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 29, 1996 Cali Realty Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 1-13274 22-3305147 - -------------------------------------------------------------------------------- (state or other jurisdiction (Commission (IRS Employer or incorporation) File Number) Identification Number) 11 Commerce Drive, Cranford , New Jersey 07016 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code (908) 272-8000 N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5, Other Events Cali Realty Corporation (the "Company") intends to acquire through three individual transactions with separate, unrelated sellers a three-building office complex, two neighboring office buildings and one individual office building (the "Proposed Acquisitions"). The total aggregate initial acquisition cost of the Proposed Acquisitions is estimated to be approximately $90,600,000. The Company anticipates it will pay the aggregate initial acquisition cost in cash, which will be made available from proceeds of a public common stock offering of 10,000,000 shares (the "Proposed Offering"). The Company intends to acquire the following properties: (1) The International Court at Airport Business Center ("Airport Center") is a three-building office complex compries of approximately 370,000 net rentable square feet located in Lester, Delaware County, Pennsylvania. (2) 300 Tice Boulevard ("Whiteweld") is an approximately 230,000 net rentable square foot office building located in Woodcliff Lake, Bergen County, New Jersey. (3) Five Sentry Parkway East & West ("5 Sentry") is a two-building office complex comprised of approximately 131,000 net rentable square feet located in Plymouth Meeting, Montgomery County, Pennsylvania. Further information regarding the Proposed Acquisitions is attached on SCHEDULE A. Additional information regarding Airport Center is provided on SCHEDULE B. The Proposed Acquisitions will be 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 include 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 takes into consideration capitalization rates at which it believes other comparable office buildings had recently sold, but determines the price it is 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 are to be 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. Pursuant to the Company's Registration Statements on Form S-3 (File No.'s 33-96538 and 333- 09081), the Company intends to arrange for an underwritten public offering and sale of 10,000,000 shares of its common stock using several different underwriters to underwrite such public offer and sale. The Company expects to receive approximately $251.5 million in net proceeds from the Proposed Offering, planning to use such funds for the Proposed Acquisitions as well as pay down outstanding borrowings on its revolving credit facilities. If the Proposed Offering does not occur, the Company intends to fund any projected shortfall in funds available to acquire the Proposed Acquisition by accessing one of a number of lending sources with which the Company currently has relationships. Such lending may be secured by liens on one or more of the Company's currently unencumbered properties. While there can be no assurance that the Company will be able to obtain such additional financing, the Company is reasonably confident that it will be able to do so. If it were not successful, the Company would likely elect not to acquire one or more of the Proposed Acquistions. Item 7, Financial Statements, Pro Forma Financial Information and Exhibits As of October 29, 1996, the Company has purchased nine 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 five office buildings in 1996. Financial Statements The Statements of Revenue and Certain Expenses included in this report encompass the following for Airport Center, Whiteweld, and 5 Sentry, individually: o Audited Statements of Revenue and Certain Expenses for the years ended December 31, 1995 and unaudited interim financial information for the six month period ended June 30, 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 June 30, 1996. o Condensed consolidated statements of operations for the six month period ended June 30, 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 APPROXIMATE ESTIMATED PERCENT INITIAL TOTAL OCCUPIED COST TO OFFICE NUMBER OF SQUARE AS OF YEAR COMPANY BUILDING BUILDINGS FEET JUNE 30, 1996 COMPLETED (in thousands) -------- --------- ---- ------------- --------- -------------- Airport Center Three 370,000 100% Buildings: $43,000 Lester, I: 1986 Delaware County, II: 1987 Pennsylvania III: 1992 Whiteweld One 230,000 94% 1991 $35,200 300 Tice Boulevard Woodcliff Lake, Bergen County, New Jersey 5 Sentry Parkway Two 131,000 99% 1984 $12,400 East & West Plymouth Meeting, Montgomery County, Pennsylvania ------- ------- TOTAL 731,000 $90,600 ======= ======= OFFICE PRINCIPAL TENANTS BUILDING (based on percentage of property leased) -------- ---------------------------------------- Airport Center PNC Bank (29%), Lester, SAP America, Inc. (28%), Delaware County, Mercy Health Plan (19%) Pennsylvania Whiteweld Medco Containment 300 Tice Boulevard Services, Inc. (20%), Woodcliff Lake, Xerox Corp. (14%), Bergen County, Chase Manhattan New Jersey Mortgage Corp.(12%), Comdisco Inc. (11%) 5 Sentry Parkway Merck, Inc. (71%), East & West Selas Fluid Proecessing Corp. (16%) Plymouth Meeting, Montgomery County, Pennsylvania
SCHEDULE B AIRPORT CENTER: Airport Center is located in Lester, Delaware County, Pennsylvania, in a master-planned business park encompassing approximately 187 acres. The Airport Center consists of three low-rise office buildings containing approximately 370,000 net rentable square feet. Airport Center is located in the southeastern quadrant of Delaware County, adjacent to Interstate 95, the major north-south highway artery for the Eastern United States. The property is located three miles north of the Philadelphia International Airport and readily accessible to the recently completed "Blue Route" (I-476), the state's major east-west toll road. International Court I ("Building One"), is a three-story office structure containing approximately 95,149 net rentable square feet and was completed in 1986. International Court II ("Building Two"), is a four-story office structure containing approximately 207,618 net rentable square feet, and was completed in 1987. International Court III ("Building Three"), is a three-story office structure containing approximately 67,990 net rentable square feet, and was completed in 1992. Building One is serviced by two Dover passenger elevators and one Dover passenger/service elevator. Building Two is serviced by four Dover passenger elevators and a freight elevator. Building Three is serviced by one Dover passenger elevator. The buildings are all equipped with card-key access and a telephone for after-hours security. Each building is fully sprinklered per NFPA requirements, with smoke detectors, two fire towers and exhaust fans. Additionally, the buildings are individually equipped with a back up generator. The buildings comply with ADA accessibility requirements. The following table sets forth certain information (on a per net rentable square foot basis unless otherwise indicated) about Airport Center. The information presented for years 1991 and 1992 are for Buildings One and Two only. Building Three was completed in 1992.
