UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Date of Report (Date of earliest event reported): February 10, 1998
Commission file number: 1-13762
RECKSON ASSOCIATES REALTY CORP.
(Exact name of registrant as specified in its charter)
Maryland 11-3233650
(State other jurisdiction of incorporation (IRS. Employer
of organization) Identification Number)
225 Broadhollow Road, Melville, NY 11747
(Address of principal executive office) (zip code)
(516) 694-6900
(Registrant's telephone number including area code)
ITEM 2. ACQUISITON OR DISPOSITION OF ASSETS
On December 19, 1997, the Company acquired Royal Executive Office Park
("Royal") a 541,884 square foot, class A office complex for $81 million.
The Royal consists of 6 buildings and is currently 98% occupied and is
located in Rye, New York. The asset acquisition was financed with proceeds
from the credit facility.
On December 19, 1997, the Company acquired Christiania office building,
a 197,785 square foot, class A office complex for $27.1 million. The building
is currently 99% occupied and is located in Tarrytown, New York. The asset
acquisition was financed with proceeds
from the credit facility.
ITEM 7. FINANCIAL STATEMENTS
Financial statements of properties acquired and pro forma financial
information.
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
ITEM 7
FINANCIAL STATEMENTS OF PROPERITIES ACQUIRED
AND PRO FORMA FINANCIAL INFORMATION
TABLE OF CONTENTS
DESCRIPTION
Pro Forma Condensed Combining Balance Sheet as of September
30, 1997 ...................................................
Pro Forma Condensed Combining Statement of Operations for
the Nine Months ended September 30, 1997 ...................
Pro Forma Condensed Combining Statement of Operations for
the Year ended December 31, 1996 ...........................
Notes to Pro Forma Financial Statements ....................
Statement of Revenue and Certain Expenses of Royal Executive
Park for the Nine Months Ended September 30, 1997 and 1996
(unaudited) and for the Year Ended December 31, 1996 .......
Notes to Statement of Revenue and Certain Expenses of Royal
Executive Park .............................................
Statement of Revenue and Certain Expenses of Christiania Office
Property for the Year Ended June 30, 1997 and for the Three
Months Ended September 30, 1997 (unaudited) .................
Notes to Statement of Revenue and Certain Expenses of
Christiania Office Property..................................
<PAGE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Balance Sheet
As of September 30, 1997
(Unaudited)
The following unaudited pro forma condensed combining balance sheet is presented
as if the The Company had acquired Royal Executive Park and Christiania Office
Property on September 30, 1997.
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, 1996 and on Form 10-Q for
the nine months ended September 30, 1997.
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 Royal Executive Park and Christiania Office Property
on September 30, 1997, nor does it purport to represent the future financial
position of the Company.
<PAGE>
<TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Balance Sheet
As of September 30, 1997
(Unaudited)
<CAPTION>
Christiania Royal September
Historical(a) Office Executive 30, 1997
(Unaudited) Property (b) Park (c) Pro Forma
___________ ____________ _________ _________
<S> <C> <C> <C> <C>
Assets
Real estate, net $ 690,053 $ 27,100 $ 81,000 $ 798,153
Cash and cash equivalents 10,211 - - 10,211
Tenant receivables 2,371 - - 2,371
Affiliate receivables 5,686 - - 5,686
Deferred rent receivable 15,358 - - 15,358
Investment in mortgage notes and note
receivable 85,853 - - 85,853
Contract and land deposits and other
pre-acquisition costs 7,172 - - 7,172
Prepaid expenses and other assets 14,565 - - 14,565
Investments in real estate joint
ventures 7,048 - - 7,048
Deferred lease and loan costs, net 15,440 - - 15,440
_________ ________ ________ _________
Total Assets $ 853,757 $ 27,100 $ 81,000 $ 961,857
========= ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<S> <C> <C> <C> <C>
Mortgage notes payable $ 180,593 $ - $ - $ 180,593
Senior unsecured notes 150,000 - - 150,000
Credit facility 33,000 27,100 81,000 141,100
Accrued expenses and other liabilities 20,124 - - 20,124
Affiliate payables 718 - - 718
Dividends and distributions payable 13,046 - - 13,046
_________ ________ ________ _________
Total Liabilities 397,481 27,100 81,000 505,581
_________ ________ ________ _________
Minority interest in consolidated
partnership 6,765 - - 6,765
Limited partners' interest in
operating partnership 75,608 - - 75,608
_________ ________ ________ _________
82,373 - - 82,373
_________ ________ ________ _________
Stockholders' Equity
Common stock 345 - - 345
Additional paid-in capital 373,558 - - 373,558
_________ ________ ________ _________
Total Stockholders' Equity 373,903 - - 373,903
_________ ________ ________ _________
Total Liabilities and Stockholders'
Equity $ 853,757 $ 27,100 $ 81,000 $ 961,857
========= ======== ======== =========
<FN>
See accompanying notes to pro forma financial statements.
</TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
For the Nine Months Ended September 30, 1997
(Unaudited)
The following unaudited pro forma condensed combining Statement of
Operations is presented as if the Company had acquired Royal Executive
Park and Christiania Office Property as of January 1, 1997 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 10-Q for the nine months ended September
30, 1997.
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 Royal Executive Park and
Christiania Office Property as of January 1, 1997, nor does it purport
to represent the operations of the Company for future periods. (Amounts
below are in thousands, except per share data.)
<PAGE>
<TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
As of September 30, 1997
(Unaudited)
(Dollars in thousands)
<CAPTION>
Christiania Royal Pro September
Historical(d) Office Executive Forma (g) 30, 1997
(Unaudited) Property (e) Park (f) Adjustments Pro Forma
___________ ____________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Revenues:
Base Rents $ 91,179 $ 3,361 $ 6,540 $ - $ 101,080
Tenant escalations and reimbursements 10,737 317 1,460 - 12,514
Equity in earnings of real estate joint
ventures 326 - - - 326
Equity in earnings of service companies 208 - - - 208
Interest income on mortgage notes and
notes receivable 3,675 - - - 3,675
Other 2,104 - - - 2,104
_________ ________ ________ _________ _________
Total Revenues 108,229 3,678 8,000 - 119,907
_________ ________ ________ _________ _________
Expenses:
Operating Expenses:
Property operating expenses 20,857 1,323 2,491 - 24,671
Real Estate Taxes 14,569 631 1,133 - 16,333
Ground Rents 918 - - - 918
Marketing, general and administrative 6,158 - - - 6,158
________ ________ ________ _________ _________
Total Operating Expenses 42,502 1,954 3,624 - 48,080
Interest 14,471 - - 3,844 18,315
Depreciation and amortization 18,991 576 1,551 - 21,118
________ ________ ________ _________ _________
Total Expenses 75,964 2,530 5,175 3,844 87,513
________ ________ ________ _________ _________
Income before minority interest and
extraordinary items 32,265 1,148 2,825 (3,844) 32,394
Minority Partners' Interest in Consolidated
partnership (income) (645) - - - (645)
________ ________ ________ _________ _________
Income before limited partners' minority
interest in Operating Partnership income
and extraordinary items $ 31,620 $ 1,148 $ 2,825 $ (3,844) 31,749
======== ======== ======== =========
Limited Partners' minority interest in
operating partnership income (5,655)(h)
_________
Net income before extraordinary item $ 26,094
=========
Net income per share before extraordinary
item $ 0.82 (i)
=========
Weighted average common shares outstanding 31,810
=========
<FN>
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
For the Year Ended December 31, 1996
(Unaudited)
The following unaudited pro forma condensed combining Statement of
Operations is presented as if the Company had acquired Royal
Executive Park and Christiania Office Property 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 10-K for the year ended December 31, 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 Royal Executive Park and
Christiania Office Property 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.)
<PAGE>
<TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
As of December 31, 1996
(Unaudited)
(Dollars in thousands)
<CAPTION>
Christiania Royal Pro December
Historical(j) Office Executive Forma (m) 31, 1996
(Unaudited) Property (k) Park (l) Adjustments Pro Forma
___________ ____________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Revenues:
Base Rents $ 82,150 $ 4,440 $ 8,368 $ - $ 94,958
Tenant escalations and reimbursements 10,628 614 1,914 - 13,156
Equity in earnings of real estate joint
ventures 266 - - - 266
Equity in earnings of service companies 1,031 - - - 1,031
Investment and other income 2,066 - - - 2,066
________ ________ ________ _________ _________
Total Revenues 96,141 5,054 10,282 - 111,477
________ ________ ________ _________ _________
Expenses:
Operating Expenses:
Property operating expenses 18,959 1,935 3,068 - 23,962
Real Estate Taxes 13,935 806 1,849 - 16,590
Ground Rents 1,107 - - - 1,107
Marketing, general and administrative 5,949 - - - 5,949
________ ________ ________ _________ _________
Total Operating Expenses 39,950 2,741 4,917 - 47,608
________ ________ ________ _________ _________
Interest 13,331 - - 7,686 21,017
Depreciation and amortization 17,670 768 2,068 - 20,506
________ ________ ________ _________ _________
Total Expenses 70,951 3,509 6,985 7,686 89,131
________ ________ ________ _________ _________
Income before minority interest and
extraordinary items 25,190 1,545 3,297 (7,686) 22,346
Minority Partners' Interest in Consolidated
partnership income (808) - - - (808)
________ ________ ________ _________ _________
Income before limited partners' minority
interest in Operating Partnership income
and extraordinary items $ 24,382 $ 1,545 $ 3,297 $ (7,686) 21,538
======== ======== ======== =========
Limited Partners' minority interest in
operating partnership income (5,265) (n)
_________
Net income before extraordinary item $ 16,273
=========
Net income per share before extraordinary
item $ 0.82 (o)
=========
Weighted average common shares outstanding 19,928
=========
<FN>
See accompanying notes to pro forma financial statements.
