SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
_____________
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 1996
RECKSON ASSOCIATES REALTY CORP.
(Exact name of Registrant as specified in its Charter)
Maryland
(State of Incorporation)
1-13762 11-3233650
(Commission File Number) (IRS Employer Id. Number)
225 Broadhollow Road 11747
Melville, New York (Zip Code)
(Address of principal executive offices)
(516) 694-6900
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Option Properties. Upon completion by Reckson Associates Realty
Corp. (the "Company") of its initial public offering (the "IPO") in June
1995, two office properties and four industrial properties owned by
Reckson affiliates (the "Reckson Option Properties") were not contributed
to Reckson Operating Partnership, L.P. (the "Operating Partnership").
However, upon completion of the IPO, the Operating Partnership was
granted an option, exercisable over a 10 year period commencing upon
closing of the IPO, to acquire each of the Reckson Option Properties at a
purchase price equal to the lesser of (i) a fixed price established at the
time of the IPO (the "Fixed Price") and (ii) the Net Operating Income
attributable to such property during the 12 month period preceding
exercise of the option by the Operating Partnership divided by a
capitalization rate of 11.5% (the "NOI Price"); provided that, in no event
could the purchase price be less than the outstanding balance of the
mortgage debt encumbering the property on the acquisition date. The terms
of the option further provide that the portion of the purchase price not
required to repay mortgage debt shall be payable in limited partnership
units of the Operating Partnership ("Units"). The Units are to be valued
based on the market price of the common stock as of four business days
prior to the closing date. In addition, the Company is obligated to
provide registration rights to the sellers with respect to common stock
obtained upon conversion of Units.
On May 22, 1996, the Independent Directors (i.e., the Directors of
the Company who are neither officers of the Company nor affiliated with
Reckson) authorized the Operating Partnership to exercise its option to
acquire 60 Charles Lindbergh Blvd. (an approximately 187,000 square foot
office building located in the Company's Nassau West Corporate Center in
Mitchel Field, New York) from a partnership owned by Donald Rechler and
Roger Rechler (the Chairman of the Board and Vice Chairman of the Board,
respectively, of the Company) at the Fixed Price of $20,726,400. The
Operating Partnership subsequently acquired such property in July 1996
with the issuance of 114,722 Units (valued at $32.63 per Unit) and
approximately $17.0 million of cash used to repay mortgage indebtedness
encumbering the property and pay closing costs. The $17.0 million cash
payment was funded with proceeds from the Company's public offering of
3,000,000 shares of common stock completed in April 1996 and borrowings
incurred under its existing credit facility with Salomon Brothers Realty
Corp. (the "Credit Facility").
On August 27, 1996, the Independent Directors further authorized the
Operating Partnership to exercise its options to acquire 48 Harbor Park
Drive (a 36,000 square foot research and development industrial property
located in Port Washington), 30 Hub Drive (a 73,000 square foot industrial
property located in the Company's County Line Industrial Center in Melville,
New York), 593 Acorn Street (a 40,000 square foot industrial property
located in Babylon, New York) and 110 Bi-County Blvd (a 147,000 square foot
industrial property located in Farmingdale, New York). 48 Harbor Park Drive
was authorized to be acquired at a purchase price of $3,500,000 (the
outstanding principal amount of mortgage debt encumbering the property which
was recently incurred to fund a retrofitting of the building and significant
tenant improvements). 30 Hub Drive, 593 Acorn Street and 110 Bi-County Blvd.
were authorized to be acquired at their Fixed Prices of $2,007,700,
$878,100 and $8,969,300, respectively.
In September 1996, the Operating Partnership acquired 48 Harbor Park
Drive from a partnership owned by Donald Rechler and Roger Rechler for a
cash payment of $3,500,000, all of which was used to repay mortgage debt.
The $3,500,000 payment was funded with borrowings incurred under the
Credit Facility.
It is expected that the Operating Partnership will acquire 30 Hub
Drive, 593 Acorn Street and 110 Bi-County Blvd. during the fourth quarter
of 1996. In addition, it also expected that the mortgage debt encumbering
30 Hub Drive and 593 Acorn Street will be prepaid in full upon acquisition
by the Operating Partnership with borrowings incurred under the Credit
Facility, and that the debt encumbering 110 Bi-County Blvd will be
maintained. At September 26, 1996, the aggregate principal amount of the
mortgage debt encumbering 30 Hub Drive, 593 Acorn Street and 110-Bi-County
Blvd. was $1,231,642, $457,445 and $4,687,961, respectively.
