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 29, 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
Cali Realty Corporation (the "Company") intends to acquire through three
individual transactions with separate, unrelated sellers a three-building office
complex, two neighboring office buildings and one individual office building
(the "Proposed Acquisitions").
The total aggregate initial acquisition cost of the Proposed Acquisitions is
estimated to be approximately $90,600,000. The Company anticipates it will pay
the aggregate initial acquisition cost in cash, which will be made available
from proceeds of a public common stock offering of 10,000,000 shares (the
"Proposed Offering").
The Company intends to acquire the following properties:
(1) The International Court at Airport Business Center ("Airport Center")
is a three-building office complex compries of approximately 370,000
net rentable square feet located in Lester, Delaware County,
Pennsylvania.
(2) 300 Tice Boulevard ("Whiteweld") is an approximately 230,000 net
rentable square foot office building located in Woodcliff Lake, Bergen
County, New Jersey.
(3) Five Sentry Parkway East & West ("5 Sentry") is a two-building office
complex comprised of approximately 131,000 net rentable square feet
located in Plymouth Meeting, Montgomery County, Pennsylvania.
Further information regarding the Proposed Acquisitions is attached on SCHEDULE
A. Additional information regarding Airport Center is provided on SCHEDULE B.
The Proposed Acquisitions will be 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 determines 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 to be obtained
in connection with the acquisition of the 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.
Pursuant to the Company's Registration Statements on Form S-3 (File No.'s
33-96538 and 333- 09081), the Company intends to arrange for an underwritten
public offering and sale of 10,000,000 shares of its common stock using several
different underwriters to underwrite such public offer and sale. The Company
expects to receive approximately $251.5 million in net proceeds from the
Proposed Offering, planning to use such funds for the Proposed Acquisitions as
well as pay down outstanding borrowings on its revolving credit facilities.
<PAGE>
If the Proposed Offering does not occur, the Company intends to fund any
projected shortfall in funds available to acquire the Proposed Acquisition by
accessing one of a number of lending sources with which the Company currently
has relationships. Such lending may be secured by liens on one or more of the
Company's currently unencumbered properties. While there can be no assurance
that the Company will be able to obtain such additional financing, the Company
is reasonably confident that it will be able to do so. If it were not
successful, the Company would likely elect not to acquire one or more of the
Proposed Acquistions.
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 Expenses included in this report encompass
the following for Airport Center, Whiteweld, and 5 Sentry, individually:
o Audited Statements of Revenue and Certain Expenses for the years ended
December 31, 1995 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
APPROXIMATE ESTIMATED
PERCENT INITIAL
TOTAL OCCUPIED COST TO
OFFICE NUMBER OF SQUARE AS OF YEAR COMPANY
BUILDING BUILDINGS FEET JUNE 30, 1996 COMPLETED (in thousands)
-------- --------- ---- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Airport Center Three 370,000 100% Buildings: $43,000
Lester, I: 1986
Delaware County, II: 1987
Pennsylvania III: 1992
Whiteweld One 230,000 94% 1991 $35,200
300 Tice Boulevard
Woodcliff Lake,
Bergen County,
New Jersey
5 Sentry Parkway Two 131,000 99% 1984 $12,400
East & West
Plymouth Meeting,
Montgomery County,
Pennsylvania
------- -------
TOTAL 731,000 $90,600
======= =======
<CAPTION>
OFFICE PRINCIPAL TENANTS
BUILDING (based on percentage of property leased)
-------- ----------------------------------------
<S> <C>
Airport Center PNC Bank (29%),
Lester, SAP America, Inc. (28%),
Delaware County, Mercy Health Plan (19%)
Pennsylvania
Whiteweld Medco Containment
300 Tice Boulevard Services, Inc. (20%),
Woodcliff Lake, Xerox Corp. (14%),
Bergen County, Chase Manhattan
New Jersey Mortgage Corp.(12%),
Comdisco Inc. (11%)
5 Sentry Parkway Merck, Inc. (71%),
East & West Selas Fluid Proecessing Corp. (16%)
Plymouth Meeting,
Montgomery County,
Pennsylvania
</TABLE>
<PAGE>
SCHEDULE B
AIRPORT CENTER:
Airport Center is located in Lester, Delaware County, Pennsylvania, in a
master-planned business park encompassing approximately 187 acres. The Airport
Center consists of three low-rise office buildings containing approximately
370,000 net rentable square feet.
Airport Center is located in the southeastern quadrant of Delaware County,
adjacent to Interstate 95, the major north-south highway artery for the Eastern
United States. The property is located three miles north of the Philadelphia
International Airport and readily accessible to the recently completed "Blue
Route" (I-476), the state's major east-west toll road.
International Court I ("Building One"), is a three-story office structure
containing approximately 95,149 net rentable square feet and was completed in
1986. International Court II ("Building Two"), is a four-story office structure
containing approximately 207,618 net rentable square feet, and was completed in
1987. International Court III ("Building Three"), is a three-story office
structure containing approximately 67,990 net rentable square feet, and was
completed in 1992.
Building One is serviced by two Dover passenger elevators and one Dover
passenger/service elevator. Building Two is serviced by four Dover passenger
elevators and a freight elevator. Building Three is serviced by one Dover
passenger elevator.
The buildings are all equipped with card-key access and a telephone for
after-hours security.
Each building is fully sprinklered per NFPA requirements, with smoke detectors,
two fire towers and exhaust fans. Additionally, the buildings are individually
equipped with a back up generator. The buildings comply with ADA accessibility
requirements. The following table sets forth certain information (on a per net
rentable square foot basis unless otherwise indicated) about Airport Center. The
information presented for years 1991 and 1992 are for Buildings One and Two
only. Building Three was completed in 1992.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
(CONT.)
Six Mos.
