SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 28, 1996
Cali Realty Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-13274 22-3305147
- --------------------------------------------------------------------------------
(state or other jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification Number)
11 Commerce Drive, Cranford , New Jersey 07016
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code (908) 272-8000
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5, Other Events
During the period July 17, 1996 through October 29, 1996, Cali Realty
Corporation (the "Company") (i) acquired two neighboring office buildings and
intends to acquire a three-building office complex through two individual
transactions with separate sellers (to be collectively referred to as the
"Acquisitions") and (ii) sold 3,450,000 shares of common stock in a public stock
offering.
On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two suburban
office buildings totaling 115,000 square feet, located in Basking Ridge, New
Jersey (the "Mount Airy Buildings") through a single transaction with one
seller. The Mount Airy Buildings were acquired for approximately $10,459,000,
which was made available through one of the Company's revolving credit
facilities. The Statements of Revenue and Certain Expenses for the Mount Airy
Buildings for the year ended December 31, 1995 and the six month period ended
June 30, 1996 were included in the Company's filing on Form 8-K dated October 8,
1996.
Additionally, the Company intends to acquire, through a single transaction with
one seller, the property known as the Harborside Financial Center
("Harborside"), a three-building office complex totaling approximately 1,886,847
square feet of office and retail space, located on the Hudson River waterfront
in Jersey City, New Jersey. As part of the purchase, the Company will acquire
11.3 acres of land fully-zoned and permitted for an additional 4.1 million
square feet of development and the water rights associated with 27.4 acres of
land extending into the Hudson River immediately east of the existing property,
including two piers with an area of 5.8 acres. The terms of the acquisition of
the vacant parcels at Harborside provide for payments ("Development Rights
Contingent Obligation") to be made to the seller for development rights if or
when the Company commences construction on the site during the next several
years. However, the agreement provides, among other things, that even if the
Company does not commence construction, the seller may nevertheless require the
Company to acquire these rights during the six-month period after the end of the
sixth year. After such period, the seller's option lapses, but any development
in years 7 through 30 will require a payment, on an increasing scale, for the
development rights. The total acquisition cost for Harborside of approximately
$287,400,000 will be financed with mortgage debt of $150,000,000 and with cash
of $137,400,000 which will be made available through the Company's revolving
credit facilities (including a new credit facility described below). The
$150,000,000 of debt is to be comprised of the following: (1) assumption of the
existing mortgage financing on the property of $100,000,000 which has a fixed
annual interest rate of 7.32 percent and a term of nine years, and (2) a
$50,000,000 mortgage provided by the seller with an annual interest rate
comparable with the current three-year treasury rate and a spread of 90 basis
points (the rate being adjusted at the end of the third and sixth years based on
the comparable treasury rates at those times, with spreads of 110 basis points
in years four through six, and 130 basis points in years seven through
maturity). In connection with the acquisition of Harborside, the Company will
obtain an additional revolving credit facility from Prudential Securities Credit
Corp. totaling $80,000,000 which bears interest at a floating rate equal to the
London Inter-Bank Offered Rate (LIBOR) plus 125 basis points, and matures on
January 15, 1998, unless the Company or the lender elects to extend the maturity
date to not earlier than June 30, 1998, or the facility is refinanced prior to
such date, at the election of either the Company or the lender. The Company
intends to draw on this credit facility and on their existing facilities to fund
the cash portion of the Harborside acquisition cost.
Further information regarding the individual properties acquired is attached on
SCHEDULE A. Additional information regarding Harborside is provided on SCHEDULE
B.
<PAGE>
On August 13, 1996, the Company sold 3,450,000 shares of its common stock
through a public stock offering (the "Offering"), which included an exercise of
the underwriter's over-allotment option of 450,000 shares. Net proceeds from the
Offering (after offering costs) were approximately $76,830,000. The Offering was
conducted using one underwriter and the shares were issued from the Company's
Registration Statement on S-3 (File No. 33-96538).
The Acquisitions are pursuant to individual agreements for the sale and purchase
of each property between each selling entity and the Company. The factors
considered by the Company in determining the price to be paid for the properties
include their historical and expected cash flow, nature of the tenants and terms
of leases in place, occupancy rates, opportunities for alternative and new
tenancies, current operating costs and real estate taxes on the properties and
anticipated changes therein under Company ownership, the physical condition and
locations of the properties, the anticipated effect on the Company's financial
results (including particularly funds from operations) and the ability to
sustain and potentially increase its distributions to Company stockholders, and
other factors. The Company takes into consideration capitalization rates at
which it believes other comparable office buildings had recently sold, but
determined the price it is willing to pay primarily on the factors discussed
above relating to the properties themselves and their fit with the Company's
operations. No separate independent appraisals are obtained in connection with
the acquisition of properties by the Company. The Company, after investigation
of the properties, is not aware of any material factors, other than those
enumerated above, that would cause the financial information reported not to be
necessarily indicative of future operating results.
Item 7, Financial Statements, Pro Forma Financial Information and Exhibits
As of October 29, 1996, the Company has purchased nine office buildings and
three portfolios of office buildings and office/flex space since its formation
in 1994; one office building in 1994, three office buildings and three
portfolios in 1995, and five office buildings in 1996.
Financial Statements
The Statements of Revenue and Certain Operating Expenses included in this report
encompass the following:
o Audited Statements of Revenue and Certain Operating Expenses for
Harborside for the years ended December 31, 1995, 1994, and 1993 and
unaudited interim financial information for the six month period ended
June 30, 1996.
Pro Forma Financial Information (unaudited)
Unaudited pro forma financial information for the Company is presented as
follows:
o Condensed consolidated balance sheet as of June 30, 1996.
o Condensed consolidated statements of operations for the six month
period ended June 30, 1996 and the year ended December 31, 1995.
o Estimated twelve-month Pro Forma statement of taxable net operating
income and operating funds available.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
CALI REALTY CORPORATION
PERCENT INITIAL
TOTAL OCCUPIED COST TO
OFFICE DATE OF SQUARE AT DATE OF YEAR COMPANY
BUILDING ACQUISITION FEET ACQUISITION COMPLETED (in thousands)
-------- ----------- ---- ----------- --------- --------------
<S> <C> <C> <C> <C> <C>
Mount Airy Buildings 7/23/96 $ 10,459
Basking Ridge,
Somerset County,
New Jersey
222 Mount Airy Road 49,000 100% 1986
233 Mount Airy Road 66,000 100% 1987
Harborside Financial Center Pending 1,886,847 97% 1930 $287,400
Christopher Columbus Drive, (with (estimated)
Exchange Place & the Hudson complete
River, Jersey City, Hudson County, recon-
New Jersey struction
in 1983 &
1990)
TOTAL 2,001,847 $297,859
</TABLE>
<TABLE>
<CAPTION>
OFFICE PRINCIPAL TENANTS
BUILDING (Based on percentage of property leased)
-------- ----------------------------------------
<S> <C> <C>
Mount Airy Buildings
Basking Ridge,
Somerset County,
New Jersey
222 Mount Airy Road Lucent Technologies, Inc. (100%)
233 Mount Airy Road AT&T Corp. (100%)
Harborside Financial Center Bankers Trust Harborside, Inc. (21%)
Christopher Columbus Drive, Dow Jones Telerate Holdings, Inc. (20%)
Exchange Place & the Hudson American Institute of Certified Public Accountants
River, Jersey City, Hudson County, (AICPA) (13%)
New Jersey Dean Witter Trust Company (10%)
</TABLE>
<PAGE>
SCHEDULE B
a. Description of Harborside:
Harborside is a completely redeveloped, three-building office complex
containing 1,886,847 square feet of net rentable area located in the
Exchange Place Newport Center submarket of Jersey City, New Jersey.