Donald Rechler and Roger Rechler maintain an ownership interest in
each of the partnerships that currently own 30 Hub Drive, 593 Acorn Street
and 110 Bi-County Blvd. In addition, Scott Rechler and Mitchell Rechler,
Executive Vice Presidents of the Company, and certain trusts established
for the benefit of other members of the Rechler family maintain an
ownership interest in the partnership that owns 110 Bi-County Blvd.
Landmark Square. In September 1996, the Operating Partnership
contracted to acquire Landmark Square, a six building office complex
(collectively, "Landmark Square") encompassing an aggregate of
approximately 800,000 square feet located in Stamford, Connecticut. The
Operating Partnership will purchase the portfolio from the Metropolitan
Life Insurance Company ("MetLife") for approximately $77 million. It is
currently expected that the acquisition will be funded with a first
mortgage provided by MetLife, borrowings incurred under the Credit
Facility and cash on hand. The acquisition is expected to close early in
the fourth quarter of 1996.
Landmark Square was developed between 1973 and 1984 by the F.D. Rich
Company and is presently approximately 85% leased to such tenants as
Guinness PLC/United Distillers, Crown Theater, McKinsey & Co. and Fleet
Bank. Landmark Square is located on seven acres in the heart of Stamford,
contiguous to Stamford Town Center, a 900,000 square foot upscale shopping
mall. Landmark offers such amenities as a full service athletic facility
and the Landmark Club, one of Stamford's premier dining clubs.
The Company plans to immediately commence an approximately $11.5
million, five year capital improvement program to upgrade the portfolio,
which has been effectively operated or controlled institutionally since
1991.
ITEM 5. OTHER EVENTS.
The following consolidated statement of operations (unaudited) of the
Company for the period June 3, 1995 (commencement of operations) to June
2, 1996 is intended to constitute an "earnings statement" made generally
available to the security holders of the Company for purposes of Section
11(a) of the Securities Act of 1933, as amended:
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 3, 1995 TO JUNE 2, 1996
(DOLLARS IN THOUSANDS)
UNAUDITED
REVENUES:
Base Rents ............................ $ 61,853
Tenants escalation and
reimbursements ................... 9,150
Equity in earnings of real estate
partnerships ..................... 47
Equity in earnings of service
companies ........................ 777
Other ................................. 823
------
Total Revenues ............................. 72,650
------
EXPENSES:
Operating Expenses:
Property operating expenses ........... 13,819
Real estate taxes ..................... 10,699
Ground rents .......................... 1,011
Marketing, general and administrative . 3,774
------
Total Operating Expenses ................... 29,303
Interest ................................... 9,970
Depreciation and amortization .............. 13,640
------
Total Expenses ............................. 52,913
------
Minority partners' interest in consolidated
partnership (income) ............. (577)
Limited partners' interest in the Operating
partnership (income) .............. (5,227)
------
Income (loss) before extraordinary item ... 13,933
Extraordinary item - loss on extinguishment
and restatement of debts, net of limited
partners' minority interest of $2,152 . (5,129)
-------
Net income ................................ $ 8,804
-------
-------
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) Financial Statements of Properties Acquired and Pro
Forma Financial Information
UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
Pro Forma Condensed Balance Sheet (Unaudited) as of
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 6
Pro Forma Condensed Combining Statement of Operations
(Unaudited) for the year ended December 31, 1995
and for the six months ended June 30, 1996 . . . . . . . . . 7
Notes to Pro Forma Financial Statements . . . . . . . . . . . 10
ACQUISITION PROPERTIES
Report of Independent Auditors . . . . . . . . . . . . . . . . 14
Combined Statement of Revenues and Certain Expenses of Landmark
Square Properties for the year ended December 31, 1995 and for
the six months ended June 30, 1996 (Unaudited) . . . . . . . 15
Notes to Combined Statement of Revenues and Certain Expenses of
Landmark Square Properties . . . . . . . . . . . . . . . . . . 16
Report of Independent Auditors . . . . . . . . . . . . . . . 18
Combined Statements of Revenues and Certain Expenses
of Certain Option Properties for the years ended
December 31, 1995, 1994 and 1993 and for the six month
periods ended June 30, 1996 and 1995 (Unaudited) . . . . . . 19
Notes to Combined Statements of Revenues and Certain
Expenses of Certain Option Properties . . . . . . . . . . . . 20
(b) Exhibits
None.
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Balance Sheet
As of June 30, 1996
The following unaudited pro forma condensed combining balance sheet is
presented as if the Company had acquired Landmark Square Properties
("Landmark Square") and Certain Option Properties on June 30, 1996.