Ended
June 30,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Number of leases signed during
Period (1) 15 3 7 7 1 1
Rentable square footage leased
during Period (1) 103,867 39,238 70,062 35,775 4,751 7,950
Base rent ($) (1) (2) 16.06 20.47 19.99 20.62 20.56 22.10
Tenant improvements ($) (3) 18.61 5.94 20.23 6.98 5.00 --
Leasing commissions ($) (4) 1.97 4.48 1.09 0.79 4.13 --
Effective rent ($) (5) 11.76 18.39 15.66 19.01 17.52 22.10
Expense stop ($) (6) 6.00 6.96 6.51 7.32 6.83 8.50
Effective equivalent triple net rent
($) (7) 5.67 11.43 9.15 11.69 10.69 13.60
Occupancy rate at end of period
(%) (1) 100.0% 82.5% 93.6% 100.0% 98.8% 99.9%
</TABLE>
(1) Includes only 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 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) 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 leased
under all lease transactions during the period.
(6) All leases in this property are gross leases (i.e. tenants pay their
proportionate share of real estate taxes, operating costs and utility
costs in excess of their applicable stops.)
(7) Equals effective rent minus expense stop.
(8) Construction of Building Three was completed during 1992. One tenant
occupying 4,194 square feet moved in during 1992, out of a total
approximate net rentable square feet of 67,990 at Building Three.
<PAGE>
The following table sets forth the average percentage leased and
average annual rental per lease on a square foot basis for the past
five years for the Airport Center. All of the leases at the Airport
Business Center are gross leases (i.e tenants pay their proportionate
share of real estate taxes, insurance and operating expenses, in excess
of their applicable stops) except for certain retail space which
comprise approximately 2,000 square feet.
<TABLE>
<CAPTION>
Average Average Annual
Percentage Rental Per Leased
Leased Square Foot
Period (%) (1) (%) (2)
------ ------- -------
<S> <C> <C>
Six months ended
June 30, 1996 99.4% 17.13
1995 99.4% 16.64
1994 96.8% 16.08
1993 88.1% 16.20
1992 91.3% 17.31
1991 86.0% 14.75
</TABLE>
(1) Average of beginning and end of year aggregate percentage leased.
(2) Total base rents for the year, determined in accordance with GAAP,
divided by the average of beginning and end of year aggregate net
rentable area leased.
AIRPORT CENTER - MAJOR TENANTS
Three tenants at the Airport Center occupied approximately 74.1 percent and 76.2
percent of the total net rentable square feet of the property as of December 31,
1995 and June 30, 1996, respectively, as follows:
PNC Bank, NA, a commercial bank, occupied approximately 107,300 net rentable
square feet as of December 31, 1995 and June 30, 1996 (approximately 28.9
percent of the total net rentable square feet), pursuant to a lease that expires
in February 2000. Total rental income, including escalation and recoveries, was
approximately $2,274,300 and $1,147,600 in 1995 and the six months ended June
30, 1996 respectively.
SAP America, Inc., a computer software company, occupied approximately 96,000
and 104,000 net rentable square feet as of December 31, 1995 and June 30, 1996
(approximately 25.9 percent and 28.0 percent of the total net rentable square
feet), respectively, pursuant to leases that expire in June 1998 and July 1999.
Total rental income, including escalations and recoveries, was approximately
$2,086,900 and $1,088,500 in 1995 and for the six months ended June 30, 1996
respectively.
Mercy Health Plan, a regional managed care organization, occupied approximately
71,700 net rentable square feet as of December 31,1995 and June 30,1996
(approximately 19.3 percent of the total net rentable square feet) pursuant to a
lease which expires in January 1998. Total rental income, including escalations
and recoveries, was approximately $1,488,000 and $748,100 in 1995 and for the
six months ended June 30, 1996 respectively.
<PAGE>
The following table sets out a schedule of the lease expirations for the Airport
Center for 1997 through 2001, for leases in place as of June 30, 1996, assuming
that none of the tenants exercise renewal options of termination rights:
<TABLE>
<CAPTION>
Percentage of
Total Leased Annual Base
Net Rentable Sq. Ft. Rent Under Average Annual Rent Per
Area Subject Represented by Expiring Rentable Square Foot
Year of Number of Leases to Expiring Expiring Leases Represented By Expiring
Lease expiration Expiring (1) Leases Sq. Ft. Leases (%) ($000) (2) Leases ($)(2)
---------------- ------------ -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1997 4 7,656 2.07% $ 126 $16.46
1998 4 82,408 22.29 1,709 20.74
1999 6 139,991 37.87 2,488 17.77
2000 5 129,594 35.05 2,033 15.69
2001 2 10,044 2.72 114 11.35
-- ------- ------ ------ ------
Total Weighted
Average 21 369,693 100.00% $6,470 $17.50
== ======= ====== ====== ======
</TABLE>
(1) Includes office tenants only.
(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>
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
- --------------------------------------------------------------------------------
PROPOSED ACQUISITIONS
Airport Center:
Report of Independent Auditors
Combined Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1995 (audited) and
the Six Months Ended June 30, 1996 (unaudited)
Notes to Combined Statements of Revenue and Certain Expenses
Whiteweld:
Report of Independent Accountants
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1995 (audited)
The Six Months Ended June 30, 1996 (unaudited)
Notes to Statements of Revenue and Certain Expenses
5 Sentry:
Report of Independent Accountants
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1995 (audited)
The Six Months Ended June 30, 1996 (unaudited)
Notes to Statements of Revenue and Certain 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 Participants and Partners of
The International Court at Airport Business Center
We have audited the accompanying combined statement of revenue and certain
expenses of the International Court at Airport Business Center (the "Airport
Center") for the year ended December 31, 1995. This financial statement is the
responsibility of the Airport Center's management. Our responsibility is to
express an opinion on this statement of revenue and certain expenses based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined statement of
revenue and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the combined statement of revenue and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenue and certain expenses of the
Airport Center was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
Current Report on Form 8-K of Cali Realty Corporation as described in Note 1,
and is not intended to be a complete presentation of the Airport Center's
revenue and expenses.
