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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBER: 1-13762
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RECKSON ASSOCIATES REALTY CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 11-3233650
(State other jurisdiction of incorporation of organization) (IRS. Employer Identification Number)
225 BROADHOLLOW ROAD, MELVILLE, NY 11747
(Address of principal executive office) (zip code)
</TABLE>
(631) 694-6900
(Registrant's telephone number including area code)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes X No __, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___.
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The company has two classes of common stock, issued at $.01 par value per
share with 45,326,722 and 10,283,513 shares of Class A common stock and Class B
common stock outstanding, respectively as of November 9, 2000
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<PAGE>
RECKSON ASSOCIATES REALTY CORP.
QUARTERLY REPORT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
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<CAPTION>
INDEX PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000 (unaudited) and
December 31, 1999 ........................................................ 3
Consolidated Statements of Income for the three and nine months ended
September 30, 2000 and 1999 (unaudited) .................................. 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 (unaudited) .................................. 5
Notes to the Consolidated Financial Statements (unaudited) ............... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................... 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk ............... 28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................................ 29
Item 2. Changes in Securities and Use of Proceeds ................................ 29
Item 3. Defaults Upon Senior Securities .......................................... 29
Item 4. Submission of Matters to a Vote of Securities Holders .................... 29
Item 5. Other Information ........................................................ 29
Item 6. Exhibits and Reports on Form 8-K ......................................... 29
SIGNATURES ..................................................................... 29
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31,
(UNAUDITED) 1999
-------------------- -------------
<S> <C> <C>
ASSETS:
Commercial real estate properties, at cost:
Land .................................................................................... $ 290,873 $ 276,204
Building and improvements ............................................................... 1,986,104 1,802,611
Developments in progress:
Land .................................................................................... 61,022 60,894
Development costs ....................................................................... 96,634 68,690
Furniture, fixtures and equipment ........................................................ 7,109 6,473
----------- ----------
2,441,742 2,214,872
Less accumulated depreciation ............................................................ (266,788) (218,385)
----------- ----------
2,174,954 1,996,487
Investment in real estate joint ventures ................................................. 40,236 31,531
Investment in mortgage notes and notes receivable ........................................ 352,809 352,466
Cash and cash equivalents ................................................................ 32,954 21,368
Tenants receivables ...................................................................... 4,679 5,117
Investments in and advances to affiliates ................................................ 169,021 178,695
Deferred rents receivable ................................................................ 53,910 32,132
Prepaid expenses and other assets ........................................................ 57,530 66,977
Contract and land deposits and pre-acquisition costs ..................................... 7,794 9,585
Deferred leasing and loan costs .......................................................... 50,233 39,520
----------- ----------
TOTAL ASSETS ............................................................................. $ 2,944,120 $2,733,878
=========== ==========
LIABILITIES:
Mortgage notes payable ................................................................... $ 530,819 $ 459,174
Unsecured credit facility ................................................................ 362,600 297,600
Unsecured term loan ...................................................................... -- 75,000
Senior unsecured notes ................................................................... 449,367 449,313
Accrued expenses and other liabilities. .................................................. 85,433 82,079
Dividends and distributions payable ...................................................... 28,498 27,166
----------- ----------
TOTAL LIABILITIES ........................................................................ 1,456,717 1,390,332
----------- ----------
Commitments and other comments ........................................................... -- --
Minority partners' interests in consolidated partnerships ................................ 228,742 93,086
Preferred unit interest in the operating partnership ..................................... 42,518 42,518
Limited partners' minority interest in the operating partnership ......................... 98,079 90,986
----------- ----------
369,339 226,590
----------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 25,000,000 shares authorized
Series A preferred stock, 9,192,000 shares issued and outstanding ....................... 92 92
Series B preferred stock, 2,000,000 and 6,000,000 shares issued and outstanding, 20 60
respectively
Common Stock, $01 par value, 100,000,000 shares authorized
Class A Common Stock, 45,290,722 and 40,375,506 shares issued and outstanding, 453 401
respectively
Class B Common Stock, 10,283,513 and 10,283,763 shares issued and outstanding, 103 103
respectively
Additional paid in capital ............................................................... 1,117,396 1,116,300
----------- ----------
Total Stockholders' Equity ............................................................... 1,118,064 1,116,956
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................................... $ 2,944,120 $2,733,878
=========== ==========
</TABLE>
(see accompanying notes to financial statements)
3
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2000 1999
-------------- --------------
<S> <C> <C>
REVENUES:
Base rents ........................................................... $ 100,854 $ 95,474
Tenant escalations and reimbursements ................................ 14,900 15,395
Equity in earnings of real estate joint ventures and service
companies ........................................................... 706 483
Interest income on mortgage notes and notes receivable ............... 1,901 520
Gain on sales of real estate ......................................... 15,206 10,052
Other ................................................................ 6,735 3,421
------------ ------------
Total Revenues ...................................................... 140,302 125,345
------------ ------------
EXPENSES:
Property operating expenses .......................................... 41,255 40,679
Marketing, general and administrative ................................ 6,930 6,804
Interest ............................................................. 24,651 20,774
Depreciation and amortization ........................................ 24,083 21,868
------------ ------------
Total Expenses ...................................................... 96,919 90,125
------------ ------------
Income before preferred dividends and distributions, minority
interests and extraordinary loss .................................... 43,383 35,220
Minority partners' interests in consolidated partnerships ............ (1,874) (2,150)
Distributions to preferred unit holders .............................. (660) (660)
Limited partners' minority interest in the operating partnership ..... (4,050) (3,014)
------------ ------------
Income before dividends to preferred shareholders and
extraordinary loss .................................................. 36,799 29,396
Dividends to preferred shareholders .................................. (5,425) (7,325)
Extraordinary loss on extinguishment of debts, net of limited
partners' minority interest share of $175, $74, $175 and $74,
respectively ........................................................ (1,396) (555)
------------ ------------
Net income available to common shareholders .......................... $ 29,978 $ 21,516
============ ============
Net Income available to:
Class A common shareholders ......................................... $ 22,143 $ 15,066
Class B common shareholders ......................................... 7,835 6,450
------------ ------------
Total ................................................................ $ 29,978 $ 21,516
============ ============
Basic net income per weighted average common share before
extraordinary loss:
Class A common shareholders ......................................... $ .51 $ .38
Extraordinary loss per Class A common share ......................... ( .02) ( .01)
------------ ------------
Basic net income per weighted average Class A common share .......... $ .49 $ .37
============ ============
Class B common shareholders ......................................... $ .80 $ .57
Extraordinary loss per Class B common share ......................... ( .04) ( .01)
============ ============
Basic net income per weighted average Class B common share .......... $ .76 $ .56
============ ============
Basic weighted average common shares outstanding:
Class A common shareholders ......................................... 45,178,451 40,367,161
Class B common shareholders ......................................... 10,283,513 11,456,931
Diluted net income per weighted average common share:
Class A common shareholders ......................................... $ .48 $ .37
============ ============
Class B common shareholders ......................................... $ .53 $ .41
============ ============
Diluted weighted average common shares outstanding:
Class A common shareholders ......................................... 49,818,354 40,796,597
Class B common shareholders ......................................... 10,283,513 11,456,931
<PAGE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2000 1999
-------------- --------------
<S> <C> <C>
REVENUES:
Base rents ........................................................... $ 291,353 $ 234,759
Tenant escalations and reimbursements ................................ 40,730 32,524
Equity in earnings of real estate joint ventures and service
companies ........................................................... 3,893 1,372
Interest income on mortgage notes and notes receivable ............... 6,377 5,627
Gain on sales of real estate ......................................... 21,868 10,052
Other ................................................................ 19,194 8,359
------------ ------------
Total Revenues ...................................................... 383,415 292,693
------------ ------------
EXPENSES:
Property operating expenses .......................................... 115,778 91,125
Marketing, general and administrative ................................ 20,151 16,241
Interest ............................................................. 72,667 53,620
Depreciation and amortization ........................................ 67,520 56,086
------------ ------------
Total Expenses ...................................................... 276,116 217,072
------------ ------------
Income before preferred dividends and distributions, minority
interests and extraordinary loss .................................... 107,299 75,621
Minority partners' interests in consolidated partnerships ............ (5,773) (4,933)
Distributions to preferred unit holders .............................. (1,981) (1,981)
Limited partners' minority interest in the operating partnership ..... (9,411) (7,082)
------------ ------------
Income before dividends to preferred shareholders and
extraordinary loss .................................................. 90,134 61,625
Dividends to preferred shareholders .................................. (19,946) (17,035)
Extraordinary loss on extinguishment of debts, net of limited
partners' minority interest share of $175, $74, $175 and $74,
respectively ........................................................ (1,396) (555)
------------ ------------
Net income available to common shareholders .......................... $ 68,792 $ 44,035
============ ============
Net Income available to:
Class A common shareholders ......................................... $ 50,244 $ 35,854
Class B common shareholders ......................................... 18,548 8,181
------------ ------------
Total ................................................................ $ 68,792 $ 44,035
============ ============
Basic net income per weighted average common share before
extraordinary loss:
Class A common shareholders ......................................... $ 1.21 $ .90
Extraordinary loss per Class A common share ......................... ( .02) ( .01)
------------ ------------
Basic net income per weighted average Class A common share .......... $ 1.19 $ .89
============ ============
Class B common shareholders ......................................... $ 1.84 $ 1.52
Extraordinary loss per Class B common share ......................... ( .04) ( .03)
============ ============
Basic net income per weighted average Class B common share .......... $ 1.80 $ 1.49
============ ============
Basic weighted average common shares outstanding:
Class A common shareholders ......................................... 42,311,751 40,234,749
Class B common shareholders ......................................... 10,283,541 5,488,759
Diluted net income per weighted average common share:
Class A common shareholders ......................................... $ 1.18 $ .88
============ ============
Class B common shareholders ......................................... $ 1.28 $ .95
============ ============
Diluted weighted average common shares outstanding:
Class A common shareholders ......................................... 42,735,828 40,651,512
Class B common shareholders ......................................... 10,283,541 5,488,759
</TABLE>
(see accompanying notes to financial statements)
4
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before dividends to preferred shareholders ........................................ $ 88,738 61,070
Adjustments to reconcile income before dividends to preferred shareholders to net cash
provided by
operating activities:
Depreciation and amortization ........................................................... 67,520 56,086
Gain on sales of real estate ............................................................ (21,868) (10,052)
Minority partners' interests in consolidated partnerships ............................... 5,773 4,933
Extraordinary loss on extinguishment of debts ........................................... 1,396 555
Limited partners' minority interest in the operating partnership ........................ 9,411 7,082
Equity in earnings of real estate joint ventures and service companies .................. (3,893) (1,372)
Changes in operating assets and liabilities:
Tenant receivables ...................................................................... 438 1,899
Real estate tax escrows ................................................................. 2,112 (2,405)
Prepaid expenses and other assets ....................................................... (7,592) (13,764)
Deferred rents receivable ............................................................... (21,778) (3,473)
Accrued expenses and other liabilities .................................................. 615 4,817
---------- -------
Net cash provided by operating activities ............................................... 120,872 105,376
---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in deposits and pre-acquisition costs .......................................... (11,893) (3,485)
Increase in developments in progress .................................................... (11,668) (8,198)
Purchase of commercial real estate properties ........................................... (184,613) (265,400)
Investment in mortgage notes and notes receivable ....................................... -- (295,048)
Proceeds from mortgage note repayments .................................................. 5,213 --
Investments in real estate joint ventures ............................................... (7,450) (11,875)
Distribution from a real estate joint venture ........................................... 312 337
Additions to commercial real estate properties .......................................... (32,772) (21,612)
Purchase of furniture, fixtures and equipment ........................................... (707) (396)
Payment of leasing costs ................................................................ (15,465) (11,851)
Proceeds from sales of real estate ...................................................... 42,594 269,324
---------- --------
Net cash used in investing activities ................................................... (216,449) (348,204)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock net of issuance costs ............................ 3,999 1,397
Proceeds from issuance of preferred stock net of issuance costs ......................... -- 148,000
Proceeds from redemption of KTR preferred stock ......................................... 19,903 --
Repurchases of Class B common stock ..................................................... -- (17,389)
Principal payments on secured borrowings ................................................ (25,518) (3,163)
Payment of loan and equity issuance costs ............................................... (7,643) (7,113)
Investments in and advances to affiliates ............................................... (4,161) (107,768)
Proceeds from issuance of senior unsecured notes net of issuance costs .................. -- 299,262
Proceeds from secured borrowings ........................................................ 97,163 125,547
Proceeds from unsecured credit facilities ............................................... 659,600 353,500
Repayment of unsecured credit facilities and term loan .................................. (669,600) (510,750)
Contributions of minority partners in consolidated partnerships ......................... 135,975 75,000
Distributions to minority partners in consolidated partnerships ......................... (6,893) (4,573)
Distributions to limited partners in the operating partnership .......................... (8,684) (8,081)
Distributions to preferred unit holders ................................................. (1,981) (1,981)
Dividends to common shareholders ........................................................ (63,785) (47,044)
Dividends to preferred shareholders ..................................................... (21,212) (15,073)
---------- --------
Net cash provided by financing activities ................................................ 107,163 279,771
---------- --------
Net increase in cash and cash equivalents ................................................ 11,586 36,943
Cash and cash equivalents at beginning of period ......................................... 21,368 2,349
---------- --------
Cash and cash equivalents at end of period ............................................... $ 32,954 $ 39,292
========== ==========
</TABLE>
(see accompanying notes to financial statements)
5
<PAGE>
RECKSON ASSOCIATES REALTY CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. ORGANIZATION AND FORMATION OF THE COMPANY
Reckson Associates Realty Corp. (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") which was incorporated in
Maryland in September 1994. In June, 1995 the Company completed an initial
public offering (the "IPO") and commenced operations.
