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: February 18, 1997
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)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Reckson Associates Realty Corp. (the "Company") entered into a contract in
December 1996 to acquire five Class A office properties encompassing
approximately 500,000 square feet in Northern New Jersey (the "New Jersey
Portfolio") for approximately $56 million. The purchase price will be funded
with a combination of cash and/or the issuance of partnership units of Reckson
Operating Partnership, L.P. ("Units"). The New Jersey Portfolio is being
acquired from various entities associated with Robert Heller, a Northern New
Jersey developer. In connection with this acquisition, the Company established a
Northern New Jersey Division, which includes staffing additions of senior
executives and property operations personnel from the Northern New Jersey
developer.
The Company has also contracted to purchase a 10-building Class A
industrial portfolio located in Hauppauge, Long Island (the "Hauppauge
Portfolio"). The Hauppauge Portfolio is located within the Company's Vanderbilt
Industrial Park. The Hauppauge Portfolio consists of 447,804 square feet of
rentable space and has a purchase price of approximately $21.6 million.
In addition, the Company has entered into a letter of intent to purchase a
221,350 square foot nine story Class A office property (the "Uniondale Office
Property") located in Uniondale, Long Island. The purchase price for the
Uniondale Office Property is approximately $19.0 million.
Item 5. Other Events.
The Company is negotiating to establish a three year unsecured credit
facility with a syndicate of lenders to be led by two commercial banks (the "New
Credit Facility"). It is expected that the New Credit Facility will provide for
a maximum borrowing amount of up to $225 million and the Company's ability to
borrow thereunder will be subject to the satisfaction of certain financial
covenants, including covenants relating to limitations on unsecured and secured
borrowings, minimum interest and fixed charge coverage ratios, a minimum equity
value and a maximum dividend payout ratio. In addition, it is expected that
borrowings under the New Credit Facility would bear interest at a floating rate
equal to one, two, three or six month LIBOR (at the Company's election) plus a
spread ranging from 1.125% to 1.50%, based on the Company's leverage ratio.
The New Credit Facility would replace the Company's existing $150 million
credit facility with Salomon Brothers Realty Corp. which is scheduled to mature
on June 2, 1997 (the "Credit
2
<PAGE>
Facility"). Borrowings under the Credit Facility bear interest at a floating
rate equal to one-month LIBOR plus 1.75% and are guaranteed by Reckson FS
Limited Partnership (the "Financing Partnership"). Such guarantee is secured by
a mortgage on certain Properties contributed to the Financing Partnership by the
Operating Partnership at the time of the IPO. Upon entering into the New Credit
Facility, this mortgage lien will be discharged. Consummation of the New Credit
Facility arrangement is subject to completion of the lenders' due diligence and
completion of documentation satisfactory to the Company and such lenders.
In addition, on February 12, 1996, the Board of Directors of the Company
declared a two-for-one stock split distributable on April 15, 1997 to
shareholders of record on April 4, 1997.
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
September 30, 1996...............................................
Pro Forma Condensed Combining Statements of Operations
(Unaudited) for the year ended December 31, 1995 and
for the nine months ended September 30, 1996.....................
Notes to Pro Forma Financial Statements...........................
ACQUISITION PROPERTIES
Report of Independent Auditors....................................
Combined Statement of Revenues and Certain Expenses of the New
Jersey Portfolio for the year ended December 31, 1996
Notes to Combined Statements of Revenues and Certain
Expenses of the New Jersey Portfolio.............................
Report of Independent Auditors
Statement of Revenues and Certain Expenses of the Hauppauge
Portfolio for the year ended December 31, 1996..................
Notes to the Combined Statements of Revenues and
Certain Expenses of the Hauppauge Portfolio......................
Report of Independent Auditors....................................
Statement of Revenues and Certain Expenses of the Uniondale Office
Property for the year ended December 31, 1996....................
3
<PAGE>
Notes to Statement of Revenues and Certain Expenses of
the Uniondale Office Property....................................
4
<PAGE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Balance Sheet
As of September 30, 1996
(unaudited)
The following unaudited pro forma condensed combining balance sheet is presented
as if the The Company had acquired (i) Landmark Square and the Certain Option
Properties and (ii) the New Jersey Portfolio, the Hauppauge Portfolio, and the
Uniondale Office Property collectively (the "1997 Acquisition Properties") on
September 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 on Form 10 Q for the
nine months ended September 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 the 1997 Acquisition Properties on September 30,1996, nor
does it purport to represent the future financial position of the Company.
