holds a Masters in Business Administration
from Pace University and a Bachelor of Arts degree in Business Administration
from St. Thomas University. Mr. Gregory is a member of management's Operating
Committee and Investment Committee.
Philip L. Hawkins, 44, has been the Company's Chief Operating Officer
since October 1998. Prior to that time Mr. Hawkins served as the Company's
Managing Director--Asset Management since February 1996. Prior to that time, Mr.
Hawkins had been employed by LaSalle Partners Limited, a real estate services
company, since 1982, serving as Executive Vice President, Eastern Division,
Asset Management Group since 1995, Senior Vice President, Northeast Region,
Asset Management Group from 1990 to 1994, and in other asset management
positions prior to that time. Mr. Hawkins also was a director of LaSalle
Partners Limited. He holds a Masters in Business Administration from the
University of Chicago Graduate School of Business and a Bachelor of Arts degree
from Hamilton College. Mr. Hawkins is a member of management's Operating
Committee and Investment Committee. Mr. Hawkins is also a member of the Board of
Directors and the Executive Committee of Broadband Office, Inc.
Richard F. Katchuk, 53, has been the Company's Chief Financial Officer
since February 1999. Prior to that time, Mr. Katchuk served as Chief Financial
Officer and Corporate Executive Vice President of Crestar Financial Corporation
since 1995. Prior to joining Crestar Financial Corporation, Mr. Katchuk was with
Banc One, serving as a Senior Vice President Corporate Finance from 1988 to
1995. Mr. Katchuk holds a Bachelor of Arts degree in Economics from Hobart &
William Smith Colleges. Mr. Katchuk is a member of management's Operating
Committee and Investment Committee.
Linda A. Madrid, 40, has been the Company's Managing Director, General
Counsel and Corporate Secretary since November 1998. Prior to that time Ms.
Madrid served as the Company's Senior Vice President and General Counsel since
March 1998. Prior to that time, Ms. Madrid had been Senior Vice President,
Managing Director of Legal Affairs and Corporate Secretary of Riggs National
Corporation/Riggs Bank N.A. since February 1996 and Vice President and
Litigation Manager from September 1993 to January 1996. Prior to that time, Ms.
Madrid practiced law in several law firms in Washington, D.C. and served as
Assistant General Counsel for Amtrak. Ms. Madrid holds a J.D. from Georgetown
University Law Center and a Bachelor of Arts degree from Arizona State
University. Ms. Madrid is a member of management's Operating Committee.
Paul R. Adkins, 41, has been the Company's Managing Director - Private
Capital since May 1999. Prior to that time Mr. Adkins served as the Company's
Senior Vice President, Market Managing Director for Washington, D.C. since
August 1996. Mr. Adkins has been with the Company for over 17 years, including
serving as Vice President of Acquisitions from May 1994 to August 1996. Prior to
that, Mr. Adkins served in a variety of other capacities with the Company, with
over 12 years in commercial real estate leasing. Mr. Adkins is a member of the
District of Columbia's Building Industry Association and Northern Virginia's
National Association of Industrial and Office Parks. Mr. Adkins holds a Bachelor
of Arts degree in Economics from Bucknell University. Mr. Adkins is a member of
management's Operating Committee.
Steven N. Bralower, 51, has been Executive Vice President of Carr Real
Estate Services, Inc. ("Carr Services, Inc."), an affiliate of the Company that
conducts management and leasing operations, since January 1999, and Senior Vice
President of Carr Realty, L.P., a subsidiary of the Company, since May 1996. Mr.
Bralower was Senior Vice President of Carr Services, Inc. from 1993 to May 1996.
Mr. Bralower is a member of the Greater Washington Commercial Association of
Realtors. Mr. Bralower has been a member of the Georgetown University Law Center
adjunct faculty since 1987. Mr. Bralower holds a Bachelor of Arts degree from
Kenyon College.
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Robert L. Brumm, 48, has been a Senior Vice President of the Company
since February 1998. Prior to that Mr. Brumm had been Vice President, Human
Resources and Administration of the Company since May 1996. From 1993 to 1996,
Mr. Brumm held the same position with Carr Services, Inc. He is responsible for
managing the Human Resources, Risk Management, Training, and Office Management
functions. He has over 20 years of experience, including eight years with Mark
Controls Corporation and five years with the real estate division of Philip
Morris, Inc. Mr. Brumm received his Bachelors degree from California State
University at Long Beach. Mr. Brumm is a member of management's Operating
Committee.
Robert O. Carr, 50, has been President of CarrAmerica Urban
Development, Inc., a subsidiary of CarrAmerica Development, since June 1998, and
Chairman of the Board of Directors of Carr Services, Inc., since February 1993.
Mr. Carr served as a director of the Company from 1993 until 1997 and as
President of Carr Services, Inc. from 1993 to 1998. Mr. Carr is a director of
The Oliver Carr Company and, from 1987 until February 1993, served as its
President and Chief Executive Officer. Mr. Carr is a member of the Boards of
Directors for the Greater Washington Research Center, the Corcoran School of Art
and the National Cathedral School for Girls. Mr. Carr is also a member of the
Greater Washington Board of Trade, the Urban Land Institute and the D.C. Chamber
of Commerce. Mr. Carr holds a Bachelor of Arts degree from Trinity College. Mr.
Carr is the son of Oliver T. Carr, Jr. and the brother of Thomas A. Carr.
Clete Casper, 40, has been the Company's Market Managing Director -
Seattle since July 1999. Prior to that time Mr. Casper served as the Company's
Vice President, Market Managing Director for Seattle since July 1996. Mr. Casper
has over 10 years of experience in real estate and marketing. Mr. Casper's most
recent experience includes one year as a Senior Associate with CB Commercial
Real Estate Group Inc., Seattle, Washington. Prior to that, Mr. Casper was with
Sabey Corporation in Seattle, Washington, serving as Development Manager for
four years and a Marketing Associate for five years. Mr. Casper is a graduate of
Washington State University. Mr. Casper is a member of management's Operating
Committee.
John J. Donovan, Jr., 56, has been a Market Managing Director of the
Company since July 1999 and President of Carr Services, Inc., since January
1999. Prior to that time, Mr. Donovan served as Senior Vice President of Carr
Services, Inc. from 1993 to 1998. He is a member of the Advisory Board for
Jubilee Enterprise of Greater Washington, the Economic Club of Washington, the
Greater Washington Board of Trade and the Greater Washington Commercial
Association of Realtors. Mr. Donovan holds a Bachelor of Arts degree from
Georgetown University. Mr. Donovan is a member of management's Operating
Committee.
Karen B. Dorigan, 35, has been the Company's Managing Director -
Capital Markets and Investments since April 1999. Prior to that time, Ms.
Dorigan served as a Senior Vice President of the Company since May 1997. Prior
to that, Ms. Dorigan was the Company's Vice President--Land Due Diligence since
January 1996. Prior to that time, Ms. Dorigan served for more than nine years in
a variety of capacities in the development business of The Oliver Carr Company,
including from February 1993 to January 1996 as a Vice President. She is a past
member of the Northern Virginia Building Industry Association's Arlington
Chapter Council. Ms. Dorigan holds a Bachelor of Science degree in Economics
from the University of Pennsylvania, Wharton School. Ms. Dorigan is a member of
management's Operating Committee and Investment Committee.
J. Thad Ellis, 39, has been the Company's Market Managing Director -
Atlanta since July 1999. Prior to that time Mr. Ellis served as the Company's
Vice President, Market Managing Director for Atlanta since November 1996. Mr.
Ellis has over 15 years of experience in real estate. Mr. Ellis' most recent
experience includes 10 years with Peterson Properties, where his primary
responsibility was to oversee and coordinate leasing and property management for
the management services portfolio. Mr. Ellis is a graduate of Washington & Lee
University and is involved with the National Association of Industrial and
Office Parks and Atlanta's Chamber of Commerce and is on the Advisory Board of
Black's Guide. Mr. Ellis is a member of management's Operating Committee.
Richard W. Greninger, 48, has been the Company's Managing Director -
Property Operations since May 1999. Prior to that time Mr. Greninger served as
the Company's Senior Vice President--Operations of the Company since January
1998. Prior to that, Mr. Greninger had been the Senior Vice President of Carr
Services, Inc., since March 1995. Prior to that time, he had been Vice President
of Carr Services, Inc. since February 1993. During 1994, Mr. Greninger served as
President of the Greater Washington Apartment and Office Building Association.
Mr. Greninger has served as a director of both the Institute of Real Estate
Management and the
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Building Owners and Managers Association. Mr. Greninger holds a Masters in
Business Administration from the University of Cincinnati and a Bachelor of
Science degree from Ohio State University. Mr. Greninger is a member of
management's Operating Committee.
William Krokowski, 37, has been the Company's Market Managing Director -
Denver since December 1999. Prior to that time Mr. Krokowski served as Vice
President/Director of Development for CarrAmerica Development, Inc., an
affiliate of CarrAmerica since 1997. Prior to 1997, Mr. Krokowski was a member
of CarrAmerica's investments group. Prior to joining CarrAmerica, Mr. Krokowski
spent over five years with Tishman Speyer Properties in New York and Washington,
D.C. as a development manager. Mr. Krokowski holds a Civil Engineering degree
from Bucknell University and a Masters in Business Administration from Duke
University. Mr. Krokowski is a member of management's Operating Committee.
Gary M. Kusin, 48, has been President and Chief Executive Officer of HQ
Global Workplaces, Inc., since September 1998. Prior to that time, Mr. Kusin was
co-founder and Chairman of Laura Mercier Cosmetics. Prior to his launch of Laura
Mercier Cosmetics, Mr. Kusin was co-founder and President of Babbage's, Inc., a
computer software and video game retailing business. Mr. Kusin holds a Masters
in Business Administration degree from Harvard Business School and a Bachelor of
Arts degree from the University of Texas at Austin.
Dwight L. Merriman, 39, has been the Company's Market Managing Director-
Southern California since August 1999. Prior to that time Mr. Merriman served as
the Company's Senior Vice President, Market Managing Director for Southern
California since 1996. Mr. Merriman has over 15 years of experience in real
estate, operations, acquisitions, construction, marketing and development. From
1995 to 1996 Mr. Merriman served as Vice President with Security Capital Pacific
Trust (an affiliate of SC-USREALTY) in Irvine, California. Prior to that, Mr.
Merriman spent 11 years with Overton, Moore in Los Angeles, serving as the
regional development and operating partner for Orange County and Riverside
County in the Southern California Market. Mr. Merriman holds a Masters in
Business Administration from the University of California at Los Angeles and a
Bachelors degree from the University of Southern California. Mr. Merriman is a
member of management's Operating Committee.
Robert M. Milkovich, 40, has been the Company's Market Managing Director -
Phoenix since July 1999. Prior to that time Mr. Milkovich served as the
Company's Vice President, Market Managing Director for Phoenix, Arizona since
January 1998. Mr. Milkovich has over 14 years of experience in real estate
leasing. Mr. Milkovich's most recent experience includes five years as the
Assistant Vice President of leasing for Carr Services, Inc. Mr. Milkovich holds
a Bachelor of Science in Business Administration from the University of
Maryland. Mr. Milkovich is a member of management's Operating Committee.
Gerald J. O'Malley, 56, has been the Company's Market Managing Director -
Chicago since July 1999. Prior to that time Mr. O'Malley served as the Company's
Vice President, Market Managing Director for Chicago since July 1996. Mr.
O'MalIey has over 32 years of experience in real estate marketing. Mr.
O'Malley's most recent experience includes 10 years as founder and President of
G. J. O'MaIIey & Company, a real estate office leasing company. Mr. O'Malley
holds a Bachelors of Business Administration degree from Loyola University. Mr.
O'Malley is a member of management's Operating Committee.
Jeffrey S. Pace, 37, has been the Company's Market Managing Director -
Austin since July 1999. Prior to that time Mr. Pace served as the Company's Vice
President, Market Managing Director for Austin, Texas since May 1997. Mr. Pace
has over 14 years of experience in real estate marketing. Mr. Pace's most recent
experience was with Trammell Crow Company, where he served as Marketing
Director. Prior to that time, Mr. Pace held the position of Marketing
Representative in the Dallas and Austin markets for Carlisle Property Company,
Stockton, Luedmann, French & West and Trammell Crow Company from 1985 to 1997.
Mr. Pace holds a Masters of Business Administration from the University of Texas
at Arlington and a Bachelor of Science from the University of Texas at Austin.
Mr. Pace is a member of management's Operating Committee.
Stephen E. Riffee, 42, has been the Company's Senior Vice President,
Controller and Treasurer since July 1999. Prior to that time, Mr. Riffee served
as Vice President Finance and Chief Accounting Officer of Marriott
International, Inc. for three years. Prior to joining Marriott International,
Inc., Mr. Riffee served as Assistant Vice President at Burlington Northern
Railroad after having previously worked in the National Transportation Practice
of KPMG Peat Marwick. Mr. Riffee holds a Bachelor of Science in Commerce degree
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from the McIntire School of Commerce of the University of Virginia. Mr. Riffee
is a member of management's Operating Committee.
Brian A. Rommel, 32, has been the Company's Chief Information Officer since
March 1998. Prior to that time, Mr. Rommel operated a technology-consulting firm
he founded in 1991. Mr. Rommel has provided consulting services to the
CarrAmerica companies since 1992. Mr. Rommel has over 11 years of experience
designing and implementing information technology solutions and more than 8
years of experience in the real estate and property management industry. Mr.
Rommel holds a Bachelors of Science in Business Finance from the University of
Maryland. Mr. Rommel is a member of management's Operating Committee.
Leah Segawa, 43, has been the Company's Market Managing Director - Northern
California since June 1999. Prior to that time Ms. Segawa served as Vice
President and Development Coordinator for CarrAmerica's Development, Inc., an
affiliate of CarrAmerica. Prior to this, from 1989 to 1997, Ms. Segawa was
President of WesTerra Collaborative Ltd., a real estate development consulting
firm which managed a wide range of development projects. Ms. Segawa holds a
Bachelor of Arts with honors in Architecture from University of California at
Berkeley and a Masters of Business Administration from Harvard University. Ms.
Segawa is a member of management's Operating Committee.
William H. Vanderstraaten, 39, has been the Company's Market Managing
Director - Dallas since July 1999. Prior to that time Mr. Vanderstraaten served
as the Company's Vice President, Market Managing Director for Dallas since April
1997. Mr. Vanderstraaten has over 16 years of experience in real estate
development and leasing fields. Mr. Vanderstraaten's most recent experience
prior to working for the Company includes eight years as Vice President--New
Development for Harwood Pacific Corporation in Dallas, Texas, where his primary
responsibilities were directing large scale development projects and
coordinating leasing efforts for portfolios. Mr. Vanderstraaten holds a Bachelor
of Science degree in Business Administration from Southern Methodist University.
Mr. Vanderstraaten is a member of management's Operating Committee.
Joseph D. Wallace, 36, has been the Chief Financial Officer of HQ Global
Workplaces, Inc. since January 1999. Prior to that time Mr. Wallace served as
the Executive Vice President of HQ Global Workplaces, Inc. since October 1997.
Prior to that time, Mr. Wallace had served as the Company's Vice President--
Building Due Diligence since January 1996. Prior to that time, Mr. Wallace had
been the Company's Vice President of Asset Management since February 1993. Mr.
Wallace holds a Bachelor of Science degree in Commerce from University of
Virginia.
Karen L. Widmayer, 41, has served as Senior Vice President of Corporate
Communications since August 1999. Prior to that time Ms. Widmayer served as the
Company's Vice President of Corporate Communications since 1997. Ms. Widmayer is
a 15-year veteran of CarrAmerica and its predecessor company. Ms. Widmayer is
responsible for the strategic marketing and branding of CarrAmerica including
media relations, advertising, community relations, employee communications,
corporate and project marketing as well as the Company's web site and intranet
site. Ms. Widmayer performed Masters work in Economics at the University of
Tennessee. Ms. Widmayer holds a Bachelor of Arts degree in Business Management
from Virginia Intermont College. Ms. Widmayer is a member of management's
Operating Committee.
James S. Williams, 43, has been a Managing Director of the Company since
April 1999 and President of CarrAmerica Development since May 1999. Prior to
that time Mr. Williams was Senior Vice President of CarrAmerica Development
since October 1996. Mr. Williams rejoined the Company after two years as Vice
President of Operations of Chadwick International. Prior to that, from 1983 to
1994, he served in a variety of capacities for The Oliver Carr Company. Mr.
Williams is a guest lecturer at George Washington University. Mr. Williams holds
a Bachelor of Science degree in Business Administration from West Virginia
University. Mr. Williams is a member of the Board of Directors and a member of
the Executive Committee of the District of Columbia Building Industry
Association. Mr. Williams is a member of the Investment Committee of CarrAmerica
Development, a member of the Company's Investment Committee, and a member of the
Company's Operating Committee.
12
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Risk Factors
In addition to the other information in this document, you should consider
carefully the following risk factors in evaluating an investment in our
securities.
Our Performance is Subject to Risks Associated with Real Estate Investment
We are a real estate company that derives most of its income from the
ownership and operation of office buildings. There are a number of factors that
may adversely affect the income that our properties generate, including the
following:
Economic Downturns. Downturns in the national economy, or in regions or
localities where our properties are located, generally will negatively impact
the demand for office space.
Oversupply of Office Space. An oversupply of space in markets where we own
office properties making it more difficult for us to lease space at attractive
rental rates would typically cause rental rates and occupancies to decline.
Competitive Properties. If our properties are not as attractive to tenants
(in terms of rents, services or location) as other properties that are
competitive with ours, we will lose tenants to those properties, or could have
to reduce our rental rates to compensate for that disparity.
Renovation Costs. In order to maintain the quality of our office buildings
and successfully compete against other properties, we periodically have to spend
money to repair and renovate our properties.
Tenant Risk. Our performance depends on our ability to collect rent from
our tenants. While no tenant in our portfolio accounted for more than 5% of our
rental revenue as of December 31, 1999, the Company's financial position may be
adversely affected by financial difficulties experienced by a major tenant, or
by a number of smaller tenants, including bankruptcies, insolvencies or general
downturns in business.
Reletting Costs. As leases expire, we try to either relet the space to an
existing tenant or attract a new tenant to occupy the space. In either case, we
likely will incur significant costs in the process. In addition, if market rents
have declined since the time the expiring lease was entered into, the terms of
any new lease signed likely will not be as favorable to us as the terms of the
expiring lease, thereby reducing the income earned from that space.
Regulatory Costs. There are a number of government regulations, including
zoning and tax laws, that apply to the ownership and operation of office
buildings. Compliance with existing and newly adopted regulations often requires
us to spend a significant amount of money on our properties.
Fixed Nature of Costs. Most of the costs associated with owning and
operating an office building are not necessarily reduced when circumstances such
as market factors and competition cause a reduction in income from the property.
Environmental Problems Are Possible and Can Be Costly. Federal, state and
local laws and regulations relating to the protection of the environment may
require a current or previous owner or operator of real property to investigate
and clean up hazardous or toxic substances or petroleum product releases at the
property. The presence of or failure to clean up contamination may adversely
affect our ability to sell or lease a property or to borrow using a property as
collateral.
Competition. A number of other major real estate investors with significant
capital compete with us. These competitors include publicly traded REITs,
private REITs, investment banking firms and private institutional investment
funds.
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New Developments and Acquisitions May Fail to Perform As Expected
Over the last few years, we have embarked on a major acquisition and
development program. In deciding whether to acquire or develop a particular
property, we made certain assumptions regarding the expected future performance
of that property. If a number of these new properties do not perform as
expected, our financial performance will be adversely affected.
While our acquisition pace has declined significantly, we remain very
active in developing office properties. New office property developments are
subject to a number of risks, including construction delays, complications in
obtaining necessary zoning, occupancy and other governmental permits, cost
overruns, financing risks, and the possible inability to meet expected occupancy
and rent levels. If any of these problems occur, development costs for a project
will increase, and there may be costs incurred for projects that are not
completed.
Our Use of Debt Subjects Us to Various Financing Risks
While we believe that we have a conservative borrowing policy, we do
regularly borrow money to finance our business, particularly the acquisition and
development of properties. We generally incur unsecured debt, although in many
cases we will incur mortgage debt that is secured by one or more of our office
buildings. There are certain risks inherent in borrowing money, including the
following:
No Limitation on Debt Incurrence. The Company's organizational documents do
not limit the amount of debt the Company can incur. The degree of leverage of
the Company could have important consequences, including making it more
difficult for us to obtain additional financing in the future for business
needs, as well as making us more vulnerable to an economic downturn.
Possible Inability to Meet Scheduled Debt Payments. If our properties do
not perform as expected, our cash flow from our properties may not be enough to
make required principal and interest payments. If a property is mortgaged to
secure payment of indebtedness and we are unable to meet mortgage payments, the
holder of the mortgage or lender could foreclose on the property, resulting in
loss of income and asset value. An unsecured lender could also attempt to
foreclose on some of the Company's assets in order to receive payment.
Inability to Refinance Debt. In almost every case, very little of the
principal amount that we borrow is repaid prior to the maturity of the loan. We
generally expect to refinance that debt when it matures, although in some cases
we may pay off the loan. If principal amounts due at maturity cannot be
refinanced, extended or paid with proceeds of other capital transactions, such
as new equity capital, our cash flow will be insufficient in all years to repay
all maturing debt. Prevailing interest rates or other factors at the time of a
refinancing (such as possible reluctance of lenders to make commercial real
estate loans) may result in higher interest rates and increased interest
expense.
Financial Covenants Could Adversely Affect Our Financial Condition. The
Company's credit facilities and the indentures under which the Company's senior
unsecured indebtedness is issued contain financial and operating covenants,
including coverage ratios and other limitations on the Company's ability to
incur secured and unsecured indebtedness, sell all or substantially all of its
assets and engage in mergers, consolidations and certain acquisitions. These
covenants may restrict the Company's ability to engage in transactions that
would otherwise be in the Company's best interests.
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Our Business Structure Has Certain Risks Associated With It
A Major Stockholder Has Influence on Our Operations. SC-USREALTY owned
approximately 42.8% of the outstanding shares of our common stock as of December
31, 1999. No other stockholder is permitted to own more than 5% of our common
stock, subject to certain exceptions. Under a Stockholders Agreement with the
Company, SC-USREALTY has the right to nominate up to 40% of the directors. The
Stockholders Agreement also gives SC-USREALTY certain rights that limit our
ability to take certain actions and limits our ability to engage in certain
transactions that may be in the short-term best interests of other stockholders.
This situation results in SC-USREALTY having a substantial influence over the
affairs of the Company. This could potentially be disadvantageous to other
stockholders' interests, which may not converge with the interests of SC-
USREALTY.
Certain Officers and Directors May Have Interests that Conflict with the
Interests of Stockholders. Certain officers and members of the board of
directors of the Company own units of limited partner interest in Carr Realty,
L.P., a partnership that owns some of the Company's properties. These
individuals may have personal interests that conflict with the interests of the
Company's stockholders with respect to business decisions affecting the Company
and Carr Realty, L.P., such as interests in the timing and pricing of property
sales or refinancings in order to obtain favorable tax treatment. The Company,
as the sole general partner of Carr Realty, L.P., has the exclusive authority to
determine whether and on what terms the partnership will sell or refinance an
individual property, but the effect of certain transactions on these unitholders
may influence decisions affecting these properties.
We May Not Be Able to Sell Properties When Appropriate. Real estate
property investments generally cannot be sold quickly. In addition, the tax laws
applicable to REITs restrict our ability to dispose of certain properties.
Therefore, we may by unable to vary our portfolio promptly in response to market
conditions, which may adversely affect our financial position.
Lack of Voting Control Over Some of Our Affiliates. While most of our
income is generated from the ownership and operation of our office buildings, we
own nonvoting interests in five affiliates that either currently produce or are
expected in the future to produce significant contributions to our income. Carr
Services, Inc. conducts management and leasing operations for third parties and
for office buildings in which we own less than a 100% interest. CarrAmerica
Development conducts fee-based development services for the Company and for
third parties. HQ Global, Omni UK and LUX are engaged in the executive suites
business, providing short-term office space together with telephone answering,
data processing and other office support services. As of December 31, 1999, the
Company owned approximately 95% of the economic interest in each of these
companies through the ownership of nonvoting common stock. The voting stock of
each of these companies is owned by certain entities and individuals that have
some affiliation with the Company (or, in the case of Omni UK and LUX, by HQ
Global).
The Company owns nonvoting stock in these companies because the tax laws
applicable to REITs currently prohibit the Company from owning more than a 10%
voting interest. As a result, the Company has no right to elect the directors of
these companies, and its ability to influence their operations is limited. These
companies may engage in business activities that are not in the Company's best
interests.
We Depend On External Capital. To qualify as a REIT, we generally must
distribute to our stockholders each year at least 95% of our net taxable income.
Because of these distribution requirements, we likely will not be able to fund
all future capital needs, including capital for property development and
acquisitions, with income from operations. We therefore will have to rely on
third-party sources of capital, which may or may not be available on favorable
terms, if at all. Our access to third-party sources of capital depends on a
number of things, including the market's perception of our growth potential and
our current and potential future earnings.
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Certain Factors May Inhibit Changes in Control of the Company
Charter and By-law Provisions. Certain provisions of our charter and by-
laws may delay or prevent a change in control of the Company or other
transactions that could provide our common stockholders with a premium over the
then-prevailing market price of their common stock or that might otherwise be in
the best interests of our stockholders. These include a staggered board of
directors and the ability of our board of directors to authorize the issuance of
preferred stock without stockholder approval. Also, any future series of
preferred stock may have voting provisions that could delay or prevent a change
in control or other transaction that might involve a premium price or otherwise
be in the best interests of our stockholders.
Ownership Limit. In order to assist the Company in maintaining its
qualification as a REIT, the Company's charter contains certain provisions
generally limiting the ownership of shares of capital stock by any single
stockholder to 5% of the Company's outstanding common stock and/or 5% of any
class or series of preferred stock. The federal tax laws include complex stock
ownership and attribution rules that apply in determining whether a stockholder
exceeds the ownership limits. These rules may cause a stockholder to be treated
as owning stock that is actually owned by others, including family members and
entities in which the stockholder has an ownership interest. The board of
directors of the Company could waive this restriction if it were satisfied that
ownership in excess of these ownership limits would not jeopardize our status as
a REIT and the board otherwise decided that a waiver would be in the Company's
interests. Capital stock acquired or transferred in breach of the ownership
limit will be automatically transferred to a trust for the benefit of a
designated charitable beneficiary.
Maryland Law Provisions. Certain provisions of Maryland law applicable to
the Company because it is a Maryland corporation prohibit "business
combinations" with any person that beneficially owns ten percent or more of the
outstanding voting shares of the Company (an "interested stockholder") or with
an affiliate of the interested stockholder. These prohibitions last for five
years after the most recent date on which the person became an interested
stockholder. After the five-year period, a business combination with an
interested stockholder must be approved by two super-majority stockholder votes
unless, among other conditions, the Company's common stockholders receive a
minimum price for their shares and the consideration is received in cash or in
the same form as previously paid by the interested stockholder for its common
shares. The Company's board of directors has opted out of these business
combination provisions. Consequently, the five-year prohibition and the super-
majority vote requirements will not apply to a business combination involving
the Company. The Company's board of directors may, however, repeal this election
in most cases and cause the Company to become subject to these provisions in the
future. Being subject to the provisions could delay or prevent a change in
control or other transaction involving the Company that might involve a premium
price or otherwise be in the best interests of the Company's stockholders.
The Market Value of Our Securities Can Be Adversely Affected by Many Factors
As with any public company, a number of factors may adversely influence the
public market price of our common stock, many of which are beyond our control.
These factors include: the level of institutional interest in the Company; the
perception of REITs generally, and REITs with portfolios similar to ours in
particular, by market professionals, and the attractiveness of securities of
REITs in comparison to other companies; our financial condition and performance,
and the market's perception of our growth potential and potential future cash
dividends; increases in market interest rates, which may lead investors to
demand a higher annual yield from distributions by the Company in relation to
the price paid for our stock; and the relatively low trading volume of shares of
REITs in general, which tends to exacerbate a market trend with respect to our
stock.
Sales of a substantial number of shares of our stock, or the perception
that such sales could occur, also could adversely affect prevailing market
prices for our stock. In addition to the possibility that we may sell shares of
our stock in a public offering at any time, we also may issue shares of common
stock upon redemption of units of interest held by third parties in affiliated
partnerships that we control, as well as upon exercise of stock options that we
grant to our employees and others. All of these shares will be available for
sale in the public markets from time to time. In addition, SC-USREALTY, our
largest stockholder (owning more than one-third of our shares) has the right to
sell its shares at any time, pursuant to registration rights granted to it in
connection with its original investment in the Company.
16
<PAGE>
Our Status As a REIT
We believe that the Company qualifies for taxation as a REIT for federal
income tax purposes, and we plan to operate so that the Company continues to
meet the requirements for taxation as a REIT. If we qualify as a REIT, we
generally will not be subject to federal income tax on our income that we
distribute currently to our shareholders. Many of the REIT requirements,
however, are highly technical and complex. The determination that the Company is
a REIT requires an analysis of various factual matters and circumstances that
may not be totally within our control. For example, to qualify as a REIT, at
least 95% of our gross income must come from specific passive sources, like
rent, that are itemized in the REIT tax laws. We also are required to distribute
to our stockholders at least 95% of our REIT taxable income (excluding capital
gains). The distribution requirements will be reduced to 90% for taxable years
after December 31, 2000. The fact that we hold certain of our assets through
partnerships and their subsidiaries further complicates the application of the
REIT requirements. Even a technical or inadvertent mistake could jeopardize the
Company's REIT status. Furthermore, Congress and the IRS might make changes to
the tax laws and regulations, and the courts might issue new rulings, that make
it more difficult, or impossible, for us to remain qualified as a REIT.
If the Company fails to qualify as a REIT, it would be subject to federal
income tax at regular corporate rates. Also, unless the IRS granted the Company
relief under certain statutory provisions, it would remain disqualified as a
REIT for four years following the year it first failed to qualify. If the
Company failed to qualify as a REIT, we would have to pay significant income
taxes. This likely would have a significant adverse affect on the value of our
securities. In addition, we would no longer be required to pay any dividends to
stockholders.
Even if we qualify as a REIT, we are required to pay certain federal, state
and local taxes on our income and property. For example, if the Company has net
income from "prohibited transactions," that income will be subject to a 100%
tax. In general, prohibited transactions are sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business. The determination as to whether a particular sale is a prohibited
transaction depends on the facts and circumstances related to that sale. While
we have recently undertaken a significant number of asset sales, we do not
believe that those sales should be considered prohibited transactions, but there
can be no assurance that the IRS would not contend otherwise. In addition, any
net taxable income earned directly by some of our affiliates, including HQ
Global, Carr Services, Inc. and CarrAmerica Development, Inc., is subject to
federal and state corporate income tax. Similarly, the income of our affiliates,
Omni UK and LUX, is subject to some foreign taxes.