The Company became the sole general partner of Reckson Operating
Partnership L.P. (the "Operating Partnership") by contributing substantially
all of the net proceeds of the IPO, in exchange for an approximate 73% interest
in the Operating Partnership. All properties acquired by the Company are held
by or through the Operating Partnership. In conjunction with the IPO, the
Operating Partnership executed various option and purchase agreements whereby
it issued common units of limited partnership interest in the Operating
Partnership ("OP Units") to certain continuing investors in exchange for (i)
interests in certain property partnerships, (ii) fee simple and leasehold
interests in properties and development land, (iii) certain business assets of
executive center entities and (iv) 100% of the non-voting preferred stock of
the management and construction companies.
As of September 30, 2000, the Company owned and operated 81 office
properties comprising approximately 14.2 million square feet,103 industrial
properties comprising approximately 6.6 million square feet and two retail
properties comprising approximately 20,000 square feet, located in the New York
tri-state area (the "Tri-State Area"). During the quarter ended September 30,
2000, the Company completed the repositioning of two former industrial
properties into Class A office properties. The Company is in the process of
developing one office property encompassing approximately 277,500 square feet
and one industrial property encompassing approximately 206,000 square feet. The
Company also owns a 357,000 square foot office building located in Orlando,
Florida and approximately 315 acres of land in 14 separate parcels of which the
Company can develop approximately 1.9 million square feet of office space and
approximately 224,000 square feet of industrial space. The Company also has
invested approximately $297.7 million in mortgage notes encumbering one Class A
office property encompassing approximately 1.4 million square feet,
approximately 403 acres of land located in New Jersey and approximately $17.1
million in a note receivable secured by a partnership interest in Omni
Partner's, L.P., owner of the Omni, a 575,000 square foot Class A office
property located in Uniondale, New York. On November 2, 2000, a mortgage note
investment and related acquisition costs of approximately $292.5 million were
exchanged, through a pre-packaged consensual bankruptcy, for title to the
property which was secured by such mortgage note investment (see Note 6).
During July 1998, the Company formed Metropolitan Partners, LLC
("Metropolitan") for the purpose of acquiring Tower Realty Trust, Inc.
("Tower"). On May 24, 1999 the Company completed the merger with Tower and
acquired three Class A office properties located in New York City totaling 1.6
million square feet and one office property located on Long Island totaling
approximately 101,000 square feet. In addition, pursuant to the merger, the
Company also acquired certain office properties, a property under development
and land located outside of the Tri-State Area. All of the assets acquired in
the merger located outside of the Tri-State Area, other than a 357,000 square
foot office property located in Orlando, Florida, have been sold.
On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association ("TIAA") and contributed
eight Class A suburban office properties to the Tri-State JV in exchange for
approximately $136 million and a 51% majority ownership interest in the
Tri-State JV.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
consolidated financial position of the Company and the Operating Partnership at
September 30, 2000 and December 31, 1999 and the results of their operations
for the three and nine months ended September 30, 2000 and 1999 respectively,
6
<PAGE>
and, their cash flows for the nine months ended September 30, 2000 and 1999,
respectively. The Operating Partnership's investments in Metropolitan, Omni
Partner's, L. P. ("Omni"), the Tri-State JV and certain industrial joint
venture properties formerly owned by Reckson Morris Operating Partnership, L.
P. ("RMI") are reflected in the accompanying financial statements on a
consolidated basis with a reduction for minority partners' interest. The
Operating Partnership's investment in RMI was reflected in the accompanying
financial statements on a consolidated basis with a reduction for minority
partner's interest through September 26, 1999. On September 27, 1999, the
Operating Partnership sold its interest in RMI to Keystone Property Trust
("KTR"). The operating results of the service businesses currently conducted by
Reckson Management Group, Inc., and Reckson Construction Group, Inc., are
reflected in the accompanying financial statements on the equity method of
accounting. The Operating Partnership also invests in real estate joint
ventures where it may own less than a controlling interest, such investments
are also reflected in the accompanying financial statements on the equity
method of accounting. All significant intercompany balances and transactions
have been eliminated in the consolidated financial statements.
The minority interests at September 30, 2000 represent an approximate 12%
limited partnership interest in the Operating Partnership, a convertible
preferred interest in Metropolitan , a 49% interest in the Tri-State JV and a
40% interest in Omni.
The accompanying interim unaudited financial statements have been prepared
by the Company's management pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosure
normally included in the financial statements prepared in accordance with
generally accepted accounting principles ("GAAP") may have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading. The unaudited financial statements as of September 30, 2000 and for
the three and nine month periods ended September 30, 2000 and 1999 include, in
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial information set forth
herein. The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. These financial statements should be read in conjunction with the
Company's audited financial statements and the notes thereto included in the
Company's Form 10K for the year ended December 31, 1999.
The Company intends to qualify as a REIT under Section 856 through 869 of
the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the
Company will not generally be subject to corporate Federal income taxes as long
as it satisfies certain technical requirements of the Code relating to
composition of its income and assets and requirements relating to distributions
of taxable income to shareholders.
In June 1999, the Financial Accounting Standards Board issued Statement
No. 137, amending Statement No. 133, "accounting for Derivative Instruments and
Hedging Activities", which extended the required date of adoption to the years
beginning after June 15, 2000. The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company expects to
adopt the new Statement effective January 1, 2001. The Company does not
anticipate that the adoption of this Statement will have any effect on its
results of operations or financial position.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
3. MORTGAGE NOTES PAYABLE
As of September 30, 2000, the Company had approximately $460.8 million of
fixed rate mortgage notes which mature at various times between 2001 and 2027.
The notes are secured by 22 properties and have a weighted average interest
rate of approximately 7.6%. In addition, the Company had a $70 million variable
rate mortgage note which matures in August 2001. The note is secured by one
property and bears interest at LIBOR plus 165 basis points.
On November 2, 2000, the Company obtained a three year secured $250
million first mortgage commitment on the property located at 919 Third Avenue,
New York N. Y. Interest rates on borrowings under the commitment are based on
LIBOR plus a spread ranging from 110 basis points to 140 basis
7
<PAGE>
points based upon the outstanding balance. At closing, $200 million was funded
under the commitment at an interest rate of LIBOR plus 120 basis points. In
addition, in connection with the $200 million initial funding, the Company
purchased a LIBOR interest rate hedge that provides for a maximum LIBOR rate of
9.25%. The initial funding was used primarily to repay outstanding borrowings
under the Company's unsecured credit facility.
4. SENIOR UNSECURED NOTES
As of September 30, 2000, the Operating Partnership had outstanding
approximately $449.4 million (net of issuance discounts) of senior unsecured
notes (the "Senior Unsecured Notes"). The following table sets forth the
Operating Partnership's Senior Unsecured Notes and other related disclosures
(dollars in thousands):
<TABLE>
<CAPTION>
FACE
ISSUANCE AMOUNT COUPON RATE TERM MATURITY
---------------------- ----------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
August 27, 1997 $150,000 7.20% 10 years August 28, 2007
March 26, 1999 $100,000 7.40% 5 years March 15, 2004
March 26, 1999 $200,000 7.75% 10 years March 15, 2009
</TABLE>
Interest on the Senior Unsecured Notes is payable semiannually with
principal and unpaid interest due on the scheduled maturity dates. In addition,
the Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate
discount of $738,000.
5. UNSECURED CREDIT FACILITY
On September 7, 2000, the Company obtained a three year $575 million
unsecured revolving credit facility (the "Credit Facility") from The Chase
Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent
and Deutsche Bank as documentation agent. The Credit Facility matures in
September, 2003 and borrowings under the Credit Facility are currently priced
off of LIBOR plus 105 basis points.
The Credit Facility replaced the Company's existing $500 million unsecured
credit facility (together with the Credit Facility, the "Credit Facility") and
$75 million term loan. As a result, certain deferred loan costs incurred in
connection with the existing unsecured credit facility and term loan were
written off. Such amount is reflected as an extraordinary loss in the
accompanying consolidated statements of income.
The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At September 30, 2000, the Company had availability under the
Credit Facility to borrow an additional $212.4 million (of which, $62.3 million
has been allocated for outstanding undrawn letters of credit).
