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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to _______.
Commission File No. 33-98136
A. Full title of the Plan and the address of the address of the Plan,
if different from that of the issuer named below:
(the "Plan")
CHELSEA GCA 401(K) SAVINGS PLAN
B. Name of the issuer of the securities held pursuant to the Plan
and the address of its principal executive office:
CHELSEA GCA REALITY, INC.
103 Eisenhower Parkway
Roseland, New Jersey 07068
<PAGE>
Financial Statements and
Supplemental Schedules
Chelsea GCA 401(k) Savings Plan
DECEMBER 31, 1997
<PAGE>
Chelsea GCA 401(k) Savings Plan
Financial Statements and Supplemental Schedules
December 31, 1997
CONTENTS
Report of Independent Auditors.........................................1
Financial Statements
Statements of Net Assets Available for Plan Benefits- with
Fund Information....................................................2
Statement of Changes in Net Assets Available for Plan
Benefits-with Fund Information......................................4
Notes to Financial Statements..........................................5
Supplemental Schedules
Schedule of Assets Held for Investment................................12
Schedule of Reportable Transactions...................................13
<PAGE>
Report of Independent Auditors
Chelsea GCA 401(k) Savings Plan
Retirement and Benefits Committee
We have audited the accompanying statements of net assets available for plan
benefits-with fund information of Chelsea GCA 401(k) Savings Plan (the "Plan")
as of December 31, 1997 and 1996, and the related statement of changes in net
assets available for plan benefits-with fund information for the year ended
December 31, 1997. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 1997 and 1996, and the changes in its net assets available for plan
benefits for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment as of December 31, 1997 and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The fund information in
the statements of net assets available for plan benefits-with fund information
and the statement of changes in net assets available for plan benefits-with fund
information is presented for purposes of additional analysis rather than to
present the net assets available for plan benefits and changes in net assets
available for plan benefits for each fund. The supplemental schedules and fund
information has been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Ernst & Young LLP
New York, NY
June 19, 1998
<PAGE>
<TABLE>
<CAPTION>
Chelsea GCA 401(k) Savings Plan
Statement of Net Assets Available for Plan Benefits-with Fund Information
December 31, 1997
FUND INFORMATION
---------------------------------------------------------------------------------------------
THE MERRILL LYNCH TRUST
--------------------------------------------------------------------------------
Corporate
Bond Fund Chelsea
Basic Investment Global Retirement CMA GCA
Value Capital Grade Allocation Growth Preservation Money Realty,
Fund Fund Portfolio Fund Fund Trust Fund Cash Inc. Participant
Common Loans
Stock Receivable Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at
fair value $287,522 $ 99,238 $90,029 $91,889 $562,335 $49,964 $3,432 $1,363 $74,961 $17,822 $1,278,555
Employee contributions
receivable 4,891 4,025 2,304 2,644 12,478 1,019 2,272 29,633
Net assets available -------------------------------------------------------------------------------------------------------------
for plan benefits
at December 31, 1997 $292,413 $103,263 $92,333 $94,533 $574,813 $50,983 $3,432 $1,363 $77,233 $17,822 $1,308,188
==============================================================================================================
SEE ACCOMPANYING NOTES.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Chelsea GCA 401(k) Savings Plan
Statement of Net Assets Available for Plan Benefits-with Fund Information
December 31, 1996
FUND INFORMATION
------------------------------------------------------------------------------
THE MERRILL LYNCH TRUST
-------------------------------------------------------------------
Corporate
Bond Fund Chelsea
Basic Investment Global Retirement CMA GCA
Value Capital Grade Allocation Growth Preservation Money Realty,
Fund Fund Portfolio Fund Fund Trust Fund Cash Inc. Participant
Common Loans
Stock Receivable Total
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at
fair value $186,735 $47,248 $64,026 $50,015 $371,141 $38,659 $1,679 $774 $40,200 $4,801 $805,278
Employee contributions