Currently, a REIT may not own securities in any one issuer if the value of
those securities exceeds 5% of the value of the REIT's total assets or the
securities owned by the REIT represent more than 10% of the issuer's outstanding
voting securities. As a result of the Work Incentives Improvement Act, after
December 31, 2000, the 5% value test and the 10% voting security test will be
modified in two respects. First, the 10% voting securities test will be expanded
so that REITs also will be prohibited from owning more than 10% of the value of
the outstanding securities of any one issuer. Second, an exception to these
tests will allow a REIT to own securities of a subsidiary that exceed the 5%
value test and the new 10% vote or value test if the subsidiary elects to be a
"taxable REIT subsidiary." The expanded 10% vote or value test, however, will
not apply to an existing subsidiary unless it engages in a substantial new line
of business or acquires any substantial asset or the Company acquires any
securities in that subsidiary after July 12, 1999. Under a new asset test, for
taxable years beginning after December 31, 2000, the Company will not be able to
own securities of taxable REIT subsidiaries that represent in the aggregate more
than 20% of the value of the Company's total assets.
Several provisions of the new law will ensure that a taxable REIT
subsidiary will be subject to an appropriate level of federal income taxation.
For example, a taxable REIT subsidiary will be limited in its ability to deduct
interest payments made to an affiliated REIT. In addition, the REIT will have to
pay a 100% penalty tax on some payments that it receives if the economic
arrangements between the REIT, the REIT's tenants, and the taxable REIT
subsidiary are not comparable to similar arrangements between unrelated parties.
The Company currently owns more than 10% of the total value of the
outstanding securities of HQ Global, Carr Services, Inc., CarrAmerica
Development, Omni UK and LUX. As part of the transaction in which FrontLine
Capital Group will acquire a majority interest in HQ Global, HQ Global will
elect to be treated as a taxable REIT subsidiary and the Company's direct
interests in Omni UK and LUX will be terminated. Carr Services, Inc. and
CarrAmerica Development also are likely to elect to be taxable REIT
subsidiaries. The
17
<PAGE>
provisions described above likely will have the effect of increasing the federal
income tax expenses of these entities.
Our Company Is Not a Suitable Investment for Foreign Investors
Our charter contains provisions generally preventing foreign investors
(other than SC-USREALTY and its affiliates) from acquiring additional shares of
the Company's capital stock if the acquisition would cause us to fail to quality
as a domestically controlled REIT under the federal tax code. The application of
such provisions could prevent a foreign investor from acquiring stock or cause
stock that has been acquired to be reacquired automatically from the foreign
investor by a designated charitable trust. Accordingly, acquisition of our
capital stock would not likely be a suitable investment for foreign investors
other than SC-USREALTY.
Item 2. PROPERTIES
General. As of December 31, 1999, the Company owned interests (consisting
of whole or partial ownership interests) in 275 operating office properties
located in 14 core markets across the United States. As of December 31, 1999,
the Company owned fee simple title or leasehold interest in 269 operating office
properties, controlling partial interests in two operating office properties,
and non-controlling partial interests of 5% to 50% in four operating office
properties. In addition, as of December 31, 1999, the Company owned (either
directly or through CarrAmerica Development) 22 office properties under
development. Except as disclosed in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources," the Company has no immediate plans to renovate its operating
office properties other than for routine capital maintenance. The Company
believes its properties are adequately covered by insurance. The Company
believes that, as a result of its national operating system, market research
capabilities, access to capital, and experience as an owner, operator and
developer of office properties, it will continue to be able to identify and
consummate acquisition and development opportunities and to operate its
portfolio more effectively than competitors without such capabilities. The
Company, however, competes in many of its core markets with other real estate
operators, some of which may have been active in such markets for a longer
period than the Company.
18
<PAGE>
The following table sets forth certain information about each operating
property owned by the Company as of December 31, 1999:
<TABLE>
<CAPTION>
Net Total Average Base
Rentable Annualized Rent Per
# of Area/(1)/ Percent Base Rent/(3)/ Leased
Property Buildings (square feet) Leased/(2)/ (in thousands) Square Foot/(4)/
- -------- --------- ------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Consolidated Properties
- -----------------------
SOUTHEAST REGION
Downtown Washington, D.C.:
International Square 3 1,014,555 98.0% $ 31,863 $ 32.05
1730 Pennsylvania Avenue 1 229,377 99.3 8,003 35.13
2550 M Street 1 187,931 99.4 6,361 34.05
1775 Pennsylvania Avenue (6) 1 143,981 97.5 4,052 28.85
900 19th Street 1 101,215 100.0 3,169 31.31
1747 Pennsylvania Avenue (7) 1 151,942 97.1 4,605 31.21
1255 23rd Street (8) 1 305,528 98.5 8,389 27.86
Suburban Washington, D.C.:
One Rock Spring Plaza (6) 1 205,298 98.9 5,204 25.63
Reston Crossing East & West 2 323,821 100.0 5,667 17.50
Sunrise Corporate Center 3 260,253 100.0 5,770 22.17
Parkway One 1 87,842 100.0 1,457 16.59
Atlanta:
Glenridge 1 64,052 47.7 592 19.36
Century Springs West 1 94,893 83.5 1,516 19.12
Holcomb Place 1 72,824 94.0 1,173 17.12
Midori 1 99,900 100.0 1,793 17.94
Parkwood 1 151,296 91.9 2,651 19.05
Lakewood 1 80,338 70.2 964 17.08
The Summit 1 179,085 100.0 2,890 16.13
2400 Lake Park 1 101,285 88.5 1,457 16.25
680 Engineering Drive 1 62,154 100.0 599 9.62
Embassy Row 3 465,674 96.7 7,919 17.59
Embassy 100, 500 2 190,470 100.0 3,973 20.85
Waterford Center 1 82,161 88.0 1,352 18.69
Spalding Ridge 1 128,233 99.3 2,518 19.78
<CAPTION>
Property Significant Tenants/(5)/
- -------- ------------------------
Consolidated Properties
- -----------------------
<S> <C>
SOUTHEAST REGION
Downtown Washington, D.C.:
International Square International Monetary Fund (46%)
1730 Pennsylvania Avenue Federal Deposit Insurance Corporation (47%), King (35%)
2550 M Street Patton Boggs, LLP (96%)
1775 Pennsylvania Avenue/(6)/ Citicorp (81%)
900 19th Street America's Community Bankers (29%), Stone & Webster (13%)
Korn/Ferry International (12%), Lucent Technologies (11%), The
Aluminum Association, Inc. (10%)
1747 Pennsylvania Avenue/(7)/ Legg Mason Wood Walker (16%)
1255 23rd Street/(8)/ Seaburry & Smith (16%), Chronicle of Higher Education (15%),
Peabody & Brown (14%), JH Marsh & McLennan, Inc. (14%), William
H. Mercer, Inc. (13%)
Suburban Washington, D.C.:
One Rock Spring Plaza /(6)/ Caterair (22%), Sybase, Inc. (19%)
Reston Crossing East & West Nextel Communications (100%)
Sunrise Corporate Center Software AG (66%), Lucas Aerospace (14%), LaFarge Corporation (12%)
Parkway One EIS International (89%)
Atlanta:
Glenridge Brooks, McGinnis & Chafin, LLC (10%)
Century Springs West No Tenants Occupy 10%
Holcomb Place Intercept Holdings, Inc. (41%), Hitachi Telecom (USA), Inc
(20%), The Progeni Corporation (13%)
Midori National Consumer Services Corporation (64%), UPS (20%)
Parkwood Onesource (20%)
Lakewood Morrison Health Care, Inc. (25%), Paychex (25%), Hickson (USA)
Corporation (17%)
The Summit Unisys Corporation (87%)
2400 Lake Park United Healthcare Services (28%), Computer Language Research
(22%), Government Services Administration (16%)
680 Engineering Drive EMS Technologies (67%), Enrev Corporation (22%), Loral Aerospace
Corporation (12%)
Embassy Row Ceridian Corporation (24%), Cabot Corporation (10%)
Embassy 100, 500 Art Institute of Atlanta (60%), Edutrek International, Inc (40%)
Waterford Center Dateq Information Network, Inc. (20%), VCG,Inc. (16%), Arkwright
Mutual Insurance Co. (15%)
Spalding Ridge OHM Remediation Services Corporation (57%), FDIC (10%)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Net Total Average Base
Rentable Annualized Rent Per
# of Area/(1)/ Percent Base Rent/(3)/ Leased
Property Buildings (square feet) Leased/(2)/ (in thousands) Square Foot/(4)/
- -------- --------- ------------------ ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Florida,
Boca Raton:
Peninsula Plaza 1 162,303 88.2% $ 2,100 $ 14.66
Peninsula Executive Center 1, 2 2 164,777 100.0 2,517 15.27
Presidential Circle 1 279,375 94.9 4,445 16.76
- --------- ---- ------- -------
Southeast Region Subtotal 36 5,390,563 96.3% $ 122,999 $ 23.69
PACIFIC REGION
Southern California,
Orange County/Los Angeles:
Scenic Business Park 4 139,012 90.6 1,724 13.69
Harbor Corporate Park 4 151,888 99.2 2,710 17.97
Plaza PacifiCare 1 104,377 100.0 999 9.57
Katella Corporate Center 1 80,609 96.1 1,305 16.85
Warner Center 12 344,181 99.4 8,461 24.73
South Coast Executive Center 2 161,787 89.6 3,216 22.19
Warner Premier 1 61,553 93.4 1,280 22.28
Pacific Corporate Plaza 3 1 40,063 100.0 649 16.20
Von Karman 1 103,713 100.0 2,410 23.23
2600 W. Olive 1 144,831 100.0 3,685 25.44
Bay Technology Center 2 107,481 100.0 1,393 12.96
Alton Deere Plaza 6 182,185 100.0 2,974 16.33
Southern California,
San Diego:
Del Mar Corporate Plaza 2 123,142 100.0 1,904 15.46
Wateridge Pavilion 1 62,194 100.0 967 15.54
Lightspan 1 64,800 100.0 1,135 17.52
Towne Center Technology Park 1, 2, 3 3 182,120 100.0 2,975 16.33
Palomar Oaks Technology Park 6 170,358 100.0 2,067 12.13
La Jolla Spectrum 1 79,759 100.0 2,393 30.00
Jaycor 1 105,358 100.0 1,762 16.73
Highlands Corporate Center 5 205,085 95.1 4,473 22.94
<CAPTION>
Property Significant Tenants/(5)/
- -------- ------------------------
<S>
Florida,
Boca Raton:
Peninsula Plaza TSI International Software, Ltd. (13%), Motoro
Peninsula Executive Center 1, 2 Sunbeam Corporation (66%), Ericsson (15%)
Presidential Circle Suncoast Savings (11%)
Southeast Region Subtotal
PACIFIC REGION
Southern California,
Orange County/Los Angeles:
Scenic Business Park Talbert Medical Management (34%), Miles, Wright, Finely & Zak
(19%), Coast Community College Dist. (13%), Southern California
Blood & Tissue Service (12%)
Harbor Corporate Park Delmas (22%), Tech Data Corporation (15%)
Plaza PacifiCare Pacificare Health Systems (100%)
Katella Corporate Center Friendly Hills Healthcare (19%)
Warner Center El Camino Resources (23%), General Services Administration (16%)
South Coast Executive Center State Compensation Insurance Fund (33%)
Warner Premier Panorama Software (34%), RSL COM, USA (27%), Charles Schwab &
Co, Inc. (12%)
Pacific Corporate Plaza 3 ZLAND, Inc. (100%)
Von Karman Fidelity National Title Insurance (41%), Vision Solutions (41%),
Taco Bell Corporation (18%)
2600 W. Olive The Walt Disney Company (89%)
Bay Technology Center AMRESCO (100%)
Alton Deere Plaza Nextlink California (24%), Prof. Coingrading Service (15%)
Southern California,
San Diego:
Del Mar Corporate Plaza Peregrine Systems, Inc. (77%), Newgen Results
Wateridge Pavilion Stellcom, Inc. (41%), Platinum Solutions, Inc. (19%), Wateridge
Insurance Services (18%), TCS Mortgage, Inc. (14%)
Lightspan The Lightspan Partnership, Inc. (100%)
Towne Center Technology Park 1, 2, 3 Gateway 2000, Inc. (100%)
Palomar Oaks Technology Park Unifet, Inc. (23%), Excalibur Technologies Corporation (18%),
Torrey Pines Research, Inc. (13%), Pacific Analytical, Inc
(11%), Coded Communications Corporation (11%)
La Jolla Spectrum Novartis Agricultural Discover (100%)
Jaycor Jaycor, Inc. (100%)
Highlands Corporate Center Brandes Investment (25%), Premier, Inc. (14%)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Net Total Average Base
Rentable Annualized Rent Per
# of Area Percent Base Rent/(3)/ Leased
Property Buildings (square feet)/1)/ Leased/(2)/ (in thousands) Square Foot/(4)/
- -------- --------- ---------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Northern California,
San Francisco Bay Area:
CarrAmerica Corporate Center 6 1,001,976 100.0% $ 18,733 $ 18.70
Bayshore Centre 2 1 94,874 100.0 1,188 12.52
Rio Robles 7 368,178 100.0 4,591 12.47
Valley Business Park II 6 166,928 100.0 2,443 14.64
Rincon Centre 3 201,178 100.0 2,045 10.16
Valley Centre II 4 212,082 100.0 2,774 13.08
Valley Office Centre 2 68,738 99.1 1,851 27.18
Valley Centre 2 102,291 100.0 1,684 16.47
Valley Business Park I 2 67,784 100.0 968 14.28
3745 North First Street 1 67,582 100.0 933 13.80
3571 North First Street 1 116,000 100.0 1,302 11.23
San Mateo I 1 70,000 100.0 2,562 36.60
San Mateo II and III 2 141,404 98.9 4,464 31.92
Hacienda West 2 206,652 89.2 4,224 22.91
Sunnyvale Technology Centre 5 165,520 100.0 2,559 15.46
Baytech Business Park 4 300,000 100.0 4,374 14.58
Golden Gateway Commons 3 272,393 99.3 7,375 27.26
Techmart Commerce Center/(6)/ 1 262,585 95.3 7,035 28.10
995 Benecia Avenue 1 36,344 100.0 741 20.40
Oakmead West A-G 7 425,981 100.0 9,201 21.60
Santa Clara Technology Park 3 178,132 100.0 2,041 11.46
Valley Technology Center 1, 2, 3, 4 & 5 5 350,000 90.2 3,254 10.31
Clarify Corporate Center 2, 3, 4 3 193,536 100.0 4,745 24.52
Fremont Technology Park 1, 2, 3 3 120,688 100.0 1,907 15.80
Portland, OR:
RadiSys Corporate Headquarters 1 80,525 100.0 822 10.21
RadiSys II 1 45,655 100.0 602 13.19
<CAPTION>
Property Significant Tenants/(5)/
- -------- -------------------
<S> <C>
Northern California,
San Francisco Bay Area:
CarrAmerica Corporate Center AT&T (47%), PeopleSoft (32%), Pacific Bell Mobil Services (17%)
Bayshore Centre 2 Redbacks Networds, Inc. (100%)
Rio Robles KLA Instruments (39%), Fujitsu (36%), NEC Systems, Inc. (25%)
Valley Business Park II Pericom (28%), Computer Training Academy (20%)
Rincon Centre Ontrak Systems (44%), Toshiba America Electronic (31%), Future
Electronics (19%)
Valley Centre II Boston Scientific (100%)
Valley Office Centre Bank of America (21%), Quadrep (20%)
Valley Centre Seagate Technology (40%), Numerical Technologies (38%), Vivace
Network (17%)
Valley Business Park I Leybold-Heraeus (35%), LGC Wireless, Inc. (17%), Millipore,
Inc./Tylan General (17%), Acer Labs, Inc. USA (15%)
3745 North First Street Comdisco, Inc. (100%)
3571 North First Street Sun Microsystems, Inc. (100%)
San Mateo I Franklin Resources (100%)
San Mateo II and III Women.com Networks (38%), Franklin Resources, Inc. (30%)
Hacienda West Paychex, Inc. (13%), Zacson Corporation (12%)
Sunnyvale Technology Centre Advanced Micro Devices, Inc. (51%), BMC Software (25%), XICOM
Technology, Inc. (12%), Metelics Corporation (12%)
Baytech Business Park Applied Materials, Inc. (50%), Schlumberger Technologies (50%)
Golden Gateway Commons Sharper Image Corporation (21%), Norcal Mutual Insurance Co.
(20%), ABM Industries, Inc. (11%)
Techmart Commerce Center/(6)/ Network Conference Company, Inc. (15%), Sun MicroSystems (11%),
Bay Business Centers, Inc. (10%)
995 Benecia Avenue Cardiac Pathways Corporation (100%)
Oakmead West A-G Applied Materials, Inc. (100%)
Santa Clara Technology Park Pycon, Inc. (75%), FRY's Metal, (25%)
Valley Technology Center 1, 2, 3, 4 & 5 Iomega Corporation (42%), Fore Systems (27%), Navisite, Inc.
(21%), Picot Interiors (10%)
Clarify Corporate Center 2, 3, 4 Clarify, Inc. (100%)
Fremont Technology Park 1, 2, 3 Applied Fiber Optics, Inc. (39%), Flash Electronics, Inc. (32%),
Bandwidth Unlimited, Inc. (16%)
Portland, OR:
RadiSys Corporate Headquarters RadiSys Corporation (100%)
RadiSys II RadiSys Corporation (100%)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Net Total Average Base
Rentable Annualized Rent Per
# of Area Percent Base Rent(3) Leased
Property Buildings (square feet)/(1)/ Leased/(2)/ (in thousands) Square Foot/(4)/
- -------- --------- ------------------ ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Seattle:
Redmond East 10 396,497 100.0% $ 5,206 $ 13.13
Willow Creek 1 96,179 100.0 981 10.20
Canyon Park Business Center 6 285,428 100.0 4,443 15.57
Canyon Park Commons 1 95,290 100.0 1,342 14.08
Willow Creek Corporate Center 1-6 6 329,009 100.0 5,089 15.47
Redmond Hilltop B & C 2 90,880 100.0 1,370 15.07
Canyon Park Commons 1 & 2 2 110,398 100.0 1,304 11.81
- --------- ----- --------- -------
Pacific Region Subtotal 161 9,335,203 98.7% $ 162,635 $ 17.65
CENTRAL REGION
Austin, Texas:
Great Hills Plaza 1 135,333 100.0 2,637 19.49
Balcones Center 1 74,978 76.2 880 15.40
Park North 2 132,744 96.5 2,129 16.62
City View Centre 3 136,183 100.0 2,357 17.31
Riata 2, 4, 5, 6, 8, 9 6 519,313 98.9 8,004 15.59
Tower of the Hills 2 166,034 96.7 2,784 17.34
City View Center 1 128,716 100.0 2,073 16.10
Riata Crossing 1, 2, 3 3 265,177 100.0 4,993 18.83
Chicago:
Parkway North I 1 249,314 100.0 3,993 16.02
Parkway North III 1 257,512 93.7 3,911 16.20
Parkway 6 1 91,604 91.4 1,502 17.94
Unisys 2 362,950 95.9 5,664 16.28
The Crossings 2 294,350 94.3 4,757 17.13
Bannockburn I & II 2 210,257 88.8 2,804 15.01
Bannockburn IV 1 108,469 100.0 1,678 15.47
<CAPTION>
Property Significant Tenants/(5)/
- -------- ------------------------
<S> <C>
Seattle:
Redmond East Lucent Technologies, Inc. (21%), Guidant Corp. (20%), IBM Corp.
(15%), Genetic Systems (14%), Genie Industries, Inc. (10%)
Willow Creek Data I/O Corporation (100%)
Canyon Park Business Center ICOS Corporation (27%), University of Washington (18%), Federal
Express (11%)
Canyon Park Commons Safeco Insurance Company of America (100%)
Willow Creek Corporate Center 1-6 Safeco Insurance Company of America (52%), Metawave
Communication Corporation (29%), Nextlink Communications, Inc.
(13%)
Redmond Hilltop B & C Concur Technologies (90%), Citrix Systems, Inc. (10%)
Canyon Park Commons 1 & 2 Washington Mutual Bank (100%)
Pacific Region Subtotal
CENTRAL REGION
Austin, Texas:
Great Hills Plaza Empire Funding (74%), Blue Cross (12%)
Balcones Center Medianet (29%)
Park North CSC Continuum Inc. (28%), Brent Rauht Engineering, Inc. (26%)
City View Centre Holt, Rinehart & Winston (48%), Money Star Communications (47%)
Riata 2, 4, 5, 6, 8, 9 Lucent Technologies (35%), Janus Capital Corporation (28%),
Pervasive Software, Inc. (13%)
Tower of the Hills Texas Guaranteed Student (65%)
City View Center IXC Communications, Inc. (100%)
Riata Crossing 1, 2, 3 EDS (100%)
Chicago:
Parkway North I Alliant Foodservice, Inc. (52%) Pactiv Corporation (11%),
Toshiba America Electronics (10%)
Parkway North III Fujisawa USA, Inc. (46%), Nestle Clinical Nutrition (15%)
Parkway 6 BT Office Products (69%), Allstate Insurance Company (23%)
Unisys PNC Mortgage (29%), Unisys Corporation (19%)
The Crossings Abercrombie & Kent (15%), Allstate Insurance Co. (14%)
Bannockburn I & II IMC Global (38%), Deutsche Credit Corporation. (12%)
Bannockburn IV Open Text (35%), Abbott Laboratories (13%), NY Life Insurance (10%)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Net Total Average Base
Rentable Annualized Rent Per
# of Area Percent Base Rent/(3)/ Leased
Property Buildings (square feet)/(1)/ Leased/(2)/ (in thousands) Square
Foot/(4)/ Significant Tenants/(5)/
- -------- --------- ------------ ------- ------------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Dallas, Texas:
Quorum North 1 116,044 88.4 1,953 19.03 Digital Matrix Systems (20%),
HQ Dallas Quorum North (17%)
Quorum Place 1 178,210 97.5 3,130 18.00 VHA Southwest, Inc. (22%),
Objectspace (11%)
Cedar Maple Plaza 3 113,127 95.6 2,138 19.78 Avreafoster, Inc. (10%)
Two Mission Park 1 77,710 96.9 1,201 15.94 Macromedia, Inc. (33%), Bland
Garvey and Taylor (18%)
5000 Quorum 1 159,712 96.8 2,830 18.31 Decision Consultants, Inc.
(10%)
Tollway Plaza 1, 2 2 342,802 100.0 8,016 23.38 Sun Microsystems (27%),
Americorp Relocation Management
(10%)
Commons @ Las Colinas 1, 3 2 380,764 100.0 9,380 24.64 Nokia (100%)
Royal Ridge Phase II 1 123,740 100.0 1,609 13.00 Capital One Services (100%)
Royal Ridge A & B 2 247,239 100.0 4,457 18.03 GTE North, Inc. (59%), Cendant
-- ------- ----- ----- ----- Operations (16%), Capital One
Services, Inc. (15%)
Central Region Subtotal 43 4,872,282 97.1 84,880 17.95
MOUNTAIN REGION
Denver:
Harlequin Plaza 2 329,100 88.6 4,848 16.62 Travelers Insurance (23%),
Bellco First Federal Credit
Union (13%), Regis University
(11%)
Quebec Court I 1 130,000 100.0 2,014 15.50 Time Warner Communications
(100%)
Quebec Court II 1 157,294 100.0 2,162 13.75 Tele-Communications, Inc.
(100%)
Quebec Center 3 106,865 98.3 1,732 16.49 Gordon Gumeson & Associates
(13%), Walberg & Dagner (11%)
Panorama Corporate Center I 1 100,881 93.2 1,901 20.22 AT&T Corporation (70%), Sprint
Spectrum, LP (11%)
Panorama II 1 100,916 100.0 2,147 21.28 Hartford Fire Insurance
Company (38%), 3COM Corporation
(18%), Toyota Motor Credit
Corporation (13%), Archstone
Communities (12%)
Panorama III 1 136,850 100.0 1,613 11.79 Charles Schwab & Co., Inc.
(100%)
Panorama V 1 137,953 97.0 3,054 22.81 ICG Equipment, Inc. (43%),
Manugistics, Inc. (12%),
Synopsis, Inc. (10%)
Phoenix, Arizona:
Camelback Lakes 2 201,238 99.9 3,773 18.76 Vanguard Group (28%), Humana
Health Plan (14%), American
Founders Life Insurance (11%),
Arizona Bank (10%)
Pointe Corridor IV 1 144,219 98.3 2,468 17.40 Jostens Learning Corporation
(22%), Aetna Life Insurance
Company (22%), TPA, Inc. (12%)
Four Gateway 1 137,709 90.8 2,670 21.35 Eclipsys Corporation (29%),
Options Health Care, Inc. (22%)
Highland Park 1 78,969 82.9 1,324 20.23 Springstreet (14%), Trendwest
Resources, Inc. (11%)
The Grove at Black Canyon 1 104,571 95.9 1,956 19.50 Cigna Healthcare of Arizona
(80%)
US West 4 532,506 100.0 8,795 16.52 US West Business Resources
(100%)
Concord Place 1 133,555 78.8 2,276 21.63 Peacock, Hislop, Staley &
Given (16%)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Net Total Average Base
Rentable Annualized Rent Per
# of Area Percent Base Rent/(3)/ Leased
Property Buildings (square feet)/(1)/ Leased/(2)/ (in thousands) Square
Foot/(4)/ Significant Tenants/(5)/
- -------- --------- ------------ ------- ------------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Salt Lake City, Utah:
Sorenson Research Park 5 285,869 99.7 3,436 12.06 Convergys Customer Management
Group (46%), Datachem
Laboratories, Inc. (20%),
Intel Corporation (14%), ITT
Educational Services (12%)
Wasatch Corporate Center 3 178,231 100.0 2,129 11.95 Advanta Financial Corporation
(28%), AchievGlobal, Inc.
(23%), Fonix Corporation.
(14%), Tenfold Corporation
(14%), Musicians Friend, Inc.
(12%)
Wasatch Corporate Center 18 1 49,886 98.2 710 14.50 Citrix Systems (51%), Western
-- ------ ---- --- -----
Aggregates, Inc. (38%), Sprint
Paranet, Inc. (10%)
Mountain Region Subtotal 31 3,046,612 96.3 49,008 16.71
---- ---------- ----- -------- --------
TOTAL CONSOLIDATED PROPERTIES: 271 22,644,660 $ 419,522
---- ---------- --------
WEIGHTED AVERAGE 97.4% $ 19.01
----- --------
Unconsolidated Properties
Downtown Washington, D.C.:
1717 Pennsylvania Avenue/(9)/ 1 184,446 100.0% $ 6,607 $ 35.82 MCI Telecommunications (57%)
AARP Headquarters/(10)/ 1 502,316 100.0 19,254 38.33 American Association of Retired
Persons (99%)
Bond Building/(11)/ 1 162,182 98.5 5,319 33.30 General Services Administration
- Dept of Justice (97%)
Suburban Washington, D.C.:
Booz-Allen & Hamilton
Building/(12)/ 1 222,989 100.0 3,503 15.71 Booz Allen & Hamilton (100%)
- ---------- ----- ------- --------
TOTAL UNCONSOLIDATED PROPERTIES: 4 1,071,933 $ 34,683
- ----------- -------
WEIGHTED AVERAGE 97.4% $ 32.43
----- --------
ALL OPERATING PROPERTIES
- ------------------------
TOTAL: 23,716,593 $ 454,205
=========== =========
WEIGHTED AVERAGE 97.5% $ 19.63
===== ========
</TABLE>
___________________
(1) Includes office and retail space but excludes storage space.
(2) Includes space for leases that have been executed and have commenced as of
December 31, 1999.
(3) Total annualized base rent equals total original base rent, including
historical contractual increases and excluding (i) percentage rents, (ii)
additional rent payable by tenants such as common area maintenance, real
estate taxes and other expense reimbursements, (iii) future contractual or
contingent rent escalations, and (iv) parking rent.
(4) Calculated as total annualized base rent divided by net rentable area
leased.
(5) Includes tenants leasing 10% or more of rentable square footage (with the
percentage of rentable square footage in parentheses).
(6) The Company owns the improvements on the property and has a leasehold
interest in all of the underlying land.
(7) The Company holds a general and limited partner interest in a partnership
that owns the property.
(8) The Company holds a 50% joint venture interest in the joint venture that
owns this property and a 50% joint venture interest in another joint
venture, which holds the remaining 50% interest in the joint venture that
owns the property. As a result of preferential rights to annual
distributions from another venture,
24
<PAGE>
the Company will receive distributions of less than 75% (but in no event
less than 50%) of the total amount distributed with respect to this
property in each year until the preferential distribution requirements are
satisfied, but will receive 100% of any subsequent distributions during the
year until its aggregate distributions equal 75% of the cumulative
distributions with respect to the property since inception of the
partnership. Thereafter, the Company will receive 75% of the distributions
made during the year with respect to the property. Upon sale of the
property, the Company will receive 75% of the distributions until the
Company receives its preference amount, 50% until the remaining venturer
receives its preference amount, and 75% of the distributions thereafter.
(9) The Company holds a 50% interest in the limited liability company that owns
the property and serves as the entity's managing member.
(10) The Company holds an effective 24% interest in the property by virtue of a
48% general partner interest in a partnership that owns a 50% general
partner interest in the property.
(11) The Company holds an effective 15% interest in the property by virtue of a
30.6% limited partner interest in a partnership that has a 49% limited
partner interest in the property.
(12) The Company holds a 50% joint venture interest, and is the managing
venturer.
25
<PAGE>
Occupancy, Average Rentals and Lease Expirations. As of December 31,
1999, 97.4% of the aggregate net rentable square footage in the 271 operating
office properties whose results are consolidated in the financial statements of
the Company was leased. The following table sets forth the percent leased and
average annualized rent per leased square foot (excluding storage space) for
office and retail space combined for the past five years for the operating
office properties that were consolidated for financial statement purposes at
each of the dates indicated:
Average
Percent Annualized Rent Number of
Leased at Per Leased Consolidated
December 31, Year End Square Foot (1) Properties
------------ ------------ ----------------- -------------
1999 97.4% $ 21.66 271
1998 96.7 20.46 292
1997 95.9 19.38 243
1996 93.6 19.37 159
1995 93.5 27.36 13
- ---------------------
(1) Calculated as total annualized building operating revenue, including
tenant reimbursements for operating expenses and excluding parking and
storage revenue, divided by the total square feet, excluding storage,
in the building under lease at year end.
