SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 16, 1996
Cali Realty Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-13274 22-3305147
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(state or other jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification Number)
11 Commerce Drive, Cranford , New Jersey 07016
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Registrant's telephone number, including area code (908) 272-8000
N/A
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(Former name or former address, if changed since last report)
Item 5, Other Events
During the period January 1, 1996 to July 16, 1996, Cali Realty Corporation (the
"Company") (i) prepaid a portion of its mortgage financing, (ii) sold an office
building and (iii) acquired one office building and a two office building
complex through two individual transactions with separate sellers. None of the
above transactions constitute a "significant subsidiary," either individually or
in the aggregate.
On March 12, 1996, the Company prepaid with cash made available from one of the
Company's credit facilities, $5,492,000 of the Mortgage Financing ("Partial
Prepayment") and obtained a release of the mortgage liens on the office building
to be sold. On account of prepayment penalties, loan origination fees, legal
fees and other costs incurred in the retirement of the debt, an extraordinary
loss of $475,000, net of minority interest's share of the loss of $86,000, was
recorded in the Company's financial statements for the three months ended March
31, 1996.
On March 20, 1996, the Company sold its office building located at 15 Essex Road
in Paramus, New Jersey ("Essex Road") and concurrently acquired a property (more
fully described below.) The concurrent transactions qualified as a tax free
exchange, as the Company used all of the approximately $10,324,000 in proceeds
from the sale of Essex Road to acquire the property. The Company's financial
statements for the three months ended March 31, 1996 include a gain of
$5,658,000 relating to this transaction.
On March 20, 1996, the Company acquired an office building located at 103
Carnegie Center in Princeton, New Jersey ("Carnegie") concurrent with the sale
of Essex Road, as described above. Additionally, on May 2, 1996, the Company
acquired a two-building suburban office complex located in Media, Pennsylvania
("Rose Tree"). Both acquisitions are to be collectively referred to as the
"Acquisitions". With the Acquisitions, the Company acquired a total of 355,200
square feet of office space for an aggregate purchase price of approximately
$38,493,000. The Company paid the aggregate purchase price in cash, of which
$28,169,000 was made available through one of the Company's revolving credit
facilities (credit facility borrowings bear interest at the London Inter Bank
Offered Rate, referred to as "LIBOR," plus 150 basis points) with the remainder
made available from proceeds from the sale of an office building, as described
above.
Further information regarding the individual properties acquired is attached on
SCHEDULE A.
The Acquisitions were pursuant to individual agreements for the sale and
purchase of each property between each selling entity and the Company. The
factors considered by the Company in determining the price to be paid for the
properties included their historical and expected cash flow, nature of the
tenants and terms of leases in place, occupancy rates, opportunities for
alternative and new tenancies, current operating costs and real estate taxes on
the properties and anticipated changes therein under Company ownership, the
physical condition and locations of the properties, the anticipated effect on
the Company's financial results (including particularly funds from operations)
and the ability to sustain and potentially increase its distributions to Company
stockholders, and other factors. The Company took into consideration
capitalization rates at which it believed other comparable office buildings had
recently sold, but determined the price it was willing to pay primarily on the
factors discussed above relating to the properties themselves and their fit with
the Company's operations. No separate independent appraisals were obtained in
connection with the acquisition of the properties by the Company. The Company,
after investigation of the properties, is not aware of any material factors,
other than those enumerated above, that would cause the financial information
reported not to be necessarily indicative of future operating results.
Item 7, Financial Statements, Pro Forma Financial Information and Exhibits
As of July 16, 1996 the Company has purchased seven office buildings and three
portfolios of office buildings and office/flex space since its formation in
1994; one office building in 1994, three office buildings and three portfolios
in 1995, and three office buildings in 1996.
Financial Statements
The statements of revenue and certain expenses included in this report encompass
the following:
o Audited statements of revenue and certain expenses for the office
building and two office building complex acquired during the period
January 1, 1996 to July 16, 1996. The audited financial statements are
presented for the year ended December 31, 1995. Unaudited interim
financial information is presented for the period from January 1, 1996
to the earlier of the date of acquisition or March 31, 1996.