(Amounts below are in thousands)
<TABLE>
<CAPTION>
Certain
Landmark Option New Jersey Hauppauge
Historical (a) Square (b) Properties (c) Portfolio (d) Portfolio (d)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Real estate, net $344,820 $77,000 $12,000 $56,000 $21,600
Cash and cash equivalents 11,766
Tenant Receivables 1,714
Affiliate receivables 1,992
Deferred rent receivable 10,958
Investment in mortgage note receivable 22,783
Deferred acquisition costs,prepaid expenses
and other assets 17,719
Investments in joint ventures 5,302
Deferred lease fees and loan costs, net 10,055
-----------------------------------------------------------------------------------
Total Assets $427,109 $77,000 $12,000 $56,000 $21,600
===================================================================================
Liabilities and Stockholders' equity
Mortgage notes payable $110,757 $50,000 $ 4,700
Credit Facility and other loans 109,000 27,000 2,239 56,000 21,600
Accrued expenses and other liabilities 9,715
Dividends payable 8,342
Affiliate payables 180
-----------------------------------------------------------------------------------
Total Liabilities 237,994 77,000 6,939 56,000 21,600
Minority interests in consolidated partnership 9,200
Minority interests in Operating Partnership 37,696 5,061
Stockholder's Equity:
Common Stock 105
Additional paid-in-capital 142,114
Retained Earnings -
-----------------------------------------------------------------------------------
Total Stockholders' Equity 142,219
-----------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $427,109 $ 77,000 $12,000 $56,000 $21,600
===================================================================================
</TABLE>
Uniondale September 30,
Office 1996
Property (d) Pro Forma
--------------------------------
Assets
Real estate, net $19,000 $530,420
Cash and cash equivalents 11,766
Tenant Receivables 1,714
Affiliate receivables 1,992
Deferred rent receivable 10,958
Investment in mortgage note receivable 22,783
Deferred acquisition costs,prepaid expenses
and other assets 17,719
Investments in joint ventures 5,302
Deferred lease fees and loan costs, net 10,055
--------------------------------
Total Assets $19,000 $612,709
================================
Liabilities and Stockholders' equity
Mortgage notes payable $165,457
Credit Facility 19,000 234,839
Accrued expenses and other liabilities 9,715
Dividends payable 8,342
Affiliate payables 180
--------------------------------
Total Liabilities 19,000 418,533
Minority interests in consolidated partnership 9,200
Minority interests in Operating Partnership 42,757
Stockholder's Equity:
Common Stock 105
Additional paid-in-capital 142,114
Retained Earnings
--------------------------------
Total Stockholders' Equity 0 142,219
--------------------------------
Total Liabilities and Stockholders' Equity $19,000 $612,709
================================
5
<PAGE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
For the Nine Months Ended September 30, 1996
(UNAUDITED)
The following unaudited pro forma condensed combining Statement of Operations is
presented as if (i) the Company had acquired the Westchester Properties,
Landmark Square, the Certain Option Properties, and (ii) the Company had
acquired the New Jersey Portfolio, the Hauppauge Portfolio and the Uniondale
Office Property collectively, (the "1997 Acquisition Properties") as of January
1, 1996 and 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 10Q for the nine months ended September 30, 1996.
The pro forma condensed combining Statement of Operations is unaudited and is
not necessarily indicative of what the actual financial position would have been
had the Company acquired Landmark Square, the Westchester Properties, the
Certain Option Properties, and the 1997 Acquisition Properties as of January
1,1996, nor does it puport to represent the operations of the Company for future
periods (Amounts below are in thousands, except per share data)
<TABLE>
<CAPTION>
Description
- ------------ The 1997 Certain
Westchester Acquisition Landmark Option
Historical (p) Properties (t) Properties(w) Square (q) Properties (r)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Base rent $56,815 $3,137 $10,097 $9,672 $2,661
Tenant escalations 7,492 100 1,502 1,286 235
Equity in earnings of real estate
partnerships 166 347
Equity in earnings of service
companies 934
Other income 1,073 574
-------------------------------------------------------------------------------
Total Revenues 66,480 3,584 11,599 11,532 2,896
Expenses:
Opearting Expenses:
Property expenses 13,519 1,496 3,377 5,638 680
Real estate taxes 9,595 626 2,460 1,216 793
Ground rents 803
Marketing, general and administrative 3,720
-------------------------------------------------------------------------------
Total Operating Expenses 27,637 2,122 5,837 6,854 1,473
Interest 8,765
Depreciation and Amortization 12,359 304 2,053 1,636 765
-------------------------------------------------------------------------------
Total expenses 48,761 2,426 7,890 8,490 2,238
-------------------------------------------------------------------------------
Minority partners' interest in
consolidated partnership income (638)
-------------------------------------------------------------------------------
Income (loss) before Limited partners'
minority interest in the Operating
Partnership and extraordinary item $17,081 $1,158 $3,709 $3,042 $658
===============================================================================
Limited partners' minority interest in
the Operating Partnership
Net income before extraordinary item
Net income per common share before
extraordinary item
Weighted average common shares
outstanding
</TABLE>
Description Reckson
- ------------ Associates
Pro Forma Realty Corp.
