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) June 12, 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
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(Former name or former address, if changed since last report)
Item 5. Other Events
During the period January 1, 1998 through June 8, 1998, Mack-Cali Realty
Corporation and subsidiaries (the "Company") acquired, or entered into contracts
to acquire, a 21-building office/flex portfolio, an 18- building office
portfolio, a six-building office complex, a three-building office portfolio, a
two-building office portfolio and seven separate buildings through 12 individual
transactions with separate sellers (to be collectively referred to as the "1998
Acquisitions"). Additionally, during the same period, the Company completed five
separate stock offerings (collectively, the "1998 Offerings"), issuing an
aggregate of 7,834,878 shares of common stock for total net proceeds of
aproximately $284.6 million. The 1998 Acquisitions and the 1998 Offerings are to
be hereinafter collectively referred to as the "Reported Events".
The following is a brief description of the Reported Events:
1998 Acquisitions:
On January 30, 1998, the Company acquired a 17-building office/flex portfolio,
aggregating approximately 748,660 square feet located in the Moorestown West
Corporate Center in Moorestown, Burlington County, New Jersey and in Bromley
Commons in Burlington, Burlington County, New Jersey. The 17 properties were
acquired for a total cost of approximately $47.5 million. The Company is under
contract with the same seller to acquire an additional four office/flex
properties, aggregating 199,400 square feet, for a total cost of approximately
$12.0 million, in the same locations. The 17 acquired properties and four
pending building acquisitions are to be collectively referred to as the
"McGarvey Portfolio". The Company also has an option to purchase an additional
property following completion of construction and required lease-up for
approximately $3.7 million. The purchase contract also provides the Company a
right of first refusal to acquire up to six additional office/flex properties
totaling 202,000 square feet upon their development and lease-up. The initial
transaction was funded primarily from drawing on one of the Company's credit
facilities, as well as the assumption of mortgage debt with an estimated fair
value of $8.4 million (the "McGarvey Mortgages"). The McGarvey Mortgages
currently have a weighted average annual effective interest rate of 6.24 percent
and are secured by five of the office/flex properties acquired.
On February 5, 1998, the Company acquired 500 West Putnam Avenue ("500 West
Putnam"), a 121,250 square-foot office building located in Greenwich, Fairfield
County, Connecticut. The property was acquired for a total cost of approximately
$20.1 million, funded from drawing on one of the Company's credit facilities, as
well as the assumption of mortgage debt with an estimated fair value of $12.1
million, which bears interest at an annual effective rate of 6.52 percent.
The McGarvey Portfolio and 500 West Putnam acquisitions were previously included
as Reported Events in the Company's Current Report on Form 8-K, dated January
16, 1998. They are included in this filing as a result of the inclusion of more
current financial statements.
On February 25, 1998, the Company acquired 10 Mountainview Road
("Mountainview"), a 192,000 square-foot office property, located in Upper Saddle
River, Bergen County, New Jersey. The property was acquired for approximately
$24.7 million, which was made available from proceeds received from the
Company's February 1998 offering of common stock.
On March 12, 1998, the Company acquired 1250 Capital of Texas Highway South
("Cielo Center"), a 270,703 square-foot office building in Austin, Travis
County, Texas. Cielo Center was acquired for a total cost of approximately $37.1
million, which was made available from drawing on one of the Company's credit
facilities.
2
On March 27, 1998, the Company acquired 10 office properties located in suburban
Denver and Colorado Springs, Colorado from Pacifica Holding Company
("Pacifica"), a private real estate owner and operator in Denver, Colorado. The
properties were acquired for a total cost of approximately $74.7 million, funded
by drawing approximately $68.2 million from the Company's credit facilities,
from the issuance of approximately $3.8 million in common operating partnership
units and $2.7 million from the Company's cash reserves. These acquired
buildings comprised approximately 620,017 square feet of Pacifica's entire 1.2
million square-foot office portfolio, which consists of 18 office buildings and
related operations (collectively, the "Pacifica Portfolio"). On June 8, 1998 the
Company acquired six of the remaining eight office buildings, encompassing
514,427 square feet, and 2.5 acres of vacant land, located in the Denver Tech
Center, from Pacifica for an aggregate purchase price of approximately $80.7
million, funded by drawing approximately $59.9 million from one of the Company's
credit facilities and the issuance of approximately $20.8 million in common
operating partnership units. The Company currently is a party to a contract to
acquire the remaining two office buildings, encompassing 95,360 square feet,
from Pacifica for an aggregate purchase price of approximately $11.9 million.
William L. Mack, a director and equity holder of the Company, was an indirect
owner of an interest in certain of the buildings contained in the Pacifica
Portfolio.
Also, on March 27, 1998, the Company acquired four office buildings and a day
care center, plus land parcels, and a 50 percent interest in a fifth office
building, all of such properties aggregating 859,946 square-feet and located in
the Prudential Business Campus office complex in Parsippany and East Hanover,
Morris County, New Jersey (collectively, the "Prudential Business Campus").
Prudential Business Campus was acquired for a total cost of approximately $175.9
million, which funds were made available from the Company's cash reserves (made
available in part from the proceeds of the sale of 2,705,628 shares of the
Company's common stock to Prudential Insurance Company of America, Strategic
Value Investors, LLC and Strategic Value Investors International, LLC) and from
drawing on one of the Company's credit facilities.
On March 30, 1998, the Company acquired Morris County Financial Center, a
308,215 square-foot, two-building office complex located in Parsippany, Morris
County, New Jersey. The property was acquired for approximately $52.8 million,
which was made available from drawing on one of the Company's credit facilities.