6. COMMERCIAL REAL ESTATE INVESTMENTS
On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a
540,000 square foot, 35 story, Class A office property, located in New York
City, for a purchase price of approximately $126.5 million. This acquisition
was financed through a $70 million secured debt financing and a draw under the
Credit Facility.
On August 15, 2000, the Company acquired 538 Broadhollow Road, a 180,000
square foot Class A office property located in Melville, New York for a
purchase price of approximately $25.6 million. This acquisition was financed,
in part, through a borrowing under the Credit Facility.
On June 15, 1999, the Company acquired the first mortgage note secured by
a 47 story, 1.4 million square foot Class A office property located at 919
Third Avenue in New York City for approximately $277.5 million. The first
mortgage note entitles the Company to all the net cash flow of the property and
to substantial rights regarding the operations of the property, with the
Company anticipating to ultimately obtain title to the property. This
acquisition was financed with proceeds from the issuance of six million shares
of Series B Convertible Cumulative Preferred Stock and through draws under the
8
<PAGE>
Credit Facility. Current financial accounting guidelines provide that where a
lender has virtually the same risks and potential rewards as those of a real
estate owner it should recognize the full economics associated with the
operations of the property. As such, the Company has recognized the real estate
operations of the 919 Third Avenue in the accompanying consolidated statements
of income from the date of acquisition. On July 28, 2000, the Company consented
to the filing of a consensual, pre-packaged bankruptcy plan with the current
fee owner and on November 2, 2000 the Company obtained title to the property.
On August 9, 1999, the Company executed a contract for the sale of its
interest in RMI, which consisted of 28 properties, comprising approximately 6.1
million square feet and three other big box industrial properties to KTR. In
addition, the Company also entered into a sale agreement with Matrix relating
to a first mortgage note and certain industrial land holdings (the "Matrix
Sale"). The combined total sale price is $310 million ($52 million of which is
attributable to the Morris Companies and its affiliates in the form of $41.6
million of preferred units of KTR's operating partnership and $10.4 million of
debt relief) and consists of a combination of (i) cash, (ii) convertible
preferred and common stock of KTR, (iii) preferred units of KTR's operating
partnership, (iv) relief of debt and (v) a purchase money mortgage note secured
by certain land that is being sold to Matrix.
As of September 30, 2000, the Matrix Sale and the sale of the Company's
interest in RMI was completed for a combined sales price of approximately $258
million (net of minority partner's interest). The combined consideration
consisted of approximately (i) $159.7 million in cash, (ii) $60 million of
preferred stock and operating partnership units of KTR, (iii) $1.5 million in
common stock of KTR, (iv) approximately $26.7 million of debt relief and (v)
approximately $10.1 million in purchase money mortgages. As a result, the
Company realized a gain of approximately $16.7 million of which approximately
$6.7 million was recognized during the current fiscal year. Cash proceeds from
the sales were used primarily to repay borrowings under the Credit Facility.
During July 2000, the Company redeemed approximately $20 million of the
preferred stock of KTR which was used primarily for general corporate purposes.
In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower").
On May 24, 1999 the Company completed the merger with Tower and acquired three
Class A office properties located in New York City totaling 1.6 million square
feet and one office property located on Long Island totaling approximately
101,000 square feet. In addition, pursuant to the merger, the Company also
acquired certain office properties, a property under development and land
located outside of the Tri-State Area. All of the assets acquired in the merger
located outside of the Tri-State Area, other than a 357,000 square foot office
property located in Orlando, Florida, have been sold.
The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity investment in Metropolitan.
Crescent's investment accrues distributions at a rate of 7.5% per annum for a
two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by
Metropolitan at any time during that period for $85 million, plus an amount
sufficient to provide a 9.5% internal rate of return. If Metropolitan does not
redeem the preferred interest, upon the expiration of the two-year period,
Crescent must convert its $85 million preferred interest into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's
Class A common stock at a conversion price of $24.61 per share.
On September 28, 2000, the Company formed the Tri-State JV with TIAA and
contributed eight Class A suburban office properties aggregating approximately
1.5 million square feet to the Tri-State JV in exchange for approximately $136
million and a 51% majority ownership interest in the Tri-State JV. As a result,
the Company realized a gain of approximately $15.2 million. Cash proceeds
received were used primarily to repay borrowings under the Company's Credit
Facility.
7. STOCKHOLDERS' EQUITY
On May 24, 1999, the Company issued 11,694,567 shares of Class B
Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class
B common stock"), which were valued for GAAP purposes at $26 per share for
total consideration of approximately $304.1 million. The shares of Class B
9
<PAGE>
common stock were entitled to receive an initial annual dividend of $2.24 per
share, which dividend is subject to adjustment annually. On July 1, 2000, the
annual dividend on the Class B Common Stock was increased to $2.40 per share.
The shares of Class B common stock are exchangeable at any time, at the
option of the holder, into an equal number of shares of Class A common stock,
par value $.01 per share, of the Company subject to customary antidilution
adjustments. The Company, at its option, may redeem any or all of the Class B
common stock in exchange for an equal number of shares of the Company's Class A
common stock at any time following November 23, 2003.
On September 14, 2000, the Board of Directors of the Company declared the
following dividends on the Company's securities:
<TABLE>
<CAPTION>
ANNUALIZED
DIVIDEND / RECORD PAYMENT THREE MONTHS DIVIDEND /
SECURITY DISTRIBUTION DATE DATE ENDED DISTRIBUTION
-------------------------- -------------- ------------------ ------------------ -------------------- -------------
<S> <C> <C> <C> <C> <C>
Class A common stock $ .386 October 6, 2000 October 17, 2000 September 30, 2000 $ 1.544
Class B common stock $ .60 October 13, 2000 October 31, 2000 October 31, 2000 $ 2.40
Series A preferred stock $ .4766 October 13, 2000 October 31, 2000 October 31, 2000 $ 1.906
Series B preferred stock $ .52188 October 13, 2000 October 31, 2000 October 31, 2000 $ 2.088
</TABLE>
On June 20, 2000, the Company issued 4,181,818 shares of Class A common
stock in exchange for four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.
The Board of Directors of the Company has authorized the purchase of up to
three million shares of the Company's Class B common stock. In addition, the
Board of Directors has also authorized the purchase of up to an additional
three million shares of the Company's Class B common stock and/or its Class A
common stock. The buy-back program will be effected in accordance with the safe
harbor provisions of the Securities Exchange Act of 1934 and may be terminated
by the Company at any time. As of September 30, 2000, the Company had purchased
and retired 1,410,804 shares of Class B common stock for approximately $30.3
million.
Basic net income per share on the Company's Class A common stock was
calculated using the weighted average number of shares outstanding of
45,178,451 and 40,367,161 for the three months ended September 30, 2000 and
1999, respectively and 42,311,751 and 40,234,749 for the nine months ended
September 30, 2000 and 1999, respectively.
Basic net income per share on the Company's Class B common stock was
calculated using the weighted average number of shares outstanding of
10,283,513 and 11,456,931 for the three months ended September 30, 2000 and
1999, respectively and 10,283,541 and 5,488,759 for the nine months ended
September 30, 2000 and 1999, respectively.
10
<PAGE>
The following table sets forth the Company's reconciliation of numerators
and denominators of the basic and diluted earnings per weighted average common
share and the computation of basic and diluted earnings per share for the
Company's Class A common stock (in thousands except for earnings per share
data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Numerator:
Income before, dividends to preferred shareholders,
income allocated to Class B common shareholders
and extraordinary loss .................................. $ 36,799 $ 29,396 $ 90,134 $ 61,625
Dividends to preferred shareholders ....................... (5,425) (7,325) (19,946) (17,035)
Income allocated to Class B common shareholders ........... (8,200) (6,616) (18,913) (8,347)
Extraordinary loss (net of share applicable to limited
partners and Class B shareholders) ...................... (1,031) (389) (1,031) (389)
-------- -------- --------- ---------
Numerator for basic earnings per Class A common
share ................................................... 22,143 15,066 50,244 35,854
Minority partner's preferred interest in a consolidated
partnership ............................................. 1,594 -- -- --
Preferred units of limited partnership interest ........... 272 -- -- --
-------- -------- --------- ---------
Numerator for diluted earnings per Class A common
share ................................................... $ 24,009 $ 15,066 $ 50,244 $ 35,854
======== ======== ========= =========
Denominator:
Denominator for basic earnings per share-weighted
average Class A common shares ........................... 45,178 40,367 42,312 40,235
Effect of dilutive securities:
Employee stock options .................................. 588 430 424 417
Minority partner's preferred interest in a
consolidated partnership ............................... 3,454 -- -- --
Preferred units of limited partnership interest ......... 598 -- -- --
-------- -------- --------- ---------
Denominator for diluted earnings per Class A common
share-adjusted weighted average shares and assumed
conversions ............................................. 49,818 40,797 42,736 40,652
======== ======== ========= =========
Basic earnings per Class A common share:
Income before extraordinary loss .......................... $ .51 $ .38 $ 1.21 $ .90
Extraordinary loss ........................................ ( .02) ( .01) ( .02) ( .01)
-------- -------- --------- ---------
Net income per Class A common share ....................... $ .49 $ .37 $ 1.19 $ .89
======== ======== ========= =========
Diluted earnings per Class A common share:
Income before extraordinary loss .......................... $ .50 $ .38 $ 1.20 $ .89
Extraordinary loss ........................................ ( .02) ( .01) ( .02) ( .01)
-------- -------- --------- ---------
Diluted net income per Class A common share ............... $ .48 $ .37 $ 1.18 $ .88
======== ======== ========= =========
</TABLE>
11
<PAGE>
The following table sets forth the Company's reconciliation of numerators
and denominators of the basic and diluted earnings per weighted average common
share and the computation of basic and diluted earnings per share for the
Company's Class B common stock (in thousands except for earnings per share
data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Numerator:
Income before dividends to preferred shareholders,
income allocated to Class A common shareholders
and extraordinary loss .................................. $ 36,799 $ 29,396 $ 90,134 $ 61,625
Dividends to preferred shareholders ....................... (5,425) (7,325) (19,946) (17,035)
Income allocated to Class A common shareholders ........... (23,174) (15,455) (51,275) (36,243)
Extraordinary loss (net of share applicable to limited
partners and Class A common shareholders) ............... (365) (166) (365) (166)
--------- --------- --------- ---------
Numerator for basic earnings per Class B common
share ................................................... 7,835 6,450 18,548 8,181
Add back:
Income allocated to Class A common shareholders ........... 22,143 15,066 50,244 35,854
Limited partners' minority interest in the operating
partnership ............................................. 4,050 3,014 9,411 7,082
Minority partner's preferred interest in a consolidated
partnership ............................................. 1,594 -- -- --
Preferred units of limited partnership interest ........... 272 -- -- --
--------- --------- --------- ---------
Numerator for diluted earnings per Class B common
share ................................................... $ 35,894 $ 24,530 $ 78,203 $ 51,117
========= ========= ========= =========
Denominator:
Denominator for basic earnings per
share-weighted average Class B common shares ............ 10,284 11,457 10,284 5,489
Effect of dilutive securities:
Weighted average Class A common shares
outstanding ............................................ 45,178 40,367 42,312 40,235
Weighted average OP Units outstanding ................... 7,695 7,702 7,697 7,706
Minority partner's preferred interest in a
consolidated partnership ............................... 3,454 -- -- --
Preferred units of limited partnership interest ......... 598 -- -- --
Employee stock options .................................. 588 430 424 417
--------- --------- --------- ---------
Denominator for diluted earnings per Class B common
share-adjusted weighted average shares and assumed
conversions ............................................... 67,797 59,956 60,717 53,847
========= ========= ========= =========
Basic earnings per Class B common share:
Income before extraordinary loss .......................... $ .80 $ .57 $ 1.84 $ 1.52
Extraordinary loss ........................................ ( .04) ( .01) ( .04) ( .03)
--------- --------- --------- ---------
Net income per Class B common share ....................... $ .76 $ .56 $ 1.80 $ 1.49
========= ========= ========= =========
Diluted earnings per Class B common share:
Income before extraordinary loss .......................... $ .55 $ .42 $ 1.31 $ .96
Extraordinary loss ........................................ ( .02) ( .01) ( .03) ( .01)
--------- --------- --------- ---------
Diluted net income per Class B common share ............... $ .53 $ .41 $ 1.28 $ .95
========= ========= ========= =========
</TABLE>
12
<PAGE>
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash paid during the period for interest ......... $88,290 $61,892
======= =======
Interest capitalized during the period ........... $ 8,447 $ 7,281
======= =======
</TABLE>
On June 20, 2000, the Company issued 4,181,818 shares of Class A common
stock in exchange for four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.