In our opinion, the combined statement of revenue and certain expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 1 of the Airport Center for the year ended December
31, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
--------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
October 16, 1996
<PAGE>
<TABLE>
<CAPTION>
International Court at Airport Business Center
Combined Statements of Revenue and Certain Expenses
Six months
Year ended ended
December 31, June 30,
1995 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Revenue:
Base rents ................................. $7,044,319 $3,575,524
Escalations and recoveries from tenants .... 1,036,914 519,212
Other ...................................... 27,848 16,454
---------- ----------
8,109,081 4,111,190
Certain expenses:
Real estate taxes .......................... 741,136 395,886
Utilities .................................. 1,054,993 527,340
Operating services ......................... 1,151,793 615,435
General and administrative ................. 408,172 190,495
---------- ----------
3,356,094 1,729,156
---------- ----------
Revenue in excess of certain expenses .......... $4,752,987 $2,382,034
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
International Court at Airport Business Center
Notes to Combined Statements of Revenue and Certain Expenses
1. Organization and Summary of Significant Accounting Policies
Organization
The International Court at Airport Business Center (the "Airport Center")
consists of three individual multi-tenant office buildings in the Airport
Business Center located in Lester, Pennsylvania. The Airport Center expects to
be acquired by Cali Realty Corporation, who will subsequently file a Current
Report on Form 8-K with the Securities and Exchange Commission.
Basis of Presentation
The accompanying combined statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission.
The accounts of each of the properties comprising the Airport Center are
combined in the statement of revenue and certain expenses. There are no
inter-property accounts to be eliminated. The financial statement is not
representative of the actual operations for the periods presented as certain
expenses that may not be comparable to the expenses expected to be incurred in
the proposed future operations of the Airport Center have been excluded.
Expenses excluded consist of interest, amortization, professional fees, and
other costs not directly related to the future operations of the Airport Center.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition
Base rents are recognized on a straight-line basis over the term of the lease.
Unaudited Interim Financial Statement
With respect to the unaudited interim financial statement, in the opinion of the
management of the Airport Center, all adjustments and eliminations, consisting
only of normal recurring adjustments, necessary to present fairly the combined
statement of revenues and certain expenses of the Airport Center for the six
months ended June 30, 1996, have been included. The results of operations for
such interim period are not necessarily indicative of the results for the full
year.
<PAGE>
International Court at Airport Business Center
Notes to Combined Statements of Revenue and Certain Expenses (continued)
2. Properties
The three multi-tenant office properties comprising the Airport Center are as
follows:
Property Name Location
----------------------------------------------
International Court I Lester, PA
International Court II Lester, PA
International Court III Lester, PA
3. Related Party Transactions
The Airport Center is managed by The Henderson Group and are related by way of
common ownership (the Henderson Family). The Airport Center has engaged in
transactions with affiliates of the Henderson Group as follows:
<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Base rents $237,683 $118,842
Escalations and recoveries from tenants 34,125 17,338
Repair and maintenance expense (operating services) 205,698 99,988
Management fees (general and administrative) 244,186 130,942
Marketing fee expense (general and administrative) 44,256 22,128
Commissions expense (general and administrative) 14,051 --
</TABLE>
Management fees are charged based upon 3% of rents collected.
<PAGE>
International Court at Airport Business Center
Notes to Combined Statements of Revenue and Certain Expenses (continued)
4. Leasing Activity
The Airport Center earns rental income under noncancelable operating leases.
Generally, leases provide for minimum rent and require each tenant to pay its
pro rata share of building operating expenses in excess of established amounts.
The following schedule of future minimum rental payments due under noncancelable
operating leases as of December 31, 1995 does not include any amounts due upon
exercise of renewal options under existing leases.
Year ending December 31:
1996 $ 6,608,000
1997 6,005,000
1998 4,108,000
1999 2,258,000
2000 339,000
-------------
$ 19,318,000
=============
In 1995, three tenants contributed approximately 75% of base rents. PNC Bank,
SAP America, and Mercy Health Plan contributed 28%, 26% and 21%, respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Statement of Revenue and Certain Expenses
for the property known as Whiteweld Centre for the year ended December 31, 1995.
This financial statement is the responsibility of management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates make by
management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared as
described in Note 2, for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission (for inclusion in the Form 8-K of Cali
Realty Corporation) and is not intended to be a complete presentation of
Whiteweld Centre's revenues and expenses.
In our opinion the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses for Whiteweld Centre,
on the basis described in Note 2, for the year ended December 31, 1995, in
conformity with generally accepted accounting principles ("GAAP").
/s/Schonbraun Safris Sternlieb & Co. L.L.C.
-------------------------------------------
SCHONBRAUN SAFRIS STERNLIEB & CO. L.L.C.
Certified Public Accountants
West Orange, New Jersey
October 17, 1996
<PAGE>
<TABLE>
<CAPTION>
WHITEWELD CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
<S> <C>
Revenue
Base rents ............................................. $3,492,867
Recoveries from tenants ................................ 359,163
----------
3,852,030
----------
Certain Expenses
Real estate taxes ...................................... 468,000
Utilities .............................................. 698,174
Operating services ..................................... 524,183
General and administrative ............................. 147,453
----------
1,837,810
----------
Revenue in excess of certain expenses .................... $2,014,220
==========
</TABLE>
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
<PAGE>
WHITEWELD CENTRE
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. Organization and Operation of Property
For the purpose of the accompanying statements of revenue and certain
expenses, Whiteweld Centre (the "Property") is an office building
located in Woodcliff Lake, New Jersey expected to be acquired by Cali
Realty Corporation (the "Company").