Pro Forma Financial Information (unaudited)
Unaudited pro forma financial information for the Company is presented as
follows:
o Condensed consolidated balance sheet as of March 31, 1996.
o Condensed consolidated statements of operations for the three months
ended March 31, 1996 and the year ended December 31, 1995.
o Estimated twelve-month Pro Forma statement of taxable net operating
income and operating funds available.
SCHEDULE A
CALI REALTY CORPORATION
PERCENT INITIAL
TOTAL OCCUPIED COST TO
OFFICE DATE OF SQUARE AT DATE OF YEAR COMPANY
BUILDING ACQUISITION FEET ACQUISITION COMPLETED (in thousands)
-------- ----------- ---- ----------- --------- --------------
103 Carnegie Center 3/20/96 95,200 91.5% 1984 $10,383
Princeton,
Mercer County,
New Jersey
- ------------------------------------------------------------------------------------------------------------------------------
Rose Tree Corporate Center 5/2/96 97.0% $28,110
1400 North Providence Rd.,
Media,
Delaware County,
Pennsylvania
Building I 100,000 1986
Building II 160,000 1990
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL 355,200 $38,493
==============================================================================================================================
OFFICE
BUILDING PRINCIPAL TENANTS
-------- -----------------
103 Carnegie Center Ronin Development (11.0%),
Princeton, Kurt Salmon (8.3%),
Mercer County, Arthur Andersen & Co. (7.7%),
New Jersey Hanover Fairs (6.3%)
- -------------------------------------------------------------------------
Rose Tree Corporate Center Crozer Keystone (5.3%),
1400 North Providence Rd., Nationwide Mutual (4.3%),
Media, Erie Indemnity (4.2%),
Delaware County, Nobel Education (4.1%)
Pennsylvania
Building I
Building II
=========================================================================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Cali Realty
Corporation has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALI REALTY CORPORATION
By: /s/Thomas A. Rizk
---------------------------------
Thomas A. Rizk
President and Chief Executive Officer
July 16, 1996 By: /s/Barry Lefkowitz
---------------------------------
Barry Lefkowitz
Vice President - Finance and
Chief Financial Officer
CALI REALTY CORPORATION
Index to Financial Statements
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ACQUISITIONS
Report of Independent Accountants
Statements of Revenue and Certain Expenses for:
The year ended December 31, 1995 (audited)
The period January 1, 1996 through the earlier of the date of
acquisition or March 31, 1996 (unaudited)
Notes to Statements of Revenue and Certain Expenses
CALI REALTY CORPORATION
Pro Forma (unaudited):
Condensed Consolidated Balance Sheet as of March 31, 1996
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1996 and for the Year Ended
December 31, 1995
Estimated Twelve Month Pro Forma Statement of Taxable Net
Operating Income and Operating Funds Available
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Cali Realty Corporation
We have audited the accompanying Statements of Revenue and Certain Expenses for
the properties known as The Rose Tree Corporate Center I & II - Media, PA ("Rose
Tree") and 103 Carnegie Center - Princeton, NJ ("Carnegie") (collectively
referred to as the "Acquisitions") for the year ended December 31, 1995. The
financial statements are the responsibility of the Acquisitions' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statements of revenue and certain expenses were prepared as
described in Note 2, for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission (for inclusion in the Form 8-K of Cali
Realty Corporation) and are not intended to be a complete presentation of Rose
Tree's and Carnegie's revenues and expenses.
In our opinion the financial statements referred to above present fairly, in all
material respects, the revenue and certain expenses for Rose Tree and Carnegie,
on the basis described in Note 2, for the year ended December 31, 1995, in
conformity with generally accepted accounting principles ("GAAP").
/s/ SCHONBRAUN SAFRIS STERNLIEB & CO., L.L.C.
---------------------------------------------
SCHONBRAUN SAFRIS STERNLIEB & CO., L.L.C.