Adjustments (s) Pro Forma (x)
------------------------------
Revenues:
Base rent $82,382
Tenant escalations 10,615
Equity in earnings of real estate
partnerships 513
Equity in earnings of service
companies 934
Other income 1,647
------------------------------
Total Revenues 96,091
Expenses:
Opearting Expenses:
Property expenses 24,710
Real estate taxes 14,690
Ground rents 803
Marketing, general and administrative 3,720
------------------------------
Total Operating Expenses 43,923
Interest 11,289 20,054
Depreciation and Amortization 17,117
------------------------------
Total expenses 11,289 81,094
------------------------------
Minority partners' interest in
consolidated partnership income (638)
------------------------------
Income (loss) before Limited partners'
minority interest in the Operating
Partnership and extraordinary item ($11,289) $14,359
========
Limited partners' minority interest in
the Operating Partnership (3,662)(u)
----------------
Net income before extraordinary item $10,697
Net income per common share before
extraordinary item $1.02(v)
Weighted average common shares
outstanding 10,441
<PAGE>
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 Company had acquired the 1995 Acquisition
Properties, the Westchester Properties, the 1996 Acquisition Properties,
Landmark Square, the Certain Option Properties and (ii) the Company had acquired
the New Jersey Portfolio, the Hauppauge Portfolio and the Uniondale Office
Building collectively (the "1997 Acquisition Properties") as of January 1, 1995
and 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 10K for the year ended December 31,1995.
The pro forma condensed combining Statement of Operations is unaudited and is
not necessarily indicative of what the actual financial position would have been
had the Company acquired the 1995 Acquisition Properties, the Westchester
Properties, the 1996 Acquisition Properties, Landmark Square, the Certain Option
Properties and (ii) the Company acquired the 1997 Acquisition Properties 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
Adjusted Reckson Associates Realty
Reckson Associates Initial Public Corp. Combined
Group (e) Realty Corp. (f) Offering and The 1995 Pro Forma
Jan.1, 1995 June 3, 1995 to Formation Acquisition January 1, 1995 to
Description to June 2, 1995 December 31, 1995 Transactions (g) Properties (h) December 31,1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Base rent $19,680 $32,661 $6,034 $58,375
Tenant escalations 3,417 5,246 566 9,229
Construction and management
company income 2,950 (2,950)(1)
Equity in earnings of service
companies 100 220 (1) 320
Other income 548 448 (548)(3) 25 473
-------------------------------------------------------------------------------------------
Total Revenues 26,595 38,455 (3,278) 6,625 68,397
-------------------------------------------------------------------------------------------
Expenses:
Opearting Expenses:
Property expenses 4,918 7,144 (408)(2) 1,204 12,858
Real estate taxes 3,858 5,755 1,172 10,785
Ground rents 411 579 990
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
-------------------------------------------------------------------------------------------
Total Operating Expenses 12,982 15,337 (2,825) 2,376 27,870
Interest 8,423 5,331 13,754
Depreciation and Amortization 4,455 7,233 146 (4) 1,300 13,134
-------------------------------------------------------------------------------------------
25,860 27,901 (2,679) 3,676 54,758
Equity in net income of investees
Minority partners' interest in
consolidated partnership income (261) (184) (445)
-------------------------------------------------------------------------------------------
Income (loss) before Limited partners'
minority interest in the Operating
Partnership and extraordinary item $474 $10,370 ($599) $2,949 $13,194
===========================================================================================
Limited partners' minority interest in
the Operating Partnership
Net income before extraordinary item
Net income per common share before
extraordinary item
Weighted average common shares
outstanding
<CAPTION>
The 1996 (j) Certain
Westchester Acquisition Pro forma (k) Landmark Option
Description Properties (i) Properties Adjustments Square (n) Properties (o)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Base rent $13,883 (1) $1,617 $12,596 $5,341
Tenant escalations 509 (1) 21 2,521 438
Construction and management
company income
Equity in earnings of service
companies 70 (3)
Other income
---------------------------------------------------------------------
Total Revenues 14,462 1,638 15,117 5,779
---------------------------------------------------------------------
Expenses:
Opearting Expenses:
Property expenses 4,632 (1) 641 7,029 665
Real estate taxes 2,697 (1) 435 1,776 1,208
Ground rents 136
Rent expense to an affiliate
Construction costs and expenses
Marketing, general and administrative 637 278