9. SEGMENT DISCLOSURE
The Company owns all of the interests in its real estate properties by or
through the Operating Partnership. The Company's portfolio consists of Class A
office properties located within the New York City metropolitan area and Class
A suburban office and industrial properties located and operated within the
Tri-State Area (the "Core Portfolio"). The Company's portfolio also includes
one office property located in Orlando, Florida, certain industrial joint
venture properties formerly owned by RMI and for the period commencing January
6, 1998 and ending September 26, 1999, industrial properties which were owned
by RMI and subsequently sold to KTR. The Company has managing directors who
report directly to the Chief Operating Officer and Chief Financial Officer who
have been identified as the Chief Operating Decision Makers because of their
final authority over resource allocation, decisions and performance assessment.
In addition, the Company does not consider (i) interest incurred on its
Credit Facility, term loan and Senior Unsecured Notes, (ii) the operating
performance of the office property located in Orlando, Florida and (iii)
commencing January 1, 2000, the operating performance of the industrial joint
venture properties formerly owned by RMI as part of its Core Portfolio's
property operating performance.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.
The following table sets forth the components of the Company's revenues
and expenses and other related disclosures for the three months ended September
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 2000
--------------------------------------------
CONSOLIDATED
CORE PORTFOLIO OTHER TOTALS
---------------- ------------ --------------
<S> <C> <C> <C>
REVENUES:
Base rents, tenant escalations and
reimbursements ........................... $ 113,546 $ 2,208 $ 115,754
Equity in earnings of real estate joint
ventures and service companies ........... -- 706 706
Interest and other income ................. 191 23,651 23,842
----------- --------- -----------
Total Revenues ............................ 113,737 26,565 140,302
----------- --------- -----------
EXPENSES:
Property operating expenses ............... 40,666 589 41,255
Marketing, general and administrative ..... 5,405 1,525 6,930
Interest .................................. 9,623 15,028 24,651
Depreciation and amortization ............. 21,282 2,801 24,083
----------- --------- -----------
Total Expenses ............................ 76,976 19,943 96,919
----------- --------- -----------
Income before preferred dividends and
distributions, minority interests and
extraordinary loss ....................... $ 36,761 $ 6,622 $ 43,383
=========== ========= ===========
Total assets .............................. $ 2,115,236 $ 828,884 $ 2,944,120
=========== ========= ===========
<PAGE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
SEPTEMBER 30, 1999
------------------------------------------------------
CONSOLIDATED
CORE PORTFOLIO RMI OTHER TOTALS
---------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Base rents, tenant escalations and
reimbursements ........................... $ 97,787 $ 5,480 $ 7,602 $ 110,869
Equity in earnings of real estate joint
ventures and service companies ........... -- -- 483 483
Interest and other income ................. 209 -- 13,784 13,993
----------- ------- --------- -----------
Total Revenues ............................ 97,996 5,480 21,869 125,345
----------- ------- --------- -----------
EXPENSES:
Property operating expenses ............... 37,202 823 2,654 40,679
Marketing, general and administrative ..... 4,384 158 2,262 6,804
Interest .................................. 7,428 128 13,218 20,774
Depreciation and amortization ............. 18,684 1,343 1,841 21,868
----------- ------- --------- -----------
Total Expenses ............................ 67,698 2,452 19,975 90,125
----------- ------- --------- -----------
Income before preferred dividends and
distributions, minority interests and
extraordinary loss ....................... $ 30,298 $ 3,028 $ 1,894 $ 35,220
=========== ======= ========= ===========
Total assets .............................. $ 2,104,169 $ -- $ 576,995 $ 2,681,164
=========== ======= ========= ===========
</TABLE>
13
<PAGE>
The following table sets forth the components of the Company's revenues
and expenses and other related disclosures for the nine months ended September
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------------------
SEPTEMBER 30, 2000
------------------------------------------
CONSOLIDATED
CORE PORTFOLIO OTHER TOTALS
---------------- ---------- --------------
<S> <C> <C> <C>
REVENUES:
Base rents, tenant
escalations and
reimbursements ...................... $ 325,218 $ 6,865 $ 332,083
Equity in earnings of real
estate joint ventures and
service companies ................... -- 3,893 3,893
Interest and other income ............ 855 46,584 47,439
--------- ------- ---------
Total Revenues ....................... 326,073 57,342 383,415
--------- ------- ---------
EXPENSES:
Property operating expenses .......... 113,963 1,815 115,778
Marketing, general and
administrative ...................... 15,434 4,717 20,151
Interest ............................. 28,218 44,449 72,667
Depreciation and
amortization ........................ 60,670 6,850 67,520
--------- ------- ---------
Total Expenses ....................... 218,285 57,831 276,116
--------- ------- ---------
Income (loss) before preferred
dividends and
distributions, minority
interests and extraordinary loss $ 107,788 $ (489) $ 107,299
========= ======= =========
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------
SEPTEMBER 30, 1999
---------------------------------------------------------
CONSOLIDATED
CORE PORTFOLIO RMI OTHER TOTALS
---------------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Base rents, tenant
escalations and
reimbursements ...................... $ 240,753 $ 15,380 $ 11,150 $ 267,283
Equity in earnings of real
estate joint ventures and
service companies ................... -- -- 1,372 1,372
Interest and other income ............ 422 2 23,614 24,038
--------- -------- ---------- ---------
Total Revenues ....................... 241,175 15,382 36,136 292,693
--------- -------- ---------- ---------
EXPENSES:
Property operating expenses .......... 84,912 2,390 3,823 91,125
Marketing, general and
administrative ...................... 12,184 456 3,601 16,241
Interest ............................. 17,179 671 35,770 53,620
Depreciation and
amortization ........................ 47,677 3,710 4,699 56,086
--------- -------- ---------- ---------
Total Expenses ....................... 161,952 7,227 47,893 217,072
--------- -------- ---------- ---------
Income (loss) before preferred
dividends and
distributions, minority
interests and extraordinary loss $ 79,223 $ 8,155 $ (11,757) $ 75,621
========= ======== ========== =========
</TABLE>
10. OTHER INVESTMENTS AND ADVANCES
During 1997, the Company formed FrontLine Capital Group ("FrontLine")
(formerly Reckson Service Industries, Inc.) and Reckson Strategic Venture
Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the
Operating Partnership established a credit facility with FrontLine (the
"FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce
and e-services operations and other general corporate purposes. As of September
30, 2000, the Company had advanced approximately $92.5 million under the
FrontLine Facility. In addition, the Operating Partnership has approved the
funding of investments of up to $100 million with or in RSVP (the "RSVP
Commitment"), through RSVP-controlled joint venture REIT-qualified investments
or advances made to FrontLine under terms similar to the FrontLine Facility. As
of September 30, 2000, approximately $77.5 million had been invested through
the RSVP Commitment, of which $37.6 million represents RSVP-controlled joint
venture REIT-qualified investments and $39.9 million represents advances to
FrontLine under the RSVP Commitment. In addition, as of September 30, 2000, the
Company, through its Credit Facility, has allocated approximately $3.2 million
in outstanding undrawn letters of credit for the benefit of FrontLine. Both the
FrontLine Facility and the RSVP Commitment have a term of five years and
advances under each are recourse obligations of FrontLine. Interest accrues on
advances made under the credit facilities at a rate equal to the greater of (a)
the prime rate plus two percent and (b) 12% per annum, with the rate on amounts
that are outstanding for more than one year increasing annually at a rate of
four percent of the prior year's rate. Prior to maturity, interest is payable
quarterly but only to the extent of net cash flow and on an interest-only
basis. As of September 30, 2000, interest accrued under the FrontLine Facility
and RSVP Commitment was approximately $13.3 million of which approximately $3.2
million was received subsequent to September 30, 2000.
During November 1999, the Board of Directors of the Company approved an
amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine
to incur secured debt and to pay interest thereon and to issue preferred stock
and to pay dividends thereon. In consideration of the
14
<PAGE>
amendments, FrontLine paid the Operating Partnership a fee of approximately
$3.6 million in the form of shares of FrontLine common stock. Such fee has been
recognized in income over an estimated nine month benefit period.
FrontLine currently has two distinct operating units: one of which
represents its interest in HQ Global Holdings, Inc., the largest provider of
flexible officing solutions in the world, and the other which represents
interests in its e-commerce and e-services partner companies. RSVP invests
primarily in real estate and real estate related operating companies generally
outside of the Company's core office and industrial focus.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
accompanying Consolidated Financial Statements of Reckson Associates Realty
Corp. (the "Company") and related notes thereto.
The Company considers certain statements set forth herein to be
forward-looking statements within the meaning of Section 27A or the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, with respect to the Company's expectations for future
periods. Certain forward-looking statements, including, without limitation,
statements relating to the timing and success of acquisitions, the financing of
the Company's operations, the ability to lease vacant space and the ability to
renew or relet space under expiring leases, involve certain risks and
uncertainties. Although the Company believes that the expectations reflected in
such forward-looking statements are based on reasonable assumptions, the actual
results may differ materially from those set forth in the forward-looking
statements and the Company can give no assurance that its expectation will be
achieved. Certain factors that might cause the results of the Company to differ
materially from those indicated by such forward-looking statements include,
among other factors, general economic conditions, general real estate industry
risks, tenant default and bankruptcies, loss of major tenants, the impact of
competition and acquisition, redevelopment and development risks, the ability
to finance business opportunities and local real estate risks such as an
oversupply of space or a reduction in demand for real estate in the Company's
real estate markets. Consequently, such forward-looking statements should be
regarded solely as reflections of the Company's current operating and
development plans and estimates. These plans and estimates are subject to
revisions from time to time as additional information becomes available, and
actual results may differ from those indicated in the referenced statements.