On May 13, 1998, the Company acquired 3600 South Yosemite ("3600 S. Yosemite"),
a 133,743 square-foot office building located in Denver, Denver County, Colorado
for approximately $13.5 million, which was made available from drawing on one of
the Company's credit facilities.
On May 14, 1998, the Company acquired One Ramland Road ("Ramland Road"), a
232,000 square-foot vacant office/flex building located in Orangeburg, Rockland
County, New York, for approximately $6.7 million, which was made available from
the Company's cash reserves. The Company intends to redevelop the property.
On May 22, 1998, the Company acquired 500 College Road East ("500 College
Road"), a 158,235 square-foot office building located in Plainsboro, Middlesex
County, New Jersey, for approximately $21.2 million, which was made available
from drawing on one of the Company's credit facilities.
On June 1, 1998, the Company acquired 1709 New York Avenue Northwest and 1400 L
Street Northwest, two individual office buildings aggregating approximately
325,000 square feet located in Washington, D.C. The properties were acquired for
approximately $90.0 million, which was made available from drawing on one of the
Company's credit facilities. Additionally, the Company also entered into a
contract with the same seller to acquire a third office building located at 4200
Parliament Drive and vacant land in Lanham, Prince Georges County, Maryland. The
122,000 square-foot office building, in addition to adjacent developable
3
land, is expected to be acquired for approximately $15.5 million. The completed
building acquisitions, and pending building and land acquisitions are to be
collectively referred to as the "D.C. Portfolio".
On June 3, 1998, the Company acquired 400 South Colorado Boulevard ("400 South
Colorado"), a 125,415 square-foot office building located in Denver, Denver
County, Colorado, for approximately $12.0 million, which was made available from
drawing on one of the Company's credit facilities.
Further information regarding the 1998 Acquisitions is attached on SCHEDULE A.
Each of the 1998 Acquisitions was, or will be, pursuant to individual agreements
for the sale and purchase of each property or group of properties 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.
1998 Offerings:
On February 25, 1998, the Company completed an underwritten public offer and
sale of 2,500,000 shares of its common stock and used the net proceeds, which
totaled approximately $92.2 million (after offering costs) to pay down a portion
of its outstanding borrowings under the Company's credit facilities and fund the
acquisition of Mountainview.
On March 18, 1998, in connection with the Company's acquisition of Prudential
Business Campus, the Company completed an offer and sale of 2,705,628 shares of
its common stock using the net proceeds of approximately $99.9 million (after
offering costs) in the funding of such acquisition.
On March 27, 1998, the Company completed an underwritten public offer and sale
of 650,407 shares of its common stock and used the net proceeds, which totaled
approximately $23.7 million (after offering costs), to pay down a portion of its
outstanding borrowings under the Company's credit facilities.
On April 29, 1998, the Company completed an underwritten public offer and sale
of 994,228 shares of its common stock and used the net proceeds, which totaled
approximately $34.7 million (after offering costs), primarily to pay down a
portion of its outstanding borrowings under the Company's credit facilities.
On May 29, 1998, the Company completed an underwritten public offer and sale of
984,615 shares of its common stock and used the net proceeds, which totaled
approximately $34.2 million (after offering costs) primarily to pay down a
portion of its outstanding borrowings under the Company's credit facilities.
4
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
The special-purpose financial statements included in this report encompass
the following:
o Audited Statement of Revenue and Certain Expenses for the McGarvey
Portfolio for the year ended December 31, 1997 and unaudited interim
financial information for the period January 1, 1998 to January 29,
1998,
o Audited Statement of Revenue and Certain Expenses for 500 West
Putnam for the year ended December 31, 1997 and unaudited interim
financial information for the period January 1, 1998 to February 4,
1998,
o Audited Statement of Revenue and Certain Expenses for Mountainview
for the year ended December 31, 1997 and unaudited interim financial
information for the period January 1, 1998 to February 24, 1998,
o Audited Statement of Revenue and Certain Expenses for Cielo Center
for the year ended December 31, 1997 and unaudited interim financial
information for the period January 1, 1998 to March 11, 1998,
o Audited Statements of Revenue and Certain Expenses for the Pacifica
Portfolio for the years ended December 31, 1997, 1996, and 1995 and
unaudited interim financial information for the period January 1,
1998 to March 26, 1998,
o Audited Historical Statement of Gross Income and Direct Operating
Expenses for Prudential Business Campus for the year ended December
31, 1997 and unaudited interim financial information for the period
January 1, 1998 to March 26, 1998,
o Audited Historical Statement of Gross Income and Direct Operating
Expenses for the Morris County Financial Center for the year ended
December 31, 1997 and unaudited interim financial information for
the period January 1, 1998 to March 29, 1998,
o Audited Statement of Revenue and Certain Expenses for 3600 S.
Yosemite for the year ended December 31, 1997 and unaudited interim
financial information for the three months ended March 31, 1998,
o Audited Statement of Revenue and Certain Expenses for 500 College
Road East for the year ended December 31, 1997 and unaudited interim
financial information for the three months ended March 31, 1998,
o Audited Statement of Revenue and Certain Expenses for the D.C.
Portfolio for the year ended December 31, 1997 and unaudited interim
financial information for the three months end March 31, 1998, and
o Audited Statement of Revenue and Certain Expenses for 400 South
Colorado for the year ended December 31, 1997 and unaudited interim
financial information for the three months ended March 31, 1998.