The following table sets forth a schedule of the lease expirations for
leases in place as of December 31, 1999 in each of the next 10 years beginning
with 2000 and thereafter for the 271 operating office properties whose results
are consolidated in the financial statements of the Company, assuming that no
tenants exercise renewal options:
<TABLE>
<CAPTION>
Number of Net Rentable Area Annual Base Rent Percent of Total
Year Tenants With Subject to Under Expiring Annual Base Rent
Of Lease Expiring Expiring Leases Leases Represented by
Expiration Leases (square feet) (in thousands) Expiring Leases
------------- ---------------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C>
2000 369 1,847,000 $ 38,033 9.1%
2001 328 2,064,000 35,767 8.5
2002 350 3,332,000 64,984 15.5
2003 321 3,091,000 56,974 13.6
2004 311 3,519,000 72,510 17.3
2005 78 1,325,000 23,595 5.6
2006 61 1,325,000 23,455 5.6
2007 52 1,351,000 26,892 6.4
2008 88 1,809,000 34,368 8.2
2009 58 1,754,000 33,455 8.0
2010 and thereafter 22 649,000 9,472 2.2
</TABLE>
26
<PAGE>
Mortgage Financing. As of December 31, 1999, certain of the 271
operating office properties that were consolidated for financial statement
purposes were subject to fixed rate mortgage indebtedness in an aggregate
principal amount of $635 million. The Company's fixed rate mortgage debt as of
December 31, 1999 bore an effective weighted average interest rate of 8.04% and
a weighted average maturity of 7.3 years (assuming loans callable before
maturity are called as early as possible). Certain information regarding the
existing mortgage indebtedness for the consolidated operating office properties
subject to fixed rate mortgage indebtedness is set forth in the table below as
of December 31, 1999:
<TABLE>
<CAPTION>
Estimated
Annual Debt Balance Due at
Interest Principal Maturity Service (in Maturity (in
Property Rate Balance Date thousands) thousands)
- --------------------------------------- ----------- ------------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Quorum Place 6.99 $ 7,450 11/15/00 $ 665 $ 7,326
Warner Center 7.40 26,000 12/1/00 1,924 26,000
Presidential Circle 7.14 22,547 3/1/01 2,061 21,999
Bannockburn I & II 9.52 18,595 8/31/01 2,801 16,840
Quorum North 8.27 6,465 12/10/01 640 6,247
Valley Business Park I & II }
Valley Office Centre }
Valley Centre II } 8.25 40,826 12/10/01 4,655 37,809
Rincon Centre }
3745 North First Street }
Sunnyvale Technology Center }
Highland Corporate Center } 8.90 34,014 6/1/02 5,486 28,386
Hacienda West }
Jaycor 8.96 12,199 2/1/03 1,657 10,206
Parkway North I 6.92 29,250 12/1/03 2,328 29,250 (1)
Canyon Park Commons 9.13 5,405 12/1/04 714 4,043
US West 7.92 48,251 12/1/05 9,915 --
Redmond East 8.38 26,984 1/1/06 2,648 23,969 (2)
Century Springs West }
Glenridge }
Midori } 7.20 20,163 1/1/06 2,126 15,123 (3)
Lakewood }
Parkwood }
Concord Place 7.75 7,509 1/1/06 725 6,420
Wateridge Pavilion 8.25 3,428 11/1/06 338 2,921
Wasatch Corporate Center 8.15 12,458 1/2/07 1,220 10,539
2600 W. Olive 6.75 19,152 1/1/09 1,293 19,152
Palomar Oaks 8.85 9,949 4/1/09 1,025 7,896
1255 23/rd/ Street 8.12 38,300 4/1/09 3,584 30,060
1730 Pennsylvania Avenue }
International Square } 8.12 183,700 4/1/09 17,190 158,569
South Coast Executive Center 7.13 15,000 6/10/09 1,069 12,660
Sorenson Research Park 7.75 2,488 7/1/11 328 --
995 Benecia Avenue 8.50 869 8/1/11 118 --
Sorenson Research Park 8.88 1,609 5/1/17 182 --
1747 Pennsylvania Avenue 9.50 14,761 7/10/17 1,730 -- (4)
900 19th Street 8.25 16,027 7/15/19 1,656 -- (5)
1775 Pennsylvania Avenue 7.63 11,972 9/1/09 1,020 --
----------- ------------- ---------------
Total 8.04% $ 635,371 $ 69,098
=========== ============= ===============
</TABLE>
- --------------------
(1) Prepayable after December 1, 1999 at the rates stated in the loan documents.
(2) Prepayable after December 19, 2005 at the rates stated in the loan
documents.
(3) Prepayable after January 2001 at the rates stated in the loan documents.
(4) Note is callable by the lender after June 30, 2002. The estimated principal
balance at June 30, 2002 will be $13,841,000.
(5) Note is callable by the lender after July 1, 2004. The estimated principal
balance at July 1, 2004 will be $14,177,000.
For additional information regarding the Company's office properties and their
operation, see "Item 1, Business."
27
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Company currently is involved in litigation with two stockholders
of HQ Global Workplaces, Inc. involving the conversion in September 1998 of
approximately $111 million of debt previously loaned by the Company to HQ Global
into stock of HQ Global. The Company and HQ Global initiated this litigation by
filing a complaint seeking a declaratory judgment that the terms of the debt
conversion were fair, after these two stockholders threatened to challenge the
terms of the conversion, claiming that the conversion price utilized, and the
methods by which the conversion price was agreed upon between the Company and HQ
Global, were not fair to HQ Global or these stockholders. The two stockholders
filed counterclaims against the Company, HQ Global and the board of directors of
HQ Global seeking a judgment declaring the conversion void or voidable, or in
the alternative compensatory and punitive damages.
Although the Company believes that the two stockholders' claims are
without merit and that it and HQ Global will ultimately prevail in their actions
against the two stockholders, there can be no assurance that the court will not
find the conversion price to have been unfair and declare the conversion void,
which would have the effect of diluting the Company's equity interest in HQ
Global or award the two stockholders compensatory and punitive damages. However,
even if the two stockholders were successful in their claims, the Company does
not believe that such a result would have a material adverse effect on the
financial condition or results of operations of the Company or HQ Global.
The Company is party to a variety of other legal proceedings arising in
the ordinary course of its business. All of these other matters, taken together,
are not expected to have a material adverse impact on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity & Related Stockholder Matters
The Company's common stock is listed on the New York Stock Exchange
("NYSE") under the symbol "CRE". As of December 31, 1999, there were 525
stockholders of record. The following table sets forth the high and low sale
prices of the Company's common stock as reported on the NYSE Composite Tape, and
the dividends per share of common stock paid for each full quarterly period
within the two most recent fiscal years:
1999 1Q 2Q 3Q 4Q Full Year
------------------------------------------------------------------------
High $ 24 3/8 26 1/2 24 5/8 22 11/16 26 1/2
Low $ 20 15/16 20 15/16 21 1/2 17 15/16 17 15/16
Dividend $ .4625 .4625 .4625 .4625 1.85
1998 1Q 2Q 3Q 4Q Full Year
------------------------------------------------------------------------
High $ 31 11/16 30 5/8 30 1/8 25 1/4 31 11/16
Low $ 28 7/16 26 1/2 19 7/16 19 19
Dividend $ .4625 .4625 .4625 .4625 1.85
The Company, in order to qualify as a REIT, is required to make
distributions (other than capital gain distributions) to its stockholders in
amounts at least equal to (i) the sum of (A) 95% of its "REIT taxable income"
(computed without regard to the dividends paid deduction and its net capital
gain) and (B) 95% of the net income (after tax), if any, from foreclosure
property, minus (ii) the sum of certain items of non-cash income. The Company's
distribution strategy is to distribute what it believes is a conservative
percentage of its cash flow permitting the Company to retain funds for capital
improvements and other investments while funding its distributions.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, nontaxable return of capital or a combination thereof.
Distributions that exceed the Company's current and accumulated
28
<PAGE>
earnings and profits (calculated for tax purposes) constitute a return of
capital rather than a dividend and reduce the stockholder's basis in his or her
shares of common stock. To the extent that a distribution exceeds both current
and accumulated earnings and profits and the stockholder's basis in his or her
shares, it will generally be treated as gain from the sale or exchange of that
stockholder's shares. The Company annually notifies stockholders of the
taxability of distributions paid during the preceding year.
The following table sets forth the taxability of common stock
distributions paid in 1999 and 1998:
1999 1998
-------------- --------------
Ordinary income 78% 92 %
Capital gain 22% --
Return of capital -- 8 %
Item 6. Selected Financial Data
The following table sets forth selected financial and operating
information for the Company. The financial and operating data has been extracted
from the Company's consolidated financial statements for each of the periods
presented, restated for the separate presentation of discontinued operations.
The following selected financial and operating information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and all of the financial statements and
notes thereto included elsewhere in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
(In thousands, except per share data) Year Ended December 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Real Estate Operating Revenue (from continuing
operations):
Rental revenue $ 498,849 440,455 325,502 154,165 89,539
Real estate service revenue 17,054 16,167 15,998 12,512 11,315
Consolidated Data:
Income from continuing operations before
extraordinary item $ 151,079(1) 119,979(1) 77,800 24,802(2) 12,067(2)
(Loss) income from discontinued operations (7,862) 6,518 940 -- --
Dividends paid to common stockholders 125,876 127,188 97,195 42,914 23,344
Per Share Data:
Basic income from continuing operations
before extraordinary item 1.71 1.23 1.21 0.90 0.90
Diluted income from continuing operations
before extraordinary item 1.71 1.23 1.21 0.90 0.90
(Loss) income from discontinued operations (0.12) 0.09 0.02 -- --
Dividends paid to common stockholders 1.85 1.85 1.75 1.75 1.75
Weighted average shares outstanding - basic 67,858 68,577 54,873 26,932 13,338
Weighted average shares outstanding - diluted 67,982 68,778 59,597 26,999 13,339
<CAPTION>
(In thousands) As of December 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Real estate, before accumulated depreciation/(3)/ $ 3,067,822 2,934,653 2,384,668 1,475,998 480,589
Total assets/(3)/ 3,479,072 3,627,260 2,730,556 1,536,564 458,860
Mortgages and notes payable/(3)/ 1,603,371 1,610,859 1,025,145 655,449 317,374
Minority interest/(3)/ 92,586 88,815 73,955 50,597 34,850
Total stockholders' equity/(3)/ 1,686,715 1,813,939 1,552,697 787,478 95,543
Total common shares outstanding 66,826 71,760 59,994 43,789 13,409
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
(In thousands) Year Ended December 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Other Data:
Net Cash provided by
operating activities $ 175,002 239,752 133,077 82,300 35,277
Net cash provided by (used by)
investing activities 83,714 (985,321) (998,733) (876,947) (81,635)
Net cash provided by (used by)
financing activities (238,366) 757,760 861,864 813,067 37,113
Funds from continuing operations
before allocation to the
unitholders(4) 226,587(4) 211,095(4) 151,900 64,496(2) 33,190(2)
</TABLE>
(1) Net income from continuing operations before extraordinary item includes a
non-recurring gain (loss) of $4.5 million and ($13.7) million related to
the treasury lock agreement for 1999 and 1998, respectively.
(2) Net income and funds from operations before allocation to unitholders
include non-recurring deductions of approximately $2.3 million and $1.9
million in 1996 and 1995, respectively, related to the write-off of the
unamortized purchase price of certain third party real estate service
contracts that were terminated in 1996 and the termination of an agreement
to acquire the development business of The Evans Company in 1995.
(3) The balance sheets have been restated to classify the assets, net of
liabilities, of discontinued operations of the Company's executive suites
affiliates into net assets of discontinued operations, a component of total
assets.
(4) 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. Adjustments
for unconsolidated partnerships and joint ventures are calculated to
reflect funds from operations on the same basis. 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is based primarily on the Consolidated
Financial Statements of CarrAmerica Realty Corporation and its subsidiaries (the
"Company") as of December 31, 1999 and 1998, and for the years ended December
31, 1999, 1998 and 1997. The comparability of the periods is significantly
impacted by acquisitions completed, development properties placed in service and
certain dispositions made during those years. The Company's owned properties
that were consolidated for financial statement purposes were 271 in 1999, 292 in
1998, 243 in 1997 and 159 in 1996. The comparability of the periods is also
impacted by development operations which grew significantly during the periods
presented.
The Company's reportable operating segments are real estate property
operations and development operations. Other business activities and operating
segments that are not reportable are included in other operations. Executive
office suites are presented as discontinued operations in the Company's
financial statements.
30
<PAGE>
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These 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 - 1999 TO 1998
Real Estate Property Operations
Operating Revenue. Total real estate property operating revenue
increased $58.4 million, or 13.3%, to $498.9 million for 1999 as compared to
$440.5 million for 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 6.4% or $13.0
million over the same period in 1998, primarily as a result of a 5.4% increase
in rental revenue. The average occupancy rate for same store properties
increased to 96.3% for 1999 from 96.1% for 1998.
Segment Expense. Real estate property operating expenses increased
$17.5 million primarily as a result of development properties placed in service.
Same store operating expenses increased by $3.6 million, or 3.4%, over 1998
primarily due to higher real estate taxes and nonrecurring costs associated with
Y2K compliance work on building facilities and bad debt expenses.
Interest Expense. Interest expense increased $3.7 million primarily due
to the refinancing of properties with increased leverage.
Other Income (Expense), net. Other revenue generated by real estate
property operations increased $0.7 million primarily as a result of additional
interest income.
Total Assets. The increase of $182.4 million, or 6.5%, from 1998 to
1999 is primarily as a result of the increase of development properties placed
in service.
Development Operations
Development fee income increased $2.2 million, or 50.0%, to $6.6
million and development operating expenses increased $1.5 million to $4.6
million. These increases are the result of an increase in the number of
development fee projects.
Total Assets. Total assets decreased $246.3 million, or 52.8% to $220.1
million in 1999 from $466.4 million in 1998 as a result of a $15.1 million
decrease in land held for development and a $231.2 million decrease in
construction in progress. This resulted primarily from an increase in
construction completions and properties placed in service and a decrease in
construction starts in 1999.
Other Operations
Operating Revenue. Operating revenue decreased $1.4 million to $10.4
million in 1999 from $11.8 million in 1998.
Segment Expense. The increase of $5.0 million to $34.3 million in 1999
from $29.3 million in 1998 is primarily a result of professional fees associated
with Project Excellence and Year 2000 Compliance work.
Interest Expense. The $14.0 million increase in the Company's interest
expense is primarily related to an additional $150 million of senior unsecured
notes outstanding during the twelve months ended December 31, 1999 and
additional borrowings on the Company's unsecured line of credit.
31
<PAGE>
Discontinued Operations
Income (loss) from operations of discontinued executive suites
businesses decreased from income in 1998 of $6.5 million to a loss in 1999 of
$7.8 million. The decrease in earnings is primarily the result of start-up costs
incurred in 1999 for new executive suite centers and costs incurred to integrate
the various acquired operations.
During 1998, the core executive suites operations were built primarily
through the acquisition of business centers. In 1999 there were fewer
acquisitions, however, more internal development of new centers. Losses incurred
during development for 1998 and 1999 were $5.0 million and $14.0 million,
respectively.
Consolidated Cash Flows
Net cash provided by operating activities decreased $64.8 million, or
27.0%, to $175.0 million for 1999 as compared to $239.8 million for 1998. Net
income after non-cash adjustments provided $245.2 million of cash for the year
ended December 31, 1999, an increase of $34.0 million over the same period in
1998. This improvement was offset by uses of cash arising from changes in non
real estate assets and liabilities of $70.2 million in 1999 compared to cash
generated of $28.6 million in 1998. This $98.8 million change from 1998 to 1999
arises primarily from changes in the timing of payments for prepaids and other
assets from executive suites acquisitions of $31.5 million and changes in the
timing of payments for accounts payable and accrued expenses. In 1999, investing
activities provided $83.7 million compared to uses of $985.3 million for 1998,
primarily as a result of an increase in proceeds from sales of rental properties
as well as reduced outflow related to acquisitions and development of both
rental properties and executive suites assets. Net cash used by financing
activities totaled $238.4 million for the year ended December 31, 1999 compared
to net cash provided of $757.8 million for the comparable period in 1998. During
1998, proceeds from sales of common and preferred stock, issuance of senior
unsecured notes and an increase in borrowings on the Company's unsecured credit
facilities contributed 970 million compared to $57 million used by the Company
during 1999 to complete the repurchase of 5.0 million shares of common stock
under the Merrill Lynch forward equity sale transaction, net of proceeds from
refinancing existing mortgages.
RESULTS OF OPERATIONS - 1998 TO 1997
Real Estate Property Operations
Operating Revenue. Total real estate property operating revenue
increased $115.0 million, or 35.3%, to $440.5 million for 1998 as compared to
$325.5 million for 1997. The Company experienced net growth in its rental
revenue as a result of its acquisitions, and development properties placed in
service, which together contributed approximately $105.1 million of additional
rental revenue in 1998. Rental revenue from properties that were fully
operational throughout both periods increased by approximately $9.9 million
primarily due to increased occupancy in these properties.
Segment Expense. Real estate property operating expenses increased
$34.9 million primarily as a result of property acquisitions and development
properties placed in service. The Company also experienced an increase in
property operating expenses from properties that were fully operational in both
periods of approximately $2.9 million.
Interest Expense. Interest expense increased $1.7 million due to the
acquisition of properties which were subject to existing mortgage debt.
Other Income (Expense), net. Other revenue generated by real estate
property operations increased $4.2 million primarily as a result of additional
interest income and increased equity in earnings of unconsolidated partnerships.
Total Assets. The increase of $504.7 million or 21.9% from 1997 to 1998
is primarily as a result of acquisitions of real estate and development
properties placed in service.
32
<PAGE>
Development Operations
Operating Revenues. Development fee income increased $1.3 million to $4.4
million in 1998 from $3.1 million in 1997 resulting from an increase in the
number of development fee projects.
Segment Expenses. Segment expense increased $1.5 million to $3.1 million in
1998 from $1.6 million in 1997, primarily as a result of increases in general
and administrative expenses related to increased staffing.
Total Assets. Total assets increased $173.9 million, or 59.5% to $466.4
million in 1998 from $292.5 million in 1997 as a result of an increase of $136.5
million and $37.5 million in construction in progress and land held for
development, respectively, primarily as a result of an increase in construction
starts from 1997 to 1998.
Other Operations
Operating Revenue. The decrease of $1.1 million to $11.8 million in 1998
from $12.9 million in 1997 is a result of decreased management fee income.
Segment Expense. The increase of $9.1 million to $29.3 million in 1998 from
$20.2 million in 1997 is as a result of the addition of new staff necessary to
implement the Company's business strategy.
Interest Expense. The $18.2 million increase in the Company's interest
expense is primarily related to borrowings on the Company's line of credit
necessary to fund acquisitions and development commitments and the sale of
$350.0 million of senior unsecured notes.
Other Income (Expense), net. Other expenses decreased $5.2 million to
$(0.3) million in 1998 from $(5.5) million in 1997 primarily as a result of
increased interest income.
Discontinued Operations
Income from operations of executive suites businesses increased from $0.9
million in 1997 to $6.5 million in 1998, primarily the result of net operating
income earned from acquired executive suite businesses and the effect of having
a full year of operations in 1998 as compared to five months in 1997.
Consolidated Cash Flows
Net cash provided by operating activities increased $106.7 million, or
80.2%, to $239.8 million for 1998 as compared to $133.1 million for 1997,
primarily as a result of the acquisitions made and development placed in service
by the Company. Net cash used by investing activities decreased $13.4 million,
to $985.3 million for 1998 as compared to $998.7 million for 1997, primarily as
a result of capital deployed by the Company for acquisitions of office
properties, executive office suites businesses, land held for future
development, investments in construction in progress and proceeds from the sale
of rental property. Net cash provided by financing activities decreased $104.1
million, to $757.8 million for 1998 as compared to $861.9 million for 1997,
primarily as a result of a reduction in the amount of proceeds from the sale of
common and preferred stock and an increase in the amount of dividends paid to
the common and preferred stockholders. These items were offset by an increase in
borrowings on the Company's unsecured credit facility and the issuance of
unsecured notes.
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, and to pay for
construction in progress in both the short and long term.
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<PAGE>
The Company has three investment grade ratings. Duff & Phelps Credit Rating
Co. (DCR) and Standard & Poors (S&P) each had assigned their BBB rating to
prospective senior unsecured debt offerings of the Company and their BBB-rating
to prospective cumulative preferred stock offerings of the Company as of
December 31, 1999. Moody's Investor Service (Moody's) has assigned its Baa3
rating to prospective senior unsecured debt offerings of the Company and its Ba2
rating to prospective cumulative preferred stock offerings of the Company as of
December 31, 1999.
The Company's total indebtedness at December 31, 1999 was $1.6 billion, of
which $343 million, or 21.4%, bore a LIBOR-based floating interest rate. The
weighted average interest rate under the unsecured credit facility for 1999 was
6.7%. Currently, the unsecured credit facility bears interest at 90 basis points
over 30 day LIBOR. The Company's mortgage payable fixed rate indebtedness bore
an effective weighted average interest rate of 8.04% at December 31, 1999 and
has a weighted average term to maturity of 7.3 years. Based upon the Company's
total market capitalization at December 31, 1999 of $3.566 billion (the common
stock price was $21.13 per share; the total shares of common stock, convertible
preferred stock and Units outstanding was 73,986,131 and the aggregate
liquidation value of the cumulative redeemable preferred stock was $400.0
million), the Company's debt represented 45.0% of its total market
capitalization. The Company has a $450.0 million unsecured credit facility, of
which $343.0 million had been advanced, letters of credit totaling $3.7 million
were issued, and $103.3 million was available for draw. HQ Global has a $200.0
million unsecured credit facility, which is guaranteed by the Company. As of
December 31, 1999, $140.5 million had been advanced, letters of credit totaling
$10.8 million were issued, and $48.7 million was available for draw under the HQ
Global unsecured credit facility. It is contemplated that the HQ Global facility
will be repaid and terminated in connection with the proposed HQ Global/VANTAS
transaction.
Rental revenue and real estate service revenue have been the principal
sources of capital to fund the operating expenses, debt service and capital
expenditures of the Company and its affiliates, excluding non-recurring capital
expenditures. The Company believes that these sources of revenue will continue
to provide the necessary funds for its operating expenses and debt service. The
Company and its affiliates also require capital to invest in its existing
portfolio of operating assets for major capital projects such as large-scale
renovations, routine capital expenditures and deferred maintenance on certain
properties recently acquired and tenant related capital expenditures, such as
tenant improvements and allowances and leasing commissions.
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 December 31, 1999,
the Company (including CarrAmerica Development) had approximately 1.3 million
square feet of office space in 22 development projects underway which are
expected to require a total investment by the Company of approximately $244.9
million. As of December 31, 1999, $149.0 million, or 60.8% of the total expected
investment, had been expended.
Historically, management has primarily met the Company's capital
requirements by accessing the public equity and debt markets. However, because
of unfavorable conditions currently existing in the REIT public equity and debt
markets, the Company does not believe that these markets are currently providing
the Company with the most attractive sources of capital. If conditions in the
public equity or debt markets improve, the Company will evaluate the cost of
capital raised in such markets to determine if it is the most attractive capital
available to the Company at the time. However, there can be no assurance that
conditions will improve in the near term. During 1999 and 1998 the Company
funded its new development through proceeds from dispositions of properties. In
addition, the Company announced the agreement with FrontLine Capital which is
expected to provide the Company with estimated cash of $170.0 million.
If (i) the debt and equity capital markets do not improve, (ii) the Company
is unable to raise the expected net proceeds from dispositions of properties,
and (iii) the Company is unable to obtain capital from other sources, the
Company believes that it would continue to have sufficient funds to continue to
pay its operating and debt service expenses, its regular quarterly dividends and
to meet the necessary capital requirements with respect to its existing
portfolio of operating assets. However, the Company's ability to continue to
fund all of its current development projects could be adversely affected. If the
Company determined that it was in the best interests of the Company to continue
to fund all of its current development projects, the Company may have to access
either the public equity or debt markets, which, at that time, may not be the
most attractive source of capital.
Net cash provided by operating activities was $175.0 million for the year
ended December 31, 1999, compared to $239.8 million for the year ended December
31, 1998. The decrease in net cash provided by operating activities was
primarily a result of changes in the timing of payments for prepaid and other
assets and
34
<PAGE>
accounts payable and accrued expenses. The Company's investing activities
provided approximately $83.7 million in 1999 and used approximately $985.3
million for the year ended December 31, 1998. The Company's investing activities
include investment in existing real estate and executive office suites assets
and acquisitions of office buildings (directly and through CarrAmerica
Development), executive office suites businesses (through HQ Global, Omni UK and
LUX), and land held for future development and additions to construction in
progress (directly and through CarrAmerica Development) and executive office
suites development (through HQ Global, Omni UK and LUX). These investments
declined from $1.087 billion in 1998 to $441.8 million in 1999. In addition, in
1999, the Company generated $487.9 million from sales of rental property
compared to $194.1 million in 1998. Net of distributions to the Company's
stockholders and minority interests, the Company's financing activities used net
cash of $65.7 million in 1999 and provided $930.9 million for the year ended
December 31, 1998. During 1998, the Company raised $969.5 million from stock
sales, issuance of notes and borrowings on the unsecured lines of credit. In
1999, the Company used $56.8 million of funds to repurchase 5.0 million shares
of common stock, net of proceeds from the refinance of existing mortgages.
The Company plans to refinance the $150 million senior unsecured note due
October 1, 2000.
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.
Year 2000 Compliance
The Year 2000 issue is the risk that computer programs using two-digit date
fields will fail to properly recognize the Year 2000, with the result being
business interruptions due to computer system failures by the Company's software
or hardware or by government entities, service providers and vendors.
With the assistance of a consulting firm and the Company's Steering
Committee, the Company completed its assessment of the exposure to Year 2000
issue and successfully remediated areas of exposure. As of December 31, 1999,
the Company had incurred approximately $2.75 million in costs for its Year 2000
program. The Company currently estimates that it will incur additional costs,
which are not expected to exceed $0.1 million, to complete its Year 2000
compliance work. To the date of this report, the Company has not encountered any
significant business interruptions or material adverse financial consequences
related to the Year 2000 issue. However, there can be no assurances that the
Company will not encounter material business interruptions or adverse financial
consequences subsequent to the date of this report.
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. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect funds from operations on the same basis. 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.
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<PAGE>
The following table provides the calculation of the Company's funds from
continuing operations for the years presented:
<TABLE>
<CAPTION>
(in thousands): 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations before minority interest and
extraordinary item $ 168,678 136,052 86,077
Adjustments to derive funds from operations:
Add:
Depreciation and amortization 117,829 99,274 72,496
(Gain) loss on settlement of treasury locks (4,489) 13,729 --
Deduct:
Minority interests' (non Unitholders share of
depreciation, amortization and net income) (609) (380) (1,253)
Gain on sale of assets, net of income taxes (54,822) (37,580) (5,420)
--------- ------- -------
Funds from operations before allocation to the minority Unitholders 226,587 211,095 151,900
Less: Funds from operations allocable to the
minority Unitholders (16,545) (15,507) (12,697)
--------- ------- -------
Funds from operations allocable to CarrAmerica Realty Corporation 210,042 195,588 139,203
Less: Preferred stock dividends (35,448) (35,571) (10,991)
--------- ------- -------
Funds from operations attributable to common shareholders: $ 174,594 160,017 128,212
========= ======= =======
</TABLE>
Changes in funds from operations are largely attributable to the effect of
property acquisitions and new developments, net of dispositions, during the
periods and on net income and depreciation and amortization, as previously
discussed.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Increases in interest rates, or the loss of the benefits from any hedging
agreements of the Company, would increase our interest expense, which would
adversely affect cash flow. As of December 31, 1999, the Company had $343.0
million outstanding under its line of credit that bears interest at a floating
rate and $635.4 of additional fixed rate mortgage debt. HQ Global also had
$140.5 million outstanding under its unsecured credit facility as of December
31, 1999 which was guaranteed by the Company. The unsecured credit facilities
mature in August 2001 and the mortgage loans mature at various times through
2009. The Company also has issued $625 million senior unsecured notes, which
mature between 2000 and 2008.
The Company is currently a party to an interest rate hedge agreement in
order to hedge against the impact that interest rate fluctuations would have on
the floating rate debt under its line of credit. Although the hedging agreements
enable us to convert floating rate liabilities to fixed rate liabilities, they
expose us to the risk that the counterparties to such hedge agreements may not
perform, negating the benefit of the hedging arrangements. In addition, if
interest rates decline after we enter into a hedging agreement, our interest
expense would be higher than the underlying floating rate and could result in us
making payments to unwind such agreements. The Company has entered into an
interest rate swap agreement effective October 12, 1999 which converts $100
million of its variable rate debt to fixed rate debt to reduce the Company's
market risk from changes in interest rates. The interest rate swap agreement
expires April 12, 2000.
The Company's future earnings, cash flow and fair values relevant to
financial instruments are dependent upon prevailing market rates. Market risk is
the risk of loss from adverse changes in market prices and interest rates. The
Company manages its risk by matching projected cash inflows from operating
activities, financing activities and investing activities with projected cash
outflows to fund debt payments, acquisitions, capital expenditures,
distributions, and other cash requirements. The Company also uses certain
derivative financial instruments at times to limit market risk. Interest rate
protection agreements are used to convert floating rate debt to a fixed rate
basis or to hedge anticipated financing transactions. Derivatives are used for
hedging purposes rather than speculation. The Company does not enter into
financial instruments for trading purposes.
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<PAGE>
If the market rates of interest on the Company's variable rate debt change
by 10% (or approximately 56 basis points) the Company's interest expense would
change by approximately $2.7 million, assuming the amount outstanding under the
variable rate credit facilities remains at $483.5 million, the balance at
December 31, 1999. Furthermore book value of these variable interest credit
facilities approximates market value at December 31, 1999.
A change in interest rates generally does not impact future earnings and
cash flows for fixed rate debt instruments, but as fixed rate debt matures and
if additional debt is acquired to fund the repayments under maturing facilities,
future earnings and cash flows may be impacted by changes in interest rates.
This impact would be realized in the periods subsequent to debt maturities. The
following is a summary of the fixed rate mortgages and senior unsecured debt
maturities (in thousands):
2000 $ 197,567
2001 100,223
2002 44,627
2003 55,224
2004 171,400
2005 & thereafter 691,330
-----------
$ 1,260,371
===========
Assuming the repayments of fixed rate borrowings are made in accordance
with the terms and conditions of the respective credit arrangements, a 10
percent change in the market interest rate for the respective fixed rate debt
instruments would change the fair value of the Company's fixed rate debt by
approximately $25 million. The estimated fair market value of the fixed rate
debt instruments and the senior unsecured notes at December 31, 1999 was $659.0
million and $584.8 million, respectively.
