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) December 31, 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 From November 4, 1996 through December 30, 1996, Cali Realty Corporation and subsidiaries (the "Company") acquired through five individual transactions with separate, unrelated sellers two three-building office complexes, a two-building office complex and two individual office buildings (the "Acquisitions"). The aggregate initial acquisition cost of the Acquisitions was approximately $403.9 million. The Company funded the aggregate initial acquisition cost with cash, which was made available primarily from proceeds of a public common stock offering of 17,537,500 shares on November 22, 1996, (the "November 1996 Offering") and with the assumption of mortgage debt. The following summarizes the Company's Acquisitions: On November 4, 1996, the Company acquired the property known as the Harborside Financial Center ("Harborside"), a 1.9 million square foot office complex located in Jersey City, New Jersey for an initial acquisition cost of approximately $286.7 million. The purchase price included the assumption of existing and seller-provided financing aggregating $150.0 million. The existing financing of approximately $107.9 million bears interest at a fixed rate of 7.32 percent for a term of approximately nine years. The seller-provided financing of approximately $42.1 million also has a term of nine years and initially bears interest at a rate of 6.99 percent. The interest rate on the seller-provided financing will be reset at the end of the third and sixth loan years based on the yield of the three year treasury obligation at that time, with spreads of 110 basis points in years four through six and 130 basis points in years seven through maturity. The balance of the initial acquisition cost, totaling approximately $136.7 million, was paid in cash and was financed substantially through drawings on the Company's credit facilities. The borrowings on the Company's credit facilities for the acquisition of Harborside were subsequently repaid from the net proceeds received from the November 1996 Offering. As part of the purchase, the Company also acquired 11.3 acres of land fully zoned and permitted for an additional 4.1 million square feet of development and the water rights associated with 27.4 acres of land extending into the Hudson River immediately east of Harborside, including two piers with an area of 5.8 acres. The terms of the acquisition of the vacant parcels provide for payments (with an estimated net present value of approximately $5.3 million) to be made to the seller for development rights ("Development Rights Contingent Obligation") if and when the Company commences construction on the site during the next several years. However, the agreement provides, among other things, that even if the Company does not commence construction, the seller may nevertheless require the Company to acquire these rights during the six-month period after the end of the sixth year. After such period, the seller's option lapses, but any development in years 7 through 30 will require a payment, on an increasing scale, for the development rights. On November 7, 1996, the Company acquired Five Sentry Parkway East & West ("Five Sentry"), a two-building office complex comprised of approximately 131,000 net rentable square feet located in Plymouth Meeting, Montgomery County, Pennsylvania for approximately $12.4 million in cash, which was drawn from one of the Company's credit facilities. The borrowing on the credit facility for the acquisition of Five Sentry was subsequently repaid from the net proceeds received from the November 1996 Offering. On December 10, 1996, the Company acquired 300 Tice Boulevard ("Whiteweld"), a 230,000 net rentable square foot office building located in Woodcliff Lake, Bergen County, New Jersey, for approximately $35.0 million in cash, made available from the net proceeds received from the November 1996 Offering. On December 16, 1996, the Company acquired One Bridge Plaza ("One Bridge"), a 200,000 net rentable square foot office building located in Fort Lee, Bergen County, New Jersey, for approximately $26.8 million in cash, made available from the net proceeds received from the November 1996 Offering. On December 17, 1996, the Company acquired the International Court at Airport Business Center ("Airport Center"), a three-building office complex comprised of approximately 370,000 net rentable square feet located in Lester, Delaware County, Pennsylvania for approximately $43.0 million in cash, made available from the net proceeds received from the November 1996 Offering. Each of 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 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 believes 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. Pursuant to the Company's Registration Statement on Form S-3 (File No. 333-09081), on November 22, 1996, the Company completed an underwritten public offering and sale of 17,537,500 shares of its common stock using several different underwriters to underwrite such public offer and sale (which included an exercise of the underwriters' over-allotment option of 2,287,500 shares). The Company received approximately $441.0 million in net proceeds (after offering costs) from the November 1996 Offering, and has used such funds to acquire certain of the Acquisitions, pay down outstanding borrowings on its revolving credit facilities, and invest the excess funds in short-term investments. Item 7, Financial Statements, Pro Forma Financial Information and Exhibits As of December 30, 1996, the Company has purchased twenty office buildings and three portfolios of office buildings and office/flex space since its formation in 1994; one office building in 1994, four office buildings and three portfolios in 1995, and fifteen office buildings in 1996. (a) Financial Statements The following summarizes the financial information included in this report: (1) Interim Statement of Revenue and Certain Operating Expenses for Harborside for the nine months ended September 30, 1996 (unaudited), (2) Interim Statement of Revenue and Certain Expenses for Five Sentry for the nine months ended September 30, 1996 (unaudited), (3) Interim