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 ) January 16, 1998
----------------
Mack-Cali Realty Corporation
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(Exact name of registrant as specified in its charter)
Maryland 1-13274 22-3305147
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(state or other jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification Number)
11 Commerce Drive, Cranford , New Jersey 07016
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Registrant's telephone number, including area code (908) 272-8000
--------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5, Other Events
- --------------------
In addition to the acquisition of 54 office properties from the Mack Company and
Patriot American Office Group on December 11, 1997 (which is more fully
described in the Form 8-K, dated December 11, 1997, and is being incorporated
herein by reference), during the period November 19, 1997 through January 16,
1998, Mack-Cali Realty Corporation and subsidiaries (the "Company") acquired
three separate office buildings through three individual transactions with
separate, unrelated sellers (to be collectively referred to as the "Completed
Acquisitions"). The Company also intends to acquire through three individual
transactions with separate, unrelated sellers: (a) an individual office
property, (b) a 22-property office/flex portfolio and (c) a vacant office
property. The Company also intends to acquire developable land with a "build-to-
suit" lease arrangement. The four transactions are to be collectively referred
to as the "Probable Transactions". The Completed Acquisitions and the Probable
Transactions are to be hereinafter collectively referred to as the "Reported
Events".
The following is a brief description of the Completed Acquisitions:
On November 19, 1997, the Company acquired 1000 Madison Avenue ("The Trooper
Building"), a 100,655 square-foot office building located in Lower Providence
Township, Montgomery County, Pennsylvania. The property was acquired for
approximately $14.2 million, which was made available from the Company's cash
reserves.
On December 19, 1997 the Company acquired 100 Overlook Center ("Princeton
Overlook"), a 149,600 square-foot office building, and a 20-acre land parcel
zoned for an additional 149,600 square feet of office development, located in
Princeton, Mercer County, New Jersey. The property was acquired for
approximately $27.1 million, which was funded by the issuance of 41,421 Common
Units in Mack-Cali Realty, L.P. (the Operating Partnership), with a value at
closing of $1.6 million, with the remaining cash portion made available from
drawing on one of the Company's credit facilities.
Additionally, on December 19, 1997, the Company acquired 200 Concord Plaza Drive
("Concord Plaza"), a 248,700 square-foot office building located in San Antonio,
Bexar County, Texas. The property was acquired for approximately $34.1 million,
which was made available from drawing on one of the Company's credit facilities.
The following is a brief description of the Probable Transactions:
The Company has entered into a contract to acquire 500 West Putnam Avenue ("500
West Putnam"), a 121,250 square-foot office building located in Greenwich,
Fairfield County, Connecticut. The property is to be acquired for a total cost
of approximately $20.1 million, $8 million of which is to be funded from drawing
on one of the Company's credit facilities, as well as the assumption of mortgage
debt with an estimated present value of approximately $12.1 million (the "West
Putnam Mortgage"), with an effective annual interest rate of 6.52 percent.
The Company has entered into a separate contract to acquire a 21-building
office/flex portfolio, aggregating approximately 948,060 square feet, with an
option to purchase another 88,000 square foot office/flex property, all located
in the Moorestown West Corporate Center in Moorestown, Burlington County, New
Jersey and in Bromly Commons in Burlington, Burlington County, New Jersey. The
initial 21 properties are to be acquired for a total cost of approximately $60.4
million, with the option property to be purchased upon completion of
construction and required lease-up for approximately $3.7 million (the total of
22 properties, including the option property, to be collectively referred to
hereinafter as the "McGarvey Portfolio"). The contract also allows the Company
to acquire up to six additional office/flex properties totaling 202,000 square
feet upon their development and lease-up. The initial transaction is to be
funded primarily from drawing on one of the Company's credit facilities, as well
as the assumption of
an aggregate of mortgage debt with an estimated present value of approximately
$15.1 million (the "McGarvey Mortgages"). The McGarvey Mortgages currently have
a weighted average annual effective interest rate of 6.21 percent and are
secured by eight of the office/flex properties being acquired.
The Company also has entered into a separate contract to acquire 2115 Linwood
Avenue ("2115 Linwood"), a 68,000 square-foot vacant office building located in
Fort Lee, Bergen County, New Jersey. The vacant building is expected to be
acquired for approximately $5.1 million, with funds made available from drawing
on one of the Company's credit facilities.
Finally, the Company has entered into a contract to acquire 10 acres of vacant
land at 650 West Avenue ("650 West") in the Stamford Executive Park, located in
Stamford, Fairfield County, Connecticut for $1.4 million, which will be funded
from drawing on one of the Company's credit facilities. The vacant land, on
which the Company plans to develop a 40,000 square-foot office/flex property, is
to be acquired from RMC Development Co., LLC, the "residual" company remaining
after the Company's acquisition of 65 properties from the Robert Martin Company
in January 1997. In conjunction with the proposed acquisition of the developable
land, the Company has signed a 15-year lease, on a triple-net basis, with
Davidoff of Geneva to occupy the entire property to be developed. This "build-
to-suit" lease arrangement is contingent upon the Company completing the
acquisition of the vacant land.
Further information regarding the Completed Acquisitions and the Probable
Transactions is attached on SCHEDULE A.
Each of the Completed Acquisitions and the Probable Transactions was, or 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 determined 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 were, or will be, obtained in connection with the
acquisition of properties by the Company. The Company, after investigation of
the properties, is not aware of any material factors, other than those
enumerated above, that would cause the financial information reported not to be
necessarily indicative of future operating results.
Item 7, Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Financial Statements
--------------------
The Statements of Revenue and Certain Expenses included in this report
encompass the following:
. Audited Statement of Revenue and Certain Expenses for The Trooper
Building for the year ended December 31, 1996 and unaudited interim
financial information for the nine months ended September 30, 1997,
. Audited Statement of Revenue and Certain Expenses for Princeton
Overlook for the year ended December 31, 1996 and unaudited interim
financial information for the nine months ended September 30, 1997,
. Audited Statement of Revenue and Certain Expenses for Concord Plaza
for the year ended December 31, 1996 and unaudited interim
financial information for the nine months ended September 30, 1997,
. Audited Statement of Revenue and Certain Expenses for 500 West
Putnam for the year ended December 31, 1996 and unaudited interim
financial information for the nine months ended September 30, 1997,
and
. Audited Statement of Revenue and Certain Expenses for the McGarvey
Portfolio for the year ended December 31, 1996 and unaudited
interim financial information for the nine months ended September
30, 1997.