This pro forma condensed combining balance sheet should be read in
conjunction with the pro forma condensed combining statement of operations
of the Company and the historical financial statements and notes thereto
of the Company as filed on Form 10-K for the year ended December 31, 1995
and Form 10-Q for the six months ended June 30, 1996.
The pro forma condensed combining balance sheet is unaudited and is not
necessarily indicative of what the actual financial position would have
been had the Company acquired Landmark Square and Certain Option
Properties on June 30, 1996, nor does it purport to represent the future
financial position of the Company. (Amounts below are in thousands)
<TABLE>
<CAPTION> Landmark
Square Certain Option June 30, 1996
Description Historical(a) (b) Properties (c) Pro Forma
<C> <S> <S> <S> <S>
Assets:
Real estate, net .................. $305,379 $77,000 $36,000 $418,379
Cash and cash equivalents ......... 10,308 10,308
Tenant Receivables ................ 1,983 1,983
Affiliate receivables ............. 692 692
Deferred rent receivable .......... 10,042 10,042
Prepaid expenses and other assets . 13,954 13,954
Investments in joint ventures ..... 5,145 5,145
Deferred lease fees and loan
costs, net ........................ 8,183 8,183
--------------------------------------------------------------------
Total Assets $355,686 $77,000 $36,000 $468,686
====================================================================
Liabilities and Stockholders'
Equity:
Mortgage notes payable ........... $109,033 $50,000 $4,700 $163,733
Credit facility .................. 40,000 27,000 22,100 89,100
Accrued expenses and other
liabilities ...................... 10,644 10,644
Dividends payable ................ 8,228 8,228
Affiliate payables ............... 145 145
--------------------------------------------------------------------
Total Liabilities ............... 168,050 77,000 26,800 271,850
--------------------------------------------------------------------
Minority interest in consolidated
partnership ................. 9,439 9,439
Minority interest in Operating
Partnership ...................... 34,453 9,200 43,653
Stockholders Equity:
Common Stock ..................... 104 104
Stockholders Equity:
Additional paid-in-capital........ 143,640 143,640
Retained Earnings................. - -
-------------------------------------------------------------------
Total Stockholders' Equity ....... 143,744 0 0 143,744
-------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity ........... $355,686 $77,000 $36,000 $468,686
===================================================================
</TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
For the Year Ended December 31, 1995
(UNAUDITED)
The following unaudited pro forma condensed combining Statement of
Operations is presented as if (i) the April 1996 Offering and the IPO and
related formation transactions had occurred on January 1, 1995, (ii) the
Company purchased all properties acquired subsequent to the IPO and prior to
December 31, 1995 (the "1995 Acquisition Properties") on January 1, 1995,
(iii) and the Company had acquired the Westchester Properties, the 1996
Acquisition Properties, Landmark Square and Certain Option Properties on
January 1, 1995, and (iv) the Company qualified as a REIT, distributed all
its taxable income and, therefore, incurred no income tax expense during the
period.
This pro forma condensed combining Statement of Operations should be read in
conjunction with the pro forma condensed combining balance sheet of the
Company and the historical financial statements and notes thereto of the
Company as filed on Form 10-K for the ended December 31, 1995 and Form 10-Q
for the six months ended June 30, 1996.
The pro forma condensed combining Statement of Operations is unaudited and
is not necessarily indicative of what the results of operations would have
been had the April 1996 Offering and the IPO and related formation
transactions and aforementioned acquisition transactions actually occurred
on January 1, 1995, nor does it purport to represent the operations of the
Company for future periods (Amounts below are in thousands, except per share
data).
<TABLE>
<CAPTION> Total
Reckson
Reckson Associates
Asso- Corp.