---------------------------------------------------------------------
Total Operating Expenses 7,329 1,076 9,442 2,287
Interest 12,767
Depreciation and Amortization 2,061 (2) 164 1,925 900
---------------------------------------------------------------------
9,390 1,240 12,767 11,367 3,187
Equity in net income of investees 989 (4)
Minority partners' interest in
consolidated partnership income
---------------------------------------------------------------------
Income (loss) before Limited partners'
minority interest in the Operating
Partnership and extraordinary item $6,061 $398 ($12,767) $3,750 $2,592
=====================================================================
Limited partners' minority interest in
the Operating Partnership
Net income before extraordinary item
Net income per common share before
extraordinary item
Weighted average common shares
outstanding
</TABLE>
Reckson
1997 Associates
Acquisition Realty Corp.
Description Properties (y) Pro Forma (x)
- ----------------------------------------------------------------------
Revenues:
Base rent $12,887 $104,699
Tenant escalations 1,454 14,172
Construction and management
company income
Equity in earnings of service
companies 390
Other income 473
----------------------------
Total Revenues 14,341 119,734
----------------------------
Expenses:
Opearting Expenses:
Property expenses 4,208 30,033
Real estate taxes 3,083 19,984
Ground rents 1,126
Rent expense to an affiliate
Construction costs and expenses
Marketing, general and administrative 4,152
----------------------------
Total Operating Expenses 7,291 55,295
Interest 26,521
Depreciation and Amortization 2,737 18,184
----------------------------
10,028 100,000
Equity in net income of investees 989
Minority partners' interest in
consolidated partnership income (445)
----------------------------
Income (loss) before Limited partners'
minority interest in the Operating
Partnership and extraordinary item $4,313 $20,278
============================
Limited partners' minority interest in
the Operating Partnership ($5,132)(l)
Net income before extraordinary item $15,146
=============
Net income per common share before $1.45(m)
extraordinary item =============
Weighted average common shares
outstanding 10,441
=============
7
<PAGE>
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 September 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 123,000 operating partnership
units (based on a weighted average unit price of $41.15 per share).
d. Reflect's the acquisition of the Hauppauge Portfolio, the New Jersey
Portfolio and the Uniondale Office Portfolio collectively (the "1997
Acquisition Properties") with additional borrowings under the credit
facility.
Pro Forma Condensed Combining Statement of Operations - for the year ended
December 31, 1995 and the nine months ended September 30, 1996.
e. 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: Properties Adjusted
Historical Omni Not Transferred Reckson Group
------------- ---- ---------------- -------------
<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
Construct 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)
8
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (continued)
(UNAUDITED)
(in thousands, except shares and units)
f. Reflects the historical operations of Reckson Associates Realty Corp. for
the period June 3, 1995 to December 31, 1995.
g. 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 or 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:
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 (g-1 above) (588)
-----
Adjustment (389)
-----
Marketing, general and administrative expenses - Reckson
Associates Realty Corp. Combined Pro Forma $3,237
=====
(Footnotes continued on following page)
9
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (continued)
(UNAUDITED)
(in thousands, except shares and units)
h. Reflects the preacquisition revenues and certain expenses of certain
properties acquired during the period from the date of the IPO to December
31, 1995.
i. 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 expenses 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.
j. Reflects the revenues and certain expenses of an office property and an
industrial property purchased in 1996, located in Westchester, and
Hauppauge, New York, respectively (the "1996 Acquisition Properties").
k. 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.
l. Represents the minority interest of the Limited Partners in the Operating
Partnership at an effective pro forma rate of approximately 25.3%.
m. Pro Forma net income per share of common stock before extraordinary item
is based upon 10,441,166 shares of common stock.
n. Reflects the combined revenues and certain expenses of Landmark Square
located in Stamford, Connecticut for the year ended December 31, 1995.
o. Reflects the combined revenues and certain expenses of the Certain Option
Properties for the year ended December 31, 1995.