5
(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 March 31, 1998,
o Condensed consolidated statements of operations for the three months
ended March 31, 1998 and the year ended December 31, 1997, and
o Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available for the twelve month period
ended March 31, 1998.
(c) Exhibits
10.162 Agreement for Purchase and Sale of Real Estate by and between
Bayer Corporation, as Seller, and Mack-Cali Realty Acquisition
Corporation, as Purchaser, dated March 31, 1998 [Ramland Road]
10.163 Agreement of Sale and Purchase by and between SI Princeton,
Inc., as Seller, and Mack- Cali Realty Acquisition
Corporation, as Purchaser, dated April 29, 1998 [500 College
Road]
10.164 Purchase and Sale Agreement by and between 1709 L.P., as
Seller, and Mack-Cali Realty Acquisition Corp., as Purchaser,
dated June 1, 1998 [D.C. Portfolio]
10.165 Purchase and Sale Agreement by and between 14L Associates, as
Seller, and Mack-Cali Realty Acquisition Corp., as Purchaser,
dated June 1, 1998 [D.C. Portfolio]
10.166 Contribution and Exchange Agreement between and among G&G
Martco, Lawrence W. Feldman, The Lawrence W. And Marie N.
Feldman Trust, Alvin Dworman and Plentitude Partners, L.P. and
Mack-Cali Realty, L.P., dated April 30, 1998 [Convention
Plaza]
10.167 Underwriting Agreement, dated May 27, 1998, between Mack-Cali
Realty Corporation and PaineWebber Incorporated.
6
SCHEDULE A:
MACK-CALI REALTY CORPORATION
Summary of 1998 Acquisitions
DATE PERCENT ACQUIS.
ACQUIRED RENTABLE OCCUPIED COST TO
(for completed SQUARE AS OF YEAR COMPANY PRINCIPAL TENANTS
PROPERTY acquisitions) FEET CLOSING COMPLETED (in thousands) (based on percentage of property leased)
McGarvey Portfolio 1/30/98 748,660 98% 1985 $47,452 Color Graphics Inc. (7%),
(21 Properties) (17 Properties) to Standard Register Co. (5%)
Moorestown and Pending: 199,400 N/A 1997 $11,997 Computer Science Corp. (5%)
Burlington, (4 Properties)
Burlington County,
New Jersey
500 West Putnam 2/05/98 121,250 100% 1973 $20,125 Hachette Magazines, Inc. (27%),
500 West Putnam Ave. Great Brands of Europe (12%),
Greenwich, Winklevoss Consultants, Inc. (12%),
Fairfield County, Orthopaedics Associates, P.C. (11%)
Connecticut
Mountainview 2/25/98 192,000 98% 1986 $24,725 Thomson Minwax Company (23%),
10 Mountainview Road Corning Life Sciences Inc. (15%),
Upper Saddle River, ITT Fluid Technology (14%),
Bergen County, Neuromedical Systems Inc. (14%),
New Jersey Professional Detailing Inc. (14%),
Innapharma Inc. (10%)
Cielo Center 3/12/98 270,703 92% 1985 $37,062 Executive Environments Inc. (16%),
1250 Capital of Texas Intelliquest Inc. (14%)
Highway South
Austin,
Travis County,
Texas
Pacifica Portfolio 3/27/98 620,017 98% 1982 $74,712 Evolving Systems, Inc. (11%),
(18 Properties and (10 Properties) to Sun Microsystems, Inc. (9%),
vacant parcel) 6/8/98 514,427 89% 1997 $80,701 TRW Inc. (9%),
Denver and (6 Properties First Tennessee Bank, N.A. (6%)
Colorado Springs, and vacant
Colorado parcel)
2 Properties 95,360 N/A $11,866
Pending
Prudential Business 3/27/98 859,946 97% 1982 $175,856 Nabisco Inc. (34%),
Campus (6 Properties to Deloitte & Touche LLP (14%),
and vacant parcel) 1991 Prudential Insurance Co. (11%),
Parsippany and Bay Networks (7%)
East Hanover,
Morris County,
New Jersey
Morris County 3/30/98 308,215 97% 1989 $52,753 Coopers & Lybrand LLP (41%),
Financial Center Integrated Communications (25%),
(2 Properties) Experian Information Solutions (8%)
Parsippany,
Morris County,
New Jersey
7
SCHEDULE A:
MACK-CALI REALTY CORPORATION
Summary of 1998 Acquisitions (continued)
DATE PERCENT ACQUIS.