Adjusted ciates Initial Combined
Reckson Realty Public Pro Forma
Group Corp. Offering The January
(d) (e) and 1995 1, 1995 The Reckson
Jan 1, June 3, Form- Acquisi- to West- Land Certain Associates
1995 to 1995 to ation tion December chester 1996(i) Pro Forma Mark Option Realty
June 2, December Transact Prop- 31, Prop- Acquisition (j) Square Proper- Corp. Pro
Description 1995 31, 1995 ions(f) erties(g) 1995(g) erties(h) Properties Adjustments (m) ties (n) Forma(v)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Base rent.. $19,680 $32,661 $6,034 $58,375 $13,883(1) $1,617 $12,596 $5,341 $91,812
Tenant
escalations. 3,417 5,246 566 9,229 509(1) 21 2,521 438 12,718
Construction
and management
company income. 2,950 (2,950)(1)
Equity in
earnings of
service
companies... 100 220(1) 320 70(3) 390
Other income... 548 448 (548)(3) 25 473 473
---------------------------------------------------------------------------------------------------------------
Total
Revenues.... 26,595 38,455 (3,278) 6,625 68,397 14,462 1,638 15,117 5,779 105,393
---------------------------------------------------------------------------------------------------------------
Expenses:
Operating
Expenses:
Property
expenses... 4,918 7,144 (408)(2) 1,204 12,858 4,632(1) 641 7,029 665 25,825
Real estate
taxes...... 3,858 5,755 1,172 10,785 2,697(1) 435 1,776 1,208 16,901
Ground rents.. 411 579 990 136 1,126
Rent expense
to an affiliate. 99 (99)(1)
Construction
costs and
expenses...... 1,929 (1,929)(1)
Marketing,
general and
administrative.. 1,767 1,859 (389)(5) 3,237 637 278 4,152
---------------------------------------------------------------------------------------------------------------
Total
Operating
Expenses 12,982 15,337 (2,825) 2,376 27,870 7,329 1,076 9,442 2,287 48,004
Interest... 8,423 5,331 13,754 5,667 19,421
Depreciation
and
Amortization.. 4,455 7,233 146(4) 1,300 13,134 2,061(2) 164 1,925 900 18,184
---------------------------------------------------------------------------------------------------------------
25,860 27,901 (2,679) 3,676 54,758 9,390 1,240 5,667 11,367 3,187 85,609
Equity in
net income of
investees.... 989(4) 989
Minority
partners'
interest
in
consolidated
partnership
income..... (261) (184) (445) (445)
-------------------------------------------------------------------------------------------------------------
Income
(loss)
before
Limited
partners'
minority
interest in
the Operating
Partnership...
and
extra
ordinary
item.......... $474 $10,370 ($599) $2,949 $13,194 $6,061 $398 ($5,667) $3,750 $2,592 20,328
=================================================================================================
Limited
partners'
minority
interest
in
the
Operating.....
Partnership ( 5,143)(k)
-----------
Net income
before
extraordinary $15,185
item ........ =======
Net income
per
common
share
before
extraordinary
item ........ $1.45(l)
========
Weighted
average
common
shares
outstanding.... 10,439
======
</TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
For the Six Months Ended June 30, 1996
(UNAUDITED)
The following unaudited pro forma condensed combining Statement of
Operations is presented as if the April 1996 Offering had occurred and the
Company had acquired the Westchester Properties, Landmark Square
and Certain Option Properties on January 1, 1996.
The pro forma condensed combining Statement of Operations should be read
in conjunction with the pro forma condensed combining balance sheet of the
Company and the historical financial statements and notes thereto of the
Company as filed on Form 10-K for the year ended December 31, 1995 and
Form 10-Q for the six months ended June 30, 1996.
The pro forma condensed combining Statement of Operations is unaudited and
is not necessarily indicative of what the results of operations would have
been had the April 1996 Offering actually occurred on January 1, 1996 and
had the Company acquired the Westchester Properties, Landmark Square and
Certain Option Properties on January 1, 1996, nor does it purport to
represent the operations of the Company for future periods (Amounts below
are in thousands, except per share data).
<TABLE>
<CAPTION> Certain
Option The Reckson Associates
Historical Landmark Properties Westchester Pro Forma(r) Realty Corp.
Description (o) Square(p) (q) Properties(s) Adjustments Pro Forma(v)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Base rent.... $35,716 $6,391 $2,393 $3,137 $47,637
Tenant escalations.... 4,696 1,078 189 100 6,063
Equity in earnings of real
estate
partnerships..... 71 71
Equity in earnings of
service
companies..... 759 759
Other income.. 517 517
-------------------------------------------------------------------------------------
Total Revenues.. 41,759 7,469 2,582 3,237 55,047
-------------------------------------------------------------------------------------
Expenses:
Operating Expenses:
Property expenses.... 8,241 3,763 317 1,496 13,817
Real estate taxes.... 5,983 831 609 626 8,049
Ground rents......... 519 68 587
Marketing, general and
administrative....... 2,390 299 132 2,821
--------------------------------------------------------------------------------------
Total Operating Expenses. 17,133 4,893 1,126 2,122 25,274
Interest............. 5,511 4,320 9,831
Depreciation and
Amortization......... 7,793 963 450 304 9,510
---------------------------------------------------------------------------------------
Total expenses....... 30,437 5,856 1,576 2,426 4,320 44,615
Equity in net income of 347 347
investees............
