<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 333-19101
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 7, 1997)
- --------------------------------------------------------------------------------
13,000,000 Shares
[LOGO]
CALI REALTY CORPORATION
Common Stock
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Cali Realty Corporation ("Cali" or the "Company") is a fully integrated,
self-administered and self-managed real estate investment trust ("REIT") that
owns and operates a portfolio comprised predominantly of Class A office and
office/flex buildings located in New Jersey, New York, Pennsylvania and
Connecticut, as well as commercial real estate leasing, management, acquisition,
development and construction businesses. As of September 15, 1997, the Company
and its subsidiaries owned 132 properties, totaling approximately 12.2 million
square feet (collectively, the "Properties"). The Company has entered into a
contribution and exchange agreement with The Mack Company and Patriot American
Office Group (collectively "Mack") pursuant to which the Company will acquire 55
office properties totaling approximately 9.4 million square feet primarily in
the Northeast and Southwest (the "Transaction"). Upon consummation of the
Transaction, the Company will become one of the largest equity REITs in the
country, with 187 properties totaling approximately 21.6 million square feet in
10 states, serving approximately 2,100 tenants. The consummation of the
Transaction is subject to certain conditions, including approval by the
Company's stockholders. While consummation of the Transaction cannot be assured,
the Company expects the Transaction to be completed in or about December 1997.
See "Recent Developments--Pending Transaction."
The 13,000,000 shares of common stock of the Company, par value $.01 per share
(the "Common Stock"), offered hereby (the "Offering") are being sold by the
Company. The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "CLI." The last reported sales price of the Common Stock on the
NYSE on October 9, 1997 was $39.8125 per share. See "Price Range of Common Stock
and Distributions."
This Offering is not conditioned on the consummation of the Transaction or any
other transaction.
The shares of Common Stock are subject to certain restrictions on ownership
designed to preserve the Company's status as a REIT for federal income tax
purposes. See "Description of Common Stock" and "Restrictions on Ownership of
Offered Securities" in the accompanying Prospectus.
SEE "RISK FACTORS" ON PAGES S-10 TO S-14 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share...................................................... $39.8125 $2.04 $37.7725
Total(3)....................................................... $517,562,500 $26,520,000 $491,042,500
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $1,500,000.
(3) The Company has granted the several Underwriters a 30-day over-allotment
option to purchase up to 1,950,000 additional shares of Common Stock on the
same terms and conditions as set forth above. If all such shares are
purchased by the Underwriters, the total Price to Public will be
$595,196,875, the total Underwriting Discounts and Commissions will be
$30,498,000 and the total Proceeds to Company will be $564,698,875. See
"Underwriting."
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The shares of Common Stock are offered by the several Underwriters, subject to
delivery by the Company and acceptance by the Underwriters, to prior sale and to
withdrawal, cancellation or modification of the offer without notice. Delivery
of the shares to the Underwriters is expected to be made at the office of
Prudential Securities Incorporated, One New York Plaza, New York, New York, on
or about October 15, 1997.
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
UBS SECURITIES
WHEAT FIRST BUTCHER
SINGER
October 9, 1997
<PAGE>
[INSIDE COVER PAGE]
[MAP/PICTURES OF CERTAIN COMPANY PROPERTIES AND MACK PROPERTIES]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN OR THEREIN BY
REFERENCE. UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL
NOT BE EXERCISED. ALL REFERENCES TO THE COMPANY IN THIS PROSPECTUS SUPPLEMENT
INCLUDE THE COMPANY, ITS SUBSIDIARIES AND THE OTHER ENTITIES OWNED OR CONTROLLED
BY THE COMPANY, UNLESS THE CONTEXT INDICATES OTHERWISE. AS USED HEREIN, "UNITS"
REFERS TO LIMITED PARTNERSHIP INTERESTS IN CALI REALTY, L.P., A DELAWARE LIMITED
PARTNERSHIP ("CRLP" OR THE "OPERATING PARTNERSHIP") THROUGH WHICH THE COMPANY
CONDUCTS ITS REAL ESTATE ACTIVITIES, CONSISTING OF COMMON LIMITED PARTNERSHIP
INTERESTS ("COMMON UNITS") AND CUMULATIVE PREFERRED LIMITED PARTNERSHIP
INTERESTS ("PREFERRED UNITS"). ALL REFERENCES TO "MACK-CALI" IN THIS PROSPECTUS
SUPPLEMENT INCLUDE THE COMPANY, ITS SUBSIDIARIES AND THE OTHER ENTITIES OWNED OR
CONTROLLED BY THE COMPANY FOLLOWING CONSUMMATION OF THE TRANSACTION.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, INCLUDING
DOCUMENTS INCORPORATED BY REFERENCE, CONTAIN FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). SEE "RISK FACTORS."
THE COMPANY
The Company is a fully integrated REIT that owns and operates a portfolio
comprised predominantly of Class A office and office/flex buildings located in
New Jersey, New York, Pennsylvania and Connecticut, as well as commercial real
estate leasing, management, acquisition, development and construction
businesses. As of September 15, 1997, the Company owned and operated 132
Properties, aggregating approximately 12.2 million square feet, consisting of
120 office and office/flex buildings totaling approximately 11.8 million square
feet, six industrial/warehouse buildings (the "Industrial/Warehouse Properties")
totaling approximately 400,000 square feet, two multi-family residential
complexes consisting of 453 units, two stand-alone retail properties and two
land leases. The 120 office and office/flex properties are comprised of 61
office buildings containing an aggregate of 8.8 million square feet (the "Office
Properties") and 59 office/flex buildings containing an aggregate of
approximately 3.0 million square feet (the "Office/Flex Properties"). The
Company believes that its Properties have excellent locations and access and are
well-maintained and professionally managed. As a result, the Company believes
that its Properties attract high quality tenants and achieve among the highest
rental, occupancy and tenant retention rates within their markets. As of June
30, 1997, the Office Properties, Office/Flex Properties and Industrial/
Warehouse Properties were approximately 96.5 percent leased to over 1,100
tenants. The Company provides substantially all construction, leasing,
management and tenant improvement services on an "in-house" basis and is
self-administered and self-managed.
The Company has entered into a contribution and exchange agreement (the
"Contribution Agreement") with Mack pursuant to which the Company will acquire
Mack's 55 office properties (the "Mack Properties") totaling approximately 9.4
million square feet, which are located in nine states primarily in the Northeast
and Southwest. Upon consummation of the Transaction, the Company will become one
of the largest equity REITs in the country, with 187 properties totaling
approximately 21.6 million square feet in 10 states. The Company believes that
the Transaction will solidify its position as the dominant super-regional REIT
in the Northeast and will provide the Company with new strategic positions in
the Southwest for future growth opportunities. Following consummation of the
Transaction, the Company intends to operate under the new name Mack-Cali Realty
Corporation. The consummation of the Transaction is subject to certain
conditions, including approval by the Company's stockholders. While consummation
of the Transaction cannot be assured, the Company expects the Transaction to be
completed in or about December 1997.
S-3
<PAGE>
Cali Associates, the entity to whose business the Company succeeded in 1994,
was founded by John J. Cali, Angelo R. Cali and Edward Leshowitz (the
"Founders"), who have been involved in the development, leasing, management,
operation and disposition of commercial and residential properties in Northern
and Central New Jersey for over 40 years and have been primarily focusing on
office building development and acquisitions for the past 16 years. In addition
to the Founders, the Company's executive officers have been employed by the
Company and its predecessor for an average of ten years. The Company and its
predecessor have built approximately four million square feet of office space,
more than one million square feet of industrial facilities and over 5,500
residential units.
RECENT DEVELOPMENTS
PENDING TRANSACTION
GENERAL. On September 18, 1997, the Company entered into the Contribution
Agreement with Mack. Upon consummation of the Transaction, the Company will
acquire 55 office properties located primarily in New Jersey, Texas and Arizona,
totaling approximately 9.4 million square feet. At June 30, 1997, the Mack
Properties were approximately 94.8 percent leased to over 1,000 tenants. For a
description of the Mack Properties to be acquired in the Transaction, see
"Properties--The Mack Properties."
Under the terms of the Contribution Agreement, the Company will acquire the
Mack Properties in exchange for a combination of cash, Common Units, Preferred
Units and warrants (the "Warrants") to purchase Common Units for an aggregate
purchase price of approximately $1.2 billion, including the assumption of
approximately $302.1 million of debt. The Contribution Agreement may be
terminated by the respective parties in certain circumstances, and is subject to
certain conditions, including approval by the Company's stockholders. See
"Recent Developments--Terms of the Contribution Agreement."
Based in Rochelle Park, New Jersey, The Mack Company has evolved into a
leading real estate investment, management and development company with a real
estate portfolio of approximately 20.0 million square feet of high quality
office, industrial, retail and hotel properties located in prime locations
throughout the United States. The Mack Company was a pioneer in the development
of large, award-winning Class A office buildings, and currently owns
approximately 17.0 million square feet of office and industrial space, including
the 5.9 million square feet of Class A office space (substantially all of the
office properties owned by The Mack Company) to be contributed (together with
the 3.5 million square feet of office properties to be contributed by Patriot
American Office Group) to Mack-Cali in the Transaction.
William L. Mack has been an active investor in real estate for over 30
years, and with his brothers, Earle I. Mack, David S. Mack and Frederic H. Mack,
owns and manages a broad range of real estate operations. He has served as
Senior Managing Partner of The Mack Company since approximately 1970. In
addition to their ownership stake in The Mack Company, the Mack family also have
voting control of Patriot American Office Group, of which they were instrumental
in its initial formation in 1991. Upon consummation of the Transaction, William
L. Mack and his brothers will own one of the largest blocks of equity interest
in Mack-Cali.
MANAGEMENT. Upon consummation of the Transaction, certain principals of
Mack will become senior officers of the Company, and the Board of Directors will
be reconstituted to include three designees of Mack and four new independent
board members selected by Mack and reasonably approved by Cali. See "Recent
Developments--Organizational Changes."
There can be no assurance that the Transaction will be consummated or that
the Contribution Agreement will not be modified or amended. This Offering is not
conditioned upon the consummation of the Transaction or any other transaction.
S-4
<PAGE>
COMPLETED ACQUISITIONS
Since the closing of its initial public offering in August 1994 (the "IPO"),
the Company has invested over $1.2 billion primarily in the purchase of 109
office and office/flex properties, increasing its portfolio by approximately
454.0 percent (based upon total net rentable square feet).
Since the closing of the Robert Martin Company acquisition on January 31,
1997, the Company has acquired the following properties:
On May 8, 1997, the Company acquired four buildings in Westlakes Office
Park, a suburban office complex located in Berwyn, Chester County, Pennsylvania,
totaling approximately 444,000 square feet. The properties were acquired for a
total cost of approximately $74.7 million, which was made available primarily
from drawing on one of the Company's credit facilities.
On July 21, 1997, the Company acquired two office buildings in the
Moorestown Corporate Center, a suburban office complex located in Moorestown,
Burlington County, New Jersey. The properties, each consisting of 74,000 square
feet, were acquired for a total cost of approximately $10.2 million, which was
made available from drawing on one of the Company's credit facilities.
On August 1, 1997, the Company acquired 1000 Bridgeport Avenue, a 133,000
square-foot office building located in Shelton, Fairfield County, Connecticut.
The property was acquired for a total cost of approximately $15.5 million, which
was made available from drawing on one of the Company's credit facilities.
On August 15, 1997, the Company acquired 200 Corporate Boulevard South, an
84,000 square foot office/flex building in the South Westchester Executive Park
complex in Yonkers, Westchester County, New York. The property was acquired
through the exercise of a purchase option obtained in the Robert Martin Company
acquisition for a total cost of approximately $8.0 million, which was financed
primarily from the Company's cash reserves.
On September 3, 1997, the Company acquired Three Independence Way, a 111,300
square foot Class A office building in the Princeton Corporate Center in
Princeton, Mercer County, New Jersey. The property was acquired for a total cost
of approximately $13.2 million, which was made available primarily from drawing
on one of the Company's credit facilities.
FINANCING ACTIVITIES
As of September 15, 1997, the Company's two revolving credit facilities
consisted of the Unsecured Facility and the Prudential Facility (each described
below) with an aggregate borrowing capacity of $500.0 million and an aggregate
outstanding balance of $234.0 million. As of September 15, 1997, the Company had
85 unencumbered properties totaling approximately 7.2 million square feet,
representing approximately 58.5 percent of the Company's portfolio.
CREDIT FACILITIES. On August 6, 1997, the Company obtained an unsecured
revolving credit facility (the "Unsecured Facility") in the amount of $400.0
million from a group of 13 lender banks. The Unsecured Facility has a three-year
term and currently bears interest at 125 basis points over LIBOR. Based upon the
Company's achievement of an investment grade long-term unsecured debt rating,
the interest rate will be reduced, on a sliding scale, and a competitive bid
option will become available. The lending group for the Unsecured Facility
includes: Fleet National Bank, The Chase Manhattan Bank, and Bankers Trust
Company, as agents; PNC Bank, N.A., Bank of America National Trust and Savings
Association, Commerzbank, and First National Bank of Chicago, as co-agents; and
Keybank, Summit Bank, Crestar Bank, Mellon Bank, N.A., Signet Bank, and
Kredeitbank NV.
Concurrently with the closing of the Unsecured Facility, the Company drew
funds on such facility to repay in full and terminate two of the Company's
existing secured revolving credit facilities and to repay in full the
outstanding balance under its remaining $100.0 million revolving credit facility
(the "Prudential
S-5
<PAGE>
Facility") with Prudential Securities Credit Corp. ("PSC"), an affiliate of
Prudential Securities Incorporated. In addition, in August 1997, the Company
retired its remaining $64.5 million real estate mortgage investment conduit
(REMIC) secured financing primarily from funds drawn on the Unsecured Facility.
FINANCING OF THE PENDING TRANSACTION. The cash portion of the purchase
price for the Mack Properties will be funded from the net proceeds of this
Offering and from drawing on the Company's credit facilities. In addition, the
Company will assume approximately $302.1 million of mortgage debt, and issue
3,931,048 Common Units, 249,656 Preferred Units convertible into approximately
7,205,079 Common Units and Warrants to purchase 2,000,000 Common Units,
aggregating 13,136,127 Common Units (assuming conversion of all Preferred Units
and exercise of all Warrants).
PRO FORMA CAPITALIZATION. Assuming completion of the Offering, the
Transaction and certain other pro forma adjustments, the Company's pro forma
debt as of June 30, 1997 would have totaled approximately $936.8 million and
would have represented approximately 26.6 percent of total market capitalization
(based on a Common Stock price of $39.8125 per share). See "Capitalization."
ORGANIZATIONAL CHANGES
Upon consummation of the Transaction, Thomas A. Rizk, the Company's
President and Chief Executive Officer, will continue to serve as Chief Executive
Officer of Mack-Cali, and William L. Mack, currently Senior Managing Partner of
The Mack Company, will serve as a Director and Chairman of the Executive
Committee of Mack-Cali. Mitchell E. Hersh, currently Partner and Chief Operating
Officer of The Mack Company, will serve as a Director and as President and Chief
Operating Officer of Mack-Cali.
In addition, John J. Cali, Chairman of the Board of Directors of the
Company, will remain as Chairman of the Board for Mack-Cali, and will lead a
restructured board of directors consisting of 13 members. The Board of Directors
of Mack-Cali will consist of three Cali representatives, Thomas A. Rizk, John J.
Cali and Robert F. Weinberg, and three Mack representatives, William L. Mack,
Earle I. Mack and Mitchell E. Hersh. The remaining seven directors will be
independent outside directors and will include three of the Company's current
independent board members. Four new independent board members will be selected
by Mack and reasonably approved by Cali. See "Recent Developments--Pending
Transaction" and "--Organizational Changes."
OPERATING PERFORMANCE
The Company has consistently increased its Funds from Operations since the
closing of its IPO. The Company's Funds from Operations (after adjustment for
the straight-lining of rents) for the six months ended June 30, 1997 grew to
$50.5 million from $19.0 million for the corresponding 1996 period. As a result
of the Company's improved operating performance, on September 16, 1997, the
Company announced an 11.1 percent increase in its regular quarterly
distribution, commencing with the Company's distribution with respect to the
third quarter of 1997, payable to holders of record of Common Stock on October
3, 1997, from $.45 per share to $.50 per share of Common Stock ($2.00 per share
of Common Stock on an annualized basis). Since the IPO, the Company has
increased its regular quarterly distribution by 23.8 percent.
S-6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered Hereby............................. 13,000,000 shares
Common Stock to be Outstanding after the Offering....... 49,664,322 shares(1)
Use of Proceeds......................................... To repay certain outstanding
borrowings under the Company's
credit facilities, to fund a
portion of the purchase price of
the Mack Properties and other
potential acquisitions and for
general corporate purposes. See
"Use of Proceeds."
NYSE Symbol............................................. CLI
</TABLE>
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(1) Excludes 4,090,170 shares of Common Stock that may be issued upon the
redemption of Units, 2,708,832 shares of Common Stock reserved for issuance
pursuant to the Company's stock option plans, of which options for 1,855,419
shares are currently outstanding, and 400,000 shares of Common Stock
issuable upon exercise of warrants issued in connection with the Robert
Martin Company acquisition. Excludes 13,136,127 shares that may be issued
upon redemption of Units that may be issued in connection with the
Transaction.
S-7
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The following table sets forth certain financial data for the Company on a
consolidated historical basis and on a pro forma basis. The financial data
should be read in conjunction with the Company's financial statements and notes
thereto incorporated by reference in this Prospectus Supplement. The
consolidated historical financial data of the Company as of and for the periods
ended December 31, 1996 and 1995 have been derived from audited financial
statements. The consolidated historical financial data of the Company as of and
for the six months ended June 30, 1997 and 1996 have been derived from unaudited
financial statements which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the unaudited interim periods.
The unaudited pro forma operating data for the six months ended June 30,
1997 and the year ended December 31, 1996 is presented as if the completion of
this Offering, the Transaction and other acquisitions completed by the Company
subsequent to January 1, 1996 all occurred as of January 1, 1996. The pro forma
balance sheet as of June 30, 1997 is presented as if the completion of this
Offering, the Transaction and other acquisitions completed by the Company
subsequent to June 30, 1997 all occurred on June 30, 1997.
The pro forma information is based upon certain assumptions that are
included in the notes to the pro forma financial statements incorporated by
reference in this Prospectus Supplement. The pro forma financial information is
unaudited and is not necessarily indicative of what the financial position and
results of operations of the Company would have been as of and for the periods
indicated, nor does it purport to represent the future financial position and
results of operations for future periods.
The combined historical financial data of Mack as of December 31, 1996 and
1995 and for the periods ended December 31, 1996, 1995 and 1994 and as of June
30, 1997 and for the six months ended June 30, 1997 and 1996, together with
certain unaudited pro forma financial data of the Company for the six months
ended June 30, 1997 and the year ended December 31, 1996, are included in the
Company's Current Report on Form 8-K/A dated September 19, 1997, and is
incorporated herein by reference.
S-8
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL HISTORICAL
SIX MONTHS SIX MONTHS ENDED PRO FORMA YEAR ENDED
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------ DECEMBER 31, ------------------------
1997 1997 1996 1996 1996 1995
----------- ----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.......................... $ 206,042 $ 112,697 $ 40,584 $ 398,036 $ 95,472 $ 62,335
Operating and other expenses...... $ 73,317 $ 40,569 $ 15,287 $ 144,617 $ 35,462 $ 24,417
Depreciation and amortization..... $ 30,773 $ 16,844 $ 6,908 $ 61,077 $ 15,812 $ 12,111
Interest expense.................. $ 31,439 $ 17,152 $ 5,568 $ 62,700 $ 12,677 $ 8,661
Gain on sale of rental property... -- -- $ 5,658 -- $ 5,658 --
Income before minority interest
and extraordinary item.......... $ 70,513 $ 38,132 $ 18,479 $ 129,642 $ 37,179 $ 17,146
Income before extraordinary item.. $ 53,455 $ 34,484 $ 15,658 $ 96,998 $ 32,419 $ 13,638
Extraordinary item-loss on early
retirement of debt.............. -- -- $ (475) -- $ (475) --
Net income........................ $ 53,455 $ 34,484 $ 15,183 $ 96,998 $ 31,944 $ 13,638
Income before extraordinary item
per share....................... $ 1.08 $ 0.95 $ 1.03 $ 1.96 $ 1.76 $ 1.23
Net income per common share....... $ 1.08 $ 0.95 $ 1.00 $ 1.96 $ 1.73 $ 1.23
Dividends declared per common
share........................... $ 0.90 $ 0.85 $ 1.75 $ 1.66
Weighted average number of common
shares.......................... 49,674 36,475 15,175 49,400 18,461 11,122
BALANCE SHEET DATA (AT PERIOD
END):
Rental property, before
accumulated
depreciation and amortization... $ 2,643,651 $ 1,391,228 $ 426,275 $ 853,352 $ 387,675
Total assets...................... $ 2,621,765 $ 1,373,692 $ 402,266 $ 1,026,328 $ 363,949
Mortgages and loans payable....... $ 936,762 $ 553,961 $ 169,147 $ 268,010 $ 135,464
Total liabilities................. $ 993,917 $ 601,073 $ 185,500 $ 297,985 $ 150,058
Stockholders' equity.............. $ 1,165,414 $ 701,708 $ 189,221 $ 701,379 $ 185,808
OTHER DATA:
Cash flows provided by operating
activities...................... $ 59,241 $ 19,163 $ 46,823 $ 28,446
Cash flows used in investing
activities...................... $ (320,432) $ (36,553) $ (307,752) $(133,736)
Cash flows provided by financing
activities...................... $ 62,474 $ 18,330 $ 464,769 $ 99,863
Funds from Operations after
adjustment for straight-lining
of rents before minority
interest of Unitholders(1)...... $ 50,453 $ 18,972 $ 45,220 $ 27,397
</TABLE>
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(1) The Company considers Funds from Operations (after adjustment for
straight-lining of rents) one measure of REIT performance. Funds from
Operations is defined as net income (loss) before minority interest of
unitholders computed in accordance with Generally Accepted Accounting
Principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate-related depreciation and amortization.
Funds from Operations should not be considered as an alternative for net
income as an indication of the Company's performance or to cash flows as a
measure of liquidity. Funds from Operations presented herein is not
necessarily comparable to Funds from Operations presented by other real
estate companies due to the fact that not all real estate companies use the
same definition. However, the Company's Funds from Operations is comparable
to the Funds from Operations of real estate companies that use the current
definition of the National Association of Real Estate Investment Trusts,
after the adjustment for straight-lining of rents.
S-9
<PAGE>
RISK FACTORS
An investment in shares of Common Stock involves various risks. Prospective
investors should consider carefully the following risk factors, in addition to
the other information set forth in this Prospectus Supplement, in connection
with an investment in the shares of Common Stock offered hereby.
This Prospectus Supplement and the accompanying Prospectus, including
documents incorporated by reference, contain forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" below and in
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" included in the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997 and June 30, 1997 and the Company's Annual Report
on Form 10-K for the year ended December 31, 1996, incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus.
CONSUMMATION OF THE TRANSACTION. Consummation of the Transaction is
conditioned upon, among other things, the receipt by the Company of the
requisite stockholder approval and receipt by Mack of certain partner, tenant
and third party consents. In addition, on or before December 12, 1997, the
Company may terminate the Contribution Agreement for any reason upon written
notice to Mack, and on or before October 27, 1997, Mack may terminate the
Contribution Agreement for any reason upon written notice to the Company.
Furthermore, during the period from October 28, 1997 through December 12, 1997
(unless such date shall have been accelerated pursuant to the Contribution
Agreement), Mack may terminate the Contribution Agreement under certain
circumstances. Accordingly, there can be no assurance that the Transaction will
be consummated or that the Contribution Agreement will not be amended or
modified. This Offering is not conditioned upon the consummation of the
Transaction or any other transaction. See "Recent Developments--Terms of the
Contribution Agreement."
DEPENDENCE ON NEW JERSEY, NEW YORK, PENNSYLVANIA AND CONNECTICUT OFFICE
MARKETS. All of the Properties are located in New Jersey, New York,
Pennsylvania and Connecticut with approximately 20.5 percent (based upon net
rentable square feet) located in Jersey City, New Jersey and approximately 32.9
percent located in Westchester County, New York. The Company's performance will
be linked to economic conditions and the demand for office space in these states
and, in particular, in Jersey City, New Jersey and Westchester County, New York.
A decline in the economy in these states generally, or in Jersey City, New
Jersey or Westchester County, New York, in particular, may result in a decline
in the demand for office space, which may adversely affect the ability of the
Company to make distributions to stockholders. Such declines could have a
greater adverse effect on the Company because its portfolio consists primarily
of office and office/flex buildings (compared to a more diversified real estate
portfolio).
REAL ESTATE INVESTMENT CONSIDERATIONS.
GENERAL. Real estate investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend on the amount of
income earned and capital appreciation generated by the related properties as
well as the expenses incurred in connection therewith. If the Properties do not
generate income sufficient to meet operating expenses, including debt service
and capital expenditures, the ability to make distributions to the Company's
stockholders could be adversely affected. Income from the Properties may be
adversely affected by the general economic climate, local conditions such as
oversupply of office space or a reduction in demand for office space in the
area, the attractiveness of the Properties to potential tenants, competition
from other office and office/flex buildings, the ability of the Company to
provide adequate maintenance and increased operating costs (including insurance
premiums and real estate taxes). In addition, revenues from properties and real
estate values are also
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affected by such factors as the cost of compliance with regulations and the
potential for liability under applicable laws, including changes in tax laws and
housing laws, interest rate levels and the availability of financing. The
Company's income would be adversely affected if a significant number of tenants
did not renew expiring leases (and if the Company were unable to release such
space on favorable terms) or were unable to pay rent or if office space
generally could not be rented on favorable terms. Certain significant
expenditures associated with an investment in real estate (such as mortgage
payments, real estate taxes and maintenance costs) generally are not reduced
when circumstances cause a reduction in income from the investment.
FINANCIALLY DISTRESSED TENANTS. In the event of any default by a tenant,
the Company may experience delays in enforcing its rights as landlord and may
incur substantial costs in protecting its investment. At any time, a tenant of
the Properties may seek the protection of the bankruptcy laws, which could
result in the rejection and termination of such tenant's lease and thereby cause
a reduction in the cash flow available for distribution by the Company.
ILLIQUIDITY OF REAL ESTATE. Real estate investments are relatively illiquid
and, therefore, the Company has limited ability to vary its portfolio quickly in
response to changes in economic or other conditions. In addition, the
prohibition in the Internal Revenue Code of 1986, as amended (the "Code"), and
related regulations on a REIT holding property for sale may affect the Company's
ability to sell properties without adversely affecting distributions to the
Company's stockholders.
COMPLIANCE WITH LAWS AND REGULATIONS. Many laws and governmental
regulations are applicable to the Properties and changes in these laws and
regulations, or their interpretation by agencies and the courts, occur
frequently. Under the Americans with Disabilities Act of 1990 (the "ADA"), all
places of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. Compliance with the ADA requires
removal of structural barriers to handicapped access in certain public areas
where such removal is "readily achievable." A number of additional federal,
state and local laws exist which also may require modifications to the
Properties, or restrict certain further renovations thereof, with respect to
access thereto by disabled persons. Noncompliance with the ADA or any of such
other laws could result in the imposition of fines or an award of damages to
private litigants. Although management of the Company believes that the
Properties are substantially in compliance with present requirements, final
regulations under the ADA have not yet been promulgated and the Company is
likely to incur additional costs of complying with the ADA. If required changes
involve a greater amount of expenditures than the Company currently anticipates
or if the changes must be made on a more accelerated schedule than the Company
currently anticipates, the Company's ability to make expected distributions to
stockholders could be adversely affected.
Under various laws and regulations relating to the protection of the
environment, an owner of real estate may be held liable for the costs of removal
or remediation of certain hazardous or toxic substances located on or in the
property. These laws often impose liability without regard to whether the owner
was responsible for, or even knew of, the presence of such substances. The
presence of such substances may adversely affect the owner's ability to rent or
sell the property or to borrow using such property as collateral and may expose
it to liability resulting from any release or exposure of such substances.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances at another location may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws impose liability for release of asbestos-containing materials into the air,
and third parties may also seek recovery from owners or operators of real estate
properties for personal injury associated with asbestos-containing materials and
other hazardous or toxic substances. In connection with the ownership (direct or
indirect), operation, management and development of real properties, the Company
may be considered an owner or operator of such properties or as having arranged
for the disposal or treatment of hazardous or toxic
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substances and, therefore, potentially liable for removal or remediation costs,
as well as certain other related costs, including governmental penalties and
injuries to persons and property.
COMPETITION IN THE COMPANY'S MARKETS. The Company plans to acquire
additional office buildings in New Jersey, New York, Pennsylvania and
Connecticut, and in the Northeast and, assuming completion of the Transaction,
the Southwest generally. There are a number of office building developers and
real estate companies that compete with the Company in seeking properties for
acquisition, prospective tenants and land for development. All of the Properties
are in developed areas where there are other properties of the same type.
Competition from other office properties may affect the Company's ability to
attract and retain tenants, rental rates and expenses of operation (particularly
in light of the higher vacancy rates of many competing properties which may
result in lower-priced space being available in such properties). The Company
may be competing with other entities that have greater resources than the
Company and whose managers have more experience than the Company's directors and
officers.
RISKS OF REAL ESTATE DEVELOPMENT. While the Company's primary focus is on
acquisitions of property, it is a part of the Company's operating strategy,
under certain conditions, to seek selective, attractive opportunities for
development. The real estate development business involves significant risks in
addition to those involved in the ownership and operation of established office,
industrial or multifamily residential apartment buildings, including the risks
that financing may not be available on favorable terms for development projects,
construction may not be completed on schedule or budget resulting in increased
debt service expense and construction costs, and long-term financing may not be
available upon completion of construction.
REAL ESTATE FINANCING RISKS.
DEBT FINANCING AND DEBT MATURITIES. The Company is subject to the risks
normally associated with debt financing, including the risk that the Company's
cash flow will be insufficient to meet required payments of principal and
interest, the risk that indebtedness on the Properties will not be able to be
refinanced at maturity or that the terms of such refinancing will not be as
favorable as the terms of such indebtedness.
As of September 15, 1997, the Company had outstanding an aggregate of
approximately $359.0 million of long-term mortgage indebtedness (in addition to
borrowings under the Company's revolving credit facilities). This indebtedness
requires, among other things, balloon payments of approximately $190.8 million
in 2003 and $150.0 million in 2005 and, with respect to the remaining
approximately $18.2 million thereof, payment of principal and interest on a
20-year amortization schedule, with the remaining principal balance due October
1, 2003. As of September 15, 1997, $234.0 million was outstanding under the
Company's revolving credit facilities. The Company currently believes it will
have to refinance the principal due on its long-term mortgage indebtedness at
maturity. There can be no assurance, however, that the Company will be able to
refinance any indebtedness the Company may incur.
If the Company were unable to refinance its indebtedness on acceptable
terms, or at all, the Company might be forced to dispose of one or more of the
Properties upon disadvantageous terms, which might result in losses to the
Company and might adversely affect its ability to make distributions. If
prevailing interest rates or other factors at the time of refinancing were to
result in higher interest rates on refinancing, the Company's interest expense
would increase, which would adversely affect the Company's cash flow and its
ability to pay expected distributions to stockholders. Further, if a Property is
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments, the mortgagee could foreclose upon the Property, appoint a
receiver and receive an assignment of rents and leases or pursue other remedies,
all with a consequent loss of income and asset value to the Company.
Foreclosures could also create taxable income without accompanying cash
proceeds, thereby hindering the Company's ability to meet the REIT distribution
requirements of the Code.
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RISK OF RISING INTEREST RATES. Advances under the Company's revolving
credit facilities, as well as certain borrowings under the Company's long-term
mortgage indebtedness, bear interest at variable rates. In addition, the Company
may incur other indebtedness in the future that also bears interest at a
variable rate. Accordingly, increases in interest rates could increase the
Company's interest expense, which could adversely affect the Company's cash flow
and its ability to pay expected distributions to stockholders or cause the
Company to be in default under certain debt covenants.
NO LIMITATION ON DEBT. The Company funds acquisitions and development
partially through short-term borrowings (including the revolving credit
facilities), as well as out of undistributed cash available for distribution and
other available cash. It expects to refinance projects purchased with short-term
debt either with long-term indebtedness or equity financing depending upon the
economic conditions at the time of refinancing. The Board of Directors has a
general policy of limiting the ratio of its indebtedness to total market
capitalization (i.e., the market value of the issued and outstanding shares of
Common Stock, including interests redeemable therefor, plus any preferred stock
that may be outstanding and total debt), but the organizational documents of the
Company do not contain any limitation on the amount or percentage of
indebtedness, funded or otherwise, that the Company may incur. The Board of
Directors could alter or eliminate its current policy on borrowing at any time
at its discretion. If this policy were changed, the Company could become more
highly leveraged, resulting in an increase in debt service that could adversely
affect the Company's cash flow and its ability to make expected distributions to
its stockholders and an increased risk of default on the Company's obligations.
