UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Date of Report (Date of earliest event reported): March 23, 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 March 13, 1998, the Company acquired 51 John F. Kennedy Parkway
("51 JFK") a 250,000 square foot, class A office complex for $67 million.
51 JFK is currently 100% occupied and is located in Short Hills, New
Jersey. The asset acquisition was financed with proceeds from the
Company's credit facility.
On March 18, 1998, the Company entered into a contract to acquire
Stamford Towers Office complex consisting of two eleven-story class A
office towers totaling 318,000 square feet, for approximately $61 million.
The building is currently 98% occupied and is located in Stamford,
Connecticut. The asset acquisition is expectecd to be financed with
proceeds from the Company's 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 51 JFK for the
Nine Months Ended September 30, 1997 and for the Years Ended
December 31, 1997 and 1996 .................................
Notes to Statement of Revenue and Certain Expenses of 51
JFK ........................................................
Statement of Revenue and Certain Expenses of Stamford Towers
for the Nine Months Ended September 30, 1997 and for the Years
Ended December 31, 1997 and 1996 ...........................
Notes to Statement of Revenue and Certain Expenses of
Stamford Towers ............................................
<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 Company had acquired 51 JFK and Stamford Towers 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 51 JFK and Stamford Towers 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>
Stamford
51 JFK Towers September
Parkway Office (c) 30, 1997
Historical(a) Property (b) Property Pro Forma
___________ ____________ _________ _________
<S> <C> <C> <C> <C>
Assets
Real estate, net $ 690,053 $ 67,000 $ 61,300 $ 818,353
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
notes 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 $ 67,000 $ 61,300 $ 982,057
========= ======== ======== =========
</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 67,000 61,300 161,300
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 67,000 61,300 525,781
_________ ________ ________ _________
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 $ 67,000 $ 61,300 $ 982,057
========= ======== ======== =========
<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 51 JFK and
Stamford Towers 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 results of operations
would have been had the Company acquired 51 JFK and Stamford Towers 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.)
<TABLE>
Reckson Associates Realty Corp.
Pro Forma Condensed Combining Statement of Operations
For the Nine Months Ended September 30, 1997
(Unaudited)
(Dollars in thousands)
<CAPTION>
Stamford
51 JFK Towers Pro September
Parkway Office Forma (g) 30, 1997
Historical(d) Property (e) Property (f) Adjustments Pro Forma
___________ ____________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Revenues:
Base Rents $ 91,179 $ 6,268 $ 3,876 $ - $ 101,323
Tenant escalations and reimbursements 10,737 238 304 - 11,279
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 6,506 4,180 - 118,915
_________ ________ ________ _________ _________
Expenses:
Operating Expenses:
Property operating expenses 20,857 1,295 1,333 - 23,485
Real Estate Taxes 14,569 564 531 - 15,664
Ground Rents 918 - - - 918
Marketing, general and administrative 6,158 - - - 6,158
________ ________ ________ _________ _________
Total Operating Expenses 42,502 1,859 1,864 - 46,225
Interest 14,471 - - 6,843 21,314
Depreciation and amortization 18,991 1,424 1,303 - 21,718
________ ________ ________ _________ _________
Total Expenses 75,964 3,283 3,167 6,843 89,257
________ ________ ________ _________ _________
Income before minority interest and
extraordinary items 32,265 3,223 1,013 (6,843) 29,658
Minority Partners' Interest in Consolidated
partnership (income) (645) - - - (645)
________ ________ ________ _________ _________
Income before limited partners' minority
interest in Operating Partnership income
and extraordinary items $ 31,620 $ 3,223 $ 1,013 $ (6,843) 29,013
======== ======== ======== =========
Limited Partners' minority interest in
operating partnership income (5,164)(h)
_________
Net income before extraordinary item $ 23,849
=========
Net income per share before extraordinary