receivable 3,856 2,807 2,075 3,238 10,276 306 1,394 23,952
Net assets available ------------------------------------------------------------------------------------------------------------
for plan benefits
at December 31, 1996 $190,591 $50,055 $66,101 $53,253 $381,417 $38,965 $1,679 $774 $41,594 $4,801 $829,230
============================================================================================================
SEE ACCOMPANYING NOTES.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Chelsea GCA 401(k) Savings Plan
Statement of Changes in Net Assets Available for Plan
Benefits-with Fund Information
Year ended December 31, 1997
FUND INFORMATION
-----------------------------------------------------------------------------
THE MERRILL LYNCH TRUST
----------------------------------------------------------------
Corporate Chelsea
Bond GCA
Fund Realty,
Basic Investment Global Retirement CMA Inc. Participant
Value Capital Grade Allocation Growth Preservation Money Common Loans
Fund Fund Portfolio Fund Fund Trust Fund Cash Stock Receivable Total
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets available
for plan benefits
at January 1, 1997 $190,591 $50,055 $66,101 $53,253 $381,417 $38,965 $1,679 $ 774 $41,594 $ 4,801 $829,230
Additions:
Employee contributions 57,343 42,598 30,341 41,944 151,100 10,909 31,206 365,441
Employee contributions
receivable 4,891 4,025 2,304 2,644 12,478 1,019 2,272 29,633
Investment income 19,224 6,737 4,518 11,049 43,317 2,379 1,753 589 4,307 93,873
--------- -------- ---------- ---------- -------- -------- ------- ------ ------- -------- -------
81,458 53,360 37,163 55,637 206,895 14,307 1,753 589 37,785 488,947
Participant withdrawals (20,503) (5,554) (5,578) (1,845) (39,230) (2,032) (4,779) (79,521)
------------------------------------------------------------- --------- ----------
(20,503) (5,554) (5,578) (1,845) (39,230) (2,032) (4,779) (79,521)
Net realized and
changes in unrealized
appreciation
(depreciation)
in fair value of
investments 37,485 5,915 1,391 (4,355) 26,604 2,492 69,532
Interfund transfers 9,326 (6,138) (8,943) 5,755 -
Loan disbursements/
proceeds, net (5,944) (513) (606) 786 (6,628) (257) 141 13,021 -
Net increase --------------------------------------------------------------------------------------------------------
(decrease) 40,867 5,402 (5,353) (12,512) 25,731 (257) - - 2,633 13,021 69,532
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets available
for plan benefits at
December 31, 1997 $292,413 $103,263 $92,333 $ 94,533 $574,813 $50,983 $3,432 $1,363 $77,233 $17,822 $1,308,188
===================================================================================================================================
</TABLE>
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The financial statements of Chelsea GCA 401(k) Savings Plan (the "Plan") are
presented on the accrual basis of accounting.
INVESTMENTS
Investments are valued at fair value using share values of the funds as reported
by Merrill Lynch on December 31, 1997 and 1996, respectively.
Appreciation or depreciation of securities represents the reinvested dividends
plus realized gains and the change in fair value during the year.
INCOME TAX STATUS
Effective January 1, 1996, the Plan is a prototype non-standardized plan
developed by Merrill Lynch, Pierce, Fenner & Smith, Inc. Prior to January 1,
1996, the Plan was a prototype plan developed by Automatic Data Processing
Federal Credit Union. The Internal Revenue Service had issued a determination
letter dated December 5, 1995 to the effect that the Plan qualified under
Section 401(a) of the Internal Revenue Code ("IRC") and, therefore, the Plan was
not subject to tax under Section 501(a) of the IRC. The Plan is required to
operate in conformity with the IRC to maintain its qualification. The Plan's
Administrative Committee is not aware of any course of action or series of
events that have occurred that might adversely affect the Plan's qualified
status.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. DESCRIPTION OF THE PLAN
The Plan is a defined contribution plan sponsored and administered by Chelsea
GCA Realty Partnership, L.P. (the "Partnership") and was established for the
purpose of allowing Plan members to make tax-deferred contributions through
voluntary payroll withholdings in order to accumulate benefits to be paid upon
retirement. The Partnership pays all administrative expenses incurred by the
Plan except for a fee of $.25 per share for all purchase and sale transactions
of Chelsea GCA Realty, Inc. common stock which is paid by the participant.