This submarket is a satellite office market of Manhattan and is
occupied primarily by the support and technical operations of New York
City-based financial institutions. The buildings, known as Plazas I, II
and III, were developed as a complete reconstruction of existing
buildings in two phases, the first completed in 1983 and the second in
1990. The buildings are connected via an enclosed 1,000 foot waterfront
promenade featuring restaurants, service retail shops and a food court,
as well as an atrium lobby.
The following summarizes the approximate net rentable area in each of the three
buildings as of June 30, 1996:
<TABLE>
<CAPTION>
Total Office Retail
----- ------ ------
<S> <C> <C> <C>
Plaza I .................. 399,578 385,000 14,578
Plaza II ................. 758,257 739,460 18,797
Plaza III ................ 729,012 709,842 19,170
--------- --------- -------
1,886,847 1,834,302 52,545
========= ========= =======
</TABLE>
Plaza I contains one tenant plus retail space on the first floor. Plazas II and
III each contain ten floors with floor area ranging from 40,000 to 110,000
square feet on each floor.
Plaza I is served by six passenger elevators as well as a 15,000 lb. freight
car. Plazas II and III are each served by ten passenger elevators and have seven
oversized freight elevators in total. In addition, there are large shafts where
freight elevators have been removed which enable tenants to bring significant
electric telecommunications cabling to their space at minimal cost.
<PAGE>
SCHEDULE B (cont.)
Harborside leases space to a parking operator and provides for approximately
1,685 parking spaces including 200 spaces on the south pier. Public
transportation to the property is available through the Exchange Place PATH rail
station which is immediately adjacent to the property and links Harborside to
downtown Manhattan in approximately four minutes. The PATH also provides access
to midtown Manhattan, Newark and Hoboken in less than twenty minutes. The
property is also connected to Manhattan by road via a three mile drive to the
Holland Tunnel and a five-mile drive to the Lincoln Tunnel. Furthermore,
Interstates 78 and 495, US Routes 1, 9 and 440, and NJ Route 3 connect the
property to locations throughout northern New Jersey.
b. Descriptions of significant tenants as follows:
Four tenants at Harborside occupy approximately 61% and 63% of the net
rentable square feet in the aggregate as of December 31, 1995 and June
30, 1996, respectively, as follows:
o Bankers Trust Harborside, Inc., a commercial bank, occupied
approximately 385,000 square feet (approximately 20% of the total net
rentable square feet) at December 31, 1995 and June 30, 1996, pursuant
to a triple net lease which expires March 31, 2003, with two five-year
renewal options. Total rental income from Bankers Trust, including
escalations and recoveries was approximately $2.6 million and $1.3
million in 1995 and for the six months ended June 30, 1996,
respectively. The lease provides, among other things, for an annual
rent increase of $770,000 beginning on April 1, 1998.
o Dow Jones Telerate Holdings, Inc., a telecommunications firm, occupied
approximately 333,045 and 378,232 net rentable square feet at December
31, 1995 and June 30, 1996, respectively (approximately 18% and 20% of
the total net rentable square feet) pursuant to various leases expiring
June 30, 1999 through March 31, 2001, with two five-year renewal
options on 187,817 square feet of the space and one five-year option on
45,187 square feet. Total rental income from Dow Jones Telerate,
Holdings, Inc. including escalations and recoveries was approximately
$7.7 million and $4.3 million in 1995 and the six months ended June 30,
1996, respectively. Certain of these leases provide for annual rental
increases totaling approximately $181,000 beginning in June 2001.
o American Institute of Certified Public Accountants (AICPA), a trade
organization, occupied approximately 249,768 net rentable square feet
(approximately 13% of total net rentable square feet) at December 31,
1995 and June 30, 1996, pursuant to a lease which expires July 31,
2012, with five-year and ten-year renewal options. Total rental income
from the AICPA, including escalations and recoveries was approximately
$6.5 million and $3.3 million in 1995 and the six months ended June 30,
1996, respectively. The AICPA lease provides for, among other things,
annual rental increases of approximately $836,000 in July 2002 and
$836,000 in July 2007.
<PAGE>
SCHEDULE B (cont.)
o Dean Witter Trust Company, a securities firm, occupied approximately
182,748 net rentable square feet (approximately 10% of the total net
rentable square feet) at both December 31, 1995 and June 30, 1996
pursuant to a lease which expires February 8, 2008, with a ten-year and
a five-year renewal option. Total rental income from Dean Witter,
including escalations and recoveries was approximately $4.0 million and
$2.4 million in 1995 and the six months ended June 30, 1996,
respectively. The lease provides for, among other things, annual rental
increases of approximately $221,000 beginning in February 1998, $30,000
in September 2000, $473,000 in February 2003, and $64,000 in September
2005.
c. The following table sets forth a schedule of the lease expirations for
Harborside, beginning in 1997, assuming that none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
Percentage Annual Avg. Annual
Net of Total Base Rent Rent Per Net
Number of Rentable Area Leased Sq. Ft. Under Expiring Rentable Sq. Ft.
Yr. of Expiring Subject to Expiring Represented Leases Represented by
Expiration Leases(1) Leases (Sq. Ft.)(1) Leases (Sq. Ft.) ($000) (2) Expir.Leases(2)
---------- ----------- -------------------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
1997 2 1,857 0.11% $ 39 $ 21.00
1998 4 30,233 1.83% 672 22.23
1999 8 83,509 5.06% 1,527 18.29
2000 8 292,257 17.72% 4,855 16.61
2001 3 74,696 4.53% 1,628 21.80
2003 2 391,299 23.72% 2,372 6.06
2004 1 24,729 1.50% 551 22.28
2005 3 34,904 2.12% 859 24.61
2006 4 67,139 4.07% 1,204 17.93
2008 3 182,748 11.08% 2,682 14.68
2009 3 137,076 8.31% 3,013 21.98
2010 1 79,397 4.81% 834 10.50
2012 4 249,768 15.14% 5,043 20.19
-- --------- ------ ------- ---------
Total/Weighted
Average 46 1,649,612 100.00% 25,279 $ 15.32
== ========= ====== ====== =========
</TABLE>
(1) Includes office tenants only. Excludes leases for amenities, retail,
parking and month-to-month office tenants.