(b) Pro Forma Financial Information (unaudited)
-------------------------------------------
Unaudited pro forma financial information for the Company is presented as
follows:
. Condensed consolidated balance sheet as of September 30, 1997.
. Condensed consolidated statements of operations for the nine months
ended September 30, 1997 and the year ended December 31, 1996.
. Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available for the twelve months ended
September 30, 1997.
(c) Exhibits
--------
10.125 - Purchase and Sale Agreement dated November 19, 1997 between The
Trooper Partnership, LTD. and Cali Realty Acquisition
Corporation.
SCHEDULE A:
MACK-CALI REALTY CORPORATION
Summary of Reported Events
DATE
ACQUIRED TOTAL % OCCUPIED INITIAL
(if SQUARE AS OF COST TO PRINCIPAL TENANTS
transaction FEET DECEMBER YEAR COMPANY (based on percentage of
PROPERTY completed) 31, 1997 COMPLETED (in thousands) property leased)
- --------------------------------------------------------------------------------------------------------------------------------
The Trooper Building 11/19/97 100,655 97% 1990 $ 14,173 Reality Online Inc. (37%),
1000 Madison Avenue First Chicago National
Lower Providence, Bank (21%),
Montgomery County, Danka Corp. (14%),
Pennsylvania Seton Company (12%)
- --------------------------------------------------------------------------------------------------------------------------------
Princeton Overlook 12/19/97 149,600 99.0% 1988 $ 27,100 Novo Nordisk
100 Overlook Center, Pharmaceutical (24%),
Princeton, Xerox Corp. (24%),
Mercer County, Hydrocarbon Research Inc.
New Jersey (14%),
Hannoch Weisman (10%)
- --------------------------------------------------------------------------------------------------------------------------------
Concord Plaza 12/19/97 248,700 98% 1986 $ 34,100 Colorado Sports Club
200 Concord Plaza Drive, Venture (22%),
San Antonio, Merrill Lynch & Co (12%)
Bexar County,
Texas
- --------------------------------------------------------------------------------------------------------------------------------
500 West Putnam Pending 121,250 100% 1973 $ 20,121 Hachette Magazines, Inc.
500 West Putnam Ave. (27%),
Greenwich, Great Brands of Europe
Fairfield County, (12%),
Connecticut Winklevoss Consultants,
Inc. (12%),
Orthopaedics Associates,
P.C. (11%)
- --------------------------------------------------------------------------------------------------------------------------------
McGarvey Portfolio Pending 1,036,060 97%(a) 1985 $ 64,105 Color Graphics (6%),
(22 Properties) to Stanfas (5%),
Moorestown & Burlington, 1997 C.S.C. (5%)(a)
Burlington County,
New Jersey(a)
- --------------------------------------------------------------------------------------------------------------------------------
2115 Linwood Pending 68,000 Vacant 1981 $ 5,050 N/A
2115 Linwood Ave.
Fort Lee,
Bergen County,
New Jersey
- --------------------------------------------------------------------------------------------------------------------------------
650 West Pending Developable N/A(b) N/A(b) $ 1,411 Davidoff of Geneva (100%)
650 West Ave. Land (b)
Stamford,
Fairfield County,
Conneticut(b)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,724,265 $166,060
================================================================================================================================
(a) The McGarvey Portfolio is comprised of 21 office/flex properties, as well as
an 88,000 square-foot office/flex "option" property, which the Company will
acquire once constructed and leased up. The option property was excluded
for purposes of the "percent occupied" calculation.
(b) 650 West is developable land on which the Company plans to develop a 40,000
square-foot office/flex property, for which it has a signed lease with
Davidoff of Geneva for the entire space.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Mack-Cali
Realty Corporation has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
MACK-CALI REALTY CORPORATION
January 16, 1998 By: /s/ Thomas A. Rizk
--------------------------------
Thomas A. Rizk
Chief Executive Officer
January 16, 1998 By: /s/ Barry Lefkowitz
--------------------------------
Barry Lefkowitz
Executive Vice President and
Chief Financial Officer
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MACK-CALI REALTY CORPORATION
Index to Financial Information
Page
----
THE TROOPER BUILDING
Report of Independent Accountants..........................................
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1996.........................................
The Nine Months Ended September 30, 1997 (unaudited).....................
Notes to Statements of Revenue and Certain Expenses.......................
PRINCETON OVERLOOK
Report of Independent Accountants..........................................
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1996.........................................
The Nine Months Ended September 30, 1997 (unaudited)
Notes to Statements of Revenue and Certain Expenses.......................
CONCORD PLAZA
Report of Independent Accountants..........................................
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1996.........................................
The Nine Months Ended September 30, 1997 (unaudited).....................
Notes to Statements of Revenue and Certain Expenses.......................
500 WEST PUTNAM
Report of Independent Accountants..........................................
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1996.........................................
The Nine Months Ended September 30, 1997 (unaudited).....................
Notes to Statements of Revenue and Certain Expenses.......................
McGARVEY PORTFOLIO
Report of Independent Accountants..........................................
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1996.........................................
The Nine Months Ended September 30, 1997 (unaudited).....................
Notes to Statements of Revenue and Certain Expenses.......................
MACK-CALI REALTY CORPORATION
Pro Forma (unaudited):
Condensed Consolidated Balance Sheet as of September 30, 1997..............
Condensed Consolidated Statements of Operations for the Nine...............
Months Ended September 30, 1997 and for the Year Ended
December 31, 1996........................................................
Estimated Twelve-Month Pro Forma Statement of Taxable Net
Operating Income and Operating Funds Available for
the Twelve Months September 30, 1997.....................................
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Statement of Revenue and Certain Expenses for
the Property known as the Trooper Building, for the year ended December 31,
1996. The financial statement is the responsibility of the Property's
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
Mack-Cali Realty Corporation) and is not intended to be a complete presentation
of The Trooper Building'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 The Trooper
Building, on the basis described in Note 2, for the year ended December 31,
1996, 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
November 21, 1997
THE TROOPER BUILDING
--------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Revenues
Base rents (Note 3) $ 967,408
Escalations and recoveries from tenants 368,789
----------
1,336,197
----------
Certain Expenses
Real estate taxes 114,490
Utilities 238,647
Operating services 180,558
General and administration (Note 4) 35,892
----------
569,587
----------
Revenue in excess of certain expenses $ 766,610
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
THE TROOPER BUILDING
--------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY
--------------------------------------
For the purpose of the accompanying statement of revenue and certain
expenses, The Trooper Building (the "Property") is an office building
located in Lower Providence Township, Montgomery County, Pennsylvania which
was acquired by a subsidiary of Mack-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
Property have been excluded. Revenues excluded consist of interest
and other revenues 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 conformity with generally
accepted accounting principles ("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 those estimates.
c. Revenue Recognition
-------------------
Base rents are recognized on a straight-line basis over the term of
the respective lease.