Statement of Revenue and Certain Expenses for Whiteweld for the nine months ended September 30, 1996 (unaudited), (4) Audited Statement of Revenue and Certain Expenses for the year ended December 31, 1995 and interim financial information for the nine months ended September 30, 1996 (unaudited) for One Bridge, and an (5) Interim Combined Statement of Revenue and Certain Expenses for Airport Center for the nine months ended September 30, 1996 (unaudited). Note: Audited Statements for the year ended December 31, 1995 for Harborside, Five Sentry, Whiteweld and Airport Center were previously included in the Company's two Current Reports on Form 8-K, both filed on October 29, 1996 (both file no. 1-13274). (b) Pro Forma Financial Information (unaudited) Unaudited pro forma financial information for the Company is presented as follows: o Condensed consolidated balance sheet as of September 30, 1996. o Condensed consolidated statements of operations for the nine months ended September 30, 1996 and the year ended December 31, 1995. (c) Exhibits Exhib. No. 10.57: Sale Agreement between Metropolitan Life Insurance Company, a New York corporation, as Seller, and Cali Realty Acquisition Corp., a Delaware corporation, as Purchaser, as of November 26, 1996. Exhib. No. 10.58: Amendment to Sale Agreement as of December 4, 1996, by and between Metropolitan Life Insurance Company, a New York corporation, and Cali Realty Acquisition Corp., a Delaware corporation. 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 December 31, 1996 By: /s/ Thomas A. Rizk ------------------ Thomas A. Rizk President and Chief Executive Officer December 31, 1996 By: /s/ Barry Lefkowitz ------------------- Barry Lefkowitz Vice President - Finance and Chief Financial Officer CALI REALTY CORPORATION Index to Financial Statements - -------------------------------------------------------------------------------- THE ACQUISITIONS Harborside: Statement of Revenue and Certain Operating Expenses for the Nine Months Ended September 30, 1996 (unaudited)................... Notes to Statement of Revenue and Certain Expenses........................ Five Sentry: Statement of Revenue and Certain Expenses for the Nine Months Ended September 30, 1996 (unaudited)................... Notes to Statement of Revenue and Certain Expenses........................ Whiteweld: Statement of Revenue and Certain Expenses for the Nine Months Ended September 30, 1996 (unaudited)................... Notes to Statement of Revenue and Certain Expenses........................ One Bridge: Report of Independent Accountants.......................................... Statements of Revenue and Certain Expenses for: The Year Ended December 31, 1995 (audited)........................... The Nine Months Ended September 30, 1996 (unaudited)................ Notes to Statements of Revenue and Certain Expenses....................... Airport Center: Combined Statement of Revenue and Certain Expenses for the Nine Months Ended September 30, 1996 (unaudited)................... Notes to Statement of Revenue and Certain Expenses........................ CALI REALTY CORPORATION Pro Forma (unaudited): Condensed Consolidated Balance Sheet as of September 30, 1996.............. Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 1996 and for the Year Ended December 31, 1995......................................................
HARBORSIDE FINANCIAL CENTER Statement of Revenue and Certain Operating Expenses For the nine-month period ended September 30, 1996 (Unaudited) Revenue: Base rent ...................................................... $24,474,056 Escalations .................................................... 6,277,834 Other income ................................................... 199,643 ----------- Total revenue ................................... 30,951,533 ----------- Certain operating expenses: Real estate taxes .............................................. 2,722,888 Utilities ...................................................... 812,106 Operating services ............................................. 3,016,131 Other property ................................................. 1,675,351 ----------- Total operating expenses ........................ 8,226,476 ----------- Excess of revenue over certain operating expenses $22,725,057 =========== The accompanying notes are an integral part of this summary.
HARBORSIDE FINANCIAL CENTER Notes to Statement of Revenue and Certain Operating Expenses 1. Organization and Nature of Business: The property known as Harborside Financial Center ("Harborside") is a three building office complex (Plazas I, II, and III) located in Jersey City, New Jersey. At September 30, 1996 Harborside consists of undeveloped land and three operating office buildings which are approximately 95 percent leased. Harborside was owned by several partnerships, which were directly or indirectly owned by a Pension Trust which is managed by Jones Lang Wootton Realty Advisors under an investment advisory contract. On November 4, 1996, Harborside was sold to subsidiaries of Cali Realty Corporation. 2. Basis of Presentation: The Statement of Revenue and Certain Operating Expenses (the "Historical Summary") has been prepared for the purpose of complying with the provisions of Article 3.14 of Regulation S-X promulgated by the Securities and Exchange Commission. This historical summary includes the historical revenue and certain operating expenses of Harborside, exclusive of interest income, mortgage interest expense and depreciation and amortization, which may not be comparable to the corresponding amounts reflected in the future operations of Harborside. The preparation of financial statements in conformity with generally accepted accounting principles requires Harborside's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Harborside's operations consist of rental income earned from tenants under leasing arrangements which generally provide for minimum rents, escalations and charges to tenants for their pro rata share of real estate taxes and operating expenses. All leases have been accounted for as operating leases. Rental income is recognized by amortizing the aggregate lease payments on the straight-line basis over the entire terms of the leases. HARBORSIDE FINANCIAL CENTER Notes to Statement of Revenue and Certain Operating Expenses, Continued 3. Leases: Harborside is leased to tenants under various noncancelable operating leases with unexpired terms ranging from 1 to 17 years. Minimum future rentals on noncancelable leases which extend for more than one year at September 30, 1996 are as follows:
Three months ended December 31, 1996 $ 7,420,000 Year ended December 31, 1997 29,609,000 1998 31,098,000 1999 30,755,000 2000 26,900,000 Thereafter 178,549,000 ------------ $304,331,000 ============
Certain leases have provisions for additional rent based on operating expenses and real estate taxes. Such amounts are reflected in the Historical Summary as escalation revenue. Minimum rentals above do not include recovery of operating expenses and real estate taxes. Included in minimum future rentals are approximately $91 million from the American Institute of Certified Public Accountants, $41 million from Bank of Tokyo, $39 million from Dean Witter Trust Company, $32 million from Telerate Systems Incorporated, and $20 million from BT Harborside Inc., five major tenants who paid approximately $4.8 million, $2.7 million, $3.8 million, $7.6 million, and $2.2 million, respectively, in base and additional rent during 1996 and who occupy approximately 13 percent, 7 percent, 10 percent, 20 percent and 21 percent of the leasable space, respectively. Also included in future minimum rentals is approximately $28 million from Kinney Parking Systems, which operates the parking facility, and paid approximately $2.2 million in base rent for the nine months ended September 30, 1996. 4. Related Parties: Institutional Realty Management, LLC ("IRM"), which replaced Jones Lang Wootton USA ("JLW-USA") during April 1996, provides property management services to Harborside. For its services IRM and JLW-USA received a management fee up to 5% of gross income collected, as defined in the management agreements. For the nine-month period ended September 30, 1996, fees incurred under these agreements amounted to $1,127,799, which is included in other property costs in the Historical Summary. HARBORSIDE FINANCIAL CENTER Notes to Statement of Revenue and Certain Operating Expenses, Continued 5. Tax Abatements: On May 12, 1988, tax abatements for Harborside were obtained from the Municipal Council of the City of Jersey City. The abatements, which commenced in 1990, are for a term of 15 years and have been granted in consideration for annual service charges in lieu of real estate taxes on the building. The service charges for the buildings are equal to 2 percent of Total Project Costs, as defined, in year one and increase by $75,000 per annum through year fifteen. Total Project Costs, as defined, for Plaza II and III are $148,712,000. The service charges for the remaining undeveloped parcels will be equal to 2 percent of Total Project Costs for each unit in year one and increase to 3 percent by year fifteen. In addition, BT Harborside Inc., a tenant which occupies space in Plaza I, obtained its own tax abatement. Pursuant to Section 7 of the Financial Agreement Urban Renewal Corporations or Association Annual Service Charge in Lieu of Taxes, dated September 28, 1988 between the owners of Harborside and the City of Jersey City in the State of New Jersey, Harborside is required to pay Jersey City Excess Profits, as defined. No payments for Excess Profits were due to Jersey City for the nine-month period ended September 30, 1996.
FIVE SENTRY PARKWAY EAST AND WEST STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) Revenue Base rents .............................................. $1,467,522 ---------- Certain expenses Real estate taxes ...................................... 130,742 Utilities .............................................. 27,718 Operating services ..................................... 288,611 General and administrative ............................. 78,198 ---------- 525,269 ---------- Revenue in excess of certain expenses .................... $ 942,253 ========== 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 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 were acquired by a subsidiary of Cali Realty Corporation (the "Company") on November 7, 1996. 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 generally accepted accounting principles 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. FIVE SENTRY PARKWAY EAST AND WEST NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES (continued) 3. LEASES Leases for the Properties have various remaining lease terms of up to six 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 September 30, 1996 are as follows:
Three months ended December 31, 1996 $ 516,561 Year ended December 31, 1997 2,054,709 Year ended December 31, 1998 1,911,808 Year ended December 31, 1999 1,692,182 Year ended December 31, 2000 1,503,396 Thereafter 523,824 ----------- $ 8,202,480 ===========
For the nine months ended September 30, 1996, two tenants contributed 88.9 percent of base rents. Merck & Co. contributed 73.7 percent and Selas Fluid Processing Corp. contributed 15.2 percent of the base rents for the nine months ended September 30, 1996. 4. GENERAL AND ADMINISTRATIVE EXPENSES The Properties incurred management fees based on three and one-quarter percent of revenues received which totaled $49,807 for the nine months ended September 30, 1996. 5. INTERIM STATEMENTS The interim financial data for the nine months ended September 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 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) Revenue Base rents ............................................. $2,986,058 Recoveries from tenants ................................ 249,616 ---------- 3,235,674 ---------- Certain Expenses Real estate taxes ...................................... 342,563 Utilities .............................................. 560,345 Operating services ..................................... 465,299 General and administrative ............................. 153,158 ---------- 1,521,365 ---------- Revenue in excess of certain expenses .................... $1,714,309 ========== The accompanying notes are an integral part of this Statement of Revenue and Certain Expenses.