LIMITS ON OWNERSHIP. In order to maintain its qualification as a REIT, not
more than 50 percent in value of the outstanding stock of the Company may be
actually and/or constructively owned by five or fewer individuals (as defined in
the Code to include certain entities). In light of the ownership positions of
certain stockholders of the Company immediately following the closing of its
IPO, the Company has limited ownership of the outstanding shares of Common Stock
by any single stockholder to 9.8 percent of the outstanding shares of Common
Stock (with exceptions for the former principals of the Cali Group who
collectively own Units redeemable for approximately 4.8 percent of the
outstanding shares of Common Stock after giving effect to the redemption of such
Units and all other outstanding Units, without giving effect to the Offering or
the Transaction). The former principals of the Cali Group are permitted to
acquire additional shares of Common Stock, except to the extent that such
acquisition results in more than 50 percent in value of the outstanding shares
of Common Stock of the Company being actually and/or constructively owned by
five or fewer individuals. The Board of Directors could waive this restriction
if it were satisfied, based upon the advice of tax counsel or otherwise, that
such action would be in the best interests of the Company. Common Stock acquired
or transferred in breach of the limitation may be redeemed by the Company for
the lesser of the price paid or the average closing price for the 10 trading
days immediately preceding redemption or sold at the direction of the Company.
The Company may elect to redeem such shares of Common Stock for Units, which are
nontransferable except in very limited circumstances. Any transfer of shares of
Common Stock, which as a result of such transfer, causes the Company to be in
violation of any ownership limit will be deemed void. Although the Company
currently intends to continue to operate in a manner which will enable the
Company to continue to qualify as a REIT, it is possible that future economic,
market, legal, tax or other considerations may cause the Company's Board of
Directors to revoke the election for the Company to qualify as a REIT. Under the
Company's Articles of Incorporation, the Board of Directors can make such
revocation without the consent of the Company's stockholders.
In addition, the consent of the holders of at least 85 percent of the Units
is required: (i) to merge (or permit the merger of) the Operating Partnership
with another unrelated person, pursuant to a transaction in which the Operating
Partnership is not the surviving entity; (ii) to dissolve, liquidate or wind-up
the Operating Partnership; or (iii) to convey or otherwise transfer all or
substantially all of the Operating Partnership's assets. The Company, as general
partner of the Operating Partnership, owns approximately 90.0 percent
(approximately 92.4 percent after giving effect to this Offering and
approximately 76.5 percent
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after giving effect to this Offering and the Transaction (assuming conversion of
all Preferred Units but not the exercise of Warrants issued in connection with
the Transaction)) of the outstanding Units.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts of its
Chairman and executive officers for strategic business direction and real estate
experience. While the Company believes that it could find replacements for these
key personnel, the loss of their services could have an adverse effect on the
operations of the Company. The Company has entered into five-year employment
agreements (including non-competition provisions) terminating in January 2002,
if not otherwise extended, with each of Thomas A. Rizk, John R. Cali, Brant
Cali, Roger W. Thomas, Barry Lefkowitz, James Nugent and Albert Spring, and
similar three-year employment agreements terminating in January 2000 with each
of Timothy M. Jones and Brad W. Berger. See "Management." It is expected that in
connection with the Transaction, such employment agreements will be terminated
or amended and restated, resulting in certain payments being made to such
individuals. The Company will enter into new or amended and restated employment
agreements with the above individuals and Mitchell E. Hersh, a principal of
Mack. See "Recent Developments--Pending Transaction" and "--Terms of the
Contribution Agreement." The Company does not have, and is not currently
contemplating obtaining, key man life insurance for its executive officers.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT.
TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REIT. The
Company has operated so as to qualify as a REIT under the Code, commencing with
its taxable year ending December 31, 1994. Although the Company believes that it
will continue to operate in such a manner, no assurance can be given that the
Company will be able to operate in a manner so as to remain so qualified.
Qualification as a REIT involves the satisfaction of numerous requirements (some
on an annual and quarterly basis) established under highly technical and complex
Code provisions for which there are only limited judicial or administrative
interpretations, and involve the determination of various factual matters and
circumstances not entirely within the Company's control.
If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at corporate rates. Moreover,
unless entitled to relief under certain statutory provisions, the Company also
would be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. This treatment would
significantly reduce the net earnings of the Company available for investment or
distribution to stockholders because of the additional tax liability to the
Company for the years involved. In addition, distributions to stockholders would
no longer be required to be made. See "Certain United States Federal Income Tax
Considerations to the Company of its REIT Election--Failure to Qualify" in the
accompanying Prospectus.
OTHER TAX LIABILITIES. The Company, notwithstanding its REIT status, is
subject to certain federal, state and local taxes on its income and property. In
addition, the Company's net income, if any, from third party management services
and tenant improvements will be subject to United States federal income tax.
EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK. Since the market
price of shares of a publicly traded REIT, such as the Company, is determined in
part by the attractiveness of the yield on those shares compared to the
prevailing interest rates on fixed-income securities, an increase in interest
rates could lead purchasers of Common Stock to demand a higher yield, which
could adversely affect the market price of the Common Stock.
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THE COMPANY
The Company is a fully-integrated REIT that owns and operates a portfolio
comprised predominantly of Class A office and office/flex buildings located in
New Jersey, New York, Pennsylvania and Connecticut, as well as commercial real
estate leasing, management, acquisition, development and construction
businesses. As of September 15, 1997, the Company owned and operated 132
Properties, aggregating approximately 12.2 million square feet, consisting of
120 office and office/flex buildings totaling approximately 11.8 million square
feet, six industrial/warehouse buildings totaling approximately 400,000 square
feet, two multi-family residential complexes consisting of 453 units, two
stand-alone retail properties and two land leases. The 120 office and
office/flex properties are comprised of 61 office buildings containing an
aggregate of 8.8 million square feet and 59 office/flex buildings containing an
aggregate of approximately 3.0 million square feet. The Company believes that
its Properties have excellent locations and access and are well-maintained and
professionally managed. As a result, the Company believes that its Properties
attract high quality tenants and achieve among the highest rental, occupancy and
tenant retention rates within their markets. As of June 30, 1997, the Office
Properties, Office/Flex Properties and Industrial/ Warehouse Properties were
approximately 96.5 percent leased to over 1,100 tenants.
The Company's strategy has been to focus its acquisition and development of
properties in sub-markets where it is, or can become, a significant and
preferred owner and operator. Management believes that the recent trend towards
increasing rental and occupancy rates in office buildings in the Company's
sub-markets presents significant opportunities for growth. The Company may also
develop properties in such sub-markets. Management believes that its extensive
market knowledge provides the Company with a significant competitive advantage,
which is further enhanced by its strong reputation for and emphasis on
delivering highly responsive management services, including direct and
continuing access to the Company's senior management. The Company performs
substantially all construction, leasing, management and tenant improvement
services on an "in-house" basis and is self-administered and self-managed.
The Company has entered into the Contribution Agreement with Mack pursuant
to which the Company will acquire Mack's 55 office properties totaling
approximately 9.4 million square feet, which are located in nine states
primarily in the Northeast and Southwest. Upon consummation of the Transaction,
the Company will become one of the largest equity REITs in the country, with 187
properties totaling approximately 21.6 million square feet in 10 states. While
consummation of the Transaction cannot be assured, the Company expects the
Transaction to be completed in or about December 1997. The Company believes that
the Transaction will solidify its position as the dominant super-regional REIT
in the Northeast and will provide the Company with new strategic positions in
the Southwest for future growth opportunities. Following consummation of the
Transaction, the Company intends to operate under the new name Mack-Cali Realty
Corporation. See "Recent Developments--Pending Transaction."
The consummation of the Transaction is subject to certain conditions,
including approval by the Company's stockholders. There can be no assurance that
the Transaction will be consummated or that the Contribution Agreement will not
be modified or amended. This Offering is not conditioned upon the consummation
of the Transaction or any other transaction.
The Company was incorporated in Maryland on May 24, 1994. The Company's
executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016,
and its telephone number is (908) 272-8000. The Company has an internet Web site
at "http://www.calirealty.com".
GROWTH STRATEGIES
The Company's objectives are to maximize growth in Funds from Operations and
to enhance the value of its portfolio through effective management, acquisition
and development strategies. The Company believes that opportunities exist to
increase cash flow per share by: (i) implementing operating strategies to
produce increased effective rental and occupancy rates and decreased concession
and tenant installation costs as vacancy rates in the Company's sub-markets
continue to decline; (ii) acquiring properties with
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attractive returns in sub-markets where, based on its expertise in leasing,
managing and operating properties, it is, or can become, a significant and
preferred owner and operator; and (iii) developing properties where such
development will result in a favorable risk-adjusted return on investment.
Based on its evaluation of current market conditions, the Company believes
that a number of factors will enable it to achieve its business objectives,
including: (i) the limited availability to competitors of capital for financing
development, acquisitions or capital improvements or for refinancing maturing
mortgages; (ii) the lack of new construction in the Company's markets providing
the Company with the opportunity to maximize occupancy levels at attractive
rental rates; and (iii) the large number of distressed sellers and inadvertent
owners (through foreclosure or otherwise) of office properties in the Company's
markets creating enhanced acquisition opportunities. Management believes that
the Company is well positioned to exploit existing opportunities because of its
extensive experience in its markets and its proven ability to acquire, develop,
lease and efficiently manage office properties.
The Company focuses on enhancing growth in cash flow per share by: (i)
maximizing cash flow from the existing Properties through continued active
leasing and property management; (ii) managing operating expenses through the
use of in-house management, leasing, marketing, financing, accounting, legal,
construction management and data processing functions; (iii) emphasizing
programs of repairs and capital improvements to enhance the Properties'
competitive advantages in their markets; (iv) maintaining and developing
long-term relationships with a diverse tenant group; and (v) attracting and
retaining motivated employees by providing financial and other incentives to
meet the Company's operating and financial goals.
The Company seeks to increase its cash flow per share by acquiring
additional properties that: (i) provide attractive initial yields with
significant potential for growth in cash flow from property operations; (ii) are
well located, of high quality and competitive in their respective sub-markets;
(iii) are located in its existing sub-markets or in sub-markets which lack a
significant owner or operator; and (iv) have been under-managed or are otherwise
capable of improved performance through intensive management and leasing that
will result in increased occupancy and rental revenues.
Consistent with its acquisition strategy, since the closing of its IPO the
Company has invested an aggregate of approximately $1.2 billion in the purchase
of 109 office and office/flex properties, increasing its portfolio by
approximately 454.0 percent (based upon total net rentable square feet). The
Company also has the Transaction under contract. See "Recent Developments."
There can be no assurance, however, that the Company will be able to improve the
operating performance of any properties that are acquired or that the
Transaction will be consummated. The Company may also develop office space when
market conditions support a favorable risk-adjusted return on such development,
primarily in stable sub-markets where the demand for office space exceeds
available supply and where the Company is, or can become, a significant owner
and operator. The Company believes that opportunities exist for it to acquire
properties in its sub-markets at less than replacement cost. Therefore, the
Company currently intends to emphasize acquisitions over development until
market conditions change.
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RECENT DEVELOPMENTS
PENDING TRANSACTION
GENERAL. On September 18, 1997, the Company entered into the Contribution
Agreement with certain contributing partnerships or other entities affiliated
with The Mack Company and Patriot American Office Group. Upon consummation of
the Transaction, the Company will acquire 55 office properties located primarily
in New Jersey, Texas and Arizona, totaling approximately 9.4 million square
feet. At June 30, 1997, the Mack Properties were approximately 94.8 percent
leased to over 1,000 tenants. For a description of the Mack Properties to be
acquired in the Transaction, see "Properties--The Mack Properties."
Under the terms of the Contribution Agreement, the Company will acquire the
Mack Properties in exchange for a combination of approximately $476.1 million in
cash, 3,931,048 Common Units, 249,656 Preferred Units and 2,000,000 Warrants,
for an aggregate purchase price of approximately $1.2 billion, including the
assumption of approximately $302.1 million of debt. The Contribution Agreement
may be terminated by the respective parties in certain circumstances, and is
subject to certain conditions, including approval by the Company's stockholders.
Accordingly, there can be no assurance that the Transaction will be consummated
or that the Contribution Agreement will not be modified or amended. This
Offering is not conditioned upon the consummation of the Transaction or any
other transaction. See "Recent Developments--Terms of the Contribution
Agreement."
The Company's headquarters will remain in Cranford, New Jersey. The
southwestern portfolio will continue to be managed from the Patriot American
Office Group headquarters in Dallas, Texas under the supervision of the
Company's headquarters.
THE MACK COMPANY
The Mack family has been an active participant in the real estate related
industry since the turn of the century. Based in Rochelle Park, New Jersey, The
Mack Company has evolved into a leading real estate investment, management and
development company. Through investment, development and acquisition, The Mack
Company has assembled a real estate portfolio of approximately 20.0 million
square feet, consisting of high quality office, industrial, retail and hotel
properties located in prime locations throughout the United States. The Mack
Company believes that its national presence, prominence in its markets, high
quality properties, level of service provided to its tenants, access to capital
and industry reputation enables it to attract and retain many Fortune 500
tenants.
The Mack office property portfolio consists of 32 Class A office properties
comprising approximately 5.9 million square feet located in major U.S. markets
with a concentration in Northern New Jersey and the Phoenix, Arizona area. Other
properties are located in Nassau County, New York, suburban Philadelphia,
Pennsylvania and Tampa, Florida. Major tenants include, among others, AT&T
Corp., AT&T Wireless Services, Toys 'R' Us, Inc., KPMG Peat Marwick, LLP,
American Express Travel Related Services Co., Inc. and Honeywell, Inc.
The Mack Company's strategy has been to develop or acquire high quality
properties in sub-markets where it is, or can become, a prominent market force,
or in markets where it identifies specific real estate investment opportunities.
Additionally, The Mack Company's operating philosophy focuses on meeting the
specific real estate objectives of specific industries, and to provide for all
aspects of a tenant's real estate and facility needs. This has been made
possible through The Mack Company's full-service organization which includes
"in-house" expertise in property management, leasing, development, architectural
design, construction and financing.
Management of The Mack Company believes that its market prominence,
extensive knowledge and understanding of its sub-markets, and operating
philosophy and focus provides The Mack Company with a significant competitive
advantage. The Mack Company believes that its properties have excellent
locations and access, and are maintained to the highest standards and
professionally managed. As a result,
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management of The Mack Company believes that its properties attract high quality
tenants and achieve among the highest rent, occupancy and tenant retention rates
within their markets.
The Mack Company is led by Mack family members William L. Mack, Senior
Managing Partner, Earle I. Mack and David S. Mack, Senior Partners in charge of
finance and management, respectively, all who have been actively involved in the
business since the 1960's, and Frederic H. Mack, Partner. Mitchell E. Hersh,
Partner, has been with The Mack Company for 24 years and serves as Chief
Operating Officer. These individuals have been involved in development,
construction, leasing, management, acquisition and disposition of the company
owned properties and are the cornerstone of The Mack Company's success. In
addition to their ownership stake in The Mack Company, the Mack family also have
voting control of Patriot American Office Group, of which they were instrumental
in its initial formation in 1991. Upon consummation of the Transaction, William
L. Mack, Earle I. Mack, David S. Mack and Frederic H. Mack will own one of the
largest blocks of equity interest in Mack-Cali.
PATRIOT AMERICAN OFFICE GROUP
Patriot American Office Group was founded in 1991 to capitalize on the lack
of liquidity and capital in the commercial real estate industry. Since its
formation, Patriot American Office Group has implemented its opportunistic
investment strategy by acquiring office buildings at prices that are below
replacement cost and by renovating, repositioning and re-marketing them to
achieve higher occupancies, resulting in revenue growth and favorable investment
returns.
The Patriot American Office Group portfolio consists of 23 office properties
totaling approximately 3.5 million square feet. The properties are concentrated
in the Sunbelt region of the United States including Texas and Arizona, with
additional locations in certain markets throughout the United States. The
properties are leased to a variety of tenants which include Union Pacific
Railroad Company, Club Corporation International, MCI Telecommunications Corp.,
American Express Travel Related Services Co. Inc., Nokia, Inc., Del Webb
Corporation, Allstate Insurance Company and R.H. Macy & Company, Inc.
Patriot American Office Group has provided direct property management and
leasing services for each of its properties except in circumstances where it was
economically not feasible to do so, or in circumstances where local real estate
licensing laws prevented the company from providing such services. Patriot
American Office Group employs a staff of 57 individuals across the country. In
1996, it acquired its Accredited Management Organization (AMO) designation from
the Institute of Real Estate Management.
TERMS OF THE CONTRIBUTION AGREEMENT
The following summary of the material provisions of the Contribution
Agreement, including the descriptions of certain provisions set forth elsewhere
in this Prospectus Supplement, is qualified in its entirety by reference to the
Contribution Agreement, a copy of which has been filed with the Securities and
Exchange Commission on a Current Report on Form 8-K dated September 19, 1997 and
is incorporated herein by reference.
CONSIDERATION. In consideration of Mack's contribution of the Mack
Properties, Cali and CRLP collectively have agreed to exchange with Mack the
following consideration: (i) approximately $476.1 million in cash to Mack; (ii)
approximately $302.1 million in assumption of debt by CRLP or its designated
subsidiaries; (iii) the issuance to Mack or Mack's designees of 3,931,048 Common
Units, redeemable after one year, for shares of Common Stock of the Company;
(iv) the issuance of 249,656 Preferred Units composed of (A) issuance to Mack or
Mack's designees of approximately 209,656 Preferred Units immediately
convertible into approximately 6,050,678 Common Units, which Common Units shall
be redeemable for shares of Common Stock of the Company after three years (the
"Series B Preferred Units") and (B) issuance to Mack or Mack's designees of
approximately 40,000 Preferred Units immediately convertible into approximately
1,154,401 Common Units, which Common Units shall be redeemable
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for shares of Common Stock of the Company after one year (the "Series A
Preferred Units"); and (v) issuance to Mack or Mack's designees of 2,000,000
Warrants to purchase Common Units.
The Preferred Units will contain anti-dilution protection and have voting
rights on any vote of limited partners as if the Preferred Units were converted
to Common Units. Currently, the 249,656 Preferred Units would convert into
7,205,079 Common Units. The quarterly distribution on each Preferred Unit will
be paid in an amount equal to the greater of (i) $16.88 or (ii) the quarterly
distribution attributable to a Preferred Unit if such unit had been converted
into Common Units, subject to adjustment for customary anti-dilution rights.
Each Preferred Unit shall have a stated value equal to $1,000.00 (the "Stated
Value"). Cali shall have the right to cause the conversion of any or all of the
Preferred Units into Common Units, at any time after the seven and one-half
years anniversary of the date of the closing of the Transaction at their Stated
Value, plus accrued but unpaid distributions, divided by $34.65 per share (the
"Conversion Price"); provided, however, that the Company may only exercise such
mandatory conversion if, for twenty trading days within the thirty consecutive
trading days immediately preceding such conversion date, the closing price of
the Common Stock equals or exceeds $34.65, subject to adjustment for customary
anti-dilution rights. Holders of the Preferred Units may convert the Preferred
Units into Common Units at any time at the Conversion Price. If, prior to the
conversion of all Preferred Units, the number of outstanding Common Units is
increased by a unit split or other similar event, the Conversion Price shall be
proportionately reduced, or if the number of outstanding Common Units is
decreased by a combination or reclassification of units, or other similar event,
the Conversion Price shall be proportionately increased. In addition, if, prior
to the conversion of all Preferred Units, there shall be any merger,
consolidation, exchange of units, recapitalization, reorganization, or other
similar event, as a result of which Common Units of CRLP shall be changed into
the same or a different number of securities of the same or another class or
classes of units or securities of CRLP or another entity, then the holders of
Preferred Units shall thereafter have the right to purchase and receive upon
conversion of units of Preferred Units, such units and/or securities as may be
issued or payable with respect to or in exchange for the number of Common Units
immediately theretofore purchasable and receivable upon the conversion of units
of Preferred Units held by such holders had such merger, consolidation, exchange
of shares, recapitalization or reorganization not taken place. CRLP and Cali
have agreed that they will not issue any class of capital stock or Units senior
to the Preferred Units without the consent of 66 2/3 percent of the holders of
the Series B Preferred Units. CRLP and Cali may, however, issue a class of
capital stock or Units PARI PASSU to the Preferred Units without such consent,
provided that such issuance is not in excess of the greater of (i) an aggregate
of $200.0 million in stated value or (ii) an amount equal to 10 percent of the
Company's total equity market capitalization (based upon the average trading
price of the Common Stock for the five trading days immediately preceding the
date of such issuance).
The Warrants shall be exercisable at any time after the first anniversary of
the closing of the Transaction for a period of four years thereafter at a
purchase price of $37.80 per Common Unit, subject to adjustment for customary
anti-dilution rights. The Warrants shall be transferable only (a) in accordance
with or as otherwise specifically permitted by the provisions of the
Contribution Agreement and (b) under circumstances such that the transfer is
exempt from the requirements of registration under the Securities Act and any
applicable state securities law. In the event of any change in Common Units by
reason of any dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of units, or of any similar change affecting
the Common Units, the number and kind of units underlying the Warrants and the
purchase price per unit thereof shall be appropriately adjusted consistent with
such change.
The Warrants, the Common Units and the Preferred Units issued pursuant to
the Transaction represent the equivalent of 13,136,127 shares of Common Stock,
which shares may be purchased by Mack upon the exercise of the Warrants and the
redemption of the Common Units and the Preferred Units, such number equaling
35.8 percent of the 36,664,322 shares of Common Stock currently outstanding and
24.4 percent, assuming redemption of all outstanding Units and including the
shares of Common Stock issued in connection with this Offering. Commencing one
year after the closing of the Transaction, the Company,
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<PAGE>
at its expense, will make a regulatory filing and will use all reasonable
efforts to provide Mack with an effective "evergreen" Form S-3 shelf
registration statement covering the resale of the shares of Common Stock
underlying the Common Units, the Preferred Units and Warrants.
TERMINATION. On or before December 12, 1997, CRLP may terminate the
Contribution Agreement for any reason upon written notice to Mack. On or before
October 27, 1997, Mack may terminate the Contribution Agreement for any reason
upon written notice to the Company. During the period beginning October 28, 1997
and ending December 12, 1997 (unless such date shall have been accelerated
pursuant to the Contribution Agreement), Mack may terminate the Contribution
Agreement only for the following reasons: (i) there has occurred a material
adverse change to the business, results of operations or financial condition of
Cali, CRLP and its subsidiaries or the Mack Properties, (ii) the stock price of
the Common Stock, as reported in the Wall Street Journal, has an average closing
price below $31.50 for any five consecutive trading days.
REPRESENTATIONS AND WARRANTIES AND COVENANTS. The Contribution Agreement
includes various customary representations and warranties and covenants of the
parties thereto.
CONDITIONS PRECEDENT TO CLOSING THE TRANSACTION. The obligations of Mack to
consummate the Transaction are subject to the fulfillment of certain conditions
by Cali or CRLP including, but not limited to, the Transaction being approved by
the Company's stockholders. The respective obligations of Cali and CRLP to
consummate the Transaction are subject to the fulfillment of certain conditions
by Mack including, but not limited to, receipt by Mack of the requisite consents
and approvals from certain necessary partners, tenants and third parties in
order to contribute and convey the Mack Properties.
CORPORATE NAME CHANGE; STOCK EXCHANGE LISTING. Upon the consummation of the
Transaction, Cali and CRLP shall change their respective names to "Mack-Cali
Realty Corporation" and "Mack-Cali Realty, L.P." If such name change is not
approved by the Company's stockholders, Cali and CRLP will operate under the
names "Mack-Cali Realty Corporation" and "Mack-Cali Realty, L.P.", respectively,
pursuant to a fictitious name certificate. Mack-Cali Realty Corporation shall
continue to trade under the New York Stock Exchange symbol "CLI".
DIRECTORS AND OFFICERS. Upon the consummation of the Transaction, the
composition of the Board of Directors of Cali will change. Three of the Board of
Directors' thirteen members shall be new members designated by Mack. The Mack
designees shall be William L. Mack, Earle I. Mack and Mitchell E. Hersh, who
shall be deemed to be "inside" members of the Board of Directors because of
their relationship with management. Three members of the Board of Directors
shall be designated by Cali and shall be deemed to be "inside" members of the
Board of Directors because of their relationship with management. The Cali
designees shall be current members of the Board of Directors and shall be John
J. Cali, who shall remain Chairman of the Board of Directors, Thomas A. Rizk,
who shall remain Chief Executive Officer, and Robert F. Weinberg. The remaining
seven directors shall be independent outside directors. They shall include three
existing independent members of Cali's Board of Directors, Brendan Byrne, Irvin
Reid and Alan Philibosian, and four new independent members selected by Mack and
reasonably approved by Cali.
After the consummation of the Transaction, the Board of Directors shall
create an Executive Committee. William L. Mack will serve as Chairman of the
Executive Committee, which will consist of William L. Mack, Mitchell E. Hersh,
Thomas A. Rizk and John J. Cali.
The parties have agreed that Thomas A. Rizk shall remain Chief Executive
Officer of Cali after the consummation of the Transaction, and that Mitchell E.
Hersh shall be appointed President and Chief Operating Officer by the Board of
Directors. Cali's existing executive officers shall retain their current
positions and responsibilities, except that Thomas A. Rizk shall resign as
President, Brant Cali shall resign as Chief Operating Officer and John R. Cali
shall resign as Chief Administrative Officer.
The rights granted to Mack under the Contribution Agreement with respect to
the management of Cali are conditioned on the continuation of Mack's legal and
beneficial ownership, in the aggregate, of not
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less than 3,174,603 shares of Common Stock and/or Units (on a fully converted
basis) in the aggregate of Cali and CRLP ("Significant Interest") held by Earle
I. Mack, David S. Mack, Frederic H. Mack and William L. Mack after applying all
reasonable attribution and affiliation rules, subject to adjustment for stock
splits, stock dividends and other customary and similar stock dilutions and
subject to certain exceptions. In the event that Mack's Significant Interest
shall no longer be retained, Mack and/or its designees shall be entitled only to
those rights accorded to every other stockholder of Cali, and each of the
directors designated by Mack shall, at the option of the directors designated by
Cali, resign from the Board of Directors of Cali on the three month and six
month anniversary respectively, of the date on which the Mack Significant
Interest is no longer retained. Notwithstanding the foregoing, any such
modification to Mack's Significant Interest shall have no effect upon Mitchell
E. Hersh or his management status, and he shall not be required to resign from
the Board of Directors of Cali.
TRANSFER RESTRICTIONS; RIGHT OF FIRST OFFER. The Warrants and the Common
Units issuable upon conversion of the Series A Preferred Units shall not be
exercised or converted, as the case may be, prior to the first anniversary of
the closing of the Transaction. The Common Units issuable upon conversion of the
Series B Preferred Units shall not be converted prior to the third anniversary
of the closing of the Transaction.
Mack has agreed that (i) upon expiration of the respective holding period,
the Common Units, the Preferred Units, the Warrants and the Common Units
underlying the Preferred Units and the Warrants may only be transferred
privately (and, with respect to Preferred Units and Common Units, including the
Common Units underlying the Preferred Units and the Warrants, after Cali
foregoes its rights to purchase such securities following receipt of a Sale
Notice (as hereinafter defined)) in accordance with the terms of the
Contribution Agreement and (ii) upon redemption or exercise of the Common Units,
the Warrants or the Common Units underlying the Preferred Units and the Warrants
to shares of Common Stock, it will execute an agreement with CRLP providing that
the Common Stock may only be transferred publicly (subject to the restrictions
of the Exchange Act) in blocks of not greater than 1,000,000 shares of Common
Stock on any one trading day and no more than 3,000,000 shares of Common Stock
per week.
Prior to the sale of any Preferred Units or Common Units by any holder
thereof, such holder shall first deliver a written notice (the "Sale Notice") to
CRLP specifying (i) the nature and class of the securities to be transferred,
(ii) the number of securities owned by such holder, (iii) the number of
securities that such holder desires to sell, (iv) the proposed cash selling
price for the securities to be sold and (v) all other material terms and
conditions of the offer. The Sale Notice shall constitute an irrevocable offer
by the holder of the securities to be sold to sell such securities to CRLP at
the price and on the terms specified in such Sale Notice. CRLP shall have ten
days following receipt of the Sale Notice to notify the selling holder of its
election to purchase the securities to be sold; otherwise CRLP shall forfeit its
right to purchase such securities pursuant to the Sale Notice.
The Contribution Agreement provides that the restrictions provided in the
preceding paragraphs shall not apply to certain pledges or permitted transfers
of, or encumbrances on, the Common Units, Preferred Units or Warrants.
RESTRICTIONS ON SALE OF THE MACK PROPERTY. The Contribution Agreement
prohibits the sale of any of the Mack Properties in a taxable transaction prior
to a specific date (the "Restricted Period") with respect to each Mack Property
(resulting in an aggregate average Restricted Period for all of the Mack
Properties of approximately seven and one-half years) without the written
consent of William L. Mack, subject to certain exceptions including, but not
limited to, the sale of substantially all of the Mack Properties.
NON-COMPETITION AGREEMENT. Upon closing the Transaction, William L. Mack,
Earle I. Mack, David S. Mack and Frederic H. Mack each will enter into a
non-competition agreement with Cali. Each of Earle I. Mack, David S. Mack and
Frederic H. Mack, pursuant to his respective non-competition agreement, will
agree, except as related to certain excluded Mack Properties, not to compete
with Cali within the continental United States by engaging in, owning, investing
in, managing or controlling any venture or enterprise engaged in development,
acquisition or management activities with respect to office-service,
S-21
<PAGE>
office or certain flex properties until the later to occur of (i) three years
from the closing of the Transaction or (ii) the date which is at least six
months after the date on which (a) such individual no longer serves as a member
of the Board of Directors and (b) Mack's Significant Interest is no longer
maintained. William L. Mack's non-competition agreement shall be similar to the
aforementioned non-competition agreements except that (i) it shall not apply to
his participation in the Apollo Real Estate funds, related funds and similar
funds in which the principals of Apollo hold a majority of the general
partnership interest and (ii) it shall contain an additional requirement that
none of Earle I. Mack, David S. Mack, Frederic H. Mack or William L. Mack shall
be a member of the Board of Directors in order to eliminate the non-competition
prohibition.
There can be no assurances that the Transaction will be consummated, that
the requisite conditions to closing will be met, that no party will exercise any
right under the Contribution Agreement to terminate the agreement, that the
Contribution Agreement will receive the requisite stockholder approval or that
the requisite consents and approvals from certain necessary partners and third
parties in order to contribute and convey the Mack Properties will be obtained.
CERTAIN CHANGE OF CONTROL CONSEQUENCES AND RELATED MATTERS
Consummation of the Transaction will trigger certain change of control and
other provisions under certain of the Company's executive officers' employment
agreements, resulting in the vesting of 199,070 restricted shares with a value
of approximately $7.9 million, the forgiveness of approximately $4.8 million of
stock purchase loans related to the acquisition of 152,000 restricted shares,
the vesting of 336,000 options with a value of approximately $4.9 million,
certain tax gross-up payments of approximately $5.1 million and the vesting of
340,000 warrants with a value of approximately $2.3 million (assuming in all
cases a Common Stock price of $39.8125 per share).
In addition, upon consummation of the Transaction, certain cash payments
aggregating approximately $26.5 million will be made to such executives.
The above amounts have been unanimously approved by the Board of Directors
of the Company, with interested directors abstaining, upon the recommendation
of, and unanimous approval by, the Option and Executive Compensation Committee
of the Board of Directors, consisting of three independent directors, who
considered various factors, including, among others, the earlier than
anticipated attainment of the Company's long range plans and goals and the
overall impact of the Transaction on the Company and its senior executives.
AMENDMENTS TO OPTION PLANS
In connection with the Transaction, the Company also plans to submit for
stockholder approval an amendment to increase the number of authorized shares of
Common Stock reserved for issuance under the Company's Employee Stock Option
Plan and an amendment to increase the number of authorized shares of Common
Stock reserved for issuance under the Company's Director Stock Option Plan.
COMPLETED ACQUISITIONS
Since the IPO, the Company has invested over $1.2 billion primarily in the
purchase of 109 office and office/flex properties, increasing its portfolio by
approximately 454.0 percent (based upon total net rentable square feet).
Since the closing of the Robert Martin Company acquisition on January 31,
1997, the Company has acquired the following properties:
On May 8, 1997, the Company acquired four buildings in Westlakes Office
Park, a suburban office complex located in Berwyn, Chester County, Pennsylvania,
totaling approximately 444,000 square feet. The properties were acquired for a
total cost of approximately $74.7 million, which was made available primarily
from drawing on one of the Company's credit facilities.
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<PAGE>
On July 21, 1997, the Company acquired two office buildings in the
Moorestown Corporate Center, a suburban office complex located in Moorestown,
Burlington County, New Jersey. The properties, each consisting of 74,000 square
feet, were acquired for a total cost of approximately $10.2 million, which was
made available from drawing on one of the Company's credit facilities.
On August 1, 1997, the Company acquired 1000 Bridgeport Avenue, a 133,000
square-foot office building located in Shelton, Fairfield County, Connecticut.
The property was acquired for a total cost of approximately $15.5 million, which
was made available from drawing on one of the Company's credit facilities.
On August 15, 1997, the Company acquired 200 Corporate Boulevard South an
84,000 square foot office/flex building in the South Westchester Executive Park
complex in Yonkers, Westchester County, New York. The property was acquired
through the exercise of a purchase option obtained in the Robert Martin Company
acquisition for a total cost of approximately $8.0 million, which was financed
primarily from the Company's cash reserves.
On September 3, 1997, the Company acquired Three Independence Way, a 111,300
square foot Class A office building in the Princeton Corporate Center in
Princeton, Mercer County, New Jersey. The property was acquired for a total cost
of approximately $13.2 million, which was made available primarily from drawing
on one of the Company's credit facilities.