</TABLE>
Reckson Associates Realty Corp.
Notes to Pro Forma Financial Statements
(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,
1997 (unaudited).
B. Reflects the acquisition of the Christiania Office Property with
borrowings under the Credit Facility.
C. Reflects the acquisition of the Royal Executive Park with
borrowings under the Credit Facility.
Pro Forma Condensed Combining Statements of Operations For the Year
Ended December 31, 1996 and Nine Months Ended September 30, 1997
D. Reflects the historical operations of the Company for the nine
months ended September 30, 1997 (unaudited).
E. Reflects the revenues and certain expenses of the Chrisitiania
Office Property for the nine months ended September 30, 1997.
F. Reflects the revenues and certain expenses of the Royal
Executive Park for the nine months ended September 30, 1997.
G. Reflects the increase in interest costs associated with
additional borrowings under the Credit Facility.
H. Represents the minority interest of the Limited Partners in
the Operating Partnership at an effective pro forma rate of
approximately 17.8%.
I. Pro forma net income per share of common stock before
extraordinary item is based upon the weighted average number of
shares outstanding during the nine months ended September 30,
1997 of 31,810,000. This reflects a two-for-one stock split
which was distributable on April 15, 1997.
J. Reflects the historical operations of the Company for the
year ended December 31, 1996.
K. Reflects the revenues and certain expenses of the Chrisitiania
Office Property for the year ended December 31, 1996.
L. Reflects the revenues and certain expenses of the Royal
Executive Park for the year ended December 31, 1996.
M. Reflects the increase in interest costs associated with
additional borrowings under the Credit Facility.
N. Represents the minority interest of the Limited Partners in
the Operating Partnership at an effective pro forma rate of
approximately 24.4%.
O. Pro forma net income per share of common stock before
extraordinary item is based upon the weighted average number
of shares outstanding during the year ended December 31, 1996
of 19,928,000. This reflects a two-for-one stock split which
was distributable on April 15, 1997.
<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
("Christiania Office Property") to be acquired from the System Realty Eighteen,
Inc. ("System Realty") by Reckson Associates Realty Corp., as described in Note
1, for the year ended June 30, 1997. The financial statement is the
responsibility of the Christiania Office Property 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 a Form 8-K of Reckson Associates Realty
Corp. and is not intended to be a complete presentation of the Christiania
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 Christiania
Office Property as described in Note 1 for the year ended June 30, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 17, 1997
<PAGE>
Christiania Office Property
Statement of Revenues and Certain Expenses
(in thousands)
(Note 1)
Three
Months
Ended
September Year Ended
30, 1997 June 30,
(Unaudited) 1997
__________ __________
Revenues: (Notes 2 and 5)
Base rents $ 1,131 $ 4,489
Tenant escalations 94 473
________ ________
Total revenues 1,225 4,962
________ ________
Certain expenses:
Real estate taxes 207 851
Management fees (Note 3) 29 116
Property operating expenses (Note 4) 412 1,684
________ ________
Total certain expenses 648 2,651
________ ________
Revenues in excess of certain expenses $ 577 $ 2,311
======== ========
See accompanying notes to financial statement.
<PAGE>
Christiania Office Property
Notes to Statement of Revenues and Certain Expenses
For the Year Ended June 30, 1997
1. Basis of Presentation
Presented herein is the statement of revenues and certain expenses related to
the operation of an office building, the Christiania Office Property, owned
by System Realty Eighteen, Inc.("System Realty"). The property is located
in Tarrytown, New York.
The Christiania 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 Christiania 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 Christiania 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 $222,000 and
$15,000 for the year ended June 30, 1997 and the three months ended September
30, 1997 (unaudited), respectively. 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 Christiania Office Property is a multi-tenant office building whose leases
expire at various dates over the next twelve years.
3. Management and Leasing Agreements
The Christiania Office Property is managed and leased by Newmark & Company
Real Estate, Inc. ("Newmark"). Newmark provides property management services
to the Christiania Office Property at the rate of 2.5% of gross cash receipts.
4. Property Operating Expenses
Property operating expenses for the year ended June 30, 1997 include
approximately $710,000 in utilities, $34,000 for insurance, $225,000 in
payroll costs, $156,000 in cleaning costs, $444,000 in repair and maintenance
costs, $90,000 of bad debt expense and $25,000 of cafeteria subsidy costs.