2. Summary of Significant Accounting Policies
a. Basis of Presentation
The accompanying statements of revenue and certain expenses have
been prepared on the accrual basis of accounting.
The accompanying financial statements are not representative of
the actual operation for the periods presented, as certain
revenues and expenses, which may not be comparable to the revenues
and expenses to be earned or incurred by the Company in the future
operations of the Property have been excluded. Revenues excluded
consist of interest unrelated to the continuing operations of the
Property. Expenses excluded consist of interest, depreciation of
the building and improvements, and amortization of organization
and other intangible costs and other expenses not directly related
to the future operations of the Property.
b. Use of Estimates
The preparation of finnancial statements in accordance with GAAP
requires management to make estimates and assumptions that affect
the disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from
those estimates.
c. Revenue Recognition
Base rents are recognized on a straight-line basis over the terms
of the lease. Certain lease agreements contain provisions which
provide for reimbursements by tenants of real estate taxes,
utility and other operating costs, generally over established base
year amounts, as defined in the tenant lease.
3. LEASES
Leases for the Property have various lease terms up to twelve years
with options to certain tenants for renewal. Minimum rental amounts for
certain leases increase as set forth under the terms of each lease.
<PAGE>
WHITEWELD CENTRE
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
3. LEASES (Continued)
Future minimum rents to be received over the next five years and
thereafter from tenants as of December 31, 1995 are as follows:
1996 $ 3,959,970
1997 4,097,187
1998 3,416,332
1999 3,032,853
2000 2,796,151
Thereafter 3,705,724
-------------
$21,008,217
===========
For the year ended December 31, 1995 and the six months ended June 30,
1996, five tenants contributed 82.5 percent and four tenants
contributed 63.9 percent of base rents, respectively, as follows:
<TABLE>
<CAPTION>
Base Rent Contributed
------------------------------------------
Year Ended Six Months Ended
December 31, 1995 June 30, 1996
----------------- ----------------
(unaudited)
<S> <C> <C>
Xerox Corp. .................................... 22.2% 19.7%
Medco Containment Services, Inc. ............... 20.4 18.0
Chase Manhattan Mortgage Corp. ................. 15.6 13.8
Comdisco Inc. .................................. 14.0 12.4
Kraft Foods .................................... 10.3 --
---- ----
82.5% 63.9%
==== ====
</TABLE>
4. GENERAL AND ADMINISTRATIVE EXPENSES
During the periods covered by these statements, the Property was
owner-managed and in lieu of management fees, incurred payroll and
related costs, which are included in general and administrative
expenses of $113,342 for the year ended December 31, 1995 and $65,654
for the six months ended June 30, 1996 (unaudited).
5. INTERIM STATEMENT
The interim financial data for the six months ended June 30, 1996 is
unaudited; however, in the opinion of management, the interim data
includes all adjustments, consisting only of normally recurring
adjustments, necessary for a fair statement of the results for the
interim period. The results for the period presented are not
necessarily indicative of the results to be expected for the entire
fiscal year or any other period.
<PAGE>
<TABLE>
<CAPTION>
WHITEWELD CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<S> <C>
Revenue
Base rents ............................................. $1,972,365
Recoveries from tenants ................................ 158,562
----------
2,130,927
Certain expenses
Real estate taxes ...................................... 228,375
Utilities .............................................. 377,844
Operating services ..................................... 297,541
General and administrative ............................. 96,008
----------
999,768
----------
Revenue in excess of certain expenses .................... $1,131,159
==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Statement of Revenue and Certain Expenses
for the property known as Five Sentry Parkway East and West for the year ended
December 31, 1995. The financial statement is the responsibility of management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared as
described in Note 2, for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission (for inclusion in the Form 8-K of Cali
Realty Corporation) and is not intended to be a complete presentation of Five
Sentry Parkway East and West revenues and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses for Five Sentry
Parkway East and West, on the basis described in Note 2, for the year ended
December 31, 1995, in conformity with generally accepted accounting principles
("GAAP").
/s/ Schonbraun Safris Sternlieb & Co., L.L.C.
---------------------------------------------
SCHONBRAUN SAFRIS STERNLIEB & CO., L.L.C.
Certified Public Accountants
West Orange, New Jersey
October 15, 1996
<PAGE>
<TABLE>
<CAPTION>
FIVE SENTRY PARKWAY EAST AND WEST
STATEMENT OF REVENUE AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1995
<S> <C>
Revenue
Base rents .............................................. $1,957,167
----------
Certain expenses
Real estate taxes ...................................... 173,196
Utilities .............................................. 34,564
Operating services ..................................... 357,031
General and administrative ............................. 100,531
----------
665,322
----------
Revenue in excess of certain expenses .................... $1,291,845
==========
</TABLE>
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
<PAGE>
FIVE SENTRY PARKWAY EAST AND WEST
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1995
1. ORGANIZATION AND OPERATION OF PROPERTY
For the purpose of the accompanying statements of revenues and certain
expenses, Five Sentry Parkway East and West (the "Properties") are two
office buildings located in Plymouth Meeting, Montgomery County,
Pennsylvania in an office park known as Sentry Parkway which are
expected to be acquired by Cali Realty Corporation, (the "Company").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The accompanying statement of revenue and certain expenses
has been prepared on the accrual basis of accounting.
The accompanying financial statement is not representative of
the actual operations for the period presented, as certain
revenues and expenses, which may not be comparable to the
revenues and expenses to be earned or incurred by the Company
in the future operations of the Properties have been
excluded. Revenues excluded consist of interest and other
revenues unrelated to the continuing operations of the
Properties. Expenses excluded consist of depreciation of the
building and improvements, and amortization of organization
and other intangible costs and other expenses not directly
related to the future operations of the Properties.
b. Use of Estimates
The preparation of financial statements in accordance with
GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the period. Actual results could
differ from these estimates.
c. Revenue Recognition
Base rents are recognized on a straight-line basis over the
terms of the respective leases.