Because we have made loans to foreign affiliates, Omni UK and LUX, we are
exposed to risks that there will be a significant change in the rate of exchange
between the United States dollar and various foreign currencies, as well as the
possibility of the imposition or modification of exchange controls by
governments or monetary authorities. These risks generally depend on factors
beyond our control, such as economic, financial and political events and the
supply and demand for various currencies. We may invest in other entities with
operations in foreign countries, and if we do, the same risks will apply to the
currencies utilized in those countries. The Company's current exposure to
foreign currency fluctuations is not significant.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data included in this Annual
Report on Form 10-K are listed in Part IV, Item 14(a).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is hereby incorporated by reference
to the material appearing in Part I of this Annual Report on Form 10-K and in
the Notice of Annual Meeting of Stockholders to be held on May 4, 2000 (the
"Proxy Statement").
Item 11. Executive Compensation
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Executive
Compensation."
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<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Voting
Securities and Principal Holders Thereof."
Item 13. Certain Relationships and Related Transactions
The information required by this item is hereby incorporated by reference
to the material appearing in the Proxy Statement under the caption "Certain
Relationships and Transactions."
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
14(a)(1) Financial Statements
Reference is made to the Index to Financial Statements and Schedule on
page F-1
14(a)(2) Financial Statement Schedule
Reference is made to the Index to Financial Statements and Schedule on
page S-1.
14(a)(3) Exhibits
3.1 Amendment and Restatement of Articles of Incorporation of CarrAmerica
Realty Corporation, as amended on April 29, 1996 and April 30, 1996
(incorporated by reference to the same numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996).
3.2 Articles Supplementary Relating to Series A Cumulative Convertible
Redeemable Preferred Stock dated October 24, 1996 (incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996).
3.3 Articles Supplementary Relating to Series B Cumulative Redeemable
Preferred Stock dated August 8, 1997 (incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
3.4 Articles Supplementary Relating to Series C Cumulative Redeemable
Preferred Stock dated October 30, 1997 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated and filed
on November 6, 1997).
3.5 Articles Supplementary Relating to Series D Cumulative Redeemable
Preferred Stock dated December 17, 1997 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated December
16, 1997 and filed on December 17, 1997).
3.6 Articles of Amendment of Amendment and Restatement of Articles of
Incorporation of CarrAmerica Realty Corporation (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998).
3.7 Second Amendment and Restatement of By-laws of CarrAmerica Realty
Corporation (incorporated by references to Exhibit 3.1 to the Company's
Current Report on Form 8-K filed on February 12, 1997).
3.8 Amendment to the Second Amendment and Restatement of By-Laws of
CarrAmerica Realty Corporation (incorporated by reference to Exhibit
3.2 to the Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998).
3.9 Amendment to the Second Amendment and Restatement of By-laws of
CarrAmerica Realty Corporation (incorporated by reference to Exhibit
3.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998).
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<PAGE>
4.1 Indenture, dated as of July 1, 1997, by and among the Company, as
Issuer, CarrAmerica Realty, L.P., as Guarantor, and Bankers Trust
Company, as Trustee, Relating to the Company's 7.20% Notes due 2004 and
7.375% Notes due 2007 (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997).
4.2 Indenture, dated as of February 23, 1998, by and among the Company, as
Issuer, CarrAmerica Realty, L.P., as Guarantor, and Bankers Trust
Company, as Trustee, Relating to the Company's 6.625% Notes due 2005
and 6.875% Notes due 2008, (incorporated by reference to Exhibit 4.2 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1997).
4.3 Indenture, dated as of October 1, 1998 by and among the Company, as
Issuer, CarrAmerica Realty, L.P., as Guarantor, and Bankers Trust
Company, as Trustee, (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on October 2, 1998).
10.1 Second Amended and Restated Agreement of Limited Partnership of
CarrAmerica Realty, L.P., dated May 9, 1997 (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997).
10.2 First Amendment to Second Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated October 6, 1997
(incorporated by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.3 Second Amendment to Second Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated December 12, 1997
(incorporated by reference to Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.4 Third Amendment to Second Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated December 31, 1997
(incorporated by reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.5 Fourth Amendment to Second Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated as of December 31, 1998
(incorporated by reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998).
10.6 Third Amended and Restated Agreement of Limited Partnership of Carr
Realty, L.P., dated March 5, 1996, as amended (incorporated by
reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996).
10.7 First Amendment to Third Amended and Restated Agreement of Limited
Partnership of Carr Realty, L.P., dated as of January 22, 1998
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998).
10.8 Second Amendment to Third Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated as of February 17, 1998
(incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998).
10.9 Third Amendment to Third Amended and Restated Agreement of Limited
Partnership of CarrAmerica Realty, L.P., dated as of May 8, 1998
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998).
10.10 1993 Carr Realty Option Plan (incorporated by reference to Exhibit 10.3
of the Company's Registration Statement on Form S-11, No. 33-53626).
10.11 Non-Employee Director Stock Option Plan (incorporated by reference to
the Company's Registration Statement on Form S-8, No. 33-92136).
10.12 First Amendment to CarrAmerica Realty Corporation 1995 Non-Employee
Director Stock Option Plan (incorporated by reference to Exhibit 10.12
to the Company's Annual Report on Form 10-K for the year ended December
31, 1998).
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<PAGE>
10.13 Second Amendment to CarrAmerica Realty Corporation 1995 Non-Employee
Director Stock Option Plan (incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999).
10.14 1997 Stock Option and Incentive Plan (incorporated by reference to
Exhibit 10.5 to the Company's annual report on Form 10-K for the year
ended December 31, 1996).
10.15 First Amendment to CarrAmerica Realty Corporation 1997 Stock Option and
Incentive Plan (incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1998).
10.16 Second Amendment to CarrAmerica Realty Corporation 1997 Stock Option
and Incentive Plan (incorporated by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1998).
10.17 Third Amendment to CarrAmerica Realty Corporation 1997 Stock Option and
Incentive Plan (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1998).
10.18 Fourth Amendment to CarrAmerica Realty Corporation 1997 Stock Option
and Incentive Plan (incorporated by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999).
10.19 Fifth Amendment to CarrAmerica Realty Corporation 1997 Stock Option and
Incentive Plan.
10.20 Noncompetition and Restriction Agreement by and among The Oliver Carr
Company, Oliver T. Carr, Jr., Carr Realty Corporation and Carr Realty,
L.P. (incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement on Form S-11, No. 33-53626).
10.21 Consolidated, Amended and Restated Promissory Note dated March 19, 1999
from Carr Realty, L.P. to the Northwestern Mutual Life Insurance
Company.
10.22 Consolidated, Amended and Restated Deed of Trust and Security Agreement
dated March 19, 1999 by and among Carr Realty, L.P., William H. Norton,
and the Northwestern Mutual Life Insurance Company.
10.23 Stock Purchase Agreement, dated November 5, 1995, by and among Carr
Realty Corporation, Security Capital Holdings, S.A. and Security
Capital U.S. Realty (incorporated by reference to Exhibit 5.1 to the
Company's Current Report on Form 8-K filed November 6, 1995).
10.24 Stockholders Agreement, dated April 30, 1996 by and among Carr Realty
Corporation, Carr Realty, L.P., Security Capital Holdings, S.A. and
Security Capital U.S. Realty (incorporated by reference to Exhibit 2.2
of Security Capital U.S. Realty's Schedule 13D dated April 30, 1996).
10.25 Registration Rights Agreement, dated April 30, 1996 by and among Carr
Realty Corporation, Security Capital Holdings, S.A. and Security
Capital U.S. Realty (incorporated by reference to Exhibit 2.3 of
Security Capital U.S. Realty's Schedule 13D dated April 30, 1996).
10.26 Fourth Amended and Restated Credit Agreement, dated August 27, 1998 by
and among CarrAmerica Realty Corporation, Carr Realty, L.P.,
CarrAmerica Realty, L.P., Morgan Guaranty Trust Company of New York,
Commerzbank Aktiengesellschaft, New York Branch, NationsBank, N.A.,
Wells Fargo Bank, National Association, Bank of America National Trust
and Savings Association, and the other banks listed therein
(incorporated by reference to Exhibit 10.15 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998).
10.27 Second Amended and Restated Credit Agreement, dated as of August 27,
1998, by and among HQ Global Workplaces, Inc., Inc., Morgan Guaranty
Trust Company of New York, J.P. Morgan Securities Inc., Commerzbank
Aktiengesellschaft, New York Branch, NationsBank, N.A., PNC Bank,
National Association, Bank of America National Trust and Savings
Association, Societe Generale, a French Banking Corporation, acting
through its Southwest Agency, and other banks listed therein
(incorporated
40
<PAGE>
by reference to Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998).
10.28 Amended and Restated Guaranty Agreement, dated as of August 27, 1998,
made by CarrAmerica Realty Corporation in favor of Morgan Guaranty
Trust Company, as bank and lead agent (incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.)
11.1 Statement regarding computation of per share earnings; reference is
made to Notes to Financial Statements, Footnote 1(L).
21.1 List of Subsidiaries.
23.1 Consent of KPMG LLP, dated March 24, 2000.
24.1 Power of Attorney of Oliver T. Carr, Jr.
24.2 Power of Attorney of Ronald Blankenship.
24.3 Power of Attorney of Andrew F. Brimmer.
24.4 Power of Attorney of A. James Clark.
24.5 Power of Attorney of Timothy Howard.
24.6 Power of Attorney of Caroline S. McBride.
24.7 Power of Attorney of William D. Sanders.
24.8 Power of Attorney of Wesley S. Williams, Jr.
27.1 Financial Data Schedule as of and for the year ended December 31, 1999.
27.2 Financial Data Schedule as of and for the year ended December 31, 1998.
14(b) Reports on Form 8-K
Form 8-K filed November 15, 1999, regarding Supplemental Financial and
Operating Information of the Company as of November 5, 1999.
14(c) Exhibits
The list of exhibits filed with this report is set forth in response to
Item 14(a)(3). The required exhibit index has been filed with the exhibits.
14(d) Financial Statements
None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registration has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the District of Columbia on March 24, 2000.
CARRAMERICA REALTY CORPORATION
a Maryland corporation
By: /s/ THOMAS A. CARR
------------------
Thomas A. Carr
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following person on behalf
of the registrant and in the capacities indicated on March 24, 2000.
Signature Title
--------- -----
*
------------------------------ Chairman of the Board
Oliver T. Carr, Jr. and Director
/s/ THOMAS A. CARR
------------------------------ President, Chief Executive Officer and
Thomas A. Carr Director
/s/ RICHARD F. KATCHUK
------------------------------ Chief Financial Officer
Richard F. Katchuk
*
------------------------------ Director
Ronald Blankenship
*
------------------------------ Director
Andrew F. Brimmer
*
------------------------------ Director
A. James Clark
*
------------------------------ Director
Timothy Howard
*
------------------------------ Director
Caroline S. McBride
*
------------------------------ Director
William D. Sanders
*
------------------------------ Director
Wesley S. Williams, Jr.
By: RICHARD F. KATCHUK
-------------------------
Richard F. Katchuk
Attorney-in-fact
42
<PAGE>
CARRAMERICA REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements and Schedule of
CarrAmerica Realty Corporation and Subsidiaries and the Independent Auditors'
Reports thereon are attached hereto:
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
Consolidated Balance Sheets as of December 31, 1999 and 1998..................................... F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997........................................................ F-3
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997........................................................ F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997........................................................ F-5
Notes to Consolidated Financial Statements....................................................... F-7
Independent Auditors' Report..................................................................... F-26
</TABLE>
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<S> <C>
Independent Auditors' Report..................................................................... F-27
Schedule III: Consolidated Real Estate and Accumulated Depreciation as of
December 31, 1999 for CarrAmerica Realty Corporation and Subsidiaries................... S-1
</TABLE>
All other schedules are omitted because they are not applicable, or because the
required information is included in the financial statements or notes thereto.
F-1
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except for per share and share amounts)
1999 1998
---- ----
<S> <C> <C>
Assets
- ------
Rental property:
Land $ 674,390 $ 692,484
Buildings 2,082,533 2,045,168
Tenant improvements 304,983 192,211
Furniture, fixtures and equipment 5,916 4,790
----------- ------------
3,067,822 2,934,653
Less - accumulated depreciation (323,455) (257,215)
----------- ------------
Total rental property 2,744,367 2,677,438
Land held for development 104,050 119,141
Construction in progress 116,013 347,294
Cash and cash equivalents 51,886 26,136
Restricted cash and cash equivalents 12,475 20,706
Accounts and notes receivable 34,734 35,866
Investments 67,143 78,163
Accrued straight-line rents 47,764 39,273
Tenant leasing costs, net of accumulated amortization
of $31,667 in 1999 and $21,878 in 1998 58,848 42,552
Deferred financing costs, net of accumulated amortization
of $12,309 in 1999 and $7,401 in 1998 15,621 18,446
Prepaid expenses and other assets, net of accumulated
depreciation and amortization of $10,896 in 1999 and $8,239 in 1998 18,503 24,671
Net assets of discontinued operations 207,668 197,574
----------- ------------
$ 3,479,072 $ 3,627,260
=========== ============
Liabilities, Minority Interest, and Stockholders' Equity
- --------------------------------------------------------
Liabilities
Mortgages and notes payable 1,603,371 1,610,859
Accounts payable and accrued expenses 68,643 85,105
Rent received in advance and security deposits 27,757 28,542
----------- ------------
Total liabilities 1,699,771 1,724,506
Minority interest 92,586 88,815
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 66,826,288 shares at December 31, 1999 and 71,760,172
shares at December 31, 1998. 668 718
Additional paid in capital 1,816,990 1,926,057
Cumulative dividends in excess of net income (131,038) (112,931)
----------- ------------
Total stockholders' equity 1,686,715 1,813,939
----------- ------------
Commitments and contingencies
$ 3,479,072 $ 3,627,260
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Operating revenues:
Rental revenue:
Minimum base rent $ 422,440 $ 379,502 $ 274,603
Recoveries from tenants 58,426 46,947 37,134
Parking and other tenant charges 17,983 14,006 13,765
--------- ---------- ----------
Total rental revenue 498,849 440,455 325,502
--------- ---------- ----------
Real estate service income 17,054 16,167 15,998
--------- ---------- ----------
Total operating revenues 515,903 456,622 341,500
--------- ---------- ----------
Operating expenses:
Property expenses
Operating expenses 122,676 109,514 84,432
Real estate taxes 44,529 40,174 30,394
Interest expense 89,057 71,419 51,455
General and administrative 38,894 32,356 21,839
Depreciation and amortization 119,700 100,810 75,609
--------- ---------- ----------
Total operating expenses 414,856 354,273 263,729
--------- ---------- ----------
Operating income 101,047 102,349 77,771
--------- ---------- ----------
Other income:
Interest Income 3,936 3,989 2,231
Equity in earnings of unconsolidated partnerships 5,167 5,282 655
Gain (loss) on treasury locks 4,489 (13,729) --
--------- ---------- ----------
Total other income 13,592 (4,458) 2,886
--------- ---------- ----------
Income from continuing operations before
income taxes, minority interests, gain on sale
of assets and extraordinary item 114,639 97,891 80,657
Income taxes (783) -- --
Minority Interest (17,599) (16,072) (8,277)
--------- ---------- ----------
Income from continuing operations before gain
on sale of assets and extraordinary item 96,257 81,819 72,380
Discontinued operations - income (loss) from Executive
Suites operations (less applicable income tax expense
(benefit) of ($816), $1,898 and ($41), respectively). (7,862) 6,518 940
--------- ---------- ----------
Income before gain on sale of assets and
extraordinary item 88,395 88,337 73,320
Gain on sale of assets, net of income taxes 54,822 38,160 5,420
Extraordinary item-loss on early extinguishment of debt -- -- (608)
--------- ---------- ----------
Net income 143,217 126,497 78,132
========= ========== ==========
Basic net income per common share
Income (loss) from continuing operations 0.90 0.67 1.11
Discontinued operations (0.12) 0.10 0.02
Gain on sale of assets, net 0.81 0.56 0.10
Extraordinary item -- -- (0.01)
--------- ---------- ----------
Net income 1.59 1.33 1.22
========= ========== ==========
Diluted net income per share
Income (loss) from continuing operations 0.90 0.67 1.11
Discontinued operations (0.12) 0.09 0.02
Gain on sale of assets, net 0.81 0.56 0.10
Extraordinary item -- -- (0.01)
--------- ---------- ----------
Net income 1.59 1.32 1.22
========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Dividends in
Additional excess of
Preferred Common Preferred Common paid-in cumulative
shares shares stock stock capital earnings Total
----------- ---------- ---------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 1,740,000 43,789,073 $ 17 $ 438 $ 837,355 $ (50,332) $ 787,478
Sales of common stock -- 15,032,815 -- 151 400,781 -- 400,932
Sales of Preferred Stock 8,800,000 -- 88 -- 386,843 -- 386,931
Shares issued in exchange
for Unit redemptions -- 118,722 -- 2 3,955 -- 3,957
Exercise of stock options -- 93,168 -- -- 280 -- 280
Conversion of Series A
Cumulative Convertible
Redeemable Preferred
Stock to Common Stock (960,000) 960,000 (9) 9 -- -- --
Net income -- -- -- -- -- 78,132 78,132
Dividends Paid -- -- -- -- -- (105,013) (105,013)
---------- ----------- ------- ------ ----------- ----------- ----------
Balance at December 31, 1997 9,580,000 59,993,778 96 600 1,629,214 (77,213) 1,552,697
Sales of common stock -- 11,612,781 -- 116 296,373 -- 296,489
Shares issued in exchange
for Unit redemptions -- 51,613 -- 1 452 -- 453
Exercise of stock options -- 2,000 -- -- 18 -- 18
Conversion of Series A
Cumulative Convertible
Redeemable Preferred
Stock to Common Stock (100,000) 100,000 (1) 1 -- -- --
Net income -- -- -- -- -- 126,497 126,497
Dividends Paid -- -- -- -- -- (162,215) (162,215)
---------- ----------- ------- ------ ----------- ----------- ----------
Balance at December 31, 1998 9,480,000 71,760,172 95 718 1,926,057 (112,931) 1,813,939
Repurchase of common stock -- (5,000,000) -- (50) (109,752) -- (109,802)
Shares issued in exchange
for Unit redemptions -- 38,430 -- -- 551 -- 551
Exercise of stock options -- 27,686 -- -- 134 -- 134
Net income -- -- -- -- -- 143,217 143,217
Dividends Paid -- -- -- -- -- (161,324) (161,324)
---------- ----------- ------- ------ ----------- ----------- ----------
Balance at December 31, 1999 9,480,000 66,826,288 $ 95 $ 668 $ 1,816,990 $ (131,038) $1,686,715
========== =========== ======= ======= =========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 143,217 126,497 78,132
---------------- ---------------- -------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 140,349 111,022 76,958
Minority interest in income 17,415 16,076 8,273
Gain on sale of assets (54,822) (38,160) (5,420)
Equity in earnings of unconsolidated partnerships (5,167) (5,282) (655)
Stock and units issued in connection with compensation plans 2,356 312 --
Extraordinary item-loss on early extinguishment of debt -- -- 608
Other 1,825 685 --
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable and notes receivable (10,736) (6,605) (26,422)
Increase in accrued straight-line rents (14,331) (13,919) (9,533)
Additions to tenant leasing costs (13,049) (12,949) (10,671)
(Increase) decrease in prepaid expenses and other assets (23,728) 7,453 (22,615)
(Decrease) increase in accounts payable and accrued expenses (16,027) 37,066 34,654
Increase in rent received in advance and security deposits 7,700 17,556 9,768
---------------- ---------------- -------------
Total adjustments 31,785 113,255 54,945
---------------- ---------------- -------------
Net cash provided by operating activities 175,002 239,752 133,077
---------------- ---------------- -------------
Cash flows from investing activities:
Acquisition and development of rental property (78,957) (337,080) (728,304)
Acquisition and development of executive suites assets (83,709) (217,439) (45,736)
Additions to land held for development (3,149) (132,416) (96,225)
Additions to construction in progress (275,942) (400,391) (180,104)
Distributions from unconsolidated partnerships 19,424 5,852 1,574
Investments in unconsolidated partnerships (5,191) (82,120) (7,398)
Acquisition of minority interest (2,231) -- --
Decrease (increase) in restricted cash and cash equivalents 25,586 (15,802) (6,019)
Proceeds from sales of rental property 487,883 194,075 63,479
---------------- ---------------- -------------
Net cash provided by (used by) investing activities 83,714 (985,321) (998,733)
---------------- ---------------- -------------
Cash flows from financing activities:
Net proceeds from sales of common and preferred stock -- 296,518 788,143
Repurchase of common stock (109,802) -- --
Net borrowings (repayments) on unsecured credit facilities 1,000 323,000 (55,500)
Proceeds from issuance of senior unsecured notes -- 350,000 275,000
Proceeds from refinancing of existing mortgages 51,980 -- --
Repayment of mortgages payable (13,468) (25,412) (19,305)
Contributions from minority interests 6,066 3,622 1,502
Dividends paid (161,324) (162,215) (105,013)
Deferred financing costs (1,516) (16,821) (4,179)
Distributions to minority interests (11,302) (10,932) (9,276)
Disposition of mortgage payable from sale of rental property -- -- (9,508)
---------------- ---------------- -------------
Net cash (used by) provided by financing activities (238,366) 757,760 861,864
---------------- ---------------- -------------
Effect of foreign currency translation (1,517) 463 --
---------------- ---------------- -------------
Increase (decrease) in unrestricted cash
and cash equivalents 18,833 12,654 (3,792)
Unrestricted cash and cash equivalents, beginning of the period 36,499 23,845 27,637
---------------- ---------------- -------------
Unrestricted cash and cash equivalents, end of the period $ 55,332 36,499 23,845
================ ================ =============
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $26,485 in
1999,
$30,482 in 1998 and $12,571 in 1997) $ 95,221 81,428 41,170
================ ================ =============
</TABLE>
F-5
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997
- ---------------------------------------------------------------------------
(Continued)
Supplemental disclosure of noncash investing and financing activities:
(a) During 1998, the Company funded a portion of the aggregate purchase
price of its property acquisitions by assuming $31.6 million of debt
and liabilities and by issuing $10.0 million of units.
(b) During 1997, the Company funded a portion of the aggregate purchase
price of its property acquisitions by assuming $182.8 million of debt
and liabilities and by issuing $26.0 million of units.
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(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 primarily are located in 14 suburban markets
across the United States.
(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 majority-owned/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.
The Company conducts an executive suites business through its affiliates HQ
Global Workplaces, Inc. ("HQ Global"), OmniOffices (UK) Limited ("Omni UK"), and
OmniOffices (Lux) 1929 Holding Company S.A. ("LUX"). On January 20, 2000, the
Company, HQ Global, VANTAS Incorporated ("VANTAS") and Reckson Service
Industries, Inc. d/b/a FrontLine Capital Group ("FrontLine Capital Group")
entered into several agreements pursuant to which a series of transactions will
occur, including (i) the merger of VANTAS with and into HQ Global, (ii) the
acquisition by FrontLine Capital Group of certain shares of common stock of HQ
Global from the Company and other stockholders of HQ Global, and (iii) the
acquisition by HQ Global from the Company of the Company's debt and equity
interests in Omni UK and LUX. Following the completion of these transactions,
FrontLine Capital Group will own a substantial majority of the outstanding stock
of HQ Global, with the Company retaining a minority interest in HQ Global. The
net assets and results of the executive suites business are reported as a
discontinued operation and certain reclassifications of prior year information
have been made to conform to the current year presentation.
(c) Rental Property
Rental property is recorded at cost less accumulated depreciation (which is
less than the fair value of the rental property). Depreciation is computed on
the straight-line basis over the estimated useful lives of the assets, as
follows:
<TABLE>
<S> <C>
Base Building.............................................. 30 to 50 years
Building components........................................ 7 to 20 years
Tenant improvements........................................ Terms of the leases or useful
lives, whichever is shorter
Leasehold improvements, furniture, fixtures and equipment.. 5 to 15 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations are capitalized.
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets.
The Company reviews its rental property to determine the point at which the
asset is under contract for sale, with contingencies waived and nonrefundable
earnest money posted. If an asset is subject to these conditions, the asset is
reclassified to "Assets Available for Sale", and depreciation is discontinued.
F-7
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(d) Development Property
Land held for development and construction in progress is carried at cost.
Specifically identifiable direct and indirect, development, construction and
external acquisition costs are capitalized including, where applicable, salaries
and related costs, real estate taxes, interest and certain pre-construction
costs essential to the development of a property.
(e) Tenant Leasing Costs
Fees and costs incurred in the successful negotiation of leases have been
deferred and are being amortized on a straight-line basis over the terms of the
respective leases.
(f) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain
financing and are being amortized over the terms of the respective loans on a
basis which approximates the interest method.
(g) Goodwill, Real Estate Service Contracts and Other Intangibles
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired in the acquisition of the now discontinued executive
suites businesses, is amortized on the straight-line basis over 30 years.
Real estate service contracts and other intangible assets represent the
fair value of assets acquired and are amortized on the straight-line basis over
their expected lives.
The Company assesses the recoverability of these intangible assets by
determining whether the balance can be recovered over its remaining life through
undiscounted future operating cash flows of the related assets or operations
acquired. The amount of impairment loss, if any, is measured as the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
The assessment of the recoverability of these intangible assets will be impacted
if estimated future operating cash flows are not achieved.
(h) Fair Value of Financial Instruments
The carrying amount of the following financial instruments approximates
fair value because of their short-term maturity: cash and cash equivalents;
accounts and notes receivable; accounts payable and accrued expenses.
(i) Revenue Recognition
The Company reports base rental revenue for financial statement purposes
straight-line over the terms of the respective leases. Accrued straight-line
rents represent the amount that straight-line rental revenue exceeds rents
collected in accordance with the lease agreements. Management, considering
current information and events regarding the tenants' ability to fulfill their
lease obligations, considers accrued straight-line rents to be impaired if it is
probable that the Company will be unable to collect all rents due according to
the contractual lease terms. If accrued straight-line rents associated with a
tenant are considered to be impaired, the amount of the impairment is measured
based on the present value of expected future cash flows. Impairment losses, if
any, are recorded through a loss on the write-off of assets. Cash receipts on
impaired accrued straight-line rents are applied to reduce the remaining
outstanding balance and as rental revenue, thereafter.
Real estate service revenue for certain properties it manages, leases and
develops for third parties is recognized when services are performed.
(j) Income and Other Taxes
The Company qualifies as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended. A REIT will generally not be subject
to federal income taxation on that portion of its income that qualifies as REIT
taxable income to the extent that it distributes at least 95 percent of its
taxable income to its shareholders and complies with certain other requirements.
Accordingly, no provision has been made for
F-8
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
federal income taxes for the Company and certain of its subsidiaries in the
accompanying consolidated financial statements.
Certain subsidiaries, organized as partnerships, of the Company are subject
to District of Columbia franchise tax which is included in income taxes in the
accompanying consolidated financial statements.
CarrAmerica Development, Inc. ("CarrAmerica Development"), the Company's
development affiliate, Carr Real Estate Services, Inc. ("Carr Services, Inc."),
the Company's real estate service affiliate, HQ Global, Omni UK and LUX, file
separate tax returns and are subject to federal, state and local income taxes as
well as certain foreign taxes. The Company uses the asset and liability method
of accounting for income taxes for these affiliates as measured by enacted tax
rules and regulations
(k) Hedging Transactions
From time to time, the Company enters into interest rate lock and collar
agreements that are designed to hedge against the impact of interest rate
fluctuations on certain of the Company's existing and probable future long-term
debt instruments. Because these agreements qualify for hedge accounting
treatment, any gains or losses are recognized as adjustments to interest expense
over the lives of the underlying debt instruments. For hedge agreements that are
terminated early or that are associated with anticipated future debt
instruments, gains or losses are deferred until those debt instruments are
entered into. If the Company determines it is no longer probable that the
Company will enter into an anticipated debt instrument, or the investment no
longer effectively hedges the existing or probable future long-term debt
instruments, any related deferred gains or losses are recognized in the current
period.
(l) Per Share Data and Dividends
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for income from continuing operations before
extraordinary item.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998 Year Ended December 31, 1997
----------------------------- ---------------------------- -----------------------------
Income Shares Per Income Shares Per Income Shares Per
(000's) (000's) Share (000's) (000's) Share (000's) (000's) Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS $115,631 67,858 $1.71 $ 84,408 68,577 $ 1.23 $ 66,809 54,873 $ 1.21
Effect of Dilutive
Securities
Stock Options -- 124 -- -- 201 -- -- 205 --
Units in Carr Realty, LP -- -- -- -- -- -- 5,530 4,519 --
-------------------------------------------------------------------------------------------------
Diluted EPS $115,631 67,982 $1.71 $ 84,408 68,778 $ 1.23 $ 72,339 59,597 $ 1.21
=================================================================================================
</TABLE>
Income from continuing operations before extraordinary item has been
reduced by preferred stock dividends of $35,448, $35,571 and $10,991 for 1999,
1998 and 1997, respectively.
The effects of units and Series A Preferred Stock are not included in the
computation of diluted EPS for a given year if their effect is antidilutive.
Following is the income tax status of common stock dividends paid during the
last three calendar years:
1999 1998 1997
---- ---- ----
Ordinary income 78% 92% 90%
Capital Gain 22% -- --
Return of Capital -- 8% 10%
(m) Cash Equivalents
For the purposes of reporting cash flows, the Company considers all highly
liquid investments with a maturity of three months or less at the time of
purchase to be cash equivalents.
F-9
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(n) Accumulated Other Comprehensive Income
The financial statements of Omni UK and LUX, foreign affiliates, have been
prepared in the respective local currency and translated into U.S. dollars based
on the current exchange rate at the end of the period for assets and liabilities
and at an average exchange rate for the period on the statement of operations.
Translation adjustments have no effect on net income and are in other net assets
of discontinued operations. Comprehensive income of the Company represents net
income and these translation adjustments. Comprehensive income amounted to
$141.7 million in 1999 and $127.0 million in 1998.
(o) Segment Operations
The Company's reportable segments are real estate property operations and
development operations. Other business activities and operating segments that
are not reportable are included in other operations.
(p) Stock / Unit Option Plans
The Company accounts for its option and unit plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. Compensation expenses
would be recorded only if the current market price of the underlying unit or
stock on the date of grant exceeded the exercise price.
(q) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting 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 as amended is effective for the Company beginning
January 1, 2001. The Company has not yet determined the impact of this
pronouncement on its financial position and operations.
(r) Reclassifications
Certain reclassifications of the prior years' amounts have been made to
conform to the current period's presentation.