(2) Determined based on aggregate base rent to be received over the term
divided by the term in months multiplied by 12, including all leases
dated on or before June 30, 1996.
<PAGE>
SCHEDULE B (cont.)
d. The following table sets forth certain information (on a per rentable
square foot basis unless otherwise indicated) about the property since
January 1, 1991 (based upon an average of all lease transactions during
the respective periods):
<TABLE>
<CAPTION>
Year ended December 31, June 30,
----------------------------------------------------------- --------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Number of leases signed
during the period (1) ..... 6 4 8 9 5 2
Rentable sq. footage leased
during period (1) ......... 277,394 192,278 12,143 201,933 50,806 45,187
Base rent ($) (2) ......... 20.62 18.18 20.35 16.04 22.33 18.39
Tenant improvements (3) ... 36.87 39.82 24.31 17.69 19.21 --
Leasing commissions (4) ... 8.29 14.60 8.68 10.28 4.71 9.19
Other concessions (5) ..... 7.21 -- -- -- -- --
Effective rent ($) (6) .... 16.89 14.41 13.86 13.91 19.95 17.49
Expense stop ($) (7) ...... 1.85 0.98 3.42 3.91 2.52 7.94
Effective equivalent triple
net rent ($) (8) ........ 15.04 13.43 10.44 10.00 17.43 9.56
Occupancy rate at end of
period (%) (1) .......... 68.4% 78.6% 88.1% 93.3% 96.1% 96.0%
</TABLE>
(1) Includes only office tenants with lease terms of 12 months or longer.
Excludes leases for amenities, parking, retail and month-to-month
office tenants.
(2) Equals aggregate base rent received over their respective terms from
all lease transactions during the period, divided by the terms in
months for such leases during the period, multiplied by 12, divided by
the total net rentable square feet leased under all lease transactions
during the period.
(3) Equals work letter costs net of estimated provision for profit and
overhead. Actual cost tenant improvements may differ from estimated
work letter costs.
(4) Equals an aggregate of leasing commissions payable to employees and
third parties based on standard commission rates and excludes
negotiated commission discounts obtained from time to time.
(5) Includes moving expenses, furniture allowances and other concessions.
(6) Equals aggregate base rent received over their respective terms from
all lease transactions during the period minus all tenant improvements,
leasing commissions and other concessions from all lease transactions
during the period, divided by the terms in months for such leases,
multiplied by 12, divided by the total net rentable square feet under
all lease transactions during the period.
(7) Equals the aggregate of each base year tax and common area maintenance
expense pool multiplied by the respective pro rata share for all lease
transactions during the period, divided by the total net rentable
square feet leased under all lease transactions during the period.
(8) Equals effective rent minus expense stop.
<PAGE>
SCHEDULE B (cont.)
e. The following schedule sets forth the average percent leased and
average annual rental per leased square foot for the years ended
December 31, 1991 through 1995 and six months ended June 30, 1996 for
Harborside:
<TABLE>
<CAPTION>
Average Annual
Average Rental Per
Percentage Leased Square
Period Leased(%)(1) Foot ($)(2)(3)
------ ------------ --------------
<S> <C> <C>
Six months ended
June 30, 1996 96.0% $16.48
1995 94.7% 15.99
1994 90.7% 15.26
1993 83.4% 16.36
1992 73.5% 14.69
1991 66.4% 13.96
</TABLE>
(1) Average of beginning and end of period aggregate percentage leased.
(2) Total base rents for the year, determined in accordance with generally
accepted accounting principles, divided by average of beginning and end
of year aggregate net rentable area leased.
(3) Average annual rental per leased square foot for the nine months ended
June 30, 1996 is computed on an annualized basis.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Cali Realty
Corporation has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALI REALTY CORPORATION
October 29, 1996 By: /s/ Thomas A. Rizk
------------------
Thomas A. Rizk
President and Chief Executive Officer
October 29, 1996 By: /s/ Barry Lefkowitz
------------------
Barry Lefkowitz
Vice President - Finance and
Chief Financial Officer
<PAGE>
CALI REALTY CORPORATION
Index to Financial Statements
- -------------------------------------------------------------------------------
HARBORSIDE
Report of Independent Auditors
Statements of Revenue and Certain Operating Expenses for:
The Years Ended December 31, 1995, 1994 and 1993 (audited)
The Six Months Ended June 30, 1996 (unaudited)
Notes to Statements of Revenue and Certain Operating Expenses
CALI REALTY CORPORATION Pro Forma (unaudited):
Condensed Consolidated Balance Sheet as of June 30, 1996
Condensed Consolidated Statements of Operations for the Six
Months Ended June 30, 1996 and for the Year Ended
December 31, 1995
Estimated Twelve Month Pro Forma Statement of Taxable Net
Operating Income and Operating Funds Available
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of
Cali Realty Corporation:
We have audited the accompanying Statements of Revenue and Certain Operating
Expenses of the property known as HARBORSIDE FINANCIAL CENTER ("Harborside") for
each of the three years in the period ended December 31, 1995 (the "Historical
Summaries"). These Historical Summaries are the responsibility of Harborside's
management. Our responsibility is to express an opinion on the Historical
Summaries based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the Historical Summaries are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summaries. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summaries. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Historical Summaries were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion on Form 8-K of Cali Realty Corporation) as described in Note 2 and are
not intended to be a complete presentation of Harborside's revenue and operating
expenses.
In our opinion, the Historical Summaries referred to above present fairly, in
all material respects, the revenue and certain operating expenses of Harborside
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
/s/Coopers & Lybrand L.L.P.
---------------------------
Coopers & Lybrand L.L.P.
New York, New York
September 19, 1996
<PAGE>
<TABLE>
<CAPTION>
HARBORSIDE FINANCIAL CENTER
Statements of Revenue and Certain Operating Expenses
For the three years in the period ended December 31, 1995
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Base rent ............................ $30,989,043 $28,495,187 $25,370,057
Escalations .......................... 9,369,387 8,435,909 8,352,109
Other income ......................... 181,919 391,475 298,918
----------- ----------- -----------
Total revenue .................... 40,540,349 37,322,571 34,021,084
----------- ----------- -----------
Certain operating expenses:
Real estate taxes .................... 4,080,635 3,899,954 3,874,678
Utilities ............................ 1,109,396 1,052,548 1,091,847
Operating services ................... 4,203,235 4,223,673 4,086,719
Other property ....................... 2,530,248 2,001,799 2,264,015
----------- ----------- -----------
Total operating expenses ......... 11,923,514 11,177,974 11,317,259
----------- ----------- -----------
Excess of revenue over
certain operating expenses ..... $28,616,835 $26,144,597 $22,703,825
=========== =========== ===========
The accompanying notes are an integral part of this summary.