WHITEWELD CENTRE NOTES TO STATEMENT 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 acquired by a subsidiary of Cali Realty Corporation (the "Company") on December 10, 1996. 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 operations or 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 Property have been excluded. Revenues excluded consist of interest unrelated to the continuing operations of the Property. 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 Property. b. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles 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-lined 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 STATEMENT 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:
Year ended December 31, 1996 $ 3,959,970 Year ended December 31, 1997 4,097,187 Year ended December 31, 1998 3,416,332 Year ended December 31, 1999 3,032,853 Year ended December 31, 2000 2,796,151 Thereafter 3,705,724 ------------ $ 21,008,217 ============
For the nine months ended September 30, 1996, four tenants contributed 63.4 percent of base rents as follows:
Xerox Corp. 19.5% Medco Containment Services, Inc. 17.9 Chase Manhattan Mortgage Corp. 13.7 Comdisco, Inc. 12.3 ---- 63.4% ====
4. GENERAL AND ADMINISTRATIVE EXPENSES During the period covered by this statement, 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 $98,480 for the nine months ended September 30, 1996. 5. INTERIM STATEMENT The interim financial data for the nine months ended September 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. INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholders of Cali Realty Corporation Cranford, New Jersey We have audited the accompanying Statement of Revenue and Certain Expenses for the property known as One Bridge Plaza 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 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 One Bridge Plaza revenues and expenses. In our opinion the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses for One Bridge Plaza, 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 Roseland, New Jersey December 16, 1996
ONE BRIDGE PLAZA STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1995 Revenue Base rents ............................................. $3,274,888 Recoveries from tenants ................................ 288,203 ---------- 3,563,091 ---------- Certain Expenses Real estate taxes ...................................... 467,654 Utilities .............................................. 416,766 Operating services ..................................... 553,990 General and administrative ............................. 258,721 ---------- 1,697,131 ---------- Revenue in excess of certain expenses .................... $1,865,960 ========== The accompanying notes are an integral part of this Statement of Revenue and Certain Expenses.
ONE BRIDGE PLAZA 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, One Bridge Plaza (the "Property") is an office building located in Fort Lee, New Jersey acquired by a subsidiary of Cali Realty Corporation (the "Company") on December 16, 1996. 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 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 financial statements in accordance with generally accepted accounting principles 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. ONE BRIDGE PLAZA 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 $ 3,481,190 1997 3,683,213 1998 3,706,315 1999 3,558,219 2000 3,033,475 Thereafter 8,269,675 ----------- $25,732,087 ===========
For the year ended December 31, 1995 and the nine months ended September 30, 1996, three tenants contributed an aggregate of 41.0 percent and 48.2 percent of base rents, respectively, as follows:
Year Ended Nine Months Ended December 31, September 30, 1995 1996 ---- ---- Bozell Worldwide 16.9% 19.0% Complete Executive Offices 10.4 13.6 Broadview Associates 13.7 15.6 ---- ---- 41.0% 48.2% ==== ====
4. GENERAL AND ADMINISTRATIVE EXPENSES During the periods covered by these statements, the Property incurred management fees based on 1.5 percent of rent collections through November 14, 1995 and one percent thereafter. These fees amounted to $53,478 and $34,116 for the year ended December 31, 1995 and nine months ended September 30, 1996, respectively. In addition to management 4. GENERAL AND ADMINISTRATIVE EXPENSES (continued) fees, general and administrative expenses includes salaries and related costs amounting to $69,649 and $51,378 for the year ended December 31, 1995 and nine months ended September 30, 1996, respectively. 5. INTERIM STATEMENT The interim financial data for the nine months ended September 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.
ONE BRIDGE PLAZA STATEMENT OF REVENUE AND CERTAIN EXPENSES NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) Revenue Base rents ............................................. $2,625,711 Recoveries from tenants ................................ 250,454 ---------- 2,876,165 ---------- Certain expenses Real estate taxes ...................................... 329,175 Utilities .............................................. 331,614 Operating services ..................................... 489,009 General and administrative ............................. 155,676 ---------- 1,305,474 ---------- Revenue in excess of certain expenses .................... $1,570,691 ========== The accompanying notes are an integral part of this Statement of Revenue and Certain Expenses.
International Court at Airport Business Center Combined Statement of Revenue and Certain Expenses (Unaudited) The period from January 1, 1996 to September 30, 1996 Revenue: Base rents ............................................. $5,399,886 Escalations and recoveries from tenants ................ 757,984 Other .................................................. 30,454 ---------- 6,188,324 Certain expenses: Real estate taxes ...................................... 603,513 Utilities .............................................. 814,725 Operating services ..................................... 948,613 General and administrative ............................. 287,248 ---------- 2,654,099 ---------- Revenue in excess of certain expenses ...................... $3,534,225 ========== See accompanying notes.
International Court at Airport Business Center Notes to Combined Statement of Revenue and Certain Expenses (Unaudited) The period from January 1, 1996 to September 30, 1996 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 properties have been acquired by a subsidiary of 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 unaudited interim statement has 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 period 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. International Court at Airport Business Center Notes to Combined Statement of Revenue and Certain Expenses (Unaudited) (continued) 1. Organization and Summary of Significant Accounting Policies (continued) 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 revenue and certain expenses of the Airport Center for the period from January 1, 1996 to September 30, 1996, have been included. The results of operations for such interim period are not necessarily indicative of the results for the full year. 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:
The period from January 1, 1996 to September 30, 1996 ------------------ Base rents .................................................... $178,262 Escalations and recoveries from tenants ....................... $ 32,346 Repair and maintenance expense (operating services) ........... $167,805 Management fees (general and administrative) .................. $185,906 Marketing fee expense (general and administrative) ............ $ 33,192 Management fees are charged based upon 3% of rents collected.