3. LEASES
Leases for the Properties have various remaining lease terms of up to
6 years with options to certain tenants for renewal. Minimum rental
amounts for certain leases increase as set forth under the terms of
each lease. Effective January 1, 1996, Merck & Co., a tenant with
space at both buildings occupying 71 percent of the buildings in the
aggregate, renegotiated its lease from a fixed escalation charge lease
to a gross lease which provides for reimbursements of real estate
taxes, insurance, utility and other operating costs, over a 1995 base
year.
<PAGE>
FIVE SENTRY PARKWAY EAST AND WEST
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1995
3. LEASES (Continued)
Future minimum rents to be received over the next five years and
thereafter from tenants as of December 31, 1995 are as follows:
1996 $2,053,959
1997 2,054,709
1998 1,911,808
1999 1,692,182
2000 1,503,396
Thereafter 523,824
----------
$9,739,878
==========
For the year ended December 31, 1995 and the six months ended June 30,
1996, two tenants contributed 88.7 percent and 89.0 percent of base
rents, respectively.
Merck, Inc. contributed 73.5 percent of the base rents for the year
ended December 31, 1995 and 73.7 percent of the base rents for the six
months ended June 30, 1996, respectively.
Selas Fluid Processing Corp. contributed 15.2 percent of the base
rents for the year ended December 31, 1995 and 15.3 percent of the
base rents for the six months ended June 30, 1996, respectively.
4. GENERAL AND ADMINISTRATIVE EXPENSES
The Properties incurred management fees based on three and one-quarter
percent of revenues received which totaled $67,082 for the year ended
December 31, 1995 and $33,186 for the six months ended June 30, 1996
(unaudited).
5. INTERIM STATEMENTS
The interim financial data for the six months ended June 30, 1996 is
unaudited; however, in the opinion of management, the interim data
includes all adjustments, consisting only of normally recurring
adjustments, necessary for a fair statement of the results for the
interim period. The results for the period presented are not
necessarily indicative of the results to be expected for the entire
fiscal year or any other period.
<PAGE>
<TABLE>
<CAPTION>
FIVE SENTRY PARKWAY EAST AND WEST
STATEMENT OF REVENUE AND CERTAIN EXPENSES
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<S> <C>
Revenue
Base rents ................................................. $977,878
--------
Certain expenses
Real estate taxes ........................................ 87,162
Utilities ................................................ 19,206
Operating services ....................................... 202,009
General and administrative ............................... 46,524
--------
354,901
--------
Revenue in excess of certain expenses ...................... $622,977
========
</TABLE>
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
<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 on
July 23, 1996, the intended purchase of Harborside and the Proposed
Acquisitions, as well as the offering of 3,450,000 shares of common stock on
August 13, 1996 and the Proposed Offering of 10,000,000 share of common stock,
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 transactions 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 $393,711 $758,676
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 $393,711 $795,977
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Mortgages and loans payable ...................................... $169,147 $ 65,381 $234,528
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 $ 65,381 $250,881
-------- -------- --------
Minority interest of unitholders in
Operating Partnership .......................................... 27,545 -- 27,545
-------- -------- --------
Common stock, $.01 par value ..................................... 152 135 287
Additional paid in capital ....................................... 186,808 328,195 515,003
Retained earnings ................................................ 2,261 -- 2,261
-------- -------- --------
Total stockholder's equity ....................................... 189,221 328,330 517,551
-------- -------- --------
Total liabilities and stockholder's equity ....................... $402,266 $393,711 $795,977
======== ======== ========
</TABLE>
<PAGE>
(a) Represents the acquisition of the Mount Airy Buildings on July 23, 1996 for
$10,459, the proposed acquisition of Harborside estimated to cost $287,400,
and estimated costs for the Proposed Acquisitions of $90,600. 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 contingent obligation payments related to the development of vacant
land parcels aggregating an estimated net present value of $5,252 of asset
and corresponding liability. The estimated acquisition costs for the
Proposed Acquisitions are intended to be made available from the net
proceeds received with the Proposed Offering. 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 and the
expected estimated net proceeds from the Proposed Offering of $251,500. The
net proceeds from the 1996 Offering and the Proposed Offering are reflected
as being used to reduce its outstanding borrowings under the Company's
revolving credit facilities, as well as fund the acquisition of the
Proposed Acquisitions.
<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, the Mount Airy Buildings on July 23, 1996 and the intended
acquisition of Harborside, (iv) the net proceeds received by the Company as a
result of the Offering on August 13, 1996, (v) the acquisition by the Company of
the Proposed Acquisitions, and (vi) the net proceeds received by the Company as
a result of the Proposed Offering. Items (i) through (iv) above are to be
collectively referred to as the "Previously Reported Events," and items (v) and
(vi) are to be collectively referred to as the "Proposed 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 Proposed 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 amounts)
--------------------------------------------------------------------------------
(unaudited)
Pro Forma Adj.
for Previously Pro Forma Adj.