3. LEASES
------
Leases for the Property 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. In
addition to base rents, the leases provide for the tenants to pay their
proportionate share of real estate taxes and operating expenses over base
year amounts.
THE TROOPER BUILDING
--------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
3. LEASES (Continued)
------
Future minimum rents to be received over the next six years from tenants as
of December 31, 1996 are as follows:
1997 $1,567,052
1998 1,640,335
1999 1,659,266
2000 1,408,014
2001 1,303,641
2002 366,477
----------
$7,944,785
==========
For the year ended December 31, 1996, three tenants made up 76.8% of base
rents, comprised of: Reality Online (36.1%), First Chicago National Bank
(25.9%), and Allstate Insurance (14.8%).
For the nine months ended September 30, 1997, four tenants made up 92.8% of
base rents, comprised of: Reality Online (53.3%), First Chicago National
Bank (15.9%), Allstate Insurance (12.1%) and Seton Corporation (11.5%).
4. GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------
The Property incurred management fees based on three percent of base rent
received which totaled $24,411 for the year ended December 31, 1996,
$25,277 for the nine months ended September 30, 1997.
5. INTERIM STATEMENTS
------------------
The interim financial data for the nine months ended September 30, 1997 is
unaudited. However, in the opinion of the Property's 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.
THE TROOPER BUILDING
--------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
(Unaudited)
Revenue
Base rents (Note 3) $1,180,656
Escalations and recoveries from tenants 456,959
----------
1,637,615
----------
Certain Expenses
Real estate taxes 91,853
Utilities 196,883
Operating services 155,150
General and administrative (Note 4) 49,255
----------
493,141
----------
Revenue in excess of certain expenses $1,144,474
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Statement of Revenue and Certain Expenses for
the property known as Princeton Overlook, for the year ended December 31, 1996.
The financial statement is the responsibility of the Property's 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
Mack-Cali Realty Corporation) and is not intended to be a complete presentation
of Princeton Overlook'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 Princeton Overlook,
on the basis described in Note 2, for the year ended December 31, 1996, 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
October 15, 1997
PRINCETON OVERLOOK
------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Revenue
Base rents (Note 3) $3,268,034
Escalations and recoveries from tenants 226,276
----------
3,494,310
----------
Certain expenses
Real estate taxes 473,396
Utilities 243,866
Operating services 352,985
General and administrative (Note 4) 151,211
----------
1,221,458
----------
Revenue in excess of certain expenses $2,272,852
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
PRINCETON OVERLOOK
------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY
--------------------------------------
For the purpose of the accompanying statement of revenue and certain
expenses, Princeton Overlook (the "Property") is an office building located
in Princeton, Mercer County, New Jersey which was acquired by a subsidiary
of Mack-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
Property have been excluded. Revenues excluded consist of interest
and other revenues 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 conformity 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 those estimates.
c. Revenue Recognition
-------------------
Base rents are recognized on a straight-line basis over the term of
the respective lease.
3. LEASES
------
Leases for the Property have various remaining lease terms of up to seven
years with options to certain tenants for renewal. Minimum rental amounts
for certain leases increase as set forth under the terms of each lease. In
addition to base rents the leases provide for the tenants to pay a portion
of real estate taxes and operating expenses in excess of base year amounts.
PRINCETON OVERLOOK
------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
3. LEASES (Continued)
------
Future minimum rents to be received over the next five years from tenants
as of December 31, 1996 are as follows:
1997 $ 3,768,529
1998 3,610,455
1999 3,411,623
2000 1,797,483
2001 93,249
----------
$12,681,339
===========
For the year ended December 31, 1996, four tenants contributed 71.7 percent
of base rents. For the nine months ended September 30, 1997 (unaudited),
four tenants contributed 71.7 percent of base rents.
Hannock Weisman contributed 10.0 percent of base rents for the year ended
December 31, 1996, and the nine months ended September 30, 1997
(unaudited).
Squib Novo contributed 25.8 percent of base rents for the year ended
December 31, 1996 and the nine months ended September 30, 1997 (unaudited).
Xerox Corporation contributed 23.9 percent of base rents for the year ended
December 31, 1996 and the nine months ended September 30, 1997 (unaudited).
Hydrocarbon Research contributed 12.0 percent of base rents for the year
ended December 31, 1996 and the nine months ended September 30, 1997
(unaudited).
4. GENERAL AND ADMINISTRATIVE
--------------------------
The Property incurred management fees based on three percent of revenues
received which totaled $145,466 for the year ended December 31, 1996 and
$111,287 for the nine months ended September 30, 1997 (unaudited).
Effective June 1, 1997, management fees increased to five percent of
revenues received.
PRINCETON OVERLOOK
------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
5. INTERIM STATEMENTS
------------------
The interim financial data for the nine months ended September 30, 1997 and
the nine months ended September 30, 1997 are unaudited; however, in the
opinion of the Property's 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.
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
PRINCETON OVERLOOK
------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
(Unaudited)
Revenue
Base rents (Note 3) $2,455,302
Escalations and recoveries from tenants 217,625
----------
2,672,927
----------
Certain expenses
Real estate taxes 371,591
Utilities 177,526
Operating services 266,248
General and administrative (Note 4) 126,089
----------
941,454
----------
Revenue in excess of certain expenses $1,731,473
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Statement of Revenue and Certain Expenses for
the property known as Concord Plaza, for the year ended December 31, 1996. The
financial statement is the responsibility of the Property's 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
Mack-Cali Realty Corporation) and is not intended to be a complete presentation
of Concord Plaza'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 Concord Plaza, on
the basis described in Note 2, for the year ended December 31, 1996, 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
November 18, 1997
CONCORD PLAZA
-------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
YEAR ENDED DECEMBER 31, 1996
----------------------------
Revenue
Base rents (Note 3) $3,530,492
Escalations and recoveries from tenants 610,787
Other income 126,392
----------
4,267,671
----------
Certain Expenses
Real estate taxes 575,223
Utilities 253,540
Operating services 635,729
General and administrative (Note 4) 204,509
----------
1,669,001
----------
Revenue in excess of certain expenses $2,598,670
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
CONCORD PLAZA
-------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY
--------------------------------------
For the purpose of the accompanying statement of revenue and certain
expenses, Concord Plaza (the "Property") is an office building located in
San Antonio, Bexar County, Texas which was acquired by a subsidiary of
Mack-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
Property have been excluded. Revenues excluded consist of interest
and other revenues 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 conformity with generally
accepted accounting principles ("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 those estimates.
c. Revenue Recognition
-------------------
Base rents are recognized on a straight-line basis over the term of
the respective lease.