Certified Public Accountants
West Orange, New Jersey
May 2, 1996
CALI REALTY CORPORATION
Acquisitions
Statements of Revenue and Certain Expenses
For the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
Rose Tree Carnegie
--------- --------
Revenue
Base rents ..................................... $3,881,714 $1,535,711
Escalations and recoveries from tenants ........ 366,717 159,119
---------- ----------
4,248,431 1,694,830
---------- ----------
Certain expenses
Real estate taxes .............................. 454,797 247,569
Utilities ...................................... 548,852 246,035
Operating services ............................. 450,875 206,596
General and administrative ..................... 140,760 45,713
---------- ----------
1,595,284 745,913
---------- ----------
Revenue in excess of certain expenses .......... $2,653,147 $ 948,917
========== ==========
The accompanying notes are an integral part of these statements of revenue and
certain expenses.
CALI REALTY CORPORATION
Acquisitions
Statements of Revenue and Certain Expenses
For the Period January 1, 1996 to the Earlier of
Date of Acquisition or March 31, 1996
- --------------------------------------------------------------------------------
(unaudited)
Rose Tree Carnegie
Period Ending Period Ending
March 31, 1996 March 19, 1996
-------------- --------------
Revenue
Base rents ..................................... $ 994,913 $ 344,219
Escalations and recoveries from tenants ........ 93,370 31,514
---------- ----------
1,088,283 375,733
---------- ----------
Certain expenses
Real estate taxes .............................. 122,530 53,906
Utilities ...................................... 133,418 56,346
Operating services ............................. 144,222 57,811
General and administrative ..................... 32,377 10,521
---------- ----------
432,547 178,584
---------- ----------
Revenue in excess of certain expenses .......... $ 655,736 $ 197,149
========== ==========
The accompanying notes are an integral part of these statements of revenue and
certain expenses.
CALI REALTY CORPORATION
Acquisitions
Notes to Statements of Revenue and Certain Expenses
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATIONS OF PROPERTIES
For the purpose of the accompanying statements of revenue and certain
expenses, the Acquisitions are the office building and the two office
building complex acquired by Cali Realty Corporation ("the Company") during
the period from January 1, 1996 to May 2, 1996.
A summary of the Acquisitions are as follows:
Date Acquired by
Acquisition Location the Company
----------- -------- ----------------
Carnegie Princeton, New Jersey March 20, 1996
Rose Tree Media, Pennsylvania May 2, 1996
The unaudited statements of revenue and certain expenses for the 1996
periods presented include the operating results of each of the Acquisitions
from January 1, 1996 to the earlier of the date of acquisition or March 31,
1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying statements of revenue and certain expenses have been
prepared on the accrual basis of accounting.
The accompanying financial statements are not representative of the actual
operations for the periods presented, as certain revenues and expenses,
which may not be comparable to the revenues and expenses to be earned or
incurred by the Company in the future operations of the Acquisitions have
been excluded. Revenues excluded consist of interest and other revenues
unrelated to the continuing operations of the Acquisitions. Excluded
expenses consist of interest, depreciation of the building and
improvements, and amortization of organization and other intangible costs
and other expenses not directly related to the future operations of the
Acquisitions. Included in escalations and recoveries from tenants for Rose
Tree for the year ended December 31, 1995 is $37,686 of a lease
cancellation fee.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates.
Revenue Recognition
Base rents are recognized on a straight-line basis over the term of the
lease. Certain lease agreements contain provisions which provide for
reimbursements by tenants of real estate taxes, insurance, utility and
other operating costs, generally over established base year amounts, as
defined in the tenant lease.
3. LEASES
Leases for the Acquisitions have various lease terms up to ten years with
options to certain tenants for renewal. Minimum rental amounts for certain
leases increase as set forth under the terms of each lease.