10
<PAGE>
p. Reflects the historical operations of the Company for the nine months
ended September 30, 1996.
q. Reflects the combined revenues and certain expenses of Landmark Square for
the nine months ended September 30, 1996.
r. Reflects the combined revenues and certain expenses of the Certain Option
Properties for the nine months ended September 30, 1996.
s. 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.
t. 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.
u. Represents the minority interest of the Limited Partners in the Operating
Partnership at an effective pro forma rate of approximately 25.3%.
v. Pro forma net income per share of common stock before extraordinary item
is based upon 10,441,166 shares of common stock.
w. Reflects the combined revenues and certain expenses of the New Jersey
Portfolio, the Hauppauge Portfolio and the Uniondale Office Property for
the nine months ended September 30, 1996.
x. 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 year ended
December 31, 1995 and the nine months ended September 30, 1996.
y. Reflects the combined revenues and certain expenses of the New Jersey
Portfolio, the Hauppauge Portfolio and the Uniondale Office Property for
the year ended December 31, 1995.
11
<PAGE>
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 100 Executive Drive, L.L.C., 200 Executive Drive,
L.L.C., 300 Executive Drive, L.L.C., 10 Rooney Circle, L.L.C. and One Paragon
Drive, L.L.C. (collectively "Paragon") by Reckson Associates Realty Corp. (the
"New Jersey Portfolio"), as described in Note 1, for the year ended December 31,
1996. The financial statement is the responsibility of the New Jersey
Portfolio's 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 the
New Jersey Portfolio's 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 the New
Jersey Portfolio as described in Note 1 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 4, 1997
<PAGE>
New Jersey Portfolio
Combined Statement of Revenues and Certain Expenses
(in thousands)
(Note 1)
For the Year ended December 31, 1996
Revenues: (Note 2)
Base rents $ 7,299
Tenant escalations, reimbursements and sundry charges 873
------------
Total revenues 8,172
------------
Certain expenses:
Property operating expenses (Note 3) 1,974
Real estate taxes 1,201
------------
Total certain expenses 3,175
------------
Revenues in excess of certain expenses $ 4,997
============
See accompanying notes to financial statement.
<PAGE>
New Jersey Portfolio
Notes to 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 five commercial real estate properties owned by 100
Executive Drive, L.L.C., 200 Executive Drive, L.L.C., 300 Executive Drive,
L.L.C., 10 Rooney Circle, L.L.C. and One Paragon Drive, L.L.C. (collectively
"Paragon"). These properties are located in West Orange and Montvale, New Jersey
and are identified as the New Jersey Portfolio.
The New Jersey Portfolio is 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 consisting of 100, 200, and 300 Executive
Drive, One Paragon Drive and 10 Rooney Circle.
The accompanying financial statement has 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 statement
excludes 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, general and
administrative expenses and fees to Paragon of approximately $1,000,000, 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 statement and accompanying notes.
Actual results could differ from those estimates.
2. Lease and Revenue Recognition
The New Jersey Portfolio is 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 amounts so recognized were less than amounts due pursuant
to the underlying leases by approximately $290,000 for the year ended December
31, 1996. 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.
The New Jersey Portfolio is principally multi-tenant office buildings whose
leases expire at various dates over the next ten years.
<PAGE>
New Jersey Portfolio
Notes to Combined Statement of Revenues and Certain Expenses
3. Property Operating Expenses
Property operating expenses for the year ended December 31, 1996 include
approximately $74,000 in insurance costs, $901,000 for utilities, $158,000 in
payroll costs, $822,000 in repair and maintenance costs, and $19,000 in
miscellaneous operating costs.
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Reckson Associates Realty Corp.