</TABLE>
<PAGE>
HARBORSIDE FINANCIAL CENTER
Notes to Statements of Revenue and Certain Operating Expenses
1. Organization and Nature of business:
The property known as Harborside Financial Center ("Harborside") is a
three building office complex (Plazas I, II, and III) located in Jersey
City, New Jersey. At December 31, 1995 Harborside consists of undeveloped
land and three operating office buildings which are approximately 96
percent leased.
Harborside is owned by several partnerships, which are directly or
indirectly owned by a pension trust which is managed by Jones Lang
Wootton Realty Advisors under an investment advisory contract.
2. Basis of Presentation:
The Statements of Revenue and Certain Operating Expenses (the "Historical
Summaries") have been prepared for the purpose of complying with the
provisions of Article 3.14 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC"), which requires certain
information with respect to real estate operations to be included with
certain filings with the SEC. These Historical Summaries include the
historical revenue and certain operating expenses of Harborside,
exclusive of interest income, mortgage interest expense and depreciation
and amortization, which may not be comparable to the corresponding
amounts reflected in the future operations of Harborside.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Harborside's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Harborside's operations consist of rental income earned from tenants
under leasing arrangements which generally provide for minimum rents,
escalations and charges to tenants for their pro rata share of real
estate taxes and operating expenses. All leases have been accounted for
as operating leases. Rental income is recognized by amortizing the
aggregate lease payments on the straight-line basis over the entire terms
of the leases.
<PAGE>
HARBORSIDE FINANCIAL CENTER
Notes to Statements of Revenue and Certain Operating Expenses, Continued
3. Leases:
Harborside is leased to tenants under various noncancelable operating
leases with unexpired terms ranging from 1 to 17 years. Minimum future
rentals on noncancelable leases which extend for more than one year at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 30,310,000
1997 28,823,000
1998 29,858,000
1999 29,552,000
2000 25,775,000
Thereafter 172,040,000
--------------
$ 316,358,000
==============
</TABLE>
Certain leases have provisions for additional rent based on operating
expenses and real estate taxes. Such amounts are reflected in the
Historical Summaries as escalation revenue. Minimum rentals above do not
include recovery of operating expenses and real estate taxes.
Included in minimum future rentals are approximately $94 million from the
AICPA, $41 million from Dean Witter Trust Company, $29 million from
Telerate Systems Incorporated, and $22 million from BT Harborside Inc.,
four major tenants who paid approximately $5 million, $4 million, $6
million, and $3 million, respectively, in base and additional rent during
1995 and who occupy approximately 13 percent, 10 percent, 18 percent and
21 percent of the leasable space, respectively.
4. Agreements and Transactions with Related Parties:
Jones Lang Wootton USA ("JLW-USA") provided property management services
to Harborside on a year-to-year basis through March 31, 1996. For its
services, JLW-USA received a management fee up to 5 percent of gross
income collected, as defined in the management agreement. During 1995,
1994 and 1993 fees incurred under this agreement amounted to $1,411,485,
$1,132,122 and $951,175, respectively, which are included in other
property costs in the Historical Summaries. During April 1996,
Institutional Realty Management, LLC became the property manager of
Harborside.
<PAGE>
HARBORSIDE FINANCIAL CENTER
Notes to Statements of Revenue and Certain Operating Expenses, Continued
5. Tax Abatements:
On May 12, 1988, tax abatements for Harborside were obtained from the
Municipal Council of the city of Jersey City. The abatements, which
commenced in 1990, are for a term of 15 years and have been granted in
consideration for annual service charges in lieu of real estate taxes on
the building. The service charges for the buildings are equal to 2
percent of Total Project Costs, as defined, in year one and increase by
$75,000 per annum through year fifteen. Total Project Costs, as defined,
for Plazas II and III are $148,712,000. The service charges for the
remaining undeveloped parcels will be equal to 2 percent of Total Project
Costs for each unit in year one and increase to 3 percent by year
fifteen. In addition, BT Harborside Inc., a tenant which occupies space
in Plaza I, obtained its own tax abatement.
Pursuant to Section 7 of the Financial Agreement, Urban Renewal
Corporation or Association Annual Service Charge in Lieu of Taxes, dated
September 28, 1988 between the owners of Harborside and the City of
Jersey City in the State of New Jersey, Harborside is required to pay
Jersey City Excess Profits, as defined. No payments for Excess Profits
were due to Jersey City for the three years in the period ended December
31, 1995.
<PAGE>
<TABLE>
<CAPTION>
HARBORSIDE FINANCIAL CENTER
Statement of Revenue and Certain Operating Expenses
For the six-month period ended June 30, 1996 (Unaudited)
<S> <C>
Revenue:
Base rent ........................................................ $16,415,438
Escalations ...................................................... 4,108,926
Other income ..................................................... 243,435
-----------
Total revenue ..................................... 20,767,799
-----------
Certain operating expenses:
Real estate taxes ................................................ 1,711,543
Utilities ........................................................ 502,631
Operating services ............................................... 1,965,527
Other property ................................................... 1,133,562
-----------
Total operating expenses .......................... 5,313,263
-----------
Excess of revenue over certain operating expenses. $15,454,536
===========
</TABLE>
The accompanying notes are an integral part of this summary.
<PAGE>
HARBORSIDE FINANCIAL CENTER
Notes to Statements of Revenue and Certain Operating Expenses
1. Organization and Nature of Business:
The property known as Harborside Financial Center ("Harborside") is a
three building office complex (Plazas I, II, and III) located in Jersey
City, New Jersey. At June 30, 1996 Harborside consists of undeveloped
land and three operating office buildings which are approximately 97
percent leased.
Harborside is owned by several partnerships, which are directly or
indirectly owned by a pension trust which is managed by Jones Lang
Wootton Realty Advisors under an investment advisory contract
2. Basis of Presentation:
The Statement of Revenue and Certain Operating Expenses (the "Historical
Summary") has been prepared for the purpose of complying with the
provisions of Article 3.14 of Regulation S-X promulgated by the
Securities and Exchange Commission. This Historical Summary includes the
historical revenue and certain operating expenses of Harborside,
exclusive of interest income, mortgage interest expense and depreciation
and amortization, which may not be comparable to the corresponding
amounts reflected in the future operations of Harborside.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Harborside's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
Harborside's operations consist of rental income earned from tenants
under leasing arrangements which generally provide for minimum rents,
escalations and charges to tenants for their pro rata share of real
estate taxes and operating expenses. All leases have been accounted for
as operating leases. Rental income is recognized by amortizing the
aggregate lease payments on the straight-line basis over the entire terms
of the leases.
<PAGE>
HARBORSIDE FINANCIAL CENTER
Notes to Statement of Revenue
and Certain Operating Expenses, Continued
3. Leases:
Harborside is leased to tenants under various noncancelable operating
leases with unexpired terms ranging from 1 to 17 years. Minimum future
rentals on noncancelable leases which extend for more than six months at
June 30, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Six months ended December 31, 1996 $ 14,257,000
1997 28,944,000
1998 30,391,000
1999 30,047,000
2000 26,192,000
Thereafter 173,479,000
---------------
$ 303,310,000
===============
</TABLE>
Certain leases have provisions for additional rent based on operating
expenses and real estate taxes. Such amounts are reflected in the
Historical Summary as escalation revenue. Minimum rentals above do not
include recovery of operating expenses and real estate taxes.