FINANCING ACTIVITIES
GENERAL. The Company utilizes the most appropriate sources of capital for
acquisitions, development, joint ventures and capital improvements, which
sources may include undistributed Funds from Operations, borrowings under its
revolving credit facilities, issuances of debt or equity securities and/or bank
and other institutional borrowings. As of September 15, 1997, the Company's
total debt constituted approximately 27.6 percent of the total market
capitalization of the Company. As of June 30, 1997, the Company's total debt
constituted approximately 26.6 percent of the total market capitalization of the
Company after giving pro forma effect to this Offering, the use of proceeds
thereof, the Transaction, and certain other pro forma adjustments and assuming a
Common Stock price of $39.8125 per share.
After the consummation of the IPO, the Company had available a $70.0 million
revolving credit facility with an affiliate of Prudential Securities
Incorporated. Concurrently with obtaining the Unsecured Facility, the Company
repaid in full and terminated such facility on August 7, 1997.
On February 1, 1996, the Company obtained a revolving credit facility
secured by certain of its Properties in the amount of $75.0 million from two
banks. Concurrently with obtaining the Unsecured Facility, the Company repaid in
full and terminated such facility on August 7, 1997.
On November 4, 1996, the Company obtained the $80.0 million Prudential
Facility which bears interest at 125 basis points over one-month LIBOR and
matures on January 15, 1998. The Prudential Facility is a recourse liability of
the Operating Partnership and is secured by the Company's equity interest in the
Harborside Financial Center Property. On August 7, 1997, the Company repaid in
full the outstanding balance under the Prudential Facility with funds drawn from
the Unsecured Facility. Additionally, on August 12, 1997, the Prudential
Facility was amended to increase the total commitment from $80.0 million to
$100.0 million and to extend the maturity date to August 31, 1998.
As of September 15, 1997, the Company's two remaining revolving credit
facilities consisted of the Unsecured Facility and the Prudential Facility, with
an aggregate borrowing capacity of $500.0 million and an aggregate outstanding
balance of $234.0 million.
As of September 15, 1997, the Company had 85 unencumbered properties
totaling approximately 7.2 million square feet, representing approximately 58.5
percent of the Company's portfolio.
CREDIT FACILITIES. On August 6, 1997, the Company obtained the Unsecured
Facility in the amount of $400.0 million from a group of 13 lender banks. The
Unsecured Facility has a three-year term and currently bears interest at 125
basis points over LIBOR. Based upon the Company's achievement of an
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<PAGE>
investment grade long-term unsecured debt rating, the interest rate will be
reduced, on a sliding scale, and a competitive bid option will become available.
The lending group for the Unsecured Facility includes: Fleet National Bank, The
Chase Manhattan Bank, and Bankers Trust Company, as agents; PNC Bank, N.A., Bank
of America National Trust and Savings Association, Commerzbank, and First
National Bank of Chicago, as co-agents; and Keybank, Summit Bank, Crestar Bank,
Mellon Bank, N.A., Signet Bank, and Kredeitbank NV.
The terms of the Unsecured Facility include certain restrictions and
covenants which limit, among other things, dividend payments and additional
indebtedness and which require compliance with specified financial ratios and
other financial measurements. The Unsecured Facility also requires a fee on the
unused balance payable quarterly in arrears, at a rate ranging from one-eighth
of one percent to one-quarter of one percent of such balance, depending on the
level of borrowings outstanding in relation to the total facility commitment.
Concurrently with the closing of the Unsecured Facility, the Company drew
funds on such facility to repay in full and terminate two of the Company's
existing secured revolving credit facilities and to repay in full the
outstanding balance under the Prudential Facility. In addition, on August 12,
1997, the Company retired its remaining $64.5 million real estate mortgage
investment conduit (REMIC) secured financing primarily from funds drawn on the
Unsecured Facility.
FINANCING OF THE PENDING TRANSACTION. The cash portion of the purchase
price for the Mack Properties will be funded from the net proceeds of this
Offering and from drawing on the Company's credit facilities. In addition, the
Company will assume approximately $302.1 million of mortgage debt, and issue
3,931,048 Common Units, 249,656 Preferred Units convertible into approximately
7,205,079 Common Units and Warrants to purchase 2,000,000 Common Units,
aggregating 13,136,127 Common Units (assuming conversion of all Preferred Units
and exercise of all Warrants).
PRO FORMA CAPITALIZATION. Assuming completion of the Offering, the
Transaction and certain other pro forma adjustments, the Company's pro forma
debt as of June 30, 1997 would have totaled approximately $936.8 million and
would have represented approximately 26.6 percent of total market capitalization
(based on a Common Stock price of $39.8125 per share). See "Capitalization."
ORGANIZATIONAL CHANGES
Upon consummation of the Transaction, Thomas A. Rizk, the Company's
President and Chief Executive Officer, will continue to serve as Chief Executive
Officer of Mack-Cali, and William L. Mack, currently Senior Managing Partner of
The Mack Company, will serve as a Director and Chairman of the Executive
Committee of Mack-Cali. Mitchell E. Hersh, currently Partner and Chief Operating
Officer of The Mack Company, will serve as a Director and as President and Chief
Operating Officer of Mack-Cali.
In addition, John J. Cali, Chairman of the Board of Directors of the
Company, will remain as Chairman of the Board for Mack-Cali, and will lead a
restructured board of directors consisting of 13 members. The Board of Directors
of Mack-Cali will consist of three Cali representatives, Thomas A. Rizk, John J.
Cali and Robert F. Weinberg, and three Mack representatives, William L. Mack,
Earle I. Mack and Mitchell E. Hersh. The remaining seven directors will be
independent outside directors and will include three of the Company's current
independent board members. Four new independent board members will be selected
by Mack and reasonably approved by Cali.
OPERATING PERFORMANCE
The Company has consistently increased its Funds from Operations since the
closing of its IPO. The Company's Funds from Operations (after adjustment for
the straight-lining of rents) for the six months ended June 30, 1997 grew to
$50.5 million from $19.0 million for the corresponding 1996 period. As a result
of the Company's improved operating performance, on September 16, 1997, the
Company announced an 11.1 percent increase in its regular quarterly
distribution, commencing with the Company's distribution with respect to the
third quarter of 1997, payable to holders of record of Common Stock on October
3, 1997, from $.45 per share to $.50 per share of Common Stock ($2.00 per share
of Common Stock on an annualized basis). Since the IPO, the Company has
increased its regular quarterly distribution by 23.8 percent.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, after the deduction of the underwriting discounts and commissions and
estimated offering expenses, are estimated to be approximately $489.5 million
($563.2 million if the Underwriters' over-allotment option is exercised in
full). The Company presently intends to use the net proceeds from the Offering
to reduce outstanding borrowings under its revolving credit facilities, to fund
a portion of the purchase price of the Mack Properties, and for general
corporate purposes, including acquisitions other than the Transaction. The
Company continually examines potential property acquisitions and, at any given
time, one or more of such acquisitions may be under consideration. There can be
no assurance that any such acquisitions, including the Transaction, will be
consummated. Pending such uses, the Company may invest the remaining net
proceeds of the Offering in short-term investment-grade income producing
investments such as investments in commercial paper, government securities or
money market funds that invest in government securities. This Offering is not
conditioned on the consummation of the Transaction or any other transaction. The
Unsecured Facility matures in August 2000 and currently bears interest at 125
basis points over LIBOR. The Prudential Facility matures in August 1998 and
currently bears interest at 125 basis points over one-month LIBOR. As of
September 15, 1997, the aggregate outstanding balance under these two facilities
was $234.0 million.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997 and on a pro forma basis assuming (i) the Transaction had occurred as
of June 30, 1997, (ii) the other acquisitions completed by the Company
subsequent to June 30, 1997 had occurred as of June 30, 1997, (iii) the issuance
of 13,000,000 shares of Common Stock pursuant to the Offering and (iv) the
anticipated use of the net proceeds therefrom as described under "Use of
Proceeds." The information set forth in the table should be read in conjunction
with the consolidated financial statements and the notes thereto and the pro
forma financial information and the notes thereto incorporated by reference in
the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
<S> <C> <C>
ACTUAL PRO FORMA
---------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage and other loans....................... $ 423,561 $ 725,708
Borrowings under revolving credit facilities... 130,400 211,054
---------- -----------
Total debt................................... 553,961 936,762
---------- -----------
Minority interest in the Operating
Partnership(1)................................. 70,911 462,434
---------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, none issued or outstanding -- --
Common Stock, $.01 par value, 190,000,000
shares authorized, 36,651,872 shares issued
and outstanding, 49,651,872 shares as
adjusted(1)(2)............................... 366 496
Other stockholders' equity..................... 701,342 1,164,918
---------- -----------
Total stockholders' equity................... 701,708 1,165,414
---------- -----------
Total Capitalization............................. $1,326,580 $2,564,610
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Assumes no redemption of Units. If all of the Units were redeemed,
40,742,042 shares (64,878,169 shares on a pro forma basis) of Common Stock
would be outstanding as of June 30, 1997.
(2) Excludes 2,721,172 shares of Common Stock reserved for issuance pursuant to
the Company's stock option plans under which 1,650,929 granted options are
outstanding, including 451,703 exercisable options, as of June 30, 1997.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The Company's Common Stock is listed on the NYSE under the symbol "CLI." The
following sets forth the high and low closing sales prices for the Common Stock
for the fiscal periods indicated as reported by the NYSE and the distributions
per share paid by the Company with respect to each such period.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTION
---------- ---------- -----------
<S> <C> <C> <C>
1994
August 25 through September 30......................................... $ 17.250 $ 16.125 $ .1346(1)
Fourth Quarter......................................................... $ 16.375 $ 14.875 $ .4038
1995
First Quarter.......................................................... $ 17.375 $ 15.500 $ .4038
Second Quarter......................................................... $ 19.375 $ 16.500 $ .4038
Third Quarter.......................................................... $ 20.250 $ 18.875 $ .4250
Fourth Quarter......................................................... $ 22.500 $ 19.125 $ .4250
1996
First Quarter.......................................................... $ 23.625 $ 20.750 $ .4250
Second Quarter......................................................... $ 24.625 $ 21.500 $ .4250
Third Quarter.......................................................... $ 27.125 $ 22.625 $ .4500
Fourth Quarter......................................................... $ 30.875 $ 26.125 $ .4500
1997
First Quarter.......................................................... $ 34.875 $ 30.000 $ .4500
Second Quarter......................................................... $ 34.000 $ 28.750 $ .4500
Third Quarter.......................................................... $ 41.625 $ 32.375 N/A
Fourth Quarter (through October 9, 1997)............................... $ 42.6875 $ 39.8125 N/A
</TABLE>
(1) Represents distributions for the partial quarter subsequent to the IPO.
As a result of the Company's improved operating performance, on September
16, 1997, the Company announced an 11.1 percent increase in its regular
quarterly distribution, commencing with the Company's distribution with respect
to the third quarter of 1997, payable to holders of record of Common Stock on
October 3, 1997, from $.45 per share to $.50 per share of Common Stock ($2.00
per share of Common Stock on an annualized basis). Since the IPO, the Company
has increased its regular quarterly distribution by 23.8 percent.
Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on the actual cash flow of the Company, its
financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the Code and such other factors as the Board of
Directors deems relevant.
Distributions by the Company to the extent of its current earnings and
profits for federal income tax purposes are taxable to stockholders as ordinary
dividend income (unless such distributions are designated as capital gain
distributions). Distributions in excess of earnings and profits will be treated
as a tax-free return of capital, reducing the stockholder's tax basis in the
Common Stock, and distributions in excess of such stockholder's tax basis in the
Common Stock will be treated as gain realized from the sale of such shares. (See
"Certain United States Federal Income Tax Considerations to Holders of Common
Stock -- Taxation of Taxable U.S. Stockholders Generally" and "Certain United
States Federal Income Tax Considerations to Holders of Common Stock -- Taxation
of Non-U.S. Stockholders -- Distributions.") The Company has determined that all
of the distributions paid during 1994, 1995 and 1996 represented ordinary
dividend income to its stockholders.
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SELECTED FINANCIAL DATA
The following table sets forth certain financial data for the Company on a
consolidated historical basis and on a pro forma basis. The financial data
should be read in conjunction with the Company's financial statements and notes
thereto incorporated by reference in this Prospectus Supplement. The
consolidated historical financial data of the Company as of and for the periods
ended December 31, 1996 and 1995 have been derived from audited financial
statements. The consolidated historical financial data of the Company as of and
for the six months ended June 30, 1997 and 1996 have been derived from unaudited
financial statements which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the unaudited interim periods.
The unaudited pro forma operating data for the six months ended June 30,
1997 and the year ended December 31, 1996 is presented as if the completion of
this Offering, the Transaction and other acquisitions completed by the Company
subsequent to January 1, 1996 all occurred as of January 1, 1996. The pro forma
balance sheet as of June 30, 1997 is presented as if the completion of this
Offering, the Transaction and other acquisitions completed by the Company
subsequent to June 30, 1997 all occurred on June 30, 1997.
The pro forma information is based upon certain assumptions that are
included in the notes to the pro forma financial statements incorporated by
reference in this Prospectus Supplement. The pro forma financial information is
unaudited and is not necessarily indicative of what the financial position and
results of operations of the Company would have been as of and for the periods
indicated, nor does it purport to represent the future financial position and
results of operations for future periods.
The combined historical financial data of Mack as of December 31, 1996 and
1995 and for the periods ended December 31, 1996, 1995 and 1994 and as of June
30, 1997 and for the six months ended June 30, 1997 and 1996, together with
certain unaudited pro forma financial data of the Company for the six months
ended June 30, 1997 and the year ended December 31, 1996, are included in the
Company's Current Report on Form 8-K/A dated September 19, 1997, and is
incorporated herein by reference.
S-27
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL HISTORICAL
SIX MONTHS SIX MONTHS ENDED PRO FORMA YEAR ENDED
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------ DECEMBER 31, ------------------------
1997 1997 1996 1996 1996 1995
----------- ----------- ----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.......................... $ 206,042 $ 112,697 $ 40,584 $ 398,036 $ 95,472 $ 62,335
Operating and other expenses...... $ 73,317 $ 40,569 $ 15,287 $ 144,617 $ 35,462 $ 24,417
Depreciation and amortization..... $ 30,773 $ 16,844 $ 6,908 $ 61,077 $ 15,812 $ 12,111
Interest expense.................. $ 31,439 $ 17,152 $ 5,568 $ 62,700 $ 12,677 $ 8,661
Gain on sale of rental property... -- -- $ 5,658 -- $ 5,658 --
Income before minority interest
and extraordinary item.......... $ 70,513 $ 38,132 $ 18,479 $ 129,642 $ 37,179 $ 17,146
Income before extraordinary item.. $ 53,455 $ 34,484 $ 15,658 $ 96,998 $ 32,419 $ 13,638
Extraordinary item-loss on early
retirement of debt.............. -- -- $ (475) -- $ (475) --
Net income........................ $ 53,455 $ 34,484 $ 15,183 $ 96,998 $ 31,944 $ 13,638
Income before extraordinary item
per share....................... $ 1.08 $ 0.95 $ 1.03 $ 1.96 $ 1.76 $ 1.23
Net income per common share....... $ 1.08 $ 0.95 $ 1.00 $ 1.96 $ 1.73 $ 1.23
Dividends declared per common
share........................... $ 0.90 $ 0.85 $ 1.75 $ 1.66
Weighted average number of common
shares.......................... 49,674 36,475 15,175 49,400 18,461 11,122
BALANCE SHEET DATA (AT PERIOD
END):
Rental property, before
accumulated
depreciation and amortization... $ 2,643,651 $ 1,391,228 $ 426,275 $ 853,352 $ 387,675
Total assets...................... $ 2,621,765 $ 1,373,692 $ 402,266 $ 1,026,328 $ 363,949
Mortgages and loans payable....... $ 936,762 $ 553,961 $ 169,147 $ 268,010 $ 135,464
Total liabilities................. $ 993,917 $ 601,073 $ 185,500 $ 297,985 $ 150,058
Stockholders' equity.............. $ 1,165,414 $ 701,708 $ 189,221 $ 701,379 $ 185,808
OTHER DATA:
Cash flows provided by operating
activities...................... $ 59,241 $ 19,163 $ 46,823 $ 28,446
Cash flows used in investing
activities...................... $ (320,432) $ (36,553) $ (307,752) $(133,736)
Cash flows provided by financing
activities...................... $ 62,474 $ 18,330 $ 464,769 $ 99,863
Funds from Operations after
adjustment for straight-lining
of rents before minority
interest of Unitholders(1)...... $ 50,453 $ 18,972 $ 45,220 $ 27,397
</TABLE>
- --------------------------
(1) The Company considers Funds from Operations (after adjustment for
straight-lining of rents) one measure of REIT performance. Funds from
Operations is defined as net income (loss) before minority interest of
unitholders computed in accordance with Generally Accepted Accounting
Principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate-related depreciation and amortization.
Funds from Operations should not be considered as an alternative for net
income as an indication of the Company's performance or to cash flows as a
measure of liquidity. Funds from Operations presented herein is not
necessarily comparable to Funds from Operations presented by other real
estate companies due to the fact that not all real estate companies use the
same definition. However, the Company's Funds from Operations is comparable
to the Funds from Operations of real estate companies that use the current
definition of the National Association of Real Estate Investment Trusts,
after the adjustment for straight-lining of rents.
S-28
<PAGE>
PROPERTIES
GENERAL
As of September 15, 1997, the Company owned 100 percent of 132 Properties,
aggregating approximately 12.2 million square feet, consisting of 120 office and
office/flex properties totaling approximately 11.8 million square feet, six
industrial/warehouse buildings totaling approximately 400,000 square feet, two
multi-family residential properties, two stand-alone retail properties and two
land leases. All of the Properties are located in New Jersey, New York,
Pennsylvania and Connecticut. The Properties are easily accessible from major
thoroughfares and are in close proximity to numerous amenities. The 61 Office
Properties contain a total of approximately 8.8 million net rentable square
feet, with the individual Office Properties ranging from approximately 20,400 to
761,200 net rentable square feet. The 59 Office/Flex Properties contain a total
of approximately 3.0 million square feet. The Office Properties, each managed by
on-site employees, generally have attractively landscaped sites, atriums and
covered parking in addition to quality design and construction. As of June 30,
1997, the Office Properties, Office/Flex Properties and Industrial/Warehouse
Properties were approximately 96.5 percent leased to over 1,100 tenants. The
Company's tenants include many service sector employers, as well as a large
number of professional firms and national and international businesses. The
Company believes that all of its Properties are well-maintained and do not
require significant capital improvements.
OFFICE MARKETS
The Office Properties and Office/Flex Properties are located in New Jersey,
New York, Philadelphia, Pennsylvania and Connecticut. The majority of the
Properties are located in northern and central New Jersey and in Westchester
County, New York. The majority of the Properties are located within the greater
New York metropolitan area and have direct access to New York City, Newark
International Airport and the New York/New Jersey Harbor by both public
transportation and an extensive highway network.
The following is a discussion of the markets within which the Properties are
located:
NORTHERN NEW JERSEY: The Northern New Jersey market consists of Bergen,
Essex, Hudson, Morris and Passaic Counties. Northern New Jersey's five counties
are part of the greater New York metropolitan area, are less than a 45 minute
drive from Manhattan, and are widely regarded as major centers for corporate and
international business. The region has direct access to New York City by public
transportation and extensive road networks. In addition to being home to the two
largest cities in New Jersey, Newark and Jersey City, Newark International
Airport and the New York/New Jersey Harbor are also located within the
five-county boundary.
Overall vacancy rates have declined in the northern New Jersey market for
the fourth consecutive year as a direct result of an increase in leasing
activity and net absorption levels. Although some built-to-suit activity is
present, speculative construction remains virtually nonexistent. The Company
owns and operates approximately 4.5 million square feet of office and
office/flex space in northern New Jersey.
CENTRAL NEW JERSEY: The central New Jersey market consists of Union,
Somerset, Hunterdon, Middlesex, Mercer and Monmouth Counties. Encompassing
approximately 2,000 square miles in six counties, central New Jersey is notable
for its proximity to major highway arteries, including Interstates 78 and 287,
Route 1, the Garden State Parkway and the New Jersey Turnpike. This market
continues to be a prime location for Fortune 500 headquarters, research &
development operations and financial, insurance and real estate (FIRE) sector
businesses.
Central New Jersey vacancy rates are decreasing while average asking rents
are increasing. This is, in part, attributable to the increase in demand,
measured by leasing activity, which rose predominantly due to corporate
expansions. The Company owns and operates approximately 1.8 million square feet
of office and office/flex space in the central New Jersey counties of Union,
Somerset, Mercer and Monmouth.
S-29
<PAGE>
SOUTHERN NEW JERSEY: The southern New Jersey market consists of Burlington,
Camden, Atlantic, Ocean, Gloucester, Salem, Cumberland and Cape May Counties.
This market has extensive geographic boundaries, stretching from the Delaware
River and Philadelphia, to the Atlantic Ocean and Atlantic City. The region is
mainly suburban, with the exception of Camden County, which is home to many
affluent communities, and Atlantic City, one of the nation's largest centers for
gaming/tourism.
The Company owns and operates 80,000 square feet of office space in Atlantic
County, a 327 unit multi-family residential complex in Burlington County and
148,000 square feet of vacant office space currently in renovation in Burlington
County.
SUBURBAN PHILADELPHIA, PENNSYLVANIA: The suburban Philadelphia,
Pennsylvania market consists of Bucks, Chester, Delaware, Montgomery, Lehigh and
Northampton Counties. These six counties surround the city of Philadelphia, are
home to many affluent communities and are regarded as major centers for
corporate and international business. The areas are served by an extensive
highway network allowing easy access to Philadelphia International Airport and
the Port of Philadelphia.
Over the last few years the overall vacancy rate in this region has declined
and in 1996, the rate declined below ten percent for the first time as a result
of strong leasing activity and virtually no new construction. The Company owns
and operates approximately 1.2 million square feet in suburban Philadelphia.
ROCKLAND COUNTY, NEW YORK: Rockland County, New York is located north of
the New Jersey/New York border directly adjacent to Bergen County. Rockland
County has excellent highway access to both New York City via Interstate 87 and
to New Jersey via Interstate 287.
The Company owns and operates a 180,000 square foot office property in
Rockland County.
WESTCHESTER COUNTY, NEW YORK: Westchester County, New York, is located
immediately north of New York City and is accessible from New York City by
public transportation and through an extensive road network. In Westchester
County, the vacancy rate has declined steadily over the last three years as the
office market has absorbed three million square feet that IBM, AT&T and NYNEX
vacated from 1989 to 1993. Speculative construction has been virtually
non-existent during the past five years.
The Company owns and operates approximately 1.6 million square feet of
office space, approximately 2.0 million square feet of office/flex space,
approximately 387,000 square feet of industrial/warehouse space and a 124 unit
residential multi-family property in Westchester County, New York. The Company
entered this market for the first time with the Robert Martin Company
acquisition.
FAIRFIELD COUNTY, CONNECTICUT: Fairfield County, Connecticut is the county
in Connecticut closest in proximity with New York City. It has direct access to
New York City via public transportation and through an extensive road network.
The county is home to ten Fortune 500 headquarters and there has been a
substantial decline in vacancy during the past two years.
The Company owns approximately 300,000 square feet of office and office/flex
space in Fairfield County. The Company entered this market for the first time
with the Robert Martin Company acquisition.
S-30
<PAGE>
SIGNIFICANT TENANTS
The following table sets out a schedule of the Company's ten largest
tenants, for Properties owned as of June 30, 1997, based upon annualized
contractual base rents for the month of June 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE COMPANY'S
TENANT RENT PER TOTAL LEASE
ANNUALIZED BASE SQUARE ANNUALIZED BASE EXPIRATION
RENTAL REVENUE(1) FOOT(2) RENTAL REVENUE DATE
----------------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Donaldson, Lufkin & Jenrette Securities
Corporation...................................... $ 7,936 $ 18.96 4.05% July 2009
Dow Jones Telerate Holdings, Inc................... 7,436 19.93 3.79 June 2006(3)
International Business Machines Corporation........ 6,449 17.22 3.29 Dec. 2000(4)
American Institute of Certified Public
Accountants...................................... 4,981 20.12 2.54 July 2012
Dean Witter Trust Company.......................... 3,999 16.90 2.04 Feb. 2008(5)
NTT Data Communications Systems Corp............... 3,050 22.35 1.56 Sept. 2000
PNC Bank National Association...................... 2,660 19.83 1.36 Feb. 2000(6)
Bank of Tokyo Information Services Inc............. 2,604 19.00 1.33 June 2009
Bankers Trust Harborside Inc....................... 2,503 6.50 1.28 March 2003
The U.S. Life Insurance Company in New York City... 2,332 12.96 1.19 Dec. 2003
------- -----
Total...................................... $ 43,950 22.43%
------- -----
------- -----
</TABLE>
- ------------------------
(1) Annual base rental revenue is based on actual June 1997 billings annualized
and is not derived from historical GAAP results. The historical results for
the 12 months ended December 31, 1997 may differ from those set forth above.
(2) Represents tenant's annualized base rent divided by the respective tenant's
leased square feet as of June 30, 1997.
(3) 45,187 net rentable square feet expire June 2006; 4,700 net rentable square
feet expire March 2001; 322,982 net rentable square feet expire June 2000;
39,985 net rentable square feet expire June 1999.
(4) 362,556 net rentable square feet expire December 2000; 6,542 net rentable
square feet expire April 1999; 5,409 net rentable square feet expire
November 1997.
(5) 221,461 net rentable square feet expire February 2008; 15,193 net rentable
square feet expire January 1998.
(6) 107,320 net rentable square feet expire February 2000; 26,808 net rentable
square feet expire October 1999.
S-31
<PAGE>
PROPERTIES
The following table sets forth certain information relating to each of the
Properties owned as of June 30, 1997 (including certain 1996 information for 15
Essex Road, Paramus, Bergen County which was sold by the Company on March 20,
1996). Certain information, including 1996 base rent and effective rent, for
those Properties acquired by the Company subsequent to December 31, 1996 has
been excluded.
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive....................... 1973 56,000 100.0 941 814 1.27 16.80
11 Commerce Drive (6).................. 1981 90,000 78.4 1,219 1,099 1.64 14.14
20 Commerce Drive...................... 1990 176,600 79.9 3,677 2,936 4.95 20.82
65 Jackson Drive....................... 1984 82,778 100.0 953 895 1.28 13.32
CLARK, UNION COUNTY, NJ
100 Walnut Avenue...................... 1985 182,555 97.3 3,679 3,341 4.95 21.39
JERSEY CITY, HUDSON COUNTY, NJ
95 Christopher Columbus Drive.......... 1989 621,900 100.0 12,123 11,031 16.33 19.49
Harborside Financial Center(7)
Christopher Columbus Drive
Exchange Place & the Hudson River
Plaza I................................ 1983(8) 400,000 100.0 516 516 0.69 8.12
Plaza II............................... 1990(8) 761,200 96.7 2,134 2,134 2.87 18.42
Plaza III.............................. 1990(8) 725,600 97.0 2,391 2,391 3.22 21.38
Parking Agreement (9).................. N/A N/A 100.0 538 538 0.72 N/A
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
OFFICE PROPERTIES
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive....................... 14.54 Public Service
Electric & Gas Co.
(18%), Excel
Scientific Protocols,
Inc. (32%), Columbia
National, Inc. (13%)
11 Commerce Drive (6).................. 12.75 Northeast
Administrators (10%),
Cali Realty, L.P.
(23%)
20 Commerce Drive...................... 16.63 Public Service
Electric & Gas Co.
(26%)
65 Jackson Drive....................... 12.51 Kraft General Foods,
Inc. (35%), Allstate
Insurance Co. (27%),
The Procter & Gamble
Distribution Co. Inc.
(18%), Unum Life
Insurance Co. (14%)
CLARK, UNION COUNTY, NJ
100 Walnut Avenue...................... 19.43 BDSI, Inc. (34%),
Allstate Insurance
Co. (13%), The
Equitable Life
Assurance Society of
the United States
(10%)
JERSEY CITY, HUDSON COUNTY, NJ
95 Christopher Columbus Drive.......... 17.74 Donaldson, Lufkin &
Jenrette Securities
Corp. (67%), NTT Data
Corp. (22%)
Harborside Financial Center(7)
Christopher Columbus Drive
Exchange Place & the Hudson River
Plaza I................................ 8.12 Bankers Trust
Harborside, Inc.(96%)
Plaza II............................... 18.42 Dow Jones Telerate
Holdings, Inc. (50%),
Dean Witter Trust Co.
(30%), Lewco
Securities (11%)
Plaza III.............................. 21.38 American Institute of
Certified Public
Accountants (32%),
Bank of Tokyo Info.
Services, Inc. (19%)
Parking Agreement (9).................. N/A Kinney Hackensack,
Inc. (100%)
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ROSELAND, ESSEX COUNTY, NJ
101 Eisenhower Parkway................. 1980 237,000 94.0 3,685 3,339 4.96 16.70
103 Eisenhower Parkway................. 1985 151,545 95.8 3,187 3,057 4.29 21.57
WOODCLIFF LAKE, BERGEN COUNTY, NJ
50 Tice Boulevard...................... 1984 235,000 99.1 4,611 3,954 6.21 19.82
300 Tice Boulevard (7)................. 1991 230,000 100.0 245 245 0.33 17.67
PARAMUS, BERGEN COUNTY, NJ
15 Essex Road.......................... 1979 (10) (10) 261 224 0.35 (10)
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208........................ 1987 143,000 100.0 3,343 3,331 4.52 23.38
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (7)................... 1981 200,000 96.3 174 174 0.24 21.88
FLORHAM PARK, MORRIS COUNTY, NJ
325 Columbia Turnpike.................. 1987 168,144 97.1 3,396 2,998 4.57 20.80
PARSIPPANY, MORRIS COUNTY, NJ
600 Parsippany Road.................... 1978 96,000 94.5 1,471 1,444 1.98 15.42
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive......................... 1987 98,500 99.2 2,048 2,037 2.76 20.96
400 Alexander Park(7).................. 1987 70,550 100.0 971 840 1.31 18.27
103 Carnegie Center(7)................. 1984 96,000 97.1 1,299 1,299 1.75 18.73
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
ROSELAND, ESSEX COUNTY, NJ
101 Eisenhower Parkway................. 15.13 Arthur Andersen LLP
(29%), Brach,
Eichler, Rosenberg,
Silver, Bernstein &
Hammer (13%)
103 Eisenhower Parkway................. 20.69 Ravin, Sarasohn,
Cook, Baumgarten
(18%), Lum, Hoenes,
Able (11%), Chelsea-
GCA (15%)
WOODCLIFF LAKE, BERGEN COUNTY, NJ
50 Tice Boulevard...................... 17.00 Syncsort, Inc. (22%)
300 Tice Boulevard (7)................. 17.67 Medco Containments
Services, Inc. (20%),
Xerox Corp. (14%),
Chase Home Mortgage
Corp. (11%),
Comdisco, Inc. (11%)
PARAMUS, BERGEN COUNTY, NJ
15 Essex Road.......................... (10) (10)
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208........................ 23.29 Lonza, Inc. (63%),
Chubb Federal Insur-
ance Co. (16%),
Boron-Lepone Assoc.,
Inc. (10%)
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (7)................... 21.88 Broadview Associates
LLP (16%), Bozell
Wordwide, Inc. (12%)
FLORHAM PARK, MORRIS COUNTY, NJ
325 Columbia Turnpike.................. 18.36 Bressler, Amery &
Ross (24%), General
Motors Acceptance
Corp.(14%), Dun &
Bradstreet, Inc.
(12%), Smith Barney
Lease Management
(10%)
PARSIPPANY, MORRIS COUNTY, NJ
600 Parsippany Road.................... 15.13 Metropolitan Life
Insurance Co. (36%),
International Busi-
ness Machines (30%)
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive......................... 20.85 U.S. Trust of N.J.
(19%), Princeton
Venture Research
Corp. (14%), Woodrow
Wilson National
Fellowship Founda-
tion (12%), Villeroy
& Boch Tableware Ltd.
(11%)
400 Alexander Park(7).................. 15.80 Berlitz International
Inc.(100%)
103 Carnegie Center(7)................. 18.73 Ronin Development
Corp. (15%)
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue..................... 1983 75,000 72.0 780 679 1.05 15.03
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive.................... 1988 56,066 95.6 967 963 1.30 17.69
WALL TOWNSHIP, MONMOUTH COUNTY, NJ
1305 Campus Parkway.................... 1988 23,350 92.4 390 375 0.53 19.00
1350 Campus Parkway.................... 1990 79,747 74.6 1,174 1,161 1.58 18.29
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66.......................... 1989 180,000 100.0 2,411 2,411 3.25 13.39
EGG HARBOR, ATLANTIC COUNTY, NJ
100 Decadon Drive...................... 1987 40,422 100.0 772 772 1.04 19.10
200 Decadon Drive...................... 1991 39,922 100.0 604 596 0.81 16.08
BASKING RIDGE, SOMERSET COUNTY, NJ
222 Mt. Airy Road (7).................. 1986 49,000 100.0 191 191 0.26 8.78
233 Mt. Airy Road (7).................. 1987 66,000 100.0 336 336 0.45 11.47
PLYMOUTH MEETING, MONTGOMERY COUNTY, PA
5 Sentry Parkway East (7).............. 1984 91,600 100.0 214 214 0.29 15.50
5 Sentry Parkway West (7).............. 1984 38,400 100.0 95 95 0.13 16.42
MEDIA, DELAWARE COUNTY, PA
Rose Tree Corporate Center
Center I (7)........................... 1986 100,000 99.5 1,221 1,221 1.64 19.01
Center II (7).......................... 1990 160,000 99.0 1,847 1,846 2.49 17.44
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue..................... 13.08 Motorola Inc. (19%)
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive.................... 17.62 Bank of New York
(56%), Bankers
Financial (16%),
Commonwealth Land
(11%)
WALL TOWNSHIP, MONMOUTH COUNTY, NJ
1305 Campus Parkway.................... 18.27 Centennial Cellular
Corp. (41%),
McClaughlin, Ben-
nett, Gelson(35%), NJ
Natural Energy(10%)
1350 Campus Parkway.................... 18.09 New Jersey National
Bank (17%), Stephen
E. Gertier (17%),
Hospital Computer
Systems, Inc. (11%)
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66.......................... 13.39 The U.S. Life Insur-
ance Company in New
York City (100%)
EGG HARBOR, ATLANTIC COUNTY, NJ
100 Decadon Drive...................... 19.10 Computer Sciences
Corp. (79%), U.S.