3. LEASES
------
Leases for the Property have various remaining lease terms of up to eleven
years with options to certain tenants for renewal. Minimum rental amounts
for certain leases increase as set forth under the terms of each lease. In
addition to base rents, the leases provide for the tenants to pay a portion
of real estate taxes and operating expenses in excess of base year amounts.
CONCORD PLAZA
-------------
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, 1996 are as follows:
1997 $ 3,644,177
1998 3,701,682
1999 3,483,403
2000 3,253,209
2001 2,610,607
Thereafter 5,768,059
-----------
$22,461,137
===========
For the year ended December 31, 1996, three tenants make up 40.77% of the
base straight-line rents comprised of: Merrill, Lynch, Pierce, Fenner and
Smith, Inc. (13.88%), Harte Hanks Communications, Inc. (11.08%) and
Colorado Club Sports Venture, L.L.C. (15.81%).
For the nine months ended September 30, 1997, three tenants make up 42.59%
of the base straight-line rents comprised of: Merrill, Lynch, Pierce,
Fenner and Smith, Inc. (14.50%), Harte Hanks Communications, Inc. (11.57%)
and Colorado Club Sports Venture, L.L.C. (16.52%) (unaudited).
4. GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------
The Property incurred management fees based on 2.9 percent of gross rents
and other income received which totaled $129,485 for the year ended
December 31, 1996 and $100,773 for the nine months ended September 30, 1997
(unaudited).
5. INTERIM STATEMENTS
------------------
The interim financial data for the nine months ended September 30, 1997 are
unaudited. However, in the opinion of the Property's management, the
interim data includes all adjustments, consisting only of normally
recurring adjustments, necessary for a fair statement of the results for
the interim periods. The results for the periods presented are not
necessarily indicative of the results to be expected for the entire fiscal
year or any other period.
CONCORD PLAZA
-------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
(unaudited)
-----------
Revenue
Base rents (Note 3) $2,902,817
Escalations and recoveries from tenants 379,525
Other income 95,162
----------
3,377,504
----------
Certain Expenses
Real estate taxes 463,955
Utilities 197,266
Operating services 429,916
General and administrative (Note 4) 134,654
----------
1,225,791
----------
Revenue in excess of certain expenses $2,151,713
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying statement of revenue and certain expenses for
the property known as 500 West Putnam for the year ended December 31, 1996. The
financial statement is the responsibility of the Property's 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 Form 8-K of Mack-
Cali Realty Corporation) and is not intended to be a complete presentation of
Concord Plaza'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 500 West Putnam, on
the basis described in Note 2, for the year ended December 31, 1996, 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 22, 1997
500 WEST PUTNAM
---------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Revenue
Base rents (Note 3) $2,043,659
Escalations and recoveries from tenants 477,289
----------
2,520,948
----------
Certain Expenses
Real estate taxes 163,925
Utilities 271,077
Operating services 314,070
General and administrative (Note 4) 147,318
----------
896,390
----------
Revenue in excess of certain expenses $1,624,558
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
500 WEST PUTNAM
---------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY
--------------------------------------
For the purpose of the accompanying statement of revenue and certain
expenses, 500 West Putnam (the "Property") is an office building located in
Greenwich, Fairfield County, Connecticut which is expected to be acquired
by a subsidiary of Mack-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
Property have been excluded. Revenues excluded consist of interest
and other revenues 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 conformity with generally
accepted accounting principles ("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 those estimates.
c. Revenue Recognition
-------------------
Base rents are recognized on a straight-line basis over the term of
the respective lease.
3. LEASES
------
Leases for the Property have various remaining lease terms of up to
thirteen years with options to certain tenants for renewal. Minimum rental
amounts for certain leases increase as set forth under the terms of each
lease. In addition to base rents, the leases provide for the tenants to
pay their proportionate share of real estate taxes and operating expenses
over base year amounts.
500 WEST PUTNAM
---------------
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, 1996 are as follows:
1997 $ 2,268,461
1998 2,271,990
1999 2,258,878
2000 2,000,824
2001 1,299,182
Thereafter 6,873,077
-----------
$16,972,412
===========
For the year ended December 31, 1996, four tenants contributed 69.42
percent of base straight-line rents comprised of: Orthopaedic Associates,
P.C. (12.88%), Hachette Magazines, Inc. (26.93%), Great Brands of Europe
(17.29%) and Winklevoss Consultants, Inc. (12.32%).
For the nine months ended September 30, 1997, four tenants contributed
62.08 percent of base straight-line rents comprised of: Orthopaedic
Associates, P.C. (11.52%), Hachette Magazines , Inc. (24.08%), Great Brands
of Europe (15.46%) and Winklevoss Consultants, Inc. (11.02%).
4. GENERAL AND ADMINISTRATIVE
--------------------------
The Property incurred management fees of approximately 5 percent and 6
percent for 1996 and the nine months ended September 30, 1997,
respectively, which amounted to $118,596 for the year ended December 31,
1996, and $117,864 for the nine months ended September 30, 1997.
5. INTERIM STATEMENTS
------------------
The interim financial data for the nine months ended September 30, 1997 is
unaudited. However, in the opinion of the Property's management, the
interim financial data includes all adjustments, consisting only of
normally recurring adjustments, necessary for a fair statement of the
results for the interim periods. The results for the periods presented are
not necessarily indicative of the results to be expected for the entire
fiscal year or any other period.