Minority partners'
interest in
consolidated partnership
income.............. (472) (472)
---------------------------------------------------------------------------------------
Income (loss) before
Limited
partners' minority
interest in
the Operating Partnership
and
extraordinary item..... $10,850 $1,613 $1,006 $1,158 ($4,320) 10,307
==================================================================
Limited partners' minority
interest in the Operating
Partnership........... (2,608)(t)
----------
Net income before
extraordinary
item................. $7,699
Net income per common share
before extraordinary item... $0.74(u)
=======
Weighted average common 10,439
shares outstanding........ ======
</TABLE>
RECKSON ASSOCIATES REALTY CORP.
NOTES TO PRO FORMA FINANCIAL STATEMENT
(UNAUDITED)
(in thousands, except shares and units)
Pro Forma Condensed Combining Balance Sheet
a. Reflects the Company's historical balance sheet as of June 30, 1996
(Unaudited).
b. Reflects the acquisition of Landmark Square with mortgage debt of $50
million and additional borrowings under the credit facility.
c. Reflects the purchase of certain properties under option with related
parties with borrowings under the credit facility, assumption of a
mortgage debt and issuance of approximately 279,000 of operating
partnership units (based on the June 30, 1996 closing price of the
Company's common stock of $33 per share).
Pro Forma Condensed Combining Statement of Operations - for the year ended
December 31, 1995 and the six months ended June 30, 1996.
d. The following reflects the historical operations of The Reckson Group
for the period January 1, 1995 to June 2, 1995, adjusted to include the
Omni and exclude properties that were not transferred to the Company:
<TABLE>
<CAPTION> Reckson Group Add: Less: Adjusted
Historical Omni Properties Reckson Group
Not Transferred
<S> <C> <C> <C> <C>
REVENUES:
Base Rents........................ $16,413 $4,812 $1,545 $19,680
Tenant escalations and reimbursements 2,907 602 92 3,417
Construction and management revenues 2,950 --- --- 2,950
Other income ...................... 548 --- --- 548
-------- -------- ------- --------
22,818 5,414 1,637 26,595
-------- --------- ------- --------
EXPENSES:
Property operating.................. 3,985 1,212 279 4,918
Real estate taxes................... 3,390 897 429 3,858
Ground Rent......................... 234 233 56 411
Rent expense to an affiliate........ 99 --- --- 99
Construction costs and expenses..... 1,929 --- --- 1,929
Marketing, general and administrative 1,759 21 13 1,767
Interest............................ 7,622 1,549 748 8,423
Depreciation........................ 3,606 1,181 332 4,455
--------- ---------- -------- ------
22,624 5,093 1,857 25,860
---------- ---------- -------- -------
Income before Limited partners' minority
interest and extraordinary item..... $ 194 $ 321 $ (220) $ 735
=========== ========== ======= ======
</TABLE>
(Footnotes continued on following page)
e. Reflects the historical operations of Reckson Associates Realty Corp.
for the period June 3, 1995 to December 31, 1995.
f. Reflects the following adjustments related to the IPO and the formation
transaction:
1. Adjustment required to record the Company's investment in the
Subsidiary Corporations under the equity method of accounting.
2. An estimated decrease in operating expenses ($408) principally as
a result of certain non-Rechler family partners of certain
Reckson Group entities receiving management fees and related cost
reimbursements ($297) in lieu of cash distributions for their
respective ownership interests and the elimination of separate
insurance coverage ($111) on properties covered under the
Company's umbrella policy.
3. A reduction in income resulting from the distribution of available-
for-sale securities and other investments to partners and
elimination of gain on sale of real estate.
4. Additional depreciation on an increase in basis of the real estate,
additional amortization on deferred financing costs related to new
debt, less amortization relating to deferred financing costs
written-off as a result of the debt repaid with proceeds from IPO.
5. Adjustment to the historical marketing, general and administrative
expenses for incremental costs of doing business as a public
company and savings from operating all properties on a combined
self-managed basis, less administrative costs attributable to the
service companies, as follows:
<TABLE>
<CAPTION>
<S> <C>
Reckson Group historical expenses for the period from January 1, 1995 to June 2, 1995.......... $1,767
Reckson Associates Realty Corp. expenses for the period from June 3, 1995 to
December 3, 1995............................................................................. 1,859
-------
3,626
-------
Incremental cost of doing business as a public company for the period January 1, 1995 to
June 2, 1995............................................................................... $416
Incremental costs incurred during the period January 1, 1995 to June 2, 1995................. (125)
Estimated savings from operating all properties on a combined, self-managed basis............ (92) 199
-----
Less: Administrative costs relating to Subsidiary Corporations described in (F-1 above)...... (588)
Adjustment................................................................................... (389)
Marketing, general and administrative expenses - Reckson Associates Realty Corp. Combined
Pro Forma.................................................................................. $3,237
------
------
</TABLE>
(Footnotes continued on following page)
g. Reflects the preacquisition revenues and certain expenses of the
properties acquired during the period from the date of the IPO to
December 31, 1995.