Social Security
Administration (20%)
200 Decadon Drive...................... 15.87 Hughes STX (27%),
Advanced Casino
Systems Corp. (24%),
International Busi-
ness Machines (14%),
Computer Sciences
Corp. (11%), Crown
Communications, Inc.
(10%)
BASKING RIDGE, SOMERSET COUNTY, NJ
222 Mt. Airy Road (7).................. 8.78 Lucent Technologies
Inc. (100%)
233 Mt. Airy Road (7).................. 11.47 A.T.& T. Corp. (100%)
PLYMOUTH MEETING, MONTGOMERY COUNTY, PA
5 Sentry Parkway East (7).............. 15.50 Merck, Inc. (73%),
Selas Fluid Process-
ing Corp. (22%)
5 Sentry Parkway West (7).............. 16.42 Merck, Inc. (70%),
David Cutler Group
(30%)
MEDIA, DELAWARE COUNTY, PA
Rose Tree Corporate Center
Center I (7)........................... 19.01 General Services
Administration (13%),
Erie Insurance
Company (11%)
Center II (7).......................... 17.44 Barnett International
(19%)
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
LESTER, DELAWARE COUNTY, PA
International Court at Airport Business
Center(7)
International Court I.................. 1986 95,000 99.7 85 85 0.11 21.84
International Court II................. 1987 208,000 99.8 153 153 0.21 17.93
International Court III................ 1992 68,000 100.0 55 55 0.07 19.68
BERWYN, CHESTER COUNTY, PA
1235 Westlakes Drive................... 1986 134,902 99.5 -- -- -- --
1205 Westlakes Drive................... 1988 130,265 99.3 -- -- -- --
1055 Westlakes Drive................... 1990 118,487 100.0 -- -- -- --
1000 Westlakes Drive................... 1989 60,696 98.3 -- -- -- --
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard.................... 1988 180,000 95.9 3,250 3,219 4.38 18.83
ELMSFORD, WESTCHESTER COUNTY, NY
100 Clearbrook Road(6)................. 1975 60,000 100.0 -- -- -- --
101 Executive Boulevard................ 1971 50,000 100.0 -- -- -- --
570 Taxter Road........................ 1972 75,000 98.3 -- -- -- --
HAWTHORNE, WESTCHESTER COUNTY, NY
1 Skyline Drive........................ 1980 20,400 50.0 -- -- -- --
2 Skyline Drive........................ 1987 30,000 100.0 -- -- -- --
17 Skyline Drive....................... 1989 85,000 100.0 -- -- -- --
30 Saw Mill River Road................. 1982 248,400 100.0 -- -- -- --
YONKERS, WESTCHESTER COUNTY, NY
1 Executive Boulevard.................. 1982 112,000 83.3 -- -- -- --
3 Executive Boulevard.................. 1987 58,000 100.0 -- -- -- --
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
LESTER, DELAWARE COUNTY, PA
International Court at Airport Business
Center(7)
International Court I.................. 21.84 SAP America, Inc.
(82%)
International Court II................. 17.93 PNC Bank (52%), Mercy
Health Plan (35%)
International Court III................ 19.68 SAP America, Inc.
(39%), McLaren Hart
Environmental Engi-
neering Corp. (39%),
Mercy Health Plan
(14%)
BERWYN, CHESTER COUNTY, PA
1235 Westlakes Drive................... -- Pepper Hamilton &
Scheetz (18%), Ratner
& Prestia (14%),
Turner Investment
Partners (10%)
1205 Westlakes Drive................... -- Provident Investment
Mutual Life Insur-
ance Co.(35%), Ora-
cle Corporation (30%)
1055 Westlakes Drive................... -- Tokai Financial Ser-
vices (92%)
1000 Westlakes Drive................... -- PNC Bank, N.A. (38%),
Drinker Biddle &
Reath (24%),
Manchester, Inc.
(14%)
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard.................... 18.65 Allstate Insurance
Co. (16%), The Pru-
dential Insurance Co.
(21%), Provident Sav-
ings F.A. (20%), John
Alden Life Insurance
Co. of NY (11%)
ELMSFORD, WESTCHESTER COUNTY, NY
100 Clearbrook Road(6)................. -- ANS (41%) Robert
Martin Co. (36%)
101 Executive Boulevard................ -- Pennysaver Group
(23%), Alcone Sim's
O'Brien (22%)
570 Taxter Road........................ -- Connecticut General
(16%)
HAWTHORNE, WESTCHESTER COUNTY, NY
1 Skyline Drive........................ -- Childtime Childcare
(50%)
2 Skyline Drive........................ -- MW Samara (42%),
Perinin Construction
(45%), Boykoff & Bell
(13%)
17 Skyline Drive....................... -- IBM (100%)
30 Saw Mill River Road................. -- IBM (100%)
YONKERS, WESTCHESTER COUNTY, NY
1 Executive Boulevard.................. -- Wise/Contact US
(17%), York Intl.
(11%)
3 Executive Boulevard.................. -- GMAC/MIC (48%),
Metropolitan Life
(22%), City & Subur-
ban (15%)
</TABLE>
S-35
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TARRYTOWN, WESTCHESTER COUNTY, NY
200 White Plains Road.................. 1982 89,000 90.1 -- -- -- --
220 White Plains Road.................. 1984 89,000 98.3 -- -- -- --
WHITE PLAINS, WESTCHESTER COUNTY, NY
1 Barker Avenue........................ 1975 68,000 97.0 -- -- -- --
3 Barker Avenue........................ 1983 65,300 98.0 -- -- -- --
1 Water Street......................... 1979 45,700 100.0 -- -- -- --
11 Martine Avenue...................... 1987 180,000 98.5 -- -- -- --
50 Main Street......................... 1985 309,000 94.2 -- -- -- --
---------- ----------- ----------- ----------- ------ -----
Total Office Properties: 8,402,029 96.7 67,407 63,009 90.78 19.00(11)
---------- ----------- ----------- ----------- ------ -----
OFFICE/FLEX PROPERTIES
TOTOWA, PASSAIC COUNTY, NJ
11 Commerce Way........................ 1989 47,025 100.0 412 412 0.55 9.86
20 Commerce Way........................ 1992 42,540 100.0 467 467 0.63 10.98
29 Commerce Way........................ 1990 48,930 100.0 454 430 0.61 9.28
40 Commerce Way........................ 1987 50,576 85.7 426 416 0.57 8.42
45 Commerce Way........................ 1992 51,207 100.0 478 454 0.64 9.33
60 Commerce Way........................ 1988 50,333 100.0 292 273 0.39 5.80
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
TARRYTOWN, WESTCHESTER COUNTY, NY
200 White Plains Road.................. -- Independent Health
(28%), Allmerica
Finance (17%), NYS
Dept. of Environmen-
tal Services(13%)
220 White Plains Road.................. -- Stellare Management
(11%)
WHITE PLAINS, WESTCHESTER COUNTY, NY
1 Barker Avenue........................ -- O'Connor, McGuinn
(19%), United Skys
Realty Corp. (18%)
3 Barker Avenue........................ -- Bernard C. Harris
(56%)
1 Water Street......................... Trigen Energy (37%),
Stewart Title (15%)
11 Martine Avenue...................... -- KPMG Peat Marwick LLP
(14%), McCarthy
Fingar (11%), David
Worby (11%)
50 Main Street......................... -- National Economic
Research (10%)
-----
Total Office Properties: 17.54(
-----
OFFICE/FLEX PROPERTIES
TOTOWA, PASSAIC COUNTY, NJ
11 Commerce Way........................ 9.86 Caremark Homecare
(78%), Olsten Health
Services (11%), Sie-
mens Electromechanic
(11%)
20 Commerce Way........................ 10.98 Motorola Inc. (45%),
Siemens Electro
Components 41%), John
Guest USA (14%)
29 Commerce Way........................ 8.79 Sandvik Sorting Sys-
tems,Inc.(44%), Pat-
erson Dental Supply
Inc. (23%), Fujitec
America Inc. (22%),
Bell Atlantic Merid-
ian Systems(11%)
40 Commerce Way........................ 8.23 Thomson Electronics
(36%), Minolta Busi-
ness Systems
Inc.(36%), Snap-On,
Inc. (14%), Inchscape
Testing Services
(14%)
45 Commerce Way........................ 8.87 Ericsson Radio Sys-
tems Inc. (52%),
Woodward Clyde
Consultants (27%),
Oakwood Corporate
Housing (10%), Sen-
sormatic Electronics
(10%)
60 Commerce Way........................ 5.42 Relectronic Service
Corp. (43%), Erics-
son Inc. (29%), Max-
lite-S.K. America
(14%) HW Exhibits
(14%)
</TABLE>
S-36
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
80 Commerce Way (7).................... 1996 22,500 88.6 -- -- -- --
100 Commerce Way (7)................... 1996 24,600 33.9 -- -- -- --
120 Commerce Way....................... 1994 9,024 100.0 128 126 0.17 14.18
140 Commerce Way....................... 1994 26,881 100.0 210 210 0.28 7.81
WALL TOWNSHIP, MONMOUTH
COUNTY, NJ
1325 Campus Parkway.................... 1988 35,000 99.7 392 391 0.53 12.19
1340 Campus Parkway.................... 1992 72,502 88.9 600 600 0.81 9.31
1345 Campus Parkway.................... 1995 76,300 100.0 -- -- -- --
1320 Wykoff Road....................... 1986 20,336 100.0 190 190 0.26 9.34
1324 Wykoff Road....................... 1987 21,168 100.0 206 206 0.28 9.73
1433 Highway 34........................ 1985 69,020 78.8 563 549 0.76 8.61
HAMILTON TOWNSHIP, MERCER COUNTY, NJ
100 Horizon Drive...................... 1989 13,275 100.0 226 226 0.30 17.02
200 Horizon Drive...................... 1991 45,770 85.3 445 445 0.60 11.40
300 Horizon Drive...................... 1989 69,780 100.00 923 919 1.25 13.23
500 Horizon Drive...................... 1990 41,205 100.0 436 427 0.59 11.40
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
80 Commerce Way (7).................... -- Hey Diddle Diddle
Inc. (40%), IDEXX
Veterinary Services
(37%), Bell Atlantic
Communications (12%)
100 Commerce Way (7)................... -- Minolta (34%)
120 Commerce Way....................... 13.96 Deerfield Healthcare
(100%)
140 Commerce Way....................... 7.81 Advanced Images
Systems Inc.(20%),
Philips Consumer
(l9%), Holder Group
Inc. (11%), Showa
Toll USA Inc. (10%),
TelSource (10%),
Dairygold (10%),
Universal Hospital
Services (10%), Alpha
Testing (10%)
WALL TOWNSHIP, MONMOUTH
COUNTY, NJ
1325 Campus Parkway.................... 12.16 American Press (71%)
1340 Campus Parkway.................... 9.31 Groundwater & Envi-
ronmental Ser-
vices(33%), Software
Shop(22%), Monmouth
Ocean Hospital (15%),
Association for
Retarded Citizens
(11%)
1345 Campus Parkway.................... -- Depot America
Inc.(37%), Quadramed
Corp.(24%), Devine
Corp. (10%)
1320 Wykoff Road....................... 9.34 Eastern Automation
(71%), AT&T Corp.
(29%)
1324 Wykoff Road....................... 9.73 AT&T Corp. (53%),
State of New Jersey
(25%), Supply Saver,
Inc. (22%)
1433 Highway 34........................ 8.40 State Farm Mutual
Auto Insurance (22%),
NJ Natural Gas Co.
(14%)
HAMILTON TOWNSHIP, MERCER COUNTY, NJ
100 Horizon Drive...................... 17.02 H.I.P. of New Jersey
Inc. (100%)
200 Horizon Drive...................... 11.40 O.H.M. Remediation
Services Corp. (85%)
300 Horizon Drive...................... 13.17 State of NJ/D.E.P
(50%), McFaul & Lyons
(26%), Fluor Daniel
GTI (24%)
500 Horizon Drive...................... 11.17 First Financial
(30%), Lakeview Child
Center Inc.(19%), MCI
Systems House Corp.
(18%), NJ Builders
Assoc. (14%), Diedre
Moire Corp. (11%)
</TABLE>
S-37
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ELMSFORD, WESTCHESTER
COUNTY, NY
1 Westchester Plaza.................... 1967 25,000 100.0 -- -- -- --
2 Westchester Plaza.................... 1968 25,000 100.0 -- -- -- --
3 Westchester Plaza.................... 1969 93,500 100.0 -- -- -- --
4 Westchester Plaza.................... 1969 44,700 100.0 -- -- -- --
5 Westchester Plaza.................... 1969 20,000 100.0 -- -- -- --
6 Westchester Plaza.................... 1968 20,000 76.0 -- -- -- --
7 Westchester Plaza.................... 1972 46,200 100.0 -- -- -- --
8 Westchester Plaza.................... 1971 67,200 69.6 -- -- -- --
11 Clearbrook Road..................... 1974 31,800 100.0 -- -- -- --
75 Clearbrook Road..................... 1990 32,720 100.0 -- -- -- --
150 Clearbrook Road.................... 1975 74,900 100.0 -- -- -- --
175 Clearbrook Road.................... 1973 98,900 100.0 -- -- -- --
200 Clearbrook Road.................... 1974 94,000 100.0 -- -- -- --
250 Clearbrook Road.................... 1973 155,000 84.2 -- -- -- --
50 Executive Boulevard................. 1969 45,200 100.0 -- -- -- --
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
ELMSFORD, WESTCHESTER
COUNTY, NY
1 Westchester Plaza.................... -- KCI Therapeutic
(40%), Thin Film
Concepts (20%), RS
Knapp(20%), American
Greeting (20%)
2 Westchester Plaza.................... -- Board of Cooperation
(78%), Kin-Tronics
(12%), Squires Pro-
duction (10%)
3 Westchester Plaza.................... -- Apria Healthcare
(32%), Kangol
Headware (28%), V-
Band Corp. (16%),
Dental Concepts (12%)
4 Westchester Plaza.................... -- Metropolitan Life
(38%), EEV Inc. (34%)
Arsys Innotech Corp.
(13%)
5 Westchester Plaza.................... -- Kramer Scientific
(26%), Rokonet
Industries (25%), UA
Plumbers Education
(25%), Furniture Etc.
(13%) Fujitsu (13%)
6 Westchester Plaza.................... -- Xerox Corp. (28%),
Signacon Control
(28%), Girard Rubber
Co. (12%)
7 Westchester Plaza.................... -- Emigrant Savings
(57%), Fire-End
Croker (22%), Health
Maintenance (10%)
8 Westchester Plaza.................... -- Mamiya Amnerica
(17%), Self Powered
Lighting (14%)
11 Clearbrook Road..................... -- Eastern Jungle (27%),
Treetops Inc. (21%)
MCS Marketing (18%),
Creative Medical
(14%), Westchester
Party Rental(14%)
75 Clearbrook Road..................... -- Evening Out
Inc.(100%)
150 Clearbrook Road.................... -- Court Sports I(24%),
Philips Medical
(18%), Transwestern
Pub (12%) ADT
Security Systems,
Inc. (11%)
175 Clearbrook Road.................... -- Midland Avenue (35%),
Hypres (14%)
200 Clearbrook Road.................... -- Midland Avenue (22%),
Proftech Corp. (20%),
IR Industries (18%),
Wyse Technology (15%)
250 Clearbrook Road.................... -- AFP Imaging (42%),
The Artina Group
(14%)
50 Executive Boulevard................. -- MMO Music Group
(66%), Medical Bill-
ing (21%)
</TABLE>
S-38
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
77 Executive Boulevard................. 1977 13,000 100.0 -- -- -- --
85 Executive Boulevard................. 1968 31,000 100.0 -- -- -- --
300 Executive Boulevard................ 1970 60,000 100.0 -- -- -- --
350 Executive Boulevard................ 1970 15,400 100.0 -- -- -- --
399 Executive Boulevard................ 1962 80,000 100.0 -- -- -- --
400 Executive Boulevard................ 1970 42,200 100.0 -- -- -- --
500 Executive Boulevard................ 1970 41,600 100.0 -- -- -- --
525 Executive Boulevard................ 1972 61,700 100.0 -- -- -- --
HAWTHORNE, WESTCHESTER
COUNTY, NY
4 Skyline Drive........................ 1987 80,600 100.0 -- -- -- --
8 Skyline Drive........................ 1985 50,000 100.0 -- -- -- --
10 Skyline Drive....................... 1985 20,000 100.0 -- -- -- --
11 Skyline Drive....................... 1989 45,000 88.1 -- -- -- --
15 Skyline Drive....................... 1989 55,000 100.0 -- -- -- --
200 Saw Mill River Road................ 1965 51,100 90.2 -- -- -- --
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
77 Executive Boulevard................. -- Bright Horizons
(55%), WNN Corpo-
ration (35%)
85 Executive Boulevard................. -- Vrex Inc. (49%),
Westhab Inc,. (18%),
Saturn II Systems
(11%), John
Caulfields (13%)
300 Executive Boulevard................ -- Varta Batteries
(44%), Princeton Ski
Outlet (43%), LMG
International (12%)
350 Executive Boulevard................ -- Copytex Corp. (100%)
399 Executive Boulevard................ -- American Banknote
(72%), Kaminstein
Imports (28%)
400 Executive Boulevard................ -- Baker Engineering
(39%), North Ameri-
can Van Lines (25%),
Execu- Lunch Inc.
(13%)
500 Executive Boulevard................ -- Original Con-
sume(36%), Dover
Elevator (16%), Com-
merceOverseas(16%),
Charles Martine
(13%), Olsten Home
Health (13%)
525 Executive Boulevard................ -- Vie de France (59%),
New York Blood
Center(21%)
HAWTHORNE, WESTCHESTER
COUNTY, NY
4 Skyline Drive........................ -- GEC Alsthom (60%)
8 Skyline Drive........................ -- Cityscape (51%),
Reveo Inc. (29%),
Stratasys Inc. (12%)
10 Skyline Drive....................... -- DX Communications
(65%), Galston Corp.
(17%), KPMG Peat
Marwick, LLP (18%)
11 Skyline Drive....................... -- Cube Computer (41%),
Bowthorpe Holdings
(18%), Planned
Parenthood (11%)
15 Skyline Drive....................... -- United Parcel Service
(34%), Tellabs Opera-
tion Inc. (27%), Emi-
sphere Technology
(23%), Minolta Cop-
ier (16%)
200 Saw Mill River Road................ -- Walter Degruyter
(21%), Monahans
Plumbing & Heating
(14%), Argents Air
Express(12%), SI
Industrial (10%), AAR
Hardware (10%)
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
YONKERS, WESTCHESTER
COUNTY, NY
100 Corporate Boulevard................ 1987 78,000 100.0 -- -- -- --
4 Executive Plaza...................... 1986 80,000 100.0 -- -- -- --
6 Executive Plaza...................... 1987 80,000 100.0 -- -- -- --
1 Odell Plaza.......................... 1980 106,000 100.0 -- -- -- --
5 Odell Plaza.......................... 1983 38,400 100.0 -- -- -- --
7 Odell Plaza.......................... 1984 42,600 93.5 -- -- -- --
<CAPTION>
STAMFORD, FAIRFIELD COUNTY, CT
<S> <C> <C> <C> <C> <C> <C> <C>
419 West Avenue........................ 1986 88,000 100.0 -- -- -- --
500 West Avenue........................ 1988 25,000 100.0 -- -- -- --
550 West Avenue........................ 1990 54,000 100.0 -- -- -- --
---------- ----------- ----------- ----------- ------ -----
Total Office/Flex Properties: 2,950,692 96.0 6,848 6,741 9.22 10.00(11)
---------- ----------- ----------- ----------- ------ -----
INDUSTRIAL/WAREHOUSE PROPERTIES
ELMSFORD, WESTCHESTER
COUNTY, NY
1 Warehouse Lane....................... 1957 6,600 100.0 -- -- -- --
2 Warehouse Lane....................... 1957 10,900 100.0 -- -- -- --
3 Warehouse Lane....................... 1957 77,200 100.0 -- -- -- --
4 Warehouse Lane....................... 1957 195,500 92.2 -- -- -- --
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
YONKERS, WESTCHESTER
COUNTY, NY
100 Corporate Boulevard................ -- Bank of New York
(28%), Montefiore
Medical Center (19%),
Xerox Corp. (13%),
Quality Lifestyle
(12%), Medigene (11%)
4 Executive Plaza...................... -- O K Industries (42%),
Minami International
(14%)
6 Executive Plaza...................... -- Cablevision System
(40%), KVL Audio
Visual (12%), Empire
Managed (10%)
1 Odell Plaza.......................... -- Court Sports II
(19%), Gannett Satel-
lite (11%), Crown
Trophy (10%)
5 Odell Plaza.......................... -- Voyetra Technology
(44%), Photo File
Inc. (34%), Premier
Pharmacy (22%)
7 Odell Plaza.......................... -- US Post Office (41%),
Bright Horizons
(16%), TT Systems Co
(12%), CP Bourg Inc.
(12%)
STAMFORD, FAIRFIELD COUNTY, CT
<S> <C> <C>
419 West Avenue........................ -- Smith Industries
(76%)
500 West Avenue........................ -- TNT Skypac (26%),
Stamford Associates
(26%), Lead Track-
ers(21%), Delecor USA
(17%), M. Cohen &
Sons (11%)
550 West Avenue........................ -- Lifecodes Corp.
(44%), Davidoff of
Geneva (40%)
-----
Total Office/Flex Properties: 9.84(
-----
INDUSTRIAL/WAREHOUSE PROPERTIES
ELMSFORD, WESTCHESTER
COUNTY, NY
1 Warehouse Lane....................... -- JP Trucking Ser-
vice(100%)
2 Warehouse Lane....................... -- RJ Bruno Roofing
(55%), Savin Engi-
neering (41%)
3 Warehouse Lane....................... -- United Parcel Service
(100%)
4 Warehouse Lane....................... -- San Mar Laboratory
(55%), Marcraft
Clothes (18%), 2
Westchester County
Medical Center (11%)
</TABLE>
S-40
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE 1996
PERCENTAGE OF 1996 AVERAGE
NET LEASED 1996 1996 TOTAL OFFICE BASE RENT
RENTABLE AS OF BASE EFFECTIVE AND OFFICE/ PER
PROPERTY YEAR AREA 6/30/97 RENT RENT FLEX SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000)(2) ($000)(3) BASE RENT(%) ($)(4)
- ----------------------------------------- --------- ---------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
5 Warehouse Lane....................... 1957 75,100 100.0 -- -- -- --
6 Warehouse Lane....................... 1982 22,100 100.0 -- -- -- --
---------- ----------- ----------- ----------- ------ -----
Total Industrial/Warehouse Properties: 387,400 96.1 -- -- -- --
---------- ----------- ----------- ----------- ------ -----
Total Properties: 11,740,121 96.5 74,255 69,750 100.00 17.28(11)
---------- ----------- ----------- ----------- ------ -----
---------- ----------- ----------- ------
<CAPTION>
1996 TENANTS LEASING
AVERAGE 10% OR MORE
EFFECTIVE OF NET
RENT PER RENTABLE AREA
PROPERTY SQ. FT. PER PROPERTY
LOCATION ($)(5) AS OF 6/30/97(6)
- ----------------------------------------- ----------- ---------------------
<S> <C> <C>
5 Warehouse Lane....................... -- F&V Distribution
(54%), Conway Import
Co. (10%)
6 Warehouse Lane....................... -- Conway General (96%)
-----
Total Industrial/Warehouse Properties: --
-----
Total Properties: 16.07(
-----
</TABLE>
- ------------------------
(1) Based on all leases in effect as of June 30, 1997.
(2) Total base rent for 1996, determined in accordance with GAAP. Substantially
all of the leases provide for annual base rents plus recoveries and
escalation charges based upon the tenant's proportionate share of and/or
increases in real estate taxes and certain operating costs, as defined, and
the pass through of charges for electrical usage.
(3) Total base rent for 1996 minus total 1996 amortization of tenant
improvements, leasing commissions and other concessions and costs,
determined in accordance with GAAP.
(4) Base rent for 1996 divided by net rentable square feet leased at December
31, 1996, with the exception of those properties acquired or fully
constructed by the Company during 1996. (See Note 7 below).
(5) Effective rent for 1996 divided by net rentable square feet leased at
December 31, 1996, with the exception of those properties acquired or fully
constructed by the Company during 1996. (See Note 7 below).
(6) Excludes office space leased by the Company.
(7) As this Property was acquired or fully constructed by the Company during
1996, the amounts represented in 1996 base rent and 1996 effective rent
reflect only that portion of the year during which the Company owned or
placed the Property in service during the year. Accordingly, these amounts
may not be indicative of the Property's full year results. Additionally, the
amounts represented in 1996 average base rent per sq. ft. and 1996 average
effective rent per sq. ft. for this Property have been calculated by taking
1996 base rent and 1996 effective rent for such Property and annualizing
these partial-year results, dividing such annualized amounts by net rentable
square feet leased at December 31, 1996. These annualized per square foot
amounts may not be indicative of the Property's results had the Company
owned or placed the Property in service for the entirety of 1996.
(8) The Harborside Financial Center was completely reconstructed from 1983
through 1990, although the base structure was originally constructed in
1930.
(9) The Company has a lease agreement with a parking services company for the
use of certain land at Harborside to be used as a paid parking area.
(10) 15 Essex Road was sold by the Company on March 20, 1996.
(11) Includes only those Properties owned by the Company and placed in service
by January 1, 1996.
S-41
<PAGE>
The following table sets out a schedule of the lease expirations for the
Office Properties owned as of June 30, 1997, beginning July 1, 1997, assuming
that none of the tenants exercises renewal options:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL ANNUAL BASE AVG. ANNUAL
NET RENTABLE AREA LEASED SQ. FT. RENT RENT PER NET
NUMBER OF SUBJECT TO REPRESENTED BY UNDER EXPIRING RENTABLE SQ. FT.
PERIOD OF LEASES EXPIRING EXPIRING LEASES ($000) REPRESENTED BY
EXPIRATION EXPIRING (1) LEASES (SQ. FT.) LEASES(%) (2) EXPIRING LEASES ($)
----------- --------------- ------------------ ----------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
7/1/97-12/31/97............... 105 454,447 5.64 9,214 20.28
1998.......................... 149 837,191 10.38 16,660 19.90
1999.......................... 185 1,003,252 12.44 19,523 19.46
2000.......................... 135 1,867,434 23.16 34,986 18.73
2001.......................... 98 843,019 10.46 17,794 21.11
2002.......................... 63 435,695 5.40 9,481 21.76
2003.......................... 27 887,381 11.01 12,546 14.14
2004.......................... 12 115,848 1.44 2,610 22.53
2005.......................... 13 190,421 2.36 3,295 17.30
2006.......................... 15 258,054 3.20 5,161 20.00
2007.......................... 5 34,305 0.43 742 21.63
2008.......................... 5 229,823 2.85 4,226 18.39
2009.......................... 9 587,184 7.28 12,683 21.60
2011.......................... 2 70,550 0.89 1,270 18.00
2012.......................... 3 247,568 3.06 5,736 23.17
--- ---------- ------ ------- -----
Total/Weighted Average........ 826 8,062,172 100.00 155,927 19.34
--- ---------- ------ ------- -----
--- ---------- ------ -------
</TABLE>
- ------------------------
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Based upon aggregate base rent, determined in accordance with GAAP,
including all leases dated on or before June 30, 1997.
S-42
<PAGE>
The following table sets out a schedule of the lease expirations for the
Office/Flex Properties owned as of June 30, 1997, beginning July 1, 1997,
assuming that none of the tenants exercises renewal options:
<TABLE>
<CAPTION>
AVG. ANNUAL
NET RENTABLE AREA PERCENTAGE OF TOTAL ANNUAL BASE RENT RENT PER NET
NUMBER OF SUBJECT TO LEASED SQ. FT. UNDER EXPIRING RENTABLE SQ. FT.
PERIOD OF LEASES EXPIRING REPRESENTED BY LEASES ($000) REPRESENTED BY
EXPIRATION EXPIRING (1) LEASES (SQ. FT.) EXPIRING LEASES (%) (2) EXPIRING LEASES ($)
- ----------------------------- --------------- ------------------ ------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
7/1/97-12/31/97.............. 35 212,689 7.83 2,557 12.02
1998......................... 71 402,928 14.84 4,953 12.29
1999......................... 57 398,014 14.65 4,535 11.39
2000......................... 53 526,127 19.37 6,404 12.17
2001......................... 53 567,452 20.89 7,096 12.51
2002......................... 25 292,374 10.76 3,892 13.31
2003......................... 5 83,695 3.08 1,085 12.96
2004......................... 1 39,060 1.44 445 11.39
2005......................... 1 7,225 0.27 71 9.83
2006......................... 2 50,320 1.85 1,148 22.81
2007......................... 2 67,918 2.50 888 13.07
2008......................... 2 34,376 1.27 320 9.31
2009......................... 3 33,863 1.25 579 17.10
--- ---------- ------ ------- ------
Total/Weighted Average....... 310 2,716,041 100.00 33,973 12.51
--- ---------- ------ ------- ------
--- ---------- ------ -------
</TABLE>
- ------------------------
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office tenants. Some tenants have multiple
leases.
(2) Based upon aggregate base rent, determined in accordance with GAAP,
including all leases dated on or before June 30, 1997.
The following table sets out a schedule of the lease expirations for the
Industrial/Warehouse Properties owned as of June 30, 1997, beginning July 1,
1997, assuming that none of the tenants exercises renewal options:
<TABLE>
<CAPTION>
AVG. ANNUAL
NET RENTABLE AREA PERCENTAGE OF TOTAL RENT PER NET
NUMBER OF SUBJECT TO LEASED SQ. FT. ANNUAL BASE RENT RENTABLE SQ. FT.
PERIOD OF LEASES EXPIRING REPRESENTED BY UNDER EXPIRING REPRESENTED BY
EXPIRATION EXPIRING (1) LEASES (SQ. FT.) EXPIRING LEASES (%) LEASES ($000) (2) EXPIRING LEASES ($)
- ----------------------------- ----------------- ------------------ ------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
7/1/97-12/31/97.............. 6 41,950 11.25 366 8.72
1998......................... 5 122,313 32.79 634 5.18
1999......................... 2 7,500 2.01 76 10.13
2000......................... 3 58,894 15.79 554 9.41
2001......................... 3 33,778 9.05 597 17.67
2004......................... 1 108,600 29.11 1,098 10.11
--
------- ------ ----- -----
Total/Weighted Average....... 20 373,035 100.00 3,325 8.91
--
--
------- ------ ----- -----
------- ------ -----
</TABLE>
- ------------------------
(1) Includes industrial/warehouse tenants only. Excludes leases for amenity,
retail, parking and month-to-month office tenants. Some tenants have
multiple leases.
(2) Based upon aggregate base rent, determined in accordance with GAAP,
including all leases dated on or before June 30, 1997.
S-43
<PAGE>
10 PERCENT PROPERTY
Because the 1996 gross revenues for Harborside Financial Center was in
excess of 10 percent of the aggregate gross revenues for the Properties and
because such Property is expected to be the Company's only 10 percent Property,
calculated on the basis of assets, gross revenues or occupied square footage, at
December 31, 1997, additional information regarding this Property is provided
below.
HARBORSIDE FINANCIAL CENTER, JERSEY CITY, NEW JERSEY. Harborside is a
completely redeveloped, three building office complex containing 1.9 million
square feet of net rentable area located in the Exchange Place/Newport Center
sub-market of Jersey City, New Jersey. This sub-market 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 table sets forth certain information (on a per net rentable
square foot basis unless otherwise indicated) about Harborside since January 1,
1992 (based upon an average of all lease transactions during the respective
periods):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Number of leases signed during the period (1).................. 4 3 9 5 8 3
Rentable square footage leased during period (1)............... 192,278 12,143 201,933 50,806 186,133 41,919
Base rent ($) (1) (2).......................................... 18.18 20.35 16.04 22.33 20.41 21.89
Tenant improvements ($) (3).................................... 39.82 24.31 17.69 19.21 13.38 4.13
Leasing commissions ($) (4).................................... 14.60 8.68 10.28 4.71 10.45 10.75
Other concessions ($) (5)...................................... 0.00 0.00 0.00 0.00 0.00 0.00
Effective rent ($) (6)......................................... 14.41 13.86 13.91 19.95 18.07 20.48
Expense stop ($) (7)........................................... 0.98 3.42 3.91 2.52 4.34 7.46
Effective equivalent triple net rent ($) (8)................... 13.43 10.44 10.00 17.43 13.73 13.02
Occupancy rate at end of period (%) (1)........................ 78.6 88.1 93.3 96.1 98.8 97.5
</TABLE>
- ------------------------
(1) Includes only office tenants with lease terms of 12 months or longer.