500 WEST PUTNAM
---------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
(unaudited)
-----------
Revenue
Base rents (Note 3) $1,713,789
Escalations and recoveries from tenants 401,612
----------
2,115,401
----------
Certain Expenses
Real estate taxes 125,856
Utilities 200,949
Operating services 265,722
General and administrative (Note 4) 139,255
----------
731,782
----------
Revenue in excess of certain expenses $1,383,619
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying statement of revenue and certain expenses for
the properties known as McGarvey Portfolio, for the year ended December 31,
1996. The financial statement is the responsibility of the Property's
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 a Form 8-K of Mack-
Cali Realty Corporation) and is not intended to be a complete presentation of
McGarvey Portfolio revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses for McGarvey Portfolio,
on the basis described in Note 2, for the year ended December 31, 1996, 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
October 10, 1997
McGARVEY PORTFOLIO
------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Revenue
Base rents (Note 3) $3,969,052
Recoveries from tenants 1,122,819
----------
5,091,871
----------
Certain Expenses
Real estate taxes 586,455
Utilities 98,490
Operating services 405,185
General and administrative (Note 4) 21,596
----------
1,111,726
----------
Revenue in excess of certain expenses $3,980,145
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
McGARVEY PORTFOLIO
------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY
--------------------------------------
For the purpose of the accompanying statement of revenue and certain
expenses, McGarvey Portfolio (the "Properties") are 21 office/flex
buildings located in southern New Jersey which are expected to be acquired
by a subsidiary of Mack-Cali Realty Corporation (the "Company").
Another property, which is currently being constructed, will be considered
an option property to be acquired by the Company subsequent to the
acquisition of the 21 original buildings. As this property is not in
operation, it was excluded from these statements.
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
Property have been excluded. Revenues excluded consist of interest
and other revenues 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 conformity with generally
accepted accounting principles ("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 those estimates.
c. Revenue Recognition
-------------------
Base rents are recognized on a straight-line basis over the term of
the respective lease.
3. LEASES
------
The Properties are leased to tenants under operating leases with expiration
dates through 2009 with options to certain tenants for renewal.
Substantially all of the leases provided for annual base rent plus
recoveries based upon the tenants proportionate share of increases in real
estate taxes and certain operating costs as defined.
McGARVEY PORTFOLIO
------------------
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, 1996 are as follows:
1997 $5,031,704
1998 4,856,736
1999 4,189,320
2000 3,780,186
2001 2,455,047
Thereafter 4,700,744
----------
$25,013,737
===========
4. RELATED PARTY TRANSACTIONS
--------------------------
The Properties incurred landscaping and repair and maintenance expenses
paid to related parties which totaled $110,512 for the year ended December
31, 1996 and $14,122 for the nine months ended September 30, 1997
(unaudited).
Related party revenue totaled $92,225 for the ended December 31, 1996 and
$55,181 for the nine months ended September 30, 1997 (unaudited).
5. INTERIM STATEMENTS
------------------
The interim financial data for the nine months ended September 30, 1997 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.
McGARVEY PORTFOLIO
------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------
(unaudited)
-----------
Revenue
Base rent (Note 3) $3,716,904
Recoveries from tenants 874,897
----------
4,591,801
----------
Certain Expenses
Real estate taxes 466,313
Utilities 120,797
Operating services 347,938
General and administrative (Note 4) 17,670
----------
952,718
----------
Revenue in excess of certain expenses $3,639,083
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of September 30, 1997 (in thousands)
- --------------------------------------------------------------------------------
The following unaudited pro forma condensed consolidated balance sheet is
presented as if the completion by the Company of the Mack Transaction (as
referred to in the Company's Current Report on Form 8-K, dated December 11,
1997 incorporated by reference herein), and the acquisitions of the Trooper
Building, Princeton Overlook, Concord Plaza, 500 West Putnam, the McGarvey
Portfolio, 2115 Linwood and 650 West had occurred on September 30, 1997. 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,
1996, the Company's Form 10-Q for the nine months ended September 30, 1997, and
the Company's Current Report on Form 8-K (relating to the Mack Transaction),
dated December 11, 1997, respectively.
The pro forma condensed consolidated balance sheet is unaudited and is not
necessarily indicative of what the actual financial position of the Company
would have been had the aforementioned acquisition actually occurred on
September 30, 1997, nor does it purport to represent the future financial
position of the Company.
Pro Forma
Unadjusted Adjustments Company
Company for Reported Pro Forma
ASSETS Pro Forma(a) Events (unaudited)
- --------------------------------------------------------------------------------
Rental property, net $2,453,729 $166,060(b) $2,619,789
Cash and cash equivalents 3,409 -- 3,409
Unbilled rents receivable 25,617 -- 25,617
Deferred charges and other
assets, net 18,571 -- 18,571
Restricted cash 6,621 -- 6,621
Accounts receivable, net 5,637 -- 5,637
Mortgage note receivable 7,250 -- 7,250
- --------------------------------------------------------------------------------
Total assets $2,520,834 $166,060 $2,686,894
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Mortgages and loans payable $ 913,856 $164,436 (c) $1,078,292
Dividends and distributions payable 20,377 -- 20,377
Accounts payable and accrued
expenses 21,711 -- 21,711
Accrued interest payable 2,081 -- 2,081
Rents received in advance
and security deposits 27,801 -- 27,801
- --------------------------------------------------------------------------------
Total liabilities 985,826 164,436 1,150,262
- --------------------------------------------------------------------------------
Minority interest of unitholders in
Operating Partnership 376,831 1,624 (d) 378,455
- --------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.01 par value 496 -- 496
Other stockholders' equity 1,157,681 -- 1,157,681
- --------------------------------------------------------------------------------
Total stockholders' equity 1,158,177 -- 1,158,177
- --------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $2,520,834 $166,060 $2,686,894
================================================================================
See accompanying footnotes on subsequent page.
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of September 30, 1997 (in thousands)
- --------------------------------------------------------------------------------
(a) Amounts are incorporated by reference from the Company's Current Report on
Form 8-K, relating to the completion of the Mack Transaction and related
1997 Offering, dated December 11, 1997. Reference should be made to the
Pro Forma Condensed Consolidated Balance Sheet and related Notes thereto
included in such Current Report.
(b) Represents the approximate aggregate cost of the Reported Events,
consisting of the acquisitions of the Trooper Building on November 19, 1997
for $14,173, Princeton Overlook on December 19, 1997 for $27,100 and
Concord Plaza December 19, 1997 for $34,100, and the proposed acquisitions
of 500 West Putnam for $20,121, the McGarvey Portfolio for $64,105, 2115
Linwood for $5,050 and 650 West for $1,411.