item $ 0.75 (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 51 JFK and
Stamford Towers 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 results of operations
would have been had the Company acquired 51 JFK and Stamford Towers 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
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
<CAPTION>
Stamford
51 JFK Towers Pro December
Parkway Office Forma (m) 31, 1996
Historical(j) Property (k) Property (l) Adjustments Pro Forma
___________ ____________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Revenues:
Base Rents $ 82,150 $ 8,319 $ 4,245 $ - $ 94,714
Tenant escalations and reimbursements 10,628 408 469 - 11,505
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 8,727 4,714 - 109,582
________ ________ ________ _________ _________
Expenses:
Operating Expenses:
Property operating expenses 18,959 1,615 1,849 - 22,423
Real Estate Taxes 13,935 657 736 - 15,328
Ground Rents 1,107 - - - 1,107
Marketing, general and administrative 5,949 - - - 5,949
________ ________ ________ _________ _________
Total Operating Expenses 39,950 2,272 2,585 - 44,807
Interest 13,331 - - 9,122 22,453
Depreciation and amortization 17,670 1,898 1,737 - 21,305
________ ________ ________ _________ _________
Total Expenses 70,951 4,170 4,322 9,122 88,565
________ ________ ________ _________ _________
Income before minority interest and
extraordinary items 25,190 4,557 392 (9,122) 21,017
Minority Partners' Interest in Consolidated
partnership income (808) - - - (808)
________ ________ ________ _________ _________
Income before limited partners' minority
interest in Operating Partnership income
and extraordinary items $ 24,382 $ 4,557 $ 392 $ (9,122) 20,209
======== ======== ======== =========
Limited Partners' minority interest in
operating partnership income (4,931) (n)
_________
Net income before extraordinary item $ 15,278
=========
Net income per share before extraordinary
item $ 0.77 (o)
=========
Weighted average common shares outstanding 19,928
=========
<FN>
See accompanying notes to pro forma financial statements.
</FN>
</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 51 JFK Parkway Property with
borrowings under the Credit Facility.
C. Reflects the acquisition of the Stamford Towers Office Property
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 51 JFK Parkway
Property for the nine months ended September 30, 1997.
F. Reflects the revenues and certain expenses of the Stamford Towers
Office Property 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 51 JFK Parkway
Property for the year ended December 31, 1996.
L. Reflects the revenues and certain expenses of the Stamford Towers
Office Property 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>
Independent Auditors's Report
To the Board of Directors of
Reckson Associates Realty Corp.
We have audited the statement of revenues and certain expenses of the property
located 51 JFK Parkway, Short Hills, New Jersey (the "Property") to be acquired
from entities controlled by Prudential Insurance Company ("Prudential")by
Reckson Associates Realty Corp., as described in Note 1, for the years ended
December 31, 1997 and 1996. The financial statements is the responsibility of
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 were 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 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 51 JFK Parkway,
as described in Note 1 for the years ended December 31, 1997 and 1996, in
conformity with generally accepted accounting principles.
KINSEY, BECK & COMPANY
New York, New York
February 10, 1998
<PAGE>
Office Center At Short Hills - 51 JFK Parkway
Statement of Revenues and Certain Operating Expenses
For The Years Ended
December 31,
____________________________
1997 1996
___________ ___________
Revenues:
Rental income $ 7,827,382 $ 7,707,057
Other income 487,159 408,100
___________ ___________
Total revenues 8,314,541 8,115,157
Certain operating expenses:
Real estate taxes 751,663 657,112
Utilities 803,753 793,466
Repairs and maintenance 253,689 233,425
Cleaning & Security 422,946 392,084
Administrative 137,568 102,400
Insurance 32,765 33,211
Management fee 88,320 60,000
___________ ___________
Total certain operating
expenses 2,490,704 2,271,698
___________ ___________
Revenues in excess of
certain operating expenses $ 5,823,837 $ 5,843,459
=========== ===========
The accompanying notes are an integral part of these statements of
revenues and certain operating expenses.