Future minimum rents to be received over the next five years and thereafter
from tenants as of December 31, 1995 are as follows:
Rose Tree Carnegie
--------- --------
1996 $ 3,665,919 $ 1,360,185
1997 3,243,896 1,080,479
1998 2,574,592 950,509
1999 2,194,742 640,659
2000 1,297,180 108,336
THEREAFTER 1,482,271 135,420
----------- -----------
$14,458,600 $ 4,275,588
=========== ===========
4. GENERAL AND ADMINISTRATIVE EXPENSES
The Acquisitions incurred management fees as follows:
For the Period
January 1, 1996
to the Earlier of
For the Year Date of Acquisition
Ended or March 31, 1996
December 31, 1995 (unaudited)
----------------- -----------
Carnegie (3.0 percent of Revenue) $ 44,106 $ 10,475
Rose Tree (2.5 percent of Revenue) $104,773 $ 28,361
5. OPERATING EXPENSES
Carnegie is subject to association fees for its proportionate share of
common area maintenance expenses consisting mainly of grounds and road
maintenance of the corporate park in which it is located. Included in
operating expenses are $18,555 and $4,027 of such fees for 1995 and for the
period January 1, 1996 to March 19, 1996, respectively.
6. INTERIM STATEMENTS
The interim financial data for the periods from January 1, 1996 to the
earlier of the date of acquisition or March 31, 1996 is unaudited; however,
in the opinion of the Acquisitions' management, the interim data includes
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair statement of the results for the interim periods. The results
for the periods presented are not necessarily indicative of the results to
be expected for the entire fiscal year or any other period.
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of March 31, 1996 (in thousands)
- --------------------------------------------------------------------------------
The following unaudited Pro Forma condensed consolidated balance sheet is
presented as if the acquisition by the Company of Rose Tree had occurred on
March 31, 1996. This unaudited Pro Forma condensed consolidated balance sheet
should be read in conjunction with the Pro Forma condensed consolidated
statement of operations of the Company and the historical financial statements
and notes thereto of the Company included in the Company's Forms 10-K and 10-Q
for the year ended December 31, 1995 and the quarter ended March 31, 1996,
respectively.
The Pro Forma condensed consolidated balance sheet is unaudited and is not
necessarily indicative of what the actual financial position of the Company
would have been had the aforementioned acquisition actually occurred on March
31, 1996, nor does it purport to represent the future financial position of the
Company.
Pro Forma
Adjustments
Company for Company
Historical Rose Tree(a) Pro Forma
---------- ------------- ---------
Assets
Rental property, net ................................................ $333,921 $ 28,110 $362,031
Cash and cash equivalents ........................................... 1,494 -- 1,494
Unbilled rents available ............................................ 18,795 -- 18,795
Restricted cash ..................................................... 4,453 -- 4,453
Other assets ........................................................ 13,068 -- 13,068
-------- -------- --------
Total assets ........................................................ $371,731 $ 28,110 $399,841
======== ======== ========
Liabilities and Stockholders' Equity
Mortgages and loans payable ......................................... $137,741 $ 28,110 $165,851
Dividends and distributions payable ................................. 7,608 -- 7,608
Accounts payable and accrued expenses ............................... 3,509 -- 3,509
Accrued interest payable ............................................ 484 -- 484
Rents received in advance
and security deposits .............................................. 4,775 -- 4,775
-------- -------- --------
Total liabilities ................................................... 154,117 28,110 182,227
-------- -------- --------
Minority interest of unitholders
in Operating Partnership .......................................... 27,683 -- 27,683
-------- -------- --------
Stockholders' equity
Common stock, $.01 per value ...................................... 152 -- 152
Additional paid in capital ........................................ 186,741 -- 186,741
Retained earnings ................................................. 3,038 -- 3,038
-------- -------- --------
Total stockholders' equity .......................................... 189,931 -- 189,931
-------- -------- --------
Total liabilities and stockholders' equity .......................... $371,731 $ 28,110 $399,841
======== ======== ========
(a) Represents the acquisition of Rose Tree on May 2, 1996 for $28,110. The
purchase price, paid in cash, was made available from the Company's
revolving credit facility with Prudential Realty Funding Corporation.
Credit facility borrowings bear interest at London Inter Bank Offered Rate
plus 150 basis points.