Included in minimum future rentals are approximately $92 million from the
AICPA, $42 million from Bank of Tokyo, $38 million from Dean Witter Trust
Company, $33 million from Telerate Systems Incorporated, and $21 million
from BT Harborside Inc., five major tenants who paid approximately $3.1
million, $1.8 million, $2.6 million, $5.4 million, and $1.5 million,
respectively, in base and additional rent during 1996 and who occupy
approximately 13 percent, 7 percent, 10 percent, 20 percent and 21
percent of the leasable space, respectively.
Also included in future minimum rentals is approximately $29 million from
Kinney Parking Systems, which operates the parking facility, and paid
approximately $1.2 million in base rent during 1996.
4. Related Parties:
Institutional Realty Management, LLC ("IRM"), which replaced Jones Lang
Wootton USA ("JLW-USA") during April 1996, provides property management
services to Harborside. For its services IRM and JLW-USA received a
management fee up to 5% of gross income collected, as defined in the
management agreements. For the six-month period ended June 30, 1996, fees
incurred under these agreements amounted to $744,891, which is included
in other property costs in the Historical Summary.
<PAGE>
HARBORSIDE FINANCIAL CENTER
Notes to Statement of Revenue
and Certain Operating Expenses, Continued
5. Tax Abatements:
On May 12, 1988, tax abatements for Harborside were obtained from the
Municipal Council of the City of Jersey City. The abatements, which
commenced in 1990, are for a term of 15 years and have been granted in
consideration for annual service charges in lieu of real estate taxes on
the building. The service charges for the buildings are equal to 2
percent of Total Project Costs, as defined, in year one and increase by
$75,000 per annum through year fifteen. Total Project Costs, as defined,
for Plazas II and III are $148,712,000. The service charges for the
remaining undeveloped parcels will be equal to 2 percent of Total Project
Costs for each unit in year one and increase to 3 percent by year
fifteen. In addition, BT Harborside Inc., a tenant which occupies space
in Plaza I, obtained its own tax abatement.
Pursuant to Section 7 of the Financial Agreement Urban Renewal
Corporations or Association Annual Service Charge in Lieu of Taxes, dated
September 28, 1988 between the owners of Harborside and the City of
Jersey City in the State of New Jersey, Harborside is required to pay
Jersey City Excess Profits, as defined. No payments for Excess Profits
were due to Jersey City for the six-month period ended June 30, 1996.
<PAGE>
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of June 30, 1996 (in thousands)
- --------------------------------------------------------------------------------
The following unaudited pro forma condensed consolidated balance sheet is
presented as if the acquisition by the Company of the Mount Airy Buildings and
Harborside, as well as the offering of 3,450,000 shares of common stock on
August 13, 1996, had occurred on June 30, 1996. This unaudited Pro Forma
condensed consolidated balance sheet should be read in conjunction with the Pro
Forma condensed consolidated statement of operations of the Company and the
historical financial statements and notes thereto of the Company included in the
Company's Form 10-K for the year ended December 31, 1995 and the Company's Form
10-Q for the six month period ended June 30, 1996, respectively.
The Pro Forma condensed consolidated balance sheet is unaudited and is not
necessarily indicative of what the actual financial position of the Company
would have been had the aforementioned acquisitions actually occurred on June
30, 1996, nor does it purport to represent the future financial position of the
Company.
<TABLE>
<CAPTION>
Company
Company Pro Forma Pro Forma
ASSETS Historical Adjustments (a) (unaudited)
- ------ ---------- --------------- -----------
<S> <C> <C> <C>
Rental property, net ..................... $364,965 $303,111 $668,076
Cash and cash equivalent ................. 1,907 -- 1,907
Unbilled rents receivable ................ 18,930 -- 18,930
Restricted cash .......................... 3,785 -- 3,785
Other assets ............................. 12,679 -- 12,679
-------- -------- --------
Total assets ............................. $402,266 $303,111 $705,377
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgages and loans payable .............. $169,147 $226,281 $395,428
Dividends and distributions payable ...... 7,610 -- 7,610
Accounts payable and accrued expenses .... 4,044 -- 4,044
Rents received in advance
and security deposits .................... 4,214 -- 4,214
Accrued interest payable ................. 485 -- 485
-------- -------- --------
Total Liabilities ........................ $185,500 $226,281 $411,781
-------- -------- --------
Minority interest of unitholders in
Operating Partnership .................... 27,545 -- 27,545
-------- -------- --------
Common stock, $.01 par value ............. 152 35 187
Additional paid in capital ............... 186,808 76,795 263,603
Retained earnings ........................ 2,261 -- 2,261
-------- -------- --------
Total stockholder's equity ............... 189,221 76,830 266,051
-------- -------- --------
Total liabilities and stockholder's equity $402,266 $303,111 $705,377
======== ======== ========
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of June 30, 1996 (in thousands)
- --------------------------------------------------------------------------------
(a) Represents the acquisition of the Mount Airy Buildings on July 23, 1996
for $10,459 and the proposed acquisition of Harborside estimated to cost
$287,400. The acquisition cost for the Mount Airy Buildings, paid in
cash, was made available from the Company's revolving credit facilities.
The acquisition cost for Harborside is intended to be financed with a
combination of assumed mortgage debt of $100,000, seller-provided
mortgage debt of $50,000, and approximately $137,400 in cash made
available through the Company's revolving credit facilities. Also
represents the Pro Forma effect of the Development Rights Contingent
Obligation aggregating an estimated net present value of $5,252 of asset
and corresponding liability. In addition, adjustments reflect the
offering of 3,450,000 shares of common stock by the Company on August 13,
1996 for net proceeds (after offering costs) of $76,830. The net proceeds
from the offering are reflected as being used to reduce its outstanding
borrowings under the Company's revolving credit facilities.
<PAGE>
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Six Months Ended June 30, 1996
And the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
The unaudited Pro Forma condensed consolidated statement of operations for the
six months ended June 30, 1996 is presented as if each of the following had
occurred on January 1, 1996: (i) the partial prepayment by the Company of its
Mortgage Financing ("Partial Prepayment"), (ii) the disposition by the Company
of its property at 15 Essex Road in Paramus, New Jersey ("Essex Road"), (iii)
the acquisition by the Company of the properties purchased from January 1, 1996
through May 2, 1996, (iv) the purchase by the Company of the Acquisitions, and
(v) the net proceeds received by the Company as a result of the Offering. Items
(i) through (iii) above are to be collectively referred to as the "Previously
Reported Events." Items (iv) and (v) are to be collectively referred to as the
"Reported Events." The unaudited Pro Forma condensed consolidated statement of
operations for the year ended December 31, 1995 is presented as if each of the
following transactions had occurred on January 1, 1995: (i) the acquisition by
the Company of the properties purchased during 1995 and the completion of its
common stock offering on November 17, 1995, (ii) the purchase by the Company on
March 8, 1995 of 100,000 shares of its common stock for constructive retirement,
(iii) the Previously Reported Events, and (iv) the Reported Events.