SCHEDULE B (CONT.) Six Mos. Ended June 30, 1991 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- ---- Number of leases signed during Period (1) 15 3 7 7 1 1 Rentable square footage leased during Period (1) 103,867 39,238 70,062 35,775 4,751 7,950 Base rent ($) (1) (2) 16.06 20.47 19.99 20.62 20.56 22.10 Tenant improvements ($) (3) 18.61 5.94 20.23 6.98 5.00 -- Leasing commissions ($) (4) 1.97 4.48 1.09 0.79 4.13 -- Effective rent ($) (5) 11.76 18.39 15.66 19.01 17.52 22.10 Expense stop ($) (6) 6.00 6.96 6.51 7.32 6.83 8.50 Effective equivalent triple net rent ($) (7) 5.67 11.43 9.15 11.69 10.69 13.60 Occupancy rate at end of period (%) (1) 100.0% 82.5% 93.6% 100.0% 98.8% 99.9%
(1) Includes only office tenants. (2) Equals aggregate base rent received over their respective terms from all lease transactions during the period, divided by the terms in months for such leases during the period, multiplied by 12, divided by the total net rentable square feet leased under all lease transactions during the period. (3) Equals work letter costs net of estimated provision for profit and overhead. Actual tenant improvements may differ from estimated work letter costs. (4) Equals an aggregate of leasing commissions payable to employees and third parties based on standard commission rates and excludes negotiated commission discounts obtained from time to time. (5) Equals aggregate base rent received over their respective terms from all lease transactions during the period minus all tenant improvements, leasing commissions and other concessions from all lease transactions during the period, divided by the terms in months for such leases, multiplied by 12, divided by the total net rentable square feet leased under all lease transactions during the period. (6) All leases in this property are gross leases (i.e. tenants pay their proportionate share of real estate taxes, operating costs and utility costs in excess of their applicable stops.) (7) Equals effective rent minus expense stop. (8) Construction of Building Three was completed during 1992. One tenant occupying 4,194 square feet moved in during 1992, out of a total approximate net rentable square feet of 67,990 at Building Three. The following table sets forth the average percentage leased and average annual rental per lease on a square foot basis for the past five years for the Airport Center. All of the leases at the Airport Business Center are gross leases (i.e tenants pay their proportionate share of real estate taxes, insurance and operating expenses, in excess of their applicable stops) except for certain retail space which comprise approximately 2,000 square feet.
Average Average Annual Percentage Rental Per Leased Leased Square Foot Period (%) (1) (%) (2) ------ ------- ------- Six months ended June 30, 1996 99.4% 17.13 1995 99.4% 16.64 1994 96.8% 16.08 1993 88.1% 16.20 1992 91.3% 17.31 1991 86.0% 14.75
(1) Average of beginning and end of year aggregate percentage leased. (2) Total base rents for the year, determined in accordance with GAAP, divided by the average of beginning and end of year aggregate net rentable area leased. AIRPORT CENTER - MAJOR TENANTS Three tenants at the Airport Center occupied approximately 74.1 percent and 76.2 percent of the total net rentable square feet of the property as of December 31, 1995 and June 30, 1996, respectively, as follows: PNC Bank, NA, a commercial bank, occupied approximately 107,300 net rentable square feet as of December 31, 1995 and June 30, 1996 (approximately 28.9 percent of the total net rentable square feet), pursuant to a lease that expires in February 2000. Total rental income, including escalation and recoveries, was approximately $2,274,300 and $1,147,600 in 1995 and the six months ended June 30, 1996 respectively. SAP America, Inc., a computer software company, occupied approximately 96,000 and 104,000 net rentable square feet as of December 31, 1995 and June 30, 1996 (approximately 25.9 percent and 28.0 percent of the total net rentable square feet), respectively, pursuant to leases that expire in June 1998 and July 1999. Total rental income, including escalations and recoveries, was approximately $2,086,900 and $1,088,500 in 1995 and for the six months ended June 30, 1996 respectively. Mercy Health Plan, a regional managed care organization, occupied approximately 71,700 net rentable square feet as of December 31,1995 and June 30,1996 (approximately 19.3 percent of the total net rentable square feet) pursuant to a lease which expires in January 1998. Total rental income, including escalations and recoveries, was approximately $1,488,000 and $748,100 in 1995 and for the six months ended June 30, 1996 respectively. The following table sets out a schedule of the lease expirations for the Airport Center for 1997 through 2001, for leases in place as of June 30, 1996, assuming that none of the tenants exercise renewal options of termination rights:
Percentage of Total Leased Annual Base Net Rentable Sq. Ft. Rent Under Average Annual Rent Per Area Subject Represented by Expiring Rentable Square Foot Year of Number of Leases to Expiring Expiring Leases Represented By Expiring Lease expiration Expiring (1) Leases Sq. Ft. Leases (%) ($000) (2) Leases ($)(2) ---------------- ------------ -------------- ---------- ---------- ------------- 1997 4 7,656 2.07% $ 126 $16.46 1998 4 82,408 22.29 1,709 20.74 1999 6 139,991 37.87 2,488 17.77 2000 5 129,594 35.05 2,033 15.69 2001 2 10,044 2.72 114 11.35 -- ------- ------ ------ ------ Total Weighted Average 21 369,693 100.00% $6,470 $17.50 == ======= ====== ====== ======
(1) Includes office tenants only. (2) Determined based on aggregate base rent to be received over the term divided by the term in months multiplied by 12, including all leases dated on or before 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 October 29, 1996 By: /s/ Thomas A. Rizk ------------------ Thomas A. Rizk President and Chief Executive Officer October 29, 1996 By: /s/ Barry Lefkowitz ------------------- Barry Lefkowitz Vice President - Finance and Chief Financial Officer CALI REALTY CORPORATION Index to Financial Statements - -------------------------------------------------------------------------------- PROPOSED ACQUISITIONS Airport Center: Report of Independent Auditors Combined Statements of Revenue and Certain Expenses for: The Year Ended December 31, 1995 (audited) and the Six Months Ended June 30, 1996 (unaudited) Notes to Combined Statements of Revenue and Certain Expenses Whiteweld: Report of Independent Accountants 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 5 Sentry: Report of Independent Accountants 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 CALI REALTY CORPORATION Pro Forma (unaudited): Condensed Consolidated Balance Sheet as of June 30, 1996 Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 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 Auditors To the Participants and Partners of The International Court at Airport Business Center We have audited the accompanying combined statement of revenue and certain expenses of the International Court at Airport Business Center (the "Airport Center") for the year ended December 31, 1995. This financial statement is the responsibility of the Airport Center's management. Our responsibility is to express an opinion on this statement of revenue and certain expenses 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 combined statement of revenue and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined statement of revenue and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined statement of revenue and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined statement of revenue and certain expenses of the Airport Center was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of Cali Realty Corporation as described in Note 1, and is not intended to be a complete presentation of the Airport Center's revenue and expenses. In our opinion, the combined statement of revenue and certain expenses referred to above presents fairly, in all material respects, the revenue and certain expenses described in Note 1 of the Airport Center for the year ended December 31, 1995, in conformity with generally accepted accounting principles. Ernst & Young LLP -------------------- Ernst & Young LLP Philadelphia, Pennsylvania October 16, 1996