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended March 31, 1996
And the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
The unaudited Pro Forma condensed consolidated statement of operations for the
three months ended March 31, 1996 is presented as if the Partial Prepayment by
the Company, the disposition by the Company of Essex Road, and the purchase of
the Acquisitions had occurred on January 1, 1996. The unaudited Pro Forma
condensed consolidated statement of operations for the year ended December 31,
1995 is presented as if each of the following transactions had occurred on
January 1, 1995: (i) the acquisition by the Company of the properties purchased
during 1995 and the completion of its second common stock offering; (ii) the
purchase by the Company on March 8, 1995 of 100,000 shares of its common stock
for constructive retirement; (iii) the Partial Prepayment by the Company of the
Mortgage Financing; (iv) the disposition by the Company of Essex Road, and (v)
the purchase by the Company of the Acquisitions.
Such Pro Forma information is based upon the historical unaudited consolidated
results of operations of the Company for the three months ended March 31, 1996
and the historical consolidated results of operations of the Company for the
year ended December 31, 1995, after giving effect to the transactions described
above. The Pro Forma condensed consolidated statements of operations should be
read in conjunction with the Pro Forma condensed consolidated balance sheet of
the Company and the historical financial statements and notes thereto of the
Company included in the Company's Forms 10-K and 10-Q for the year ended
December 31, 1995 and the quarter ended March 31, 1996, respectively.
The unaudited Pro Forma condensed consolidated statements of operations are not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the transactions had been completed as set forth above,
nor does it purport to represent the Company's results of operations for future
periods.
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1996
(in thousands, except per share amounts)
- --------------------------------------------------------------------------------
(unaudited)
Company Pro Forma Company
Revenue Historical Adjustments(a) Pro Forma
- ------- ---------- -------------- ---------
Base rents ............................................................... $16,012 $ 1,112 $17,124
Escalations and recoveries ............................................... 3,081 87 3,168
Parking and other ........................................................ 404 -- 404
Interest income .......................................................... 74 -- 74
------- ------- -------
Total revenues ...................................................... 19,571 1,199 20,770
------- ------- -------
Expenses
Real estate taxes ........................................................ 1,959 127 2,086
Utilities ................................................................ 1,882 133 2,015
Operating services ....................................................... 2,803 124 2,927
General and administrative ............................................... 936 32 968
Depreciation and amortization ............................................ 3,294 120 3,414
Interest expense ......................................................... 2,569 484 3,053
------- ------- -------
Total expenses ...................................................... 13,443 1,020 14,463
------- ------- -------
Income before gain on sale of rental
property, minority interest and extraordinary item .................... 6,128 179 6,307
Gain on sale of rental property .......................................... 5,658 (5,658) --
------- ------- -------
Income before minority interest and
extraordinary item .................................................... 11,786 (5,479) 6,307
Minority interest ........................................................ 1,812 (842) 970
------- ------- -------
Income before extraordinary item ......................................... $ 9,974 ($4,637) $ 5,337
======= ======= =======
Weighted average common shares outstanding ............................... 15,146
=======
Income before extraordinary item per common share ........................ $ .35
=======