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
All employees of the Partnership are eligible to participate in the Plan after
completing one year of service and attaining age 21. Employees who elect to
enroll in the Plan may elect to have from 1% to 15% of their pre-tax gross pay
(for up to a 40 hour work week) contributed to their account each pay period.
This deduction may not exceed the maximum amount allowed under the IRC of $9,500
in 1997 and 1996. Rollover contributions of $3,519 and $76,831 in 1997 and 1996,
respectively, were made by participants from other qualified Plans.
Effective January 1, 1996, Merrill Lynch Asset Management, Inc. serves as
trustee (the "Trustee") of the Plan. The Trustee has invested the assets of the
Plan in funds maintained in pooled separate accounts held by Merrill Lynch
Trust. Prior to January 1, 1996, State Street Bank and Trust Company served as
trustee (the "Predecessor Trustee") of the Plan. The Predecessor Trustee had
invested the assets of the Plan in funds maintained in pooled separate accounts
held in the ADP/State Street Collective Trust.
Employees participating in the Plan are eligible to receive a benefit upon their
normal retirement date, early retirement date, disability retirement date or
termination date, equal to the amount in their individual account. Participants
are always 100% vested in their accounts including the earnings thereon.
Participants are eligible to borrow from their account. The minimum loan is
$500. A participant may borrow 50% of his or her account to a maximum of
$50,000. The loans must be paid back within five years. The loans bear interest
at a rate of 8.99% and 8.73% at December 31, 1997 and 1996, respectively.
Effective January 1, 1996, participants are permitted to invest their
contributions in any of the following investment vehicles:
MERRILL LYNCH BASIC VALUE FUND
This fund seeks capital appreciation and, secondarily, income by investing in
primarily equity securities that are undervalued and represent basic
investment value. Particular emphasis is placed on securities which provide
an above average dividend return and sell at a below average price-earnings
ratio.
MERRILL LYNCH CAPITAL FUND
The objective of the fund is to achieve the highest total investment return
through flexibility of investments in equity, debt or other convertible
securities, as well as investing in quality companies.
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
MERRILL LYNCH CORPORATE BOND FUND INVESTMENT GRADE
PORTFOLIO
This fund seeks primarily to attain the highest level of current income by
investing in a diversified portfolio of fixed income securities, such as
corporate bonds and notes, convertible securities, preferred stocks and
government obligations. As a secondary objective, the fund seeks capital
appreciation, when consistent with the primary objective.
MERRILL LYNCH GLOBAL ALLOCATION FUND
The fund seeks a high total investment return, consistent with prudent risk,
utilizing United States and foreign equity, debt and money market securities.
Total investment return is the aggregate of capital value changes and income.
MERRILL LYNCH GROWTH FUND
The investment objectives of the fund are to seek growth of capital and,
secondarily, income by investing in a diversified portfolio of equity
securities.
MERRILL LYNCH RETIREMENT PRESERVATION TRUST
This is a fixed income portfolio which invests in guaranteed investment
contracts of insurance companies, bank investment contracts, money market
instruments and United States Government Agency Securities.
CHELSEA GCA REALTY, INC. COMMON STOCK
Participants are offered the opportunity to purchase the common stock of
Chelsea GCA Realty, Inc. The stock is currently traded on the open market.
While the Partnership hopes and expects to continue the Plan indefinitely, it
reserves the right to terminate, amend or modify the Plan at any time.
This is not a complete description of the Plan. For more information on the
Plan, see the Summary Plan Description available at the office of the
Administrator.