Excludes leases for amenity, 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 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 per square foot minus expense stop per square foot.
S-44
<PAGE>
The following schedule sets forth the average percentage leased and average
annual rental per leased square foot for the years ended December 31, 1991
through 1996 and the six months ended June 30, 1997 for Harborside:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
RENTAL PER
AVERAGE LEASED SQUARE
PERCENTAGE FOOT ($) (2)
PERIOD LEASED (%) (1) (3)
- ---------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
1/1/97 - 6/30/97............................................................ 98.2 20.63(4)
1996........................................................................ 97.5 16.23(4)
1995........................................................................ 94.7 15.99
1994........................................................................ 90.7 15.26
1993........................................................................ 83.4 16.36
1992........................................................................ 73.5 14.69
</TABLE>
- ------------------------
(1) Average of beginning and end of period aggregate percentage leased.
(2) Total base rents for the period, determined in accordance with GAAP, divided
by the average of beginning and end of year aggregate net rentable square
feet leased.
(3) Average annual rental per leased square foot for the six months ended June
30, 1997 is computed on an annualized basis.
(4) Harborside was acquired by the Company on November 4, 1996. Such acquisition
resulted in certain upward adjustments in Harborside's base rent, in
accordance with GAAP, for such period.
Four tenants at Harborside occupied approximately 64.0 percent of the net
rentable square feet in the aggregate as of June 30, 1997, as follows:
Bankers Trust Harborside, Inc., a commercial bank, occupied approximately
385,000 net rentable square feet at June 30, 1997 (approximately 20.0 percent of
the total net rentable square feet of Harborside) pursuant to a triple net lease
which expires on March 31, 2003, with a five-year renewal option at an annual
base rent of approximately $3.3 million. Total rental income from Bankers Trust,
including escalations and recoveries, was approximately $1.6 million for the
period January 1, 1997 through June 30, 1997. The lease provides for, among
other things, an annual rental increase of $770,000 to an annual rent of
approximately $3.3 million beginning in April 1998.
Dow Jones Telerate Holdings, Inc., a telecommunications firm, occupied
approximately 373,000 net rentable square feet at June 30, 1997 (approximately
20.0 percent of the total net rentable square feet of Harborside) pursuant to
various leases expiring June 30, 1999 through June 5, 2006, with two five-year
renewal options on 285,000 square feet and one five-year renewal option on
45,000 square feet. Total rental income from Dow Jones Telerate Holdings, Inc.,
including escalations and recoveries, was approximately $4.6 million for the
period January 1, 1997 through June 30, 1997. The lease covering 45,000 square
feet provides for an increase in base rent of approximately $181,000 beginning
in June 2001.
American Institute of Certified Public Accountants (AICPA), a professional
organization, occupied 250,000 net rentable square feet at June 30, 1997
(approximately 13.0 percent of total net rentable square feet of Harborside)
pursuant to a lease that expires July 31, 2012, with a ten-year renewal option.
Total rental income from the AICPA, including escalations and recoveries, was
approximately $3.6 million for the period January 1, 1997 through June 30, 1997.
The AICPA lease provides for, among other things, annual rental increases of
approximately $836,000 in July 2002 and $836,000 in July 2007.
Dean Witter Trust Company, a securities firm, occupied approximately 179,000
net rentable square feet and Dean Witter Reynolds Inc. occupied approximately
42,000 net rentable square feet (a combined total of approximately 11.0 percent
of the total net rentable square feet of Harborside) at June 30, 1997, pursuant
to leases which expire in February 2008, with five-year and ten-year renewal
options. Total
S-45
<PAGE>
combined rental income from Dean Witter Trust Company and Dean Witter Reynolds
Inc., including escalations and recoveries, was approximately $2.9 million for
the period January 1, 1997 through June 30, 1997. The lease with Dean Witter
Trust Company provides for, among other things, annual rental increases of
approximately $251,000 in February 1998 and $537,000 in February 2003. The lease
with Dean Witter Reynolds Inc. provides for, among other things, annual rental
increases of approximately $59,000 in May 1998 and $127,000 in May 2003.
The following table sets forth a schedule of the lease expirations for
Harborside, beginning July 1, 1997, assuming that none of the tenants exercises
renewal options:
<TABLE>
<CAPTION>
AVG. ANNUAL
NET RENTABLE AREA PERCENTAGE OF TOTAL ANNUAL BASE RENT RENT PER NET
NUMBER OF SUBJECT TO LEASED SQ. FT. UNDER EXPIRING RENTABLE SQ. FT.
PERIOD OF LEASES EXPIRING REPRESENTED BY LEASES ($000) REPRESENTED BY
EXPIRATION EXPIRING (1) LEASES (SQ. FT.) EXPIRING LEASES (%) (2) EXPIRING LEASES ($)(2)
- -------------------------- ----------------- ------------------ ------------------- ---------------- -----------------------
<S> <C> <C> <C> <C> <C>
1998................... 3 28,586 1.57 676 23.65
1999................... 7 85,209 4.69 1,986 23.31
2000................... 7 295,477 16.26 5,917 20.03
2001................... 2 69,996 3.85 1,679 23.99
2003................... 2 391,299 21.53 3,269 8.35
2004................... 1 24,729 1.36 590 23.86
2005................... 5 118,971 6.55 1,734 14.57
2006................... 9 158,410 8.72 2,954 18.65
2007................... 4 32,638 1.80 705 21.60
2008................... 4 227,128 12.51 4,176 18.39
2009................... 3 137,076 7.54 3,513 25.63
2012................... 3 247,568 13.62 5,736 23.17
--
---------- ------ ------- -----
Total/Weighted Average.... 50 1,817,087 100.00 32,935 18.13
--
--
---------- ------ ------- -----
---------- ------ -------
</TABLE>
- ------------------------
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Based upon aggregate base rent, determined in accordance with GAAP,
including all leases dated on or before June 30, 1997.
S-46
<PAGE>
THE MACK PROPERTIES
GENERAL
The Mack Properties are 55 office properties comprising a total of
approximately 9.4 milion rentable square feet, ranging from approximately 40,000
to 475,000 rentable square feet. As of June 30, 1997, the Mack Properties had a
weighted average occupancy rate of approximately 94.8 percent and were leased to
over 1,000 tenants. As of June 30, 1997, only one tenant, occupying 100 percent
of two properties aggregating approximately 862,000 net rentable square feet
under two separate lease agreements, represented more than 10 percent of the
aggregate contractual annualized base rent of the Mack portfolio.
The properties are located throughout the continental United States,
primarily in the Northeast and Southwest, with a concentration of properties
located in Northern New Jersey (25 properties comprising approximately 4.8
million square feet), Texas (17 properties comprising approximately 2.5 million
square feet) and Arizona (5 properties comprising approximately 609,000 square
feet). Generally each property has attractively landscaped sites, expansive
common areas (some with atriums), and on-site parking (some covered), in
addition to high quality design and construction. The Mack Properties are
generally managed by on-site employees under the direction of either The Mack
Company or Patriot American Office Group. The Mack Company believes that such
management provides for a high level of service to tenants, as well as a
proactive approach to building maintenance.
The properties are leased to a variety of service sector employers, as well
as a large number of professional firms and national and international firms.
Major tenants include, among others, AT&T Corp., AT&T Wireless Services,
Prentice-Hall, Inc., CMP Media Inc., Toys 'R' Us, Inc., Electronic Data Systems
Corp., KPMG Peat Marwick, LLP, Western Union Financial Services, Inc., Union
Pacific Railroad Company and American Express Travel Related Services Co., Inc.
Leases are typically structured with terms ranging from one to ten years,
however, approximately 2.3 million rentable square feet of the portfolio (26.3
percent of the aggregate net rentable area of the portfolio) are leased under 16
separate long-term leases which expire in 2007 or thereafter. Generally all
leases provide for contractual rent increases each five (5) year period. A
typical gross lease requires (i) payment of base rent, (ii) payment of the
tenant's proportionate share of real estate taxes, utilities and common area and
other operating expense escalations over a base year, and (iii) payment of
overtime HVAC and electrical use. Under these leases, the landlord is typically
responsible for certain structural repairs. Various of the properties are leased
to a single tenant or one or more major tenants on a triple net basis. Under
these leases, the respective tenant(s) are responsible for paying all or a
proportionate share of all real estate taxes, utilities and operating expenses;
under some leases, the tenant directly contracts and pays for such costs.
Additionally, some of the leases provide renewal options or provisions of
varying durations which extend the original lease terms, typically at either
market rents or negotiated rental rates set forth in the leases.
S-47
<PAGE>
MACK PROPERTIES
The following tables set forth certain historical information relating to
each of the Mack Properties which were owned by Mack as of June 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
NET PERCENTAGE 1996 1996 OF
RENTABLE LEASED BASE EFFECTIVE 1996
YEAR AREA AS OF RENT RENT TOTAL BASE
PROPERTY/LOCATION BUILT (SQ. FT.) 6/30/97(%)(1) ($000)(2) ($000)(3) RENT (%)
- --------------------------------------------- --------- ---------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
ROCHELLE PARK, BERGEN COUNTY, NJ
Mack Centre I -- 365 West Passaic Street... 1976 212,578 86.2 3,297 2,682 2.57
120 Passaic Street......................... 1972 52,000 100.0 575 551 0.45
PARAMUS, BERGEN COUNTY, NJ
Mack Centre II -- 650 From Road............ 1978 348,510 100.0 6,066 4,993 4.74
Mack Centre III -- 140 East Ridgewood
Avenue..................................... 1981 239,680 99.1 4,806 4,009 3.75
Mack Centre IV -- 61 South Paramus Road.... 1985 269,191 78.8 5,177 4,249 4.04
Mack Centre VI -- 461 From Road............ 1988 253,554 100.0 5,087 4,762 3.97
Mack Centre VII -- 15 East Midland
Avenue..................................... 1988 259,823 100.0 4,493 3,758 3.51
UPPER SADDLE RIVER, BERGEN COUNTY, NJ
Mack Saddle River -- One Lake Street....... 1973/94(7) 474,801 100.0 7,144 6,234 5.58
MONTVALE, BERGEN COUNTY, NJ
Mack Montvale I -- 95 Chestnut Ridge
Road....................................... 1975 47,700 100.0 507 290 0.40
Mack Montvale II -- 135 Chestnut Ridge
Road....................................... 1981 66,150 100.0 1,217 973 0.95
WOODCLIFF LAKE, BERGEN COUNTY, NJ
400 Chestnut Ridge Road.................... 1982 89,200 100.0 1,814 1,813 1.42
470 Chestnut Ridge Road.................... 1987 52,500 100.0 1,051 1,051 0.82
530 Chestnut Ridge Road.................... 1986 57,204 100.0 1,083 1,082 0.85
<CAPTION>
1996 AVG. TENANTS LEASING
1996 EFFECTIVE 10% OR MORE OF
AVERAGE RENT PER NET RENTABLE AREA
BASE RENT SQ. FT. PER PROPERTY
PROPERTY/LOCATION PER SQ. FT.($)(4) ($)(5) AS OF 6/30/97(6)
- --------------------------------------------- ------------------- ----------- -----------------------
<S> <C> <C> <C>
ROCHELLE PARK, BERGEN COUNTY, NJ
Mack Centre I -- 365 West Passaic Street... 19.15 15.58 Sizes Unlimited Inc.
(26%) Financial Telesis
Inc. (10%) Catalina
Marketing Corp. (10%)
120 Passaic Street......................... 11.06 10.60 Electronic Data
Systems Corp. (100%)
PARAMUS, BERGEN COUNTY, NJ
Mack Centre II -- 650 From Road............ 19.34 15.92 Western Union Financial
Services, Inc. (38%)
Mack Centre III -- 140 East Ridgewood
Avenue..................................... 22.05 18.40 AT&T Wireless
Services (41%), Smith
Barney
Inc. (19%)
Mack Centre IV -- 61 South Paramus Road.... 25.37 20.82 Dunn & Bradstreet
Software Services, Inc.
(10%)
Mack Centre VI -- 461 From Road............ 20.41 19.11 Toys 'R' Us, Inc. (89%)
Mack Centre VII -- 15 East Midland
Avenue..................................... 17.29 14.46 AT&T Wireless Services
(98%)
UPPER SADDLE RIVER, BERGEN COUNTY, NJ
Mack Saddle River -- One Lake Street....... 15.05 13.13 Prentice-Hall, Inc.
(100%)
MONTVALE, BERGEN COUNTY, NJ
Mack Montvale I -- 95 Chestnut Ridge
Road....................................... 10.63 6.08 ArgEvo E.H. (100%)
Mack Montvale II -- 135 Chestnut Ridge
Road....................................... 18.40 14.70 Alliance Funding
Company (100%)
WOODCLIFF LAKE, BERGEN COUNTY, NJ
400 Chestnut Ridge Road.................... 20.34 20.33 Timeplex, Inc. (100%)
470 Chestnut Ridge Road.................... 20.02 20.01 Timeplex, Inc. (100%)
530 Chestnut Ridge Road.................... 18.93 18.92 KPMG Peat Marwick, LLP
(100%)
</TABLE>
S-48
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NET PERCENTAGE 1996 1996 OF
RENTABLE LEASED BASE EFFECTIVE 1996
YEAR AREA AS OF RENT RENT TOTAL BASE
PROPERTY/LOCATION BUILT (SQ. FT.) 6/30/97(%)(1) ($000)(2) ($000)(3) RENT (%)
- --------------------------------------------- --------- ---------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
LITTLE FERRY, BERGEN COUNTY, NJ
Mack Airport -- 200 Riser Road............. 1974 286,628 100.0 991 896 0.77
MORRIS PLAINS, MORRIS COUNTY, NJ
Mack Lakeview Plaza -- 201 Littleton
Road....................................... 1979 88,369 89.0 1,414 1,135 1.10
Mack Morris Plains -- 250 Johnson Road..... 1977 75,000 100.0 1,125 782 0.88
MORRIS TOWNSHIP, MORRIS COUNTY, NJ
Kemble Plaza I -- 340 Mt. Kemble Ave....... 1985 387,000 100.0 5,244 5,198 4.09
Kemble Plaza II -- 412 Mt. Kemble Ave...... 1986 475,100 100.0 7,499 7,311 5.86
WAYNE, PASSAIC COUNTY, NJ
Mack Willowbrook -- 201 Willowbrook
Boulevard.................................. 1970 178,329 100.0 2,214 1,894 1.73
BRIDGEWATER, SOMERSET COUNTY, NJ
Mack Bridgewater I -- 721 Route 202/206.... 1989 192,741 100.0 3,631 2,558 2.84
CRANFORD, UNION COUNTY, NJ
Mack Cranford -- 12 Commerce Drive......... 1967 72,260 87.3 552 492 0.43
NEW PROVIDENCE, UNION COUNTY, NJ
Mack Murray Hill -- 890 Mountain Road...... 1977 80,000 59.2 1,538 1,437 1.20
<CAPTION>
1996 AVG. TENANTS LEASING
1996 EFFECTIVE 10% OR MORE OF
AVERAGE RENT PER NET RENTABLE AREA
BASE RENT SQ. FT. PER PROPERTY
PROPERTY/LOCATION PER SQ. FT.($)(4) ($)(5) AS OF 6/30/97(6)
- --------------------------------------------- ------------------- ----------- -----------------------
<S> <C> <C> <C>
LITTLE FERRY, BERGEN COUNTY, NJ
Mack Airport -- 200 Riser Road............. 3.46 3.13 Ford Motor Co. (34%)
Sanyo Fisher Service
Corp. (33%)
Dassault Falcon Jet
Corp. (33%)
MORRIS PLAINS, MORRIS COUNTY, NJ
Mack Lakeview Plaza -- 201 Littleton
Road....................................... 17.98 14.43 Poppe Tyson Inc. (34%)
Xerox Corp. (29%)
Willis Corroon Corp. of
New Jersey (20%)
Mack Morris Plains -- 250 Johnson Road..... 15.00 10.43 Electronic Data Systems
Corp. (100%)
MORRIS TOWNSHIP, MORRIS COUNTY, NJ
Kemble Plaza I -- 340 Mt. Kemble Ave....... 13.55 13.43 AT&T Corp. (100%)
Kemble Plaza II -- 412 Mt. Kemble Ave...... 15.78 15.39 AT&T Corp. (100%)
WAYNE, PASSAIC COUNTY, NJ
Mack Willowbrook -- 201 Willowbrook
Boulevard.................................. 12.42 10.62 The Grand Union Co.
(76%)
Woodward-Clyde
Consultants (24%)
BRIDGEWATER, SOMERSET COUNTY, NJ
Mack Bridgewater I -- 721 Route 202/206.... 18.84 13.27 Allstate Insurance
Company (37%) Norris,
McLaughlin & Marcus, PA
(30%) Lucent
Technologies, Inc.
(20%)
CRANFORD, UNION COUNTY, NJ
Mack Cranford -- 12 Commerce Drive......... 8.75 7.80 Dames & Moore (42%)
Registrar & Transfer
Co. (23%) Body
Connections, Inc. (20%)
NEW PROVIDENCE, UNION COUNTY, NJ
Mack Murray Hill -- 890 Mountain Road...... 19.23 17.97 Allstate Insurance
Company (59%)
</TABLE>
S-49
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NET PERCENTAGE 1996 1996 OF
RENTABLE LEASED BASE EFFECTIVE 1996
YEAR AREA AS OF RENT RENT TOTAL BASE
PROPERTY/LOCATION BUILT (SQ. FT.) 6/30/97(%)(1) ($000)(2) ($000)(3) RENT (%)
- --------------------------------------------- --------- ---------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
MILLBURN, ESSEX COUNTY, NJ
Mack Short Hills -- 150 J.F. Kennedy
Parkway.................................... 1980 247,476 100.0 5,241 4,965 4.09
EAST BRUNSWICK, MIDDLESEX COUNTY, NJ
Mack East Brunswick -- 377 Summerhill
Road....................................... 1977 40,000 100.0 363 359 0.28
WOODBRIDGE, MIDDLESEX COUNTY, NJ
Mack Woodbridge II -- 581 Main Street...... 1991 200,000 95.5 3,688 2,916 2.88
NORTH HEMPSTEAD, NASSAU COUNTY, NY
Mack Manhasset -- 111 East Shore Road...... 1980 55,575 100.0 1,612 1,591 1.26
Mack North Hills -- 600 Community Drive.... 1983 206,274 100.0 4,379 4,102 3.42
FISHKILL, DUTCHESS COUNTY, NY
Westage Business Center -- 300 South Lake
Drive.................................... 1987 118,727 99.8 1,471 1,228 1.14
TAMPA, HILLSBOROUGH COUNTY, FL
One Mack Centre -- 501 Kennedy Boulevard... 1982 297,429 90.5 3,852 3,480 3.01
PLYMOUTH MEETING, MONTGOMERY COUNTY, PA
Mack Plymouth Meeting -- 1150 Plymouth
Meeting Mall............................... 1970 167,748 98.4 2,451 2,317 1.91
<CAPTION>
1996 AVG. TENANTS LEASING
1996 EFFECTIVE 10% OR MORE OF
AVERAGE RENT PER NET RENTABLE AREA
BASE RENT SQ. FT. PER PROPERTY
PROPERTY/LOCATION PER SQ. FT.($)(4) ($)(5) AS OF 6/30/97(6)
- --------------------------------------------- ------------------- ----------- -----------------------
<S> <C> <C> <C>
MILLBURN, ESSEX COUNTY, NJ
Mack Short Hills -- 150 J.F. Kennedy
Parkway.................................... 21.18 20.06 KPMG Peat Marwick, LLP
(44%) Budd Larner Gross
Rosenbaum Greenberg &
Sade, PC (22%) Coldwell
Banker Residential Real
Estate (13%)
EAST BRUNSWICK, MIDDLESEX COUNTY, NJ
Mack East Brunswick -- 377 Summerhill
Road....................................... 9.08 8.97 Greater New York Mutual
Insurance Company
(100%)
WOODBRIDGE, MIDDLESEX COUNTY, NJ
Mack Woodbridge II -- 581 Main Street...... 19.98 15.80 First Investors
Management Company,
Inc.(46%) CIBA Consumer
Pharmaceuticals (39%)
NORTH HEMPSTEAD, NASSAU COUNTY, NY
Mack Manhasset -- 111 East Shore Road...... 29.01 28.63 Administrations for the
Professions, Inc.
(100%)
Mack North Hills -- 600 Community Drive.... 21.23 19.89 CMP Media, Inc. (100%)
FISHKILL, DUTCHESS COUNTY, NY
Westage Business Center -- 300 South Lake
Drive.................................... 13.59 11.34 Allstate Insurance
Company (15%)
TAMPA, HILLSBOROUGH COUNTY, FL
One Mack Centre -- 501 Kennedy Boulevard... 14.58 13.17 Raytheon Engineers &
Constructors, Inc.(31%)
Fowler, White, Gillen
Boggs, Villareal &
Banker, PA (30%)
PLYMOUTH MEETING, MONTGOMERY COUNTY, PA
Mack Plymouth Meeting -- 1150 Plymouth
Meeting Mall............................... 14.66 13.85 Smith Enviromental
Technologies Corp.
(42%)
Ken Crest Services
(16%)
Computer Learning
Centers, Inc. (12%)
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NET PERCENTAGE 1996 1996 OF
RENTABLE LEASED BASE EFFECTIVE 1996
YEAR AREA AS OF RENT RENT TOTAL BASE
PROPERTY/LOCATION BUILT (SQ. FT.) 6/30/97(%)(1) ($000)(2) ($000)(3) RENT (%)
- --------------------------------------------- --------- ---------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
PHOENIX, MARICOPA COUNTY, AZ
Beardsley Corporate Center -- 20002 North
19th Ave................................. 1986 119,301 100.0 673 389 0.53
Patriot Biltmore Plaza -- 6001 North 24th
Street................................... 1987 124,690 100.0 1,604 1,335 1.25
Mack Beardsley -- 19640 North 31st
Street................................... 1990 124,171 100.0 1,396 1,396 1.09
SCOTTSDALE, MARICOPA COUNTY, AZ
9060 E. Via Linda Boulevard................ 1984 111,200 100.0 1,276 1,276 1.00
GLENDALE, MARICOPA COUNTY, AZ
Mack Glendale -- 5551 West Talavi
Boulevard.................................. 1991 130,000 100.0 1,087 1,076 0.85
EULESS, TARRANT
COUNTY, TX
Landmark Centre -- 150 West Park Way....... 1984 74,429 96.6 856 738 0.67
RICHARDSON, DALLAS COUNTY, TX
Santa Fe Building -- 1122 Alma Road........ 1977 82,576 100.0 599 446 0.47
IRVING, DALLAS COUNTY, TX
Metroport -- 2300 Valley View.............. 1985 142,634 100.0 1,688 1,304 1.32
DALLAS, DALLAS COUNTY, TX
3100 Monticello............................ 1984 173,837 83.8 1,908 1,746 1.49
Preston Centre Plaza -- 8214 Westchester... 1983 95,509 89.3 1,096 944 0.86
Tri West Plaza -- 3030 LBJ Freeway......... 1984 367,018 96.0 4,660 4,059 3.64
<CAPTION>
1996 AVG. TENANTS LEASING
1996 EFFECTIVE 10% OR MORE OF
AVERAGE RENT PER NET RENTABLE AREA
BASE RENT SQ. FT. PER PROPERTY
PROPERTY/LOCATION PER SQ. FT.($)(4) ($)(5) AS OF 6/30/97(6)
- --------------------------------------------- ------------------- ----------- -----------------------
<S> <C> <C> <C>
PHOENIX, MARICOPA COUNTY, AZ
Beardsley Corporate Center -- 20002 North
19th Ave................................. 5.64 3.26 American Express Travel
Related Services Co.,
Inc. (100%)
Patriot Biltmore Plaza -- 6001 North 24th
Street................................... 12.86 10.71 Del Webb Corporation
(68%)
Wrigley Mansion Club,
Inc. (24%)
Mack Beardsley -- 19640 North 31st
Street................................... 11.24 11.24 American Express Travel
Related Services Co.,
Inc. (100%)
SCOTTSDALE, MARICOPA COUNTY, AZ
9060 E. Via Linda Boulevard................ 11.47 11.47 Sentry Insurance A
Mutual Company (100%)
GLENDALE, MARICOPA COUNTY, AZ
Mack Glendale -- 5551 West Talavi
Boulevard.................................. 8.36 8.28 Honeywell, Inc. (100%)
EULESS, TARRANT
COUNTY, TX
Landmark Centre -- 150 West Park Way....... 11.64 10.04 Warrantech Corporation
(34%)
Mike Bowman
Realtors/Century 21
(17%)
Landmark Bank-Mid
Cities (16%)
RICHARDSON, DALLAS COUNTY, TX
Santa Fe Building -- 1122 Alma Road........ 7.25 5.40 MCI Telecommunications
Corp. (100%)
IRVING, DALLAS COUNTY, TX
Metroport -- 2300 Valley View.............. 13.21 10.20 Nokia, Inc. (52%)
Computer Task Group,
Inc. (12%)
Alltell Information
Services, Inc.(12%)
DALLAS, DALLAS COUNTY, TX
3100 Monticello............................ 16.71 15.28 Insignia Financial
Group, Inc.(18%)
Time Marketing
Corporation (11%)
Preston Centre Plaza -- 8214 Westchester... 12.91 11.12 State Bank & Trust
(10%)
Preston Business
Center, Inc. (15%)
Malone Mortgage Company
America, Inc. (11%)
Tri West Plaza -- 3030 LBJ Freeway......... 12.84 11.18 Club Corporation
International (29%)
</TABLE>
S-51
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NET PERCENTAGE 1996 1996 OF
RENTABLE LEASED BASE EFFECTIVE 1996
YEAR AREA AS OF RENT RENT TOTAL BASE
PROPERTY/LOCATION BUILT (SQ. FT.) 6/30/97(%)(1) ($000)(2) ($000)(3) RENT (%)
- --------------------------------------------- --------- ---------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
PLANO, COLLIN COUNTY, TX
555 Republic Place......................... 1986 97,889 97.5 1,039 765 0.81
HOUSTON, HARRIS COUNTY, TX
Cornerstone Regency -- 14511 Falling
Creek...................................... 1982 70,999 87.4 584 466 0.46
Katy Plaza -- 5225 Katy Freeway............ 1983 112,213 92.0 899 646 0.70
5300 Memorial.............................. 1982 155,099 96.0 1,634 1,321 1.28
1717 St. James Place....................... 1975 109,574 96.0 988 796 0.77
1770 St. James Place....................... 1973 103,689 95.2 1,082 775 0.84
10497 Town & Country Way................... 1981 148,434 99.0 1,564 1,293 1.22
SAN ANTONIO, BEXAR COUNTY, TX
Bexar Plaza -- 1777 N.E. Loop 410.......... 1986 256,137 94.0 2,754 2,252 2.15
Century Building -- 84 N.E. Loop 410....... 1971 187,312 91.4 2,032 1,470 1.59
Riverview -- 111 Soledad................... 1918 248,153 60.0 1,269 999 0.99
AMARILLO, POTTER COUNTY, TX
Atrium at Coulter Ridge -- 6900 IH-40
West..................................... 1986 71,771 80.0 583 464 0.46
SAN FRANCISCO, SAN FRANCISCO COUNTY, CA
Phelan Building -- 760 Market Street....... 1908 267,446 83.1 4,078 3,726 3.18
OMAHA, DOUGLAS COUNTY, NE
Brandeis Building -- 210 South 16th
Street................................... 1894 319,535 94.4 2,326 2,210 1.82
<CAPTION>
1996 AVG. TENANTS LEASING
1996 EFFECTIVE 10% OR MORE OF
AVERAGE RENT PER NET RENTABLE AREA
BASE RENT SQ. FT. PER PROPERTY
PROPERTY/LOCATION PER SQ. FT.($)(4) ($)(5) AS OF 6/30/97(6)
- --------------------------------------------- ------------------- ----------- -----------------------
<S> <C> <C> <C>
PLANO, COLLIN COUNTY, TX
555 Republic Place......................... 10.61 7.81 William Smith
Enterprises (19%)
Kaiser Foundation
Health Plan of Texas
(17%)
Dayton Hudson
Corporation (14%)
HOUSTON, HARRIS COUNTY, TX
Cornerstone Regency -- 14511 Falling
Creek...................................... 8.53 6.81 Nationwide Mutual
Insurance Company (11%)
Katy Plaza -- 5225 Katy Freeway............ 9.09 6.53
5300 Memorial.............................. 11.08 8.96 Drypers Corporation
(20%)
HCI Chemicals USA,
Inc.(14%)
Datavox, Inc. (17%)
1717 St. James Place....................... 9.50 7.65 Mississippi Chemical
Express, Inc. (14%)
1770 St. James Place....................... 10.84 7.76 Gateway Homes, Inc.
(10%)
10497 Town & Country Way................... 10.61 8.77 Texas Ohio Gas, Inc.
(11%)
Vastar Resources,
Inc.(22%)
SAN ANTONIO, BEXAR COUNTY, TX
Bexar Plaza -- 1777 N.E. Loop 410.......... 11.64 9.52
Century Building -- 84 N.E. Loop 410....... 11.41 8.25 KBL Cable, Inc. (26%)
Pacificare of Texas,
Inc. (30%)
Kraft General Foods,
Inc. (25%)
Riverview -- 111 Soledad................... 9.35 7.36
AMARILLO, POTTER COUNTY, TX
Atrium at Coulter Ridge -- 6900 IH-40
West..................................... 9.86 7.85 Sitel Corporation (16%)
SAN FRANCISCO, SAN FRANCISCO COUNTY, CA
Phelan Building -- 760 Market Street....... 18.69 17.07 R.H. Macy & Company,
Inc. (19%)
Comp USA, Inc. (11%)
OMAHA, DOUGLAS COUNTY, NE
Brandeis Building -- 210 South 16th
Street................................... 7.72 7.33 Union Pacific Railroad
Company (69%)
</TABLE>
S-52
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
NET PERCENTAGE 1996 1996 OF
RENTABLE LEASED BASE EFFECTIVE 1996
YEAR AREA AS OF RENT RENT TOTAL BASE
PROPERTY/LOCATION BUILT (SQ. FT.) 6/30/97(%)(1) ($000)(2) ($000)(3) RENT (%)
- --------------------------------------------- --------- ---------- --------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
WEST DES MOINES, POLK COUNTY, IA
Century III -- 2600 Westown Parkway........ 1988 72,265 95.4 809 689 0.62
---------- ----- ---------- ---------- ------
Total Mack Properties...................... 9,357,428 94.8 128,066 111,689 100.00
---------- ----- ---------- ---------- ------
---------- ---------- ---------- ------
<CAPTION>
1996 AVG. TENANTS LEASING
1996 EFFECTIVE 10% OR MORE OF
AVERAGE RENT PER NET RENTABLE AREA
BASE RENT SQ. FT. PER PROPERTY
PROPERTY/LOCATION PER SQ. FT.($)(4) ($)(5) AS OF 6/30/97(6)
- --------------------------------------------- ------------------- ----------- -----------------------
<S> <C> <C> <C>
WEST DES MOINES, POLK COUNTY, IA
Century III -- 2600 Westown Parkway........ 11.75 10.00 MCI Telecommunications
Corp. (14%)
New England Mutual Life
Insurance Company (13%)
St. Paul Fire and
Marine Insurance
Company (19%)
American Express
Financial
Advisors, Inc. (10%)
----- -----
Total Mack Properties...................... 14.61 12.74
----- -----
</TABLE>
- ------------------------
(1) Based on all leases in effect as of June 30, 1997.
(2) Total base rent for 1996, determined in accordance with GAAP. Substantially
all of the leases provide for annual base rents plus recoveries and
escalation charges based upon the tenant's proportionate share of and/or
increases in real estate taxes and certain operating costs, as defined, and
the pass through of charges for electrical usage.
(3) Total base rent for 1996 minus total 1996 amortization of tenant
improvements, leasing commissions and other concessions and costs,
determined in accordance with GAAP.
(4) Base rent for 1996 divided by net rentable square feet leased at December
31, 1996.
(5) Effective rent for 1996 divided by net rentable square feet leased at
December 31, 1996.
(6) Excludes office space leased subsequent to June 30, 1997.
(7) A 130,000 square foot building addition was completed in 1994.
S-53
<PAGE>
MACK'S SIGNIFICANT TENANTS
The following table sets forth a schedule of Mack's ten largest tenants as
of June 30, 1997, based upon annualized contractual base rents for the month of
June 1997.
<TABLE>
<CAPTION>
PERCENTAGE
OF MACK'S
AVERAGE TOTAL
RENT PER ANNUALIZED LEASE
SQUARE FOOT BASE RENTAL EXPIRATION
TENANT NAME (2) REVENUE DATE
- ---------------------------------------------------------- TENANT ------------- ------------- ----------
ANNUALIZED
BASE RENTAL
REVENUE (1)
--------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
AT&T Corp................................................. $ 13,491 $15.65 10.21% Jan. 2008(3)
AT&T Wireless Services.................................... 7,653 21.76 5.79 March 2007(4)
Prentice Hall, Inc........................................ 5,795 12.21 4.39 Dec. 2014
CMP Media, Inc............................................ 4,823 21.75 3.65 Oct. 2014
Toys 'R' Us, Inc.......................................... 4,308 19.18 3.26 Dec. 2012
Timeplex, Inc............................................. 2,780 19.62 2.10 June 2004(5)
KPMG Peat Marwick, LLP.................................... 2,535 22.46 1.92 Sept. 2002
Western Union Financial Services, Inc..................... 2,434 18.50 1.84 Nov. 2000
Union Pacific Railroad Company............................ 2,394 10.79 1.81 May 2002
American Express Company.................................. 2,266 8.97 1.72 July 2000(6)
------- -----
Total............................................. $ 48,479 36.69%
------- -----
------- -----
</TABLE>
- ------------------------
(1) Annual base rental revenue is based on actual June 1997 billings annualized
and is not derived from historical GAAP results. The historical results for
the 12 months ended December 31, 1997 may differ from those set forth above.