International Court at Airport Business Center Combined Statements of Revenue and Certain Expenses Six months Year ended ended December 31, June 30, 1995 1996 ---------- ---------- (Unaudited) Revenue: Base rents ................................. $7,044,319 $3,575,524 Escalations and recoveries from tenants .... 1,036,914 519,212 Other ...................................... 27,848 16,454 ---------- ---------- 8,109,081 4,111,190 Certain expenses: Real estate taxes .......................... 741,136 395,886 Utilities .................................. 1,054,993 527,340 Operating services ......................... 1,151,793 615,435 General and administrative ................. 408,172 190,495 ---------- ---------- 3,356,094 1,729,156 ---------- ---------- Revenue in excess of certain expenses .......... $4,752,987 $2,382,034 ========== ==========
See accompanying notes. International Court at Airport Business Center Notes to Combined Statements of Revenue and Certain Expenses 1. Organization and Summary of Significant Accounting Policies Organization The International Court at Airport Business Center (the "Airport Center") consists of three individual multi-tenant office buildings in the Airport Business Center located in Lester, Pennsylvania. The Airport Center expects to be acquired by Cali Realty Corporation, who will subsequently file a Current Report on Form 8-K with the Securities and Exchange Commission. Basis of Presentation The accompanying combined statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The accounts of each of the properties comprising the Airport Center are combined in the statement of revenue and certain expenses. There are no inter-property accounts to be eliminated. The financial statement is not representative of the actual operations for the periods presented as certain expenses that may not be comparable to the expenses expected to be incurred in the proposed future operations of the Airport Center have been excluded. Expenses excluded consist of interest, amortization, professional fees, and other costs not directly related to the future operations of the Airport Center. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Revenue Recognition Base rents are recognized on a straight-line basis over the term of the lease. Unaudited Interim Financial Statement With respect to the unaudited interim financial statement, in the opinion of the management of the Airport Center, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the combined statement of revenues and certain expenses of the Airport Center for the six months ended June 30, 1996, have been included. The results of operations for such interim period are not necessarily indicative of the results for the full year. International Court at Airport Business Center Notes to Combined Statements of Revenue and Certain Expenses (continued) 2. Properties The three multi-tenant office properties comprising the Airport Center are as follows: Property Name Location ---------------------------------------------- International Court I Lester, PA International Court II Lester, PA International Court III Lester, PA 3. Related Party Transactions The Airport Center is managed by The Henderson Group and are related by way of common ownership (the Henderson Family). The Airport Center has engaged in transactions with affiliates of the Henderson Group as follows:
Six months Year ended ended December 31, June 30, 1995 1996 ---- ---- (Unaudited) Base rents $237,683 $118,842 Escalations and recoveries from tenants 34,125 17,338 Repair and maintenance expense (operating services) 205,698 99,988 Management fees (general and administrative) 244,186 130,942 Marketing fee expense (general and administrative) 44,256 22,128 Commissions expense (general and administrative) 14,051 --
Management fees are charged based upon 3% of rents collected. International Court at Airport Business Center Notes to Combined Statements of Revenue and Certain Expenses (continued) 4. Leasing Activity The Airport Center earns rental income under noncancelable operating leases. Generally, leases provide for minimum rent and require each tenant to pay its pro rata share of building operating expenses in excess of established amounts. The following schedule of future minimum rental payments due under noncancelable operating leases as of December 31, 1995 does not include any amounts due upon exercise of renewal options under existing leases. Year ending December 31: 1996 $ 6,608,000 1997 6,005,000 1998 4,108,000 1999 2,258,000 2000 339,000 ------------- $ 19,318,000 ============= In 1995, three tenants contributed approximately 75% of base rents. PNC Bank, SAP America, and Mercy Health Plan contributed 28%, 26% and 21%, respectively. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Cali Realty Corporation Cranford, New Jersey We have audited the accompanying Statement of Revenue and Certain Expenses for the property known as Whiteweld Centre for the year ended December 31, 1995. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates make 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 Whiteweld Centre's revenues and expenses. In our opinion the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses for Whiteweld Centre, 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 October 17, 1996
WHITEWELD CENTRE STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1995 Revenue Base rents ............................................. $3,492,867 Recoveries from tenants ................................ 359,163 ---------- 3,852,030 ---------- Certain Expenses Real estate taxes ...................................... 468,000 Utilities .............................................. 698,174 Operating services ..................................... 524,183 General and administrative ............................. 147,453 ---------- 1,837,810 ---------- Revenue in excess of certain expenses .................... $2,014,220 ==========
The accompanying notes are an integral part of this Statement of Revenue and Certain Expenses. WHITEWELD CENTRE NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES 1. Organization and Operation of Property For the purpose of the accompanying statements of revenue and certain expenses, Whiteweld Centre (the "Property") is an office building located in Woodcliff Lake, New Jersey expected to be acquired by Cali Realty Corporation (the "Company"). 2. Summary of Significant Accounting Policies a. 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 operation 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 Property have been excluded. Revenues excluded consist of interest unrelated to the continuing operations of the Property. Expenses excluded 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 Property. b. Use of Estimates The preparation of finnancial 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. c. Revenue Recognition Base rents are recognized on a straight-line basis over the terms of the lease. Certain lease agreements contain provisions which provide for reimbursements by tenants of real estate taxes, utility and other operating costs, generally over established base year amounts, as defined in the tenant lease. 3. LEASES Leases for the Property have various lease terms up to twelve years with options to certain tenants for renewal. Minimum rental amounts for certain leases increase as set forth under the terms of each lease. WHITEWELD CENTRE NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES 3. LEASES (Continued) Future minimum rents to be received over the next five years and thereafter from tenants as of December 31, 1995 are as follows: 1996 $ 3,959,970 1997 4,097,187 1998 3,416,332 1999 3,032,853 2000 2,796,151 Thereafter 3,705,724 ------------- $21,008,217 =========== For the year ended December 31, 1995 and the six months ended June 30, 1996, five tenants contributed 82.5 percent and four tenants contributed 63.9 percent of base rents, respectively, as follows:
Base Rent Contributed ------------------------------------------ Year Ended Six Months Ended December 31, 1995 June 30, 1996 ----------------- ---------------- (unaudited) Xerox Corp. .................................... 22.2% 19.7% Medco Containment Services, Inc. ............... 20.4 18.0 Chase Manhattan Mortgage Corp. ................. 15.6 13.8 Comdisco Inc. .................................. 14.0 12.4 Kraft Foods .................................... 10.3 -- ---- ---- 82.5% 63.9% ==== ====
4. GENERAL AND ADMINISTRATIVE EXPENSES During the periods covered by these statements, the Property was owner-managed and in lieu of management fees, incurred payroll and related costs, which are included in general and administrative expenses of $113,342 for the year ended December 31, 1995 and $65,654 for the six months ended June 30, 1996 (unaudited). 5. INTERIM STATEMENT The interim financial data for the six months ended June 30, 1996 is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normally recurring adjustments, necessary for a fair statement of the results for the interim period. The results for the period presented are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.