Such Pro Forma information is based upon the historical unaudited consolidated
results of operations of the Company for the six months ended June 30, 1996 and
the historical consolidated results of operations of the Company for the year
ended December 31, 1995, after giving effect to the transactions described
above. The Pro Forma condensed consolidated statements of operations should be
read in conjunction with the Pro Forma condensed consolidated balance sheet of
the Company and the historical financial statements and notes thereto of the
Company included in the Company's Forms 10-K for the year ended December 31,
1995 and the Company's Form 10-Q for the six month period ended June 30, 1996,
respectively.
The unaudited Pro Forma condensed consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the transactions had been completed as set forth above,
nor does it purport to represent the Company's results of operations for future
periods.
<PAGE>
<TABLE>
<CAPTION>
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1996
(in thousands, except per share amount)
-------------------------------------------------------------------------------------------------------------------------
(unaudited)
Pro Forma Adj.
for Previously Pro Forma Adj.
Company Reported for Reported Company
REVENUES Historical Events(a) Events(b) Pro Forma
- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Base rents ........................................ $33,276 $ 1,435 $19,459 $54,170
Escalations and recoveries from tenants ........... 6,232 109 4,199 10,540
Parking and other ................................. 923 -- 243 1,166
Interest income ................................... 153 -- -- 153
------- ------- ------- -------
Total revenues .................................... 40,584 1,544 23,901 66,029
------- ------- ------- -------
EXPENSES
Real estate taxes ................................. 4,153 169 1,802 6,124
Utilities ......................................... 3,755 180 503 4,438
Operating services ................................ 5,315 159 1,970 7,444
General and administrative ........................ 2,064 43 1,182 3,289
Depreciation and amortization ..................... 6,908 177 3,149 10,234
Interest expense .................................. 5,568 650 7,798 14,016
------- ------- ------- -------
Total expenses .................................... 27,763 1,378 16,404 45,545
------- ------- ------- -------
Income before gain on sale of rental
property, minority interest and
extraordinary item ............................... 12,821 166 7,497 20,484
Gain on sale of property ......................... 5,658 (5,658) -- --
------- ------- ------- -------
Income before minority interest and
extraordinary item ............................... 18,479 (5,492) 7,497 20,484
Minority interest ................................. 2,821 (836) 630 2,615
------- ------- ------- -------
Income before extraordinary item .................. $15,658 $(4,656) $ 6,867 $17,869
======= ======= ======= =======
Pro Forma weighted average common shares outstanding 18,625
=======
Pro Forma income before extraordinary item per common share $0.96
=======
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1996
(in thousands)
(a) Reflects:
Revenues and expenses for the properties acquired by the Company from January 1,
1996 through the earlier of date of acquisition or June 30, 1996 for the six
month period ended June 30, 1996, as follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
-------- ---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Carnegie March 20, 1996 $ 386 $ 31 $ 54 $ 56 $ 58
Rose Tree May 2, 1996 1,312 115 165 180 179
------ ------ ------ ------ ------
$1,698 $ 146 $ 219 $ 236 $ 237
------ ------ ------ ------ ------
<CAPTION>
General and Gain on
Property Administrative Depreciation(2) Interest(3) Sale
-------- -------------- --------------- ----------- ----
<S> <C> <C> <C> <C>
Carnegie $11 $49 -- --
Rose Tree 43 215 650 --
--- ---- ---- ----
$54 $264 $650 --
--- ---- ---- ----
</TABLE>
Revenues and expenses of the property disposed of in 1996 for the period from
January 1, 1996 through date of disposition, as follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
-------- ---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Essex Road March 20, 1996 ($263) ($37) ($50) ($56) ($78)
----- ---- ---- ---- ----
<CAPTION>
General and Gain on
Property Administrative Depreciation(2) Interest(3) Sale
-------- -------------- --------------- ----------- ----
<S> <C> <C> <C> <C>
Essex Road ($11) ($81) ($43) ($5,658)
---- ---- ---- -------
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1996
(in thousands)
(continued)
Revenues and expenses related to the Partial Prepayment in 1996 for the period
from January 1, 1996 through the Partial Prepayment date, as follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Estate Operating
Date Rents(1) Recoveries Taxes Utilities Services
---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Partial
Prepayment March 12, 1996 -- -- -- -- --
------ ---- ---- ---- ----
Total Pro Forma
adjustments for
Previously Reported
Events $1,435 $109 $169 $180 $159
====== ==== ==== ==== ====
<CAPTION>
General and Gain on
Administrative Depreciation(2) Interest(3) Sale
-------------- --------------- ----------- ----
<S> <C> <C> <C> <C>
Partial
Prepayment -- ($6) $ 43 --
--- ---- ---- -------
Total Pro Forma
adjustments for
Previously Reported
Events $43 $177 $650 ($5,658)
=== ==== ==== =======
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1996
(in thousands)
(b) Reflects:
Revenues and expenses of the property acquired on July 24, 1996 and the proposed
acquisition of Harborside for the six month period ended June 30, 1996, as
follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Other Estate
Property Date Rents(1) Recoveries Income Taxes Utilities
- -------- ---- -------- ---------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Mount Airy Bldgs. July 23, 1996 $ 598 $ 90 -- $ 90 --
Harborside Pending 18,861 4,109 243 1,712 503
------- ------ ---- ------ ----
$19,459 $4,199 $243 $1,802 $503
------- ------ ---- ------ ----
<CAPTION>
Operating General and
Property Services Administrative Depreciation(2) Interest(3)
- -------- -------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Mount Airy Bldgs. $4 $48 $ 95 $ 359
Harborside 1,966 1,134 3,054 10,074
------ ------ ------ -------
$1,970 $1,182 $3,149 $10,433
------ ------ ------ -------
</TABLE>
Reduction of expenses on account of the net proceeds from the Offering on August
13, 1996 for the six month period ended June 30, 1996, as follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Other Estate
Date Rents(1) Recoveries Income Taxes Utilities
---- -------- ---------- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C>
The Offering August 13, 1996 -- -- -- -- --
------- ------ ---- ------ ----
Total Pro Forma Adj.
for 1996 Reported
Events $19,459 $4,199 $243 $1,802 $503
======= ====== ==== ====== ====
<CAPTION>
Operating General and
Services Administrative Depreciation(2) Interest(3)
-------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
The Offering -- -- -- ($2,635)
------ ------ ------ ------
Total Pro Forma Adj.
for 1996 Reported
Events $1,970 $1,182 $3,149 $7,798
====== ====== ====== ======
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1996
(in thousands)
(1) Pro Forma base rents are presented on a straight-line basis calculated
from January 1, 1996 forward.