For the three months ended September 30, 1997 (unaudited) property operating
expenses include approximately $212,000 in utilities, $8,000 for insurance,
$42,000 in payroll costs, $37,000 in cleaning costs, $84,000 in repair and
maintenance costs, $23,000 of bad debt expense and $6,000 of cafeteria
subsidy costs.
5. Significant Tenants
Three tenants, Christiania General Insurance Company, the Dannon Company,
Inc. and First UNUM Life Insurance Company accounted for approximately 11%,
24% and 33% of the fiscal year 1997 rents on a straight line basis,
respectively.
6. Lease Agreements
Future minimum lease payments to be received by the Christiana Office
Property as of June 30, 1997 under non-cancellable operating leases, which
expire on various dates through October 2009, are as follows:
1998 $ 4,538,000
1999 4,641,000
2000 4,627,000
2001 4,541,000
2002 4,417,000
Thereafter 18,331,000
_____________
$ 41,095,000
=============
<PAGE>
Report of Independent Auditors
To the Board of Directors of
Reckson Associates Realty Corp.
We have audited the statement of revenues and certain expenses of the property
("Royal Executive Park") to be acquired from entities controlled by London &
Leeds by Reckson Associates Realty Corp., as described in Note 1, for the year
ended December 31, 1996. The financial statement is the responsibility of
London & Leeds management. Our responsibility is to express an opinion on
the 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 basis of accounting 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 a Form 8-K of Reckson Associates Realty
Corp. and is not intended to be a complete presentation of Royal Executive
Park'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 Royal Executive Park
as described in Note 1 for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
KINSEY, BECK & COMPANY
New York, New York
December 22, 1997
<PAGE>
Royal Executive Park
Statement of Revenues and Certain Expenses
Nine Months Ended Year Ended
September 30, 1997 December 31,
____________________________
1997 1996 1996
(Unaudited) (Unaudited)
___________ ___________ ___________
Revenues:
Rental income $ 6,539,917 $ 6,314,869 $ 8,367,927
Other income 1,459,978 1,435,256 1,914,002
___________ ___________ ___________
Total revenues 7,999,895 7,750,125 10,281,929
Certain operating expenses:
Real estate taxes 1,133,121 1,349,615 1,848,837
Utilities 438,263 388,038 522,740
Repairs and maintenance 1,033,529 1,044,486 1,315,102
Cleaning 451,919 373,477 486,606
Administrative 354,618 376,286 479,629
Insurance 71,314 59,762 80,389
Management fee 141,774 134,796 183,388
___________ ___________ ___________
Total certain operating
expenses 3,624,538 3,726,460 4,916,691
___________ ___________ ___________
Revenues in excess of
certain operating expenses $ 4,375,357 $ 4,023,665 $ 5,365,238
=========== =========== ===========
The accompanying notes are an integral part of these statements of
revenues and certain operating expenses.
<PAGE>
Royal Executive Park
Notes to Statement of Revenues and
Certain Operating Expenses
1. Organization and Significant Accounting Policies
The accompanying statements of revenues and certain operating expenses of Royal
Executive Park have been presented on a historical cost basis because the assets
and liabilities are expected to be the subject of a combination with Reckson
Associates Realty Corp. (the "Company"). In management's opinion, these
statements of revenues and certain operating expenses include the revenues and
expenses associated with the operations of the property intended to be sold to
the Company.
The accompanying historical statements have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission and are
not representative of the actual operations of the property for the periods
presented. The statements exclude certain expenses, such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the property that may not be comparable to the expenses expected
to be incurred in the proposed future operations of the property.
2. Revenue Recognition
Royal Executive park, as a lessor, has retained substantially all the risks and
benefits of ownership of the rental property and accounts for its leases as
operating leases. Space is leased to tenants under leases ranging from 4 to
25 years. Rental income is recognized over the terms of the leases as it is
earned.
3. Future Rental Revenue
The future minimum lease payments to be received by Royal Executive Park as of
December 31, 1996 under noncancelable operating leases, which expire on various
dates through April 30, 2008, are as follows:
1997 $ 8,796,292
1998 9,104,336
1999 8,351,851
2000 7,632,923
2001 4,892,888
Thereafter 12,433,831
_____________
$ 51,212,121
=============
There was one major tenant which represented 59% and 58% of Royal Executive
Park's total revenue for the year ended December 31, 1996 and the nine months
ended September 30, 1997, respectively.
4. Use of Estimates in the Preparation of Financial Statements
The preparation of statements of revenues and certain operating expenses in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported amounts of revenues
and certain expenses during the reporting period. Actual results could differ
from those estimates.
5. Unaudited Interim Statements
The revenues in excess of certain operating expenses for the nine months ended
September 30, 1997 and 1996 are unaudited. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of such statements have been included. The revenues in excess
of certain operating expenses for the nine months ended September 30, 1997 are
not necessarily indicative of Royal Executive Park's future operations for the
full year ending December 31, 1997.