(2) Represents tenant's annualized base rent divided by the respective tenant's
leased square feet as of June 30, 1997.
(3) Represents leases at two office properties. AT&T Corp.'s lease of (i)
475,100 net rentable square feet at Kemble Plaza II, Morris Township, New
Jersey expires in January 2008 and (ii) 387,000 net rentable square feet at
Kemble Plaza I, Morris Township, New Jersey expires in January 2009.
(4) Represents leases at three office properties. AT&T Wireless Services' leases
of (i) 255,536 net rentable square feet at Mack Centre VII, Paramus, New
Jersey expires in March 2007, (ii) 85,976 net rentable square feet in Mack
Centre III, Paramus, New Jersey expires in March 2007, and (iii) 10,113 net
rentable square feet in Mack Centre I, Rochelle Park, New Jersey expires in
May 1998.
(5) Represents leases at two office properties. Timeplex, Inc.'s lease of (i)
89,200 net rentable square feet at 400 Chestnut Ridge Road, Woodcliff Lake,
New Jersey expires in June 2004 and (ii) 52,500 net rentable square feet at
470 Chestnut Ridge Road, Woodcliff Lake, New Jersey expires in December
2005.
(6) Represents leases at three office properties. American Express Travel
Related Services Co., Inc.'s leases of (i) 124,171 net rentable square feet
at 19640 No. 31st St., Phoenix, Arizona expires in July 2000 and (ii)
119,301 net rentable square feet at 20002 No. 19th Ave., Phoenix, Arizona
expires in February 2004. American Express Financial Advisors, Inc.'s lease
of 9,175 net rentable square feet at Mack Centre IV, Paramus, New Jersey
expires in September, 1999.
S-54
<PAGE>
MACK PROPERTIES: SCHEDULE OF LEASE EXPIRATIONS
The following table sets forth a schedule of the lease expirations for the
Mack Properties beginning with the six months ending December 31, 1997 and
annually thereafter, assuming that none of the tenants exercises renewal
options:
<TABLE>
<CAPTION>
NET
RENTABLE AVERAGE ANNUAL
AREA RENT PER NET
SUBJECT TO PERCENTAGE OF TOTAL ANNUAL BASE RENT RENTABLE SQ. FT.
EXPIRING LEASED UNDER EXPIRING REPRESENTED BY
YEAR OF NUMBER OF LEASES SQ. FT. REPRESENTED LEASES EXPIRING LEASES
EXPIRATION LEASES EXPIRING(1) (SQ.FT.) BY EXPIRING LEASES(%) ($000)(2) ($)
- -------------------------------- ------------------- ----------- ----------------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
7/1/97-12/31/97................. 112 243,827 2.75 4,346 17.82
1998............................ 258 710,955 8.01 9,563 13.45
1999............................ 206 808,502 9.11 13,336 16.49
2000............................ 162 1,279,712 14.42 18,190 14.21
2001............................ 104 790,246 8.90 10,807 13.68
2002............................ 86 951,378 10.72 16,247 17.08
2003............................ 25 586,730 6.61 7,277 12.40
2004............................ 20 706,770 7.96 10,908 15.43
2005............................ 13 303,678 3.42 5,631 18.54
2006............................ 7 159,085 1.79 3,052 19.18
2007 & thereafter............... 16 2,335,817 26.31 38,445 16.46
----- ----------- -------- ------- -----
Total/Weighted Average.... 1,009 8,876,700 100.00 137,802 15.52
----- ----------- -------- ------- -----
----- ----------- -------- -------
</TABLE>
- ------------------------
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Based upon aggregate base rent, determined in accordance with GAAP, for all
leases dated on or before June 30, 1997.
S-55
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- -------------------------- --- -----------------------------------------------------------------------------
<S> <C> <C>
John J. Cali.............. 79 Chairman of the Board and a member of the Board of Directors of the Company.
In addition, Mr. Cali was a principal of Cali Associates and a member of its
Executive and Long Range Planning Committees. Mr. Cali co-founded Cali
Associates in 1949 and since such date has been responsible for its and the
Company's overall development strategies and policies.
Thomas A. Rizk............ 40 President, Chief Executive Officer and a member of the Board of Directors of
the Company. In addition, Mr. Rizk was a principal of Cali Associates and
served as its General Counsel and as a member of its Executive Committee from
1989 to 1994 and as its Chief Financial Officer from 1991 to 1994. Mr. Rizk
was responsible for coordinating all financial activities for Cali
Associates, including federal income tax planning, and for developing its
strategic direction and investment strategies. Mr. Rizk has remained
responsible for conducting these activities for the Company. Prior to joining
Cali Associates, Mr. Rizk was vice president and general counsel of Dubnoff &
Koch, a New Jersey-based real estate development firm.
John R. Cali.............. 50 Chief Administrative Officer of the Company. In addition, Mr. Cali was a
principal of Cali Associates and served as a member of its Long Range
Planning Committee from 1981 to 1994 and its Executive Committee from 1987 to
1994. Mr. Cali was responsible for the development of Cali Associates' office
system and the management of its office personnel and he remains responsible
for such duties with the Company. Mr. Cali also developed and organized the
leasing and property management departments of Cali Associates and he is now
responsible for directing the acquisition functions of the Company.
Brant Cali................ 43 Chief Operating Officer, Secretary and a member of the Board of Directors of
the Company. In addition, Mr. Cali was a principal of Cali Associates and
served as a member of its Executive and Long Range Planning Committees from
1981 to 1994. Mr. Cali is responsible for directing the leasing and property
management departments and providing overall strategic direction for the
Company.
Timothy M. Jones.......... 42 Executive Vice President of the Company. Prior to the Robert Martin Company
acquisition in January 1997, Mr. Jones served as Executive Vice President and
Chief Operating Officer of the Robert Martin Company, where he was
responsible for the daily corporate operations and management of the firm's
six-million square foot portfolio in New York and Connecticut. Mr. Jones
joined the Robert Martin Company in 1990 as Vice President of Construction,
where he was responsible for the organization, administration and
coordination of all the properties, both in the construction and planning
stages. In 1992, he became Senior Vice President, continuing to direct all
construction activities and was involved in the coordination of the firm's
finance, property management and construction divisions.
</TABLE>
S-56
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- -------------------------- --- -----------------------------------------------------------------------------
<S> <C> <C>
Barry Lefkowitz........... 35 Vice President, Chief Financial Officer of the Company. Mr. Lefkowitz is
responsible for all financial reporting matters, strategic financial
planning, long-term forecasting, investor relations and management of capital
markets activities. Before joining the Company, Mr. Lefkowitz was a Senior
Manager specializing in real estate with the accounting firm of Deloitte &
Touche LLP.
Roger W. Thomas........... 40 Vice President, General Counsel and Assistant Secretary of the Company. Mr.
Thomas' responsibilities include structuring and implementing Cali's
acquisitions and mergers, corporate governance, supervising outside legal
counsel, insuring legal compliance and preparation of required disclosure
documents. Mr. Thomas also assists the Company in investor relations and in
implementing the Company's investment strategies, financial activities, and
acquisitions. Prior to joining the Company, Mr. Thomas was a partner at the
law firm Dreyer & Traub in New York, specializing in real estate and
commercial transactions.
James Nugent.............. 44 Vice President-Leasing of the Company since its formation. In addition, from
1991 to 1994, Mr. Nugent served as the Senior Director of Leasing at Cali
Associates, supervising all leasing activity and analyzing the financial
aspects of all major leases, and he remains responsible for such duties with
the Company. From 1984 to 1991, Mr. Nugent's responsibilities included
negotiating the financial and business terms of leases for the Cali
Associates portfolio of properties, analyzing future projects and formulating
the structure of potential development opportunities.
Albert Spring............. 51 Vice President-Operations of the Company since its formation. In addition,
Mr. Spring was responsible from 1977 to 1994 for construction management at
Cali Associates, including engineering, processing approvals, estimating
costs and supervising contractors.
Angelo R. Cali............ 82 Member of the Board of Directors of the Company since its formation. Prior to
the formation of the Company, Mr. Cali was a principal of Cali Associates,
the real estate development company which was the predecessor of the Company,
and a member of its Executive and Long Range Planning Committees. Mr. Cali
co-founded Cali Associates in 1949 and was responsible for its organizational
development from such date until the completion of the Company's initial
public offering in 1994.
Brad W. Berger............ 42 Executive Vice President and a member of the Board of Directors of the
Company. Prior to the Robert Martin Company acquisition in January 1997, Mr.
Berger served as the Robert Martin Company's President and Chief Executive
Officer from 1994 to 1996, leading the Robert Martin Company's strategic,
organizational and financial endeavors. Employed with the Robert Martin
Company since 1977, Mr. Berger became Director of Commercial Leasing of the
Robert Martin Company in 1979, was promoted to Vice President in 1982 and
appointed to Executive Vice President in 1986, upon which he assumed the
daily operations responsibilities of the commercial real estate portfolio.
</TABLE>
S-57
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- -------------------------- --- -----------------------------------------------------------------------------
<S> <C> <C>
Robert F. Weinberg........ 68 Director of the Company. Prior to the Robert Martin Company acquisition in
January 1997, Mr. Weinberg served as Co-Chairman and General Partner of the
Robert Martin Company since its founding in 1957. Mr. Weinberg is presently
the Chairman of the Outreach Committee on Orderly Growth in Westchester, a
Director of City & Suburban Federal Savings Bank and a Director of the
Westchester County Association.
Alan G. Philibosian....... 44 Director of the Company. Mr. Philibosian is an attorney practicing in
Englewood, New Jersey. Mr. Philibosian is currently a Commissioner on The
Port Authority of New York & New Jersey, and also serves on the Board of
Directors of the Armenian Missionary Association of America, Paramus, New
Jersey and John Harms Center for the Arts, Englewood, New Jersey.
Brendan T. Byrne.......... 72 Director of the Company; Former two-term Governor of the State of New Jersey
and a senior partner with Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart &
Olstein, a Roseland, New Jersey law firm.
Kenneth A. DeGhetto....... 72 Director of the Company; Member of the Board of Directors and former
President of Foster Wheeler Corporation and member of the Board of Directors
of Brandon Systems.
James W. Hughes........... 52 Director of the Company; Dean of the Edward J. Bloustein School of Planning
and Public Policy at Rutgers University and Professor of Urban Planning and
Policy Development.
Irvin D. Reid............. 56 Director of the Company; President of Montclair State University (formerly
Montclair State College) in New Jersey and a member of the Board of Directors
of Fleet Bank, N.A.
Alan Turtletaub........... 82 Director of the Company; Founder and Chairman of the Board of The Money
Store. Mr. Turtletaub is also the founder and a board member of the National
Second Mortgage Association and is also on the advisory board of Valley
National Bank.
</TABLE>
Upon the consummation of the Transaction, the composition of the Board of
Directors of the Company will change. "See "Recent Developments--Pending
Transaction" and "--Organizational Changes". Three of the Board of Directors'
thirteen members will be new members designated by Mack. The Mack designees will
be William L. Mack, Earle I. Mack and Mitchell E. Hersh. Three members of the
Board of Directors will be designated by the Company. The Company designees will
be current members of the Board of Directors and will be John J. Cali, who will
remain Chairman of the Board of Directors, Thomas A. Rizk, who will remain Chief
Executive Officer, and Robert F. Weinberg. The remaining seven directors will be
independent outside directors. They will include three existing independent
members of Cali's Board of Directors, Brendan Byrne, Irvin Reid and Alan
Philibosian, and four independent members who will be selected by Mack and
reasonably approved by Cali. Kenneth A. DeGhetto, Alan Turtletaub, James W.
Hughes, Brad W. Berger, Angelo Cali and Brant Cali will resign from the Board of
Directors at the closing of the Transaction.
After the consummation of the Transaction, the Board of Directors will
create an Executive Committee. William L. Mack will serve as Chairman of the
Executive Committee, which will consist of William L. Mack, Mitchell E. Hersh,
Thomas A. Rizk and John J. Cali.
Thomas A. Rizk will remain Chief Executive Officer of the Company after the
consummation of the Transaction, and Mitchell E. Hersh will be appointed
President and Chief Operating Officer by the Board
S-58
<PAGE>
of Directors. The Company's existing executive officers will retain their
current positions and responsibilities, except that Thomas A. Rizk will resign
as President, Brant Cali will resign as Chief Operating Officer and John R. Cali
will resign as Chief Administrative Officer.
The following sets forth certain information with respect to the additional
directors and executive officers of the Company upon completion of the
Transaction. No assurance can be made that the Transaction will be consummated.
WILLIAM L. MACK will be appointed Chairman of the Executive Committee of the
Company and as a member of the Board of Directors in connection with the
Transaction. Prior to the Transaction, Mr. Mack served as Managing Partner of
The Mack Company, where he pioneered the development of large, Class A office
properties and helped to increase The Mack Company's portfolio to approximately
20 million square feet of office, industrial, retail and hotel facilities. Mr.
Mack also served as Chairman of Patriot American Group. In addition, Mr. Mack is
a managing partner of Apollo Real Estate Advisors, L.P. which investment funds
have invested in approximately $5 billion of various diversified real estate
ventures. Mr. Mack attended Wharton School of Business and Finance at the
University of Pennsylvania and has a B.S. degree in business administration,
finance and real estate from New York University.
EARLE I. MACK will be appointed as a member of the Board of Directors in
connection with the Transaction. Prior to the Transaction, Mr. Mack served as
Senior Partner and Chief Financial Officer of The Mack Company since 1964. Mr.
Mack, together with his three brothers, led The Mack Company in pioneering the
development of large, Class A office properties and helped to grow The Mack
Company's portfolio to approximately 20 million square feet of office,
industrial, retail and hotel facilities. Mr. Mack has a B.S. degree in Business
Administration from Drexel University and also attended Fordham Law School.
MITCHELL E. HERSH will be appointed President and Chief Operating Officer of
the Company and as a member of the Board of Directors in connection with the
Transaction. Prior to the Transaction, Mr. Hersh has served as a partner of The
Mack Company since 1982 and Chief Operating Officer of The Mack Company since
1990, where he was responsible for overseeing the development, operations,
leasing and acquisitions of The Mack Company's office and industrial portfolio.
Mr. Hersh has a B.A. degree in architecture from Ohio University.
S-59
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS TO HOLDERS OF COMMON STOCK
The following summary of certain United States federal income tax
considerations to holders of Common Stock is based on current law, is for
general information only, and is not tax advice. The tax treatment of a holder
of Common Stock will vary depending upon such holder's particular situation, and
this discussion does not purport to deal with all aspects of taxation that may
be relevant to particular stockholders in light of their personal investment or
tax circumstances, or to certain types of stockholders (including insurance
companies, financial institutions or broker-dealers, tax-exempt organizations,
foreign corporations, and persons who are not citizens or residents of the
United States, except to the extent discussed under the heading "Taxation of
Tax-Exempt Stockholders" and "Taxation of Non-U.S. Stockholders") subject to
special treatment under the United States federal income tax laws.
THIS SUMMARY SUPPLEMENTS THE DISCUSSION SET FORTH IN THE SECTION IN THE
ACCOMPANYING PROSPECTUS ENTITLED "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS TO THE COMPANY OF ITS REIT ELECTION," WHICH CONTAINS A SUMMARY OF
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TO THE COMPANY, AND SHOULD BE READ
TOGETHER THEREWITH. EACH INVESTOR IS ADVISED TO CONSULT WITH HIS OWN TAX
ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND
SALE OF COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
TAXPAYER RELIEF ACT OF 1997
The recently-enacted Taxpayer Relief Act of 1997 (the "Act") revises several
of the REIT-related requirements, and, in general, modifies the general
requirements for qualification as a REIT and the taxation of a REIT. The Act is
generally effective for the taxable years of a REIT beginning after August 5,
1997. Thus, the amendments in the law resulting from the Act will not apply to
the Company until the Company's taxable year beginning on January 1, 1998. Set
forth below is a brief summary of certain provisions of the Act.
In order for the Company to maintain its qualification as a REIT, during the
last half of each taxable year, not more than 50 percent in value of the
Company's outstanding stock may be owned, actually or constructively, by five or
fewer individuals (as defined to include certain entities). (See "Certain United
States Federal Income Tax Considerations to the Company of its REIT
Election--Taxation of the Company as a REIT--Requirements for Qualification" in
the accompanying Prospectus). Effective for the Company's taxable years
beginning on or after January 1, 1998, so long as the Company complies with the
Treasury regulations (the "Stock Ownership Regulations") for ascertaining the
ownership of its stock, the Company will not lose its qualification as a REIT as
a result of a violation of the foregoing requirement if it neither knows nor
upon exercising reasonable diligence would have known of such violation.
Furthermore, under pre-Act law, the Company's failure to comply with the Stock
Ownership Regulations could have resulted in the Company's disqualification as a
REIT for the taxable year of the failure. Effective for the Company's taxable
years beginning on or after January 1, 1998, instead of being disqualified as a
REIT, the Company would be subject to a financial penalty of $25,000 ($50,000
for intentional violations) for any year in which the Company fails to comply
with the Stock Ownership Regulations. Furthermore, if the Company can establish
that its failure to comply was due to reasonable cause and not to willful
neglect, no penalty would be imposed.
The Company must also satisfy certain gross income tests on an annual basis.
(See "Certain United States Federal Income Tax Considerations to the Company of
its REIT Election--Taxation of the Company as a REIT--Income Tests" in the
accompanying Prospectus). Under pre-Act law, short-term gain from the sale or
other disposition of stock or securities, gain from prohibited transactions and
gain on the sale or other disposition of real property held for fewer than four
years (apart from involuntary conversions and sales of foreclosure property)
must constitute less than 30 percent of the Company's gross
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income (including gross income from prohibited transactions) for each taxable
year (the "30 Percent Test"). Effective for the Company's taxable years
beginning on or after January 1, 1998, the Company will no longer be subject to
the 30 Percent Test.
For purposes of the 75 percent and 95 percent gross income tests (together,
the "Gross Income Tests"), in order for the rents received by the Company in
respect of property to qualify as "rents from real property," the Company is
generally not permitted to operate or manage the property or furnish or render
services to the tenants of such property, other than through an "independent
contractor" from whom the Company derives no revenue; except that the Company
may directly perform certain services that are "usually or customarily rendered"
in connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. (See "Certain United
States Federal Income Tax Considerations to the Company of its REIT
Election--Taxation of the Company as a REIT-- Income Tests" in the accompanying
Prospectus). Effective for the Company's taxable years beginning on or after
January 1, 1998, the Company may render a DE MINIMIS amount of impermissible
services to tenants, or in connection with the management of a property
(together, "Impermissible Services"), without having otherwise qualifying rents
from the property being disqualified as "rents from real property". In order to
qualify for this DE MINIMIS exception, the amount received by the Company for
Impermissible Services with respect to any property for any taxable year may not
exceed 1 percent of all amounts received or accrued by the Company during such
taxable year with respect to such property. For purposes of the foregoing, the
amount treated as "received" by the Company for Impermissible Services will not
be less than 150 percent of the Company's direct cost in rendering such service.
However, the amount of any income that the Company receives for Impermissible
Services will not be treated as "rents from real property" for purposes of the
Gross Income Tests. The Operating Partnership may receive fees in consideration
of the performance of management and administrative services with respect to
properties that are not owned entirely by the Operating Partnership. Although a
portion of such management and administrative fees generally will not constitute
"qualifying income" for purposes of the Gross Income Tests, the Company believes
that the aggregate amount of such fees (plus any income from Impermissible
Services and other nonqualifying income) in any taxable year will not cause the
Company to fail the Gross Income Tests.
Also, rents received by the Company from a tenant will not qualify as "rents
from real property" for purposes of the Gross Income Tests if the Company, or an
owner of 10 percent or more of the Company, directly or constructively owns 10
percent or more of such tenant (a "Related Tenant"). (See "Certain United States
Federal Income Tax Considerations to the Company of its REIT Election--Taxation
of the Company as a REIT--Income Tests" in the accompanying Prospectus).
Effective for the Company's taxable years beginning on or after January 1, 1998,
the constructive ownership rules for determining whether a tenant is a Related
Tenant have been modified with respect to partners and partnerships so that
attribution between partners and partnerships occurs only when a partner owns,
directly and/or indirectly, a 25 percent-or-greater interest in the partnership.
Thus, a tenant will not be treated as a Related Tenant with respect to the
Company if shares of the Company are owned by a partnership and a partner that
owns, directly and indirectly, a less-than-25 percent interest in such
partnership also owns an interest in the tenant. A tenant will also not be a
Related Tenant with respect to the Company if stockholders of the Company and
owners of such tenant are partners in a partnership in which neither own,
directly and/or indirectly, a 25 percent-or-greater interest.
Also effective for the Company's taxable years beginning on or after January
1, 1998, except to the extent provided by regulations, "qualifying income" for
purposes of the Gross Income Tests would include payments to the Company under
an interest rate swap, cap agreement, option, futures contract, forward rate
agreement or any similar financial instrument entered into by the Company to
hedge its indebtedness, as well as any gain from the disposition of any of the
foregoing investments.
Other amendments enacted pursuant to the Act include: (a) an earnings and
profits ("E&P") sourcing rule which, for purposes of determining whether a REIT
has non-REIT E&P as of the close of its taxable year, treats a REIT's
distributions of accumulated E&P as being made out of the REIT's earliest
accumulated E&P, (b) an extension of the period for which property may be
treated as "foreclosure
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property", (c) the exclusion of involuntarily converted property from the
"prohibited transaction" rules, (d) the treatment of any wholly-owned subsidiary
of a REIT (whether or not the subsidiary has always been wholly-owned by the
REIT) as a "qualified REIT subsidiary" (although certain tax consequences may
result from such treatment), (e) the expansion of the list of "excess noncash"
items for purposes of the annual 95 percent distribution requirement and (f) an
election to allow the Company to retain its net long-term capital gain
(discussed below).
TAXATION OF TAXABLE U.S. STOCKHOLDERS GENERALLY
As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock who (for United States federal income tax purposes) is (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity that is treated as a domestic entity for federal income tax
purposes, (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source, (iv) a trust (other than a
grantor trust) which (x) was in existence on August 20, 1996 and was treated as
a U.S. person on August 19, 1996 and (y) has elected, pursuant to regulations
(which have not yet been issued), to continue to be treated as a U.S. person, or
(v) a trust not described in (iv) above, if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust.
As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Stockholders as ordinary income. Such distributions will not be
eligible for the dividends-received deduction in the case of U.S. Stockholders
that are corporations. Distributions made by the Company that are properly
designated by the Company as capital gain dividends will be taxable to taxable
U.S. Stockholders as long-term capital gains (to the extent that they do not
exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which a U.S. Stockholder has held his shares of stock.
U.S. Stockholders that are corporations may, however, be required to treat up to
20 percent of certain capital gain dividends as ordinary income. As a result of
the enactment of the Act, although the matter is not entirely free from doubt,
it would appear that the portion of any such capital gain dividends attributable
to gain recognized after July 28, 1997 with respect to capital assets held by
the Company for more than 18 months on the date of sale will be treated as
long-term capital gain taxable to the stockholders at a maximum rate of 20
percent (or 25 percent to the extent any such gain arises from the recapture of
straight-line depreciation deductions reflected in the basis of real property
that has been held by the Company for more than 18 months as of the date of
sale), and the portion of such capital gain dividends attributable to gain
recognized with respect to property that has been held for more than one year
but not more than 18 months will be treated as long-term capital gain taxable to
the stockholders at a maximum rate of 28 percent.
Also, pursuant to the Act, effective for its taxable years beginning on or
after January 1, 1998, the Company may elect to retain its net long term capital
gains recognized during a taxable year ("Retained Gains") and pay a
corporate-level tax on such Retained Gains. Corporations are currently subject
to a maximum 35 percent tax on recognized capital gains. A stockholder owning
shares of the Company's stock on December 31st of a taxable year in which the
Company has Retained Gains would be required to include in gross income such
stockholder's proportionate share of the Retained Gains (as designated by the
Company in a notice mailed to stockholders within 60 days following the end of
the taxable year). The amount of any corporate-level tax paid by the Company in
respect of the Retained Gains (the "Company Tax") would be treated as having
been paid by the stockholders of the Company and each stockholder would receive
a credit for such stockholder's share of the Company Tax. A stockholder's basis
in his shares of Company stock would increase by the excess of such
stockholder's proportionate share of the Retained Gains over the stockholder's
share of the Company Tax. In addition, if the Company, in general, should fail
to distribute during each calendar year at least the sum of (i) 85 percent of
its REIT ordinary income for each such year, (ii) 95 percent of its REIT capital
gain net income for each such year and (iii) any
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undistributed taxable income from prior years, the Company would be subject to a
4 percent excise tax (the "Excise Tax") on the excess of such required
distribution over the amounts actually distributed. It is unclear under the Act
whether the Excise Tax could apply to the Retained Gains. (See "Certain United
States Federal Income Tax Considerations to the Company of its REIT Election --
Taxation of the Company as a REIT -- General" in the accompanying Prospectus).
Unless the Retained Gains were treated as actually distributed, it is possible
that the Retained Gains might be subject to the Excise Tax.
To the extent that the Company makes distributions (not designated as
capital gain dividends) in excess of its current and accumulated earnings and
profits, such distributions will be treated first as a tax-free return of
capital to each U.S. Stockholder, reducing the adjusted basis which such U.S.
Stockholder has in his shares of stock for tax purposes by the amount of such
distribution (but not below zero), with distributions in excess of the U.S.
Stockholder's adjusted basis in his shares taxable as capital gains (provided
that the shares have been held as a capital asset). Any such distribution in
excess of a stockholder's adjusted basis in his shares of Company stock will be
included in income as long-term capital gain subject to a maximum rate of 20
percent if the gain is recognized after July 28, 1997, and the shares have been
held for more than 18 months at the time of distribution, long-term capital gain
subject to a maximum tax rate of 28 percent if the shares have been held for
more than one year but not more than 18 months as of the time of distribution
and short-term capital gain subject to a maximum rate of up to 39.6 percent if
the shares were held for no more than one year at the time of the distribution.
Distributions declared by the Company in October, November or December of any
year and payable to a stockholder of record on a specified date in any such
month shall be treated as both paid by the Company and received by the
stockholder on December 31 of such year, provided that the dividend is actually
paid by the Company on or before January 31 of the following calendar year.
Stockholders may not include in their own income tax returns any net operating
losses or capital losses of the Company.
In general, any loss recognized by a U.S. Stockholder upon the sale or other
disposition of shares of the Company that have been held for six or fewer months
(after applying certain holding period rules) will be treated as a long-term
capital loss, to the extent of distributions received by such U.S. Stockholder
from the Company which were required to be treated as a long-term capital gain.
TAX CONSEQUENCES OF THE TRANSACTION
Pursuant to the Contribution Agreement, the Company will acquire each of the
Mack Properties as a contribution to the capital of CRLP in exchange for a
combination of Units, the assumption of certain liabilities, and, in certain
cases cash and Warrants. The Mack Properties have an aggregate value of
approximately $1.2 billion. Pursuant to Section 721 of the Code, no gain or loss
will be recognized by CRLP or to any of its partners (including the Company) as
a result of the contribution of the Mack Properties to CRLP. Pursuant to Section
723 of the Code, the basis of the Mack Properties shall be equal to the adjusted
tax basis of such properties at the time of contribution, increased by the
amount of gain recognized by Mack upon contribution. The aggregate adjusted tax
bases of the Mack Properties at the time of contribution is estimated to be
approximately $480 million, which will be increased by the amount of gain
recognized by Mack. Generally, the difference between the value of contributed
property (which, in the case of the Mack Properties, is approximately $1.2
billion) at the time of contribution and the adjusted tax bases of such
contributed property (which, in the case of the Mack Properties, is
approximately $480 million) at the time of contribution reflects the built
in-gain associated with such contributed property (the "Book--Tax Difference").
The Book-Tax Difference of the Properties as a result of the Transaction will be
approximately $720 million, which will be reduced by the amount of gain
recognized by Mack. CRLP and Cali have elected to utilize the "traditional
method" of taking into account the Book-Tax Difference and, accordingly, Cali
may not be entitled to the benefit of depreciation deductions attributable to
the Book-Tax Difference. As a result, Cali may be required to distribute more
dividends in order to satisfy a 95 percent distribution requirement than it
would have had the Company purchased the assets for cash in a taxable
transaction. (See "Certain United States Federal Income Tax Considerations to
the Company of its REIT
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Election -- Taxation of the Company as a REIT -- Annual Distribution
Requirements" in the accompanying Prospectus). In addition, the amount of
tax-free return of capital to each U.S. Stockholder may be less than the amount
each stockholder would have realized had the Company purchased the assets for
cash in a taxable transaction.
BACKUP WITHHOLDING
The Company will report to its U.S. Stockholders and to the Internal Revenue
Service (the "IRS") the amount of dividends paid during each calendar year, and
the amount of tax withheld, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31 percent with
respect to dividends paid unless such holder (a) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact or (b) provides a taxpayer identification number, certifies as to no loss
of exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A U.S. Stockholder that does not
provide the Company with the correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the stockholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any stockholders who fail to certify their non-foreign status to the Company.
See "--Taxation of Non-U.S. Stockholders."
TAXATION OF TAX-EXEMPT STOCKHOLDERS
In applying the REIT stock ownership test under the Code, a pension trust
generally is not treated as a single individual. Rather, beneficiaries of
certain pension trusts are treated as holding the shares of a REIT in proportion
to their actuarial interests in such trust, and thus permits certain pension
trusts to acquire more concentrated ownership of a REIT.
In addition, a pension fund owning more than 10 percent of a REIT must treat
a percentage of dividends from the REIT as "unrelated business taxable income"
("UBTI"). The percentage is determined by dividing the REIT's gross income
derived from an unrelated trade or business for the year by the gross income of
the REIT for the year in which the dividends are paid. If this percentage is
less than five percent, however, dividends are not treated as UBTI. In general,
the UBTI rule applies to a REIT where the REIT qualifies as a REIT by reason of
the above modification of the stock ownership test and (i) one pension trust
owns more than 25 percent of the value of the REIT; or (ii) a group of pension
trusts individually holding more than 10 percent of the value of the REIT
collectively owns more than 50 percent of the value of the REIT.
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing United States federal income taxation of the ownership
and disposition of stock by persons that are, for purposes of such taxation,
nonresident alien individuals, foreign corporations, foreign partnerships or
foreign estates or trusts (collectively, "Non-U.S. Stockholders") are complex,
and no attempt is made herein to provide more than a brief summary of such
rules. Accordingly, the discussion does not address all aspects of United States
federal income tax and does not address state, local or foreign tax consequences
(including treaty benefits, if any, that may be available in certain instances)
that may be relevant to a Non-U.S. Stockholder in light of its particular
circumstances. In addition, this discussion is based on current law, which is
subject to change, and assumes that the Company qualifies for taxation as a
REIT. Prospective Non-U.S. Stockholders should consult with their own tax
advisers to determine the impact of federal, state, local and foreign income tax
laws with regard to an investment in stock, including any reporting
requirements.
DISTRIBUTIONS. Distributions by the Company to a Non-U.S. Stockholder that
are neither attributable to gain from sales or exchanges by the Company of
"United States real property interests" (discussed below) nor designated by the
Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions ordinarily will be subject to
withholding of United States federal income tax
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on a gross basis (that is, without allowance of deductions) at a 30 percent rate
unless an applicable treaty lowers the withholding rate. However, if income from
the investment in Common Stock is treated as effectively connected with the
conduct by the Non-U.S. Stockholder of a United States trade or business, the
Non-U.S. Stockholder will be subject to tax on a net basis (that is, after
allowance of deductions) at graduated rates, in the same manner as U.S.
Stockholders are taxed with respect to such distributions, and are generally not
subject to withholding. Any such effectively connected distributions received by
a Non-U.S. Stockholder that is a corporation may also be subject to an
additional branch profits tax at a 30 percent rate or such lower rate as may be
specified by an applicable income tax treaty. The Company expects to withhold
United States federal income tax at the rate of 30 percent on the gross amount
of any distributions paid to a Non-U.S. Stockholder unless (i) a lower treaty
rate applies and the required form evidencing eligibility for that reduced rate
is filed with the Company or (ii) the Non-U.S. Stockholder files an IRS Form
4224 with the Company claiming that the distribution is "effectively connected"
income.
Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's stock, but rather
will reduce the adjusted basis of such stock. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's stock, they
will give rise to tax liability if the Non-U.S. Stockholder would otherwise be
subject to tax on any gain from the sale or disposition of his stock, as
described below. If it cannot be determined at the time a distribution is made
whether or not such distribution will be in excess of current and accumulated
earnings and profits, the distribution may be subject to withholding at the rate
applicable to dividends. However, amounts thus withheld are generally refundable
if it is subsequently determined that such distribution was, in fact, in excess
of current and accumulated earnings and profits of the Company. In such a case,
the Non-U.S. Stockholder must file a U.S. income tax return with the IRS to
claim a refund.