h. Reflects the operations of eight class A suburban office properties
encompassing an aggregate of approximately 935,000 square feet
located in Westchester County, New York (the "Westchester Properties"),
as follows:
1. The revenues and certain expenses of seven of the Westchester
Properties
2. Depreciation expense on the buildings (30 years) and tenant costs
(life of lease)
3. Equity in the earnings of the management and construction business.
4. Equity in earnings of the eighth Westchester Property in which the
Company acquired a 60% interest in an LLC entity which owns the
property.
i. Reflects the revenues and certain expenses of an additional office
property and an industrial property purchased in 1996, located in
Westchester, and Hauppauge, New York, respectively (the "1996
Acquisition Properties").
j. Reflects the net effect of (i) a reduction in mortgage interest costs
associated with repayment of certain mortgage debt with proceeds from
the IPO and a modification of certain loan terms in the remaining
mortgages after the IPO and (ii) an increase in interest costs
associated with a $50 million mortgage debt expected to be incurred
with an estimated interest rate of 8% to finance the acquisition of
Landmark Square, a $4.7 million mortgage debt with an interest
rate of 9.125% to be assumed in connection with the acquisition
of one of the Certain Option Properties, a $9.2 million mortgage
debt with an interest rate of 7.375% assumed in connection
with the acquisition of one of the Westchester Properties and
additional borrowings under the Credit Facility.
k. Represents the minority interest of the Limited Partners in the
Operating Partnership at an effective pro forma rate of approximately
25.3%.
l. Pro Forma net income per share of common stock before extraordinary item
is based upon 10,439,200 shares of common stock.
m. Reflects the combined revenues and certain expenses of Landmark Square
located in Stamford, Connecticut for the year ended December 31, 1995.
n. Reflects the combined revenues and certain expenses of the Certain
Option Properties for the year ended December 31, 1995.
o. Reflects the historical operations of the Company for the six months
ended June 30, 1996.
p. Reflects the combined revenues and certain expenses of Landmark Square
for the six months ended June 30, 1996.
q. Reflects the combined revenues and certain expenses of the Certain
Option Properties for the six months ended June 30, 1996.
r. Reflects the increase in interest costs associated with a $50 million
mortgage debt expected to be incurred with an estimated interest rate
of 8% to finance the acquisition of Landmark Square, a $4.7 million
mortgage debt with an interest rate of 9.125% to be assumed in
connection with the acquisition of one of the Certain Option Properties,
a $9.2 million mortgage debt with an interest rate of 7.375% assumed in
connection with the acquisition of one of the Westchester Properties
and additional borrowings under the Credit Facility.
s. Reflects the combined revenues and certain expenses of the Westchester
Properties for the period of time during 1996 prior to the acquisition
by the Company.
t. Represents the minority interest of the Limited Partners in the Operating
Partnership at an effective pro forma rate of approximately 25.3%.
u. Pro forma net income per share of common stock before extraordinary item
is based upon 10,439,200 shares of common stock.
v. The revenues and certain expenses of certain insignificant property
acquisitions, including vacant buildings have been excluded from the pro
forma condensed combining Statement of Operations for the six months
ended June 30, 1996.
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
RECKSON ASSOCIATES REALTY CORP.
We have audited the combined statement of revenues and certain
expenses of properties to be acquired from the Metropolitan Life
Insurance Company ("MetLife") by Reckson Associates Realy Corp. (the
"Landmark Square Properties"), as described in Note 1, for the year ended
December 31, 1995. The financial statement is the responsibility of
Landmark Square Properties management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles
used and the significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses
was prepared for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission for inclusion in Form 8-K of
Reckson Associates Realty Corp. and is not intended to be a complete
presentation of Landmark Square Properties revenues and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the combined revenues and certain
expenses of Landmark Square Properties as described in Note 1 for the year
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
September 20, 1996
LANDMARK SQUARE PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
(In thousands)
(Note 1)
<TABLE>
<CAPTION> Six months Year ended
ended December
June 30, 31,
1996 1995
------------------------
(Unaudited)
<S> <C> <C>
REVENUES: (Note 2 and 6)
Base rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,391 $12,596
Tenant escalations, reimbursements, and parking income . . . . . . . 1,078 2,521
--------------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,469 15,117
---------------------
CERTAIN EXPENSES:
Property operating expenses (Note 5) . . . . . . . . . . . . . . . . 3,763 7,029
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . 831 1,776
Management fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . 299 637
--------------------
Total certain expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 4,893 9,442
--------------------
REVENUES IN EXCESS OF CERTAIN EXPENSES . . . . . . . . . . . . . . . . . . $2,576 $5,675
---------------------
</TABLE>
See accompanying notes to financial statements
LANDMARK SQUARE PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION
Presented herein is the combined statement of revenues and certain
expenses related to the operations of six commercial real estate
properties owned by Metropolitan Life Insurance Company ("MetLife").