WHITEWELD CENTRE STATEMENT OF REVENUE AND CERTAIN EXPENSES SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) Revenue Base rents ............................................. $1,972,365 Recoveries from tenants ................................ 158,562 ---------- 2,130,927 Certain expenses Real estate taxes ...................................... 228,375 Utilities .............................................. 377,844 Operating services ..................................... 297,541 General and administrative ............................. 96,008 ---------- 999,768 ---------- Revenue in excess of certain expenses .................... $1,131,159 ==========
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Cali Realty Corporation Cranford, New Jersey We have audited the accompanying Statement of Revenue and Certain Expenses for the property known as Five Sentry Parkway East and West for the year ended December 31, 1995. The financial statement is the responsibility of management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and 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 Five Sentry Parkway East and West revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses for Five Sentry Parkway East and West, 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 October 15, 1996
FIVE SENTRY PARKWAY EAST AND WEST STATEMENT OF REVENUE AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1995 Revenue Base rents .............................................. $1,957,167 ---------- Certain expenses Real estate taxes ...................................... 173,196 Utilities .............................................. 34,564 Operating services ..................................... 357,031 General and administrative ............................. 100,531 ---------- 665,322 ---------- Revenue in excess of certain expenses .................... $1,291,845 ==========
The accompanying notes are an integral part of this Statement of Revenue and Certain Expenses. FIVE SENTRY PARKWAY EAST AND WEST NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1995 1. ORGANIZATION AND OPERATION OF PROPERTY For the purpose of the accompanying statements of revenues and certain expenses, Five Sentry Parkway East and West (the "Properties") are two office buildings located in Plymouth Meeting, Montgomery County, Pennsylvania in an office park known as Sentry Parkway which are expected to be acquired by Cali Realty Corporation, (the "Company"). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of Presentation The accompanying statement of revenue and certain expenses has been prepared on the accrual basis of accounting. The accompanying financial statement is not representative of the actual operations for the period 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 Properties have been excluded. Revenues excluded consist of interest and other revenues unrelated to the continuing operations of the Properties. Expenses excluded consist of 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 Properties. b. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 these estimates. c. Revenue Recognition Base rents are recognized on a straight-line basis over the terms of the respective leases. 3. LEASES Leases for the Properties have various remaining lease terms of up to 6 years with options to certain tenants for renewal. Minimum rental amounts for certain leases increase as set forth under the terms of each lease. Effective January 1, 1996, Merck & Co., a tenant with space at both buildings occupying 71 percent of the buildings in the aggregate, renegotiated its lease from a fixed escalation charge lease to a gross lease which provides for reimbursements of real estate taxes, insurance, utility and other operating costs, over a 1995 base year. FIVE SENTRY PARKWAY EAST AND WEST NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1995 3. LEASES (Continued) Future minimum rents to be received over the next five years and thereafter from tenants as of December 31, 1995 are as follows: 1996 $2,053,959 1997 2,054,709 1998 1,911,808 1999 1,692,182 2000 1,503,396 Thereafter 523,824 ---------- $9,739,878 ========== For the year ended December 31, 1995 and the six months ended June 30, 1996, two tenants contributed 88.7 percent and 89.0 percent of base rents, respectively. Merck, Inc. contributed 73.5 percent of the base rents for the year ended December 31, 1995 and 73.7 percent of the base rents for the six months ended June 30, 1996, respectively. Selas Fluid Processing Corp. contributed 15.2 percent of the base rents for the year ended December 31, 1995 and 15.3 percent of the base rents for the six months ended June 30, 1996, respectively. 4. GENERAL AND ADMINISTRATIVE EXPENSES The Properties incurred management fees based on three and one-quarter percent of revenues received which totaled $67,082 for the year ended December 31, 1995 and $33,186 for the six months ended June 30, 1996 (unaudited). 5. INTERIM STATEMENTS The interim financial data for the six months ended June 30, 1996 is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normally recurring adjustments, necessary for a fair statement of the results for the interim period. The results for the period presented are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.
FIVE SENTRY PARKWAY EAST AND WEST STATEMENT OF REVENUE AND CERTAIN EXPENSES SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) Revenue Base rents ................................................. $977,878 -------- Certain expenses Real estate taxes ........................................ 87,162 Utilities ................................................ 19,206 Operating services ....................................... 202,009 General and administrative ............................... 46,524 -------- 354,901 -------- Revenue in excess of certain expenses ...................... $622,977 ========
The accompanying notes are an integral part of this Statement of Revenue and Certain Expenses. CALI REALTY CORPORATION Pro Forma Condensed Consolidated Balance Sheet (unaudited) As of June 30, 1996 (in thousands) - -------------------------------------------------------------------------------- The following unaudited pro forma condensed consolidated balance sheet is presented as if the acquisition by the Company of the Mount Airy Buildings on July 23, 1996, the intended purchase of Harborside and the Proposed Acquisitions, as well as the offering of 3,450,000 shares of common stock on August 13, 1996 and the Proposed Offering of 10,000,000 share of common stock, had occurred on June 30, 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 Form 10-K for the year ended December 31, 1995 and the Company's Form 10-Q for the six month period ended June 30, 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 transactions actually occurred on June 30, 1996, nor does it purport to represent the future financial position of the Company.