Distributions to a Non-U.S. Stockholder that are designated by the Company
at the time of distribution as capital gains dividends (other than those arising
from the disposition of a United States real property interest) generally will
not be subject to United States federal income taxation, unless (i) investment
in the stock is effectively connected with the Non-U.S. Stockholder's United
States trade or business, in which case the Non U.S. Stockholder will be subject
to the same treatment as U.S. Stockholders with respect to such gain (except
that a stockholder that is a foreign corporation may also be subject to the 30
percent branch profits tax, as discussed above), or (ii) the Non-U.S.
Stockholder is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and has a "tax home" in the
United States, in which case the nonresident alien individual will be subject to
a 30 percent tax on the individual capital gains.
Distributions to a Non-U.S. Stockholder that are attributable to gain from
sales or exchanges by the Company of United States real property interests will
cause the Non-U.S. Stockholder to be treated as recognizing such gain as income
effectively connected with a United States trade or business. Non-U.S.
Stockholders would thus generally be taxed at the same rates applicable to U.S.
Stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
such gain may be subject to a 30 percent branch profits tax in the hands of a
Non-U.S. Stockholder that is a corporation, as discussed above. The Company is
required to withhold 35 percent of any such distribution that could be
designated by the Company as a capital gains dividend. Any such withheld amount
is creditable against the Non-U.S. Stockholder's United States federal income
tax liability.
Under recently proposed Treaty Regulations, withholding procedures would be
revised. Should the proposal be adopted, withholding generally would be at
either 31 percent or 30 percent unless a new Form W-8 is filed with the Company
by the beneficial owner to establish entitlement to treaty benefits or exemption
based upon the income being "effectively connected." In some instances,
additional documentation might be required from the beneficial owner, including
an individual taxpayer identification number from the IRS and a certification of
tax status from the tax authorities of the beneficial owner's country of
residence.
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SALE OF STOCK. Gain recognized by a Non-U.S. Stockholder upon the sale or
exchange of shares of stock generally will not be subject to the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA") so long as the Company is
a "domestically controlled REIT," defined generally as a REIT in which at all
times during a specified testing period less than 50 percent in value of its
stock is held directly or indirectly by Non-U.S. Stockholders. It is currently
anticipated that the Company will be a "domestically controlled REIT," and
therefore the sale of stock will not be subject to taxation under FIRPTA.
Notwithstanding the foregoing, gain from the sale or exchange of shares of stock
not otherwise subject to FIRPTA will be taxable to a Non-U.S. Stockholder if
either (i) investment in the stock is effectively connected with the Non-U.S.
Stockholder's United States trade or business, in which case the Non-U.S.
Stockholder will be subject to the same treatment as a U.S. Stockholder with
respect to such gain (a Non-U.S. Stockholder that is a foreign corporation may
also be subject to a 30 percent branch profits tax, as discussed above), or (ii)
the Non-U.S. Stockholder is a nonresident alien individual who is present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, in which case the nonresident alien individual will be
subject to a 30 percent United States withholding tax on the amount of such
individual's gain. If the gain on the sale of stock were to be subject to
taxation under FIRPTA, the Non-U.S. Stockholder would be subject to the same
treatment as U.S. Stockholders with respect to such gain (subject to applicable
alternative minimum tax, possible withholding tax and a special alternative
minimum tax in the case of nonresident alien individuals.)
If the Company is not or ceases to be, a "domestically-controlled REIT,"
whether gain arising from the sale or exchange of shares of stock by a Non-U.S.
Stockholder would be subject to United States taxation under FIRPTA as a sale of
a "United States real property interest" will depend on whether the shares are
"regularly traded" (as defined by applicable Treasury regulations) on an
established securities market (e.g., the New York Stock Exchange) and on the
size of the selling Non-U.S. Stockholder's interest in the Company. In the case
where the Company is not or ceases to be a "domestically-controlled REIT" and
the Common Stock is "regularly traded" on an established securities market at
any time during the calendar year, a sale of shares of Common Stock by a
Non-U.S. Stockholder will only be treated as a sale of a "United States real
property interest" (and thus subject to taxation under FIRPTA) if such selling
shareholder beneficially owns (including by attribution) more than 5 percent of
the total fair market value of the Common Stock at any time during the five-year
period ending either on the date of such sale or other applicable determination
date. If gain on the sale or exchange of shares of stock were subject to
taxation under FIRPTA, the Non-U.S. Stockholder would be subject to regular
United States income tax with respect to such gain in the same manner as a U.S.
Stockholder (subject to any applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals); provided,
however, that deductions otherwise allowable will be allowed as deductions only
if the tax returns were filed within the time prescribed by law. In general, the
purchaser of the stock would be required to withhold and remit to the IRS 10
percent of the amount realized by the seller on the sale of such stock.
OTHER TAX CONSEQUENCES
The Company and its stockholder may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its stockholder may not conform to the United States federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Company.
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UNDERWRITING
Prudential Securities Incorporated, Bear, Stearns & Co. Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated,
PaineWebber Incorporated, Smith Barney Inc., UBS Securities LLC, and Wheat,
First Securities, Inc. (collectively, the "Underwriters"), have severally
agreed, subject to the terms and conditions contained in the Underwriting
Agreement, to purchase from the Company the number of shares of Common Stock set
forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------------------------------------ ------------
<S> <C>
Prudential Securities Incorporated........................................................ 1,852,500
Bear, Stearns & Co. Inc................................................................... 1,852,500
Donaldson, Lufkin & Jenrette Securities Corporation....................................... 1,852,500
Morgan Stanley & Co. Incorporated......................................................... 1,852,500
PaineWebber Incorporated.................................................................. 1,852,500
Smith Barney Inc.......................................................................... 1,852,500
UBS Securities LLC........................................................................ 942,500
Wheat, First Securities, Inc.............................................................. 942,500
------------
Total............................................................................... 13,000,000
------------
------------
</TABLE>
The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the shares of Common Stock offered hereby if any are purchased.
The Underwriters have advised the Company that they propose to offer the
shares of Common Stock initially at the public offering price set forth on the
cover page of this Prospectus Supplement; that the Underwriters may allow to
selected dealers a concession of $1.22 per share, and that such dealers may
reallow a concession of $0.10 per share to certain other dealers. After the
public offering, the offering price and the concessions may be changed by the
Underwriters.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus Supplement, to purchase up to 1,950,000
additional shares of Common Stock at the public offering price, less the
underwriting discounts and commissions, as set forth on the cover page of this
Prospectus Supplement. The Underwriters may exercise such option solely for the
purpose of covering over-allotments incurred in the sale of shares of Common
Stock offered hereby. To the extent such option to purchase is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to
13,000,000.
The Company has agreed to indemnify the several Underwriters and to
contribute to losses arising out of certain liabilities, including liabilities
under the Securities Act.
The Company and the directors and executive officers of the Company have
agreed that they will not, directly or indirectly, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any option to purchase or other sale or disposition) of any shares of
Common Stock or other capital stock of the Company, or any securities
convertible into, or exchangeable or exercisable for, any shares of Common Stock
or other capital stock of the Company (including Units), for a period of 90 days
from the date of this Prospectus Supplement, without the prior written consent
of Prudential Securities Incorporated, on behalf of the Underwriters. Prudential
Securities Incorporated, at any time and without notice, may release all or any
portion of the shares subject to such agreements.
In the ordinary course of their businesses, Prudential Securities
Incorporated and its affiliates have engaged, and may in the future engage, in
investment banking or financing transactions with the Company. The Company has a
revolving credit facility (the Prudential Facility) with an affiliate of
Prudential
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<PAGE>
Securities Incorporated that bears interest at 125 basis points over one-month
LIBOR and is secured by the Company's equity interest in certain Office
Properties. As of September 15, 1997, there was approximately $4.0 million
outstanding under the Prudential Facility. The Company has also retained
Prudential Securities Incorporated to provide certain financial advisory
services in connection with the Transaction. The Prudential Insurance Company of
America is the mortgage lender with respect to the Company's office building
located at 17-17 Route 208, Fairlawn, New Jersey. In addition, in the ordinary
course, certain of the Underwriters or their affiliates lease space at certain
of the Company's Properties.
PaineWebber Incorporated is the lender with respect to a mortgage loan to
certain affiliates of Patriot American Office Group (the "PaineWebber
Mortgage"). The PaineWebber Mortgage bears interest at 300 basis points over
LIBOR, and as of September 15, 1997 there was approximately $126 million
outstanding. The PaineWebber Mortgage is secured by certain of the Mack
Properties.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M promulgated by the Commission, pursuant to which
such persons may bid for or purchase Common Stock for the purpose of stabilizing
its market price. The Underwriters also may create a short position for the
account of the Underwriters by selling more Common Stock in connection with the
Offering than they are committed to purchase from the Company, and in such case
may purchase Common Stock in the open market following the closing of the
Offering to cover all or a portion of such short position. The Underwriters may
also cover all or a portion of such short position, up to 1,950,000 shares of
Common Stock, by exercising the Underwriters' over-allotment option referred to
above. In addition, Prudential Securities, on behalf of the Underwriters, may
impose "penalty bids" under contractual arrangements with the Underwriters
whereby it may reclaim from an Underwriter (or selling group member
participating in the Offering) for the account of the other Underwriters, the
selling concession with respect to Common Stock that is distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
EXPERTS
The financial statements incorporated by reference in the accompanying
Prospectus by reference to the Annual Report on Form 10-K of the Company for the
year ended December 31, 1996 have been so incorporated in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting. The combined financial statements of
Robert Martin Group for the three years ended December 31, 1996 appearing in the
Company's Current Reports on Form 8-K/A, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated by reference in the accompanying Prospectus. Such combined
financial statements are incorporated by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing. The
financial statements incorporated by reference in the accompanying Prospectus by
reference to the Current Report on Form 8-K of the Company, dated September 18,
1997, have been so incorporated in reliance on the report of Schonbraun Safris
Sternlieb & Co., L.L.C., independent accountants, given on the authority of said
firm as experts in auditing and accounting. The financial statements of The Mack
Group incorporated by reference in the accompanying Prospectus by reference to
the Current Report on Form 8-K and Form 8-K/A of the Company, dated September
19, 1997, except as they relate to the unaudited six-month periods ended June
30, 1997 and 1996 and except as they relate to Patriot American Office Group,
have been audited by Price Waterhouse LLP, independent accountants, and, insofar
as they relate to Patriot American Office Group, by Ernst & Young LLP,
independent accountants, whose reports thereon are incorporated by
S-68
<PAGE>
reference in the accompanying Prospectus. Such financial statements have been so
included in reliance on the reports of such independent accountants given on the
authority of such firms as experts in auditing and accounting.
LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock offered
hereby as well as certain legal matters described under "Certain United States
Federal Income Tax Considerations to Holders of Common Stock" will be passed
upon for the Company by Pryor, Cashman, Sherman & Flynn, New York, New York.
Certain legal matters relating to Maryland law, including the validity of the
issuance of the securities registered hereby, will be passed upon for the
Company by Ballard, Spahr, Andrews & Ingersoll. Certain legal matters will be
passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP,
New York, New York.
S-69
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<PAGE>
PROSPECTUS
CALI REALTY CORPORATION
$1,000,000,000
PREFERRED STOCK, COMMON STOCK AND WARRANTS
Cali Realty Corporation (together with its subsidiaries, the "Company") may
from time to time offer in one or more series (i) shares or fractional shares of
its preferred stock, par value $.01 per share (the "Preferred Stock"), (ii)
shares of its common stock, par value $.01 per share (the "Common Stock"), or
(iii) warrants to purchase Common Stock or Preferred Stock (the "Warrants"),
with an aggregate initial public offering price of up to $1,000,000,000 on terms
to be determined at the time of offering. The Preferred Stock, Common Stock and
Warrants (collectively, the "Offered Securities") may be offered, separately or
together, in separate series in amounts, at prices and on terms to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Preferred
Stock, the specific title and stated value, any dividend, liquidation,
redemption, conversion, voting and other rights and the initial public offering
price; (ii) in the case of Common Stock, the initial public offering price; and
(iii) in the case of Warrants, the securities as to which such Warrants may be
exercised, the duration, offering price, exercise price and detachability. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Offered Securities, in each case
as may be appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for United States federal income tax purposes. See
"Restrictions on Ownership of Capital Stock".
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is January 7, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
in accordance with the Exchange Act can be inspected and copied at the
Commission's public reference section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained at prescribed rates by
writing to the public reference section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is: http://www.sec.gov. In addition,
the Company's Common Stock is listed on the New York Stock Exchange (the "NYSE")
and similar information concerning the Company can be inspected and copied at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement (the
"Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Offered Securities, reference is hereby made to
the Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company (File No. 1-13274)
under the Exchange Act with the Commission and are incorporated herein by
reference:
a. The Company's Current Reports on Form 8-K dated July 16, 1996,
August 12, 1996, October 8, 1996, October 28, 1996, October 29, 1996,
November 18, 1996, November 21, 1996, December 30, 1996 and December 31,
1996;
b. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
c. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996;
d. The Company's Proxy Statement relating to the Annual Meeting of
Shareholders held on May 13, 1996;
e. The description of the Common Stock and the description of certain
provisions of Maryland Law and the Company's Articles of Incorporation and
Bylaws, both contained in the Company's Registration Statement on Form 8-A,
dated August 9, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from
2
<PAGE>
the date of filing such documents (provided, however, that the information
referred to in Item 402(a)(8) of Regulation S-K of the Commission shall not be
deemed specifically incorporated by reference herein).
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner of the Offered
Securities, to whom this Prospectus is delivered, upon written or oral request.
Requests should be made to Barry Lefkowitz, Vice President-Finance and Chief
Financial Officer of the Company, 11 Commerce Drive, Cranford, New Jersey
07016-3510 (telephone number: (908) 272-8000).
3
<PAGE>
THE COMPANY
Cali Realty Corporation (together with its subsidiaries, the "Company") is a
fully-integrated real estate investment trust ("REIT") that owns and operates a
portfolio comprised predominantly of Class A office and office/flex buildings
located primarily in New Jersey, as well as commercial real estate leasing,
management, acquisition, development and construction businesses. As of
September 30, 1996, the Company owned 100 percent of 44 office and office/flex
properties encompassing approximately 4.3 million net rentable square feet and
one 327 unit multifamily residential property (collectively, the "Properties").
The 44 office and office/flex properties are comprised of 27 office buildings
containing an aggregate of 3.6 million square feet (the "Office Properties") and
17 office/flex buildings containing an aggregate of approximately 700,000 square
feet (the "Office/Flex Properties"). The Company believes that its Properties
have excellent locations and access and are well-maintained and professionally
managed. As a result, the Company believes that its properties attract high
quality tenants and achieve among the highest rent, occupancy and tenant
retention rates within their markets. As of September 30, 1996, the Office
Properties and Office/Flex Properties were approximately 97 percent leased to
over 430 tenants.
On November 4, 1996, the Company acquired Harborside, a 1.9 million square
foot office complex located in Jersey City, New Jersey for an initial
acquisition cost of approximately $286.7 million. The purchase price included
the assumption of existing and seller-provided financing aggregating
approximately $150.0 million. The balance of the acquisition cost, totaling
approximately $137.4 million, was paid in cash and was financed substantially
through drawings on the Company's existing credit facilities. As part of the
purchase, the Company also acquired 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 immediately east of
Harborside, including two piers with an area of 5.8 acres. The terms of the
acquisition of the vacant parcels at Harborside provide for payments (with an
estimated net present value of approximately $5.3 million) to be made to the
seller for development rights if and 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.
In addition, on November 7, 1996, the Company acquired Five Sentry Parkway
East & West ("Five Sentry"), a two-building office complex comprised of
approximately 131,000 net rentable square feet located in Plymouth Meeting,
Montgomery County, Pennsylvania, for approximately $12.4 million in cash, which
was drawn from one of the Company's credit facilities. Such borrowing was
subsequently repaid from the net proceeds received from the Company's public
common stock offering of 17,537,500 shares (the "November Offering") on November
23, 1996. On December 10, 1996, the Company acquired 300 Tice Boulevard
("Whiteweld"), a 230,000 net rentable square foot office building located in
Woodcliff Lake, Bergen County, New Jersey, for approximately $35.0 million in
cash, made available from the net proceeds received from the November Offering.
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 net
rentable square foot office building located in Fort Lee, Bergen County, New
Jersey, for approximately $26.8 million in cash, made available from the net
proceeds received from the November Offering. On December 17, 1996, the Company
acquired the International Court at Airport Business Center ("Airport Center"),
a three-building office complex comprised of approximately 370,000 net rentable
square feet located in Lester, Delaware County, Pennsylvania for approximately
$43.0 million in cash, made available from the net proceeds received from the
November Offering.
The Company's strategy has been to focus its development and ownership of
properties in sub-markets where it is, or can become, a significant and
preferred owner and operator. The Company will continue this strategy by
expanding, primarily through acquisitions, into sub-markets where it has, or can
achieve, similar status. Management believes that the recent trend towards
increasing rental and occupancy rates in Class A office buildings in the
Company's sub-markets presents significant opportunities for
4
<PAGE>
growth. The Company may also develop properties in such sub-markets. Management
believes that its extensive market knowledge provides the Company with a
significant competitive advantage which is further enhanced by its strong
reputation for and emphasis on delivering highly responsive management services,
including direct and continued access to the Company's senior management. The
Company performs substantially all construction, leasing, management and tenant
improvements on an "in-house" basis and is self-administered and self-managed.
Cali Associates, the entity whose business the Company succeeded in 1994,
was founded by John J. Cali, Angelo R. Cali and Edward Leshowitz (the
"Founders"), who have been involved in the development, leasing, management,
operation and disposition of commercial and residential properties in Northern
and Central New Jersey for over 40 years and have been primarily focusing on
office building development for the past 17 years. In addition to the Founders,
the Company's executive officers have been employed by the Company and its
predecessor for an average of approximately ten years. The Company and its
predecessor have built approximately four million square feet of office space,
more than one million square feet of industrial facilities and over 5,500
residential units.
The Company has elected to be taxed as a REIT for federal income tax
purposes and expects to continue to elect such status. Although the Company
believes that it was organized and has been operating in conformity with the
requirements for qualification under the Internal Revenue Code of 1986, as
amended (the "Code"), no assurance can be given that the Company will continue
to qualify as a REIT. Qualification as a REIT involves the application of highly
technical and complex Code provisions of which there are only limited judicial
or administrative interpretations. If in any taxable year the Company were to
fail to qualify as a REIT, the Company would not be allowed a deduction for
distributions to stockholders in computing taxable income and would be subject
to federal taxation at regular corporate rates. As a result, such a failure
would adversely affect the Company's ability to make distributions to its
stockholders and could have an adverse affect on the market value and
marketability of the Offered Securities.
To ensure that the Company qualifies as a REIT, the transfer of shares of
Common Stock and Preferred Stock (as defined below) is subject to certain
restrictions, and ownership of capital stock by any single person is limited to
9.8 percent of the value of such capital stock, subject to certain exceptions.
The Company's Articles of Incorporation provide that any purported transfer in
violation of the above-described ownership limitations shall be void ab initio.
The shares of Common Stock of the Company are listed on the NYSE under the
symbol "CLI." The Company has paid regular quarterly distributions on its Common
Stock since it commenced operations as a REIT in 1994. The Company intends to
continue making regular quarterly distributions to its Common Stockholders.
Distributions depend upon a variety of factors, and there can be no assurance
that distributions will be made.
All of the Company's interests in the Properties are held by, and its
operations are conducted through, Cali Realty, L.P., a Delaware limited
partnership (the "Operating Partnership"), or by entities controlled by the
Operating Partnership. The Company owned, as of November 30, 1996, approximately
93.1 percent of the Operating Partnership's outstanding units of partnership
interest ("Units"), and is the sole general partner of the Operating
Partnership.
The Company was incorporated under the laws of Maryland on May 24, 1994. Its
executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016,
and its telephone number is (908) 272-8000.
5
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following tables set forth the Company's consolidated ratios of earnings
to fixed charges for the periods shown:
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR FOR THE PERIOD
MONTHS ENDED ENDED AUGUST 31, 1994
SEPTEMBER 30, 1996 DECEMBER 31, 1995 TO DECEMBER 31, 1994
- ------------------- ------------------- ---------------------
<S> <C> <C>
3.08x..... 2.69x 3.13x
</TABLE>
The following tables set forth the amounts by which the Company's
predecessor's earnings were inadequate to cover fixed charges:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS ENDED DECEMBER
JANUARY 1, 1994 31,
TO -------------------------------
AUGUST 30, 1994 1993 1992 1991
- ----------------- --------- --------- ---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
$(110) $ (1,064) $ (2,172) $ (1,125)
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
before fixed charges by fixed charges. For this purpose, earnings consist of
pre-tax income (loss) from continuing operations before minority interest plus
fixed charges excluding capitalized interest. Fixed charges consist of interest
costs, both expensed and capitalized, debt issuance costs and the interest
portion of ground rents on land leases. To date, the Company has not issued any
Preferred Stock, therefore, the ratios of earnings to combined fixed charges and
preferred stock dividend requirements are the same as the ratios of earnings to
fixed charges presented above. For the nine months ended September 30, 1996, the
calculation of the ratio of earnings to fixed charges excludes a gain on sale of
rental property of $5,658. The ratio of earnings to fixed charges, including
gain on sale of rental property, for the same period was 4.64.
USE OF PROCEEDS
The Company is required by the terms of the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership to invest the net proceeds
of any sale of Common Stock or Preferred Stock in the Operating Partnership in
exchange for additional Units. Unless otherwise described in the applicable
Prospectus Supplement, the Company intends to use the net proceeds from the sale
of the Offered Securities for general corporate purposes, including the leasing,
management, acquisition, development and construction of office, office/flex,
industrial, multi-family residential or other properties as suitable
opportunities arise, the expansion and improvement of certain properties in the
Company's portfolio, and the repayment of indebtedness.
DESCRIPTION OF COMMON STOCK
The Company has the authority to issue up to 95,000,000 shares of common
stock, par value $.01 per share (the "Common Stock"). At November 30, 1996, the
Company had outstanding 36,318,894 shares of Common Stock.
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Preferred Stock of the Company or upon the exercise
of Warrants to purchase Common Stock issued by the Company. The statements below
describing the Common Stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the Company's
Articles of Incorporation and bylaws.
Each outstanding share of Common Stock entitles the holder to one vote on
all matters presented to stockholders for a vote, subject to the provisions of
the Company's Articles of Incorporation regarding the
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<PAGE>
ownership of shares of Common Stock in excess of the Ownership Limit described
below under "Restrictions on Ownership of Offered Securities". Holders of shares
of Common Stock have no preemptive rights or cumulative voting rights. All
shares of Common Stock will, when issued, be duly authorized, fully paid, and
nonassessable. Distributions may be paid to the holders of shares of Common
Stock if and when declared by the Board of Directors of the Company out of funds
legally available therefor.
Under Maryland law, stockholders are generally not liable for the Company's
debts or obligations. If the Company is liquidated, subject to the right of any
holders of Preferred Stock to receive preferential distributions, each holder of
Common Stock will be entitled to participate PRO RATA in the assets remaining
after payment of, or adequate provision for, all known debts and liabilities of
the Company, including debts and liabilities arising out of its status of
general partner of the Operating Partnership.
RESTRICTIONS ON OWNERSHIP
With certain exceptions, the Company's Articles of Incorporation provide
that no person may own, or be deemed to own by virtue of the attribution rules
of the Code, more than 9.8 percent of the value of the Company's issued and
outstanding shares of capital stock. See "Restrictions on Ownership of Offered
Securities".
TRANSFER AGENT
The registrar and transfer agent for the Company's Common Stock is Chase
Mellon Shareholder Services, LLC.
DESCRIPTION OF PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). No shares of Preferred
Stock are outstanding as of the date hereof.
Under the Company's Articles of Incorporation, shares of Preferred Stock may
be issued from time to time, in one or more series, as authorized by the Board
of Directors. Prior to the issuance of shares of each series, the Board of
Directors is required by the Maryland General Corporation Law (the "MGCL") and
the Company's Articles of Incorporation to adopt resolutions and file Articles
Supplementary (the "Articles Supplementary") with the State Department of
Assessments and Taxation of Maryland, setting for each such series the
designations, powers, preferences and rights of the shares of such series and
the qualifications, limitations or restrictions thereon, including, but not
limited to, dividend rights, dividend rate or rates, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences as are permitted by
Maryland law. Because the Board of Directors has the power to establish the
terms and conditions of each series of Preferred Stock, it may afford the
holders of any series of Preferred Stock power, preferences and rights, voting
or otherwise, senior to the rights of holders of shares of Common Stock. The
issuance of Preferred Stock could have the effect of delaying or preventing a
change in control of the Company.
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation (including the
applicable Articles Supplementary) and bylaws.
GENERAL
Subject to limitations prescribed by Maryland law and the Company's Articles
of Incorporation and bylaws, the Board of Directors is authorized to fix the
number of shares constituting each series of Preferred Stock and the
designations, powers, preferences and relative, participating, optional or other
7
<PAGE>
special rights and qualifications, limitations or restrictions thereon,
including such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, conversion or exchange,
and such other subjects or matters as may be fixed by resolution of the Board of
Directors or a duly authorized committee thereof. The Preferred Stock will, when
issued, be fully paid and nonassessable.
Reference is made to the Prospectus Supplement relating to the series of
Preferred Stock offered thereby for specific terms, including:
(1) the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) whether dividends shall be cumulative or non-cumulative and, if
cumulative, the date from which dividends on such Preferred Stock shall
accumulate; (5) the procedures for any auction and remarketing, if any,
for such Preferred Stock;
(6) the provisions for a sinking fund, if any, for such Preferred Stock;
(7) any voting rights of such Preferred Stock;
(8) the provisions for redemption, if applicable, of such Preferred Stock;
(9) any listing of such Preferred Stock on any securities exchange;
(10) the terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof) and conversion
period;
(11) if appropriate, a discussion of United States federal income tax
considerations applicable to such Preferred Stock;
(12) any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT;
(13) the relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(14) any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(15) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock of the Company, and to all equity securities ranking junior to such
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company; (ii) on a parity with all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company; and (iii) junior to all equity securities issued by the Company the
terms of which specifically provide that such equity securities rank senior to
the Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the
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Company. As used in the Company's Articles of Incorporation for these purposes,
the term "equity securities" does not include convertible debt securities.
DIVIDENDS
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will have the rights with respect to payment of dividends set forth below.
Holders of shares of the Preferred Stock of each series shall be entitled to
receive, when, as and if declared and authorized by the Board of Directors of
the Company, out of assets of the Company legally available for payment, cash
dividends at such rates and on such dates as will be set forth in the applicable
Prospectus Supplement. Each such dividend shall be payable to holders of record
as they appear on the stock transfer books of the Company on such record dates
as shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will accumulate from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are noncumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If any shares of the Preferred Stock of any series are outstanding, no full
dividends shall be declared or paid or set apart for payment on the Preferred
Stock of the Company of any other series ranking, as to dividends, on a parity
with or junior to the Preferred Stock of such series for any period unless (i)
if such series of Preferred Stock has a cumulative dividend, full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof irrevocably set apart for such payment on
the Preferred Stock of such series for all past dividend periods and the then
current dividend period or (ii) if such series of Preferred Stock does not have
a cumulative dividend, full dividends for the then current dividend period have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof irrevocably set apart for such payment on the Preferred
Stock of such series. When dividends are not paid in full (or a sum sufficient
for such full payment is not so irrevocably set apart) upon the shares of
Preferred Stock of any series and the shares of any other series of preferred
stock ranking on a parity as to dividends with the Preferred Stock of such
series, all dividends declared upon shares of Preferred Stock of such series and
any other series of preferred stock ranking on a parity as to dividends with
such Preferred Stock shall be declared PRO RATA so that the amount of dividends
declared per share on the Preferred Stock of such series and such other series
of preferred stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of Preferred Stock of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Stock does not have a cumulative
dividend) and such other series of preferred stock bear to each other. Except as
may otherwise be set forth in the applicable Prospectus Supplement, no interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
irrevocably set apart for payment for all past dividend periods and the then
current dividend period or (ii) if such series of Preferred Stock does not have
a cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof irrevocably set apart for payment for the then current
dividend period,
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no dividends (other than in Common Stock or other capital stock ranking junior
to the Preferred Stock of such series as to dividends and upon liquidation,
dissolution or winding up of the Company) shall be declared or paid or set aside
for payment or other distribution shall be declared or made upon the Common
Stock or any other capital stock of the Company ranking junior to or on a parity
with the Preferred Stock of such series as to dividends or upon liquidation,
dissolution or winding up of the Company, nor shall any Common Stock or any
other capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, dissolution
or winding up of the Company be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Company (except by
conversion into or exchange for other capital stock of the Company ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation, dissolution or, winding up of the Company).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in such year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of any series
of Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof irrevocably set apart for
payment for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred Stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
irrevocably set apart for payment for the then current dividend period, no
shares of any series of Preferred Stock shall be redeemed unless all outstanding
shares of Preferred Stock of such series are simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock of such series. In addition, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all outstanding shares
of any series of Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof irrevocably set
apart for payment for all past dividend periods and the then current dividend
period and (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends on the Preferred Stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof irrevocably set apart for payment for the then current dividend
period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital stock of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation, dissolution
or winding up of the Company); provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of Preferred Stock of such series
to preserve the REIT status of the
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Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed PRO RATA from the holders of record
of such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Company that will not result in violation of
the ownership limitations set forth in the Articles of Incorporation.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of a share of Preferred
Stock of any series to be redeemed at the address shown on the stock transfer
books of the Company. Each notice shall state: (i) the redemption date; (ii) the
number of shares and series of the Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Preferred
Stock are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion rights, if any, as to
such shares shall terminate. If fewer than all the shares of Preferred Stock of
any series are to be redeemed, the notice mailed to each such holder thereof
shall also specify the number of shares of Preferred Stock to be redeemed from
each such holder. If notice of redemption of any shares of Preferred Stock has
been given and if the funds necessary for such redemption have been irrevocably
set apart by the Company in trust for the benefit of the holders of any shares
of Preferred Stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such shares of Preferred Stock, such
shares of Preferred Stock shall no longer be deemed outstanding and all rights
of the holders of such shares will terminate, except the right to receive the
redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement and Articles Supplementary),
plus an amount equal to all dividends accrued and unpaid thereon (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend). Except as
may otherwise be set forth in the applicable Prospectus Supplement, after
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Stock will have no right or claim to any of
the remaining assets of the Company. In the event that, upon any such voluntary
or involuntary liquidation, dissolution or winding up, the legally available
assets of the Company are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of Preferred Stock and the corresponding
amounts payable on all shares of other classes or series of capital stock of the
Company ranking on a parity with the Preferred Stock in the distribution of
assets upon liquidation, dissolution or winding up of the Company, then the
holders of the Preferred Stock and all other such classes or series of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up of the Company, according to their respective rights and preferences and in
each case according to their respective number of shares. For such purposes, the
consolidation or merger of the Company with or into
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any other corporation, or the sale, lease, transfer or conveyance of all or
substantially all of the property or business of the Company, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Except as may otherwise be set forth in the applicable Prospectus
Supplement, whenever dividends on any shares of Preferred Stock shall be in
arrears for the equivalent of six or more quarterly periods, the holders of such
shares of Preferred Stock (voting separately as a class with all other series of
preferred stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of the Company at the next annual meeting of stockholders, and at each
subsequent annual meeting, until (i) if such series of Preferred Stock has a
cumulative dividend, all dividends accumulated on such shares of Preferred Stock
for the past dividend periods and the then current dividend period shall have
been fully paid or declared and a sum sufficient for the payment thereof
irrevocably set apart for payment or (ii) if such series of Preferred Stock does
not have a cumulative dividend, four consecutive quarterly dividends shall have
been fully paid or declared and a sum sufficient for the payment thereof
irrevocably set apart for payment. In such case, the entire Board of Directors
of the Company will be increased by two directors.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, the Company shall not, without the
affirmative vote or consent of the holders of at least 66 percent of the shares
of each series of Preferred Stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting (each such series voting separately as
a class), (i) authorize or create, or increase the authorized or issued amount
of, any class or series of capital stock ranking senior to such series of
Preferred Stock with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up of the Company or reclassify
any authorized capital stock of the Company into any such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation (including the Articles Supplementary
for such series of Preferred Stock), whether by merger, consolidation or
otherwise, so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, that any increase in the amount of the authorized
preferred stock or the creation or issuance of any other series of preferred
stock, or any increase in the amount of authorized shares of such series or any
other series of Preferred Stock, in each case ranking on a parity with or junior
or to the Preferred Stock of such series with respect to payment of dividends
and the distribution of assets upon liquidation, dissolution or winding up of
the Company, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring
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an adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such Preferred Stock.
RESTRICTIONS ON OWNERSHIP
With certain exceptions, the Company's Articles of Incorporation provide
that no person may own, or be deemed to own by virtue of the attribution rules
of the Code, more than 9.8 percent of the value of the Company's issued and
outstanding shares of capital stock. See "Restrictions on Ownership of Offered
Securities". These ownership limitations could have the effect of discouraging a
takeover or other transaction in which holders of some, or a majority, of shares
of capital stock of the Company might receive a premium for their shares over
the then prevailing market price or which such holders might believe to be
otherwise in their best interest.