(2) Mortgages, Unsecured Notes and Credit Facility
The Company's mortgages payable, unsecured credit facility and senior
unsecured notes are summarized as follows (in thousands):
December 31, December 31,
1999 1998
---- ----
Fixed rate mortgages $ 635,371 $ 596,859
Unsecured credit facility 343,000 389,000
Senior unsecured notes 625,000 625,000
---------- ----------
$1,603,371 $1,610,859
========== ==========
F-10
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Mortgages payable are collateralized by certain rental properties and
generally require monthly principal and/or interest payments. Mortgages payable
mature at various dates from November 2000 through September 2009. The weighted
average interest rate of mortgages payable was 8.04% at December 31, 1999 and
8.2% at December 31, 1998.
The Company has a $450.0 million unsecured credit facility with Morgan
Guaranty Trust Company of New York (Morgan), as agent for a group of banks. At
December 31, 1999, the credit facility bore interest, as selected by the
Company, at either (i) the higher of the prime rate or the Federal Funds Rate
for such day or (ii) an interest rate equal to 90 basis points above the 30 day
London Interbank Offered Rate (LIBOR). The Company has predominately selected
interest rates equal to 90 basis points above the 30 day LIBOR rate for initial
draws and upon the expiration of current LIBOR contracts. The credit facility
matures in August 2001. At December 31, 1999, the Company had $103.3 million
available for draw under the credit facility.
The Company's unsecured credit facility contains a number of financial and
other covenants with which the Company must comply including, but not limited
to, covenants relating to ratios of annual EBITDA (earnings before interest,
taxes, depreciation and amortization) to interest expense, annual EBITDA to debt
service, and total debt to tangible fair market value of the Company's assets,
and restrictions on the ability of the Company to make dividend distributions in
excess of 90% of funds from operations. Availability under the unsecured credit
facility is also limited to a specified percentage of the Company's unsecured
properties.
The Company has senior unsecured notes outstanding in the aggregate
principal amount of $625 million. These notes are in the form of $150 million of
6.625% notes due in 2000, $150 million of 7.20% notes due in 2004, $100 million
of 6.625% notes due in 2005, $125 million of 7.375% notes due in 2007 and $100
million of 6.875% notes due in 2008. The notes due in 2000, 2005 and 2008 were
issued in 1998. The notes due in 2004 and 2007 were issued in 1997. The
Company's senior unsecured notes contain various covenants with which the
Company must comply: limits on both the aggregate amount of indebtedness and
secured indebtedness the Company may have outstanding on a consolidated basis;
and, limits on the Company's required debt service payments. The senior
unsecured notes are unconditionally guaranteed by CarrAmerica Realty, L.P.
The annual maturities of debt as of December 31, 1999 are summarized as follows
(in thousands):
2000 $ 197,567/(1)/
2001 443,223/(2)/
2002 44,627
2003 55,224
2004 171,400/(3)/
2005 and thereafter 691,330/(4)/
----------
$1,603,371
==========
______________________
(1) Includes $150 million of senior unsecured notes, which mature in 2000.
(2) Includes $343 million outstanding under the Company's $450 million
unsecured line of credit.
(3) Includes $150 million of senior unsecured notes, which mature in 2004.
(4) Includes $325 million of senior unsecured notes, $100 million of which
matures in 2005, $125 million of which matures in 2007, and $100 million of
which matures in 2008.
F-11
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Restricted cash and cash equivalents consists primarily of escrow deposits
required by lenders to be used for future building renovations, tenant
improvements or as collateral for letters of credit.
Based on the borrowing rates available to the Company for fixed rate
mortgages payable with similar terms and average maturities, the estimated fair
value of these mortgages at December 31, 1999 and 1998 was approximately $659.0
million and $615.5 million, respectively. The fair market value of the senior
unsecured notes payable at December 31, 1999 and 1998 was $584.8 million and
$610.1 million, respectively. The fair market value of the unsecured credit
facility approximates book value.
(3) Discontinued Operations
On January 20, 2000, the Company, HQ Global, VANTAS and FrontLine Capital
Group entered into several agreements pursuant to which a series of transactions
will occur, including (i) the merger of VANTAS with and into HQ Global, (ii) the
acquisition by FrontLine Capital Group of certain shares of common stock of HQ
Global from the Company and other stockholders of HQ Global, and (iii) the
acquisition by HQ Global from the Company of the Company's debt and equity
interests in Omni UK and LUX. Following the completion of these transactions,
FrontLine Capital Group will own a substantial majority of the outstanding stock
of HQ Global, with the Company retaining a minority interest in HQ Global.
HQ Global has $140.5 million outstanding under a $200.0 million credit
facility with Morgan. The Company unconditionally guarantees this credit
facility and the terms of the HQ Global credit facility with respect to interest
rate and maturity are the same as the terms of the Company's unsecured credit
facility with Morgan. The borrowings outstanding under the HQ Global unsecured
credit facility are included within net assets of discontinued operations in the
accompanying balance sheets.
The assets and liabilities of the executive suites businesses at December
31, 1999 and 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Assets:
Rental property, net $ 98,880 53,673
Goodwill, net of accumulated amortization 253,050 221,570
Other assets 87,000 88,555
-------- -------
Total assets $438,930 363,798
Liabilities and other:
Unsecured credit facility 140,500 93,500
Other liabilities 81,256 67,812
-------- -------
221,756 161,312
Minority interest 10,560 4,449
Foreign currency translation adjustment (1,054) 463
-------- -------
Net assets of discontinued operations $207,668 197,574
======== =======
</TABLE>
Executive Suites revenue (included in discontinued operations in the
statement of operations) represents rental income from executive suites
customers and income from various services provided to these customers, such as,
telephone and administrative support. Such revenue is recognized as earned.
Total revenues for the executive suites operations were $237.2 million for 1999;
$145.9 million for 1998 and $17.9 million for 1997.
F-12
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The executive suite businesses lease certain commercial office space for
its operations under noncancellable operating leases with initial terms ranging
from 10 to 15 years. Future minimum lease payments required under these
operating leases as of December 31, 1999 were (in thousands) $83,018 for 2000;
$85,384 for 2001; $80,950 for 2002; $76,816 for 2003; $71,766 for 2004 and
$393,638 for 2005 and thereafter.
The Company does not expect a loss from disposal of the executive suites
businesses. The merger is scheduled to close on or before April 30, 2000. The
proposed transaction is subject to satisfaction of a number of conditions. There
can be no assurance that the proposed transaction will be consummated.
(4) Minority Interest
In conjunction with the formation of the Company and its majority-owned
subsidiary, Carr Realty, L.P., persons contributing interests in properties to
Carr Realty, L.P. had the right to elect to receive either common stock of the
Company or Units in Carr Realty, L.P. In addition, the Company has acquired
certain assets since its formation by issuing distribution paying Units and non-
distribution paying Units of Carr Realty, L.P. and CarrAmerica Realty, L.P. The
non-distribution paying Units are not entitled to any distributions until they
automatically convert into distribution paying Units at various dates in the
future. During the year ended December 31, 1999, 107,919 non-distribution paying
units of CarrAmerica Realty, L.P. were converted to 108,673 distribution paying
units. Each distribution paying Unit, subject to certain restrictions, may be
redeemed for either one share of common stock or, at the option of the Company,
cash equal to the fair market value of a share of common stock at the time of
the redemption. When a Unitholder redeems a distribution paying Unit for a share
of common stock or cash, minority interest is reduced and the Company's
investment in Carr Realty, L.P. or CarrAmerica Realty, L.P., as the case may be,
is increased. During the years ended December 31, 1999 and 1998, 38,430 and
51,613 distribution paying Units, respectively, of Carr Realty, L.P. were
redeemed for common stock of the Company.
The following table sets forth the common stock and preferred stock which
is convertible into common stock, of the Company and Units of Carr Realty, L.P.
and CarrAmerica Realty, L.P. (in thousands):
<TABLE>
<CAPTION>
Common Convertible Distribution Non-Distribution
Stock Preferred Stock Paying Units Paying Units
Outstanding Outstanding Outstanding Outstanding
----------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
As of December 31:
1999 66,826 680 6,048 432
1998 71,760 680 5,978 540
1997 59,994 780 5,699 540
Weighted average for:
1999 67,858 680 6,003 495
1998 68,577 745 5,985 540
1997 54,873 1,322 5,381 540
</TABLE>
Minority interest in the accompanying consolidated financial statements relates
primarily to holders of units.
F-13
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(5) Investments in Unconsolidated Partnerships
The Company owns interests ranging from 15% to 50% in real estate property
operations and development operations through unconsolidated partnerships. The
Company had six investments in 1999, eight investments in 1998 and five
investments in 1997 in these partnerships. The combined condensed financial
information for the unconsolidated partnerships is as follows (in thousands):
Real Estate Property Operations
December 31,
Balance Sheets 1999 1998
------------- -------------
Assets
------
Rental property, net $ 188,463 248,004
Cash and cash equivalents 4,549 19,398
Other assets 36,821 47,379
------------- -----------
$ 229,833 314,781
============= ===========
Liabilities and Partners' Deficit
---------------------------------
Liabilities:
Notes payable $ 230,830 291,803
Other liabilities 18,637 27,831
------------- -----------
Total liabilities 249,467 319,634
Partners' (deficit) (19,634) (4,853)
------------- -----------
$ 229,833 314,781
============= ===========
1999 1998 1997
--------- -------- --------
Statements of Operations
Revenue $ 39,825 90,734 82,583
Depreciation and amortization expense 7,370 11,331 10,217
Interest expense 19,464 26,123 26,257
Other expenses 11,371 47,853 42,335
--------- -------- --------
Net income $ 1,620 5,427 3,774
========= ======== ========
Development Operations
December 31,
Balance Sheets 1999 1998
--------- ---------
Assets
------
Land and construction in progress $ 47,134 22,213
Cash and cash equivalents 372 18,456
Other assets 994 1,667
---------- ----------
$ 48,500 42,336
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Notes payable $ 18,500 18,350
Other liabilities 78 313
----------- ----------
Total liabilities 18,578 18,663
Partners' Capital 29,922 23,673
----------- ----------
$ 48,500 42,336
=========== ==========
Statements of Operations 1999 1998 1997
------ ------ ------
Revenue $ -- -- --
Other expenses -- 197 --
------ ------ ------
Net loss $ -- (197) --
======= ====== ======
F-14
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
(6) Lease Agreements
The following table summarizes the real estate property operations future
minimum base rent to be received under noncancellable tenant leases and the
percentage of total rentable space under leases expiring each year, as of
December 31, 1999 (in thousands):
Future Percentage of
Minimum Total Space Under
Rent Leases Expiring
------------- ----------------------
2000 $ 433,809 8.4%
2001 414,197 9.4
2002 374,240 15.1
2003 308,522 14.0
2004 230,658 15.9
2005 & thereafter 644,992 37.2
-------------
$ 2,406,418
=============
The leases also provide for additional rent based on increases in the
Consumer Price Index (CPI) and increases in operating expenses. These increases
are generally payable in equal installments throughout the year.
The Company leases land beneath two office properties located in
metropolitan Washington, D.C. and one office property located in Santa Clara,
California. The Company also leases land adjacent to an office property in
Chicago. The initial terms of these leases range from 5 years to 99 years, with
the last lease maturing in the year 2086. The minimum base annual rental payment
associated with these leases is $2.4 million.
(7) Preferred Stock
The Company is authorized to issue 35,000,000 shares of Preferred Stock. On
October 25, 1996, the Company issued 1,740,000 shares of Series A Cumulative
Convertible Redeemable Preferred Stock ("Series A Preferred Stock") at $25 per
share. Dividends for the Series A Preferred Stock are cumulative from the date
of issuance and are payable quarterly in arrears in an amount per share equal to
the greater of (1) $1.75 per share per annum, or (2) the cash dividend paid on
the number of shares, or portion thereof, of the Company's common stock into
which a share of Series A Preferred Stock is convertible. The Series A Preferred
Stock has a liquidation preference of $25 per share. After April 25, 1997, each
share of Series A Preferred Stock became convertible, at the option of the
holder, into one share of the Company's common stock, subject to certain
conversion adjustments. As of December 31, 1999, 1,060,000 shares of Series A
Preferred Stock had been converted into the Company's common stock. After
October 25, 1999, each outstanding share of Series A Preferred Stock became
redeemable at the Company's option, at $25 per share, plus accrued and unpaid
dividends.
As of December 31, 1999, the following additional preferred stock issued by
the Company was outstanding:
Liquidation
Shares Issue Date Preference Dividend Rate
---------- --------- ------------ ----------- ---------------
Series B 8,000,000 August 1997 $ 25.00 8.57%
Series C 6,000,000 November 1997 $ 25.00 8.55%
Series D 2,000,000 December 1997 $ 25.00 8.45%
F-15
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Series C and D shares listed above are Depositary Shares, each representing a
1/10 fractional interest in a share of preferred stock. Dividends for the Series
B, C and D shares are cumulative from the date of issuance and are payable
quarterly in arrears on the last day of February, May, August and November of
each year. These preferred shares are redeemable at the option of the Company
not prior to the following dates:
Series B - August 12, 2002
Series C - November 6, 2002
Series D - December 19, 2002
(8) Stock/Unit Option Plans
As of December 31, 1999, the Company had three option plans: two plans
for the purpose of attracting and retaining executive officers and other key
employees (1997 Employee Stock Option and Incentive Plan and the 1993 Carr
Realty Option Plan); and the other plan for the purpose of attracting and
retaining directors who are not employees of the Company (1995 Non-Employee
Director Stock Option Plan).
The 1997 Employee Stock Option and Incentive Plan ("Stock Option Plan")
allows for the grant of options to purchase the Company's common stock at an
exercise price which is equal to the fair market value of the common stock at
the date of grant. The Stock Option Plan was approved by the Company's
stockholders at its Annual Meeting of Stockholders on May 8, 1997. At December
31, 1999, the Company had options and units to purchase 10,000,000 shares of
common stock and units reserved for issuance under the Stock Option Plan, of
which 5,225,621 were outstanding. All of the outstanding options have a 10-year
term from the date of grant. The majority of the options vest over a five-year
period, 20% per year, with the exception of 1,492,500 options which vest over a
four-year period, 25% per year, and 450,000 options which vest at the end of
five years.
The 1993 Carr Realty Option Plan allows for the grant of options to
purchase Units of Carr Realty, L.P. (Unit options) that are exercisable at the
fair market value of the Units at the date of grant, which is deemed to be
equivalent to the fair market value of the Company's common stock at such date.
Units (following exercise of Unit options) are redeemable for cash or common
stock of the Company, at the option of the Company. At December 31, 1999, the
Company had options to purchase 1,266,900 Units authorized for grant under the
1993 Carr Realty Option Plan, of which 820,622 were outstanding. All of the
outstanding options have a 10-year term from the date of grant and vest over a
five-year period, 20% per year
The 1995 Non-Employee Director Stock Option Plan provides for the grant of
options to purchase the Company's common stock at an exercise price which is
equal to the fair market value of the common stock on the date of grant. Under
this plan, each newly elected non-employee director was granted options to
purchase 3,000 shares of the Company's common stock upon commencement of
service. In connection with each annual election of directors, each continuing
non-employee director will receive options to purchase 7,500 shares of the
Company's common stock. The stock options have a 10-year term from the date of
grant and vest over a three-year period, 33 1/3% per year. At December 31, 1999,
the Company had 270,000 shares of common stock authorized for grant under the
1995 Non-Employee Director Stock Option Plan, of which 243,392 were outstanding.
The per share weighted-average fair values of Unit options and stock
options granted during 1999, 1998 and 1997 was $2.25, $2.38 and $2.84,
respectively, on the date of grant using the Black Scholes option-pricing model
with the following weighted-average assumptions: 1999 - expected dividend yield
of 7.54%, risk free interest rate of 5.16%, stock volatility of 22.78%, and
expected option life of 3.95 years; 1998 - expected dividend yield of 7.38%,
risk free interest rate of 5.05%, stock volatility of 21.82%, and expected
option life of 5.00 years; 1997 - expected dividend yield of 7.36%, risk free
interest rate of 6.26%, stock volatility of 19.42%, and expected option life of
5.46 years.
The Company applies APB Opinion No. 25 in accounting for its Unit options
and stock options. Pro forma information regarding net income and earnings per
share is required by SFAS No. 123 and has been determined as if the Company had
accounted for its unit and stock options under the fair value method. For 1999
and 1998 the Company's pro forma net income and basic EPS was $140,507 and
$1.55, and $125,026 and $1.30, respectively.
F-16
<PAGE>
Unit option and stock option activity during 1999, 1998 and 1997 is as follows:
1993 Plan 1995 Plan 1997 Plan
---------------- ---------------- -------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Under Exercise Under Exercise Under Exercise
Option Price Option Price Option Price
------ -------- ------- -------- ------ ---------
Outstanding at
December 31, 1996 989,733 23.056 69,000 22.531 -- --
Granted 12,389 28.250 38,000 28.288 1,039,231 29.060
Exercised 80,500 23.327 12,668 22.089 -- --
Forfeited 33,000 23.565 -- -- 17,250 29.205
------- ------- ------ ------ --------- ------
Outstanding at
December 31, 1997 888,622 23.084 94,332 24.909 1,021,981 29.057
Granted -- -- 97,560 25.004 4,217,500 26.178
Exercised 1,000 22.875 1,000 17.750 -- --
Forfeited 20,000 24.375 -- -- 159,912 29.514
------- ------- ------ ------ --------- ------
Outstanding at
December 31, 1998 867,622 23.055 190,892 24.995 5,079,569 26.652
Granted -- -- 52,500 24.250 451,500 23.008
Exercised 16,200 23.480 -- -- -- --
Forfeited 30,800 24.643 -- -- 737,433 26.477
------- ------- ------ ------ --------- ------
Outstanding at
December 31, 1999 820,622 22.987 243,392 24.835 4,793,636 26.332
======= ======= ======= ====== ========= ======
Options exercisable at:
December 31, 1997 530,718 17,001 --
December 31, 1998 702,542 52,332 203,890
December 31, 1999 791,388 113,185 1,103,832
The following table summarizes information about the Company's stock
options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------ -------------------------------------
Outstanding Weighted-Average Exercisable
Range of Exercise as of Remaining Weighted-Average as of Weighted-Average
Prices 12/31/1999 Contractual Life Exercise Price 12/31/1999 Exercise Price
- ----------------------- ------------- ------------------ ------------------ -------------- -------------------
<S> <C> <C> <C> <C> <C>
$15.0941 - $18.1128 16,000 5.3 $17.7500 16,000 $17.7500
$18.1129 - $21.1316 25,000 10.0 $19.0000 -- --
$21.1317 - $24.1504 3,293,293 7.4 $23.3209 1,202,703 $23.0512
$24.1505 - $27.1692 167,832 8.4 $24.8272 41,532 $25.0307
$27.1693 - $30.1880 2,350,525 7.0 $29.4717 748,170 $29.3533
------------- ------------------ ------------------ -------------- -------------------
5,852,650 7.2 $25.8007 2,008,405 $25.3975
</TABLE>
The Company has also granted to key executives 449,737 restricted stock units
under the 1997 Stock Option Plan. The stock units were granted at a zero
exercise price. The fair market value of the units at the date of grant ranged
from $22.00 to $23.938 per unit. The units are subject to a 5-year vesting
schedule, at 20% per year. Compensation expense of $2.0 million and $0.3 million
for 1999 and 1998, respectively, was recognized. During 1999, 11,486 units were
converted to common stock.
F-17
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(9) Transactions With Affiliates
Accounts receivable includes management and leasing fees, development
and architectural fees and payroll reimbursements receivable from affiliates of
$6.1 million at December 31, 1999 and $3.5 million at December 31, 1998. This
amount includes a leasing commission receivable of $2.1 million at December 31,
1999 and $2.3 million at December 31, 1998, which receivable is collectible in
quarterly installments of approximately $47,000 through September 2011. The fair
market value of this receivable is $1.4 million at December 31, 1999 and $1.5
million at December 31, 1998. The leasing commission is due from an
unconsolidated investee partnership.
The Company earned management, leasing, development and architectural
fees from affiliated partnerships of $7.9 million in 1999, $6.1 million in 1998,
and $7.4 million in 1997.
A wholly owned subsidiary of Clark Enterprises, Inc., a Unitholder, has
provided construction management services to the Company. In connection with
these services, the Company paid $3.1 million in 1999, $19.6 million in 1998,
and $1.5 million in 1997. Additionally, a wholly owned subsidiary of Clark
Enterprises, Inc. received a total of $19.6 million during the years of 1997,
1996 and 1995 under a construction contract for the Booz-Allen & Hamilton
Building (in which the Company is a 50% joint venturer).
The Company formerly leased office space from a partnership affiliated
with The Oliver Carr Company. Rent expense amounted to $0.6 million in 1998 and
$1.2 million in 1997 under the lease.
During 1999 and 1998, payments of $0.2 million and $0.3 million,
respectively were made to Security Capital Investment Research Incorporated, an
affiliate of SC-USREALTY, for research rendered in connection with the
acquisition of operating properties, executive office suites businesses and
development properties.
(10) Gains/Losses From Dispositions of Assets
The Company has disposed of assets that are inconsistent with its
long-term strategic or return objectives or where market conditions for sale are
favorable. The proceeds of the sales were redeployed into other office
properties (utilizing tax-deferred exchanges in some cases). During 1999, the
Company disposed of 63 operating properties and two parcels of land that were
being held for development. The Company recognized a gain totaling $54.8 million
on these dispositions which is net of District of Columbia Franchise tax of $0.6
million. During 1998, the Company disposed of 13 operating properties and one
parcel of land. The Company recognized a gain totaling $38.2 million on these
dispositions. During 1997, the Company disposed of seven operating properties.
The Company recognized a gain totaling $5.4 million on these dispositions.
(11) Commitments and Contingencies
At December 31, 1999, the Company is contingently liable on letters of
credit amounting to approximately $3.7 million for various completion escrows
and on performance bonds amounting to approximately $13.1 million to ensure
completion of required public improvements on its construction projects.
The Company has entered into an interest rate cap agreement on June 22,
1998 in the notional amount of $200 million at a rate of 9.5%. In addition, on
October 25, 1999, the Company entered into an interest rate swap agreement in
the notional amount of $100 million at a fixed rate of 5.83% against the 30-day
LIBOR rate on the unsecured line of credit. The agreements were entered into in
order to hedge against the impact that interest rate fluctuations would have on
the interest rate attainable on the Company's line of credit. As of December 31,
1999, unrealized gain/loss on the agreements was zero.
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 positions no longer represented effective
hedges and, accordingly, the amount due to the counterparty under the forward
Treasury Lock Agreements of $13.7 million was recognized in the Company's
financial statements as a loss. These contracts were settled on February 12,
1999, for $9.2 million in cash, resulting in a gain of $4.5 million.
F-18
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company has a 401(k) plan for employees that will match 50% of
employee contributions up to the first 4% of an employee's pay and will make a
base contribution of 3% of pay for participants who remain employed on December
31 (the end of the plan year). Company contributions to the plan are subject to
a five-year graduated vesting schedule. Company contributions to the plan
amounted to $ million in 1999, $1.1 million in 1998 and $0.6 million in 1997.
The Company currently is involved in litigation with two stockholders
of HQ Global Workplaces, Inc. involving the conversion in September 1998 of
approximately $111 million of debt previously loaned by the Company to HQ Global
into stock of HQ Global. The Company and HQ Global initiated this litigation by
filing a complaint seeking a declaratory judgment that the terms of the debt
conversion were fair, after these two stockholders threatened to challenge the
terms of the conversion, claiming that the conversion price utilized, and the
methods by which the conversion price was agreed upon between the Company and HQ
Global, were not fair to HQ Global or these stockholders. The two stockholders
filed counterclaims against the Company, HQ Global and the board of directors of
HQ Global seeking a judgment declaring the conversion void or voidable, or in
the alternative compensatory and punitive damages.
Although the Company believes that the two stockholders' claims are
without merit and that it and HQ Global will ultimately prevail in their actions
against the two stockholders, there can be no assurance that the court will not
find the conversion price to have been unfair and declare the conversion void,
which would have the effect of diluting the Company's equity interest in HQ
Global or award the two stockholders compensatory and punitive damages. However,
even if the two stockholders were successful in their claims, the Company does
not believe that such a result would have a material adverse effect on the
financial condition or results of operations of the Company or HQ Global.
In the course of the Company's normal business activities, various
lawsuits, claims and proceedings have been or may be instituted or asserted
against the Company. Based on currently available facts, management believes
that the disposition of matters that are pending or asserted will not have a
material adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
F-19
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(12) Acquisition and Development Activities
During 1999 and 1998, the Company made the following operating property
acquisitions (in millions except number of buildings):
<TABLE>
<CAPTION>
1999 1998
----------------------------------------- ------------------------------------------
Square Square
Operating # of Feet Purchase # of Feet Purchase
Properties Buildings (Unaudited) Price Buildings (Unaudited) Price
---------------- ---------- ------------ ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Pacific 5 .2 $ 40.5 28 1.6 $ 251.8
Mountain -- -- -- 1 .1 19.5
Central -- -- -- 2 .4 39.3
Southeast -- -- -- 1 .1 8.8
---------- ------------ ----------- ----------- ------------ ----------
5 .2 $ 40.5 32 2.2 $ 319.4
========== ============ =========== =========== ============ ==========
</TABLE>
The following unaudited pro forma summary presents information as if
the Company's property acquisitions and sales of property through December 31,
1999 had occurred at the beginning of 1998. The pro forma information is
provided for informational purposes only and does not include any of the
acquisitions of Executive Suite businesses included in discontinued operations
as such proforma information is not meaningful. The pro forma information is
based on historical information and does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the Company.
<TABLE>
<CAPTION>
Pro forma Information (unaudited)
(in thousands, except per share amounts) 1999 1998
------------- ---------------
<S> <C> <C>
Total revenue from continuing operations $ 493,684 $ 391,981
Income from continuing operations before gain
on sale of assets $ 85,957 $ 50,274
Basic income per share from continuing
operations $ 0.74 $ 0.21
=========== ==========
Diluted income per share from continuing
operations $ 0.74 $ 0.21
=========== ==========
</TABLE>
During 1999 and 1998, the Company acquired land that will support the
development of up to 0.4 million square feet (unaudited) and 4.7 million square
feet (unaudited), respectively, for an aggregate purchase price of approximately
$6.7 million and $133.4 million, respectively. In addition, as of December 31,
1999, and 1998, the Company has the following office properties under
construction:
<TABLE>
<CAPTION>
1999 1998
(unaudited) (unaudited)
----------------------- ------------------------
<S> <C> <C>
Number of office properties under construction 22 50
Square Feet (in millions) 1.3 3.8
Total expected investment (in millions) $ 200.1 $ 578.7
</TABLE>
F-20
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(13) Quarterly Financial Information (unaudited)
The following is a summary of quarterly results of operations for 1999
and 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
1999
- ----
Rental revenue $ 121,458 119,238 128,311 129,842
=========== ========== ========== ==========
Real estate service income $ 3,900 4,947 4,202 4,005
=========== ========== ========== ==========
Real estate operating revenue 28,231 24,272 23,082 25,462
=========== ========== ========== ==========
Income from continuing operations before gain on sale of
assets $ 28,391 21,779 20,952 24,135
=========== ========== ========== ==========
Loss from discontinued operations $ (1,271) (1,849) (2,848) (1,894)
=========== ========== ========== ==========
Net income $ 46,175 30,406 39,387 27,249
=========== ========== ========== ==========
Basic net income per share:
Income from continuing operations before gain on sale of
assets $ 0.29 0.19 0.18 0.23
=========== ========== ========== ==========
Loss from discontinued operations $ (0.02) (0.03) (0.04) (0.03)
=========== ========== ========== ==========
Net income $ 0.53 0.32 0.46 0.27
=========== ========== ========== ==========
Diluted net income per share:
Income from continuing operations before gain on sale of
assets $ 0.30 0.19 0.18 0.23
=========== ========== ========== ==========
Loss from discontinued operations $ (0.02) (0.03) (0.04) (0.03)
=========== ========== ========== ==========
Net income $ 0.52 0.32 0.45 0.27
=========== ========== ========== ==========
1998
- ----
Rental revenue $ 100,329 106,964 113,657 119,505
=========== ========== ========== ==========
Real estate service income $ 2,990 3,524 4,471 5,182
=========== ========== ========== ==========
Real estate operating revenue $ 24,368 27,771 26,402 23,808
=========== ========== ========== ==========
Income from continuing operations before gain on sale of
assets $ 17,382 27,902 26,234 10,301
=========== ========== ========== ==========
Income from discontinued operations $ 1,196 1,949 3,304 69
=========== ========== ========== ==========
Net income $ 44,509 30,107 36,381 15,500
=========== ========== ========== ==========
Basic net income per share:
Income from continuing operations before gain on sale of
assets $ 0.14 0.27 0.24 0.02
=========== ========== ========== ==========
Income from discontinued operations 0.02 0.03 0.05 0.00
=========== ========== ========== ==========
Net income $ 0.60 0.30 0.38 0.09
=========== ========== ========== ==========
Diluted net income per share:
Income from continuing operations before gain on sale of
assets $ 0.16 0.27 0.24 0.02
=========== ========== ========== ==========
Income from discontinued operations $ 0.02 0.03 0.04 0.00
=========== ========== ========== ==========
Net income $ 0.59 0.30 0.37 0.09
=========== ========== ========== ==========
</TABLE>
F-21
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(14) Segment Information
The Company's reportable operating segments are real estate property
operations and development operations. Other business activities and operating
segments that are not reportable are included in other operations.
The Company's operating segments' performance is measured using funds
from operations. Funds from operations represents net operating income before
minority interest and extraordinary items, excluding depreciation and
amortization on real estate assets and discontinued operations, gains or losses
on treasury locks and gain on sale of assets.