Company Company Pro Forma Pro Forma ASSETS Historical Adjustments (a) (unaudited) - ------ ---------- --------------- ----------- Rental property, net ............................................. $364,965 $393,711 $758,676 Cash and cash equivalent ......................................... 1,907 -- 1,907 Unbilled rents receivable ........................................ 18,930 -- 18,930 Restricted cash .................................................. 3,785 -- 3,785 Other assets ..................................................... 12,679 -- 12,679 -------- -------- -------- Total assets ..................................................... $402,266 $393,711 $795,977 ======== ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Mortgages and loans payable ...................................... $169,147 $ 65,381 $234,528 Dividends and distributions payable .............................. 7,610 -- 7,610 Accounts payable and accrued expenses ............................ 4,044 -- 4,044 Rents received in advance and security deposits .......................................... 4,214 -- 4,214 Accrued interest payable ......................................... 485 -- 485 -------- -------- -------- Total liabilities ................................................ $185,500 $ 65,381 $250,881 -------- -------- -------- Minority interest of unitholders in Operating Partnership .......................................... 27,545 -- 27,545 -------- -------- -------- Common stock, $.01 par value ..................................... 152 135 287 Additional paid in capital ....................................... 186,808 328,195 515,003 Retained earnings ................................................ 2,261 -- 2,261 -------- -------- -------- Total stockholder's equity ....................................... 189,221 328,330 517,551 -------- -------- -------- Total liabilities and stockholder's equity ....................... $402,266 $393,711 $795,977 ======== ======== ========
(a) Represents the acquisition of the Mount Airy Buildings on July 23, 1996 for $10,459, the proposed acquisition of Harborside estimated to cost $287,400, and estimated costs for the Proposed Acquisitions of $90,600. The acquisition cost for the Mount Airy Buildings, paid in cash, was made available from the Company's revolving credit facilities. The acquisition cost for Harborside is intended to be financed with a combination of assumed mortgage debt of $100,000, seller-provided mortgage debt of $50,000, and approximately $137,400 in cash made available through the Company's revolving credit facilities. Also represents the Pro Forma effect of the contingent obligation payments related to the development of vacant land parcels aggregating an estimated net present value of $5,252 of asset and corresponding liability. The estimated acquisition costs for the Proposed Acquisitions are intended to be made available from the net proceeds received with the Proposed Offering. In addition, adjustments reflect the offering of 3,450,000 shares of common stock by the Company on August 13, 1996 for net proceeds (after offering costs) of $76,830 and the expected estimated net proceeds from the Proposed Offering of $251,500. The net proceeds from the 1996 Offering and the Proposed Offering are reflected as being used to reduce its outstanding borrowings under the Company's revolving credit facilities, as well as fund the acquisition of the Proposed Acquisitions. CALI REALTY CORPORATION Pro Forma Condensed Consolidated Statement of Operations (unaudited) For the Six Months Ended June 30, 1996 And the Year Ended December 31, 1995 - ------------------------------------------------------------------------------- The unaudited Pro Forma condensed consolidated statement of operations for the six months ended June 30, 1996 is presented as if each of the following had occurred on January 1, 1996: (i) the partial prepayment by the Company of its Mortgage Financing ("Partial Prepayment"), (ii) the disposition by the Company of its property at 15 Essex Road in Paramus, New Jersey ("Essex Road"), (iii) the acquisition by the Company of the properties purchased from January 1, 1996 through May 2, 1996, the Mount Airy Buildings on July 23, 1996 and the intended acquisition of Harborside, (iv) the net proceeds received by the Company as a result of the Offering on August 13, 1996, (v) the acquisition by the Company of the Proposed Acquisitions, and (vi) the net proceeds received by the Company as a result of the Proposed Offering. Items (i) through (iv) above are to be collectively referred to as the "Previously Reported Events," and items (v) and (vi) are to be collectively referred to as the "Proposed Events". 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 common stock offering on November 17, 1995, (ii) the purchase by the Company on March 8, 1995 of 100,000 shares of its common stock for constructive retirement, (iii) the Previously Reported Events, and (iv) the Proposed Events. Such Pro Forma information is based upon the historical unaudited consolidated results of operations of the Company for the six months ended June 30, 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 for the year ended December 31, 1995 and the Company's Form 10-Q for the six month period ended June 30, 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 Six Months Ended June 30, 1996 (in thousands, except per share amounts) -------------------------------------------------------------------------------- (unaudited) Pro Forma Adj. for Previously Pro Forma Adj. Company Reported For Proposed Company REVENUES Historical Events(a) Sub-total Events (b) Pro Forma - -------- ---------- --------- --------- ---------- --------- Base rents ...................................................... $ 33,276 $ 20,894 $ 54,170 $ 6,665 $ 60,835 Escalations and recoveries from tenants ......................... 6,232 4,308 10,540 678 11,218 Parking and other ............................................... 923 243 1,166 16 1,182 Interest income ................................................. 153 -- 153 -- 153 -------- -------- -------- -------- -------- Total revenues .................................................. 40,584 25,445 66,029 7,359 73,388 -------- -------- -------- -------- -------- EXPENSES Real Estate Taxes ............................................... 4,153 1,971 6,124 711 6,835 Utilities ....................................................... 3,755 683 4,438 924 5,362 Operating services .............................................. 5,315 2,129 7,444 1,115 8,559 General and administrative ...................................... 2,064 1,225 3,289 333 3,622 Depreciation and amortization ................................... 6,908 3,326 10,234 963 11,197 Interest expense ................................................ 