(c) Represents the Company's assumption of the McGarvey Mortgages with an
estimated present value of $15,085 and the West Putnam Mortgage with an
estimated present value of $12,104, as well as the approximate aggregate
pro forma drawings on the Company's credit facilities of $137,247, which
are to be, and have been used, as the primary means in funding the cash
portion of the Reported Events, listed in note (b) above.
(d) Represents the issuance of 41,421 Common Units in the Operating Partnership
in connection with the completion of the Princeton Overlook acquisition.
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Nine Months Ended September 30, 1997
And the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
The unaudited pro forma condensed consolidated statements of operations for the
nine months ended September 30, 1997 and for the year ended December 31, 1996
are presented as if each of the following had occurred on January 1, 1996: (i)
the partial prepayment by the Company of its Initial 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 the properties known as 103 Carnegie, Rose
Tree, the Mount Airy Road Buildings , Five Sentry Parkway, Harborside, Whiteweld
Centre, One Bridge Plaza and Airport Center 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 Offering"), (v) the net proceeds received
by the Company as a result of its common stock offering of 17,537,500 shares on
November 22, 1996 (the "November Offering"), (vi) the completion by the Company
of the RM Transaction, (vii) the acquisitions of 1345 Campus Parkway, Westlakes
Office Park, the Moorestown Buildings, Shelton Plaza, 200 Corporate and Three
Independence in 1997, (viii) the completion by the Company of the Mack
Transaction and the 1997 Offering (which are more fully discussed in the
Company's Current Report on Form 8-K, dated December 11, 1997 incorporated by
reference herein), and (ix) the acquisitions of The Trooper Building, Princeton
Overlook and Concord Plaza in 1997, and the pending acquisitions of 500 West
Putnam, the McGarvey Portfolio, 2115 Linwood and 650 West (all to be
collectively referred to as the "Reported Events").
Such pro forma information is based upon the historical consolidated results of
operations of the Company for the nine months ended September 30, 1997 and for
the year ended December 31, 1996, 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-Q for the nine months ended
September 30, 1997, in the Company's Form 10-K for the year ended December 31,
1996, and in the Company's Current Report on Form 8-K (relating to the Mack
Transaction) dated December 11, 1997.
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,
not does it purport to represent the Company's results of operations for future
periods.
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1997
(in thousands, except per share amount)
- --------------------------------------------------------------------------------
(unaudited)
Unadjusted Pro Forma Adj.
Company for Reported Company
REVENUES Pro Forma (b) Events Pro Forma
- --------------------------------------------------------------------------------
Base rents $259,592 $12,385 (a) $271,977
Escalations and recoveries
from tenants 36,370 2,331 (a) 38,701
Parking and other 11,900 95 (a) 11,995
Interest income 1,312 -- 1,312
- --------------------------------------------------------------------------------
Total revenues 309,174 14,811 323,985
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Real estate taxes 31,813 1,520 (a) 33,333
Utilities 24,466 894 (a) 25,360
Operating services 37,320 1,465 (a) 38,785
General and administrative 16,254 467 (a) 16,721
Depreciation and
amortization 44,134 2,396 (a) 46,530
Interest expense 47,816 8,014 (c) 55,830 (c)
- --------------------------------------------------------------------------------
Total expenses 201,803 14,756 216,559
- --------------------------------------------------------------------------------
Income before minority
interest 107,371 55 107,426
Minority interest 22,073 70 (d) 22,143 (d)
- --------------------------------------------------------------------------------
Net income $ 85,298 ($15) $ 85,283
================================================================================
Weighted average common
shares outstanding 49,668 49,668 (e)
------ ------
Net income per common share (f) $ 1.72 $ 1.72
------ ------
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1997
(in thousands)
- --------------------------------------------------------------------------------
(a) Reflects:
Revenues and expenses for the Reported Events for the nine months ended
September 30, 1997, as follows:
Real
Date Base Escalations/ Other Estate Operating General and
Property (1) Acquired Rents (2) Recoveries Income Taxes Utilities Services Administrative Depreciation (3)
- ------------------------------------------------------------------------------------------------------------------------------------
The Trooper Building November 19, 1997 $ 1,181 $ 457 -- $ 92 $197 $ 155 $ 49 $ 213
Princeton Overlook December 19, 1997 2,813 218 -- 372 178 266 126 407
Concord Plaza December 19, 1997 2,822 379 $95 464 197 430 135 512
500 West Putnam Pending 1,810 402 -- 126 201 266 139 302
McGarvey Portfolio Pending 3,759 875 -- 466 121 348 18 962
- ------------------------------------------------------------------------------------------------------------------------------------
Total Pro Forma Adj. for
Reported Events $12,385 $2,331 $95 $1,520 $894 $1,465 $467 $2,396
====================================================================================================================================
(1) 2115 Linwood and 500 West were not in operations, due to being a vacant
building and vacant land, respectively, during 1996 and for the nine months
ended September 30, 1997.
(2) Pro forma base rents are presented on a straight-line basis calculated from
January 1, 1996 forward.
(3) 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.
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1997
(in thousands)
- --------------------------------------------------------------------------------
(b) Amounts are incorporated by reference from the Company's Current Report on
Form 8-K, relating to the completion of the Mack Transaction and related
1997 Offering, dated December 11, 1997. Reference should be made to the Pro
Forma Condensed Consolidated Statements of Operations for the Nine Months
Ended September 30, 1997 and related Notes thereto included in such Current
Report.
(c) Pro forma adjustment to interest expense for the nine months ended September
30, 1997 reflects interest on mortgage debt assumed with certain
acquisitions and additional borrowings from the Company's credit facilities
to fund certain acquisitions. Pro forma interest expense for the nine months
ended September 30, 1997 is computed as follows:
Interest expense on the Initial Mortgage Financing, after the Partial Pre- $ 3,665
payment (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 6.60 percent)
Interest expense on loan assumed with Fair Lawn acquisition on March 3, 1995 1,154
(fixed interest rate of 8.25 percent on average outstanding principal balance
of approximately $18,605)
Interest expense on mortgages in connection with the Harborside acquisition in 8,125
1996 (fixed interest rate of 7.32 percent on $107,912 and initial rate of 6.99
percent on $42,088)
Interest expense on Teachers Mortgage assumed with the RM Transaction on January 9,977
31, 1997 (fixed interest rate of 7.18 percent on $185,283)
Interest expense on Mack Assumed Debt ($291,883) with a weighted average 16,791
interest rate of 7.67 percent
Interest expense on West Putnam Mortgage ($12,104) with an effective interest 592
rate of 6.52 percent
Interest expense on McGarvey Mortgages ($15,085) with a weighted average 703
effective interest rate of 6.21 percent
Interest expense on Pro Forma drawings on the Company's credit facilities of 14,100
$274,356 at a weighted average rate of 6.85 percent
Historical amortization of deferred mortgage, finance and title costs for the 723
nine months ended September 30, 1997 -------
Pro forma interest expense for the nine months ended September 30, 1997: $55,830
-------
Unadjusted Company Pro Forma Interest Expense 47,816
-------
Adjustment $ 8,014
=======
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 $343
change for the nine months ended September 30, 1997.