OVERVIEW AND BACKGROUND
The Company is a self-administered and self-managed real estate investment
trust ("REIT") specializing in the acquisition, leasing, financing, management
and development of office and industrial properties. The Company's growth
strategy is focused on the real estate markets in and around the New York
tri-state area (the "Tri-State Area").
The Company owns all of the interests in its real properties through
Reckson Operating Partnership, L.P. (the "Operating Partnership"). As of
September 30, 2000, the Company owned and operated 81 office properties
comprising approximately 14.2 million square feet, 103 industrial properties
comprising approximately 6.6 million square feet and two retail properties
comprising approximately 20,000 square feet, located in the Tri-State Area.
During the quarter ended September 30, 2000, the Company completed the
repositioning of two former industrial properties into Class A office
properties. The Company is in the process of developing one office property
encompassing approximately 277,500 square feet and one industrial property
encompassing approximately 206,000 square feet. The Company also owns a 357,000
square foot office building located in Orlando, Florida and approximately 315
acres of land in 14 separate parcels of which the Company can develop
approximately 1.9 million square feet of office space and approximately 224,000
square feet of industrial space. The Company also has invested approximately
$297.7 million in mortgage notes encumbering one Class A office property
encompassing approximately 1.4 million square feet, approximately 403 acres of
land located in New Jersey and approximately $17.1 million in a note receivable
secured by a partnership interest in Omni Partner's, L.P., owner of the Omni, a
575,000 square foot Class A office property located in Uniondale, New York. On
November 2, 2000, a mortgage note investment and related acquisition costs of
approximately $292.5 million were exchanged, through a pre-packaged consensual
bankruptcy, for title to the property which was secured by such mortgage note
investment.
During 1997, the Company formed FrontLine Capital Group ("FrontLine")
(formerly Reckson Service Industries, Inc.) and Reckson Strategic Venture
Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the
Operating Partnership established a credit facility with FrontLine (the
"FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce
and e-services operations and other general corporate purposes. As of September
30, 2000, the Company had advanced approximately $92.5 million under the
FrontLine Facility. In addition, the Operating Partnership has
16
<PAGE>
approved the funding of investments of up to $100 million with or in RSVP (the
"RSVP Commitment"), through RSVP-controlled joint venture REIT-qualified
investments or advances made to FrontLine under terms similar to the FrontLine
Facility. As of September 30, 2000, approximately $77.5 million had been
invested through the RSVP Commitment, of which $37.6 million represents
RSVP-controlled joint venture REIT-qualified investments and $39.9 million
represents advances to FrontLine under the RSVP Commitment. In addition, as of
September 30, 2000, the Company, through its unsecured credit facility, has
allocated approximately $3.2 million in outstanding undrawn letters of credit
for the benefit of FrontLine. Both the FrontLine Facility and the RSVP
Commitment have a term of five years and advances under each are recourse
obligations of FrontLine. Interest accrues on advances made under the credit
facilities at a rate equal to the greater of (a) the prime rate plus two
percent and (b) 12% per annum, with the rate on amounts that are outstanding
for more than one year increasing annually at a rate of four percent of the
prior year's rate. Prior to maturity, interest is payable quarterly but only to
the extent of net cash flow of FrontLine and on an interest-only basis. As of
September 30, 2000, interest accrued under the FrontLine Facility and RSVP
Commitment was approximately $13.3 million of which approximately $3.2 million
was received subsequent to September 30, 2000.
During November 1999, the Board of Directors of the Company approved an
amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine
to incur secured debt and to pay interest thereon and to issue preferred stock
and to pay dividends thereon. In consideration of the amendments, FrontLine
paid the Operating Partnership a fee of approximately $3.6 million in the form
of shares of FrontLine common stock. Such fee has been recognized in income
over an estimated nine month benefit period.
FrontLine currently has two distinct operating units: one of which
represents its interest in HQ Global Holdings, Inc., the largest provider of
flexible officing solutions in the world, and the other which represents
interests in its e-commerce and e-services partner companies. RSVP invests
primarily in real estate and real estate related operating companies generally
outside of the Company's core office and industrial focus.
On August 9, 1999, the Company executed a contract for the sale of its
interest in Reckson Morris Operating Partnership, L. P. ("RMI"), which
consisted of 28 properties, comprising approximately 6.1 million square feet
and three other big box industrial properties to Keystone Property Trust
("KTR"). In addition, the Company also entered into a sale agreement with
Matrix relating to a first mortgage note and certain industrial land holdings
(the "Matrix Sale"). The combined total sale price is $310 million ($52 million
of which is attributable to the Morris Companies and its affiliates in the form
of $41.6 million of preferred units of KTR's operating partnership and $10.4
million of debt relief) and consists of a combination of (i) cash, (ii)
convertible preferred and common stock of KTR, (iii) preferred units of KTR's
operating partnership, (iv) relief of debt and (v) a purchase money mortgage
note secured by certain land that is being sold to Matrix.
As of September 30, 2000, the Matrix Sale and the sale of the Company's
interest in RMI was completed for a combined sales price of approximately $258
million (net of minority partner's interest). The combined consideration
consisted of approximately (i) $159.7 million in cash, (ii) $60 million of
preferred stock and operating partnership units of KTR, (iii) $1.5 million in
common stock of KTR, (iv) approximately $26.7 million of debt relief and (v)
approximately $10.1 million in purchase money mortgages. As a result, the
Company realized a gain of approximately $16.7 million of which approximately
$6.7 million was recognized during the current fiscal year. Cash proceeds from
the sales were used primarily to repay borrowings under the Company's unsecured
credit facility. During July 2000, the Company redeemed approximately $20
million of the preferred stock of KTR which was used primarily for general
corporate purposes.
In July 1998, the Company formed a joint venture, Metropolitan Partners
LLC "Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT
("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower").
On May 24, 1999 the Company completed the merger with Tower and acquired three
Class A office properties located in New York City totaling 1.6 million square
feet and one office property located on Long Island totaling approximately
101,000 square feet. In addition,
17
<PAGE>
pursuant to the merger, the Company also acquired certain office properties, a
property under development and land located outside of the Tri-State Area. All
of the assets acquired in the merger located outside of the Tri-State Area,
other than a 357,000 square foot office property located in Orlando, Florida,
have been sold.
The Company controls Metropolitan and owns 100% of the common equity;
Crescent owns a $85 million preferred equity investment in Metropolitan.
Crescent's investment accrues distributions at a rate of 7.5% per annum for a
two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by
Metropolitan at any time during that period for $85 million, plus an amount
sufficient to provide a 9.5% internal rate of return. If Metropolitan does not
redeem the preferred interest, upon the expiration of the two-year period,
Crescent must convert its $85 million preferred interest into either (i) a
common membership interest in Metropolitan or (ii) shares of the Company's
Class A common stock at a conversion price of $24.61 per share.
On September 28, 2000, the Company formed a joint venture (the "Tri-State
JV") with Teachers Insurance and Annuity Association and contributed eight
Class A suburban office properties aggregating approximately 1.5 million square
feet to the Tri-State JV in exchange for approximately $136 million and a 51%
majority ownership interest in the Tri-State JV. As a result, the Company
realized a gain of approximately $15.2 million. Cash proceeds received were
used primarily to repay borrowings under the Company's unsecured credit
facility.
The market capitalization of the Company at September 30, 2000 was
approximately $3.4 billion. The Company's market capitalization is based on the
sum of (i) the market value of the Company's Class A common stock and common
units of limited partnership interest in the Operating Partnership ("OP Units")
(assuming conversion) of $25.50 per share/unit (based on the closing price of
the Company's Class A common stock on September 30, 2000), (ii) the market
value of the Company's Class B common stock of $26.75 per share (based on the
closing price of the Company's Class B common stock on September 30, 2000),
(iii) the liquidation preference value of the Company's Series A preferred and
Series B preferred stock of $25 per share, (iv) the liquidation preference
value of the Operating Partnership's preferred units of $1,000 per unit, (v)
the contributed value of Metropolitan's preferred interest of $85 million and
(vi) the approximately $1.3 billion (including its share of joint venture debt
and net of minority partners' interests) of debt outstanding at September 30,
2000. As a result, the Company's total debt to total market capitalization
ratio at September 30, 2000 equaled approximately 39.5%.
RESULTS OF OPERATIONS
The Company's total revenues increased by $15.0 million or 11.9% for the
three months ended September 30, 2000 as compared to the 1999 period. Property
operating revenues, which include base rents and tenant escalations and
reimbursements ("Property Operating Revenues") increased by $4.9 million or
4.4% for the three months ended September 30, 2000 as compared to the 1999
period. The increase in Property Operating Revenues is attributable to the
acquisition of 1350 Avenue of the Americas and the development and/or
redevelopment of several properties. In addition, Property Operating Revenues
were also positively impacted by approximately $5.2 million from increases in
occupancies and rental rates in our "same store" properties. Offsetting the
increases in Property Operating Revenues was the negative impact of
approximately $8.0 million of expired rent attributable to a major tenant
vacating at 919 Third Avenue. Furthermore, Property Operating Revenues were
negatively impacted by approximately $5.2 million of rent attributable to the
industrial joint venture properties formerly owned by RMI, which properties
were sold on September 27, 1999 as well as $4.6 million of rent attributable to
certain Tower properties disposed of subsequent to the Tower transaction. The
Company's base rent reflects the positive impact of the straight-line rent
adjustment of $12.2 million for the three months ended September 30, 2000 as
compared to $2.1 million for the 1999 period. Included in the $12.2 million
straight-line rent adjustment is $8.2 million attributable to 919 Third Avenue.
This amount is attributable to the free rent periods contained in the three
tenants' leases which replaced the major tenant vacating as described above.
The remaining balance of the increase in total revenues is attributable to the
gain on sales of real estate, interest income and fees relating to the
FrontLine Facility and the RSVP Commitment and earnings generated by
RSVP-controlled joint venture REIT-qualified investments.
18
<PAGE>
Property operating expenses, real estate taxes and ground rents ("Property
Expenses") increased by $.6 million or 1.4% for the three months ended
September 30, 2000 as compared to the 1999 period. This increase is primarily
due to the acquisition of 1350 Avenue of the Americas in January 2000.
Offsetting the increase in Property Expenses is a reduction of approximately
$.8 million and $2.2 million, respectively, relating to the RMI and Tower
dispositions.
Gross Operating Margins (defined as Property Operating Revenues less
Property Expenses, taken as a percentage of Property Operating Revenues) for
the three months ended September 30 , 2000 and 1999 were 64.4% and 63.3%
respectively. The increase in Gross Operating Margins is primarily attributable
to the increase in rental rates and occupancy levels.
Marketing, general and administrative expenses increased by approximately
$126,000 for the three months ended September 30, 2000 as compared to the 1999
period. Marketing, general and administrative expenses as a percentage of total
revenues were 4.9% for the three months ended September 30, 2000 as compared to
5.4% for the 1999 period.