5,568 8,448 14,016 (5,524) 8,492 -------- -------- -------- -------- -------- Total expense .................................................. 27,763 17,782 45,545 (1,478) 44,067 -------- -------- -------- -------- -------- Income before gain on sale of rental property, minority interest and extraordinary item ............................................. 12,821 7,663 20,484 8,837 29,321 Gain on sale of property ........................................ 5,658 (5,658) -- -- -- -------- -------- -------- -------- -------- Income before minority interest and extraordinary item ............................................. 18,479 2,005 20,484 8,837 29,321 Minority interest ............................................... 2,821 (206) 2,615 (66) 2,549 -------- -------- -------- -------- -------- Income before extraordinary item ................................ $ 15,658 $ 2,211 $ 17,869 $ 8,903 $ 26,772 ======== ======== ======== ======== ======== Pro Forma weighted average common shares outstanding ............ 28,625 ======== Pro Forma income before extraordinary item per common share ..... $ 0.94 ========
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Six Months Ended June 30, 1996 (in thousands) (a) Reflects: Revenues and expenses of the properties acquired from January 1, 1996 through July 23, 1996 and the pending acquisition of Harborside, for the period January 1, 1996 through the earlier of June 30, 1996 or the date of acquisition, as follows:
Base Escalations/ Other Real Estate Operating Property Date Rents(1) Recoveries Income Taxes Utilities Services - -------- ---- -------- ---------- ------ ----- --------- -------- Carnegie March 20, 1996 $ 386 $ 31 -- $ 54 $ 56 $ 58 Rose Tree May 2, 1996 1,312 115 -- 165 180 179 Mount Airy Buildings July 23, 1996 598 90 -- 90 -- 4 Harborside Pending 18,861 4,109 243 1,712 503 1,966 ------- ------ ---- ------ ---- ------ $21,157 $4,345 $243 $2,021 $739 $2,207 ------- ------ ---- ------ ---- ------ General and Gain on sale Property Administrative Depreciation Interest(3) of property - -------- -------------- ------------ ----------- ----------- Carnegie $ 11 $ 49 -- -- Rose Tree 43 215 650 -- Mount Airy Buildings 48 95 359 -- Harborside 1,134 3,054 10,074 -- ------ ------ ------- ------ $1,236 $3,413 $11,083 -- ------ ------ ------- ------
Revenues and expenses of the property disposed of in 1996 for the period January 1, 1996 through the disposition date, as follows:
Base Escalations/ Other Real Estate Operating Property/Event Date Rents(1) Recoveries Income Taxes Utilities Services - -------------- ---- -------- ---------- ------ ----- --------- -------- Essex Road March 20, 1996 ($263) ($37) -- ($50) ($56) ($78) ----- ---- ------ ---- ---- ---- General and Gain on sale Property/Event Administrative Depreciation(2) Interest(3) of property - -------------- -------------- --------------- ----------- ----------- Essex Road ($11) ($81) ($43) ($5,658) ---- ---- ---- -------
Revenues and expenses related to the Partial Prepayment in 1996 for the period January 1, 1996 through March 12, 1996, as follows:
Base Escalations/ Other Real Estate Operating Property/Event Date Rents(1) Recoveries Income Taxes Utilities Services - -------------- ---- -------- ---------- ------ ----- --------- -------- Partial Prepayment March 12, 1996 -- -- -- -- -- -- -------- ---------- ------ ----- --------- -------- General and Gain on sale Property/Event Administrative Depreciation(2) Interest(3) of property - -------------- -------------- --------------- ----------- ----------- Partial Prepayment -- ($6) $43 -- ---- --- --- ----
Reduction of expenses on account of the net proceeds from the Offering on August 13, 1996 for the six months ended June 30, 1996, as follows:
Base Escalations/ Other Real Estate Operating Date Rents(1) Recoveries Income Taxes Utilities Services ---- -------- ---------- ------ ----- --------- -------- The Offering August 13, 1996 -- -- -- -- -- -- ------- ------ ---- ------ ---- ------ Total Pro Forma adjustment for Previously Reported Events $20,894 $4,308 $243 $1,971 $683 $2,129 ======= ====== ==== ====== ==== ====== General and Gain on sale Administrative Depreciation(2) Interest(3) of property -------------- --------------- ----------- ----------- The Offering -- -- ($2,635) -- ------ ------ ------ ------- Total Pro Forma adjustment for Previously Reported Events $1,225 $3,326 $8,448 ($5,658) ====== ====== ====== =======
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Six Months Ended June 30, 1996 - ------------------------------------------------------------------------------- (in thousands) (b) Reflects: Revenues and expenses of the Proposed Acquisitions for the six months ended June 30, 1996, as follows:
Base Escalations/ Other Real Estate Operating Property Rents(1) Recoveries Income Taxes Utilities Services -------- -------- ---------- ------ ----- --------- -------- Airport Center $3,592 $519 $16 $396 $527 $ 615 Whiteweld 2,043 159 -- 228 378 298 5 Sentry 1,030 -- -- 87 19 202 ------ ---- --- ---- ---- ------ $6,665 $678 $16 $711 $924 $1,115 ------ ---- --- ---- ---- ------ General and Property Administrative Depreciation(2) Interest(3) - -------- -------------- --------------- ----------- Airport Center $190 $457 $1,476 Whiteweld 96 374 1,208 5 Sentry 47 132 426 ---- ---- ------ $333 $963 $3,110 ---- ---- ------
Reduction of expenses on account of the net proceeds from the Proposed Offering for the six months ended June 30, 1996, as follows:
Base Escalations/ Other Real Estate Operating Event Rents(1) Recoveries Income Taxes Utilities Services - --------------------- -------- ---------- ------ ----- --------- -------- The Proposed Offering Total Pro Forma Adj. for Proposed Events -- -- -- -- -- -- ------ ---- --- ---- ---- ------ $6,665 $678 $16 $711 $924 $1,115 ====== ==== === ==== ==== ====== General and Event Administrative Depreciation(2) Interest(3) - --------------------- -------------- --------------- ----------- The Proposed Offering Total Pro Forma Adj. for Proposed Events -- -- $(8,634) ---- ---- ------- $333 $963 $(5,524) ==== ==== =======
(1) Pro Forma base rents are presented on a straight-line basis calculated from January 1, 1996 forward. (2) Depreciation is based on the building-related portion of the purchase price and associated costs depreciated using the straight-line method over a 40-year life. (3) Interest for floating rate debt is calculated using LIBOR plus 150 basis points for the existing credit lines, and LIBOR plus 125 basis points for the new facility to be used in the Harborside acquisition. Had the interest rate for floating rate debt been one-eighth of one percent different, interest would have changed by $12 for Rose Tree, $1 for the Partial Prepayment, $7 for the Mount Airy Building, $86 for Harborside, $48 for the Offering, and $214 for the Proposed Events. Interest for the Partial Prepayment is not recorded in the Essex Road disposition.