(2) Depreciation is based on the building-related portion of the purchase
price and associated costs depreciated using the straight-line method
over a 40-year life.
(3) Interest for floating rate debt is calculated using one-month LIBOR plus
150 basis points for the existing credit lines, and LIBOR plus 125 basis
points for the new credit facility to be used in the Harborside
acquisition. Had the interest rate for floating rate debt been one-eighth
of one percent different, interest would have changed by $12 for Rose
Tree, $1 for the Partial Prepayment, $7 for the Mount Airy Buildings, $86
for Harborside and $48 for the Offering. Interest for the Partial
Prepayment is recorded net of a reduction in interest of $172, reflecting
the effect of the Partial Prepayment not recorded in the Essex Road
disposition.
<PAGE>
<TABLE>
<CAPTION>
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement Of Operations
For The Year Ended December 31, 1995
(in thousands, except per share amount)
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
Pro Forma Pro Forma
Adjustments Adj. for 1996 Pro Forma
for 1995 Previously Adj. for 1996
Company Acquired Reported Reported Company
REVENUES Historical Properties(a) Sub-total Events(b) Events (c) Pro Forma
- -------- ---------- ------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Base rents ............................... $ 50,808 $ 12,961 $ 63,769 $ 4,067 $ 35,912 $103,748
Escalations and recoveries
from tenants ............................ 9,504 2,684 12,188 304 9,552 22,044
Parking and other ........................ 1,702 -- 1,702 -- 182 1,884
Interest income .......................... 321 -- 321 -- -- 321
-------- -------- -------- -------- -------- --------
Total revenues ........................... 62,335 15,645 77,980 4,371 45,646 127,997
-------- -------- -------- -------- -------- --------
EXPENSES
Real estate taxes ........................ 5,856 1,821 7,677 470 4,264 12,411
Utilities ................................ 6,330 939 7,269 580 1,109 8,958
Operating services ....................... 8,519 1,354 9,873 331 4,209 14,413
General and administrative ............... 3,712 519 4,231 134 2,582 6,947
Depreciation and amortization ............ 12,111 2,201 14,312 465 6,296 21,073
Interest expense ......................... 8,661 2,127 10,788 2,222 15,907 28,917
-------- -------- -------- -------- -------- --------
Total expenses ........................... 45,189 8,961 54,150 4,202 34,367 92,719
-------- -------- -------- -------- -------- --------
Income before minority interest .......... 17,146 6,684 23,830 169 11,279 35,278
Minority interest ........................ 3,508 208 3,716 26 870 4,612
-------- -------- -------- -------- -------- --------
Net income ............................... $ 13,638 $ 6,476 $ 20,114 $ 143 $ 10,409 $ 30,666
======== ======== ======== ======== ======== ========
Pro Forma weighted average
common shares outstanding ................ 18,555
--------
Pro Forma net income per
common share ............................ $ 1.65
========
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands)
(a) Reflects revenues and expenses of the properties acquired by the Company in
1995 for the period January 1, 1995 through the date of acquisition, as follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1717 Rt. 208 Fairlawn, NJ March 3, 1995 $ 564 $ 61 $ 48 $ 62 $ 64
400 Rella Blvd. Montebello, NY April 11, 1995 874 68 121 132 100
5 Vaughn Dr. Princeton, NJ July 21, 1995 1,031 100 126 93 127
New Jersey Resources Nov. 8, 1995 6,004 954 802 506 591
Commercenter Totowa Nov. 6, 1995 2,942 786 407 71 295
Horizon Center Business Park Nov. 8, 1995 1,546 715 317 75 177
------- ------ ------ ---- ------
Total Pro Forma Adj. for
1995 Acquired Properties $12,961 $2,684 $1,821 $939 $1,354
======= ====== ====== ==== ======
<CAPTION>
General and
Property Administrative Depreciation(2) Interest(3)
- -------- -------------- --------------- -----------
<S> <C> <C> <C>
1717 Rt. 208 Fairlawn, NJ $ 25 $ 81 $ 259
400 Rella Blvd. Montebello, NY 29 85 359
5 Vaughn Dr. Princeton, NJ 40 137 476
New Jersey Resources 202 1,046 557
Commercenter Totowa 147 586 330
Horizon Center Business Park 76 266 146
---- ------ ------
Total Pro Forma Adj. for
1995 Acquired Properties $519 $2,201 $2,127
==== ====== ======
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands)
(b) Reflects:
Revenues and expenses of the properties acquired from January 1, 1996 through
May 2, 1996 for the period January 1, 1995 through December 31, 1995, as
follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Carnegie March 20, 1996 $1,538 $ 159 $ 248 $ 246 $ 207
Rose Tree May 2, 1996 3,990 367 455 549 451
------ ----- ----- ----- -----
$5,528 $ 526 $ 703 $ 795 $ 658
------ ----- ----- ----- -----
<CAPTION>
General and
Property Administrative Depreciation(2) Interest(3)
- -------- -------------- --------------- -----------
<S> <C> <C> <C>
Carnegie $ 46 $195 --
Rose Tree 141 633 2,193
---- ---- ------
$187 $828 $2,193
---- ---- ------
</TABLE>
Revenues and expenses of the property disposed of in 1996 for the period January
1, 1995 through December 31, 1995, as follows:
<TABLE>
<CAPTION>
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Essex Road March 20, 1996 ($1,461) ($222) ($233) ($215) ($327)
------- ----- ----- ----- -----
<CAPTION>
General and
Property Administrative Depreciation(2) Interest(3)
- -------- -------------- --------------- -----------
<S> <C> <C> <C>
Essex Road ($53) ($334) ($228)
---- ----- -----
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands)
Revenues and expenses related to the Partial Prepayment in 1996 for the period
January 1, 1995 through December 31, 1995, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Estate Operating
Date Rents(1) Recoveries Taxes Utilities Services
---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Partial Prepayment March 12, 1996 -- -- -- -- --
------ ---- ---- ---- ----
Total Pro Forma adj. for 1996
Previously Reported Events $4,067 $304 $470 $580 $331
====== ==== ==== ==== ====
<CAPTION>
General and
Administrative Depreciation(2) Interest(3)
-------------- --------------- -----------
<S> <C> <C> <C>
Partial Prepayment -- ($29) $ 257
---- ---- ------
Total Pro Forma adj. for 1996
Previously Reported Events $134 $465 $2,222
==== ==== ======
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands)
(c) Reflects:
Revenues and expenses of the property acquired on July 23, 1996 and the proposed
acquisition of Harborside for the period January 1, 1995 through December 31,
1995, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate
Property Date Rents(1) Recoveries Income Taxes Utilities
- -------- ---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Mount Airy Bldgs. July 23, 1996 $ 1,130 $ 183 -- $ 183 --
Harborside Pending 34,782 9,369 182 4,081 1,109
------- ------ ---- ------ ------
Total Acquisitions $35,912 $9,552 $182 $4,264 $1,109
------- ------ ---- ------ ------
<CAPTION>
Operating General and
Property Services Administrative Depreciation(2) Interest(3)
- -------- -------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Mount Airy Bldgs. $6 $52 $ 189 $ 816
Harborside 4,203 2,530 6,107 21,086
------ ------ ------ -------
Total Acquisitions $4,209 $2,582 $6,296 $21,902
------ ------ ------ -------
</TABLE>
Reduction of expenses on account of the net proceeds from the Offering on August
13, 1996 for the period January 1, 1995 through December 31, 1995, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate
Date Rents(1) Recoveries Income Taxes Utilities
---- -------- ---------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
The Offering August 13, 1996 -- -- -- -- --
------- ------ ---- ------ ------
Total Pro Forma Adj.