Company Reported For Proposed Company
REVENUES Historical Events(a) Sub-total Events (b) Pro Forma
- -------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Base rents ...................................................... $ 33,276 $ 20,894 $ 54,170 $ 6,665 $ 60,835
Escalations and recoveries from tenants ......................... 6,232 4,308 10,540 678 11,218
Parking and other ............................................... 923 243 1,166 16 1,182
Interest income ................................................. 153 -- 153 -- 153
-------- -------- -------- -------- --------
Total revenues .................................................. 40,584 25,445 66,029 7,359 73,388
-------- -------- -------- -------- --------
EXPENSES
Real Estate Taxes ............................................... 4,153 1,971 6,124 711 6,835
Utilities ....................................................... 3,755 683 4,438 924 5,362
Operating services .............................................. 5,315 2,129 7,444 1,115 8,559
General and administrative ...................................... 2,064 1,225 3,289 333 3,622
Depreciation and amortization ................................... 6,908 3,326 10,234 963 11,197
Interest expense ................................................ 5,568 8,448 14,016 (5,524) 8,492
-------- -------- -------- -------- --------
Total expense .................................................. 27,763 17,782 45,545 (1,478) 44,067
-------- -------- -------- -------- --------
Income before gain on sale of rental
property, minority interest and
extraordinary item ............................................. 12,821 7,663 20,484 8,837 29,321
Gain on sale of property ........................................ 5,658 (5,658) -- -- --
-------- -------- -------- -------- --------
Income before minority interest and
extraordinary item ............................................. 18,479 2,005 20,484 8,837 29,321
Minority interest ............................................... 2,821 (206) 2,615 (66) 2,549
-------- -------- -------- -------- --------
Income before extraordinary item ................................ $ 15,658 $ 2,211 $ 17,869 $ 8,903 $ 26,772
======== ======== ======== ======== ========
Pro Forma weighted average common shares outstanding ............ 28,625
========
Pro Forma income before extraordinary item per common share ..... $ 0.94
========
</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 of the properties acquired from January 1, 1996 through
July 23, 1996 and the pending acquisition of Harborside, for the period January
1, 1996 through the earlier of June 30, 1996 or the date of acquisition, as
follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Property Date Rents(1) Recoveries Income Taxes Utilities Services
- -------- ---- -------- ---------- ------ ----- --------- --------
<S> <C> <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
Mount Airy Buildings July 23, 1996 598 90 -- 90 -- 4
Harborside Pending 18,861 4,109 243 1,712 503 1,966
------- ------ ---- ------ ---- ------
$21,157 $4,345 $243 $2,021 $739 $2,207
------- ------ ---- ------ ---- ------
<CAPTION>
General and Gain on sale
Property Administrative Depreciation Interest(3) of property
- -------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Carnegie $ 11 $ 49 -- --
Rose Tree 43 215 650 --
Mount Airy Buildings 48 95 359 --
Harborside 1,134 3,054 10,074 --
------ ------ ------- ------
$1,236 $3,413 $11,083 --
------ ------ ------- ------
</TABLE>
<PAGE>
Revenues and expenses of the property disposed of in 1996 for the period January
1, 1996 through the disposition date, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Property/Event Date Rents(1) Recoveries Income Taxes Utilities Services
- -------------- ---- -------- ---------- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Essex Road March 20, 1996 ($263) ($37) -- ($50) ($56) ($78)
----- ---- ------ ---- ---- ----
<CAPTION>
General and Gain on sale
Property/Event Administrative Depreciation(2) Interest(3) of property
- -------------- -------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Essex Road ($11) ($81) ($43) ($5,658)
---- ---- ---- -------
</TABLE>
Revenues and expenses related to the Partial Prepayment in 1996 for the period
January 1, 1996 through March 12, 1996, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Property/Event Date Rents(1) Recoveries Income Taxes Utilities Services
- -------------- ---- -------- ---------- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Partial Prepayment March 12, 1996 -- -- -- -- -- --
-------- ---------- ------ ----- --------- --------
<CAPTION>
General and Gain on sale
Property/Event Administrative Depreciation(2) Interest(3) of property
- -------------- -------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Partial Prepayment -- ($6) $43 --
---- --- --- ----
</TABLE>
<PAGE>
Reduction of expenses on account of the net proceeds from the Offering on August
13, 1996 for the six months ended June 30, 1996, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Date Rents(1) Recoveries Income Taxes Utilities Services
---- -------- ---------- ------ ----- --------- --------
<C> <C> <C> <C> <C> <C> <C>
The Offering August 13, 1996 -- -- -- -- -- --
------- ------ ---- ------ ---- ------
Total Pro Forma adjustment
for Previously Reported Events $20,894 $4,308 $243 $1,971 $683 $2,129
======= ====== ==== ====== ==== ======
<CAPTION>
General and Gain on sale
Administrative Depreciation(2) Interest(3) of property
-------------- --------------- ----------- -----------
<C> <C> <C> <C>
The Offering -- -- ($2,635) --
------ ------ ------ -------
Total Pro Forma adjustment
for Previously Reported Events $1,225 $3,326 $8,448 ($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 Proposed Acquisitions for the six months ended June
30, 1996, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Property Rents(1) Recoveries Income Taxes Utilities Services
-------- -------- ---------- ------ ----- --------- --------
Airport Center $3,592 $519 $16 $396 $527 $ 615
Whiteweld 2,043 159 -- 228 378 298
5 Sentry 1,030 -- -- 87 19 202
------ ---- --- ---- ---- ------
$6,665 $678 $16 $711 $924 $1,115
------ ---- --- ---- ---- ------
<CAPTION>
General and
Property Administrative Depreciation(2) Interest(3)
- -------- -------------- --------------- -----------
<S> <C> <C> <C>
Airport Center $190 $457 $1,476
Whiteweld 96 374 1,208
5 Sentry 47 132 426
---- ---- ------
$333 $963 $3,110
---- ---- ------
</TABLE>
Reduction of expenses on account of the net proceeds from the Proposed Offering
for the six months ended June 30, 1996, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Event Rents(1) Recoveries Income Taxes Utilities Services
- --------------------- -------- ---------- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
The Proposed Offering
Total Pro Forma
Adj. for
Proposed Events -- -- -- -- -- --
------ ---- --- ---- ---- ------
$6,665 $678 $16 $711 $924 $1,115
====== ==== === ==== ==== ======
<CAPTION>
General and
Event Administrative Depreciation(2) Interest(3)
- --------------------- -------------- --------------- -----------
<S> <C> <C> <C>
The Proposed Offering
Total Pro Forma
Adj. for
Proposed Events -- -- $(8,634)
---- ---- -------
$333 $963 $(5,524)
==== ==== =======
