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) October 8, 1996
Cali Realty Corporation
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(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
On July 23, 1996, Cali Realty Corporation (the "Company") acquired 222 and 233
Mount Airy Road, two suburban office buildings totaling 115,000 square feet,
located in Basking Ridge, New Jersey (the "Mount Airy Buildings") through a
single transaction with one seller. The Mount Airy Buildings were acquired for
approximately $10,400,000, which was made available through one of the Company's
revolving credit facilities.
The Mount Airy Buildings consist of the following: 222 Mount Airy Road is a
49,000 square foot office building built in 1986 and is currently 100 percent
leased to a single tenant, Lucent Technologies, Inc.; 233 Mount Airy Road is a
66,000 square foot office building built in 1987 and is currently 100 percent
leased to a single tenant, AT&T Corp.
The Mount Airy Buildings were acquired pursuant to an agreement for the sale and
purchase of the Mount Airy Buildings between the 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
The acquisition of the Mount Airy Buildings is not considered significant to the
Company, and the financial statements included herein are included for
informational purposes only.
The statements of revenue and certain expenses included in this report encompass
the following:
o Audited statements of revenue and certain expenses for the Mount Airy
Buildings acquired on July 23, 1996. The audited financial statements
are presented for the year ended December 31, 1995. Unaudited interim
financial information is presented for the six months ended June 30,
1996
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
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Thomas A. Rizk
President and Chief Executive Officer
October 8, 1996 By: /s/ Barry Lefkowitz
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Barry Lefkowitz
Vice President - Finance and
Chief Financial Officer
CALI REALTY CORPORATION
Index to Financial Statements
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Report of Independent Accountants
Mount Airy Buildings:
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1995 (audited)
The Six Months Ended June 30, 1996 (unaudited)
Notes to Statements of Revenue and Certain Expenses
Consent of Independent Accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Cali Realty Corporation
We have audited the accompanying Statement of Revenue and Certain Expenses for
the properties known as 222 & 223 Mount Airy Road - Basking Ridge, NJ (the
"Mount Airy Buildings") for the year ended December 31, 1995. The financial
statements are the responsibility of the Mount Airy Buildings' 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 Statement of Revenue and Certain Expenses was 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 is not intended to be a complete presentation of the
Mount Airy Buildings' revenues and expenses.
In our opinion the financial statement referred to above presents fairly, in all
material respects, the revenue and certain expenses for the Mount Airy
Buildings, on the basis described in Note 2, for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ Schonbraun Safris Sternlieb & Co., L.L.C.
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SCHONBRAUN SAFRIS STERNLIEB & CO., L.L.C.
Certified Public Accountants
West Orange, New Jersey
July 25, 1996
Mount Airy Buildings
Statement of Revenue and Certain Expenses
For the Year Ended December 31, 1995
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Revenue
Base rents ................................................. $1,129,658
Escalations and recoveries from tenants .................... 182,764
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1,312,422
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Certain expenses
Real estate taxes .......................................... 182,764
Operating services ......................................... 6,452
General and administrative ................................. 51,942
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241,158
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Revenue in excess of certain expenses ...................... $1,071,264
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The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
Mount Airy Buildings
Statement of Revenue and Certain Expenses
For the Six Months Ended June 30, 1996
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(unaudited)
Revenue
Base rents ................................................... $597,963
Escalations and recoveries from tenants ...................... 90,308
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688,271
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Certain expenses
Real estate taxes ............................................ 90,308
Operating services ........................................... 3,644
General and administrative ................................... 48,428
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142,380
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Revenue in excess of certain expenses ........................ $545,891
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The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
Mount Airy Buildings
Notes to Statements of Revenue and Certain Expenses
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1. ORGANIZATION AND OPERATIONS OF PROPERTIES
For the purpose of the accompanying Statement of Revenue and Certain
Expenses, the Mount Airy Buildings represent the two neighboring buildings
located in Basking Ridge, New Jersey acquired by Cali Realty Corporation
("the Company") on July 23, 1996.
The unaudited Statement of Revenue and Certain Expenses for the 1996 period
presented includes the operating results of the Mount Airy Buildings for
the six months ended June 30, 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 Mount Airy
Buildings have been excluded. Revenues excluded consist of interest and
other revenues unrelated to the continuing operations of the Mount Airy
Buildings. 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 Mount Airy Buildings.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles (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. The lease agreements contain provisions which provide for
reimbursement by tenants of all real estate taxes and the direct payment of
substantially all operating costs.
3. LEASES
222 Mount Airy Road is 100 percent leased to Lucent Technologies, Inc.
subject to a long-term lease expiring February 28, 1999. 233 Mount Airy
Road is 100 percent leased to AT&T Corp. subject to a long-term lease
expiring December 31, 2000.
Future minimum rents to be received over the next five years from the
above-mentioned tenants as of December 31, 1995 are as follows:
1996 $1,195,926
1997 1,195,926
1998 1,195,926
1999 834,389
2000 762,082
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$5,184,249
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4. GENERAL AND ADMINISTRATIVE EXPENSES
The Mount Airy Buildings incurred managment fees based on three percent of
revenues in 1995. In 1996, the managment fees to be charged were changed to
a fixed negotiated amount.
The Mount Airy Buildings incurred managements fees of $24,299 and $35,190
for the six months ended June 30, 1996 and the year ended December 31,
1995, respectively.
These management fees were paid to a company controlled by one of the
former owners
5. INTERIM STATEMENTS
The interim financial data for the six months ended June 30, 1996 are
unaudited; however, in the opinion of the Mount Airy Buildings' management,
the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for
the interim period. 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.
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, October 1, 1995, July 29, 1996 and August 12, 1996, and Form S-8 dated
August 1, 1995 of Cali Realty Corporation of our report dated July 25, 1996
relating to the Statements of Revenue and Certain Expenses of the Mount Airy
Buildings.
October 8, 1996 /s/ Schonbraun Safris Sternlieb & Co., L.L.C.
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Schonbraun Safris Sternlieb & Co., L.L.C.
West Orange, New Jersey