(in millions)
<TABLE>
<CAPTION>
As of and for the year ended
December 31, 1999
-----------------------------------------------------------------
Real
Estate
Property Development Other
Operations Operations Operations Total
--------------------------------------- ------------ --------------- -------------- -----------
<S> <C> <C> <C> <C>
Operating Revenue $ 498.9 6.6 10.4 $ 515.9
Segment Expense 167.2 4.6 34.3 206.1
------------ --------------- -------------- -----------
Net segment revenue (expense) 331.7 2.0 (23.9) 309.8
Interest Expense 50.5 -- 38.6 89.1
Other income (expense), net 8.9 0.2 (3.2) 5.9
------------ --------------- -------------- -----------
Funds from operations $ 290.1 2.2 (65.7) 226.6
============ =============== ==============
Adjustments:
Depreciation and amortization (117.3)
Gain on settlement of treasury locks 4.5
Other, net 0.8
-----------
Income from continuing operations
before gain on sale of assets, income
taxes and minority interest 114.6
Income taxes, minority interest and
gain on sale of assets 36.4
Discontinued operations - loss, net
of income tax (7.8)
-----------
Net income $ 143.2
===========
Total assets from continuing operations $ 2,991.8 220.1 59.5 3,271.4
Net assets of discontinued operations 207.7
-----------
Total assets 3,479.1
===========
Expenditures for long-lived assets $ 92.0 279.1 -- 371.1
</TABLE>
F-22
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of and for the year ended
December 31, 1998
------------------------------------------------------------------
Real
Estate
Property Development Other
Operations Operations Operations Total
--------------------------------------- ------------ --------------- -------------- -----------
<S> <C> <C> <C> <C>
Operating Revenue $ 440.5 4.4 11.8 $ 456.7
Segment Expense 149.7 3.1 29.3 182.1
------------ --------------- -------------- -----------
Net segment revenue (expense) 290.8 1.3 (17.5) 274.6
Interest Expense 46.8 -- 24.6 71.4
Other income (expense), net 8.2 -- (0.3) 7.9
------------ --------------- -------------- -----------
Funds from operations $ 252.2 1.3 (42.4) 211.1
============ =============== ==============
Adjustments:
Depreciation and amortization (98.8)
Gain on settlement of treasury locks (13.7)
Other, net 0.7
-----------
Income from continuing operations
before gain on sale of assets and
minority interest 97.9
Minority interest and gain on sale
of assets 22.1
Discontinued operations - income, net of
income taxes (6.5)
-----------
Net income $ 126.5
===========
Total assets from continuing operations $ 2,809.4 466.4 153.9 3,429.7
Net assets of discontinued operations 197.6
-----------
Total assets 3,627.3
===========
Expenditures for long-lived assets $ 391.6 532.8 -- 924.4
</TABLE>
F-23
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of and for the year ended
December 31, 1997
------------------------------------------------------------------
Real
Estate
Property Development Other
Operations Operations Operations Total
--------------------------------------- ------------ --------------- -------------- -----------
<S> <C> <C> <C> <C>
Operating Revenue $ 325.5 3.1 12.9 $ 341.5
Segment Expense 114.8 1.6 20.2 136.6
------------ --------------- -------------- -----------
Net segment revenue (expense) 210.7 1.5 (7.3) 204.9
Interest Expense 45.1 -- 6.4 51.5
Other income (expense), net 4.0 -- (5.5) (1.5)
------------ --------------- -------------- -----------
Funds from operations $ 169.6 1.5 (19.2) 151.9
============ =============== ==============
Adjustments:
Depreciation and amortization (72.0)
Other, net 0.8
-----------
Income from continuing operations
before gain on sale of assets, minority
interest and extraordinary item 80.7
Minority interest, gain on sale of assets
and extraordinary item (3.5)
Discontinued operations - loss, net of
income taxes (0.9)
-----------
Net income $ 78.1
===========
Total assets from continuing operations $ 2,304.7 292.5 78.3 2,675.5
Net assets of discontinued operations 55.1
-----------
Total assets 2,730.6
===========
Expenditures for long-lived assets $ 947.8 276.3 -- 1,224.1
</TABLE>
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORTS
CarrAmerica Realty Corporation and Subsidiaries
- --------------------------------------------------------------------------------
The Board of Directors and Stockholders
CarrAmerica Realty Corporation:
We have audited the accompanying consolidated balance sheets of
CarrAmerica Realty Corporation and subsidiaries as of December 31, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CarrAmerica
Realty Corporation and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Washington, D.C.
February 1, 2000
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
CarrAmerica Realty Corporation and Subsidiaries
- --------------------------------------------------------------------------------
The Board of Directors and Stockholders
CarrAmerica Realty Corporation:
Under date of February 1, 2000, we reported on the consolidated balance
sheets of CarrAmerica Realty Corporation and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999, which are included in this Form 10-K. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule in this Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
Washington, D.C.
February 1, 2000
F-26
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Cost Costs Capitalized Carried at Close of Period
------------------------ -------------------------------
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition/(4)/ Land Improvements Total
- ---------- ------------ ---- ------------ ---------------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Downtown Washington, D.C.:
International Square/(1)/ $ 183,700/(2)/ 69,651 100,921 16,101 69,651 117,022 186,673
1730 Pennsylvania Avenue, N.W. --/(2)/ 2,196 11,013 13,378 2,196 24,391 26,587
2550 M Street, N.W. -- 2,340 11,348 4,159 2,340 15,507 17,847
1775 Pennsylvania Avenue, N.W. 11,972 -- 19,000 2,143 -- 21,143 21,143
900 19th Street 16,027 1,985 13,358 3,167 1,985 16,525 18,510
1747 Pennsylvania Avenue, N.W. 14,761 1,636 8,157 6,385 1,636 14,542 16,178
1255 23rd Street 38,300 10,793 40,214 3,678 10,793 43,892 54,685
Washington, D.C.:
Sunrise Corporate Center -- 8,250 34,322 1,577 9,011 35,138 44,149
Parkway One -- 2,010 4,663 409 2,013 5,069 7,082
Reston Crossing East & West -- 8,379 -- 36,132 8,048 36,463 44,511
Reston Towne Center -- -- 2,150 -- -- 2,150 2,150
One Rock Spring Plaza -- -- 18,409 1,626 -- 20,035 20,035
Orange County/Los Angeles:
Plaza PacifiCare -- 3,493 6,392 78 3,493 6,470 9,963
Katella Corporate Center -- 2,671 4,314 534 2,681 4,838 7,519
Warner Center 26,000 16,490 33,698 3,513 16,574 37,127 53,701
Scenic Business Park -- 2,469 4,503 1,278 2,469 5,781 8,250
South Coast Executive Center 15,000 3,324 17,212 1,257 3,388 18,405 21,793
Harbor Corporate Park -- 2,191 5,784 2,097 2,191 7,881 10,072
Warner Premier -- 3,252 6,040 260 3,285 6,267 9,552
2600 W. Olive 19,152 3,855 25,054 2,907 3,904 27,912 31,816
Bay Technology Center -- 2,442 11,164 128 2,462 11,272 13,734
Von Karman -- 3,731 12,493 478 3,744 12,958 16,702
Pacific Corporate Plaza/(7)/ -- 5,756 -- 9,963 3,357 12,362 15,719
Alton Deere Plaza -- 5,666 17,967 643 5,676 18,600 24,276
Art Institute/(7)/ -- 3,384 -- 1,116 -- 4,500 4,500
San Diego:
Del Mar Corporate Center -- 2,860 13,252 144 2,869 13,387 16,256
Wateridge Pavilion 3,428 881 5,509 112 895 5,607 6,502
Lightspan -- 1,438 5,710 724 1,440 6,432 7,872
Towne Center Technology Park -- 4,929 -- 20,506 5,317 20,118 25,435
Palomar Oaks Technology Park 9,949 4,698 12,495 77 4,714 12,556 17,270
Jaycor 12,199 5,123 11,754 191 5,154 11,914 17,068
LaJolla Spectrum Technology Park/(7)/ -- 6,447 -- 19,254 3,251 22,450 25,701
Highlands Corporate Center --/(6)/ 10,156 30,369 8 10,156 30,377 40,533
San Francisco Bay Area:
CarrAmerica Corporate Center -- 33,035 75,720 8,281 33,049 83,987 117,036
Valley Business Park I 40,826/(3)/ 3,859 3,155 345 3,865 3,494 7,359
Valley Business Park II 8,753 7,155 1,411 8,765 8,554 17,319
Valley Centre --/(3)/ 6,051 4,945 815 6,059 5,752 11,811
Valley Office Centre -- 6,134 5,014 334 6,142 5,340 11,482
Valley Centre II --/(3)/ 13,658 11,164 (123) 13,676 11,023 24,699
Rincon Centre --/(3)/ 12,464 10,188 211 12,480 10,383 22,863
Bayshore Centre --/(3)/ 8,525 6,969 267 8,960 6,801 15,761
3745 North First Street -- 3,388 4,884 420 3,411 5,281 8,692
Rio Robles --/(3)/ 16,655 29,598 655 16,669 30,239 46,908
San Mateo II & III -- 9,723 15,556 940 9,817 16,402 26,219
3571 North First Street -- 6,297 8,862 70 6,326 8,903 15,229
San Mateo I -- 5,703 9,126 108 5,710 9,227 14,937
Baytech Business Park -- 14,958 -- 17,874 14,569 18,263 32,832
<CAPTION>
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
<S> <C> <C> <C>
Downtown Washington, D.C.:
International Square/(1)/ 60,335 1977,1979,1982 1993
1730 Pennsylvania Avenue, N.W. 12,222 1972 1993
2550 M Street, N.W. 9,248 1978 1993
1775 Pennsylvania Avenue, N.W. 3,355 1975 1994
900 19th Street 6,759 1986 1993
1747 Pennsylvania Avenue, N.W. 7,130 1970 1993
1255 23rd Street 16,540 1983 1993
Washington, D.C.:
Sunrise Corporate Center 4,995 1987-1989 1996
Parkway One 1,039 1985 1996
Reston Crossing East & West 1,016 1987-1989 1996
Reston Towne Center 355 N/A 1996
One Rock Spring Plaza 5,706 1989 1996
Orange County/Los Angeles:
Plaza PacifiCare 968 1986 1996
Katella Corporate Center 757 1982 1996
Warner Center 5,546 1981-1985 1996
Scenic Business Park 1,209 1985 1996
South Coast Executive Center 2,090 1987 1996
Harbor Corporate Park 1,505 1987 1996
Warner Premier 694 1990 1997
2600 W. Olive 2,625 1986 1997
Bay Technology Center 767 1985 1997
Von Karman 1,105 1981 1997
Pacific Corporate Plaza/(7)/ 57 1998 1997
Alton Deere Plaza 1,118 1989 1998
Art Institute/(7)/ -- 1999 1999
San Diego:
Del Mar Corporate Center 1,967 1986 1996
Wateridge Pavilion 587 1987 1997
Lightspan 735 1985 1997
Towne Center Technology Park 1,245 1998 1997
Palomar Oaks Technology Park 615 1989 1998
Jaycor 478 1989 1998
LaJolla Spectrum Technology Park/(7)/ 508 1999 1998
Highlands Corporate Center 127 N/A 1999
San Francisco Bay Area:
CarrAmerica Corporate Center 23,920 1988 1996
Valley Business Park I 432 1981 1996
Valley Business Park II 962 1979 1996
Valley Centre 629 1980 1996
Valley Office Centre 584 1981 1996
Valley Centre II 1,413 1980 1996
Rincon Centre 1,545 1984 1996
Bayshore Centre 810 1984 1996
3745 North First Street 564 1984 1997
Rio Robles 3,188 1985 1996
San Mateo II & III 1,393 1985 1997
3571 North First Street 730 1985 1997
San Mateo I 676 1986 1997
Baytech Business Park 1,187 1998 1997
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
Costs Gross Amount at Which
Initial Cost Capitalized Carried at Close of Period
------------------------------- ---------------------------
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements
- ---------- ------------ ---- ------------ --------------- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Oakmead West A-G -- 22,842 -- 41,618 21,624 42,836
Hacienda West --/(6)/ 6,468 24,062 619 6,492 24,657
Sunnyvale Technology Centre 34,014/(6)/ 12,098 16,131 146 12,106 16,269
Santa Clara Technology Park -- 9,750 11,917 47 9,771 11,943
Techmart Commerce Center -- -- 36,594 1,210 -- 37,804
Golden Gateway Commons -- 21,112 51,689 1,341 21,166 52,976
995 Benecia Avenue 869 3,407 3,026 31 3,423 3,041
Clarify Corporate Center/(7)/ -- 17,574 -- 33,084 13,269 37,389
Valley Technology Center -- 23,419 -- 31,946 24,173 31,192
Valley Technology Center II/(7)/ -- 9,491 -- 2,148 -- 11,639
Fremont Technology Park -- 10,122 10,797 10,388 21,161 10,146
Denver:
Quebec Center -- 1,423 5,659 765 1,423 6,424
Quebec Court I & II -- 2,368 19,819 10,212 2,371 30,028
Harlequin Plaza -- 4,746 21,344 6,613 4,748 27,955
Panorama Phase III -- 1,541 -- 16,055 2,625 14,971
Panorama Phase V -- 1,786 -- 14,480 2,274 13,992
Panorama Phase IV -- 1,775 -- 1,429 3,204 --
Panorama Phase VI -- 1,716 -- 1,647 3,363 --
Panorama Phase VII -- 1,226 -- 1,724 2,950 --
Panorama Corporate Center I -- 1,325 6,486 3,568 1,326 10,053
Panorama Corporate Center II -- 1,844 -- 9,368 1,939 9,273
Panorama Corporate Center VIII -- 4,060 -- 1,223 5,283 --
Dry Creek Corporate Center/(7)/ -- 10,575 -- 2,363 8,954 3,984
Panorama Phase IX -- 1,997 -- 363 2,360 --
Panorama Phase X/(7)/ -- 484 -- 1,721 -- 2,205
Seattle:
Redmond East 26,984 6,957 32,390 1,522 6,972 33,897
Redmond Hilltop B & C -- 2,511 -- 7,766 2,489 7,788
Canyon Park Business Center -- 7,643 23,624 2,559 5,782 28,044
Canyon Park 4 -Land/(7)/ -- 3,217 -- 17,609 3,064 17,762
Canyon Park Commons 1 & 2 5,405 2,375 9,958 111 2,380 10,064
Willow Creek Corporate Center -- 1,709 6,972 79 1,724 7,036
Willow Creek Corporate Center 1 - 6 -- 6,485 -- 39,456 5,864 40,077
Salt Lake City, Utah:
Sorenson Research Park 4,097 4,389 25,304 1,145 4,423 26,415
Sorenson Research Park XI/(7)/ -- 1,490 -- 5,142 2,665 3,967
Wasatch Corporate Center 12,458 3,318 15,495 410 3,587 15,636
Wasatch Corporate Center 17 & 18/(7)/ -- 2,636 -- 11,161 1,657 12,140
Wasatch Corporate Center 16 -- 1,172 -- 820 1,992 --
Chicago:
Parkway North I 29,250 3,727 29,146 2,011 3,733 31,151
Parkway North III -- 4,304 34,390 3,703 4,310 38,087
Unisys -- 6,387 45,111 4,329 6,346 49,481
Parkway North 4, 6-10 - Land/(7)/ -- 8,810 -- 45,848 10,203 44,455
The Crossings -- 5,268 34,215 2,520 5,289 36,714
Bannockburn IV -- 1,914 12,729 488 1,924 13,207
Bannockburn I & II 18,595 3,448 22,928 1,912 3,472 24,816
Austin, Texas:
Balcones Center -- 949 7,649 546 949 8,195
Great Hills Plaza -- 1,680 13,545 264 1,680 13,809
<CAPTION>
Accumulated Date of Year of
Properties Total Depreciation Construction Acquisition
- ---------- ----- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Oakmead West A-G 64,460 3,220 1998 1997
Hacienda West 31,149 1,646 1987 1998
Sunnyvale Technology Centre 28,375 1,062 1971 - 1975 1998
Santa Clara Technology Park 21,714 647 1984-1985 1998
Techmart Commerce Center 37,804 2,198 1987 1998
Golden Gateway Commons 74,142 3,243 1980-1984 1998
995 Benecia Avenue 6,464 148 1976 1998
Clarify Corporate Center/(7)/ 50,658 854 1999 1998
Valley Technology Center 55,365 649 1998 1998
Valley Technology Center II/(7)/ 11,639 -- 1999 1998
Fremont Technology Park 31,307 327 1999 1998
Denver:
Quebec Center 7,847 1,106 1985 1996
Quebec Court I & II 32,399 3,974 1979-1980 1996
Harlequin Plaza 32,703 4,142 1981 1996
Panorama Phase III 17,596 417 1996 1996
Panorama Phase V 16,266 818 1998 1996
Panorama Phase IV 3,204 -- N/A 1996
Panorama Phase VI 3,363 -- N/A 1996
Panorama Phase VII 2,950 -- N/A 1996
Panorama Corporate Center I 11,379 1,799 N/A 1996
Panorama Corporate Center II 11,212 1,540 N/A 1996
Panorama Corporate Center VIII 5,283 -- N/A 1997
Dry Creek Corporate Center/(7)/ 12,938 -- 1999 1998
Panorama Phase IX 2,360 -- N/A 1998
Panorama Phase X/(7)/ 2,205 -- 1999 1998
Seattle:
Redmond East 40,869 5,687 1988-1992 1996
Redmond Hilltop B & C 10,277 1,134 1998 1996
Canyon Park Business Center 33,826 2,937 1989 1997
Canyon Park 4 -Land/(7)/ 20,826 359 N/A 1997
Canyon Park Commons 1 & 2 12,444 708 1988 1997
Willow Creek Corporate Center 8,760 617 1981 1997
Willow Creek Corporate Center 1 - 6 45,941 3,596 1998 1997
Salt Lake City, Utah:
Sorenson Research Park 30,838 2,371 1988-1997 1997
Sorenson Research Park XI/(7)/ 6,632 98 1999 1997
Wasatch Corporate Center 19,223 1,321 1996 1997
Wasatch Corporate Center 17 & 18/(7)/ 13,797 333 1998-1999 1997
Wasatch Corporate Center 16 1,992 -- N/A 1999
Chicago:
Parkway North I 34,884 3,954 1986-1989 1996
Parkway North III 42,397 6,593 1986-1989 1996
Unisys 55,827 5,688 1984-1985 1996
Parkway North 4, 6-10 - Land/(7)/ 54,658 815 1998 1996
The Crossings 42,003 4,315 1985 1997
Bannockburn IV 15,131 1,183 1988 1997
Bannockburn I & II 28,288 2,576 1980 1997
Austin, Texas:
Balcones Center 9,144 1,165 1985 1996
Great Hills Plaza 15,489 1,635 1985 1996
</TABLE>
S-2
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Initial Cost Costs Carried at Close of Period
Capitalized
------------------------------- ---------------------------
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements
- ---------- ------------ ---- ------------ --------------- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Park North -- 1,671 13,471 862 1,671 14,333
City View Centre -- 1,718 13,854 1,135 1,720 14,987
Tower of the Hills -- 1,633 13,625 462 1,634 14,086
Riata Buildings 1 - 9/(7)/ -- 10,121 -- 62,026 12,533 59,614
City View Centre -- 1,890 -- 13,702 2,107 13,485
Braker Pointe -- 6,602 -- 3,496 10,098 --
Riata Crossing -- 4,933 -- 24,225 4,941 24,217
Dallas, Texas:
Quorum North 6,465 1,357 9,078 998 1,368 10,065
Quorum Place 7,450 1,941 14,234 1,327 1,954 15,548
Two Mission Park -- 823 4,326 852 831 5,170
Cedar Maple Plaza -- 1,220 10,982 401 1,225 11,378
Tollway I & II -- 2,960 -- 45,049 3,017 44,992
Tollway III -- 2,522 -- 1,083 3,605 --
Royal Ridge A & B -- 3,159 -- 19,159 3,286 19,032
5000 Quorum -- 1,774 15,616 638 1,782 16,246
The Commons at Las Colinas/(7)/ -- 9,990 -- 62,046 6,897 65,139
Royal Ridge Phase II -- 5,221 -- 13,451 6,522 12,150
Royal Ridge III 2,186 -- 319 2,505 --
Phoenix, Arizona:
Camelback Lakes -- 5,476 21,365 (4,871) 4,275 17,695
Highland Park -- 1,956 5,544 1,238 1,974 6,764
The Grove @ Black Canyon -- 1,748 9,658 663 1,754 10,315
U.S. West 48,251 18,517 74,069 786 18,641 74,731
Pointe Corridor IV -- 2,396 12,580 1,682 2,401 14,257
Four Gateway Plaza -- 3,420 -- 13,995 3,730 13,685
Concord Place 7,509 3,337 16,675 742 3,348 17,406
East Gateway -- 6,002 -- 1,901 7,903 --
Portland, Oregon:
Radisys Corporate Headquarters -- 1,448 7,518 49 1,456 7,559
Radisys II -- 926 -- 4,766 798 4,894
Sunset Corporate Park A-H/(7)/ -- 4,932 -- 8,848 2,359 11,421
Rock Creek Corporate Park 1-3/(7)/ -- 2,614 -- 11,460 399 13,675
Atlanta:
Century Springs West 20,163/(5)/ 1,642 7,646 (1,424) 1,280 6,584
Glenridge --/(5)/ 1,423 4,870 (73) 1,292 4,928
Midori --/(5)/ 1,802 6,715 2,804 2,320 9,001
Summit -- 2,237 15,027 1,136 2,241 16,159
Holcomb Place -- 1,419 4,574 398 1,421 4,970
Parkwood --/(5)/ 2,080 12,678 3,971 2,362 16,367
Lakewood --/(5)/ 1,040 6,789 566 1,055 7,340
Spalding Ridge -- 1,550 4,950 7,971 1,678 12,793
2400 Lake Park Drive -- 805 6,539 898 812 7,430
680 Engineering Drive -- 559 3,420 297 563 3,713
Embassy Row -- 7,916 36,907 2,942 7,959 39,806
Embassy Row 500-Land -- 4,328 -- 28,144 4,473 27,999
Preston Ridge -- 1,993 -- 585 2,578 --
Waterford Centre -- 1,110 7,737 420 1,115 8,152
<CAPTION>
- -----------------------------------------------------------------------------------------------
Accumulated Date of Year of
Properties Total Depreciation Construction Acquisition
- ---------- ----- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Park North 16,004 1,967 1981 1996
City View Centre 16,707 2,261 1985 1996
Tower of the Hills 15,720 999 1986 1997
Riata Buildings 1 - 9/(7)/ 72,147 3,201 1998-1999 1996
City View Centre 15,592 1,441 1998 1996
Braker Pointe 10,098 -- N/A 1997
Riata Crossing 29,158 999 1999 1998
Dallas, Texas:
Quorum North 11,433 1,081 1983 1997
Quorum Place 17,502 1,672 1981 1997
Two Mission Park 6,001 525 1983 1997
Cedar Maple Plaza 12,603 1,191 1985 1997
Tollway I & II 48,009 1,696 1998 1997
Tollway III 3,605 -- N/A 1997
Royal Ridge A & B 22,318 1,284 1998-1999 1997
5000 Quorum 18,028 1,050 1984 1998
The Commons at Las Colinas/(7)/ 72,036 1,848 1999 1998
Royal Ridge Phase II 18,672 36 1999 1998
Royal Ridge III 2,505 -- N/A 1999
Phoenix, Arizona:
Camelback Lakes 21,970 2,632 1982 1996
Highland Park 8,738 783 1986 1997
The Grove @ Black Canyon 12,069 925 1986 1997
U.S. West 93,372 5,086 1988 1997
Pointe Corridor IV 16,658 1,968 1990 1996
Four Gateway Plaza 17,415 737 1998-1999 1997
Concord Place 20,754 835 1989 1998
East Gateway 7,903 -- N/A 1998
Portland, Oregon:
Radisys Corporate Headquarters 9,015 703 1996 1997
Radisys II 5,692 516 1997 1997
Sunset Corporate Park A-H/(7)/ 13,780 13 1999 1998
Rock Creek Corporate Park 1-3/(7)/ 14,074 64 1999 1998
Atlanta:
Century Springs West 7,864 742 1982 1996
Glenridge 6,220 562 1986 1996
Midori 11,321 950 1989 1996
Summit 18,400 1,830 1986 1996
Holcomb Place 6,391 518 1982 1996
Parkwood 18,729 1,903 1985 1996
Lakewood 8,395 792 1985 1996
Spalding Ridge 14,471 1,653 1998 1996
2400 Lake Park Drive 8,242 748 1982 1997
680 Engineering Drive 4,276 514 1985 1997
Embassy Row 47,765 4,548 1983 1997
Embassy Row 500-Land 32,472 1,013 1998-1999 1997
Preston Ridge 2,578 -- N/A 1997
Waterford Centre 9,267 518 1985 1998
</TABLE>
S-3
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------- --------------------------------
Gross Amount at Which
Initial Cost Costs Capitalized Carried at Close of Period
--------------------- --------------------------------
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition (4) Land Improvements Total
- ---------- ------------ ---- ------------ --------------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Boca Raton, Florida:
Peninsula Plaza -- 3,003 10,475 4,842 3,745 14,575 18,320
Presidential Circle 22,547 7,074 35,370 1,307 7,082 36,669 43,751
Peninsula Executive Center 1 & 2 -- 5,962 -- 27,015 6,465 26,512 32,977
Peninsula Corporate Center -- 2,933 -- 9,716 12,649 -- 12,649
------- ------- --------- ------- ------- --------- ---------
Rental Property Totals 635,371 768,606 1,606,873 913,146 778,525 2,510,100 3,288,625
------- ------- --------- ------- ------- --------- ---------
Intercompany Elimination -- -- -- (740) (655) (740)
(85)
Total 635,371 768,606 1,606,873 912,406 778,440 2,509,445 3,287,885
======= ======= ========= ======= ======= ========= =========
<CAPTION>
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
<S> <C> <C> <C>
Boca Raton, Florida:
Peninsula Plaza 1,787 1988 1996
Presidential Circle 2,873 1989 1997
Peninsula Executive Center 1 & 2 680 1999 1997
Peninsula Corporate Center -- N/A 1997
--------
Rental Property Totals 323,455
-------
Intercompany Elimination --
Total 323,455
=======
</TABLE>
Depreciation and amortization of the investment in building and improvements
reflected in the statements of operations are calculated over the estimated
lives of the assets as follows:
<TABLE>
<S> <C>
Base Building 30 to 50 years
Building components 7 to 20 years
Tenant improvements Terms of leases or useful lives, whichever is shorter
Furniture, fixtures and equipment 5 to 15 years
</TABLE>
The aggregate cost for federal income tax purposes was approximately $2,724,274
at December 31, 1999.
The changes in total real estate assets and accumulated depreciation and
amortization for the three years ended December 31, 1999, 1998, and 1997 are as
follows:
<TABLE>
<CAPTION>
Total Real Estate Assets
---------- ----------- ----------
1999 1998 1997
---------- ----------- ----------
<S> <C> <C> <C>
Balance, beginning of period $3,401,088 $ 2,677,144 $1,539,998
Less: Discontinued operations (56,471) (46,561) (12,355)
Acquisitions 40,525 492,498 1,023,070
Improvements 345,716 442,288 186,541
Sales, retirements
and write-offs (442,973) (164,281) (60,110)
---------- ----------- ----------
$3,287,885 $ 3,401,088 $2,677,144
========== =========== ==========
<CAPTION>
Accumulated Depreciation
---------- ----------- ----------
1999 1998 1997
---------- ----------- ----------
<S> <C> <C> <C>
Balance, beginning of period $ 257,215 $ 183,343 $ 119,657
Less Discontinued operations (11,264) (4,320) (923)
Depreciation for the period 114,388 94,708 67,353
Sales, retirements
and write-offs (36,884) (16,516) (2,744)
---------- ----------- ----------
$ 323,455 $ 257,215 183,343
========== =========== ==========
</TABLE>
_____________________
Notes:
(1) The Company leases approximately 78,000 square feet of office space for
its corporate headquarters as of December 31, 1999.
(2) Secured by International Square and 1730 Pennsylvania Avenue.
(3) Secured by Valley Business Park I and II, Valley Office Centre, Valley
Centre II, Rincon Centre and 3745 North First Street.
(4) Costs capitalized are offset by retirements and write-offs.
(5) Secured by Century Springs West, Glenridge, Midori, Lakewood and Parkwood.
(6) Secured by Sunnyvale Technology Centre, Hacienda West and Highland
Corporate Centre.
(7) Under construction as of December 31, 1999. Construction costs are shown
under buildings and improvements until completion. At that time, costs
will be allocated between land and buildings and improvements.
S-4
<PAGE>
Exhibit 10.19
Fifth 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
<PAGE>
Exhibit 10.21
District of Columbia
Loan No. C-332339
CONSOLIDATED, AMENDED AND RESTATED
PROMISSORY NOTE
---------------
$183,700,000.00 As of March 19, 1999
THIS CONSOLIDATED, AMENDED AND RESTATED PROMISSORY NOTE (this "Note")
is made by CARR REALTY, L.P., a Delaware limited partnership, hereinafter called
"Borrower", for the benefit of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a
Wisconsin corporation, 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
who, together with any subsequent holder of this Note, is hereinafter referred
to as "Lender", in substitution for and in replacement of, but not in repayment
of, the following notes, all of which Lender holds (which notes are hereinafter
referred to as the "Existing Notes"):
1. Promissory Note dated February 1, 1993 in the original principal
amount of $80,000,000.00 made by Borrower and payable to the
order of Lender, as amended by that certain First Amendment to
Promissory Note dated October 12, 1995 between Borrower and
Lender and by that certain Second Amendment to Promissory Note
dated April 26, 1996 between Borrower and Lender.
2. Promissory Note dated September 16, 1993 in the original
principal amount of $40,000,000.00 made by Carr Realty Square 106
Partnership ("Square 106") and payable to the order of Lender, as
amended by that certain First Amendment to Promissory Note dated
April 26, 1996 between Square 106 and Lender.
3. Promissory Note dated April 15, 1994 in the original principal
amount of $10,000,000.00 made by Square 106 and payable to the
order of Lender, as amended by that certain First Amendment to
Promissory Note dated October 12, 1995 between Square 106 and
Lender and by that certain Second Amendment to Promissory Note
dated April 26, 1996 between Square 106 and Lender.
4. Promissory Note dated October 12, 1995 in the original principal
amount of $40,000,000 made by Borrower and payable to the order
of Lender, as amended by that certain First Amendment
<PAGE>
to Promissory Note dated April 26, 1996 between Borrower and
Lender.
The Existing Notes and the respective principal amount of indebtedness evidenced
thereby and additional indebtedness of Borrower to Lender are hereby combined
and consolidated to constitute one indebtedness in the principal amount of ONE
HUNDRED EIGHTY-THREE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($183,700,000.00).
The manner and timing of payment and the other terms, covenants, agreements and
provisions of the Existing Notes are hereby modified, amended and restated in
their entirety so that henceforth the terms, provisions, covenants and
agreements thereof shall be as set forth herein, and in the event of any
conflict in the terms, provisions, covenants or agreements between the Existing
Notes and this Note, this Note shall prevail. The Existing Notes are attached
hereto and shall be negotiated only with this Note.
For value received, Borrower promises to pay to the order of Lender,
at 720 E. Wisconsin Avenue, Milwaukee, WI 53202 or at such other place as
Lender shall designate in writing, in coin or currency which, at the time or
times of payment, is legal tender for public and private debts in the United
States, the principal sum of ONE HUNDRED EIGHTY-THREE MILLION SEVEN HUNDRED
THOUSAND DOLLARS or so much thereof as shall have been advanced from time to
time plus interest on the outstanding principal balance at the rate and payable
as follows:
Interest shall accrue from the date of advance until maturity at
the rate of eight and twelve hundredths percent (8.12%) per annum (the
"Interest Rate").