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1996
(in thousands)
(a) Reflects:
Revenues and expenses of the Acquisitions in 1996 for the period from
January 1, 1996 through the earlier of the date of acquisition or March 31,
1996, as follows:
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
Carnegie March 20, 1996 $ 386 $ 31 $ 54 $ 56 $ 58
Rose Tree May 2, 1996 989 93 123 133 144
------ ------ ------ ------ ------
$1,375 $ 124 $ 177 $ 189 $ 202
------ ------ ------ ------ ------
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1996 (Continued)
(in thousands)
General and Depreciation/ Gain on
Property Administrative Amortization(2) Interest(3) Sale
- -------- -------------- --------------- ----------- ----
Carnegie $ 11 $ 49 -- --
Rose Tree 32 158 $484 --
---- ---- ---- ----
$ 43 $207 $484 --
---- ---- ---- ----
Revenues and expenses of the property disposed of in 1996 for the period
from January 1, 1996 through March 20, 1996, as follows:
Real
Base Escalations/ Estate Operating
Property Date Rents Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
Essex Road March 20, 1996 ($263) ($ 37) ($ 50) ($ 56) ($ 78)
----- ----- ----- ----- -----
General and Depreciation/ Gain on
Property Administrative Amortization Interest Sale
- -------- -------------- ------------- -------- -------
Essex Road ($11) ($81) ($43) ($5,658)
---- ---- ---- -------
Revenues and expenses related to the Partial Prepayment in 1996 for the
period from January 1, 1996 through March 12, 1996, as follows:
Real
Base Escalations/ Estate Operating
Date Rents Recoveries Taxes Utilities Services
---- ----- ---------- ----- --------- --------
Partial Prepayment March 12, 1996 -- -- -- -- --
------ ---- ---- ----- -----
Total Pro Forma
adjustments $1,112 $ 87 $127 $ 133 $ 124
====== ==== ==== ===== =====
General and Depreciation/ Gain on
Administrative Amortization Interest(3) Sale
-------------- ------------ ----------- -------
Partial Prepayment --- ($ 6) 43 ---
--- ---- ---- -------
Total Pro Forma
adjustments $32 $120 $484 $(5,658)
=== ==== ==== ========
(1) Pro Forma base rents are presented on a straight line basis calculated from
January 1, 1996 forward.
(2) Depreciation is based on purchase price depreciated on the straight-line
method over a 40 year life.
(3) Interest is calculated at LIBOR plus 150 basis points. Had the interest
rate been one-eighth of one percent different, interest would have changed
by $9 for Rose Tree and $1 for the Partial Prepayment. Interest for the
Partial Prepayment is recorded net of a reduction in interest of $172,
reflecting the effect of the Partial Prepayment not recorded in Essex Road
above.
CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands, except per share amounts)
Pro Forma Pro Forma
Adjustments Adjustments
for 1995 for 1996
Company Acquired Reported Company
Historical Properties(b) Subtotal Events(c) Pro Forma
---------- ------------- -------- --------- ---------
REVENUE
Base rents ............................................. $50,808 $12,961 $63,769 $ 4,067 $67,836
Escalations and recoveries ............................. 9,504 2,684 12,188 304 12,492
Parking and other ...................................... 1,702 -- 1,702 -- 1,702
Interest income ........................................ 321 -- 321 -- 321
------- ------- ------- ------- -------
Total revenues ..................................... 62,335 15,645 77,980 4,371 82,351
------- ------- ------- ------- -------
EXPENSES
Real estate taxes ...................................... 5,856 1,821 7,677 470 8,147
Utilities .............................................. 6,330 939 7,269 580 7,849
Operating services ..................................... 8,519 1,354 9,873 331 10,204
General and administrative ............................. 3,712 519 4,231 134 4,365
Depreciation and amortization .......................... 12,111 2,201 14,312 465 14,777
Interest expense ....................................... 8,661 2,127 10,788 2,222 13,010
------- ------- ------- ------- -------
Total expenses ..................................... 45,189 8,961 54,150 4,202 58,352
------- ------- ------- ------- -------
Income before minority interest .................... 17,146 6,684 23,830 169 23,999
Minority interest .................................. 3,508 208 3,716 26 3,742