Interest expense increased by $3.9 million for the three months ended
September 30, 2000 as compared to the 1999 period. The increase is due to new
debt incurred with the 1350 Avenue of the Americas acquisition and is
attributable to an increase in interest expense on the Company's variable rate
debt due to rising interest rates.
The Company's total revenues increased by $90.7 million or 31.0% for the
nine months ended September 30, 2000 as compared to the 1999 period. Property
Operating Revenues, increased by $64.8 million or 24.2% for the nine months
ended September 30, 2000 as compared to the 1999 period. The increase in
Property Operating Revenues is substantially attributable to the properties
retained from the Tower portfolio acquisition in May 1999, the acquisition of
the first mortgage note secured by 919 Third Avenue (which property and other
revenue was reflected in Property Operating Revenues) in June 1999 and the
acquisition of 1350 Avenue of the Americas in January 2000. In addition,
Property Operating Revenues were also positively impacted by approximately $8.9
million from increases in occupancies and rental rates in our "same store"
properties. Offsetting the increase in Property Operating Revenues was the
negative impact of approximately $14.8 million of rent attributable to the RMI
disposition and approximately $7.3 million of rent attributable from Tower
properties disposed of subsequent to the Tower transaction. The Company's base
rent reflects the positive impact of the straight-line rent adjustment of $25.0
million for the nine months ended September 30, 2000 as compared to $6.8
million for the 1999 period. Included in the $25.0 million is $13.6 million
attributable to 919 Third Avenue. This amount is attributable to the free rent
periods contained in the three tenants' leases which replaced the major tenant
vacating as described above. The remaining balance of the increase in total
revenues is attributable to the gain on sales of real estate, interest income
and fees relating to the FrontLine Facility and the RSVP Commitment and
earnings generated by RSVP-controlled joint venture REIT-qualified investments.
<PAGE>
Property Expenses increased by $24.7 million or 27.1% for the nine months
ended September 30, 2000 as compared to the 1999 period. This increase is
primarily due to the acquisition of the Tower portfolio in May 1999, the
acquisition of the first mortgage note secured by 919 Third Avenue in June
1999, (which operations were reflected in Property Expenses) and the
acquisition of 1350 Avenue of the Americas in January 2000. Offsetting the
increases in Property Expenses is a reduction of expenses of approximately $2.2
million and $3.2 million, respectively, relating to the RMI and Tower
dispositions.
Gross Operating Margins for the nine months ended September 30 , 2000 and
1999 were 65.1% and 65.9%, respectively. The decrease in Gross Operating
Margins is primarily attributable to a larger proportionate share of gross
operating margin derived from office properties, which has a lower gross margin
percentage, in 2000 compared to 1999. The higher proportionate share of the
gross operating margins is attributable to the office properties acquired
during the period May 1999 through January 2000 and the disposition of net
leased industrial properties in September 1999. This shift in the composition
of the portfolio was offset by increases in rental rates and occupancies and
operating efficiencies realized.
Marketing, general and administrative expenses increased by $3.9 million
for the nine months ended September 30, 2000 as compared to the 1999 period.
The increase is due to the increased costs of managing the acquisition
properties and the increase in corporate management and administrative costs
associated with the growth of the Company including the opening of its New York
City division in March
19
<PAGE>
1999. Marketing, general and administrative expenses as a percentage of total
revenues were 5.3% for the nine months ended September 30, 2000 as compared to
5.6% for the 1999 period.
Interest expense increased by $19.0 million for the nine months ended
September 30, 2000 as compared to the 1999 period. The increase is primarily
due to secured borrowings assumed in the Tower acquisition as well as new debt
incurred with the Tower and 1350 Avenue of the Americas acquisitions.
Additionally, the increase is also due to $300 million of Senior Unsecured
Notes issued on March 26, 1999 and an increased cost attributable to an
increased average balance on the Company's unsecured credit facility and term
loan. The weighted average balance on the Company's unsecured credit facility
and term loan was $465.6 million for the nine months ended September 30, 2000
as compared to $446.1 million for the nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
On September 7, 2000, the Company obtained a three year $575 million
unsecured revolving credit facility (the "Credit Facility") from The Chase
Manhattan Bank, as administrative agent, UBS Warburg LLC as syndication agent
and Deutsche Bank as documentation agent. The Credit Facility matures in
September, 2003 and borrowings under the Credit Facility are currently priced
off of LIBOR plus 105 basis points.
The Credit Facility replaced the Company's existing $500 million unsecured
credit facility (together with the Credit Facility, the "Credit Facility") and
$75 million term loan. As a result, certain deferred loan costs incurred in
connection with the existing unsecured credit facility and term loan were
written off. Such amount is reflected as an extraordinary loss in the Company's
consolidated statements of income.
The Company utilizes the Credit Facility primarily to finance real estate
investments, fund its real estate development activities and for working
capital purposes. At September 30, 2000, the Company had availability under the
Credit Facility to borrow an additional $212.4 million (of which, $62.3 million
has been allocated for outstanding undrawn letters of credit).
On November 2, 2000, the Company obtained a three year secured $250
million first mortgage commitment on the property located at 919 Third Avenue,
New York N. Y. Interest rates on borrowings under the commitment are based on
LIBOR plus a spread ranging from 110 basis points to 140 basis points based
upon the outstanding balance. At closing, $200 million was funded under the
commitment at an interest rate of LIBOR plus 120 basis points. In addition, in
connection with the $200 million initial funding, the Company purchased a LIBOR
interest rate hedge that provides for a maximum LIBOR rate of 9.25%. The
initial funding was used primarily to repay outstanding borrowings under the
Company's Credit Facility.
<PAGE>
On May 24, 1999, the Company issued 11,694,567 shares of Class B
Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class
B common stock"), which were valued for generally accepted accounting
principles ("GAAP") purposes at $26 per share for total consideration of
approximately $304.1 million. The shares of Class B common stock were entitled
to receive an initial annual dividend of $2.24 per share, which dividend is
subject to adjustment annually. On July 1, 2000, the annual dividend on the
Class B Common Stock was increased to $2.40 per share.
The shares of Class B common stock are exchangeable at any time, at the
option of the holder, into an equal number of shares of Class A common stock,
par value $.01 per share, of the Company subject to customary antidilution
adjustments. The Company, at its option, may redeem any or all of the Class B
common stock in exchange for an equal number of shares of the Company's Class A
common stock at any time following November 23, 2003.
On June 20, 2000, the Company issued 4,181,818 shares of Class A common
stock in exchange for four million shares of Series B Convertible Cumulative
Preferred Stock with a liquidation preference value of $100 million.
The Board of Directors of the Company has authorized the purchase of up to
three million shares of the Company's Class B common stock. In addition, the
Board of Directors has also authorized the purchase of up to an additional
three million shares of the Company's Class B common stock and/or its Class A
common stock. The buy-back program will be effected in accordance with the safe
harbor provisions of the Securities Exchange Act of 1934 and may be terminated
by the Company at any time. As of September 30, 2000, the Company had purchased
and retired 1,410,804 shares of Class B Common Stock for approximately $30.3
million.
20
<PAGE>
The Company's indebtedness at September 30, 2000 totaled approximately
$1.3 billion (including its share of joint venture debt and net of minority
partners' interests) and was comprised of $362.6 million outstanding under the
Credit Facility, approximately $449.4 million of senior unsecured notes and
approximately $516.7 million of mortgage indebtedness. Based on the Company's
total market capitalization of approximately $3.4 billion at September 30, 2000
(calculated based on the sum of (i) the market value of the Company's Class A
common stock and OP Units, assuming conversion, (ii) the market value of the
Company's Class B common stock, (iii) the liquidation preference value of the
Company's preferred stock, (iv) the liquidation preference value of the
Operating Partnership's preferred units, (v) the contributed value of
Metropolitan's preferred interest and (vi) the $1.3 billion of debt), the
Company's debt represented approximately 39.5% of its total market
capitalization.
Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures of the Company. The Company expects to meet
its short-term liquidity requirements generally through its net cash provided
by operating activities along with the Credit Facility previously discussed.
The Company expects to meet certain of its financing requirements through
long-term secured and unsecured borrowings and the issuance of debt and equity
securities of the Company. In addition, the Company also believes that it will,
from time to time, generate funds from the sale of certain of its real estate
properties or interests therein. The Company will refinance existing mortgage
indebtedness or indebtedness under the Credit Facility at maturity or retire
such debt through the issuance of additional debt securities or additional
equity securities. The Company anticipates that the current balance of cash and
cash equivalents and cash flows from operating activities, together with cash
available from borrowings and equity offerings, will be adequate to meet the
capital and liquidity requirements of the Company in both the short and
long-term. In order to qualify as a REIT for federal income tax purposes,
the Company is required to make distributions to its stockholders of at least
95% of REIT taxable income. The Company expects to use its cash flow from
operating activities for distributions to stockholders and for payment of
recurring, non-incremental revenue-generating expenditures. The Company intends
to invest amounts accumulated for distribution in short-term investments.
INFLATION
The office leases generally provided for fixed base rent increases or
indexed escalations. In addition, the office leases provide for separate
escalations of real estate taxes and electric costs over a base amount. The
industrial leases generally provide for fixed base rent increases, direct pass
through of certain operating expenses and separate real estate tax escalations
over a base amount. The Company believes that inflationary increases in
expenses will be offset by contractual rent increases and expense escalations
described above.
The Credit Facility and a certain mortgage note payable bear interest at a
variable rate, which will be influenced by changes in short-term interest
rates, and is sensitive to inflation.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is an appropriate
measure of performance of an equity REIT. FFO is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or loss,
excluding gains or losses from debt restructuring and sales of properties plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not indicative of cash available to fund cash needs. FFO
should not be considered as an alternative to net income as an indicator of the
Company's operating performance or as an alternative to cash flow as a measure
of liquidity. In November 1999, NAREIT issued a "White Paper" analysis to
address certain interpretive issues under its definition of FFO. The White
Paper provides that FFO should include both recurring and non-recurring
operating results, except those results defined as "extraordinary items" under
GAAP. This revised definition is effective for all periods beginning on or
after January 1, 2000.
Since all companies and analysts do not calculate FFO in a similar
fashion, the Company's calculation of FFO presented herein may not be
comparable to similarly titled measures as reported by other companies.