CALI REALTY CORPORATION Pro Forma Condensed Consolidated Balance Sheet (unaudited) As of September 30, 1996 (in thousands) The following unaudited pro forma condensed consolidated balance sheet is presented as if the purchase of the Acquisitions by the Company and the November 1996 Offering of 17,537,500 shares of common stock had occurred on September 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 nine months ended September 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 September 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 ..................... $ 376,468 $ 409,135 $ 785,603 Cash and cash equivalent ................. 10,351 187,117 197,468 Unbilled rents receivable ................ 18,959 -- 18,959 Restricted cash .......................... 2,650 -- 2,650 Other assets ............................. 13,411 -- 13,411 ---------- ---------- ---------- Total assets ............................. $ 421,839 $ 596,252 $1,018,091 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgages and loans payable .............. $ 112,856 $ 155,252 $ 268,108 Dividends and distributions payable ...... 9,615 -- 9,615 Accounts payable and accrued expenses .... 3,492 -- 3,492 Rents received in advance and security deposits .................. 3,819 -- 3,819 Accrued interest payable ................. 349 -- 349 ---------- ---------- ---------- Total liabilities ........................ $ 130,131 $ 155,252 $ 285,383 ---------- ---------- ---------- Minority interest of unitholders in Operating Partnership .................. 27,375 -- 27,375 Common stock, $.01 a value ............... 187 175 362 Additional paid in capital ............... 263,690 440,825 704,515 Retained earnings ........................ 456 -- 456 ---------- ---------- ---------- Total stockholders' equity ............... 264,333 441,000 705,333 ---------- ---------- ---------- Total liabilities and stockholders' equity $ 421,839 $ 596,252 $1,018,091 ========== ========== ==========
See accompanying footnote on subsequent page. (a) Represents the purchase cost of the Acquisitions for $409,135. Included in the cost of the Acquisitions and as a corresponding liability is the Development Rights Contingent Obligation with a net present value of approximately $5,252. The initial acquisition cost of Harborside was financed with a combination of assumed mortgage debt of $107,912, seller-provided mortgage debt of $42,088, and approximately $136,700 in cash made available through the Company's revolving credit facilities. In addition, adjustments reflect the net proceeds (after offering costs) from the November 1996 Offering of $441,000. The net proceeds from the offering are reflected as being used to reduce the outstanding borrowings under the Company's revolving credit facilities and fund the Acquisitions, and the balance is held in cash and cash equivalents. CALI REALTY CORPORATION Pro Forma Condensed Consolidated Statement of Operations (unaudited) For the Nine Months Ended September 30, 1996 And the Year Ended December 31, 1995 The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 1996 and the year ended December 31, 1995 are presented as if each of the following had occurred on January 1, 1995 (i) the partial prepayment by the Company of its Mortgage Financing ("Partial Prepayment") in 1996, (ii) the disposition by the Company of its property at 15 Essex Road in Paramus, New Jersey ("Essex Road") in 1996, (iii) the acquisition by the Company of 103 Carnegie, Rose Tree and the Mount Airy Road Buildings in 1996, (iv) the net proceeds received by the Company as a result of its common stock offering of 3,450,000 shares on August 13, 1996 (the "August 1996 Offering"), (v) the purchase by the Company of the Acquisitions, (vi) the net proceeds received by the Company as a result of the November 1996 Offering, (vii) the acquisition by the Company of the properties purchased during 1995, (viii) the net proceeds received by the Company as a result of its common stock offering on November 17, 1995, and (ix) the purchase by the Company on March 8, 1995 of 100,000 shares of its common stock for constructive retirement. Items (i) through (iv) above are to be collectively referred to as the "YTD Sept. 1996 Events," items (v) and (vi) are to be collectively referred to as the "Reported Events", and items (iv), (vi) and (viii) are to be collectively referred to as the "Offerings". Such pro forma information is based upon the historical unaudited consolidated results of operations of the Company for the nine months ended September 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 Form 10-K for the year ended December 31, 1995 and the Company's Form 10-Q for the nine months ended September 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 Nine Months Ended September 30, 1996 (in thousands, except per share amount) (unaudited) Pro Forma Adj. for YTD Pro Forma Adj. Company Sept. 1996 for Reported Company REVENUES Historical Events (a) Sub-total Events (b) Pro Forma - -------- ---------- ---------- --------- ---------- --------- Base rents ....................................... $ 51,713 $ 2,100 $ 53,813 $ 40,605 $ 94,418 Escalations and recoveries from tenants .......... 9,646 210 9,856 7,536 17,392 Parking and other ................................ 1,453 -- 1,453 230 1,683 Interest income .................................. 282 -- 282 -- 282 -------- -------- -------- -------- -------- Total revenues ................................... 63,094 2,310 65,404 48,371 113,775 -------- -------- -------- -------- -------- EXPENSES Real estate taxes ................................ 6,342 270 6,612 4,130 10,742 Utilities ........................................ 5,965 180 6,145 2,547 8,692 Operating services ............................... 7,952 163 8,115 5,208 13,323 General and administrative ....................... 3,427 94 3,521 2,349 5,870 Depreciation and amortization .................... 10,655 284 10,939 6,605 17,544 Interest expense (c) ............................. 8,288 n/a 8,288 6,177 14,465 -------- -------- -------- -------- -------- Total expense ................................... 42,629 991 43,620 27,016 70,636 -------- -------- -------- -------- -------- Income before gain on sale of rental property, minority interest and extraordinary item ........................... 20,465 1,319 21,784 21,355 43,139 Gain on sale of rental property .................. 5,658 (5,658) -- -- -- Minority interest (d) ............................ 3,866 n/a 3,866 (38) 3,828(d) -------- -------- -------- -------- -------- Income before extraordinary item ................. $ 22,257 ($ 4,339) $ 17,918 $ 21,393 $ 39,311 ======== ======== ======== ======== ======== Pro forma weighted average common shares outstanding (e) 27,892(e) ====== Pro forma income before extraordinary item per common share $1.41 =====