Accrued interest only on the amount advanced shall be paid in
arrears on the first day of the month following the date hereof and on
the first day of each month thereafter until and including the
Amortization Period Commencement Date. On the first day of the month
following the Amortization Period Commencement Date, and on the first
day of each month thereafter until maturity, installments of principal
and interest shall be paid in an amount equal to the unpaid principal
balance of this Note on the Amortization Period Commencement Date
multiplied by .00779782431. Installments shall be made directly to
Lender by electronic transfer of funds using the Automated Clearing
House System. All installments shall be applied first in payment of
interest, calculated monthly on the unpaid principal balance, and the
remainder of each installment shall be applied in payment of
principal. The entire unpaid principal balance plus accrued
2
<PAGE>
interest thereon shall be due and payable on April 1, 2009 (the
"Maturity Date").
As used herein, "Amortization Period Commencement Date" means
April 1, 2001.
Borrower shall have the right, upon thirty (30) days advance written
notice, beginning on April 1, 2002 of making a partial prepayment (a "Partial
Prepayment") or a full prepayment (a "Full Prepayment") of this Note with a
prepayment fee. A Partial Prepayment may only be made in connection with a
Partial Release (as hereinafter defined). The prepayment fee represents
consideration to Lender for loss of yield and reinvestment costs and shall also
be payable whenever prepayment occurs as a result of a condemnation or sale
under threat of condemnation of all or substantially all of the Property.
In the event of a Full Prepayment, the fee shall be the greater of Yield
Maintenance or 1% of the outstanding principal balance of this Note.
In the event of a Partial Prepayment, the fee shall be equal to the product of
(i) a fraction, the numerator of which is the amount of principal being prepaid
and the denominator of which is the outstanding principal balance of this Note
immediately prior to such prepayment, and (ii) the prepayment fee that would be
payable if there were a Full Prepayment at such time.
As used herein, "Yield Maintenance" means the amount, if any, by which
(i) the present value of the Then Remaining Payments (as hereinafter
defined) calculated using a periodic discount rate (corresponding
to the payment frequency under this Note) which, when compounded
for such number of payment periods in a year, equals the per
annum effective yield of the Most Recently Auctioned United
States Treasury Obligation having a maturity date equal to the
Maturity Date (or, if there is no such equal maturity date, then
the linearly interpolated per annum effective yield of the two
Most Recently Auctioned United States Treasury Obligations having
maturity dates most nearly equivalent to the Maturity Date) as
reported by The Wall Street Journal five business days prior to
-----------------------
the date of prepayment; exceeds
(ii) the outstanding principal balance of this Note (exclusive of all
accrued interest).
3
<PAGE>
If such United States Treasury obligation yields shall not be reported as of
such time or the yields as of such time shall not be ascertainable, then the
periodic discount rate shall be equal to the Treasury Constant Maturity Series
yields reported, for the latest day for which such yields shall have been so
reported, as of five business days preceding the prepayment date, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded United States Treasury obligations having a constant
maturity most nearly equivalent to the Maturity Date.
All parties at any time liable, whether primarily or secondarily, for
payment of indebtedness evidenced hereby, for themselves, their heirs, legal
representatives, successors and assigns, respectively, expressly waive
presentment for payment, notice of dishonor, protest, notice of protest, and
diligence in collection; consent to the extension by Lender of the time of said
payments or any part thereof; further consent that the Property or any part
thereof may be released by Lender, without in any way modifying, altering,
releasing, affecting, or limiting their respective liability or the lien of the
Lien Instrument; and agree to pay reasonable attorneys' fees and expenses of
collection in case this Note is placed in the hands of an attorney for
collection or suit is brought hereon and any attorneys' fees and expenses
incurred by Lender to enforce or preserve its rights under any of the Loan
Documents (as defined in the Lien Instrument) in any bankruptcy or insolvency
proceeding.
Any principal, interest or other amounts payable under any of the Loan
Documents, not paid when due (without regard to any notice and/or cure
provisions contained in any of the Loan Documents), including principal becoming
due by reason of acceleration by Lender of the entire unpaid balance of this
Note, shall bear interest from the due date thereof until paid at the Default
Rate. As used herein, "Default Rate" means the lower of a rate equal to the
interest rate in effect at the time of the default as herein provided plus 5%
per annum or the maximum rate permitted by law.
No provision of this Note shall require the payment or permit the
collection of interest, including any fees paid which are construed under
applicable law to be interest, in excess of the maximum permitted by law. If
any such excess interest is collected or herein provided for, or shall be
adjudicated to have been collected or be so provided for herein, the provisions
of this paragraph shall govern, and Borrower shall not be obligated to pay the
amount of such interest to the extent that it is in excess of the amount
permitted by law. Any such excess collected shall, at the option of Lender,
unless otherwise required by applicable law, be immediately refunded to Borrower
or credited on the principal of this Note immediately upon Lender's awareness of
the collection of such excess.
4
<PAGE>
Notwithstanding any provision contained herein or in the Lien
Instrument to the contrary, if Lender shall take action to enforce the
collection of the indebtedness evidenced hereby or secured by the Lien
Instrument (collectively, the "Indebtedness"), its recourse, except as provided
below, shall be limited to the Property or the proceeds from the sale of the
Property, the proceeds from the sale of the assets of Borrower, and the proceeds
realized by Lender in exercising its rights and remedies (i) under the Absolute
Assignment (as defined in the Lien Instrument), (ii) under the Guarantee of
Recourse Obligations of even date herewith executed by CarrAmerica Realty
Corporation for the benefit of Lender, (iii) under any of the other Loan
Documents (as defined in the Lien Instrument) and (iv) in any other collateral
securing the Indebtedness. If such proceeds are insufficient to pay the
Indebtedness, Lender will never institute any action, suit, claim or demand in
law or in equity against the partners of Borrower for or on account of such
deficiency; provided, however, that the provisions contained in this paragraph
(i) shall not in any way affect or impair the validity or
enforceability of the Indebtedness or the Lien Instrument; and
(ii) shall not prevent Lender from seeking and obtaining a judgment
against the general partner(s) of Borrower as well as Borrower,
and the general partner(s) of Borrower as well as Borrower shall
be personally liable, for the Recourse Obligations.
As used herein, the term "Recourse Obligations" means
(a) Rents and other income from the Property from and after the date
which is forty-five (45) days prior to the occurrence of an Event of
Default, which Event of Default remains uncured prior to the
foreclosure sale of the Property pursuant to the Lien Instrument or
the conveyance of the Property to Lender in lieu of foreclosure, which
rents and other income have not been applied to the payment of
principal and interest on this Note or to reasonable operating
expenses of the Property,
(b) Amounts necessary to repair any damage to the Property caused by
the intentional acts or omissions of Borrower or those acting on
behalf of Borrower,
(c) Insurance loss and condemnation proceeds released to Borrower but
not applied in accordance with any agreement between Borrower and
Lender as to their application and consistent with the terms and
provisions of the Lien Instrument,
5
<PAGE>
(d) The amount of insurance loss proceeds which would have been
available with respect to a casualty on the Property, but were not
available due to the default by Borrower in carrying all insurance
required by Lender,
(e) Damages suffered by Lender as a result of fraud or
misrepresentation in connection with the Indebtedness by Borrower or
any other person or entity acting on behalf of Borrower,
(f) Amounts necessary to pay real estate taxes, special assessments
and insurance premiums with respect to the Property either paid by
Lender and not reimbursed prior to, or remaining due or delinquent on,
either (i) the later of (A) the date on which title vests in the
purchaser at the foreclosure sale of the Property pursuant to the Lien
Instrument or (B) the date on which Borrower's statutory right of
redemption shall expire or be waived or (ii) the date of the
conveyance of the Property to Lender in lieu of foreclosure, and
(g) All outstanding amounts due under the Indebtedness, including
principal, interest, and other charges if there shall be a violation
of any of the provisions of the Lien Instrument following the caption
entitled "Due on Sale".
-----------
This Note, the interpretation hereof and the rights, obligations,
duties and liabilities hereunder shall be governed and controlled by the laws of
the District of Columbia.
CARR REALTY, L.P., a Delaware limited partnership
By: CarrAmerica Realty Corporation, a
Maryland corporation, general partner
By: /s/ Paul R. Adkins
-----------------------------
(corporate seal) Name: Paul R. Adkins
---------------------------
Title: Senior Vice President
--------------------------
Attest: /s/ Linda A. Madrid
------------------------------
6
<PAGE>
Exhibit 10.22
Loan No. C-332339 District of Columbia
RECORDING REQUESTED BY
_______________________________
WHEN RECORDED MAIL TO
The Northwestern Mutual Life Ins. Co.
720 East Wisconsin Avenue - Rm N16WC
Milwaukee, WI 53202
Attn: Rosemary Poetzel
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
CONSOLIDATED, AMENDED AND RESTATED
DEED OF TRUST AND SECURITY AGREEMENT
------------------------------------
(SECURES NEW INDEBTEDNESS IN THE AMOUNT OF $13,700,000)
THIS CONSOLIDATED, AMENDED AND RESTATED DEED OF TRUST AND SECURITY
AGREEMENT, (this "Deed of Trust") Made as of March 19, 1999 between CARR REALTY,
L.P., a Delaware limited partnership, whose address is c/o CarrAmerica Realty
Corporation, 1850 K Street, Suite 500, Washington, DC 20006, herein called
"Grantor"; WILLIAM H. NORTON, whose address 1133 20th Street NW, Suite 600,
Washington. DC 20036, herein called "Trustee"; and THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY, a Wisconsin corporation, whose address is 720 East Wisconsin
Avenue, Milwaukee, WI 53202, herein called "Beneficiary."
WITNESSETH:
WHEREAS, Beneficiary is, on the date of delivery hereof, the owner and
holder of the following deeds of trust (hereinafter referred to as "Prior
Deeds"):
1. Deed of Trust and Security Agreement dated as of February 1,
1993 executed by Grantor to Patrick H. McGuire, III, as trustee,
given to secure a certain Promissory Note of even date therewith
in the face amount of $80,000,000.00 made by Grantor and payable
to the order of Beneficiary, which Deed of Trust and Security
Agreement was recorded among the land records of the District of
Columbia on February 16, 1993 as Instrument No. 10820 and amended
by (A) that certain First Amendment to Deed of Trust dated as of
September 16, 1993 between Grantor, Beneficiary and William H.
Norton, as substitute trustee, and recorded on September 20, 1993
among the land records of the District of Columbia as Instrument
No. 62213, (B) that certain Second Amendment to Deed of Trust
dated as of April 15, 1994 among Grantor, Beneficiary and William
H. Norton, as substitute trustee, and recorded on May 3, 1994
among the land records of the District of
<PAGE>
Columbia as Instrument No. 36213, and (C) that certain Third
Amendment to Deed of Trust dated as of June 8, 1994 among
Grantor, Beneficiary and William H. Norton, as substitute
trustee, and recorded on June 9, 1994 among the land records of
the District of Columbia as Instrument No. 47555;
2. Deed of Trust and Security Agreement dated as of September
16, 1993 executed by Grantor to William H. Norton, as trustee,
which is an indemnity deed of trust given to secure a certain
Promissory Note of even date therewith in the amount of
$40,000,000.00 made by Carr Realty Square 106 Partnership, a
Delaware general partnership hereinafter referred to as "Square
106," and payable to the order of Beneficiary, which was recorded
among the land records of the District of Columbia on September
20, 1993 as Instrument No. 62211;
3. Deed of Trust and Security Agreement dated April 15, 1994
from Grantor to William H. Norton, as trustee, for the benefit of
Beneficiary, which is an indemnity deed of trust given to secure
a certain Promissory Note of even date therewith in the original
principal amount of $10,000,000 made by Square 106 and payable to
the order of Beneficiary, which Deed of Trust and Security
Agreement was recorded on May 3, 1994 among the land records of
the District of Columbia as Instrument No. 36212; and
4. Amendment, Restatement and Consolidation of Deeds of Trust
and Security Agreements dated October 12, 1995 from Grantor to
William H. Norton, as trustee, for the benefit of Beneficiary,
given to secure a certain Promissory Note of even date therewith
in the original principal amount of $40,000,000 made by Grantor
and payable to the order of Beneficiary, which Amendment,
Restatement and Consolidation of Deeds of Trust and Security
Agreements was recorded on November 13, 1995 among the land
records of the District of Columbia as Instrument No. 68635; and
5. Deed of Trust and Security Agreement dated April 15, 1994
from Square 106 to William H. Norton, as trustee, for the benefit
of Beneficiary, given to secure a certain Promissory Note of even
date therewith in the original principal amount of $10,000,000
made by Square 106 and payable to the order of Beneficiary, which
Deed of Trust and Security Agreement was recorded on May 3, 1994
among the land records of the District of Columbia as Instrument
No. 36211; and
6. Deed of Trust and Security Agreement dated September 16,
1993 from Square 106 to William H. Norton as trustee, for the
benefit of Beneficiary, given to secure a certain Promissory Note
of even date therewith in the original principal amount of
$40,000,000 made by Square 106 and payable to the order of
Beneficiary, which Deed of Trust and Security Agreement was
recorded on September 20, 1993 as Instrument No. 62210; and
2
<PAGE>
WHEREAS, Beneficiary has agreed to make an additional loan to Grantor,
which loan is to be secured by the property described in the Prior Deeds;
WHEREAS, Grantor and Beneficiary have agreed to amend the Prior Deeds
to secure the said additional loan and to combine, consolidate and coordinate
the liens evidenced by the Prior Deeds and to supplement, amend, modify and
restate in their entireties the terms of the Prior Deeds in the manner
hereinafter appearing, without affecting the lien status of the Prior Deeds;
NOW, THEREFORE. in pursuance of said agreement and in consideration of
the sum of Ten ($10.00) Dollars and other valuable consideration each to the
other in hand paid, the receipt of which is hereby acknowledged, the parties
hereto mutually covenant and agree as follows
That this instrument amends, consolidates and restates the Prior Deeds
in their entireties, it being the intent of Grantor by this instrument to, and
Grantor does hereby, bargain, sell, grant, transfer, assign and convey unto
Trustee, in trust, with power of sale and right of entry and possession, the
following property (herein referred to as the "Property"):
A. The land in the District of Columbia described in Exhibit
"A" attached hereto and incorporated herein, all appurtenances
thereto and all warranties of title owned by Grantor with respect
thereto (which together with the items thereon described in
subparagraph C below, is hereinafter referred to as the "1730
Pennsylvania Avenue Project");
B. The land in the District of Columbia described in Exhibit
"B" attached hereto and hereby incorporated within this
instrument and all appurtenances thereto and all warranties of
title or covenants of quiet enjoyment owned by Grantor with
respect thereto (which, together with the items thereon described
in subparagraph C below, is hereinafter referred to as the
"International Square Project"), and
C. All buildings and improvements now existing or hereafter
erected on the land referred to above (the "Land"), all waters
and water rights, all engines, boilers, elevators and machinery,
all heating apparatus, electrical equipment, air-conditioning and
ventilating equipment, water and gas fixtures, all furniture and
easily removable equipment, and all other fixtures of every
description belonging to Grantor which are or may be placed or
used upon the Land or attached to the buildings or improvements,
all of which, to the extent permitted by applicable law, shall
3
<PAGE>
be deemed an accession to the freehold and a part of the realty
as between the parties hereto.
The 1730 Pennsylvania Avenue Project and the International Square Project are
hereinafter individually referred to as a "Project" and collectively referred to
as the "Projects."
Grantor agrees not to sell, transfer, assign or remove anything described in C
above now or hereafter located on the Land without prior written consent from
Beneficiary unless (i) such action does not constitute a sale or removal of any
buildings or improvements or the sale or transfer of waters or water rights and
(ii) such action results in the substitution or replacement with similar items
of equal value.
Without limiting the foregoing grants, Grantor hereby pledges to Beneficiary,
and grants to Beneficiary a security interest in, all of Grantor's present and
hereafter acquired right, title and interest in and to the Property and any and
all
D. Cash and other funds now or at any time hereafter deposited
by or for Grantor on account of tax, special assessment,
replacement or other reserves required to be maintained pursuant
to the Loan Documents (as hereinafter defined) with Beneficiary
or a third party, or otherwise deposited with, or in the
possession of, Beneficiary pursuant to the Loan Documents; and
E. To the extent a security interest may be granted therein,
surveys, soils reports, environmental reports, guaranties,
warranties, architect's contracts, construction contracts,
drawings and specifications, applications, permits, surety bonds
and other contracts relating to the acquisition, design,
development, construction and operation of the Property; and
F. Present and future rights to condemnation awards, insurance
proceeds or other proceeds at any time payable to or received by
Grantor on account of the Property or any of the foregoing
personal property.
All personal property hereinabove described is hereinafter referred to as the
"Personal Property".
If any of the Property is of a nature that a security interest therein can be
perfected under the Uniform Commercial Code, this instrument shall constitute a
security agreement and financing statement if permitted by applicable law and
Grantor agrees to join with Beneficiary in the execution of any financing
statements and to execute any other instruments that may be required for the
perfection or renewal of such security interest under the Uniform Commercial
Code.
TO HAVE AND TO HOLD the same unto Trustee for the purpose of securing:
4
<PAGE>
(a) Payment to the order of Beneficiary of the indebtedness evidenced by a
Consolidated, Amended and Restated Promissory Note of even date herewith (and
any restatement, extension or renewal thereof and any amendment thereto)
executed by Grantor for the principal sum of ONE HUNDRED EIGHTY-THREE MILLION
SEVEN HUNDRED THOUSAND DOLLARS, with final maturity no later than April 1, 2009
and with interest as therein expressed (which promissory note, as such
instrument may be amended, restated, renewed and extended, is hereinafter
referred to as the "Note");
(b) Payment to the order of Beneficiary of the indebtedness evidenced by an
Amended and Restated Promissory Note of even date herewith executed by Capitol
50 Associates, a District of Columbia joint venture ("Cap 50"), for the
principal sum of THIRTY-EIGHT MILLION THREE HUNDRED THOUSAND DOLLARS, with final
maturity no later than April 1, 2009 and with interest as therein expressed
(which promissory note, as such instrument may be amended, restated, renewed and
extended, is hereinafter referred to as the "Cap 50 Note") and secured by a lien
on certain property described in that certain Amended and Restated Deed of Trust
and Security Agreement of even date herewith executed by Cap 50, for the benefit
of Beneficiary to be recorded in the land records of the District of Columbia
(the "Cap 50 Lien Instrument");
(c) Payment of all sums that may become due Beneficiary under the
provisions of, and the performance of each agreement of Grantor contained in,
the Loan Documents and the Cap 50 Loan Documents.
As used herein, "Loan Documents" means this instrument, the Note, that certain
Consolidated Amended and Restated Absolute Assignment of Leases and Rents of
even date herewith between Grantor and Beneficiary (the "Absolute Assignment"),
that certain Certification of Borrower of even date herewith, and any other
agreement entered into by Grantor and delivered to Beneficiary in connection
with the indebtedness evidenced by the Note, except for any separate
environmental indemnity agreement, as any of the foregoing may be amended from
time to time.
As used herein, "Cap 50 Loan Documents" means the Cap 50 Lien Instrument, the
Cap 50 Note, that certain Absolute Assignment of Leases and Rents of even date
herewith between Cap 50 and Beneficiary (the "Cap 50 Absolute Assignment"), that
certain Certification of Borrower of even date herewith, and any other agreement
entered into by Cap 50 and delivered to Beneficiary in connection with the
indebtedness evidenced by the Cap 50 Note, except for any separate environmental
indemnity agreement as any of the foregoing may be amended from time to time
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, GRANTOR COVENANTS AND AGREES:
Payment of Debt. Grantor agrees to pay the indebtedness hereby secured (the
- ---------------
"Indebtedness") promptly and in full compliance with the terms of the Loan
Documents.
Ownership. Grantor represents that it owns the Property and has good and lawful
- ---------
right to convey the same and that the Property is free and clear from any and
all encumbrances whatsoever, except as appears in the title commitment accepted
by Beneficiary. Grantor does
5
<PAGE>
hereby forever warrant and shall forever defend the title and possession thereof
against the lawful claims of any and all persons whomsoever.
Maintenance of Property and Compliance with Laws. Grantor agrees to keep the
- ------------------------------------------------
buildings and other improvements now or hereafter erected on the Land in good
condition and repair; not to commit or suffer any waste; to comply in all
material respects with all laws, rules and regulations affecting the Property;
and to permit Beneficiary to enter at all reasonable times for the purpose of
inspection and of conducting, in a reasonable and proper manner, such tests as
Beneficiary determines to be necessary in order to monitor Grantor's compliance
with applicable laws and regulations regarding hazardous materials affecting the
Property.
Insurance. Grantor agrees to keep the Property insured for the protection of
- ---------
Beneficiary and Beneficiary's wholly owned subsidiaries and agents in such
manner, in such amounts and in such companies as Beneficiary may from time to
time approve, and to keep the policies therefor, properly endorsed, on deposit
with Beneficiary, or at Beneficiary's option, to keep certificates of insurance
(Acord 27 for all property insurance and Acord 25-S for all liability insurance)
evidencing all insurance coverages required hereunder on deposit with
Beneficiary, which certificates shall provide at least thirty (30) days notice
of cancellation to Beneficiary and shall list Beneficiary as the certificate
holder, that insurance loss proceeds from all property insurance policies,
whether or not required by Beneficiary, (less expenses of collection) shall, at
Beneficiary's option, be applied on the Indebtedness, whether due or not, or to
the restoration of the Property, or be released to Grantor, but such application
or release shall not cure or waive any default under any of the Loan Documents.
If Beneficiary elects to apply the insurance loss proceeds on the Indebtedness,
no prepayment privilege fee shall be due thereon.
Notwithstanding, the foregoing provision, Beneficiary agrees that if the
insurance loss proceeds are less than the unpaid principal balance of the Note
and if the casualty occurs prior to the last three years of the term of the
Note, then the insurance loss proceeds (less expenses of collection) shall be
applied to restoration of the Property to its condition prior to the casualty,
subject to satisfaction of the following conditions:
(a) There is no existing Event of Default at the time of
casualty, and if there shall occur any Event of Default after the
date of the casualty, Beneficiary shall have no further
obligation to release insurance loss proceeds hereunder.
(b) The casualty insurer shall not have denied liability for
payment of insurance loss proceeds as a result of any act,
neglect, use or occupancy of the Property by Grantor or any
tenant of the Property.
(c) Beneficiary shall be satisfied that all insurance loss
proceeds so held, together with supplemental funds received from
Grantor, shall be sufficient to complete the restoration of the
Property. Any remaining insurance loss proceeds may, at the
option of Beneficiary, be applied on the Indebtedness, whether or
not due, or be released to Grantor.
(d) If required by Beneficiary, Beneficiary shall be furnished a
satisfactory
6
<PAGE>
report addressed to Beneficiary from an environmental engineer or
other qualified professional satisfactory to Beneficiary to the
effect that no adverse environmental impact to the Property
resulted from the casualty.
(e) Beneficiary shall release casualty insurance proceeds as
restoration of the Property progresses provided that Beneficiary
is furnished satisfactory evidence of the costs of restoration
and if, at the time of such release, there shall exist no
Monetary Default (as hereinafter defined) and no default under
the Loan Documents with respect to which Beneficiary shall have
given Grantor notice pursuant to the Notice of Default provision
-----------------
herein. If the estimated cost of restoration exceeds $250,000.00,
(i) the drawings and specifications for the restoration shall be
approved by Beneficiary in writing prior to commencement of the
restoration, and (ii) Beneficiary shall receive an administration
fee equal to 1% of the cost of restoration.
(f) Prior to each release of funds, Grantor shall obtain for the
benefit of Beneficiary an endorsement to Beneficiary's title
insurance policy insuring Beneficiary's lien as a first and valid
lien on the Property subject only to liens and encumbrances
theretofore approved by Beneficiary.
(g) Grantor shall pay all reasonable costs and expenses incurred
by Beneficiary, including, but not limited to, outside legal
fees, title insurance costs, third-party disbursement fees,
third-party engineering reports and inspections deemed necessary
by Beneficiary.
(h) All reciprocal easement and operating agreements, if any,
benefiting the Property shall remain in full force and effect
between the parties thereto on and after restoration of the
Property.
(i) Beneficiary shall be satisfied that Projected Debt Service
Coverage of at least 1.3 will be produced from the leasing of not
more than 93% of the rentable square feet of space to former
tenants or approved new tenants with leases satisfactory to
Beneficiary for terms of at least five (5) years to commence not
later than thirty (30) days following completion of such
restoration ("Approved Leases").
(j) All leases in effect at the time of the casualty with
tenants who have entered into Beneficiary's form of Non-
Disturbance and Attornment Agreement or similar agreement shall
remain in full force, subject to the terms of such leases, and
each tenant thereunder shall be obligated, or shall elect, to
continue the lease term at full rental (subject only to
abatement, if any, during any period in which the Property or a
portion thereof shall not be used and occupied by such tenant as
a result of the casualty).
As used herein. "Projected Debt Service Coverage" means a number calculated by
dividing Projected Operating Income Available for Debt Service for the first
fiscal year following restoration of the Property by the debt service during the
same fiscal year under all indebtedness
7
<PAGE>
secured by any portion of the Property. For purposes of the preceding sentence,
"debt service" means the greater of (x) debt service due under all such
indebtedness during the first fiscal year following completion of the
restoration of the Property or (y) debt service that would be due and payable
during such fiscal year if all such indebtedness were amortized over twenty-five
(25) years (whether or not amortization is actually required) and if interest on
such indebtedness were due as it accrues at the face rate shown on the notes
therefor (whether or not interest payments based on such face rates are
required).
"Projected Operating Income Available for Debt Service" means projected gross
annual rent from the Approved Leases for the first full fiscal year following
completion of the restoration of the Property less:
(A) the operating expenses of the Property for the last fiscal year
preceding the casualty or the Taking, as the case may be;
(B) a replacement reserve for future tenant improvements, leasing
commissions and structural items based on not less than $3.10 per
rentable square foot at the Property per annum;
(C) the amount, if any, by which actual gross income during such fiscal
period exceeds that which would be earned from the rental of 93% of
the gross leasable area in the Property;
(D) the amount, if any, by which the actual management fee is less than
3.0% of gross revenue during such fiscal period;
(E) the amount, if any, by which the actual real estate taxes are less
than $3.75 per rentable square foot at the Property per annum; and
(F) the amount, if any, by which total operating expenses, excluding real
estate taxes and replacement reserves, are less than $7.50 per
rentable square foot at the Property per annum.
All projections referenced above shall be calculated in a manner satisfactory to
Beneficiary.
Condemnation. Grantor hereby assigns to Beneficiary all Condemnation Proceeds.
- ------------
As used herein "Condemnation Proceeds" means all awards and any other proceeds
resulting from damage to, the taking of, or any sale or transfer in lieu of a
taking of, all or any portion of the Property in connection with condemnation
proceedings, the exercise of any power of eminent domain or the threat thereof
(a "Taking") less reasonable expenses of collection by Grantor or Beneficiary.
Condemnation Proceeds shall, at Beneficiary's option, be applied on the
Indebtedness in such manner as Beneficiary shall determine, whether due or not,
or to the restoration of the Property, or be released to Grantor, but such
application or release shall not cure or waive any default under any of the Loan
Documents. No application of Condemnation Proceeds to the Indebtedness shall
reduce any monthly payments under the Note, and any application by Beneficiary
against principal shall be in inverse order of when due. No
8
<PAGE>
application by Beneficiary of Condemnation Proceeds to the Indebtedness shall,
except for a Taking of all or substantially all of the Property, require the
payment of a prepayment fee.
Notwithstanding the foregoing provision, Beneficiary agrees that if there shall
be a Taking of less than all or substantially all of the Property, the
restoration or replacement of the improvements on the Land to their functional
and economic utility prior to such Taking is possible and the Condemnation
Proceeds from such Taking are received prior to the last three years of the term
of the Note, such Condemnation Proceeds shall be applied to restoration of the
Property substantially to its condition prior to the Taking or to such other
condition desired by Grantor and approved by Beneficiary, subject to
satisfaction of the following conditions:
(a) There shall be no existing Event of Default (as hereinafter
defined) at the time of the Taking, and if there shall occur any
Event of Default after the date of the Taking, Beneficiary shall
have no further obligation to release Condemnation Proceeds
hereunder.
(b) Beneficiary shall be satisfied that all Condemnation
Proceeds so held, together with supplemental funds to be made
available by Grantor, shall be sufficient to complete the
restoration of the Property. Any remaining Condemnation Proceeds
may, at the option of Beneficiary, be applied on the
Indebtedness, whether or not due, or be released to Grantor.
(c) Beneficiary shall release Condemnation Proceeds as
restoration of the Property progresses if Beneficiary is
furnished satisfactory evidence of the costs of restoration and,
at the time of such release, there shall exist no default under
the Loan Documents or the Ground Lease with respect to which
Beneficiary shall have given Grantor notice pursuant to the Event
-----
of Default provision. If the estimated cost of restoration
----------
exceeds $250,000, (i) the drawings and specifications for the
restoration shall be approved by Beneficiary in writing prior to
commencement of the restoration and (ii) Beneficiary shall
receive an administration fee equal to 1% of the cost of
restoration.
(d) Prior to each release of funds, Grantor shall obtain for the
benefit of Beneficiary an endorsement to Beneficiary's title
insurance policy insuring Beneficiary's lien as a first and valid
lien on the Property subject only to liens and encumbrances
theretofore approved by Beneficiary.
(e) Grantor shall pay all reasonable costs and expenses incurred
by Beneficiary, including, but not limited to, outside legal
fees, title insurance costs, third-party disbursement fees,
third-party engineering reports and inspections deemed necessary
by Beneficiary.
(f) All reciprocal easement and operating agreements, if any,
benefiting the Property shall remain in full force and effect
between the parties thereto on and after restoration of the
Property.
9
<PAGE>
(g) Beneficiary shall be satisfied that Projected Debt Service
Coverage of at least 1.30 will be produced from the leasing of
not more than 93% of the rentable square feet of space to former
tenants or approved new tenants with Approved Leases.
(h) All leases in effect at the time of Taking with tenants who
have entered into Beneficiary's form of Non-Disturbance and
Attornment Agreement or similar agreement shall remain in full
force and each tenant thereunder shall be obligated, or shall
elect, to continue the lease term at full rental (subject only to
abatement, if any, during any period in which the Property or a
portion thereof shall not be used and occupied by such tenant as
a result of the Taking).