------- ------- ------- ------- -------
Net income ............................................. $13,638 $ 6,476 $20,114 $ 143 $20,257
======= ======= ======= ======= =======
Weighted average common shares outstanding 15,105
=======
Net income per common share $1.34
=====
CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(in thousands, except per share amounts)
(b) Reflects revenues and expenses of the properties acquired in 1995 for the
period from January 1, 1995 through the date of acquisition, as follows:
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
1717 Rt. 208 Fairlawn, NJ ............... March 3, 1995 $ 564 $ 61 $ 48 $ 62 $ 64
400 Rella Blvd. Montebello, NY .......... April 11, 1995 874 68 121 132 100
5 Vaughn Dr. Princeton, NJ .............. July 21, 1995 1,031 100 126 93 127
New Jersey Resources .................... Nov. 8, 1995 6,004 954 802 506 591
Commcercenter Totowa .................... Nov. 6, 1995 2,942 786 407 71 295
Horizon Center Business Park ............ Nov. 8, 1995 1,546 715 317 75 177
------- ------- ------- ------- -------
$12,961 $ 2,684 $ 1,821 $ 939 $ 1,354
======= ======= ======= ======= =======
General and Depreciation/
Property Administrative Amortization(2) Interest(3)
- -------- -------------- --------------- -----------
1717 Rt. 208 Fairlawn, NJ .................... $ 25 $ 81 $ 259
400 Rella Blvd. Montebello, NY ............... 29 85 359
5 Vaughn Dr. Princeton, NJ ................... 40 137 476
New Jersey Resources ......................... 202 1,046 557
Commcercenter Totowa ......................... 147 586 330
Horizon Center Business Park ................. 76 266 146
------ ------ ------
$ 519 $2,201 $2,127
====== ====== ======
(c) Reflects:
Revenues and expenses of the Acquisitions in 1996 for the period from
January 1, 1995 through December 31, 1995, as follows:
Real
Base Escalations/ Estate Operating
Property Date Rents(1) Recoveries Taxes Utilities Services
- -------- ---- -------- ---------- ----- --------- --------
Carnegie ...................... March 20, 1996 $1,538 $ 159 $ 248 $ 246 $ 207
Rose Tree .................... May 2, 1996 3,990 367 455 549 451
------ ------ ------ ------ ------
$5,528 $ 526 $ 703 $ 795 $ 658
------ ------ ------ ------ ------
General and Depreciation/
Property Administrative Amortization(2) Interest(3)
- -------- -------------- --------------- -----------
Carnegie .................... $ 46 $ 195 --
Rose Tree ................... 141 633 2,193
------ ------ ------
$ 187 $ 828 $2,193
------ ------ ------
Revenues and expenses of the property disposed of in 1996 for the period
from January 1, 1995 through December 31, 1995, as follows:
Real
Base Escalations/ Estate Operating
Property Date Rents Recoveries Taxes Utilities Services
-------- ---- -------- ---------- ----- --------- --------
Essex Road .................. March 20, 1996 ($1,461) ($222) ($233) ($215) ($327)
------- ----- ----- ----- -----
General and Depreciation/
Property Administrative Amortization Interest
- -------- -------------- -------------- -----------
Essex Road .................. ($53) ($334) ($228)
---- ----- -----
Revenues and expenses related to the Partial Prepayment in 1996 for the
period from January 1, 1995 through December 31, 1995, as follows:
Partial Prepayment March 12, 1996 -- -- -- -- -- -- ($ 29) $ 257 (3)
------- ------- ------- ------- ------- ------- ------- -------
Total Pro Forma
adjustments $ 4,067 $ 304 $ 470 $ 580 $ 331 $ 134 $ 465 $ 2,222
======= ======= ======= ======= ======= ======= ======= =======
(1) Pro Forma base rents are presented on a straight line basis calculated from
January 1, 1995 forward.
(2) Depreciation is based on purchase price depreciated using the straight-line
method over a 40 year life.
(3) Interest is calculated at LIBOR plus 275 basis points through February 1,
1995, at LIBOR plus 200 basis points through November 1, 1995 and at LIBOR
plus 150 points after such date. Had the interest rate been one-eighth of
one percent different, interest would have changed by $32 for the
properties acquired in 1995, $35 for the Acquisitions in 1996, and $7 for
the Partial Prepayment. Interest for the Partial Prepayment is recorded net
of reduction in interest of $172, reflecting the effect of the Partial
Prepayment not recorded in Essex Road above.