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DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Preferred Stock or Common
Stock. Warrants may be issued independently or together with any Offered
Securities and may be attached to or separate from such securities. Each series
of Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between the Company and a warrant agent specified
therein ("Warrant Agent"). The Warrant Agent will act solely as an agent of the
Company in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (1) the title of such Warrants; (2) the aggregate number of such
Warrants; (3) the price or prices at which such Warrants will be issued; (4) the
currencies in which the price or prices of such Warrants may be payable; (5) the
designation, amount and terms of the Offered Securities purchasable upon
exercise of such Warrants; (6) the designation and terms of the other Offered
Securities, if any, with which such Warrants are issued and the number of such
Warrants issued with each such security; (7) if applicable, the date on and
after which such Warrants and the Offered Securities purchasable upon exercise
of such Warrants will be separately transferable; (8) the price or prices at
which and currency or currencies in which the Offered Securities purchasable
upon exercise of such Warrants may be purchased; (9) the date on which the right
to exercise such Warrants shall commence and the date on which such right shall
expire; (10) the minimum or maximum amount of such Warrants which may be
exercised at any one time; (11) information with respect to book-entry
procedures, if any; (12) a discussion of certain federal income tax
considerations; and (13) any other material terms of such Warrants, including
terms, procedures and limitations relating to the exchange and exercise of such
Warrants.
RESTRICTIONS ON OWNERSHIP
With certain exceptions, the Company's Articles of Incorporation provide
that no person may own, or be deemed to own by virtue of the attribution rules
of the Code, more than 9.8 percent of the value of the Company's issued and
outstanding shares of capital stock. See "Restrictions on Ownership of Offered
Securities". These ownership limitations could have the effect of discouraging a
takeover or other transaction in which holders of some, or a majority, of shares
of capital stock of the Company might receive a premium for their shares over
the then prevailing market price or which such holders might believe to be
otherwise in their best interest.
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RESTRICTIONS ON OWNERSHIP OF OFFERED SECURITIES
For the Company to qualify as a REIT under the Code, not more than 50
percent in value of its outstanding capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year, and its capital stock
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year.
The Company's Articles of Incorporation provide, subject to certain
exceptions specified therein, that no holder may own, or be deemed to own by
virtue of the attribution rules of the Code, more than 9.8 percent by value (the
"Ownership Limit") of the outstanding capital stock of the Company. Any transfer
of Offered Securities that would create a direct or indirect ownership of shares
of Common Stock and/or Preferred Stock (collectively the "Stock") in excess of
the Ownership Limit or result in the Company being "closely held" within the
meaning of Code Section 856(h) shall be null and void, and the intended
transferee will acquire no rights to the Offered Securities. Any transfer of
Stock that would result in the capital stock of the Company being beneficially
owned by fewer than 100 persons shall be null and void, and the interested
transferee will acquire no rights to such shares of Stock.
The constructive ownership rules are complex and may cause Common Stock or
Preferred Stock owned directly or constructively by a group of related
individuals and/or entities to be deemed constructively owned by one individual
or entity. As a result, the acquisition of less than 9.8 percent of the value of
the capital stock of the Company (or the acquisition of an interest in an entity
which owns such capital stock) by an individual or entity could cause that
individual or entity (or another individual or entity) to own constructively in
excess of 9.8 percent of the value of the capital stock, and thus subject such
capital stock to the Ownership Limit. Moreover, an individual or an entity which
owns Warrants to acquire Stock will be deemed to own such Stock for purposes of
applying the Ownership Limit.
The Board of Directors may, upon receipt of either a certified copy of a
ruling from the Internal Revenue Service or an opinion of counsel satisfactory
to the Board of Directors, but shall in no case be required to, exempt a person
(the "Exempted Holder") from the Ownership Limit if the ruling or opinion
concludes that no person who is an individual as defined in Section 542(a)(2) of
the Code will, as the result of the ownership of shares by the Exempted Holder,
be considered to have Beneficial Ownership of an amount of capital stock that
will violate the Ownership Limit.
The foregoing restrictions on transferability and ownership will not apply
if the Board of Directors determines that it is no longer in the best interests
of the Company to attempt to qualify, or to continue to qualify, as a REIT.
All certificates representing shares of Common Stock and Preferred Stock
will bear a legend referring to the restrictions described above.
All stockholders of record who own more than a specified percentage of the
outstanding capital stock of the Company must file a written statement with the
Company containing certain information specified in Treasury Regulations,
pertaining to the actual ownership of capital stock of the Company, within 30
days after December 31 of each year. In addition, each holder of capital stock
of the Company and/or Warrants shall, upon demand, be required to disclose to
the Company in writing such information with respect to the direct, indirect and
constructive ownership of capital stock of the Company as the Board of Directors
deems necessary to comply with the provisions of the Code applicable to a REIT
or to comply with the requirements of any taxing authority or governmental
agency.
In addition to preserving the Company's status as a REIT, the Ownership
Limit may have the effect of precluding an acquisition of control of the REIT
without the approval of the Board of Directors. These ownership limitations
could have the effect of discouraging a takeover or other transaction in which
holders of some, or a majority, of shares of capital stock of the Company might
receive a premium for their
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shares over the then prevailing market price or which such holders might believe
to be otherwise in their best interest.
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS TO THE COMPANY OF ITS REIT ELECTION
Pryor, Cashman, Sherman & Flynn, which has acted as tax counsel to the
Company in connection with the formation of the Company and the Company's
election to be taxed as a REIT, has reviewed the following discussion and is of
the opinion that it fairly summarizes the federal income tax considerations
relevant to the Company's status as a REIT. The following summary of certain
federal income tax considerations is based on current law, is for general
information only, and is not tax advice. The tax treatment of a holder of any of
the Offered Securities will vary depending upon the terms of the specific
securities acquired by such holder, as well as his particular situation.
THE REIT PROVISIONS OF THE CODE ARE HIGHLY TECHNICAL AND COMPLEX. The
following sets forth the material aspects of the sections that govern the
federal income tax treatment of a REIT. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change (which change may apply retroactively).
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS
WELL AS HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES OF THE ACQUISITION,
OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND
SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY AS A REIT
GENERAL. The Company has elected to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with its taxable year ended December 31,
1994. The Company believes that it has been organized and operated in such a
manner as to qualify for taxation as a REIT under the Code for such taxable year
and for the current taxable year and the Company intends to continue to operate
in such a manner in the future, but no assurance can be given that it will
operate in a manner so as to qualify or remain qualified.
In the opinion of Pryor, Cashman, Sherman & Flynn, the Company has been
organized in conformity with the requirements for qualification and taxation as
a REIT, commencing with its taxable year ended December 31, 1994, and for all
subsequent taxable years to date, and its method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT under
the Code. It must be emphasized that this opinion is based on various
assumptions and is conditioned upon such assumptions and certain representations
made by the Company as to factual matters. Pryor, Cashman, Sherman & Flynn is
not aware of any facts or circumstances that are inconsistent with these
representations and assumptions. Moreover, such qualification and taxation as a
REIT depends upon the Company's ability to meet, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Code and discussed below, the results of
which will not be reviewed by Pryor, Cashman, Sherman & Flynn. Accordingly, no
assurance can be given that the actual results of the Company's operation of any
particular taxable year will satisfy such requirements. See "-- Failure to
Qualify."
If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from
investment in a regular corporation. However, the Company will be subject to
federal income tax as
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follows: First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"corporate alternative minimum tax" on its items of tax preference. Third, if
the Company has (i) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in the
ordinary course of business or (ii) other non-qualifying net income from
foreclosure property, it will be subject to tax at the highest corporate rate on
such income. Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business, other than
foreclosure property), such income will be subject to a 100 percent tax. Fifth,
if the Company should fail to satisfy the 75 percent gross income test or the 95
percent gross income test (as discussed below), but has nonetheless maintained
its qualification as a REIT because certain other requirements have been met, it
will be subject to a 100 percent tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75
percent or 95 percent test, multiplied by (b) a fraction intended to reflect the
Company's profitability. Sixth, if the Company should fail to distribute during
each calendar year at least the sum of (i) 85 percent of its REIT ordinary
income for such year, (ii) 95 percent of its REIT capital gain net income for
such year, and (iii) any undistributed taxable income from prior years, the
Company would be subject to a 4 percent excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, with
respect to an asset (a "Built-In Gain Asset") acquired by the Company from a
corporation which is or has been a C corporation (i.e., generally, a corporation
subject to full corporate-level tax) in a transaction in which the basis of the
Built-In Gain Asset in the hands of the Company is determined by reference to
the basis of the asset in the hands of the C corporation, if the Company
recognizes gain on the disposition of such asset during the ten-year period (the
"Recognition Period") beginning on the date on which such asset was acquired by
the Company, then, to the extent of the Built-In Gain (i.e., the excess of (a)
the fair market value of such asset over (b) the Company's adjusted basis in
such asset, determined as of the beginning of the Recognition Period), such gain
will be subject to tax at the highest corporate tax rate pursuant to Internal
Revenue Service ("IRS") regulations that have not yet been promulgated. The
results described above with respect to the recognition of Built-In Gain assume
that the Company will make an election pursuant to IRS Notice 88-19. In
addition, Cali Services, Inc. is taxed on its income at regular corporate rates.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (1) which is managed by one or more trustees or directors,
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest, (3) which would be taxable as
a domestic corporation, but for Code Sections 856 through 859, (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code, (5) the beneficial ownership of which is held by 100 or
more persons (determined without reference to any rules of attribution), (6)
during the last half of each taxable year, not more than 50 percent in value of
the outstanding stock of which is owned, directly or constructively, by five or
fewer individuals (as defined in the Code to include certain entities) and (7)
which meets certain other tests, described below, regarding the matter of its
income and assets. The Code provides that conditions (1) to (4), inclusive, must
be met during the entire taxable year and that condition (5) must be met during
at least 335 days of a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months.
The Company has previously issued sufficient shares to allow it to satisfy
conditions (5) and (6). In addition, the Company's Articles of Incorporation
provide for restrictions regarding ownership and transfer of the Company's
capital stock, which restrictions are intended to assist the Company in
continuing to satisfy the share owner-ship requirements described in (5) and (6)
above. The ownership and transfer restrictions are described in "Restrictions on
Ownership of Offered Securities."
The Company owns and operates all of the properties through partnerships in
which the Operating Partnership and six direct, wholly-owned subsidiaries (the
"Cali Subs") are partners. Code Section 856 (i) provides that a corporation,
100% of whose stock is held by a REIT at all times during the corporation's
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existence, is a "qualified REIT subsidiary." A "qualified REIT subsidiary" shall
not be treated as a separate corporation, and all assets, liabilities, and items
of income, deduction, and credit of a "qualified REIT subsidiary" shall be
treated as assets, liabilities and such items (as the case may be) of the REIT.
Thus, in applying the requirements described herein, the Company's "qualified
REIT subsidiaries" will be ignored, and all assets, liabilities and items of
income, deduction, and credit of such subsidiaries will be treated as assets,
liabilities and items of the Company. The Company has not, however, sought or
received a ruling from the IRS that any of the Cali Subs is a "qualified REIT
subsidiary."
In the case of a REIT that is a partner in a partnership, either directly,
or indirectly through a "qualified REIT subsidiary," IRS regulations provide
that the REIT will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to such share. In addition, the character of the assets and gross
income of the partnership will retain the same character in the hands of the
REIT for purposes of Code Section 856, including satisfying the gross income
tests and the asset tests. Thus, the Company's proportionate share of the
assets, liabilities and items of income of the partnerships in which the Company
is a partner, directly or indirectly, will be treated as the assets, liabilities
and items of income of the Company for purposes of applying the requirements
described herein.
INCOME TESTS. In order to maintain qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75
percent of the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments.
Second, at least 95 percent of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
such real property investments, dividends, interest and gain from the sale or
disposition of stock or securities (or from any combination of the foregoing).
Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions and gain on the sale or other
disposition of real property held for fewer than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30 percent of the Company's gross income (including gross income from
prohibited transactions) for each taxable year. See "--Sales or Dispositions of
Assets."
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits derived by any person from such property.
However, an amount received or accrued generally will not be excluded from the
term "rents from real property" solely by reason of being based on a fixed
percentage or percentages of receipts or sales. Second, the Code provides that
rents received from a tenant will not qualify as "rents from real property" in
satisfying the gross income tests if the REIT, or a direct or constructive owner
of 10 percent or more of the REIT, directly or constructively owns 10 percent or
more of such tenant (a "Related Party Tenant"). Third, if rent attributable to
personal property leased in connection with a lease of real property is greater
than 15 percent of the total rent received under the lease, then the portion of
rent attributable to such personal property will not qualify as "rents from real
property." Finally, for rents received to qualify as "rents from real property,"
the REIT generally must not operate or manage the property or furnish or render
services to the tenants of such property, other than through an independent
contractor from whom the REIT derives no revenue; provided, however, the Company
may directly perform certain services that are "usually or customarily rendered"
in connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. The Company does not and
will not (i) charge rent for any property that is based in whole or in part on
the income or profits of any person (except by reason of being based on a fixed
percentage of receipts or sales, as described above), (ii) rent any property to
a Related Party Tenant, (iii) derive rental income attributable to personal
property (other
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than personal property leased in connection with the lease of real property, the
amount of which is less than 15 percent of the total rent received under the
lease), or (iv) perform services which are not usually or customarily rendered
and which are considered to be rendered to the occupant of the property, other
than through an independent contractor from whom the Company derives no revenue.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.
The Operating Partnership may receive fees in consideration of the
performance of management and administrative services with respect to Properties
that are not owned entirely by the Operating Partnership. Although a portion of
such management and administrative fees generally will not qualify under the 75
percent or 95 percent gross income tests, the Company believes that the
aggregate amount of such fees (and any other non-qualifying income) in any
taxable year will not cause the Company to exceed the limits on non-qualifying
income under the 75 percent and 95 percent gross income tests.
In the opinion of Pryor, Cashman, Sherman & Flynn, the Company has satisfied
the 75 percent and 95 percent gross income tests for taxable years ending prior
to the date of this Prospectus. The Company intends to operate in such a manner
as will enable it to satisfy such tests in the future. If the Company fails to
satisfy one or both of the 75 percent or 95 percent gross income tests for any
taxable year, it may nevertheless qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
will generally be available if the Company's failure to meet such tests is due
to reasonable cause and not due to willful neglect, the Company attaches a
schedule of the sources of its income to its federal income tax return, and any
incorrect information on the schedule is not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of these relief provisions. As
discussed above under "--General," even if these relief provisions were to
apply, a tax would be imposed with respect to the excess net income.
SALES OR DISPOSITIONS OF ASSETS. The Company, as a REIT, is generally
subject to two restrictions that limit its ability to sell real property. First,
as previously discussed, to qualify as a REIT, the Company must satisfy the 30
Percent Limitation, as described above. Second, the Company is subject to a tax
of 100 percent on its gain (i.e., the excess, if any, of the amount realized
over the Company's adjusted basis in the property) from each sale of property
(excluding certain property obtained through foreclosure) in which it is a
dealer. In calculating its gains subject to the 100 percent tax, the Company is
not allowed to offset gains on sales of property against losses on other sales
of property in which it is a dealer.
The Company may be subject to an entity level tax with respect to gain
recognized from the sale of property the Company held either prior to its
electing REIT status or which the Company acquired in a carryover basis
transaction. The tax is triggered if the property sold has a build-in-gain and
is sold within 10 years of the Company's qualification as a REIT.
Under the Code, the Company would be deemed to be a dealer in any property
that the Company holds primarily for sale to customers in the ordinary course of
its business. Such determination is a factual inquiry, and absolute legal
certainty of the Company's status generally cannot be provided. However, the
Company will not be treated as a dealer in real property for the 30 percent
gross income limitation if (i) it has held the property for at least four years
for the production of rental income, (ii) capitalized expenditures on the
property in the four years preceding sale do not exceed 30 percent of the net
selling price of the property, and (iii) the Company either (a) has seven or
fewer sales of property (excluding certain property obtained through
foreclosure) for the year, (b) the aggregate tax basis of property sold during
the taxable year is 10 percent or less of the aggregate tax basis of all assets
of the Company as of the beginning of the taxable year, or (c) substantially all
of the marketing and development expenditures with respect to the property sold
are made through an independent contractor from whom the Company derives no
income. The sale of more than one property to one buyer as part of one
transaction constitutes one
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sale. However, the failure of the Company to meet these "safe harbor"
requirements does not necessarily mean that it is a dealer in real property for
purposes of the 100 percent tax.
ASSET TESTS. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75 percent of the value of the Company's total assets must be represented
by real estate assets (including (i) assets held by the Company's qualified REIT
subsidiaries and the Company's allocable share of real estate assets held by
partnerships in which the Company owns an interest and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company),
cash, cash items and government securities. Second, not more than 25 percent of
the Company's total assets may be represented by securities other than those in
the 75 percent asset class. Third, of the investments included in the 25 percent
asset class, the value of any one issuer's securities owned by the Company may
not exceed (at the end of the quarter in which such securities are acquired) 5
percent of the value of the Company's total assets and the Company may not own
more than 10 percent of any one issuer's outstanding voting securities.
ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (A) the sum of (i) 95 percent of
the Company's "REIT taxable income" (computed without regard to the dividends
paid deduction and the Company's net capital gain) and (ii) 95 percent of the
net income (after tax), if any, from foreclosure property, minus (B) the sum of
certain items of non-cash income. In addition, if the Company disposes of any
Built-In Gain Asset during its Recognition Period, the Company will be required,
pursuant to IRS regulations which have not yet been promulgated, to distribute
at least 95 percent of the Built-in Gain (after tax), if any, recognized on the
disposition of such asset. Such distributions must be paid in the taxable year
to which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such prior year and if paid on or before
the first regular dividend payment after such declaration. To the extent that
the Company does not distribute all of its net capital gain or distributes at
least 95 percent, but less than 100 percent, of its "REIT taxable income," as
adjusted, it will be subject to tax thereon at regular ordinary and capital gain
corporate tax rates. Furthermore, if the Company should fail to distribute
during each calendar year at least the sum of (i) 85 percent of its REIT
ordinary income for such year, (ii) 95 percent of its REIT capital gain income
for such year, and (iii) any undistributed taxable income from prior periods,
the Company would be subject to a 4 percent excise tax on the excess of such
required distribution over the amounts actually distributed.
In the opinion of Pryor, Cashman, Sherman & Flynn, the Company has satisfied
the annual distribution requirements for taxable years ended prior to the date
of this Prospectus. The Company intends to continue to make timely distributions
sufficient to satisfy this annual distribution requirement in the future. It is
possible that the Company, from time to time, may not have sufficient cash or
other liquid assets to meet the 95 percent distribution requirement due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at the taxable income of the Company, or if the amount
of nondeductible expenses, such as principal amortization or capital
expenditures exceeds the amount of noncash deductions. In the event that such
timing differences occur, in order to meet the 95 percent distribution
requirement, the Company may find it necessary to arrange for short-term, or
possibly long-term, borrowing or to pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, the Company
will be required to pay interest to the IRS based upon the amount of any
deduction taken for deficiency dividends.
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FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Such a failure could have an adverse effect
on the market value and marketability of the Offered Securities. Distributions
to stockholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. In such event,
to the extent of current and accumulated earnings and profits, all distributions
to stockholders will be taxable as ordinary income and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief.
TAXATION OF STOCKHOLDERS
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS. As long as the Company qualifies
as a REIT, distributions made to the Company's taxable domestic stockholders out
of current or accumulated earnings and profits (and not designated as capital
gain dividends) will be taken into account by them as ordinary income and will
not be eligible for the dividends received deduction for corporations.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the stockholder has held its stock. However, corporate stockholders may be
required to treat up to 20 percent of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the adjusted
basis of a stockholder's shares, they will be included in income as long-term
capital gain (or short-term capital gain if the shares have been held for one
year or less), assuming the shares are a capital asset in the hands of the
stockholder. In addition, any dividend declared by the Company in October,
November or December of any year payable to a stockholder of record on a
specific date in any such month shall be treated as both paid by the Company and
received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by the Company during January of the following
calendar year. Stockholders may not include in their individual income tax
returns any net operating losses or capital losses of the Company.
In general, any loss upon a sale or exchange of shares by a stockholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gain.
BACKUP WITHHOLDING. The Company will report to its domestic stockholders
and the IRS the amount of dividends paid during each calendar year, and the
amount of tax withheld, if any, with respect thereto. Under the backup
withholding rules, a stockholder may be subject to backup withholding at the
rate of 31 percent with respect to dividends paid unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A
stockholder who does not provide the Company with its correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, the Company may be required to withhold a
portion of capital gain distributions made to any stockholders who fail to
certify their non-foreign status to the Company. See "--Taxation of Foreign
Stockholders" below.
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Taxation of Tax-Exempt Stockholders. Under the Revenue Reconciliation Act of
1993 (the "1993 Act"), in applying the REIT stock ownership test under the Code,
a pension trust generally is not treated as a single individual as it would have
been under prior law. Rather, the 1993 Act treats beneficiaries of certain
pension trusts as holding the shares of a REIT in proportion to their actuarial
interests in such trust, and thus permits certain pension trusts to acquire more
concentrated ownership of a REIT.
In addition, under the 1993 Act, a pension fund owning more than 10 percent
of a REIT must treat a percentage of dividends from the REIT as "unrelated
business taxable income" ("UBTI"). The percentage is determined by dividing the
REIT's gross income derived from an unrelated trade or business for the year by
the gross income of the REIT for the year in which the dividends are paid. If
this percentage is less than five percent, however, dividends are not treated as
UBTI. In general, the UBTI rule applies to a REIT where the REIT qualifies as a
REIT by reason of the above modification of the stock ownership test and (i) one
pension trust owns more than 25 percent of the value of the REIT; or (ii) a
group of pension trusts individually holding more than 10 percent of the value
of the REIT collectively own more than 50 percent of the value of the REIT.
The provisions of the 1993 Act apply to taxable years of a REIT beginning on
or after January 1, 1994.
TAXATION OF FOREIGN STOCKHOLDERS. The rules governing U.S. federal income
taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. Prospective Non-U.S. Stockholders should
consult with their own tax advisors to determine the impact of U.S. federal,
state and local income tax laws with regard to an investment in the Offered
Securities, including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
the Company of U.S. real property interests and not designated by the Company as
capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
the Company. Such distributions will ordinarily be subject to a withholding tax
equal to 30 percent of the gross amount of the distribution unless an applicable
tax treaty reduces that tax. However, if income from the investment in the
Offered Securities is treated as effectively connected with the Non-U.S.
Stockholder's conduct of a U.S. trade or business, the Non-U.S. Stockholder
generally will be subject to a tax at graduated rates, in the same manner as
U.S. stockholders are taxed with respect to such dividends (and may, subject to
possible treaty relief, the 30 percent branch profits tax if the stockholder is
a foreign corporation). The Company expects to withhold U.S. income tax at the
rate of 30 percent on the gross amount of any dividends paid to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies and the required form
evidencing eligibility for that reduced rate is filed with the Company or (ii)
the Non-U.S. Stockholder files an IRS Form 4224 with the Company claiming that
the distribution is "effectively connected" income. Distributions in excess of
current and accumulated earnings and profits of the Company will not be taxable
to a stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's shares, but rather will reduce the adjusted basis of such shares.
To the extent that such distributions exceed the adjusted basis of a Non-U.S.
Stockholder's shares, they will give rise to tax liability if the Non-U.S.
Stockholder would otherwise be subject to tax on any gain from the sale or
disposition of his shares, as described below. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in excess
of current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Stockholder may seek a refund of such amounts from the IRS if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Company.
Under recently proposed Treasury Regulations, withholding procedures would
be revised. Should the proposal be adopted, withholding generally would be at
either 31 percent or 30 percent unless a new Form W-8 is filed with the Company
by the beneficial owner to establish entitlement to treaty benefits or
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exemption based upon the income being "effectively connected". In some
instances, additional documentation might be required from the beneficial owner,
including an individual taxpayer identification number from the U.S. Internal
Revenue Service and a certification of tax status from the tax authorities of
the beneficial owner's country of residence.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Stockholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under
FIRPTA, these distributions are taxed to a Non-U.S. Stockholder as if such gain
were effectively connected with a U.S. business. Thus, Non-U.S. Stockholders
would be taxed at the normal capital gain rates applicable to U.S. stockholders
(subject to applicable alternative minimum tax and a special alternative minimum
tax in the case of nonresident alien individuals). Also, distributions subject
to FIRPTA may be subject to a 30 percent branch profits tax in the hands of a
corporate Non-U.S. Stockholder not entitled to treaty relief or exemption. The
Company is required by applicable Treasury Regulations to withhold 35 percent of
any distribution to a Non-U.S. Stockholder that could be designated by the
Company as a capital gain dividend. This amount is creditable against the
Non-U.S. Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of stock generally
will not be taxed under FIRPTA if a REIT is a "domestically controlled REIT,"
defined generally as a REIT in which at all times during a specified testing
period less than 50 percent in value of the stock was held directly or
indirectly by foreign persons. It is currently anticipated that the Company will
be a "domestically controlled REIT," and therefore the sale of stock will not be
subject to taxation under FIRPTA. However, gain not subject to FIRPTA will be
taxable to a Non-U.S. Stockholder if (i) investment in the Stock is "effectively
connected" with the Non-U.S. Stockholder's U.S. trade or business, in which case
the Non-U.S. Stockholder will be subject to the same treatment as U.S.
stockholders with respect to such gain, or (ii) the Non-U.S. Stockholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, in
which case the nonresident alien individual will be subject to a 30 percent tax
on the individual's capital gains. If the gain on the sale of stock were to be
subject to taxation under FIRPTA, the Non-U.S. Stockholder would be subject to
the same treatment as U.S. stockholders with respect to such gain (subject to
applicable alternative minimum tax, possible withholding tax and a special
alternative minimum tax in the case of nonresident alien individuals).
OTHER TAX MATTERS
Certain of the Company's investments are through partnerships which may
involve special tax risks. Such risks include possible challenge by the IRS of
(a) allocations of income and expense items, which could affect the computation
of income of the Company and (b) the status of the partnerships as partnerships
(as opposed to associations taxable as corporations) for income tax purposes.
This partnership status risk should be substantially diminished by Treasury
Regulations issued on December 17, 1996, permitting election of partnership
status effective January 1, 1997 by the filing of Form 8823 or in certain other
ways specified in the new Regulations. With respect to the Company existing
partnership investments, the new Regulations provide that (1) previously claimed
partnership status, if supported by a reasonable basis for classification, will
generally be respected for all periods prior to January 1, 1997; and (2)
previously claimed partnership status will be generally retained after January
1, 1997, without the need to file a formal election. If any of the partnerships,
however, should be treated as an association, it would be taxable as a
corporation. In such a situation, if the Company's ownership in any of the
partnerships exceeded 10 percent of the partnership's voting interests or the
value of such interest exceeded 5 percent of the value of the Company's assets,
the Company would cease to qualify as a REIT. Furthermore, in such a situation,
distributions from any of the partnerships to the Company would be treated as
dividends, which are not taken into account in satisfying the 75 percent gross
income test described above and which could therefore make it more difficult for
the Company to qualify as a REIT for the taxable year in which
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such distribution was received. In addition, in such a situation, the interest
in any of the partnerships held by the Company would not qualify as a "real
estate asset," which could make it more difficult for the Company to meet the 75
percent asset test described above. Finally, in such a situation, the Company
would not be able to deduct its share of losses generated by the partnerships in
computing its taxable income. See "Failure to Qualify" above for a discussion of
the effect of the Company's failure to meet such tests for a taxable year. The
Company believes that each of the partnerships will be treated for tax purposes
as a partnership (and not as an association taxable as a corporation). However,
no assurance can be given that the IRS may not successfully challenge the tax
status of any of the partnerships.
TAX ALLOCATIONS WITH RESPECT TO CONTRIBUTED PROPERTIES. Pursuant to Section
704(c) of the Code, income, gain, loss, and deduction attributable to
appreciated property that is contributed to a partnership in exchange for an
interest in the partnership must be allocated for Federal income tax purposes in
a manner such that the contributor is charged with the unrealized gain
associated with the property at the time of the contribution. The amount of such
unrealized gain is generally equal to the difference between the fair market
values of the contributed property at the time of contribution and the adjusted
tax basis of such property at the time of contribution (the "Book-Tax
Difference"). In general, the fair market value of the interests in the various
Partnerships contributed to the Operating Partnership are substantially in
excess of their adjusted tax bases. The Partnership Agreements of each of the
Operating Partnership, the Existing Partnerships and the Holding Partnerships
require that allocations attributable to each item of contributed property be
made so as to allocate the tax depreciation available with respect to such
property first to the partners other than the partner that contributed the
property, to the extent of, and in proportion to, their book depreciation, and
then, if any tax depreciation remains, to the partner that contributed the
property. Upon the disposition of any item of contributed property, any gain
attributable to an excess, at such time, of basis for book purposes over basis
for tax purposes would be allocated for tax purposes to the contributing
partner. These allocations are intended to be consistent with the Treasury
Regulations under Section 704(c) of the Code.
In general, certain persons who acquired interests in the Operating
Partnership in connection with the formation of the Company are allocated
disproportionately lower amounts of depreciation deductions for tax purposes
relative to their percentage interests in the Operating Partnership, and
disproportionately greater shares relative to their percentage interests in the
Operating Partnership of the taxable income and gain on the sale by the
Partnerships of one or more of the contributed properties. These tax allocations
will tend to reduce or eliminate the Book-Tax Difference over the life of the
Partnerships. The Partnership Agreements of the Partnerships adopt the
"traditional method" of making allocations under Section 704(c) of the Code,
unless otherwise agreed to between the Company and the contributing partner.
Under the traditional method the amounts of the special allocations of
depreciation and gain under the special rules of Section 704(c) of the Code will
be limited by the so-called "ceiling rule" and will not always eliminate the
Book-Tax Difference on an annual basis or with respect to a specific transaction
such as a sale. Thus, the carryover basis of the contributed assets in the hands
of the partnerships will cause the Company to be allocated less depreciation
than would be available for newly purchased properties.
STATE AND LOCAL TAXES. The Company and its stockholders may be subject to
state or local taxation in various state or local jurisdictions, including those
in which it or they transact business or reside. The state and local tax
treatment of the Company and its stockholders may not conform to the federal
income tax consequences discussed above. Consequently, prospective stockholders
should consult their own tax advisors regarding the effect of state and local
tax laws on an investment in the Offered Securities.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Company also may, from time to
time, authorize underwriters acting as the Company's agents to offer and sell
the Offered Securities upon the terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from any entity for whom they may act as agent. Underwriters
may sell Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts, concessions and commissions
received by them and any profit realized by them on resale of the Offered
Securities may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with the Company, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject, and
(ii) if the Offered Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for the Company and its subsidiaries
in the ordinary course of business.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1995
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. The financial statements incorporated in this
Prospectus by reference to the Current Reports on Form 8-K of the Company, dated
July 16, 1996, October 8, 1996, October 29, 1996
25
<PAGE>
(two reports) and December 31, 1996, have been so incorporated in reliance on
the reports of Schonbraun Safris Sternlieb & Co., L.L.C., independent
accountants, given on the authority of said firm as experts in auditing and
accounting. The Statements of Revenues and Certain Operating Expenses of the
property known as Harborside Financial Center for each of the three years in the
period ended December 31, 1995, incorporated by reference in this Prospectus to
the Current Report on Form 8-K of the Company, dated October 29, 1996, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent auditors, given on the authority of said firm as experts in auditing
and accounting. The combined statement of revenue and certain expenses of the
International Court at Airport Business Center for the year ended December 31,
1995 included in the Company's Current Report on Form 8-K, dated October 29,
1996 has been audited by Ernst & Young, LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such financial statement is incorporated herein by reference in reliance on such
report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
Certain legal matters in connection with the Offered Securities as well as
certain legal matters described under "Certain United States Federal Income Tax
Considerations to the Company of its REIT Election" will be passed upon for the
Company by Pryor, Cashman, Sherman & Flynn, New York, New York. Certain legal
matters relating to Maryland law, including the validity of the issuance of the
securities registered hereby, will be passed upon for the Company by Swidler &
Berlin, Chartered, Washington, D.C.
26
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF THE UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE
ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DO THEY
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary............................................. S-3
Risk Factors........................................ S-10
The Company......................................... S-15
Recent Developments................................. S-17
Use of Proceeds..................................... S-25
Capitalization...................................... S-25
Price Range of Common Stock and Distributions....... S-26
Selected Financial Data............................. S-27
Properties.......................................... S-29
The Mack Properties................................. S-47
Management.......................................... S-56
Certain United States Federal Income Tax
Considerations to Holders of Common Stock......... S-60
Underwriting........................................ S-67
Experts............................................. S-68
Legal Matters....................................... S-69
<CAPTION>
PROSPECTUS
PAGE
---------
<S> <C>
Available Information............................... 2
Incorporation of Certain Documents by Reference..... 2
The Company......................................... 4
Ratios of Earnings to Fixed Charges................. 6
Use of Proceeds..................................... 6
Description of Common Stock......................... 6
Description of Preferred Stock...................... 7
Description of Warrants............................. 14
Restrictions on Ownership of Offered Securities..... 15
Certain United States Federal Income Tax
Considerations to the Company of its REIT
Election.......................................... 16
Plan of Distribution................................ 25
Experts............................................. 25
Legal Matters....................................... 26
</TABLE>
13,000,000 Shares
[LOGO]
CALI REALTY CORPORATION
Common Stock
-----------------------------
PROSPECTUS SUPPLEMENT
-----------------------------
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
UBS SECURITIES
WHEAT FIRST BUTCHER SINGER
October 9, 1997
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