ACQUIRED RENTABLE OCCUPIED COST TO
(for completed SQUARE AS OF YEAR COMPANY PRINCIPAL TENANTS
PROPERTY acquisitions) FEET CLOSING COMPLETED (in thousands) (based on percentage of property leased)
3600 S. Yosemite 5/13/98 133,743 100% 1974 $13,500 M.D.C. Holdings, Inc. (100%)
3600 S. Yosemite Rd,
Denver,
Denver County,
Colorado
Ramland Road 5/14/98 232,000 0% 1987 $6,700 N/A
One Ramland Road
Orangeburg,
Rockland County,
New York
500 College Road East 5/22/98 158,235 100% 1984 $21,200 Merrill Lynch Asset Management
500 College Road East (73%),
Plainsboro, Buchanan Ingersoll P.C. (17%),
Middlesex County, PNC Bank N.A. (10%)
New Jersey
D.C. Portfolio 6/1/98 325,000 93% 1972 $90,000 Board of Gov./Federal Reserve (21%),
(3 Properties and (2 Properties) to Winston & Strawn (20%),
vacant parcel) Pending: 122,000 N/A 1989 $15,450 Comnet Corporation (11%),
1709 New York Ave. (1 Property) The United States of America (7%),
and World Resources Institute (6%)
1400 L Street
Washington, D.C.;
4200 Parliament Drive
Lanham, Prince
Georges County,
Maryland
400 South Colorado 6/3/98 125,415 94% 1983 $12,000 Community Health Plan (12%),
400 South Colorado Department of Revenue (12%),
Boulevard Northwest Bank, N.A. (11%),
Denver, Senter, Goldfarb & Rice (10%)
Denver County,
Colorado
TOTAL 5,026,371 $696,099
8
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
June 12, 1998 By: /s/ Thomas A. Rizk
------------------
Thomas A. Rizk
Chief Executive Officer
June 12, 1998 By: /s/ Barry Lefkowitz
-------------------
Barry Lefkowitz
Executive Vice President and
Chief Financial Officer
9
MACK-CALI REALTY CORPORATION
Index to Financial Information
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Page
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McGARVEY PORTFOLIO
Report of Independent Accountants........................................ 12
Combined Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 13
The Period January 1, 1998 to January 29, 1998 (unaudited)............ 17
Notes to Statements of Revenue and Certain Expenses...................... 14-16
500 WEST PUTNAM
Report of Independent Accountants........................................ 18
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 19
The Period January 1, 1998 to February 4, 1998 (unaudited)............ 22
Notes to Statements of Revenue and Certain Expenses...................... 20-21
MOUNTAINVIEW
Report of Independent Accountants........................................ 23
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 24
The Period January 1, 1998 to February 24, 1998 (unaudited)........... 27
Notes to Statements of Revenue and Certain Expenses...................... 25-26
CIELO CENTER
Report of Independent Accountants........................................ 28
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997 and.................................. 29
The Period January 1, 1998 to March 11, 1998 (unaudited).............. 32
Notes to Statements of Revenue and Certain Expenses...................... 30-31
PACIFICA PORTFOLIO
Report of Independent Accountants........................................ 33
Statements of Revenue and Certain Expenses for:
The Years Ended December 31, 1997, 1996, and 1995, and................ 34
The Period January 1, 1998 to March 26, 1998 (unaudited).............. 38
Notes to Statements of Revenue and Certain Expenses...................... 35-37
PRUDENTIAL BUSINESS CAMPUS
Report of Independent Accountants........................................ 39
Historical Statements of Gross Income and Direct Operating Expenses for:
The Year Ended December 31, 1997, and................................. 40
The Period January 1, 1998 to March 26, 1998 (unaudited).............. 44
Notes to Historical Statements of Gross Income and
Direct Operating Expenses.. ............................................. 41-43
10
MACK-CALI REALTY CORPORATION
Index to Financial Information (continued)
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Page
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MORRIS COUNTY FINANCIAL CENTER
Report of Independent Accountants........................................ 45
Historical Statements of Gross Income and Direct Operating Expenses for:
The Year Ended December 31, 1997, and................................. 46
The Period January 1, 1998 to March 29, 1998 (unaudited).............. 49
Notes to Historical Statements of Gross Income and
Direct Operating Expenses.. ............................................. 47-48
3600 S. YOSEMITE
Report of Independent Accountants........................................ 50
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 51
The Three Months Ended March 31, 1998 (unaudited)..................... 54
Notes to Statements of Revenue and Certain Expenses...................... 52-53
500 COLLEGE ROAD EAST
Report of Independent Accountants........................................ 55
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 56
The Three Months Ended March 31, 1998 (unaudited)..................... 59
Notes to Statements of Revenue and Certain Expenses...................... 57-58
D.C. PORTFOLIO
Report of Independent Accountants........................................ 60
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 61
The Three Months Ended March 31, 1998 (unaudited)..................... 64
Notes to Statements of Revenue and Certain Expenses...................... 62-63
400 SOUTH COLORADO
Report of Independent Accountants........................................ 65
Statements of Revenue and Certain Expenses for:
The Year Ended December 31, 1997, and................................. 66
The Three Months Ended March 31, 1998 (unaudited)..................... 69
Notes to Statements of Revenue and Certain Expenses...................... 67-68
MACK-CALI REALTY CORPORATION
Pro Forma (unaudited):
Condensed Consolidated Balance Sheet as of March 31, 1998................ 70-71
Condensed Consolidated Statements of Operations for:
The Three Months Ended March 31, 1998, and............................ 72-76
The Year Ended December 31, 1997...................................... 77-81
Estimated Twelve-Month Pro Forma Statement of Taxable Net
Operating Income and Operating Funds Available for
the Twelve Months Ended March 31, 1998................................ 82
11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses for the properties known as the McGarvey Portfolio, as more fully
described in Note 1, for the year ended December 31, 1997. The combined
financial statement is the responsibility of the McGarvey Portfolio'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 combined financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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 combined financial statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying Combined 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 McGarvey Portfolio's revenues and expenses.
In our opinion, the combined financial statement referred to above
presents fairly, in all material respects, the revenue and certain expenses of
the McGarvey Portfolio for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
April 6, 1998
12
McGARVEY PORTFOLIO
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $5,002,423
Escalations and recoveries from tenants 1,009,119
----------
6,011,542
----------
Certain Expenses
Real estate taxes 779,904
Utilities 89,624
Operating services (Note 4) 375,870
General and administrative 2,126
----------
1,247,524
----------
Revenue in excess of certain expenses $4,764,018
==========
The accompanying notes are an integral part of this Combined Statement of
Revenue and Certain Expenses.