CALI REALTY CORPORATION
Estimated Twelve Month Pro Forma Statement of
Taxable Net Operating Income and Operating Funds Available
- --------------------------------------------------------------------------------
(unaudited)
The following unaudited statement is a Pro Forma estimate for a twelve month
period of taxable income and funds available from operations of the Company. The
Pro Forma statement is based on the Company's historical operating results for
the twelve month period ended December 31, 1995 adjusted for historical
operations of the properties acquired during 1995 and 1996 (as reported in this
report) and certain items related to operations which can be factually
supported. This statement does not purport to forecast actual operating results
for any period in the future.
This statement should be read in conjunction with (i) the financial statements
of the Company and (ii) the Pro Forma financial statement of the Company.
Estimate of Taxable Net Operating Income (in thousands):
Cali Realty Corporation historical income before minority
interest, year ended December 31, 1995,
exclusive of depreciation and amortization (Note 1) ................$ 29,257
Properties acquired during 1995 - historical earnings from operations,
as adjusted, exclusive of depreciation (Note 2) .................... 8,885
Properties acquired during 1996 - historical earnings from operations,
as adjusted, exclusive of depreciation (Note 2) .................... 1,518
Property disposed of during 1996-historical earnings from operations
as adjusted, exclusive of depreciation (Note 2) .................... (627)
Pro Forma adjustments relating to the Partial Prepayment (Note 3) .... (228)
Net adjustment for tax basis rental revenue recognition (Note 4) ..... (1,121)
Estimated tax depreciation and amortization (Note 5)
Properties owned at December 31, 1994 .............................. (6,746)
Properties acquired during 1995 .................................... (915)
Properties acquired during 1996 .................................... (859)
--------
Pro Forma taxable income before allocation to minority interest and
dividends deduction ................................................ 29,164
Estimated allocation to minority interest (Note 6) ................... (5,037)
Estimated dividends deduction (Note 7) ............................... (25,678)
--------
$ (1,551)
========
Pro Forma taxable net operating income ...............................$ --
========
Estimate of Operating Funds Available (in thousands):
Pro Forma taxable operating income before allocation to minority
interests and dividends deduction ....................................$ 29,164
Add Pro Forma depreciation and amortization ........................ 8,520
--------
Estimated Pro Forma operating funds available (Note 8) ...............$ 37,684
========
CALI REALTY CORPORATION
Estimated Twelve Month Pro Forma Statement of
Taxable Net Operating Income and Operating Funds Available
- --------------------------------------------------------------------------------
(unaudited)
Note 1 - The historical income before minority interest represents the
Company's income before minority interest for the year ended December 31,
1995.
Note 2 - The historical earnings from operations represents the Pro Forma
result of the properties acquired during 1995 and 1996, and the property
disposed of in 1996 as referred to in the Pro Forma condensed consolidated
statement of operations for the year ended December 31, 1995 and included
elsewhere herein.
Note 3 - Represents the Pro Forma result for the Partial Prepayment as
referred to in the Pro Forma condensed consolidated statement of operations
for the year ended December 31, 1995 and included elsewhere herein.
Note 4 - Represents the net adjustment to (i) recognize prepaid rent and
(ii) reverse the effect of rental revenue recognition on a straight line
basis.
Note 5 - Tax depreciation for the Company is based upon the original cost
or purchase price allocated to the buildings, depreciated on a
straight-line method over a 39-year life.
Note 6 - Estimated allocation of taxable income to minority interests is
based on a 15.08 percent minority interest in the operating partnership
with a special allocation of depreciation on properties included in the
Initial Public Offering.
Note 7 - Estimated dividends deduction is based on 15,104,725 shares
outstanding at the dividend rate of $1.70 per share. Shares outstanding, on
a Pro Forma basis, are 15,104,725.
Note 8 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting parts of the Registration Statements on Forms S-3, dated September
1, 1995 and October 1, 1995, and Form S-8 dated August 1, 1995 of Cali Realty
Corporation of our report dated May 2, 1996 relating to the Statement of Revenue
and Certain Expenses of the Acquired Properties of Cali Realty Corporation.
/s/Schonbraun Safris Sternlieb & Co., L.L.C.
- --------------------------------------------
Schonbraun Safris Sternlieb & Co., L.L.C.
West Orange, New Jersey
July 16, 1996