We have audited the statement of revenues and certain expenses of the property
("Uniondale Office Property") to be acquired from the Metropolitan Life
Insurance Company ("MetLife") by Reckson Associates Realty Corp., as described
in Note 1, for the year ended December 31, 1996. The financial statement is the
responsibility of the Uniondale Office Property's 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 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 the Uniondale Office
Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of the Uniondale Office
Property as described in Note 1 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
January 16, 1997
<PAGE>
Uniondale Office Property
Statement of Revenues and Certain Expenses
(in thousands)
(Note 1)
For the Year Ended December 31, 1996
Revenues: (Notes 2 and 6)
Base rents $ 3,586
Tenant escalations 556
------------
Total revenues 4,142
------------
Certain Expenses:
Real estate taxes 1,476
Management fees (Note 3) 109
Property operating expenses (Note 5) 1,734
------------
Total certain expenses 3,319
------------
Revenues in excess of certain expenses $ 823
============
See accompanying notes to financial statement.
<PAGE>
Uniondale Office Property
Notes to Statement of Revenues and Certain Expenses
For the Year Ended December 31, 1996
1. Basis of Presentation
Presented herein is the statement of revenues and certain expenses related to
the operation of an office building, the Uniondale Office Property, owned by
Metropolitan Life Insurance Company ("MetLife"). The property is located in East
Meadow, New York.
The Uniondale Office Property is not a legal entity but rather certain real
estate subject to a purchase contract by Reckson Associates Realty Corp. (the
"Company"). The accompanying statement of revenues and certain expenses includes
the accounts of the Uniondale Office Property.
The accompanying financial statement has been prepared in accordance with the
applicable rules and regulations of the Securities and Exchange Commission for
the acquisition of real estate property. Accordingly, the financial statement
excludes certain expenses that may not be comparable to those expected to be
incurred by Reckson Associates Realty Corp. in the proposed future operations of
the aforementioned property. 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 statement and accompanying notes.
Actual results could differ from those estimates.
2. Lease and Revenue Recognition
The Uniondale Office Property is 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 $472,000 for the year ended
December 31, 1996. 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.
The Uniondale Office Property is a multi-tenant office building whose leases
expire at various dates over the next ten years.
<PAGE>
Uniondale Office Property
Notes to Statement of Revenues and Certain Expenses (continued)
3. Management and leasing Agreements
The Uniondale Office Property is managed and leased by Koll Management
Services Inc. ("Koll"). Koll provides property management services to the
Uniondale Office Property at the rate of 3% of gross cash receipts or $8,000
per month, whichever is greater.
4. Ground Lease
On January 25, 1983, a prior owner of the Uniondale Office Property entered into
a thirty-seven year non-cancelable ground lease, with six renewal options
totaling sixty-four years, for the Uniondale Office Property with the County of
Nassau. The ground lease was subsequently transferred to MetLife.
5. Property Operating Expenses
Property operating expenses for the year ended December 31, 1996 include
approximately $209,000 in ground rent, $36,000 for insurance, $608,000 for
utilities, $287,000 in payroll costs and $594,000 in repair and maintenance
costs.
6. Significant Tenants
Three tenants, Medical Liability Inc., Certilman Balin Alder & Hyman Associates,
and Travelers Insurance Company accounted for 19%, 25% and 26% of the 1996 rents
on a straight line basis, respectively.
<PAGE>
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 ("Hauppauge Portfolio") to be acquired from RREEF USA Fund-I
("Rreef") by Reckson Associates Realty Corp., as described in Note 1, for the
year ended December 31, 1996. The financial statement is the responsibility of
the Hauppauge Portfolio's 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 the
Hauppauge Portfolio's 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 the
Hauppauge Portfolio as described in Note 1 for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
January 17, 1997
<PAGE>
Hauppauge Portfolio
Combined Statement of Revenues and Certain Expenses
(Note 1)
For the Year Ended December 31, 1996
(in thousands)
Revenues (Note 2)
Base rents $2,748
Tenant escalations and reimbursements 563
----------
Total revenues 3,311
Certain expenses
Real estate taxes 605
Management fees (Note 3) 107
Property operating expenses (Note 5) 580
----------
Total certain expenses 1,292
----------
Revenues in excess of certain expenses $2,019
==========
See accompanying notes to financial statement.
<PAGE>
Hauppauge Portfolio
Notes to Combined Statement of
Revenues and Certain Expenses
For the Year Ended December 31, 1996
1. Basis of Presentation
Presented herein is the combined statement of revenues and certain expenses
related to the operations of ten industrial real estate properties owned by
Rreef USA Fund-I ("Rreef"). These properties are located in Hauppauge, Long
Island, and are identified as the Hauppauge Portfolio.