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Nine Months Ended September 30, 1996 (in thousands) (a) Reflects: Revenues and expenses of the properties acquired from January 1, 1996 through July 23, 1996 for the period January 1, 1996 through the dates of acquisition, as follows:
Base Escalations/ Real Estate Operating General and Property Date Rents(1) Recoveries Taxes Utilities Services Administrative Depreciation(2) - -------- ---- -------- ---------- ----- --------- -------- -------------- --------------- Carnegie March 20, 1996 $ 386 $ 31 $ 54 $ 56 $ 58 $ 11 $ 49 Rose Tree May 2, 1996 1,312 115 165 180 179 43 215 Mount Airy Buildings July 23, 1996 665 101 101 -- 4 51 107 ------ ---- ---- ---- ---- ---- ---- $2,363 $247 $320 $236 $241 $105 $371 ------ ---- ---- ---- ---- ---- ----
Revenues and expenses of the property disposed of in 1996 for the period January 1, 1996 through the disposition date, as follows:
Base Escalations/ Real Estate Operating General and Event Date Rents(1) Recoveries Taxes Utilities Services Administrative Depreciation(2) - ----- ---- -------- ---------- ----- --------- -------- -------------- --------------- Essex Road March 20, 1996 ($263) ($37) ($50) ($56) ($78) ($11) ($81) ----- ---- ---- ---- ---- ---- ----
Reduction of expenses as a result of the Partial Prepayment in 1996 for the period January 1, 1996 through March 12, 1996, as follows:
Base Escalations/ Real Estate Operating General and Event Date Rents(1) Recoveries Taxes Utilities Services Administrative Depreciation(2) - ----- ---- -------- ---------- ----- --------- -------- -------------- --------------- Partial Prepayment March 12, 1996 -- -- -- -- -- -- ($6) ------ ---- ---- ---- ---- --- ---- Total Pro Forma Adj. for YTD Sept. 1996 Events $2,100 $210 $270 $180 $163 $94 $284 ====== ==== ==== ==== ==== === ==== See accompanying footnotes on the subsequent page.
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Nine Months Ended September 30, 1996 (in thousands) (b) Reflects: Revenues and expenses of the Acquisitions for the nine months ended September 30, 1996, as follows:
Acquisition Base Escalations/ Other Real Estate Property Date Rents (1) Recoveries Income Taxes Utilities - -------- ---- --------- ---------- ------ ----- --------- Harborside November 4, 1996 $27,780 $6,278 $200 $2,723 $ 812 Five Sentry November 7, 1996 1,546 -- -- 131 28 Whiteweld December 10, 1996 3,038 250 -- 343 560 One Bridge December 16, 1996 2,808 250 -- 329 332 Airport Center December 17, 1996 5,433 758 30 604 815 ------- ------ ---- ------ ----- Total Pro Forma Adj. for Reported Events $40,605 $7,536 $230 $4,130 $2,547 ======= ====== ==== ====== ====== Operating General and Property Services Administrative Depreciation (2) - -------- -------- -------------- ---------------- Harborside $3,016 $1,675 $4,737 Five Sentry 289 78 198 Whiteweld 465 153 558 One Bridge 489 156 427 Airport Center 949 287 685 ------ ------ ------ Total Pro Forma Adj. for Reported Events $5,208 $2,349 $6,605 ====== ====== ====== (1) Pro forma base rents are presented on a straight-line basis. (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.
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Nine Months Ended September 30, 1996 (in thousands) (c) The pro forma adjustments to interest expense reflect interest on mortgage debt assumed with certain acquisitions and the use of proceeds from the Offerings to pay down outstanding borrowings on the Company's credit facilities. Pro forma interest expense is computed as follows:
Interest expense on the Initial Mortgage Financing, after the Partial $ 3,645 Prepayment (fixed interest rate of 8.02 percent on $44,313 and variable rate of 30-day LIBOR plus 100 basis points on $20,195; weighted average interest rate used is 6.47 percent) Interest expense on loan assumed with Fair Lawn acquisition on March 3, 1,154 1995 (fixed interest rate of 8.25 percent on average outstanding principal balance of approximately $18,654) Interest expense on mortgages assumed with Harborside acquisition on 8,131 November 4, 1996 (fixed interest rate of 7.32 percent on $107,912 and initial rate of 6.99 percent on $42,088) Interest expense on outstanding borrowings on the Company's credit 1,535 lines (a variable rate of 30-day LIBOR plus 150 basis points during the period on $29,805; weighted average interest rate used is 6.87 percent) ------- Total pro forma interest expense for nine months ended September 30, 1996: $14,465 =======
Interest expense can be effected by increases and decreases in the variable interest rates under the Company's various floating rate debt. For example, a one-eighth percent change in such variable interest rates will result in a $86 change for the nine months ended September 30, 1996. (d) Represents the pro forma income allocated to the estimated 8.87 percent pro forma weighted average minority interest (Units) in Cali Realty L.P. (the Operating Partnership). (e) Pro forma weighted average shares outstanding is computed assuming that the Offerings occurred as of January 1, 1995 and that shares were not issued in excess of amounts needed to fund the Acquisitions and pay down the credit facilities.