13
McGARVEY PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND OPERATION OF PROPERTY
McGarvey Development Company ("McGarvey") is engaged in the development,
ownership and operation of office/flex buildings located in New Jersey. On
January 30, 1998 McGarvey sold 17 office/flex buildings to certain
subsidiaries of Mack-Cali Realty Corporation (the "Company") totaling
approximately 748,660 square feet. McGarvey is under contract to sell to
the Company four additional office/flex buildings, aggregating 199,400
square feet. The Company also has an option to purchase an office/flex
property, as well as rights of first refusal to purchase up to six
additional properties. There is no assurance that the purchases of the
properties indicated in the preceding two sentences will be consummated or
that certain conditions or purchase terms will not be modified or amended.
The combined statements of revenue and certain expenses include the 17
acquired buildings and the four buildings under contract, totaling 21
office/flex buildings which are collectively referred to as the "McGarvey
Portfolio" or the "Properties".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The accompanying Statement of Revenue and Certain Expenses has been
presented on a combined basis, which is considered to be the most
meaningful, due to the common general partners in partnerships or
managing members in limited liability companies and common
management.
The following table sets forth the Properties included in the
Combined Statement of Revenue and Certain Expenses:
Properties Acquired by the Company on January 30, 1998:
Partnership Property Address
- ----------- -------- -------
Bromley Commons 3 Terri Lane 3 Terri Lane, Burlington
5 Terri Lane 5 Terri Lane, Burlington
Cambridge Management Garlock Building 1451 Metropolitan Avenue,
West Deptford
McGarvey Development Flex III 201 Commerce Drive, Moorestown
Color Graphics 101 Commerce Drive, Moorestown
Flex VII 1 Executive Drive, Moorestown
Flex IX 102 Executive Drive, Moorestown
Moorestown West Flex VIII 101 Executive Drive, Moorestown
Flex XI 225 Executive Drive, Moorestown
Flex X 1256 N. Church Street, Moorestown
Lenola Flex Flex XII and 840 N. Lenola Road, Moorestown
Flex XIV 844 N. Lenola Road, Moorestown
14
McGARVEY PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
a. Basis of Presentation (Continued)
Properties Acquired by the Company on January 30, 1998 (Continued):
Partnership Property Address
- ----------- -------- -------
Twosome Flex Flex XV 30 Twosome Drive, Moorestown
Flex XVI 40 Twosome Drive, Moorestown
Flex XVII 50 Twosome Drive, Moorestown
Foster Flex Assoc. Flex XXII 97 Foster Road, Moorestown
Lancer Associates Flex XXIV 1507 Lancer Drive, Moorestown
Properties Under Contract as of This Report Date:
Partnership Property Address
- ----------- -------- -------
McGarvey Development Flex II 2 Commerce Drive, Moorestown
Flex IV 102 Commerce Drive, Moorestown
Flex V 202 Commerce Drive, Moorestown
Flex VI 2 Executive Drive, Moorestown
The accompanying Combined 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 revenue and certain expenses,
which may not be comparable to the revenue and certain expenses to
be earned or incurred by the Company in the future operations of the
Properties, have been excluded. Revenue excluded consists of
interest and other revenue 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 the combined financial statements in accordance
with generally accepted accounting principles requires management to
make estimates and assumptions that affect 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.
15
McGARVEY PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 various
expiration dates through 2009. 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, and/or increase in, real estate taxes, operating expenses, and
utilities.
Future minimum rentals to be received under noncancellable operating
leases at December 31, 1997 are as follows:
1998 $ 4,062,739
1999 3,404,851
2000 2,979,711
2001 2,276,969
2002 1,597,634
Thereafter 3,640,606
------------
$17,962,510
============
For the year ended December 31, 1997 and for the period of January 1, 1998
through January 29, 1998 (unaudited) no individual tenant contributed more
than 10% of base rent.
4. RELATED PARTY TRANSACTIONS
The Properties incurred landscaping, snow removal and repair and
maintenance expenses paid to related parties which totaled $40,891 for the
year ended December 31, 1997.
5. INTERIM FINANCIAL STATEMENT
The interim financial data for the period January 1, 1998 through January
29, 1998 are 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 year or any other
period.
16
McGARVEY PORTFOLIO
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1998 TO JANUARY 29, 1998
(unaudited)
Revenue
Base rents (Note 2) $423,130
Escalations and recoveries from tenants 71,581
--------
494,711
--------
Certain Expenses
Real estate taxes 66,092
Utilities 8,392
Operating services (Note 4) 7,433
General and administrative 87
--------
82,004
--------
Revenue in excess of certain expenses $412,707
========
The accompanying notes are an integral part of this Combined Statement of
Revenue and Certain Expenses.
17
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, as more fully described in
Note 1, for the year ended December 31, 1997. The financial statement is the
responsibility of 500 West Putnam'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 Reality Corporation) and is not intended to be a complete presentation
of 500 West Putnam's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of 500 West Putnam
for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
March 29, 1998
18
500 WEST PUTNAM
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $2,269,855
Escalation and recoveries from tenants 481,910
----------
2,751,765
----------
Certain Expenses
Real estate taxes 169,749
Utilities 268,560
Operating services 313,872
General and administrative (Note 4) 166,900
----------
919,081
----------
Revenue in excess of certain expenses $1,832,684
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
19
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 totaling
approximately 121,250 square feet in Greenwich, Fairfield County,
Connecticut, which was acquired by a subsidiary of Mack-Cali Realty
Corporation on February 5, 1998.