These properties are located in Stamford, Connecticut, and are identified
as the Landmark Square Properties.
The Landmark Square Properties are not a legal entity but rather a
combination of the operations of certain real estate properties subject to
purchase contracts by Reckson Associates Realty Corp. (the "Company").
The accompanying combined statement of revenues and certain expenses
includes the accounts of the commercial real estate properties consiting
of One through Six Landmark Square.
The accompanying financial statements have been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for the acquisition of real estate properties.
Accordingly, the financial statements exclude certain expenses that may
not be comparable to those expected to be incurred by the Company in the
proposed future operations of the aforementioned properties. Items
excluded consist of interest, depreciation and general and administrative
expenses not directly related to the future operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
The combined statement of revenues and certain expenses for the six
months ended June 30, 1996 is unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the combined statement
of revenues and certain expenses for this interim period have been
included. The results of interim periods are not necessarily indicative of
the results to be obtained for a full fiscal year.
LANDMARK SQUARE PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
2. LEASE AND REVENUE RECOGNITION
The Landmark Square Properties are being leased to tenants under
operating leases. Minimum rental income is generally recognized on a
straight-line basis over the term of the lease. The excess of amounts so
recognized over amounts due pursuant to the underlying leases amounted to
approximately $400,000 for the year ended December 31, 1995. The lease
agreements generally contain provisions for reimbursement of real estate
taxes and operating expenses over base year amounts, as well as fixed
increases in rent.
All of the Landmark Square Properties are principally multi-tenant
office buildings whose leases expire at various dates over the next
twenty years.
3. MANAGEMENT AND LEASING AGREEMENTS
The Landmark Square Properties are managed by GRM Management, Inc.
("GRM"). GRM provides leasing services to the Landmark Square Properties
at the rate of $25,000 per month. GRM also provides property management
services equal to 4% of the total revenues (as defined) .
JM Parking Company, an affiliate of GRM, operates the parking garage
located at Landmark Square Properties. Landmark Square Properties pays a
management fee of $30,000 per year.
4. GROUND LEASE
On February 23, 1983, 9/th/ Stamford New Urban Corporation entered
into a ninety nine year noncancellable ground lease for Six Landmark
Square with Rich - Taubman Associates. Net rent was $1 for the entire
ninety-nine year term. The ground lease was subsequently transferred to
Metlife.
5. PROPERTY OPERATING EXPENSES
Property operating expenses for the year ended December 31, 1995
include approximately$130,000 in insurance costs which have been
allocated from Metlife. In addition, property operating expenses also
include approximately $742,000 in bad debt expense, $2,453,000 for
utilities, $958,000 in payroll costs and $1,561,000 in repair and
maintenance costs.
6. SIGNIFICANT TENANTS
Two tenants, United Distillers North America, Inc. and Pneumo Abex
Corporation accounted for 12% and 19% of the 1995 rents, respectively.
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
RECKSON ASSOCIATES REALTY CORP.
We have audited the combined statements of revenues and expenses of
certain properties acquired or to be acquired (the "Certain Option
Properties") from certain limited partners in Reckson Operating Partnership,
L.P., as described in Note 1, for the years ended December 31, 1995, 1994 and
1993. These financial statements are the responsibility of the Certain Option
Properties' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and the
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying combined statements of revenues and certain expenses
were prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission for inclusion in the Form 8-K of
Reckson Associates Realty Corp. and are not intended to be a complete
presentation of the Certain Option Properties' revenues and expenses.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined revenues and certain expenses
of the Certain Option Properties as described in Note 1 for the years ended
December 31, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
September 16, 1996
CERTAIN OPTION PROPERTIES
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(IN THOUSANDS)
(NOTE 1)
<TABLE>
<CAPTION> Six Months Ended June 30, Years Ended December 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES (NOTE 2):
Base rents $ 2,393 $ 2,698 $ 5,341 $ 5,184 $ 5,376
Tenant escalations and
reimbursements,
including lease cancellation
income of $421 (1994) and $24 189 336 438 1,180 833
(1993) -------- -------- -------- ---------- -------
Total revenues 2,582 3,034 5,779 6,364 6,209
--------- -------- --------- ----------- -------
CERTAIN EXPENSES:
Property operating expenses 317 327 665 817 607
Real estate taxes 609 579 1,208 1,154 1,057
Ground rent (Note 3) 68 68 136 136 136
Management fees (Note 4) 132 144 278 303 298
-------- ------- ------- ------ ------
Total certain expenses 1,126 1,118 2,287 2,410 2,098
-------- -------- -------- ------- -------
REVENUES IN EXCESS OF CERTAIN
EXPENSES $ 1,456 $ 1,916 $ 3,492 $ 3,954 $ 4,111
------- ------- ------- ------- ------
------- -------- ------- ------- ------
</TABLE>
See accompanying notes to financial statements.