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
As indicated by the Trustee, the following investments, exclusive of
receivables, as of December 31, 1997 and 1996 represent 5% or more of the Plan's
net assets at fair value:
1997
The Merrill Lynch Trust:
Merrill Lynch Basic Value Fund $287,522
Merrill Lynch Capital Fund 99,238
Merrill Lynch Corporate Bond Fund Investment Grade Portfolio 90,029
Merrill Lynch Global Allocation Fund 91,889
Merrill Lynch Growth Fund for Investment & Retirement 562,335
Chelsea GCA Realty, Inc. Common Stock 74,961
1996
The Merrill Lynch Trust:
Merrill Lynch Basic Value Fund $186,735
Merrill Lynch Capital Fund 47,248
Merrill Lynch Corporate Bond Fund Investment Grade Portfolio 64,026
Merrill Lynch Global Allocation Fund 50,015
Merrill Lynch Growth Fund for Investment & Retirement 371,141
Chelsea GCA Realty, Inc. Common Stock 40,200
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The Trustee has reported units and per unit values, exclusive of receivables, as
follows:
<TABLE>
<CAPTION>
THE MERRILL LYNCH TRUST
--------------------------------------------------------------------------------
CORPORATE BOND
BASIC INVESTMENT GLOBAL
VALUE FUND CAPITAL FUND GRADE PORTFOLIO ALLOCATION FUND
----------------- ------------------ --------------------- ---------------------
UNITS PER UNITS PER UNITS PER UNITS PER
UNIT UNIT UNIT UNIT
----------------- ------------------ --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 6,096.5 $30.63 1,551.1 $30.46 5,656.0 $11.32 3,482.9 $14.36
March 31, 1997 6,410.4 31.44 1,791.9 30.73 6,185.1 11.08 4,118.4 14.56
June 30, 1997 6,669.5 35.89 2,077.7 33.85 7,069.3 11.24 5,048.7 15.60
September 30, 1997 7,270.6 37.43 2,459.2 34.73 7,090.4 11.40 5,604.2 15.96
December 31, 1997 7,860.1 36.58 2,936.9 33.79 7,842.3 11.48 6,591.8 13.94
</TABLE>
<TABLE>
<CAPTION>
THE MERRILL LYNCH TRUST
--------------------------------------------------------------------------------
RETIREMENT CHELSEA GCA
PRESERVATION CMA MONEY REALTY, INC.
GROWTH FUND TRUST FUND COMMON STOCK
--------------------- --------------------- --------------------- ---------------
UNITS PER UNITS PER UNITS PER UNITS PER
UNIT UNIT UNIT UNIT
--------------------- --------------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 15,285.9 $24.28 38,654.5 $1.00 1,679 $1.00 1,161 $34.625
March 31, 1997 16,142.8 24.33 41,315.5 1.00 501 1.00 1,360 35.87
June 30, 1997 17,516.9 26.42 44,407.9 1.00 642 1.00 1,532 38.00
September 30, 1997 18,389.0 331.31 47,331.3 1.00 609 1.00 1,731 41.75
December 31, 1997 21,284.5 26.42 49,964.0 1.00 3,432 1.00 1,963 38.18
</TABLE>
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements (continued)
4. PARTIES-IN-INTEREST
During 1997 and 1996, the Plan did not enter into any transactions with
parties-in-interest.
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits in the
financial statements to Form 5500:
YEAR ENDED DECEMBER 31
1997 1996
--------------------------
Net assets available for plan benefits
per the financial statements $1,308,188 $829,230
Employee contributions receivable (29,633) (23,952)
Other receivables (2,665) (601)
---------------------------
Net assets available for plan benefits $1,275,890 $804,677
per Form 5500 ===========================
6. SUBSEQUENT EVENTS
As of January 1, 1998 the Plan has been amended to include an employer
discretionary matching contribution in an amount not to exceed 100% of each
participant's first 6% of yearly compensation contributed to the Plan. As of the
date of this report, the matching contribution is equal to 50% of each
participant's first 6% contributed to the Plan. The Plan's Administrative
Committee, on June 16, 1998, has requested a determination letter from the
Internal Revenue Service in connection with the Plan's amendments mentioned
above.
Employees with the following titles are not eligible to participate in the
matching contributions: Vice President, Executive Vice President, Chief
Operating Officer, President and CFO, Vice Chairman, and Chairman and CEO.
Participants shall have a vested percentage in the matching contributions as
follows:
After 1 year of vesting service 20%
After 2 years of vesting service 40%
After 3 years of vesting service 60%
After 4 years of vesting service 80%
After 5 years of vesting service 100%
<PAGE>
Chelsea GCA 401(k) Savings Plan
Notes to Financial Statements (continued)
7. YEAR 2000 ISSUE (UNAUDITED)
The Plan Sponsor has developed a plan to modify its internal information
technology to ready for the year 2000 and has begun converting critical data
processing systems. The project also includes determining whether third party
service providers have reasonable plans in place to become year 2000 compliant.