<PAGE>
51 JFK Parkway
Notes to the Statements of Revenues and
Certain Operating Expenses
1. Organization and Significant Accounting Policies
The accompanying statements of revenues and certain operating expenses of 51 JFK
Parkway 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
Prudential, 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 1 to
15 years. Rental income is recognized over the terms of the leases as it is
earned.
3. Future Rental Revenue
The future minimum rental payments due from tenants under non-cancelable
operating leases as of December 31, 1997, are as follows:
Year Ended
------------
1998 $ 7,618,841
1999 6,577,259
2000 5,099,750
2001 3,534,784
2002 3,319,690
Thereafter 17,459,345
_____________
$ 43,609,669
=============
Approxiamately 110,622 sq. ft. and 109,765 sq. ft. of the 251,455 sq. ft.
was leased to affiliates of Prudential during the years ended December 31,
1997 and 1996, respectively. Rental revenue earned from these affiliates
amounted to approximately $3,662,000 and $3,594,000 in 1997 and 1996,
respectively. Rental rates paid by affiliates are comparable to those paid
by non-affiliates.
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 operating expenses during the year. Actual results could differ
from those estimates.
<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
("Stamford Towers Office Property") to be acquired from Stamford Towers Limited
Partnership by Reckson Associates Realty Corp., as described in Note
1, for the year ended December 31, 1997. The financial statement is the
responsibility of the Stamford Towers 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 a Form 8-K of Reckson Associates Realty
Corp. and is not intended to be a complete presentation of the Stamford Towers
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 Stamford Towers
Office Property as described in Note 1 for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 17, 1998
<PAGE>
Stamford Towers Office Property
Statement of Revenues and Certain Expenses
(Note 1)
For the Year Ended December 31, 1997
Revenues: (Notes 2 and 5)
Base rents $ 5,074,594
Tenant reimbursable income 379,827
____________
Total revenues 5,454,421
____________
Certain expenses:
Property operating expenses 1,691,376
Real estate taxes 710,188
Management fees (Note 3) 83,982
____________
Total certain expenses 2,485,546
____________
Revenues in excess of certain expenses $ 2,968,875
============
See accompanying notes to financial statement.
<PAGE>
Stamford Towers Office Property
Notes to Statement of Revenues and Certain Expenses
For the Year Ended December 31, 1997
1. Basis of Presentation
Presented herein is the statement of revenues and certain expenses related to
the operation of an office building, Stamford Towers Office Property, owned
by Stamford Towers Limited Partnership. The property is located in Stamford
Connecticut.
The Stamford Towers 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 Stamford Towers 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 Stamford Towers 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 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 Stamford Towers Office Property is a multi-tenant office building whose
leases expire at various dates over the next sixteen years.
3. Management and Leasing Agreements
The Stamford Towers Office Property is managed and leased by Insignia/ESG.
Insignia/ESG provides property management services to the Stamford Towers
Office Property at the rate of 1.5% of total base rents plus total operating
expense escalations.
4. Property Operating Expenses
Property operating expenses for the year ended December 31, 1997 include
approximately $54,900 for insurance, $613,000 for utilites, $180,500 in
payroll costs and $25,500 in repair and maintenance costs.
5. Significant Tenants
One tenant, Citicorp POS Information Services, accounted for 67% of the 1997
rents on a straight line basis.
6. Future Minimum Lease Rental Payments
Future minimum lease rental payments (excluding cancellation penalties)
to be received under the non-cancelable portion of the existing operating
leases as of December 31, 1997 are as follows:
1998 $ 6,701,599
1999 6,661,300
2000 6,653,240
2001 6,653,240
2002 6,388,462
Thereafter 17,343,100
_____________
$ 50,400,941
=============
Terms of the non-cancelable portion of the existing operating leases range
from five to ten years. The leases allow for increases in certain property
operating expenses to be passed on to the tenants.