CALI REALTY CORPORATION Pro Forma Condensed Consolidated Statement Of Operations For The Year Ended December 31, 1995 (in thousands, except per share amount) - ------------------------------------------------------------------------------- (unaudited) Pro Forma Pro Forma Adjustments Adj. for 1996 For 1995 Previously Company Acquired Reported REVENUES Historical Properties(a) Sub-total Events (b) Sub-total - -------- ---------- ------------- --------- ---------- --------- Base rents ............................... $ 50,808 $ 12,961 $ 63,769 $ 39,979 $103,748 Escalations and recoveries from tenants ................................ 9,504 2,684 12,188 9,856 22,044 Parking and other ........................ 1,702 -- 1,702 182 1,884 Interest income .......................... 321 -- 321 -- 321 -------- ------- -------- -------- -------- Total revenues ........................... 62,335 15,645 77,980 50,017 127,997 -------- ------- -------- -------- -------- EXPENSES Real estate taxes ........................ 5,856 1,821 7,677 4,734 12,411 Utilities ................................ 6,330 939 7,269 1,689 8,958 Operating services ....................... 8,519 1,354 9,873 4,540 14,413 General and administrative ............... 3,712 519 4,231 2,716 6,947 Depreciation and amortization ............ 12,111 2,201 14,312 6,761 21,073 Interest expense ......................... 8,661 2,127 10,788 18,129 28,917 -------- ------- -------- -------- -------- Total Expenses ........................ 45,189 8,961 54,150 38,569 92,719 -------- ------- -------- -------- -------- Income before minority interest .......... 17,146 6,684 23,830 11,448 35,278 Minority interest ........................ 3,508 208 3,716 896 4,612 -------- ------- -------- -------- -------- Net income ............................... $ 13,638 $ 6,476 $ 20,114 $ 10,552 $ 30,666 ======== ======== ======== ======== ======== CALI REALTY CORPORATION Pro Forma Condensed Consolidated Statement Of Operations For The Year Ended December 31, 1995 (in thousands, except per share amount) - ------------------------------------------------------------------------------- (unaudited) (continued) Pro Forma Adj. for 1996 Proposed Company REVENUES Events(c) Pro Forma - -------- --------- --------- Base rents $12,765 $116,513 Escalations and recoveries from tenants 1,396 23,440 Parking and other 28 1,912 Interest income -- 321 ------- ------- Total revenues 14,189 142,186 ------- ------- EXPENSES Real estate taxes 1,382 13,793 Utilities 1,788 10,746 Operating services 2,033 16,446 General and administrative 656 7,603 Depreciation and amortization 1,926 22,999 Interest expense (12,555) 16,362 ------- ------- Total Expenses (4,770) 87,949 ------- ------- Income before minority interest 18,959 54,237 Minority interest 217 4,829 ------- ------- Net income $18,742 $49,408 ======= ======= Pro Forma weighted average common shares outstanding 28,555 ------ Pro Forma net income per common share $1.73 =====
(a) Reflects revenues and expenses of the properties acquired in 1995 for the period January 1, 1995 through the date of acquisition, as follows:
Base Escalations/ Real 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 Commerce Center Totowa Nov 6, 1995 2,942 786 407 71 295 Horizon Center Business Park Nov 8, 1995 1,546 715 317 75 177 ------- ------ ------ ---- ------ Total Pro Forma Adjustment for Acquired Properties $12,961 $2,684 $1,821 $939 $1,354 ======= ====== ====== ==== ====== General and Property Administrative Depreciation(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 Commerce Center Totowa 147 586 330 Horizon Center Business Park 76 266 146 ---- ------ ------ Total Pro Forma Adjustment for Acquired Properties $519 $2,201 $2,127 ==== ====== ======
(b) Reflects: Revenues and expenses of the properties acquired from January 1, 1996 through July 23, 1996 and the proposed acquisition of Harborside for the period January 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Other Real Estate Property Date Rents(1) Recoveries Income Taxes Utilities -------- ---- -------- ---------- ----- ----- -------- Carnegie March 20, 1996 $1,538 $159 -- $248 $246 Rosetree May 2, 1996 3,990 367 -- 455 549 Mount Airy Building July 23, 1996 1,130 183 -- 183 -- Haborside October 24, 1996 34,782 9,369 182 4,081 1,109 ------- ------- ---- ------ ------ $41,440 $10,078 $182 $4,967 $1,904 Operating General and Property Services Administrative Depreciation(2) Interest(3) -------- --------- -------------- --------------- ----------- Carnegie $207 $46 $195 -- Rosetree 451 141 633 2,193 Mount Airy Building 6 52 189 816 Haborside 4,203 2,530 6,107 21,086 ------ ------ ------ ------- $4,867 $2,769 $7,124 $24,095
Revenues and expenses of the property disposed of in 1996 for the period January 1, 1995 through December 31, 1995,as follows:
Base Escalations/ Other Real Estate Property Date Rents(1) Recoveries Income Taxes Utilities -------- ---- -------- ---------- ----- ----- -------- Essex Road March 20, 1996 ($1,461) ($222) -- ($233) ($215) Operating General and Property Services Administrative Depreciation(2) Interest(3) -------- --------- -------------- --------------- ----------- Essex Road ($327) ($53) ($334) ($228)
Revenues and expenses related to the Partial Prepayment in 1996 for the period January 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Other Real Estate Date Rents(1) Recoveries Income Taxes Utilities ---- -------- ---------- ----- ----- -------- Partial Prepayment March 12, 1996 -- -- -- -- -- ------ ------- --- ---- ------ Operating General and Services Administrative Depreciation(2) Interest(3) --------- -------------- --------------- ----------- Partial Prepayment -- -- (29) 257 ---- ---- ---- ----
Reduction of expenses on account of the net proceeds from the Offering on August 13, 1996 for the period Janaury 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Other Real Estate Date Rents(1) Recoveries Income Taxes Utilities ---- -------- ---------- ----- ----- -------- The Offering August 13, 1996 -- -- -- -- -- ------- ------ ---- ------ ------ Total Pro Forma Adj. for 1996 Previously Reported event $39,979 $9,856 $182 $4,734 $1,689 ======= ====== ==== ====== ====== Operating General and Services Administrative Depreciation(2) Interest(3) --------- -------------- --------------- ----------- The Offering -- -- -- (5,995) ------ ------ ------ ------- Total Pro Forma Adj. for 1996 Previously Reported event $4,540 $2,716 $6,761 $18,129 ====== ====== ====== =======
(c) Reflects: Revenues and expenses of the Proposed Acquisitions for the period January 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Other Real Estate Operating Property Rents(1) Recoveries Income Taxes Utilities Services -------- -------- ---------- ------ ----- --------- -------- Airport Center $ 7,085 $1,037 $ 28 $ 741 $1,055 $1,152 Whiteweld 3,625 359 -- 468 698 524 5 Sentry 2,055 0 -- 173 35 357 ------- ------ ----- ------ ------ ------ $12,765 $1,396 $ 28 $1,382 $1,788 $2,033 ------- ------ ----- ------ ------ ------ General and Property Administrative Depreciation(2) Interest(3) -------- -------------- --------------- ----------- Airport Center $408 $ 914 $3,355 Whiteweld 147 748 2,747 5 Sentry 101 264 968 ---- ------ ------ $656 $1,926 $7,070 ---- ------ ------