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 Adj. for 1995 Adj. for YTD Company Acquired Sept. 1996 REVENUES Historical Properties (a) Sub-total Events (b) Sub-total - -------- ---------- -------------- --------- ---------- --------- Base rents $50,808 $12,961 $63,769 $5,197 $68,966 Escalations and recoveries from tenants 9,504 2,684 12,188 487 12,675 Parking and other 1,702 -- 1,702 -- 1,702 Interest income 321 -- 321 -- 321 ------- ------- ------- ------ ------- Total revenues 62,335 15,645 77,980 5,684 83,664 ------- ------- ------- ------ ------- EXPENSES - -------- Real estate taxes 5,856 1,821 7,677 653 8,330 Utilities 6,330 939 7,269 580 7,849 Operating services 8,519 1,354 9,873 337 10,210 General and administrative 3,712 519 4,231 186 4,417 Depreciation and amortization 12,111 2,201 14,312 654 14,966 Interest expense (d) 8,661 n/a 8,661 n/a 8,661 ------- ------- ------- ------ ------- Total expenses 45,189 6,834 52,023 2,410 54,433 ------- ------- ------- ------ ------- Income before minority interest 17,146 8,811 25,957 3,274 29,231 Minority interest (e) 3,508 n/a 3,508 n/a 3,508 ------- ------- ------- ------ ------- Net income $13,638 $8,811 $22,449 $3,274 $25,723 ======= ====== ======= ====== ======= Pro forma weighted average common shares outstanding (f) Pro forma net income per common share Pro Forma Adj. for Reported Company REVENUES Events(C) Pro Forma - -------- -------- --------- Base rents $51,055 $120,021 Escalations and recoveries from tenants 11,053 23,728 Parking and other 210 1,912 Interest income -- 321 ------- -------- Total revenues 62,318 145,982 ------- -------- EXPENSES - -------- Real estate taxes 5,931 14,261 Utilities 3,314 11,163 Operating services 6,790 17,000 General and administrative 3,445 7,862 Depreciation and amortization 8,812 23,778 Interest expense (d) 11,263 19,924 ------- -------- Total expenses 39,555 93,988 ------- -------- Income before minority interest 22,763 51,994 Minority interest (e) 1,234 4,742(e) ------- -------- Net income $21,529 $47,252 ======= ======= Pro forma weighted average common shares outstanding (f) 27,812(f) ------ Pro forma net income per common share $1.70 =====
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Year Ended December 31, 1995 (in thousands) (a) Reflects revenues and expenses of the properties acquired in 1995 for the period January 1, 1995 through the date of acquisition, as follows:
Acquisition Base Escalations/ Real Estate Property Date Rents (1) Recoveries Taxes Utilities - -------- ---- --------- ---------- ----- --------- 1717 Rt. 208 Fair Lawn, NJ March 3, 1995 $ 564 $ 61 $ 48 $ 62 400 Rella Blvd Montebello, NY April 11, 1995 874 68 121 132 5 Vaughn Dr. Princeton, NJ July 21, 1995 1,031 100 126 93 New Jersey Resources Nov 8, 1995 6,004 954 802 506 Commerce Center Totowa, NJ Nov 6, 1995 2,942 786 407 71 Horizon Center Business Park Nov 8, 1995 1,546 715 317 75 ------ ------ ------ ---- Total Pro Forma Adj. for 1995 Acquired Properties $12,961 $2,684 $1,821 $939 ======= ====== ====== ==== General and Operating Property Administrative Depreciation (2) Services - -------- -------------- ---------------- -------- 1717 Rt. 208 Fair Lawn, NJ $ 64 $ 25 $81 400 Rella Blvd Montebello, NY 100 29 85 5 Vaughn Dr. Princeton, NJ 127 40 137 New Jersey Resources 591 202 1,046 Commerce Center Totowa, NJ 295 147 586 Horizon Center Business Park 177 76 266 ------ ---- ------ Total Pro Forma Adj. for 1995 Acquired Properties $1,354 $519 $2,201 ====== ==== ======
(b) Reflects: Revenues and expenses of the properties acquired from January 1, 1996 through September 30, 1996 for the period January 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Real Estate Operating General and Property/Event Date Rents(1) Recoveries Taxes Utilities Services Administrative Depreciation(2) - -------------- ---- -------- ---------- ----- --------- -------- -------------- --------------- Carnegie March 20, 1996 $1,538 $159 $248 $246 $207 $ 46 $ 195 Rose Tree May 2, 1996 3,990 367 455 549 451 141 633 Mount Airy Buildings July 23, 1996 1,130 183 183 -- 6 52 189 ------ ---- ---- ---- ---- ---- ------ $6,658 $709 $886 $795 $664 $239 $1,017 ------ ---- ---- ---- ---- ---- ------
Revenues and expenses of the property disposed of in 1996 for the period January 1, 1995 through December 31, 1995, as follows:
Essex Road March 20, 1996 ($1,461) ($222) ($233) ($215) ($327) ($53) ($334) ------- ----- ----- ----- ----- ---- -----
Revenues and expenses related to the Partial Prepayment in 1996 for the period January 1, 1995 through December 31, 1995, as follows:
Partial Prepayment March 12, 1996 -- -- -- -- -- -- (29) ------ ---- ---- ---- ---- ---- ---- Total Pro forma Adj. for YTD Sept. 1996 Events $5,197 $487 $653 $580 $337 $186 $654 ====== ==== ==== ==== ==== ==== ==== See accompanying footnotes on the subsequent page.