</TABLE>
<PAGE>
(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 LIBOR plus 150 basis
points for the existing credit lines, and LIBOR plus 125 basis points for
the new 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 Building, $86 for Harborside, $48 for the
Offering, and $214 for the Proposed Events. Interest for the Partial
Prepayment is 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
For 1995 Previously
Company Acquired Reported
REVENUES Historical Properties(a) Sub-total Events (b) Sub-total
- -------- ---------- ------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Base rents ............................... $ 50,808 $ 12,961 $ 63,769 $ 39,979 $103,748
Escalations and recoveries from
tenants ................................ 9,504 2,684 12,188 9,856 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 50,017 127,997
-------- ------- -------- -------- --------
EXPENSES
Real estate taxes ........................ 5,856 1,821 7,677 4,734 12,411
Utilities ................................ 6,330 939 7,269 1,689 8,958
Operating services ....................... 8,519 1,354 9,873 4,540 14,413
General and administrative ............... 3,712 519 4,231 2,716 6,947
Depreciation and amortization ............ 12,111 2,201 14,312 6,761 21,073
Interest expense ......................... 8,661 2,127 10,788 18,129 28,917
-------- ------- -------- -------- --------
Total Expenses ........................ 45,189 8,961 54,150 38,569 92,719
-------- ------- -------- -------- --------
Income before minority interest .......... 17,146 6,684 23,830 11,448 35,278
Minority interest ........................ 3,508 208 3,716 896 4,612
-------- ------- -------- -------- --------
Net income ............................... $ 13,638 $ 6,476 $ 20,114 $ 10,552 $ 30,666
======== ======== ======== ======== ========
<PAGE>
<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)
(continued)
Pro Forma
Adj. for 1996
Proposed Company
REVENUES Events(c) Pro Forma
- -------- --------- ---------
<S> <C> <C>
Base rents $12,765 $116,513
Escalations and recoveries from
tenants 1,396 23,440
Parking and other 28 1,912
Interest income -- 321
------- -------
Total revenues 14,189 142,186
------- -------
EXPENSES
Real estate taxes 1,382 13,793
Utilities 1,788 10,746
Operating services 2,033 16,446
General and administrative 656 7,603
Depreciation and amortization 1,926 22,999
Interest expense (12,555) 16,362
------- -------
Total Expenses (4,770) 87,949
------- -------
Income before minority interest 18,959 54,237
Minority interest 217 4,829
------- -------
Net income $18,742 $49,408
======= =======
Pro Forma weighted average common shares
outstanding 28,555
------
Pro Forma net income per common share $1.73
=====
</TABLE>
<PAGE>
(a) Reflects revenues and expenses of the properties acquired in 1995 for the
period January 1, 1995 through the date of acquisition, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Real 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
Commerce Center 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 Adjustment for
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
Commerce Center Totowa 147 586 330
Horizon Center Business Park 76 266 146
---- ------ ------
Total Pro Forma Adjustment for
Acquired Properties $519 $2,201 $2,127
==== ====== ======
</TABLE>
<PAGE>
(b) Reflects:
Revenues and expenses of the properties acquired from January 1, 1996 through
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>
Carnegie March 20, 1996 $1,538 $159 -- $248 $246
Rosetree May 2, 1996 3,990 367 -- 455 549
Mount Airy Building July 23, 1996 1,130 183 -- 183 --
Haborside October 24, 1996 34,782 9,369 182 4,081 1,109
------- ------- ---- ------ ------
$41,440 $10,078 $182 $4,967 $1,904
<CAPTION>
Operating General and
Property Services Administrative Depreciation(2) Interest(3)
-------- --------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Carnegie $207 $46 $195 --
Rosetree 451 141 633 2,193
Mount Airy Building 6 52 189 816
Haborside 4,203 2,530 6,107 21,086
------ ------ ------ -------
$4,867 $2,769 $7,124 $24,095
</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>
Base Escalations/ Other Real Estate
Property Date Rents(1) Recoveries Income Taxes Utilities
-------- ---- -------- ---------- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Essex Road March 20, 1996 ($1,461) ($222) -- ($233) ($215)
<CAPTION>
Operating General and
Property Services Administrative Depreciation(2) Interest(3)
-------- --------- -------------- --------------- -----------
<S> <C> <C> <C> <C>
Essex Road ($327) ($53) ($334) ($228)
</TABLE>
<PAGE>
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/ Other Real Estate
Date Rents(1) Recoveries Income Taxes Utilities
---- -------- ---------- ----- ----- --------
<C> <C> <C> <C> <C> <C>
Partial Prepayment March 12, 1996 -- -- -- -- --
------ ------- --- ---- ------
<CAPTION>
Operating General and
Services Administrative Depreciation(2) Interest(3)
--------- -------------- --------------- -----------
<C> <C> <C> <C>
Partial Prepayment -- -- (29) 257
---- ---- ---- ----
</TABLE>
Reduction of expenses on account of the net proceeds from the Offering on August
13, 1996 for the period Janaury 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
Previously Reported event $39,979 $9,856 $182 $4,734 $1,689
======= ====== ==== ====== ======
<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
Previously Reported event $4,540 $2,716 $6,761 $18,129
====== ====== ====== =======
</TABLE>
<PAGE>
(c) Reflects:
Revenues and expenses of the Proposed Acquisitions for the period January 1,
1995 through December 31, 1995, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Property Rents(1) Recoveries Income Taxes Utilities Services
-------- -------- ---------- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Airport Center $ 7,085 $1,037 $ 28 $ 741 $1,055 $1,152
Whiteweld 3,625 359 -- 468 698 524
5 Sentry 2,055 0 -- 173 35 357
------- ------ ----- ------ ------ ------
$12,765 $1,396 $ 28 $1,382 $1,788 $2,033
------- ------ ----- ------ ------ ------
<CAPTION>
General and
Property Administrative Depreciation(2) Interest(3)
-------- -------------- --------------- -----------
<S> <C> <C> <C>
Airport Center $408 $ 914 $3,355
Whiteweld 147 748 2,747
5 Sentry 101 264 968
---- ------ ------
$656 $1,926 $7,070
---- ------ ------
</TABLE>
<PAGE>
Reduction of expenses on account of the net proceeds from the Proposed Offering
for the period Janaury 1, 1995 through December 31, 1995, as follows:
<TABLE>
<CAPTION>
Base Escalations/ Other Real Estate Operating
Rents(1) Recoveries Income Taxes Utilities Services
-------- ---------- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
The Proposed Offering -- -- -- -- -- --
------- ------ --- ------ ------ ------
Total Pro Forma Adj for 1996
Proposed Events $12,765 $1,396 $28 $1,382 $1,788 $2,033
======= ====== === ====== ====== ======
<CAPTION>
General and
Administrative Depreciation(2) Interest(3)
-------------- --------------- -----------
<S> <C> <C> <C>
The Proposed Offering -- -- $(19,625)
---- ------ --------
Total Pro Forma Adj for 1996
Proposed Events $656 $1,926 $(12,555)
==== ====== ========
</TABLE>
(1) Pro Forma base rents are presented on a straight-line basis calculated from
January 1, 1995 forward.