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1997
(in thousands)
- --------------------------------------------------------------------------------
(d) Represents minority interest computed as follows:
Income before extraordinary item and minority interest $107,426
Dividend yield of 6.75 percent on the Preferred Units with a $ 11,672
par value of $230,562
Income allocable to common stockholders of the Company and $ 95,754
unitholders in the Operating Partnership --------
Allocation to minority interest based upon weighted average 10,471
percentage of Common Units outstanding of 10.94 percent --------
Minority interest for the Nine Months Ended 22,143
September 30, 1997 --------
Unadjusted Company Pro Forma 22,073
--------
Adjustment: $ 70
========
(e) The following is a reconciliation of the historical weighted average shares
outstanding to the pro forma primary weighted average shares outstanding
(shares in thousands):
Historical weighted average shares outstanding 36,469
Shares issued in connection with the 1997 Offering 13,000
Vesting of 199 shares on an accelerated basis as a result of the
Transaction 199
------
Pro forma weighted average shares outstanding 49,668
======
(f) Fully-diluted pro forma net income per share is not presented since common
stock equivalents and the Preferred Units are not dilutive.
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement Of Operations
For the Year Ended December 31, 1996 (unaudited)
(in thousands, except per share amount)
- --------------------------------------------------------------------------------
Unadjusted Pro Forma Adj.
Company for Reported Company
REVENUES Pro Forma (b) Events Pro Forma
- --------------------------------------------------------------------------------
Base rents $338,112 $ 14,364 (a) $352,476
Escalations and recoveries
from tenants 48,384 2,806 (a) 51,190
Parking and other 10,048 126 (a) 10,174
Interest income 1,179 -- 1,179
- --------------------------------------------------------------------------------
Total revenues 397,723 17,296 415,019
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Real estate taxes 40,700 1,912 (a) 42,612
Utilities 31,847 1,106 (a) 32,953
Operating services 50,002 1,889 (a) 51,891
General and administrative 21,070 561 (a) 21,631
Depreciation and amortization 57,929 3,191 (a) 61,120
Interest expense 63,612 10,555 (c) 74,167 (c)
- --------------------------------------------------------------------------------
Total expenses 265,160 19,214 284,374
- --------------------------------------------------------------------------------
Income before gain on sale
of rental property, minority
interest and extraordinary
item 132,563 (1,918) 130,645
Gain on sale of rental
property -- -- --
- --------------------------------------------------------------------------------
Income before minority
interest and extraordinary
item 132,563 (1,918) 130,645
Minority interest 28,381 (134)(d) 28,247 (d)
- --------------------------------------------------------------------------------
Income before extraordinary
item $104,182 (1,784) $102,398
================================================================================
Weighted average common
shares outstanding 49,401 49,401 (e)
------ ------
Income before extraordinary
item per common share (f) $ 2.11 $ 2.07
------ ------
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1996
(in thousands)
- --------------------------------------------------------------------------------
(a) Reflects:
Revenues and expenses for the Reported Events for the year ended December 31,
1996, as follows:
Real
Date Base Escalations/ Other Estate Operating General and
Property (1) Acquired Rents (2) Recoveries Income Taxes Utilities Services Administrative Depreciation (3)
- ------------------------------------------------------------------------------------------------------------------------------------
The Trooper Building November 19, 1997 $ 968 $ 369 -- $ 114 $ 239 $ 181 $ 36 $ 283
Princeton Overlook December 19, 1997 3,735 226 -- 473 244 353 151 542
Concord Plaza December 19, 1997 3,423 611 $126 575 254 636 205 682
500 West Putnam Pending 2,171 477 -- 164 271 314 147 402
McGarvey Portfolio Pending 4,067 1,123 -- 586 98 405 22 1,282
- ------------------------------------------------------------------------------------------------------------------------------------
Total Pro Forma Adj. for
Reported Events $14,364 $2,806 $126 $1,912 $1,106 $1,889 $561 $3,191
====================================================================================================================================
(1) 2115 Linwood and 650 West were not in operations, due to being a vacant
building and vacant land, respectively, during 1996.
(2) Pro forma base rents are presented on a straight-line basis calculated from
January 1, 1996 forward.
(3) 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.
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1996
(in thousands)
- --------------------------------------------------------------------------------
(b) Amounts are incorporated by reference from the Company's Current Report on
Form 8-K, relating to the completion of the Mack Transaction and related
1997 Offering, dated December 11, 1997. Reference should be made to the Pro
Forma Condensed Consolidated Statements of Operations for the Year Ended
December 31, 1996 and related Notes thereto included in such Current Report.
(c) The pro forma adjustment to interest expense for the year ended December 31,
1996 reflects interest on mortgage debt assumed with certain acquisitions
and additional borrowings from the Company's credit facilities to fund
certain acquisitions. Pro forma interest expense for the year ended
December 31, 1996 is computed as follows:
Interest expense on the Initial Mortgage Financing, after the Partial $ 4,867
Pre-payment (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 6.50 percent)
Interest expense on loan assumed with Fair Lawn acquisition on March 3, 1,535
1995 (fixed interest rate of 8.25 percent on average outstanding
principal balance of approximately $18,605)
Interest expense on mortgages in connection with the Harborside 10,841
acquisition on 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 Teachers Mortgage assumed with the RM Transaction on 13,303
January 31, 1997 (fixed interest rate of 7.18 percent on $185,283)
Interest expense on Mack Assumed Debt ($291,883) with a weighted average 22,300
interest rate of 7.64 percent
Interest expense on West Putnam Mortgage ($12,104) with an effective 789
interest rate of 6.52 percent
Interest expense on McGarvey Mortgage ($15,085) with a weighted average 937
effective interest rate of 6.21 percent
Interest expense on pro forma drawings on the Company's credit 18,514
facilities of $274,356 at a weighted average rate of 6.7 percent
Historical amortization of deferred mortgage, finance and title costs 1,081
for the year ended December 31, 1996
-------
Pro forma interest expense for the year ended December 31, 1996: $74,167
-------
Unadjusted Company Pro Forma 63,612
-------
Adjustment $10,555
=======
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1996
(in thousands)
- --------------------------------------------------------------------------------
NOTE (c) continued:
Interest expense can be effected by increases and decreases in the
variable rates under the Company's various floating rate debt. For
example, a one-eight percent change in such variable interest rates will
result in a $458 change for the year ended December 31, 1996.