21
<PAGE>
The following table presents the Company's FFO calculation (unaudited and
in thousands, except per share/unit data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ------------------------------
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net income available to common shareholders .................. $ 29,978 $ 21,516 $ 68,792 $ 44,035
Adjustments for basic funds from operations:
Add:
Limited partners' minority interest in the operating
partnership ............................................... 4,050 3,014 9,411 7,082
Real estate depreciation and amortization .................. 23,632 21,312 66,184 54,406
Minority partners' interests in consolidated partnerships . 1,874 2,150 5,773 4,933
Extraordinary loss ......................................... 1,396 555 1,396 555
Less:
Gain on sales of real estate ............................... 15,206 10,052 21,868 10,052
Amounts distributable to minority partners in
consolidated partnerships ................................. 2,247 2,607 6,764 6,031
-------- -------- --------- --------
Basic Funds From Operations (FFO) ............................ 43,477 35,888 122,924 94,928
Add:
Dividends and distributions on dilutive shares and units . 7,679 9,579 26,708 21,283
-------- -------- --------- --------
Diluted FFO ................................................ $ 51,156 $ 45,467 $ 149,632 $116,211
======== ======== ========= ========
Basic FFO calculations:
Weighted average common shares outstanding .................. 55,462 51,824 52,595 45,724
Weighted average units of limited partnership interest
outstanding ................................................ 7,695 7,702 7,697 7,706
-------- -------- --------- --------
Basic weighted average common shares and units
outstanding ................................................ 63,157 59,526 60,292 53,430
======== ======== ========= ========
Basic FFO per weighted average common share or unit ......... $ .69 $ .60 $ 2.04 $ 1.78
Basic weighted average dividends or distributions per share
or unit .................................................... $ .42 $ .41 $ 1.25 $ 1.14
Basic FFO payout ratio ...................................... 61.2% 67.6% 61.2% 64.3%
Diluted FFO calculations:
Basic weighted average common shares and units
outstanding ................................................ 63,157 59,526 60,292 53,430
Adjustments for dilutive FFO weighted average shares and
unit outstanding:
Add:
Weighted average common stock equivalents ................. 588 430 424 417
Weighted average shares of Series A Preferred Stock . 8,060 8,060 8,060 8,060
Weighted average shares of Series B Preferred Stock . 1,919 5,758 4,315 2,552
Weighted average shares of minority partners
preferred interest ...................................... 3,454 3,454 3,454 1,645
Weighted average units of preferred limited
partnership interest .................................... 1,367 1,367 1,367 1,367
-------- -------- --------- --------
Dilutive FFO weighted average shares and units
outstanding ................................................ 78,545 78,595 77,912 67,471
======== ======== ========= ========
Diluted FFO per weighted average share or unit .............. $ .65 $ .58 $ 1.92 $ 1.72
Diluted weighted average dividends or distributions per
share or unit .............................................. $ .41 $ .40 $ 1.22 $ 1.13
Diluted FFO payout ratio .................................... 63.7% 68.9% 63.7% 65.5%
</TABLE>
22
<PAGE>
The following table presents the Company's CAD calculation (unaudited and
in thousands, except per share/unit data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -------------------------------
2000 1999 2000 1999
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Basic Funds From Operations ............................ $ 43,477 $ 35,888 $ 122,924 $ 94,928
Adjustments for basic cash available for distribution:
Less:
Straight line rents (Note a) ......................... 12,153 2,086 24,991 6,600
Non-incremental capitalized tenant improvements
and leasing commissions ............................. 4,239 1,618 8,982 3,673
Non-incremental capitalized improvements ............. 1,075 833 3,773 2,312
--------- -------- --------- ---------
Basic Cash Available for Distribution (CAD) ............ 26,010 31,351 85,178 82,343
Add: ..................................................
Dividends and distributions on dilutive shares and
units ............................................... -- 9,579 5,597 21,283
--------- -------- --------- ---------
Diluted CAD .......................................... $ 26,010 $ 40,930 $ 90,775 $ 103,626
========= ======== ========= =========
Basic CAD calculations:
Weighted average common shares outstanding ............ 55,462 51,824 52,595 45,724
Weighted average units of limited partnership
interest outstanding ................................. 7,695 7,702 7,697 7,706
--------- -------- --------- ---------
Basic weighted average common shares and units
outstanding .......................................... 63,157 59,526 60,292 53,430
========= ======== ========= =========
Basic CAD per weighted average common share or
unit ................................................. $ .41 $ .53 $ 1.41 $ 1.54
Basic weighted average dividends or distributions
per share or unit .................................... $ .42 $ .41 $ 1.25 $ 1.14
Basic CAD payout ratio (Note a) ....................... 102.4% 77.4% 88.3% 74.1%
Diluted CAD calculations:
Basic weighted average common shares and units
outstanding .......................................... 63,157 59,526 60,292 53,430
Adjustments for dilutive CAD weighted average
shares and units outstanding:
Add:
Weighted average common stock equivalents ............ 588 430 424 417
Weighted average shares of Series A Preferred
Stock ............................................... -- 8,060 -- 8,060
Weighted average shares of Series B Preferred
Stock ............................................... -- 5,758 -- 2,552
Weighted average shares of minority partners
preferred interest .................................. -- 3,454 3,454 1,645
Weighted average units of preferred limited
partnership interest ................................ -- 1,367 598 1,367
--------- -------- --------- ---------
Dilutive CAD weighted average shares and units
outstanding ........................................... 63,745 78,595 64,768 67,471
========= ======== ========= =========
Diluted CAD per weighted average share or unit ......... $ .41 $ .52 $ 1.40 $ 1.54
Diluted weighted average dividends or distributions
per share or unit ..................................... $ .42 $ .40 $ 1.24 $ 1.13
Diluted CAD payout ratio (Note a) ...................... 103.2% 76.6% 88.5% 73.5%
</TABLE>
----------
Notes:
(a) Includes straight line rental income attributable to the property located
at 919 Third Avenue, New York, N. Y. of $8,175, $834, $13,560 and $995,
respectively.
23
<PAGE>
SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES,
TENANT IMPROVEMENTS AND LEASING COMMISSIONS
The following table summarizes the expenditures incurred for
non-incremental capital expenditures, tenant improvements and leasing
commissions for the Company's office and industrial properties for the nine
month period ended September 30, 2000 and the historical average of such
non-incremental capital expenditures, tenant improvements and leasing
commissions for the years 1996 through 1999.
NON-INCREMENTAL REVENUE GENERATING CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
NINE MONTHS
1996 -1999 ENDED
1996 1997 1998 1999 AVERAGE SEPT. 30, 2000
------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
SUBURBAN OFFICE PROPERTIES
Total ................... $ 375,026 $ 1,108,675 $ 2,004,976 $ 2,298,899 $ 1,446,894 $ 2,376,738
Per Square Foot ......... 0.13 0.22 0.23 0.23 0.20 0.24
CBD OFFICE PROPERTIES
Total ................... N/A N/A N/A N/A N/A $ 916,657
Per Square Foot ......... N/A N/A N/A N/A N/A 0.43
INDUSTRIAL PROPERTIES
Total ................... $ 670,751 $ 733,233 $ 1,205,266 $ 1,048,688 $ 914,485 $ 658,848
Per Square Foot ......... 0.18 0.15 0.12 0.11 0.14 0.09
</TABLE>
<PAGE>
NON-INCREMENTAL REVENUE GENERATING TENANT IMPROVEMENTS AND LEASING COMMISSIONS
<TABLE>
<CAPTION>
NINE MONTHS
1996 -1999 ENDED
1996 1997 1998 1999 AVERAGE SEPT. 30, 2000
------------- -------------- --------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
LONG ISLAND OFFICE PROPERTIES
Tenant Improvements .............. $ 523,574 $ 784,044 $ 1,140,251 $ 1,009,357 $ 864,307 $ 2,373,409
Per Square Foot Improved ......... 4.28 7.00 3.98 4.73 5.00 6.37
Leasing Commissions .............. $ 119,047 $ 415,822 $ 418,191 $ 551,762 $ 376,206 $ 1,995,078
Per Square Foot Leased ........... 0.97 4.83 1.46 2.59 2.46 4.88
--------- ---------- ----------- ----------- ---------- -----------
Total Per Square Foot ............ $ 5.25 $ 11.83 $ 5.44 $ 7.32 $ 7.46 $ 11.25
========= ========== =========== =========== ========== ===========
WESTCHESTER OFFICE PROPERTIES
Tenant Improvements .............. $ 834,764 $1,211,665 $ 711,160 $ 1,316,611 $1,018,550 $ 992,895
Per Square Foot Improved ......... 6.33 8.90 4.45 5.62 6.33 4.39
Leasing Commissions .............. $ 264,388 $ 366,257 $ 286,150 $ 457,730 $ 343,631 $ 340,099
Per Square Foot Leased ........... 2.00 2.69 1.79 1.96 2.11 3.00
--------- ---------- ----------- ----------- ---------- -----------
Total Per Square Foot ............ $ 8.33 $ 11.59 $ 6.24 $ 7.58 $ 8.44 $ 7.39
========= ========== =========== =========== ========== ===========
CONNECTICUT OFFICE PROPERTIES (A)
Tenant Improvements .............. $ 58,000 $1,022,421 $ 202,880 $ 179,043 $ 449,952 $ 342,973
Per Square Foot Improved ......... 12.45 13.39 5.92 4.88 9.16 4.86
Leasing Commissions .............. $ 0 $ 256,615 $ 151,063 $ 110,252 $ 159,363 $ 277,483
Per Square Foot Leased ........... 0.00 3.36 4.41 3.00 2.69 3.93
--------- ---------- ----------- ----------- ---------- -----------
Total Per Square Foot ............ $ 12.45 $ 16.75 $ 10.33 $ 7.88 $ 11.85 $ 8.79
========= ========== =========== =========== ========== ===========
NEW JERSEY OFFICE PROPERTIES
Tenant Improvements .............. N/A N/A $ 654,877 $ 454,054 $ 554,466 $ 1,724,101
Per Square Foot Improved ......... N/A N/A 3.78 2.29 3.04 8.11
Leasing Commissions .............. N/A N/A $ 396,127 $ 787,065 $ 591,596 $ 1,205,706
Per Square Foot Leased ........... N/A N/A 2.08 3.96 3.02 5.76
--------- ---------- ----------- ----------- ---------- -----------
Total Per Square Foot ............ N/A N/A $ 5.86 $ 6.25 $ 6.06 $ 13.87
========= ========== =========== =========== ========== ===========
NEW YORK OFFICE PROPERTIES
Tenant Improvements .............. N/A N/A N/A N/A N/A $ 11,977
Per Square Foot Improved ......... N/A N/A N/A N/A N/A 0.51
Leasing Commissions .............. N/A N/A N/A N/A N/A $ 212,673
Per Square Foot Leased ........... N/A N/A N/A N/A N/A 9.01
--------- ---------- ----------- ----------- ---------- -----------
Total Per Square Foot ............ N/A N/A N/A N/A N/A $ 9.52
========= ========== =========== =========== ========== ===========
INDUSTRIAL PROPERTIES