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Year Ended December 31, 1995 (in thousands) (continued) (c) Reflects: Revenues and expenses of the Acquisitions for the period January 1, 1995 through December 31, 1995, as follows:
Base Escalations/ Other Real Estate Property/Event Date Rents(1) Recoveries Income Taxes Utilities - -------------- ---- -------- ---------- ------ ----- --------- Harborside November 4, 1996 $34,782 $ 9,369 $182 $4,081 $1,109 Five Sentry November 7, 1996 2,055 -- -- 173 35 Whiteweld December 10, 1996 3,625 359 -- 468 698 One Bridge Plaza December 16, 1996 3,508 288 -- 468 417 Airport Center December 17, 1996 7,085 1,037 28 741 1,055 ------- ------ ---- ------ ------ Total Pro Forma Adj. for 1996 Reported Events $51,055 $11,053 $210 $5,931 $3,314 ======= ======= ==== ====== ====== Operating General and Property/Event Services Administrative Depreciation(2) - -------------- -------- -------------- -------------- Harborside $4,203 $2,530 $6,316 Five Sentry 357 101 264 Whiteweld 524 147 748 One Bridge Plaza 554 259 570 Airport Center 1,152 408 914 ------ ------ ------ Total Pro Forma Adj. for 1996 Reported Events $6,790 $3,445 $8,812 ====== ====== ====== (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.
CALI REALTY CORPORATION Notes to Pro Forma Condensed Consolidated Statement of Operations For the Year Ended December 31, 1995 (in thousands) (continued) (d) The pro forma adjustments to interest expense reflect interest on mortgage debt assumed with certain acquisitions, the effect of the Partial Prepayment, and the use of proceeds from the Offerings to pay down outstanding borrowings on the Company's credit facilities. Pro forma interest expense is computed as follows:
Interest expense on the Initial Mortgage Financing, after the Partial $ 4,962 Prepayment (fixed interest rate of 8.02 percent on $44,313 and variable rate of 30-day LIBOR plus 100 basis points on $20,195; weighted average interest rate used is 6.97 percent) Interest expense on loan assumed with Fair Lawn acquisition on March 3, 1,539 1995 (fixed interest rate of 8.25 percent on average outstanding principal balance of approximately $18,654) Interest expense on mortgages assumed with Harborside acquisition on 10,840 November 4, 1996 (fixed interest rate of 7.32 percent on $107,912 and initial rate of 6.99 percent on $42,088) Additional interest expense incurred as a result of the Partial Prepay- 257 ment on March 12, 1996 Interest expense on outstanding borrowings on the Company's credit lines 2,326 (a variable rate decreasing from 30-day LIBOR plus 275 basis point to 30-day LIBOR 150 basis points during the period on $29,805; weighted average interest rate used is 7.80 percent) ------- Total 1995 pro forma interest expense $19,924 =======
Interest expense can be effected by increases and decreases in the variable interest rates under the Company's various floating rate debt. For example, a one-eighth percent change in such variable interest rates will result in a $115 change for the year ended December 31, 1995. (e) Represents the pro forma income allocated to the estimated 9.12 percent pro forma weighted average minority interest (Units) in Cali Realty L.P. (the Operating Partnership). (f) Pro forma weighted average shares outstanding is computed assuming that the Offerings occurred as of January 1, 1995 and that shares were not issued in excess of amounts needed to fund the Acquisitions and pay down the credit facilities. 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 Nos. 33-91822 and 333-18725) of our report dated December 16, 1996 on our audit of the Statement of Revenue and Certain Expenses for One Bridge Plaza which report is included in this Current Report on Form 8-K. /s/ Schonbraun Safris Sternlieb & Co., L.L.C. - --------------------------------------------- Schonbraun Safris Sternlieb & Co., L.L.C. Roseland, New Jersey December 31, 1996 Exhibit Index Exhibit Number Exhibit Title - ------ ------------- 10.57 Sale Agreement between Metropolitan Life Insurance Company, a New York corporation, as Seller, and Cali Realty Acquisition Corp., a Delaware corporation, as Purchaser, as of November 26, 1996 10.58 Amendment to Sale Agreement as of December 4, 1996, by and between Metropolitan Life Insurance Company, a New York corporation, and Cali Realty Acquisition Corp., a Delaware corporation.