CERTAIN OPTION PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
1 BASIS OF PRESENTATION
Presented herein are the combined statements of revenues and certain
expenses related to the operations of five commercial real estate properties
owned by certain limited partners of Reckson Operating Partnership, L.P.
These properties are located on Long Island, New York, and are identified as
the Certain Option Properties (the "Properties").
The Properties are not a legal entity but rather a combination of the
operations of certain real estate properties acquired by Reckson Associates
Realty Corp. (the "Company") subsequent to June 30, 1996, or subject to
purchase contracts. The accompanying combined statements of revenues and
certain expenses include the accounts of the commercial real estate
properties listed below. The Company has acquired the first two properties
listed below and is in contract to acquire the fee title in the remaining
properties.
PROPERTIES
----------
1. 60 Charles Lindbergh Boulevard, Mitchel Field, New York
2. 48 Harbor Park Drive, Port Washington, New York
3. 110 Bi-county Boulevard, Farmingdale, New York
4. 30 Hub Drive, Melville, New York
5. 593 Acorn Street, Babylon, New York
The accompanying financial statements have been prepared in accordance
with the applicable rules and regulations of the Securities and Exchange
Commission for the acquisition of related party real estate properties.
Accordingly, the financial statements exclude certain expenses that may not
be comparable to those expected to be incurred by the Company in the proposed
future operations of the aforementioned Properties. Expenses excluded consist
of interest, depreciation and general and administrative expenses not
directly related to the future operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The combined statements of revenues and certain expenses for the six
months ended June 30, 1996 and 1995 are unaudited; however, in the opinion
of management, all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the combined statements of
revenues and certain expenses for these interim periods have been included.
The results of interim periods are not necessarily indicative of the results
to be obtained for a full fiscal year.
2 LEASES AND REVENUE RECOGNITION
The Properties are being leased to tenants under operating leases.
Minimum rental income is generally recognized on a straight-line basis over
the term of the lease. The excess of amounts so recognized over amounts due
pursuant to the underlying leases amounted to approximately $334,000,
$230,000 and $466,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The lease agreements for certain of the Properties generally
contain provisions which provide for reimbursement of real estate taxes and
operating expenses over base year amounts, as well as fixed increases in
rent.
The Properties are office or industrial buildings whose leases expire
at various dates over the next eleven years.
CERTAIN OPTION PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
3. LAND LEASES
One of the Properties leases, pursuant to a noncancellable operating
lease, the land on which the building is constructed. The lease, which
contains renewal options, expires in 2018. The lease contains provisions for
scheduled increases in the minimum rent. Minimum ground rent is recognized
on a straight-line basis over the term of the lease. The excess of amounts
recognized over amounts contractually due was approximately $20,000 in each
of 1995, 1994 and 1993.
4. RELATED PARTY TRANSACTIONS
The Company provided executive, supervisory, leasing, legal and
accounting services to the Properties. The combined fees charged and
collected by the Company relating to these services amounted to approximately
$278,000, $303,000 and $298,000 for the years ended December 31, 1995, 1994
and 1993, respectively. These amounts have been included in the accompanying
combined statements of revenues and certain expenses as management fees.
An affiliate of the Company, which is accounted for on the equity
method, provided tenant related and other construction and architectural
services to the Properties. Tenant improvement costs and other services
performed by this affiliate aggregated approximately $230,000, $584,000 and
$189,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
These amounts have been capitalized as assets and accordingly are not
included in the accompanying statements of revenues and certain expenses.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECKSON ASSOCIATES REALTY CORP.
/s/ J. Michael Maturo
J. Michael Maturo
Executive Vice President
and Chief Financial Officer
Date: September 30, 1996