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 revenue and certain expenses, which may
not be comparable to the revenue and certain expenses to be earned
or incurred by the Company in the future operations of the Property,
have been excluded. Revenue excluded consists of interest and other
revenues unrelated to the continuing operations of the Property.
Expenses excluded consist of depreciation of the building and
improvements, 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 the financial statements in conformity with
generally accepted accounting principles requires 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 reported 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 up to 13 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, and/or increases in, real estate taxes, operating
expenses and utilities.
20
500 WEST PUTNAM
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
3. LEASES (Continued)
Future minimum rentals to be received under non-cancelable operating
leases at December 31, 1997 are as follows:
1998 $ 2,271,990
1999 2,258,878
2000 2,000,824
2001 1,299,182
2002 944,756
Thereafter 5,928,321
------------
$14,703,951
============
For the year ended December 31, 1997, four tenants contributed 62.5% of
base rents comprised of: 24.2% for Hachette, Inc., 15.6% for Great Brands,
Inc., 11.6% for Orthopedic Associates, P.C. and 11.1% for Winklevoss, Inc.
For the period January 1, 1998 to February 4, 1998 (unaudited), four
tenants contributed 60.7% of base rents comprised of: 23.5% for Hachette,
Inc., 15.1% for Great Brands, Inc., 11.3% for Orthopedic Associates, P.C.
and 10.8% for Winklevoss, Inc.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees of 5.7% of total revenues for both
1997 and for the period of January 1, 1998 to February 4, 1998. Management
fee expense for the property was $156,752 for 1997 and $15,207 (unaudited)
for the period January 1, 1998 to February 4, 1998.
5. INTERIM STATEMENT
The interim financial data for the period of January 1, 1998 to February
4, 1998 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 results for the interim
period. The results for the period presented are not necessarily
indicative of the results to be expected for the entire year or any other
period.
21
500 WEST PUTNAM
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1998 TO FEBRUARY 4, 1998
(unaudited)
Revenue
Base rents (Note 2) $229,677
Escalation and recoveries from tenants 38,132
--------
267,809
--------
Certain Expenses
Real estate taxes 17,244
Utilities 26,152
Operating services 27,076
General and administrative (Note 4) 15,384
--------
85,856
--------
Revenue in excess of certain expenses $181,953
========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
22
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 Mountainview, as more fully described in Note 1, for
the year ended December 31, 1997. 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 Mountainview's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses for Mountainview for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
March 27, 1998
23
MOUNTAINVIEW
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $2,653,925
Escalations and recoveries from tenants 210,922
Other income 3,562
----------
2,868,409
----------
Certain Expenses
Real estate taxes 221,427
Utilities 421,110
Operating services 508,280
General and administrative (Note 4) 110,307
----------
1,261,124
----------
Revenue in excess of certain expenses $1,607,285
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
24
MOUNTAINVIEW
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, Mountainview (the "Property") is an office building totaling
approximately 192,000 square feet in Upper Saddle River, Bergen County,
New Jersey which was acquired by a subsidiary of Mack-Cali Realty
Corporation, (the "Company") on February 25, 1998.
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 revenue and certain expenses, which may
not be comparable to the revenue and certain expenses to be earned
or incurred by the Company in the future operations of the Property
have been excluded. Revenue excluded consists of interest and other
revenue 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 requires management to make estimates
and assumptions that affect disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and certain expenses during the reporting 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 up to ten years
with options to certain tenants for renewal. Minimum rental amounts for
certain leases increase as set forth under the terms of each lease. In
addition to base rents, the leases provide for the tenants to pay their
proportionate share of, and/or increases in, real estate taxes, operating
expenses, and utilities.
25
MOUNTAINVIEW
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
3. LEASES (Continued)
Future minimum rentals to be received under non-cancelable operating
leases at December 31, 1997 are as follows:
1998 $ 3,227,095
1999 3,643,536
2000 3,691,848
2001 3,662,848
2002 3,190,766
Thereafter 9,059,546
------------
$26,475,639
============
For the year ended December 31, 1997, four tenants contributed 87.6
percent of base rents, comprised of: 34.5 percent for Thompson Minwax
Company, Inc., 21.0 percent for Neuromedical Systems, Inc., 19.5 percent
for Corning Life Sciences, Inc. and 12.6 percent for Innapharma, Inc.
For the period of January 1, 1998 to February 24, 1998 (unaudited) four
tenants contributed 86.8 percent of base rents, comprised of: 34.2 percent
for Thompson Minwax, Inc., 20.8 percent for Neuromedical, Inc., 19.3
percent for Corning Life Sciences, Inc. and 12.5 percent for Innapharma,
Inc.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees based on two percent of gross
revenues which totaled $58,778 for the year ended December 31, 1997 and
$8,867 (unaudited) for the period of January 1, 1998 to February 24, 1998.
5. INTERIM STATEMENT
The interim financial data for the period of January 1, 1998 to February
24, 1998 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.
26
MOUNTAINVIEW
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1998 TO FEBRUARY 24, 1998
(unaudited)
Revenue
Base rents (Note 2) $421,974
Escalation and recoveries from tenants 33,573
--------
455,547
--------
Certain Expenses
Real estate taxes 35,028
Utilities 67,880
Operating services 69,726
General and administrative (Note 4) 14,435
--------
187,069
--------
Revenue in excess of certain expenses $268,478
========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
27
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 Cielo Center, as more fully described in
Note 1, for the year ended December 31, 1997. The financial statement is the
responsibility of Cielo Center'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 Reality Corporation) and is not intended to be a complete presentation
of Cielo Center's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of Cielo Center for
the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Schonbraun Safris McCann Bekritsy & Co., L.L.C.