(2) Depreciation is based on 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 LIBOR plus 275 basis
points through February 1, 1995, at LIBOR plus 200 basis points through
November 1, 1995 and at LIBOR plus 150 basis points after such date (for
the existing credit lines), and LIBOR plus 125 basis points (for the new
credit facility to be used in the Haborside acquisition). Had the interest
rate on floating rate debt been one-eighth of one percent different,
interest would have changed by $32 for the properties acquired in 1995, $35
for Rose Tree, $4 for the Partial Prepayment, $13 for the Mount Airy
Building, $172 for Harborside, $96 for the Offering, and $427 for the
Proposed Events. 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>
CALI REALTY CORPORATION
Estimated Twelve Month Pro Forma Statement of
Taxable Net Operating Income and Operating Funds Available
- --------------------------------------------------------------------------------
(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>
<S> <C>
Estimate of Taxable Net Operating Income (in thousands):
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 during January 1, 1996 through July 23, 1996, and including the
pending acquisition of Harborside - historical earnings from operations, as adjusted,
exclusive of depreciation (Note 2) .................................................... 13,098
Proposed Acquisitions - historical earnings from operations, as adjusted,
exclusive of depreciation (Note 2) .................................................... 1,260
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
Pro Forma adjustments relating to the Proposed Offering (Note 5) ....................... 19,625
Net adjustment for tax basis rental revenue recognition (Note 6) ....................... (8,496)
Estimated tax depreciation and amortization (Note 7)
Properties owned at December 31, 1994 ................................................ (6,746)
Properties acquired during 1995 ...................................................... (3,494)
Properties acquired January 1, 1996 through July 23, 1996, and including the pending
acquisition of Harborside ........................................................... (7,335)
Proposed Acquisitons (Note 2)........................................................... (1,975)
--------
Pro Forma taxable income before allocation to minority interest and
dividends deduction .................................................................. 49,219
Estimated allocation to minority interest (Note 8) ..................................... (4,660)
Estimated dividends deduction (Note 9) ................................................. (48,543)
--------
$ (3,984)
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 ...................................................... $ 49,219
Add Pro Forma depreciation and amortization .......................................... 19,550
--------
Estimated Pro Forma operating funds available (Note 10) ................................ $ 68,769
========
</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 result
of the properties acquired during 1995 and 1996, 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 Pro Forma results of the Proposed Offering as referred
to in the Pro Forma condensed consolidated statement of operations for
the year ended December 31, 1995 and included elsewhere herein.
Note 6 - Represents the net adjustment to (i) recognize prepaid rent and (ii)
reverse the effect of rental revenue recognition on a straight line
basis.
Note 7 - 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 8 - 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 9 - Estimated dividends deduction is based on 28,554,724 shares outstanding
at the dividend rate of $1.70 per share. Shares outstanding, on a Pro
Forma basis, are 28,554,725.
Note 10- 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 (Form
S-3 No. 33-96538) and related Prospectus of Cali Realty Corporation, as amended
on October 6, 1995, the Registration Statement (Form S-3 No. 33-96542) and
related Prospectus of Cali Realty Corporation, as amended on October 10, 1995,
the Registration Statement (Form S-3 No. 333-09081) and related Prospectus of
Cali Realty Corporation, as amended on August 9, 1996, the Registration
Statement (Form S-3 No. 333-09875) and related Prospectus of Cali Realty
Corporation dated August 9, 1996, and the Registration Statement (Form S-8 No.
33-91822) pertaining to the 1994 Employee and Director Stock Option Plans, as
amended on September 29, 1996, of our report dated October 16, 1996, with
respect to the combined statement of revenue and certain expenses of the
International Court at Airport Business Center included in the Current Report on
Form 8-K of Cali Realty Corporation dated October 29, 1996, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
--------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
October 29, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Cali Realty Corporation on Forms S-3 (File Nos. 333- 09875, 333-09081, 33-96542,
and 33-96538) and Form S-8 (File No. 33-91822) of our reports dated October 17,
1996 and October 15,. 1996, on our audits of the Statements of Revenues and
Certain Expenses for the Whiteweld Centre and Five Sentry Parkway East & West,
respectively, which reports are included in this Report on Form 8-K.
/s/Schonbraun Safris Sternlieb & Co., L.L.C.
- -----------------------------------------
Schonbraun Safris Sternlieb & Co., L.L.C.
West Orange, New Jersey
October 29, 1996