The Plan Sponsor currently expects the project to be substantially complete by
the end of 1998. The Plan Sponsor does not expect this project to have a
significant effect on plan operations.
<TABLE>
<CAPTION>
Chelsea GCA 401(k) Savings Plan
Assets Held for Investment
December 31, 1997
NUMBER
OF UNITS/ COST CURRENT
IDENTITY OF ISSUE SHARES BASIS VALUE
<S> <C> <C> <C>
The Merrill Lynch Trust:
Merrill Lynch Basic Value Fund 7,860.1 $247,367 $287,522
Merrill Lynch Capital Fund 2,936.9 93,170 99,238
Merrill Lynch Corporate Bond Fund Investment Grade Portfolio 7,842.3 89,639 90,029
Merrill Lynch Global Allocation Fund 6,591.8 97,266 91,889
Merrill Lynch Growth Fund for Investment & Retirement 21,284.5 508,563 562,335
Merrill Lynch Retirement Preservation Trust 49,964 49,964 49,964
Merrill Lynch CMA Money Fund 3,432 3,432 3,432
---------- ----------
1,089,401 1,184,409
Cash 1,363 1,363
Chelsea GCA Realty, Inc. Common Stock 1,963 66,422 74,961
Participant loans receivable (interest rates range from
8.73% to 8.99% maturing through 2001) - 17,822
----------- ----------
Total investments $1,157,186 $1,278,555
=========================
</TABLE>
<PAGE>
Chelsea GCA 401(k) Savings Plan
Reportable Transactions
Year ended December 31, 1997
<TABLE>
<CAPTION>
FAIR VALUE
OF
TRANSACTION
COST PURCHASE UPON GAIN/
DESCRIPTION OF ASSET BASIS PRICE SALE OR (LOSS)
REDEMPTION
CATEGORY (I)--SINGLE TRANSACTIONS IN EXCESS
OF 5% OF PLAN ASSETS
<S> <C> <C> <C> <C>
Merrill Lynch CMA Money Fund (1) $78,874 $78,874
Merrill Lynch CMA Money Fund (1) 70,241 $70,241
CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS
OF 5% OF PLAN ASSETS
Merrill Lynch Basic Value Fund (27) 89,972 89,972
Merrill Lynch Basic Value Fund (21) 19,332 22,216 $2,884
Merrill Lynch Capital Fund (24) 52,218 52,218
Merrill Lynch Capital Fund (14) 3,147 3,403 256
Merrill Lynch Corporate Bond Fund Investment Grade
Portfolio (31) 37,002 37,002
Merrill Lynch Corporate Bond Fund Investment Grade
Portfolio (20) 12,462 12,389 (73)
Merrill Lynch Global Allocation Fund (25) 58,090 58,090
Merrill Lynch Global Allocation Fund (15) 11,400 11,860 460
Merrill Lynch Growth Fund for Investment
& Retirement (26) 212,091 212,091
Merrill Lynch Growth Fund for Investment
& Retirement (24) 34,395 40,510 6,115
Merrill Lynch CMA Money Fund (61) 255,495 255,495
Merrill Lynch CMA Money Fund (52) 253,742 253,742
Chelsea GCA Realty, Inc. Common Stock (26) 37,909 37,909
Chelsea GCA Realty, Inc. Common Stock (11) 4,817 5,548 731
Numbers in brackets ( ) represent number of transactions.
THERE WERE NO CATEGORY (II) OR (IV) REPORTABLE TRANSACTIONS DURING THE YEAR
ENDED DECEMBER 31, 1997.
</TABLE>
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-98136) pertaining to the Chelsea GCA 401(k) Savings Plan of our
report dated June 19, 1998, with respect to the financial statements of the
Chelsea GCA 401(k) Savings Plan included in this Annual Report (Form 11-K) for
the year ended December 31, 1997.
Ernst & Young LLP
New York, NY
June 19, 1998