for 1996 Reported Events $35,912 $9,552 $182 $4,264 $1,109
======= ====== ==== ====== ======
<CAPTION>
Operating General and
Services Administrative Depreciation(2) Interest(3)
-------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
The Offering -- -- -- ($5,995)
------ ------ ------ --------
Total Pro Forma Adj.
for 1996 Reported Events $4,209 $2,582 $6,296 $ 15,907
====== ====== ====== ========
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands)
(1) Pro Forma base rents are presented on a straight line basis calculated
from January 1, 1995 forward.
(2) Depreciation is based on the building-related portion of the purchase
price and associated costs depreciated using the straight-line method
over a 40-year life.
(3) Interest is calculated at LIBOR plus 275 basis points through February 1,
1995, at LIBOR plus 200 basis points through November 1, 1995 and at
LIBOR plus 150 points after such date. Had the interest rate been
one-eighth of one percent different, interest would have changed by $32
for the properties acquired in 1995, $35 for the Acquisitions in 1996,
and $4 for the Partial Prepayment. Interest for the Partial Prepayment is
recorded net of a reduction in interest of $172, reflecting the effect of
the Partial Prepayment not recorded in Essex Road in note (b).
<PAGE>
CALI REALTY CORPORATION
Estimated Twelve Month Pro Forma Statement of
Taxable Net Operating Income and Operating Funds Available
(in thousands)
(unaudited)
The following unaudited statement is a Pro Forma estimate for a twelve month
period of taxable income and funds available from operations of the Company. The
Pro Forma statement is based on the Company's historical operating results for
the twelve month period ended December 31, 1995, adjusted for historical
operations of the properties acquired during 1995 and 1996 (as reported in this
report) and certain items related to operations which can be factually
supported. This statement does not purport to forecast actual operating results
for any period in the future.
This statement should be read in conjunction with (i) the financial statements
of the Company and (ii) the Pro Forma financial statements of the Company.
<TABLE>
<CAPTION>
Estimate of Taxable Net Operating Income (in thousands):
<S> <C>
Cali Realty Corporation historical income before minority
interest, year ended December 31, 1995,
exclusive of depreciation and amortization (Note 1) ................................ $ 29,257
Properties acquired during 1995 - historical earnings from operations, as
adjusted, exclusive of depreciation (Note 2) ....................................... 8,885
Properties acquired from January 1, 1996 through May 2, 1996 - historical earnings from
operations, as adjusted, exclusive of depreciation (Note 2) ........................ 1,518
Property acquired on July 23, 1996 and pending acquisition of Harborside - historical
earnings from operations, as adjusted, exclusive of depreciation (Note 2) ........... 11,580
Property disposed of during 1996-historical earnings from operations
as adjusted, exclusive of depreciation (Note 2) ................................... (627)
Pro Forma adjustments relating to the Partial Prepayment (Note 3) .................... (228)
Pro Forma adjustments relating to the Offering (Note 4) .............................. 5,995
Net adjustment for tax basis rental revenue recognition (Note 5) ..................... (8,290)
Estimated tax depreciation and amortization (Note 6)
Properties owned at December 31, 1994 .............................................. (6,746)
Properties acquired during 1995 .................................................... (3,494)
Properties acquired January 1, 1996 through May 2, 1996 ............................ (843)
Properties acquired May 3, 1996 through October 24, 1996 (Note 6) .................... (6,492)
--------
Pro Forma taxable income before allocation to minority interest and
dividends deduction ................................................................ 30,515
Estimated allocation to minority interest (Note 7) ................................... (4,399)
Estimated dividends deduction (Note 8) ............................................... (31,543)
--------
$ (5,427)
========
Pro Forma taxable net operating income ............................................... $ --
========
Estimate of Operating Funds Available (in thousands):
Pro Forma taxable operating income before allocation to minority
interests and dividends deduction .................................................... $ 30,515
Add Pro Forma depreciation and amortization ........................................ 17,575
--------
Estimated Pro Forma operating funds available (Note 9) ............................... $ 48,090
========
</TABLE>
<PAGE>
CALI REALTY CORPORATION
Estimated Twelve Month Pro Forma Statement of
Taxable Net Operating Income and Operating Funds Available
- --------------------------------------------------------------------------------
(unaudited)
Note 1 - The historical income before minority interest represents the
Company's income before minority interest for the year ended December
31, 1995.
Note 2 - The historical earnings from operations represents the Pro Forma
results of the properties acquired during 1995 and 1996 (including the
pending acquisition of Harborside), and the property disposed of in
1996 as referred to in the Pro Forma condensed consolidated statement
of operations for the year ended December 31, 1995 and included
elsewhere herein.
Note 3 - Represents the Pro Forma result for the Partial Prepayment as referred
to in the Pro Forma condensed consolidated statement of operations for
the year ended December 31, 1995 and included elsewhere herein.
Note 4 - Represents the Pro Forma results of the Offering as referred to in the
Pro Forma condensed statement of operations for the year ended
December 31, 1995 and included elsewhere herein.
Note 5 - Represents the net adjustment to (i) recognize prepaid rent and (ii)
reverse the effect of rental revenue recognition on a straight line
basis.
Note 6 - Tax depreciation for the Company is based upon the original cost or
purchase price allocated to the buildings, depreciated on a
straight-line method over a 39-year life.
Note 7 - Estimated allocation of taxable income to minority interests is based
on a 13.07 percent minority interest in the operating partnership with
a special allocation of depreciation on properties included in the
Initial Public Offering.
Note 8 - Estimated dividends deduction is based on 18,554,725 shares
outstanding at the dividend rate of $1.70 per share. Shares
outstanding, on a Pro Forma basis, are 18,554,725.
Note 9 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund
cash needs.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement of
Cali Realty Corporation on Forms S-3 (File Nos. 333-09875, 333-09081, 33-96538,
and 33-96542) and Form S-8 (File No. 33-91822) of our report dated September 19,
1996, on our audits of the Statements of Revenue and Certain Operating Expenses
of the property known as Harborside Financial Center for the years ended
December 31, 1995, 1994, and 1993, which report is included in this Report on
Form 8-K.
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
New York, New York
October 23, 1996