Tenant Improvements .............. $ 380,334 $ 230,466 $ 283,842 $ 375,646 $ 317,572 $ 360,691
Per Square Foot Improved ......... 0.72 0.55 0.76 0.25 0.57 0.64
Leasing Commissions .............. $ 436,213 $ 81,013 $ 200,154 $ 835,108 $ 388,122 $ 137,184
Per Square Foot Leased ........... 0.82 0.19 0.44 0.56 0.50 0.24
--------- ---------- ----------- ----------- ---------- -----------
Total Per Square Foot ............ $ 1.54 $ 0.74 $ 1.20 $ 0.81 $ 1.07 $ 0.88
========= ========== =========== =========== ========== ===========
</TABLE>
----------
(A) 1996 -- 1999 average weighted to reflect October 1996 acquisition date
24
<PAGE>
LEASE EXPIRATIONS
The following table sets forth scheduled lease expirations for executed
leases as of September 30, 2000:
LONG ISLAND OFFICE PROPERTIES (EXCLUDING OMNI):
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 13 37,717 1.2% $ 21.01 $ 23.39
2001 .................... 40 179,285 5.8% $ 22.94 $ 24.62
2002 .................... 33 165,462 5.4% $ 22.24 $ 24.82
2003 .................... 49 291,296 9.4% $ 22.12 $ 25.09
2004 .................... 45 275,654 8.9% $ 23.04 $ 25.84
2005 .................... 67 603,218 19.5% $ 22.17 $ 24.66
2006 AND THEREAFTER ..... 85 1,543,154 49.8% -- --
-- --------- -----
TOTAL ................... 332 3,095,786 100.0%
=== ========= =====
</TABLE>
OMNI:
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... -- -- -- -- --
2001 .................... 4 32,680 5.6% $ 27.39 $ 34.02
2002 .................... 4 80,060 13.8% $ 26.23 $ 30.60
2003 .................... 6 81,809 14.1% $ 29.60 $ 34.59
2004 .................... 4 112,414 19.4% $ 26.05 $ 33.44
2005 .................... 7 59,166 10.2% $ 27.99 $ 34.47
2006 AND THEREAFTER ..... 8 214,323 36.9% -- --
-- ------- -----
TOTAL ................... 33 580,452 100.0%
== ======= =====
</TABLE>
INDUSTRIAL PROPERTIES:
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 10 213,450 4.3% $ 4.74 $ 5.43
2001 .................... 28 557,139 11.2% $ 5.42 $ 6.77
2002 .................... 26 240,344 4.8% $ 6.43 $ 7.19
2003 .................... 30 731,234 14.7% $ 5.30 $ 6.11
2004 .................... 34 634,085 12.8% $ 6.40 $ 7.10
2005 .................... 18 396,810 8.0% $ 5.81 $ 7.96
2006 AND THEREAFTER ..... 49 2,192,911 44.2% -- --
-- --------- -----
TOTAL ................... 195 4,965,973 100.0%
=== ========= =====
</TABLE>
25
<PAGE>
LEASE EXPIRATIONS -- (CONTINUED)
RESEARCH AND DEVELOPMENT PROPERTIES:
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 2 13,204 1.1% $ 15.04 $ 11.60
2001 .................... 7 96,120 7.5% $ 11.61 $ 13.21
2002 .................... 3 118,620 9.3% $ 10.19 $ 11.80
2003 .................... 5 244,648 19.1% $ 5.01 $ 5.88
2004 .................... 10 129,218 10.1% $ 11.98 $ 13.43
2005 .................... 4 359,417 28.1% $ 8.33 $ 9.27
2006 AND THEREAFTER ..... 13 317,457 24.8% -- --
-- ------- -----
TOTAL ................... 44 1,278,684 100.0%
== ========= =====
</TABLE>
WESTCHESTER OFFICE PROPERTIES:
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 12 39,684 1.3% $ 21.57 $ 21.50
2001 .................... 39 255,484 8.3% $ 20.73 $ 21.12
2002 .................... 47 459,105 14.8% $ 20.20 $ 20.47
2003 .................... 43 263,153 8.5% $ 21.94 $ 23.26
2004 .................... 26 158,602 5.1% $ 21.08 $ 22.04
2005 .................... 48 381,712 12.3% $ 24.97 $ 25.17
2006 AND THEREAFTER ..... 46 1,539,039 49.7% -- --
-- --------- -----
TOTAL ................... 261 3,096,779 100.0%
=== ========= =====
</TABLE>
STAMFORD OFFICE PROPERTIES:
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 10 30,373 2.9% $ 21.22 $ 21.22
2001 .................... 22 136,087 12.9% $ 22.58 $ 25.11
2002 .................... 20 100,199 9.5% $ 27.39 $ 28.30
2003 .................... 14 95,298 9.1% $ 31.50 $ 32.26
2004 .................... 20 221,929 21.1% $ 22.85 $ 23.74
2005 .................... 23 109,943 10.4% $ 28.28 $ 30.27
2006 AND THEREAFTER ..... 20 359,099 34.1% -- --
-- ------- -----
TOTAL ................... 129 1,052,928 100.0%
=== ========= =====
</TABLE>
26
<PAGE>
LEASE EXPIRATIONS -- (CONTINUED)
NEW JERSEY OFFICE PROPERTIES:
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 4 12,054 0.6% $ 20.54 $ 21.49
2001 .................... 21 239,999 12.3% $ 17.85 $ 18.08
2002 .................... 21 184,595 9.4% $ 19.80 $ 20.43
2003 .................... 20 335,298 17.2% $ 19.94 $ 20.04
2004 .................... 34 244,184 12.5% $ 22.44 $ 22.98
2005 .................... 34 382,221 19.6% $ 22.56 $ 23.61
2006 AND THEREAFTER ..... 18 555,154 28.4% -- --
-- ------- -----
TOTAL ................... 152 1,953,505 100.0%
=== ========= =====
</TABLE>
NEW YORK CITY OFFICE
<TABLE>
<CAPTION>
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER
LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT
EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2)
------------------------- ----------- ---------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
2000 .................... 5 55,468 1.6% $ 38.28 $ 38.32
2001 .................... 18 134,464 3.9% $ 33.07 $ 30.43
2002 .................... 18 184,130 5.4% $ 32.02 $ 32.87
2003 .................... 7 115,726 3.4% $ 31.89 $ 32.34
2004 .................... 20 223,686 6.6% $ 36.74 $ 37.72
2005 .................... 34 437,590 12.8% $ 35.58 $ 36.89
2006 AND THEREAFTER ..... 114 2,262,900 66.3% -- --
--- --------- -----
TOTAL ................... 216 3,413,964 100.0%
=== ========= =====
</TABLE>
(1) Per square foot rental rate represents annualized straight line rent as of
the lease expiration date.
(2) Per square foot rental rate represents annualized base rent as of the lease
expiration date plus non-recoverable operating expense pass-throughs.
27
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The primary market risk facing the Company is interest rate risk on its
long term debt, mortgage notes and notes receivable. The Company will, when
advantageous, hedge its interest rate risk using financial instruments. The
Company is not subject to foreign currency risk.
The Company manages its exposure to interest rate risk on its variable
rate indebtedness by borrowing on a short-term basis under its Credit Facility
until such time as it is able to retire the short-term variable rate debt with
either a long-term fixed rate debt offering, long term mortgage debt, equity
offerings or through sales or partial sales of assets.
The fair market value ("FMV") of the Company's long term debt, mortgage
notes and notes receivable is estimated based on discounting future cash flows
at interest rates that management believes reflects the risks associated with
long term debt, mortgage notes and notes receivable of similar risk and
duration.
The following table sets forth the Company's long term debt obligations by
scheduled principal cash flow payments and maturity date, weighted average
interest rates and estimated FMV at September 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2000 2001 2002 2003 2004
----------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Long term debt:
Fixed rate ..................... $ 1,872 $ 23,227 $ 17,014 $ 8,907 $ 112,372
Weighted average interest rate . 7.76% 7.59% 7.80% 7.79% 7.50%
Variable rate .................. $ -- $ 70,000 $ -- $362,600 $ --
Weighted average interest rate . -- 8.28% -- 7.68% --
<CAPTION>
THEREAFTER TOTAL(1) FMV
-------------- -------------- ------------
<S> <C> <C> <C>
Long term debt:
Fixed rate ..................... $ 747,427 $ 910,819 $ 910,819
Weighted average interest rate . 7.56% 7.56%
Variable rate .................. $ -- $ 432,600 $ 432,600
Weighted average interest rate . -- 7.77%
</TABLE>
------------------
(1) Includes unamortized issuance discounts of $633,000 on the 5 and 10 year
senior unsecured notes issued on March 26, 1999 which are due at maturity.
<PAGE>
In addition, the Company has assessed the market risk for its variable
rate debt, which is based upon LIBOR, and believes that a one percent increase
in the LIBOR rate would have an approximate $4.3 million annual increase in
interest expense based on approximately $432.6 million of variable rate debt
outstanding at September 30, 2000.
The following table sets forth the Company's mortgage notes and note
receivables by scheduled maturity date, weighted average interest rates and
estimated FMV at September 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2000 2001 2002 2003 2004
------------- ---------- ----------- ------ ------------
<S> <C> <C> <C> <C> <C>
Mortgage notes and Notes
receivable:
Fixed rate ......................... $ 277,551 $ 15 $ 6,326 $ -- $ 36,500
Weighted average Interest rate ..... 9.41% 9.00% 10.22% -- 10.23%
<CAPTION>
THEREAFTER TOTAL (2) FMV
------------ ------------- -----------
<S> <C> <C> <C>
Mortgage notes and Notes
receivable:
Fixed rate ......................... $ 16,990 $ 337,382 $337,382
Weighted average Interest rate ..... 11.65% 9.63%
</TABLE>
------------------
(2) Excludes mortgage note receivable acquisition costs and interest
receivables aggregating approximately $15.4 million.
28
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings -- None
Item 2. Changes in Securities and use of proceeds
On October 13, 2000, the Board of Directors of the Company authorized a
dividend distribution of one preferred share purchase right (a "Right") for
each outstanding share of Class A common stock of the Company under a
shareholder rights plan. This dividend was distributed to all holders of record
on October 27, 2000. Each Right generally entitles the holder to purchase one
one-thousandth of a share of Series C junior participating preferred stock (the
"Preferred Shares") at a price of $84.44 per one one-thousandth of a Preferred
Share (the "Purchase Price"). The Rights expire on October 13, 2010, unless
earlier redeemed by the Company.
The Rights are generally exercisable only if a person or group becomes the
beneficial owner of 15% or more of the outstanding Class A common stock or
announces a tender offer for 15% or more of the outstanding stock (an
"Acquiring Person"). In the event that a person or group becomes an Acquiring
Person, each holder of a Right, excluding the Acquiring Person, will have the
right to receive, upon exercise, Class A common stock or one one-thousandth of
a Preferred Share having a market value equal to two times the Purchase Price
of the Right.
Item 3. Defaults Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Securities Holders -- None
Item 5. Other information -- None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
NUMBER
------------
<S> <C>
3(ii) Amended and Restated By-Laws of Reckson Associates Realty Corp.
27.0 Financial Data Schedule
</TABLE>
b) During the three months ended September 30, 2000, the Registrant filed
the following reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RECKSON ASSOCIATES REALTY CORP.
<TABLE>
<S> <C>
/s/ Michael Maturo
By: \s\ Scott H. Rechler
---------------------------------- -----------------------------------
Scott H. Rechler, Co-Chief Executive Michael Maturo, Executive Vice President,
Officer and President Treasurer and Chief Financial Officer
</TABLE>
DATE: November 9, 2000
29