The Hauppauge Portfolio is not a legal entity but rather a combination of the
operations of certain real estate assets subject to purchase contracts by
Reckson Associates Realty Corp. (the "Company"). The accompanying combined
statement of revenues and certain expenses includes the accounts of these
commercial real estate properties.
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 Reckson Associates Realty Corp. in the proposed future operations of
the aforementioned properties. Items excluded consist of interest, depreciation
and certain general and administrative expenses.
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 statement and accompanying notes.
Actual results could differ from those estimates.
2. Lease Revenue Recognition
The Hauppauge Portfolio is 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 amounts so recognized were less than amounts due pursuant
to the underlying leases by approximately $21,000 for the year ended December
31, 1996. The lease agreements for 400 Oser, 180 Oser and 85 Adams, generally
contain provisions for reimbursement of real estate taxes and operating expenses
over base year amounts, as well as fixed increases in rent and all other
properties are net leased.
All of the Hauppauge Portfolio is either single tenant or multi-tenant
industrial buildings whose leases expire at various dates over the next twelve
years.
<PAGE>
Hauppauge Portfolio
Notes to Combined Statement of
Revenues and Certain Expenses
(estimates)
3. Management Agreement
Rreef Management Company provides property management services for a fee equal
to 3.25% of the total revenues (as defined).
4. Ground Lease
On June 14, 1991, Rreef entered into a fourteen year noncancellable ground lease
for one of the properties in the Hauppauge Portfolio with Heartland Associates.
Net rent was $44,651.
5. Property Operating Expenses
Property operating expenses for the year ended December 31, 1996 include
approximately $32,700 in insurance costs which have been allocated from Rreef.
In addition, property operating expenses also include approximately $153,000 for
water and sewer, $62,000 for electricity, $19,000 for HVAC, $52,000 in payroll
costs and $217,000 in repair and maintenance costs.
(c) Exhibits
Exhibit
Number Description
- ------ -----------
23 Consent of Independent Auditors
<PAGE>
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: February 18, 1997
<PAGE>
Consent of Independent Accountants
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-13213) and related
Prospectus Supplement of Reckson Associates Realty Corp. (the "Company") for the
registration of $250,00O,000 of common stock, preferred stock, common stock
warrants, and preferred stock warrants and to the incorporation by reference
therein of our report dated February 22, 1996, with respect to the consolidated
financial statements and schedule of the Company for the period June 3, 1995 to
December 31, 1995 and the combined financial statements of the Reckson Group for
the period January 1, 1995 to June 2, 1995 and for the years ended December 31,
1994 and 1993, included in the Company's Annual Report (Form 10-K) for the
fiscal year ended December 31, 1995 filed with the Securities and Exchange
Commission. We also consent to the incorporation by reference therein of (i) our
report dated February 23, 1996, with respect to the combined statement of
revenues and certain expenses of the Westchester Properties for the year ended
December 31, 1995, included in the Company's Form 8-K/A filed with the
Securities and Exchange Commission on March 27, 1996, (ii) our report dated
September 20, 1996, with respect to the combined statement of revenues and
certain expenses of the Landmark Square Properties for the year ended December
31, 1995, included in the Company's Form 8-K filed with the Securities and
Exchange Commission on October 1, 1996, (iii) our report dated September 16,
1996, with respect to the combined statements of revenues and certain expenses
of the Certain Option Properties for the years ended December 31, 1995, 1994 and
1993, included in the Company's Form 8-K filed with the Securities and Exchange
Commission on October 1, 1996, (iv) our report dated February 4, 1997, with
respect to the combined statement of revenues and certain expenses of the New
Jersey Portfolio for the year ended December 31, 1996, included in the Company's
Form 8-K filed with the Securities and Exchange Commission on February 18, 1997,
(v) our report dated January 16, 1997, with respect to the statement of revenues
and certain expenses of the Uniondale Office Property for the year ended
December 31, 1996, included in the Company's Form 8-K filed with the Securities
and Exchange Commission on February 18, 1997 and (vi) our report dated January
17, 1997, with respect to the combined statement of revenues and certain
expenses of the Hauppauge Portfolio for the year ended December 31, 1996,
included in the Company's Form 8-K filed with the Securities and Exchange
Commission on February 18, 1997.
/s/ Ernst & Young LLP
New York, New York
February 18, 1997