Reduction of expenses on account of the net proceeds from the Proposed Offering for the period Janaury 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Other Real Estate Operating Rents(1) Recoveries Income Taxes Utilities Services -------- ---------- ------ ----- --------- -------- The Proposed Offering -- -- -- -- -- -- ------- ------ --- ------ ------ ------ Total Pro Forma Adj for 1996 Proposed Events $12,765 $1,396 $28 $1,382 $1,788 $2,033 ======= ====== === ====== ====== ====== General and Administrative Depreciation(2) Interest(3) -------------- --------------- ----------- The Proposed Offering -- -- $(19,625) ---- ------ -------- Total Pro Forma Adj for 1996 Proposed Events $656 $1,926 $(12,555) ==== ====== ========
(1) Pro Forma base rents are presented on a straight-line basis calculated from January 1, 1995 forward. (2) Depreciation is based on building-related portion of the purchase price and associated costs depreciated using the straight-line method over a 40-year life. (3) Interest for floating rate debt is calculated using LIBOR plus 275 basis points through February 1, 1995, at LIBOR plus 200 basis points through November 1, 1995 and at LIBOR plus 150 basis points after such date (for the existing credit lines), and LIBOR plus 125 basis points (for the new credit facility to be used in the Haborside acquisition). Had the interest rate on floating rate debt been one-eighth of one percent different, interest would have changed by $32 for the properties acquired in 1995, $35 for Rose Tree, $4 for the Partial Prepayment, $13 for the Mount Airy Building, $172 for Harborside, $96 for the Offering, and $427 for the Proposed Events. 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 the Essex Road disposition. 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 statements 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 January 1, 1996 through July 23, 1996, and including the pending acquisition of Harborside - historical earnings from operations, as adjusted, exclusive of depreciation (Note 2) .................................................... 13,098 Proposed Acquisitions - historical earnings from operations, as adjusted, exclusive of depreciation (Note 2) .................................................... 1,260 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) Pro Forma adjustments relating to the Offering (Note 4) ................................ 5,995 Pro Forma adjustments relating to the Proposed Offering (Note 5) ....................... 19,625 Net adjustment for tax basis rental revenue recognition (Note 6) ....................... (8,496) Estimated tax depreciation and amortization (Note 7) Properties owned at December 31, 1994 ................................................ (6,746) Properties acquired during 1995 ...................................................... (3,494) Properties acquired January 1, 1996 through July 23, 1996, and including the pending acquisition of Harborside ........................................................... (7,335) Proposed Acquisitons (Note 2)........................................................... (1,975) -------- Pro Forma taxable income before allocation to minority interest and dividends deduction .................................................................. 49,219 Estimated allocation to minority interest (Note 8) ..................................... (4,660) Estimated dividends deduction (Note 9) ................................................. (48,543) -------- $ (3,984) 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 ...................................................... $ 49,219 Add Pro Forma depreciation and amortization .......................................... 19,550 -------- Estimated Pro Forma operating funds available (Note 10) ................................ $ 68,769 ========
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 Pro Forma results of the Offering as referred to in the Pro Forma condensed statement of operations for the year ended December 31, 1995 and included elsewhere herein. Note 5 - Represents the Pro Forma results of the Proposed Offering as referred to in the Pro Forma condensed consolidated statement of operations for the year ended December 31, 1995 and included elsewhere herein. Note 6 - Represents the net adjustment to (i) recognize prepaid rent and (ii) reverse the effect of rental revenue recognition on a straight line basis. Note 7 - 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 8 - Estimated allocation of taxable income to minority interests is based on a 13.07 percent minority interest in the operating partnership with a special allocation of depreciation on properties included in the Initial Public Offering. Note 9 - Estimated dividends deduction is based on 28,554,724 shares outstanding at the dividend rate of $1.70 per share. Shares outstanding, on a Pro Forma basis, are 28,554,725. Note 10- 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 AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 33-96538) and related Prospectus of Cali Realty Corporation, as amended on October 6, 1995, the Registration Statement (Form S-3 No. 33-96542) and related Prospectus of Cali Realty Corporation, as amended on October 10, 1995, the Registration Statement (Form S-3 No. 333-09081) and related Prospectus of Cali Realty Corporation, as amended on August 9, 1996, the Registration Statement (Form S-3 No. 333-09875) and related Prospectus of Cali Realty Corporation dated August 9, 1996, and the Registration Statement (Form S-8 No. 33-91822) pertaining to the 1994 Employee and Director Stock Option Plans, as amended on September 29, 1996, of our report dated October 16, 1996, with respect to the combined statement of revenue and certain expenses of the International Court at Airport Business Center included in the Current Report on Form 8-K of Cali Realty Corporation dated October 29, 1996, filed with the Securities and Exchange Commission. Ernst & Young LLP -------------------- Ernst & Young LLP Philadelphia, Pennsylvania October 29, 1996 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Cali Realty Corporation on Forms S-3 (File Nos. 333- 09875, 333-09081, 33-96542, and 33-96538) and Form S-8 (File No. 33-91822) of our reports dated October 17, 1996 and October 15,. 1996, on our audits of the Statements of Revenues and Certain Expenses for the Whiteweld Centre and Five Sentry Parkway East & West, respectively, which reports are included in this Report on Form 8-K. /s/Schonbraun Safris Sternlieb & Co., L.L.C. - ----------------------------------------- Schonbraun Safris Sternlieb & Co., L.L.C. West Orange, New Jersey October 29, 1996