Taxes and Special Assessments. Grantor agrees to pay before delinquency all
- -----------------------------
taxes and special assessments of any kind that have been or may be levied or
assessed against the Property, this instrument, the Note or the Indebtedness, or
upon the interest of Trustee or Beneficiary in the Property, this instrument,
the Note or the Indebtedness, and to procure and deliver to Beneficiary the
official receipt of the proper officer showing timely payment of all such taxes
and assessments; provided, however, that Grantor shall not be required to pay
any such taxes or special assessments if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
and funds sufficient to satisfy the contested amount have been deposited in an
escrow satisfactory to Beneficiary.
Personal Property. With respect to the Personal Property, Grantor hereby
- -----------------
represents, warrants and covenants as follows:
(a) Except for the security interest granted hereby, Grantor is, and as to
portions of the Personal Property to be acquired after the date hereof will be,
the sole owner of the Personal Property, free from any lien, security interest,
encumbrance or adverse claim thereon of any kind whatsoever. Grantor shall
notify Beneficiary of, and shall indemnify and defend Beneficiary and the
Personal Property against, all claims and demands of all persons at any time
claiming the Personal Property or any part thereof or any interest therein.
(b) Except as otherwise provided above, Grantor shall not lease, sell,
convey or in any manner transfer the Personal Property without the prior consent
of Beneficiary.
(c) Grantor maintains a place of business at the address set forth above in
this instrument, and Grantor shall immediately notify Beneficiary in writing of
any change in its place of business.
(d) At the request of Beneficiary, Grantor shall Join Beneficiary in
executing one or more financing statements and continuations and amendments
thereof pursuant to the Uniform Commercial Code of the jurisdiction in which the
Property is located in form satisfactory to Beneficiary, and Grantor shall pay
the cost of filing the same in all public offices wherever filing is deemed by
Beneficiary to be necessary or desirable.
Other Liens. Grantor agrees to keep the Property free from all other mortgage
- -----------
liens and from all liens prior to the lien created hereby. The creation of any
other mortgage lien, whether or not
10
<PAGE>
prior to the lien created hereby, the creation of any prior lien or the
assignment or pledge by Grantor of its revocable license to collect, use and
enjoy rents and profits from the Property shall constitute a default under the
terms of this instrument. The term "mortgage" includes a mortgage, deed of trust
deed to secure debt or any other security interest in the Property.
Leases. Grantor represents and warrants that there is no assignment or pledge
- ------
of any leases of, or rentals or income from, the Property now in effect except
to Beneficiary; and covenants that, until the Indebtedness is fully paid, it (i)
shall not make any such assignment or pledge to anyone other than Beneficiary,
(ii) shall not, unless expressly permitted under another provision in this
instrument, make any assignment or pledge to anyone of its hereinafter described
revocable license to collect, use and enjoy the rents and profits, and (iii)
shall not, without the prior written approval of Beneficiary, consent to a
cancellation or surrender of any of said leases having at the time an unexpired
term of more than two years or to a release or reduction of the liability of any
party to such a lease.
In consideration of the Indebtedness, Grantor, pursuant to the Absolute
Assignment has assigned to Beneficiary all of Grantor's right title and interest
in said leases, including Grantor's right to collect, use and enjoy the rents
and profits therefrom. Beneficiary has, in the Absolute Assignment, granted to
Grantor a license to collect use and enjoy said rents and profits. Such license
is revocable by Beneficiary pursuant to the terms of the Absolute Assignment.
Costs, Fees and Expenses. Grantor agrees to pay all reasonable costs, fees and
- ------------------------
expenses of this trust; to appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Beneficiary
or Trustee hereunder; to pay all reasonable costs and expenses, including the
cost of obtaining evidence of title and reasonable attorney's fees, incurred in
connection with any such action or proceeding; and to pay any and all reasonable
attorney's fees and expenses of collection and enforcement in the event the Note
is placed in the hands of an attorney for collection, enforcement of any of the
Loan Documents is undertaken or suit is brought thereon.
Failure of Grantor to Act. If Grantor falls to make any payment or do any act
- -------------------------
as herein provided, Beneficiary or Trustee may, without obligation so to do,
without notice to or demand upon Grantor and without releasing Grantor from any
obligation hereof: (i) make or do the same in such manner and to such extent as
Beneficiary may deem necessary to protect the security hereof, Beneficiary or
Trustee being authorized to enter upon the Property for such purpose; (ii)
appear in and defend any action or proceeding purporting to affect the security
hereof, or the rights or powers of Beneficiary or Trustee; (iii) pay, purchase,
contest or compromise any encumbrance, charge or lien which in the judgment of
Beneficiary appears to be prior or superior hereto; and (iv) in exercising any
such powers, pay necessary reasonable expenses, employ counsel and pay its
reasonable fees. Sums so expended shall be payable by Grantor immediately upon
demand with interest from date of expenditure at the Default Rate (as defined in
the Note). All sums so expended by Beneficiary and the interest thereon shall
be included in the Indebtedness and secured by the lien of this instrument.
Event of Default; Cross Default. Any default by Grantor in making any required
- -------------------------------
payment of the Indebtedness or any default in any provision, covenant, agreement
or warranty contained in
11
<PAGE>
any of the Loan Documents shall, except as provided in the two immediately
succeeding paragraphs, constitute an "Event of Default". Any Event of Default
(as defined in the Cap 50 Lien Instrument) shall constitute an "Event of
Default" under this instrument, and Beneficiary, at its option, may declare the
Indebtedness due and payable at once, and may exercise or cause to be exercised
all its rights and remedies under this instrument and the Cap 50 Lien Instrument
concurrently or separately and in such order as Beneficiary may determine.
Notice of Default. A default in any payment required in the Note or any other
- -----------------
Loan Document, whether or not payable to Beneficiary, (a "Monetary Default")
shall not constitute an Event of Default unless Beneficiary shall have given a
written notice of such Monetary Default to Grantor and Grantor shall not have
cured such Monetary Default by payment of all amounts in default (including
payment of interest at the Default Rate, as defined in the Note, from the date
of default to the date of cure on amounts owed to Beneficiary) within five (5)
business days after the date on which Beneficiary shall have given such notice
to Grantor.
Any other default under the Note or under any other Loan Document (a "Non-
Monetary Default") shall not constitute an Event of Default unless Beneficiary
shall have given a written notice of such Non-Monetary Default to Grantor and
Grantor shall not have cured such Non-Monetary Default within thirty (30) days
after the date on which Beneficiary shall have given such notice of default to
Grantor (or, if the Non-Monetary Default is not curable within such 30-day
period, Grantor shall not have (i) diligently undertaken and continued to pursue
the curing of such Non-Monetary Default and (ii) deposited an amount sufficient
to cure such Non-Monetary Default in an escrow account satisfactory to
Beneficiary).
For purposes of this provision, written notice may be delivered personally or
sent by certified mail or reputable courier service with charges prepaid, by
telecopier or by such other method whereby the receipt thereof may be confirmed.
Notice shall be deemed given on the date received. Any notice which is
rejected, the acceptance of which is refused or which is incapable of being
delivered for any reason shall be deemed received as of the date of attempted
delivery.
In no event shall the notice and cure period provisions recited above constitute
a grace period for the purposes of commencing interest at the Default Rate (as
defined in the Note).
Substitution of Trustee. Beneficiary and its successors and assigns may for any
- -----------------------
reason and at any time appoint a new or substitute Trustee by written
appointment delivered to such new or substitute Trustee without notice to
Grantor, without notice to, or the resignation or withdrawal by, the existing
Trustee and without recordation of such written appointment unless notice or
recordation is required by the laws of the jurisdiction in which the Property is
located. Upon delivery of such appointment, the new or substitute Trustee shall
be vested with the same title and with the same powers and duties granted to the
original Trustee.
Appointment of Receiver. Upon commencement of any proceeding to enforce any
- -----------------------
right under this instrument, including foreclosure thereof, Beneficiary (without
limitation or restriction by any present or future law, without regard to the
solvency or insolvency at that time of any party liable for the payment of the
Indebtedness, without regard to the then value of the Property, whether or not
there exists a threat of imminent harm, waste or loss to the Property and
whether
12
<PAGE>
or not the same shall then be occupied by the owner of the equity of redemption
as a homestead) shall have the absolute right to the appointment of a receiver
of the Property and of the revenues, rents, profits and other income therefrom,
and said receiver shall have (in addition to such other powers as the court
making such appointment may confer) full power to collect all such income and,
after paying all necessary expenses of such receivership and of operation,
maintenance and repair of said Property, to apply the balance to the payment of
any of the Indebtedness then due.
Foreclosure. Upon the occurrence of an Event of Default, the entire unpaid
- -----------
Indebtedness shall, at the option of Beneficiary, become immediately due and
payable for all purposes without any notice or demand, except as required by law
(ALL OTHER NOTICE OF THE EXERCISE OF SUCH OPTION, OR OF THE INTENT TO EXERCISE
- ------------------------------------------------------------------------------
SUCH OPTION, BEING HEREBY EXPRESSLY WAIVED), and Beneficiary may, in addition to
- -------------------------------------------
exercising any rights it may have with respect to the Personal Property under
the Uniform Commercial Code of the jurisdiction in which the Property is
located, institute proceedings in any court of competent jurisdiction to
foreclose this instrument as a mortgage, or to enforce any of the covenants
hereof, or Trustee or Beneficiary may, either personally or by agent or attorney
in fact, enter upon and take possession of the Property and may manage, rent or
lease the Property or any portion thereof upon such terms as Beneficiary may
deem expedient, and collect, receive and receipt for all rentals and other
income therefrom and apply the sums so received as hereinafter provided in case
of sale. Trustee is hereby further authorized and. empowered, either after or
without such entry, to sell and dispose of the Property en masse or in separate
parcels (as Trustee may think best), and all the right, title and interest of
Grantor therein, by advertisement or in any manner provided by the laws of the
jurisdiction in which the Property is located, (GRANTOR HEREBY EXPRESSLY WAIVES
--------------------------------
ANY RIGHT TO A HEARING PRIOR TO SUCH SALE), and to issue, execute and deliver a
- ------------------------------------------
deed of conveyance, all as then may be provided by law; and Trustee shall, out
of the proceeds or avails of such sale, after first paying and retaining all
fees, charges, costs of advertising the Property and of making said sale, and
attorneys' fees as herein provided, pay to Beneficiary or the legal holder of
the Indebtedness the amount thereof, including all sums advanced or expended by
Beneficiary or the legal holder of the Indebtedness, with interest from date of
advance or expenditure at the Default Rate (as defined in the Note), rendering
the excess, if any, as provided by law; such sale or sales and said deed or
deeds so made shall be a perpetual bar, both in law and equity, against Grantor,
the heirs, successors and assigns of Grantor, and all other persons claiming the
Property aforesaid, or any part thereof, by, from, through or under Grantor.
The legal holder of the Indebtedness may purchase the Property or any part
thereof, and it shall not be obligatory upon any purchaser at any such sale to
see to the application of the purchase money.
Due on Sale. The present ownership and management of the Property is a material
- -----------
consideration to Beneficiary in making the loan secured by this instrument, and,
except as provided in provision hereof entitled "Partial Release", Grantor shall
---------------
not (i) convey title to all or any part of the Property or (ii) enter into any
contract to convey (land contract/installment sales contract/contract for deed)
title to all or any part of the Property which gives a purchaser possession of,
or income from, the Property prior to a transfer of title to all or any part of
the Property ("Contract to Convey"), and CarrAmerica Realty Corporation, a
Maryland corporation (the "REIT") shall not convey or enter into any contract to
convey its interest in Grantor.
13
<PAGE>
Financial Statements. Grantor agrees to furnish to Beneficiary, at Grantor's
- --------------------
expense and within ninety (90) days after the close of each fiscal year
("Financial Statements Due Date"), the following:
(A) Annual audited financial statements for Grantor (unless such
statements are consolidated with the audited financial statements of
the REIT) and annual audited financial statements for the REIT
(collectively, the "Statements"), prepared in accordance with
generally accepted accounting principles by a "Big 5" firm or such
other certified public accountant reasonably satisfactory to
Beneficiary; and
(B) Annual operating statements for each Project, including a detailed
line item breakdown of all operating expenses and a separate
supplemental schedule listing the capitalized costs associated with
tenant improvements, lease commissions and capital improvements
(collectively referred to herein as the "Property Statements");
(C) A current rent roll (the "Rent Roll");
(D A certification (the "Certification") by a senior officer of the
general partner of Grantor stating that the Property Statements and
Rent Roll are true and correct and the Property Statements have been
prepared in accordance with generally accepted accounting principles;
and
(E) A copy of each lease (the "Leases") for space in excess of 10,000
rentable square feet of space at the Property executed during the
immediately preceding fiscal year.
Grantor acknowledges that Beneficiary requires the Statements, Property
Statements, Rent Roll, Leases and Certification in order to record accurately
the value of the Property for financial and regulatory reporting.
If Grantor does not furnish or cause to be furnished the Statements, Property
Statements, Rent Roll, Leases and Certification to Beneficiary by the Financial
Statements Due Date, within 30 days after Beneficiary shall have given written
notice to Grantor that the Statements, Property Statements, Rent Roll, Leases
and/or Certification have not been received as required,
(x) interest on the unpaid principal balance of the Indebtedness shall as
of the Financial Statements Due Date, accrue and become payable at a rate
equal to the sum of the Interest Rate (as defined the Note) plus one
percent (1%) per annum (the "Increased Rate"); and
(y) Beneficiary may elect to obtain an independent appraisal and audit of
the Property at Grantor's expense, and Grantor agrees that it will, upon
request, promptly make Grantor's books and records regarding the Property
available to Beneficiary and the person(s) performing the appraisal and
audit (which obligation Grantor agrees can be
14
<PAGE>
specifically enforced by Beneficiary).
The amount of the payments due under the Note during the time in which the
Increased Rate shall be in effect shall be changed to an amount which, prior to
the Amortization Period Commencement Date (as defined in the Note), reflects the
Increased Rate and which, after the Amortization Period Commencement Date, is
sufficient to amortize the then unpaid principal balance at the Increased Rate
during the then remaining portion of a period of 25 years commencing with the
Amortization Period Commencement Date (as defined in the Note). Interest shall
continue to accrue and be due and payable monthly at the Increased Rate until
the Statements, Property Statements, Rent Roll, Leases and Certification shall
be furnished to Beneficiary as required. Commencing on the date on which the
Statements, Property Statements, Rent Roll, Leases and Certification are
received by Beneficiary, interest on the unpaid principal balance shall again
accrue at the Interest Rate and the payments due thereafter shall be changed to
an amount which prior to the Amortization Period Commencement Date, reflects
interest at the Interest Rate and which, after the Amortization Period
Commencement Date, is sufficient to amortize the then unpaid principal balance
at the Interest Rate during the then remaining portion of a period of 25 years
commencing with the Amortization Period Commencement Date.
Notwithstanding the foregoing, Beneficiary shall have the right to conduct an
independent audit at its own expense at any time, upon thirty (30) days prior
notice to Grantor, but not more than once annually unless an Event of Default
exists.
Partial Releases. Upon written request from each obligor of the Note, a Project
- ----------------
(a "Released Project") shall be released from the lien of this instrument,
provided there then exists no Event of Default and subject to the following:
1) Payment of a $10,000.00 service fee for each release.
2) Payment toward the unpaid principal balance of the Note due at final
maturity in an amount equal to (i) the current outstanding principal
balance of the Note less the Supportable Loan Amount, (ii) 1.10 times
the Allocated Loan Amount for the Project to be released, or (iii) a
lesser amount determined by Beneficiary, whichever of (i), (ii) or
(iii) Beneficiary shall choose.
3) Payment of a Partial Prepayment (as defined in the Note) fee.
As used herein "Supportable Loan Amount" means an amount equal to the Net Income
Available for Debt Service divided by the product of (i) an annual loan constant
of 0.0926 and (ii) 1.30.
For purpose of this provision, "Net Income Available for Debt Service" means
audited net income from the Remaining Property, determined in accordance with
generally accepted accounting principles, from the last full fiscal period plus
the following:
A) interest on indebtedness secured by any portion of the Property for
such fiscal period allocable to the Remaining Property;
15
<PAGE>
B) depreciation, if any, of fixed assets at or constituting the Remaining
Property for such fiscal period;
C) amortization, if any, of standard tenant finish expenditures at the
Remaining Property (but specifically excluding the amortization of
---------
tenant finish expenditures by Grantor in excess of $30.00 per square
foot for new tenants and $15.00 per square foot for renewal tenants
(i.e., above standard tenant finishes), free rent and rent
concessions); and
D) amortization of costs incurred in connection with any indebtedness
secured by any portion of the Remaining Property and leasing
commissions which have been prepaid; and
less the following:
E) a replacement reserve for future tenant improvements, leasing
commissions and structural items based on not less than $3.10 per
annum per rentable square foot of the Remaining Property;
F) the amount, if any, by which actual gross income during such fiscal
period exceeds that which would have been earned from the rental of
93% of the gross leasable area in the Remaining Property;
G) the amount, if any, by which the actual management fee is less than 3%
of gross revenue from the Remaining Property during such fiscal
period;
H) the amount, if any, by which the actual real estate taxes are less
than $3.75 per square foot of the Remaining Property per annum; and
I) the amount, if any, by which total actual operating expenses,
excluding real estate taxes and replacement reserves, are less than
$7.50 per square foot of the Remaining Property per annum.
All adjustments to net income referred to above in clauses (A) through (I) shall
be calculated in a manner satisfactory to Beneficiary.
As used herein, "Remaining Property" means the Property less the Project to be
released.
For purposes of this provision, any required allocation of any adjustment to net
income [including the interest adjustment in clause (A)] shall be based on the
"Allocated Proportionate Share" for each Project, which shall be defined as
follows:
---------------------------------------------------------------------
ALLOCATED
PROJECT PROPORTIONATE
SHARE
---------------------------------------------------------------------
International Square Project 79.46%
---------------------------------------------------------------------
16
<PAGE>
---------------------------------------------------------------------
1730 Pennsylvania Avenue Project 20.54%
---------------------------------------------------------------------
As used herein, the "Allocated Loan Amount" for any Project means the product of
the Allocated Proportionate Share and the outstanding principal balance of the
Note.
Tenants Using Chlorinated Solvents. Grantor covenants not to lease any of the
- ----------------------------------
Property, without the prior written consent of Beneficiary, to (i) dry cleaning
operations that perform dry cleaning on site with chlorinated solvents or (ii)
any other tenants that use chlorinated solvents in the operation of their
business.
Readiness Status Report. Grantor agrees that it will comply with its report
- -----------------------
with respect to the Property's Year 2000 compliance reports furnished to
Beneficiary prior to the date hereof (the "Readiness Status Report") in all
material respects. Notwithstanding anything to the contrary herein, any
equipment failure that does not have a material impact on the operations of the
Property or that does not impact the rental income of the Property shall not
constitute a breach of this provision.
Deposits by Grantor. To assure the timely payment of real estate taxes and
- -------------------
special assessments (including personal property taxes. if appropriate),
Beneficiary shall have the option, upon the occurrence of an Event of Default,
to require Grantor to deposit funds with Beneficiary in monthly or other
periodic installments in amounts estimated by Beneficiary from time to time
sufficient to pay real estate taxes and special assessments as they become due.
If at any time the funds so held by Beneficiary shall be insufficient to pay any
of said expenses, Grantor shall, upon receipt of notice thereof, immediately
deposit such additional funds as may be necessary to remove the deficiency. All
funds so deposited shall be irrevocably appropriated to Beneficiary to be
applied to the payment of such real estate taxes and special assessments and, at
the option of Beneficiary after default, the Indebtedness.
Liens Discharged by Proceeds. Beneficiary shall be subrogated to the lien of
- ----------------------------
any and all prior encumbrances, liens or charges paid and discharged from the
proceeds of the Note, and even though said prior liens have been released of
record, the repayment of the Note shall be secured by such liens on the portion
of the Property affected thereby to the extent of such payments, respectively.
Modification of Terms. Without affecting the liability of Grantor or any other
- ---------------------
person (except any person expressly released in writing) for payment of the
Indebtedness or for performance of any obligation contained herein and without
affecting the rights of Beneficiary with respect to any security not expressly
released in writing, Beneficiary may. at any tune and from time to time, either
before or after the maturity of the Note, without notice or consent: (i) release
any person liable for payment of all or any part of the Indebtedness or for
performance of any obligation; (ii) make any agreement extending the time or
otherwise altering the terms of payment of all or any part of the Indebtedness,
or modifying or waiving any obligation, or subordinating, modifying or otherwise
dealing with the lien or charge hereof; (iii) exercise or
17
<PAGE>
refrain from exercising or waive any right Beneficiary may have; (iv) accept
additional security of any kind; (v) release or otherwise deal with any
property, real or personal, securing the Indebtedness, including all or any part
of the Property.
Exercise of Options. Whenever, by the terms of this instrument, of the Note or
- -------------------
any of the other Loan Documents, Beneficiary is given any option, such option
may be exercised when the right accrues, or at any time thereafter, and no
acceptance by Beneficiary of payment of Indebtedness in default shall constitute
a waiver of any default then existing and continuing or thereafter occurring.
Nature and Succession of Agreements. Each of the provisions, covenants and
- -----------------------------------
agreements contained herein shall inure to the benefit of, and be binding on,
the successors, grantees, and assigns of the parties hereto, respectively, and
the term "Beneficiary" shall include the owner and holder of the Note.
Legal Enforceability. No provision of this instrument, the Note or any other
- --------------------
Loan Documents shall require the payment of interest or other obligation in
excess of the maximum permitted by law. If any such excess payment is provided
for in any Loan Documents or shall be adjudicated to be so provided, the
provisions of this paragraph shall govern and Grantor shall not be obligated to
pay the amount of such interest or other obligation to the extent that it is in
excess of the amount permitted by law.
Limitation of Liability. Notwithstanding any provision contained herein to the
- -----------------------
contrary, the personal liability of the partners in Grantor shall be limited as
provided in the Note.
Captions. The captions contained herein are for convenience and reference only
- --------
and in no way define, limit or describe the scope or intent of, or in any way
affect this instrument.
Governing Law. This instrument, the interpretation hereof and the rights,
- -------------
obligations, duties and liabilities hereunder shall be governed and controlled
by the laws of the District of Columbia.
Commitment Superseded. The provisions of the Loan Documents replace and
- ---------------------
supersede in their entirety the provisions of the Application for Mortgage Loan
dated March 1, 1999 for Carr Realty, L.P., as accepted by Beneficiary on March
15, 1999.
IN WITNESS WHEREOF, Carr Realty, L.P., a Delaware limited partnership, as
Grantor, has executed this instrument through its general partner, CarrAmerica
Realty Corporation, a Maryland corporation, which has caused this instrument as
of the date and year first written above to be executed by Paul R. Adkins, its
Senior Vice President, and attested by Linda A. Madrid, its ____________________
- ---------------------
Secretary, and its corporate seal affixed and acknowledges this instrument as
its act and deed.
18
<PAGE>
CARR REALTY, L.P., a Delaware limited
partnership
By: CarrAmerica Realty Corporation, a
Maryland Corporation, the general
partner
By: /s/ Paul R. Adkins
-----------------------------
(corporate seal) Name: Paul R. Adkins
---------------------------
Title: Senior Vice President
--------------------------
Attest: /s/ Linda A. Madrid
-------------------------
19
<PAGE>
STATE OF )
)ss.
COUNTY OF )
or
DISTRICT OF COLUMBIA, to wit:
This instrument was acknowledged before me on March 18, 2000, by Paul R. Adkins
and Linda A. Madrid, as Senior Vice President and Secretary, respectively, of
CarrAmerica Realty Corporation, a Maryland corporation, the general partner of
CARR REALTY, L.P., a Delaware limited partnership.
/s/ Alice Anne Arth
-----------------------------
Notary Public
(Notarial Seal) My commission expires:
My Commission Expires April 30, 2003
This instrument was prepared by Frederick W. Bessette, Attorney, for The
Northwestern Mutual Life Insurance Company, 720 East Wisconsin Avenue,
Milwaukee, WI 53202.
20
<PAGE>
Exhibit 21.1
CARRAMERICA REALTY GP HOLDINGS, INC. DE
CARRAMERICA REALTY LP HOLDINGS, INC. DE
CARRAMERICA REALTY SERVICES, INC. DE
CARR REDMOND CORPORATION DE
CARR PARKWAY NORTH I CORPORATION DE
CARRAMERICA DEVELOPMENT, INC. DE
CARRAMERICA URBAN DEVELOPMENT, INC. DE
CDC TEXAS HOLDINGS, INC. DE
CDC TEXAS LP HOLDINGS, INC. DE
CARR REAL ESTATE SERVICES, INC. DE
CARR REALTY, L.P. DE
CARRAMERICA REALTY, L.P. DE
CARR DEVELOPMENT & CONSTRUCTION, L.P. DE
SQUARE 24 ASSOCIATES DC
1747 PENNSYLVANIA AVENUE ASSOCIATES, L.P. DE
CARR REAL ESTATE SERVICES, L.L.C. DE
CARRAMERICA U.S. WEST, LLC DE
CARRAMERICA TECHMART, L.L.C. DE
PALOMAR OAKS, L.L.C. DE
1201 F STREET, L.L.C. DE
1717 PENNSYLVANIA AVENUE, L.L.C. DE
CARR REAL ESTATE SERVICES PARTNERSHIP. DE
CAPITOL 50 ASSOCIATES DC
SQUARE 50 ASSOICATES DC
WCM/CARR 135-302 WA
<PAGE>
Exhibit 23.1
ACCOUNTANT'S CONSENT
The Board of Directors
CarrAmerica Realty Corporation:
We consent to incorporation by reference in the registration statement (No.
333-22353, 333-53751, 333-50019, 333-18451, 333-04519, 333-80164, 333-89191 and
333-89193) on Form S-3 and registration statements (No. 033-92136, 333-33313,
333-88555 and 333-88557) on Form S-8 of CarrAmerica Realty Corporation of our
reports dated February 1, 2000, relating to the consolidated balance sheets of
CarrAmerica Realty Corporation and subsidiaries as of December 31, 1999 and 1998
and the related consolidated statements of operations, stockholder's equity, and
cash flows for each of the years in the three-year period ended December 31,
1999 and the related schedule, which reports appear in the December 31, 1999
annual report on Form 10-K of CarrAmerica Realty Corporation.
Washington, D.C.
March 24, 2000
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ Oliver T. Carr, Jr.
-------------------------------
Oliver T. Carr, Jr.
<PAGE>
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ C. Ronald Blankenship
---------------------------------
C. Ronald Blankenship
<PAGE>
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints Richard F. Katchuk and Linda A.
Madrid, and each of them, his or her true and lawful attorney-in-fact and agent,
with full power of substitution, to execute and deliver in the undersigned's
name and on the undersigned's behalf the Annual Report on Form 10-K for the year
ended December 31, 1999 for CarrAmerica Realty Corporation, and any and all
amendments thereto, and to file the same, with all exhibits and other documents
in connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ Andrew F. Brimmer
--------------------------------
Andrew F. Brimmer
<PAGE>
Exhibit 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ A. James Clark
-----------------------------
A. James Clark
<PAGE>
Exhibit 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ Timothy Howard
------------------------------
Timothy Howard
<PAGE>
Exhibit 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ Caroline S. McBride
---------------------------------
Caroline S. McBride
<PAGE>
Exhibit 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as the undersigned might or could
do in person; and the undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue of the power of attorney granted
hereby.
Date: March 24, 2000
/s/ William D. Sanders
--------------------------------
William D. Sanders
<PAGE>
Exhibit 24.8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears
below hereby constitutes and appoints Richard F. Katchuk and Linda A. Madrid,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution, to execute and deliver in the undersigned's name and
on the undersigned's behalf the Annual Report on Form 10-K for the year ended
December 31, 1999 for CarrAmerica Realty Corporation, and any and all amendments
thereto, and to file the same, with all exhibits and other documents in
connection therewith, with the Securities and Exchange Commission, and to
execute, deliver and file in connection therewith any other documents and
instruments in the undersigned's name or on the undersigned's behalf which said
attorneys-in-fact and agents, or either of them, may determine to be necessary
or advisable to comply with the Securities Exchange Act of 1934, as amended, and
any rules or regulations promulgated thereunder, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as the undersigned
might or could do in person; and the undersigned hereby ratifies and confirms
all that said attorneys-in-fact and agents, or either of them, or their
substitutes, may lawfully do or cause to be done by virtue of the power of
attorney granted hereby.
Date: March 24, 2000
/s/ Wesley S. Williams, Jr.
------------------------------
Wesley S. Williams, Jr.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from CarrAmerica
Realty Corporation and subsidiaries consolidated balance sheet as of December
31, 1999 and from CarrAmerica Realty Corporation and subsidiaries and
consolidated statement of operations for the year ended December 31, 1999.
</LEGEND>
<CIK> 0000893577
<NAME> CARRAMERICA REALTY CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1,000
<CASH> 12,475
<SECURITIES> 0
<RECEIVABLES> 34,734
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,067,822
<DEPRECIATION> 323,455
<TOTAL-ASSETS> 3,479,072
<CURRENT-LIABILITIES> 0
<BONDS> 1,603,371
0
95
<COMMON> 668
<OTHER-SE> 1,685,952
<TOTAL-LIABILITY-AND-EQUITY> 3,479,072
<SALES> 0
<TOTAL-REVENUES> 515,903
<CGS> 0
<TOTAL-COSTS> 414,856
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 114,639
<INCOME-TAX> 783
<INCOME-CONTINUING> 96,257
<DISCONTINUED> 7,862
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,217
<EPS-BASIC> 1.59
<EPS-DILUTED> 1.59
<FN>
<F1>(1) Notes & accounts receivable are presented net of allowance for doubtful
accounts as the allowance is immaterial.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARRAMERICA
REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF DECEMBER
31, 1998 AND FROM CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES AND
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 20,706
<SECURITIES> 0
<RECEIVABLES> 35,866
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,934,653
<DEPRECIATION> 257,215
<TOTAL-ASSETS> 3,627,260
<CURRENT-LIABILITIES> 0
<BONDS> 1,610,859
0
95
<COMMON> 718
<OTHER-SE> 1,813,126
<TOTAL-LIABILITY-AND-EQUITY> 3,627,260
<SALES> 0
<TOTAL-REVENUES> 456,622
<CGS> 0
<TOTAL-COSTS> 354,273
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 97,891
<INCOME-TAX> 0
<INCOME-CONTINUING> 81,819
<DISCONTINUED> 6,518
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126,497
<EPS-BASIC> 1.33
<EPS-DILUTED> 1.32
<FN>
<F1>(1) Notes & accounts receivable are presented net of allowance for doubtful
accounts as the allowance is immaterial.
</FN>
</TABLE>