---------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
March 30, 1998
28
CIELO CENTER
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $3,976,912
Escalation and recoveries from tenants 205,862
Parking and other 105,890
----------
4,288,664
----------
Certain Expenses
Real estate taxes 596,834
Utilities 491,554
Operating services 848,825
General and administrative (Note 4) 264,364
----------
2,201,577
----------
Revenue in excess of certain expenses $2,087,087
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
29
CIELO CENTER
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND OPERATION OF PROPERTY
For the purpose of the accompanying Statement of Revenue and Certain
Expenses, Cielo Center (the "Property") is an office property totaling
approximately 270,703 square feet in Austin, Texas, which was acquired by
a subsidiary of Mack-Cali Realty Corporation (the "Company") on March 12,
1998.
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 revenue and operating expenses,
which may not be comparable to the revenue and certain expenses to
be earned or incurred by the Company in the future operations of the
Property have been excluded. Revenue excluded consists of interest
and other revenue unrelated to the continuing operations of the
Property. Expenses excluded consist of depreciation of the building
and improvements, 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 the financial statements in conformity with
generally accepted accounting principles requires 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 reported 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 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, and/or increases in, real estate taxes, operating
expenses and utilities.
30
CIELO CENTER
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
3. LEASES (Continued)
Future minimum rentals to be received under non-cancelable operating
leases at December 31, 1997 are as follows:
1998 $ 4,912,707
1999 4,988,500
2000 4,291,747
2001 3,390,066
2002 1,280,066
2003 596,890
------------
$19,459,976
============
For the year ended December 31, 1997 and for the period of January 1, 1998
to March 11, 1998 (unaudited) one tenant contributed more than 10.0
percent of base rents. Intelliquest, Inc. contributed 14.3 and 12.6
percent of base rents, respectively.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees based on four percent of gross
revenues which totaled $175,900 for the year ended December 31, 1997 and
$38,570 (unaudited) for the period January 1, 1998 to March 11, 1998.
5. INTERIM STATEMENT
The interim financial data for the period of January 1, 1998 to March 11,
1998 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 results for the interim
period. The results for the period presented are not necessarily
indicative of the results to be expected for the entire year or any other
period.
31
CIELO CENTER
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1998 TO MARCH 11, 1998
(unaudited)
Revenue
Base rents (Note 2) $ 943,309
Escalation and recoveries from tenants 42,638
Parking and other 19,532
-----------
1,005,479
-----------
Certain Expenses
Real estate taxes 124,340
Utilities 88,929
Operating services 137,961
General and administrative (Note 4) 73,375
-----------
424,605
-----------
Revenue in excess of certain expenses $ 580,874
===========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Combined Statements of Revenue and
Certain Expenses for the properties known as the Pacifica Portfolio, as more
fully described in Note 1, for the years ended December 31, 1997, 1996 and 1995.
The combined financial statements are the responsibility of the Pacifica
Portfolio's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying Combined Statements of Revenue and Certain Expenses were
prepared as described in Note 2, for the purpose of complying with the rules and
regulations of the Security 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 Pacifica Portfolio's revenue and expenses.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the revenue and certain expenses of
the Pacifica Portfolio for the years ended December 31, 1997, 1996 and 1995 in
conformity with generally accepted accounting principles.
/s/ Schonbraun Safris McCann Bekrtisky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
April 8, 1998
33
PACIFICA PORTFOLIO
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
---- ---- ----
Revenue
Base rents (Note 2) $7,824,679 $2,919,402 $2,066,367
Escalation and recoveries from tenants 791,363 116,788 98,331
Parking and other 52,773 16,507 6,055
---------- ---------- ----------
8,668,815 3,052,697 2,170,753
---------- ---------- ----------
Certain Expenses
Real estate taxes 1,084,022 271,824 216,750
Utilities 494,821 354,919 356,041
Operating services 808,182 515,424 433,538
General and administrative (Note 4) 263,093 153,066 108,726
---------- ---------- ----------
2,650,118 1,295,233 1,115,055
---------- ---------- ----------
Revenue in excess of certain expenses $6,018,697 $1,757,464 $1,055,698
========== ========== ==========
The accompanying notes are an integral part of these Combined Statements of
Revenue and Certain Expenses.
34
PACIFICA PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND OPERATION OF PROPERTY
The Pacifica Portfolio (not a legal entity) is engaged in the ownership
and operation of commercial office buildings located in the state of
Colorado (the "Properties"). The Properties consist of 18 office buildings
comprising approximately 1.2 million square feet and a parcel of
undeveloped land. Management, leasing and construction services with
respect to the Properties have been historically provided by Pacifica
Holding Company LLC, which is affiliated with the Properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The accompanying Combined Statements of Revenue and Certain Expenses
of the Properties have been presented on a combined basis, which is
considered to be the most meaningful due to the common general
partners in partnerships or managing members in limited liability
companies and common management.