(d) Represents minority interest computed as follows:
Income before extraordinary item and minority interest $130,645
Dividend yield of 6.75 percent on the Preferred Units with a $15,563
par value of $230,562
Income allocable to common stockholders of the Company and 115,082
unitholders in the Operating Partnership
Allocation to minority interest based upon weighted average 12,684
percentage of Common Units outstanding of 11.02 percent, ------
respectively
Minority interest for the Year Ended December 31, 1996 28,247
------
Unadjusted Company Pro Forma $28,381
-------
Adjustment: $ (134)
=======
(e) The following is a reconciliation of the historical weighted average shares
outstanding to the pro forma primary weighted average shares outstanding
(shares in thousands):
Historical weighted average shares outstanding 18,461
Shares issued in connection with the November 1996 offering 17,538
Issued in connection with the August 1996 offering 3,450
Adjustment for period of year during which shares issued with (3,247)
the 1996 offerings were outstanding
Shares issued in connection with the 1997 Offering 13,000
Vesting of 199 shares on an accelerated basis as a result of the
Transaction 199
------
Pro forma weighted average shares outstanding 49,401
======
(f) Fully-diluted pro forma net income before extraordinary item per share is
not presented since common stock equivalents and the Preferred Units are not
dilutive.
MACK-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 September 30, 1997, adjusted for historical
operations of the properties acquired or to be acquired during the period from
October 1, 1996 to January 16, 1998 (as reported in this Current Report and
previous Form 8-K and 8-K/A filings of the Company dated December 11, 1997,
September 19, 1997, September 18, 1997, January 31, 1997, December 31, October
27, October 28, October 8, and July 16, 1996) 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 for the year
ended December 31, 1996, exclusive of depreciation and amortization......................... $ 47,333
Cali Realty Corporation historical income before minority interest for the nine
months ended September 30, 1997, exclusive of depreciation and
amortization................................................................................ 83,736
Cali Realty Corporation historical income before minority interest for the nine
months ended September 30, 1996, exclusive of depreciation and
amortization................................................................................ (31,120)
--------
Cali Realty Corporation historical income before minority interest for the
twelve month period ended September 30, 1997 , exclusive of depreciation and
amortization (Note 1)....................................................................... 99,949
Properties acquired October 1, 1996 through January 16, 1998, historical
earnings from operations, as adjusted, exclusive of depreciation and
amortization (Note 2)....................................................................... 49,234
Pro Forma adjustments relating to the Company's common stock offerings (Note 3).............. 38,772
Net adjustment for tax basis revenue recognition (Note 4).................................... (1,852)
Estimated tax deduction from the exercise and sale of stock options under the
Company's Employee Stock Option Plan........................................................ (3,700)
Estimated tax depreciation and amortization (Note 5)......................................... (53,012)
--------
Pro Forma taxable income before allocation to minority interest and dividends deduction...... 129,391
Estimated allocation to minority interest (Note 6)........................................... (30,182)
Estimated dividends deduction (Note 7)....................................................... (99,336)
--------
$ (127)
========
Pro Forma taxable net operating income....................................................... $ 0
========
Estimate of Operating Funds Available (in thousands):
Pro Forma taxable operating income before allocation to minority interests and
dividends deduction......................................................................... $129,391
Add: Pro Forma depreciation and amortization................................................. 53,012
--------
Estimated Pro Forma operating funds available (Note 8)....................................... $182,403
========
MACK-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 twelve month period
ended September 30, 1997.
Note 2 - The historical earnings from operations represents the Pro Forma
results of the properties acquired during the period from October 1,
1996 to January 16, 1998 for the period from October 1, 1996 through
the earlier of the date of acquisition or September 30, 1997.
Note 3 - Represents the Pro Forma interest reduction resulting from the paydown
of funds drawn on the Company's credit facilities with proceeds from
the Company's common stock offerings on November 22, 1996, and
October 15, 1997.
Note 4 - Represents the net adjustment to (i) recognize prepaid rent and (ii)
reverse the effect of rental revenue recognition on a straight line
basis.
Note 5 - Tax depreciation for the Company is based upon the original cost or
purchase price allocated to the buildings, depreciated on a straight-
line method over their respective tax lives.
Note 6 - Estimated allocation of taxable income to minority interests is based
on a 20.43 percent minority interest in the operating partnership
after certain gross income and depreciation adjustments, with a
special allocation of depreciation on properties included in the
Initial Public Offering and subsequent acquisitions where Operating
Units were issued as part of the consideration in the transaction.
Note 7 - Estimated dividends deduction is based on 49,668,044 weighted average
shares outstanding at the dividend rate of $2.00 per share. Shares
outstanding, on a Pro Forma basis, are 49,668,044.
Note 8 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund
cash needs.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Cali Realty Corporation on Forms S-3 (File Nos. 333-25475, 333-09875, 333-19101,
333-09081, 33-96542, and 33-96538) and Forms S-8 (File No. 33-91822, 333-18725,
333-19831 and 333-32661) of our report dated November 21, 1997 on our audit of
the Statement of Revenue and Certain Expenses for The Trooper Building, of our
report dated October 15, 1997 on our audit of the Statement of Revenue and
Certain Expenses for Princeton Overlook, of our report dated November 18, 1997
on our audit of the Statement of Revenue and Certain Expenses for Concord Plaza,
of our report dated December 22, 1997 on our audit of the Statement of Revenue
and Certain Expenses for 500 West Putnam, and of our report dated October 10,
1997 on our audit of the Statement of Revenue and Certain Expenses for the
McGarvey Portfolio, which reports are 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
January 16, 1998