The following table sets forth the Properties included in these
Combined Statements of Revenue and Certain Expenses:
Square Year Placed
Property (A) Address Footage in Service
- ------------ ------- ------- ----------
Pacifica Progress 141 Union / Lakewood 63,600 1986
Pacifica Place 5350 S. Roslyn / Englewood 63,754 1982
384 Inverness 384 Inverness / Englewood 52,647 1985
ESI Building 9777 Mt. Pyramid / Parker 120,281 1996
Pacifica Pointe 5975 S. Quebec / Englewood 102,877 1996
67 Inverness 67 Inverness / Englewood 54,280 1996
TRW Building 750 W. Richfield / Aurora 108,240 1997
Interlocken I 303 Technology / Broomfield 74,870 1997
Centennial Valley I 1172 Century Drive / Louisville 49,566 1997
Centennial Valley I 248 Centennial Pkwy / Louisville 39,266 1997
Centennial Valley II 285 Century Place / Louisville 69,145 1997
--------
Total square footage 798,526
========
Certain properties included in the Pacifica Portfolio have begun
rental activity during various years, as indicated by the above
schedule. Inclusion of such rental activity in the combined
statements was based on the initial year of activity. Other
properties have been excluded from the combined statements as they
were under various stages of development as of December 31, 1997.
(A) All of the above listed properties have been acquired by
subsidiaries of Mack-Cali Realty Corporation, with the
exception of Centennial Valley II which is currently under
contract.
35
PACIFICA PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (Continued)
a. Basis of Presentation (Continued)
The following table sets forth the properties under development and
the land parcel, which are excluded from the combined statements:
Square
Property Address Footage
- -------- ------- -------
Interlocken II 105 Technology Court / Broomfield 37,574 (a)
Pacifica Inverness 400 Inverness / Englewood 111,798 (b)
Pacifica Highland 9359 E. Nichols Ave. / Arapahoe 72,610
Pacifica Tech Briargate 2375 Telstar Drive / Colorado Springs 46,400
Pacifica Tech Briargate 8415 Explorer Drive / Colorado Springs 46,400
Pacifica Pointe Briargate 1975 Research Pkway / Colorado Springs 115,250
DTC Land 4501 S. Tamarac Pkway / Denver -- (c)
-------
Total square footage 430,032
=======
(a) Included in combined statements for the period January 1, 1998
to March 26, 1998. Property began rental activity on March 1,
1998.
(b) Included in combined statements for the period January 1, 1998
to March 26, 1998. Property began rental activity on January
1, 1998.
(c) Vacant land parcel.
The accompanying Combined Statements of Revenue and Certain Expenses
have been prepared on the accrual basis of accounting for those
properties which had rental activity during the years ended December
31,1997, 1996 and 1995. The accompanying combined financial
statements are not representative of the actual operations for the
period presented as revenue and certain expenses, which may not be
comparable to the revenue and certain expenses to be earned or
incurred by the Company in the future operations of the Properties
because certain expenses have been excluded. Revenue excluded
consists of interest and other revenue unrelated to the continuing
operations of the Properties. Expenses excluded consist of
depreciation of the building and improvements, 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 the combined 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 revenue 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.
36
PACIFICA PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
3. LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2016. Substantially all of these leases provide
for annual base rents plus recoveries and escalation charges based upon
the tenant's proportionate share of and/or increases in real estate taxes
and certain operating costs as defined and the pass-through of charges for
electrical usage.
Future minimum rentals to be received under non-cancelable operating
leases at December 31, 1997 are as follows:
1998 $ 13,178,000
1999 13,808,000
2000 13,773,000
2001 12,504,000
2002 10,221,000
Thereafter 41,232,000
-------------
$104,716,000
=============
For the year ended December 31, 1995, two tenants contributed 23.7 percent
of base rent, comprised of: 12.6 percent for Quickpen International, Inc.
and 11.1 percent for Tom Brown, Inc.
For the year ended December 31, 1996, Northern Telecom, Inc. contributed
13.9 percent of base rent.
For the year ended December 31, 1997, two tenants contributed 31.1 percent
of base rent, comprised of: 18.6 percent for Evolving Systems, Inc. and
12.5 percent for Northern Telecom, Inc.
For the period of January 1, 1998 to March 26, 1998 (unaudited), two
tenants contributed 32.9 percent of base rent, comprised of: 22.0 percent
for TRW, Inc. and 10.9 percent for Evolving Systems, Inc.
4. RELATED PARTY TRANSACTIONS
General and Administrative
The Properties incurred management fees based on various rates of
approximately 1.5 to 4 percent of gross revenues which totaled $219,294,
$125,928 and $87,533 for the years 1997, 1996 and 1995, respectively. For
the period January 1, 1998 to March 26, 1998, the Properties incurred
management fees which totaled $85,390 (unaudited).
5. INTERIM STATEMENT
The interim financial data for the period January 1, 1998 to March 26,
1998 are 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.
37
PACIFICA PORTFOLIO
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1998 TO MARCH 26, 1998
(unaudited)
Revenue
Base rents (Note 2) $3,226,647
Escalation and recoveries from tenants 371,762
Parking and other 19,742
----------
3,618,151
----------
Certain Expenses
Real estate taxes 326,646
Utilities 168,749
Operating services 246,103
General and administrative (Note 4) 98,179
----------
839,677
----------
Revenue in excess of certain expenses $2,778,474
==========
The accompanying notes are an integral part of this Combined Statement of
Revenue and Certain Expenses.
38
Report of Independent Accountants
To the Board of Directors and
Shareholders of Mack-Cali Realty Corporation
We have audited the accompanying Historical Statement of Gross Income and Direct
Operating Expenses of the property known as the Prudential Business Campus (the
"Property") for the year ended December 31, 1997. This historical statement is
the responsibility of the Property's management. Our responsibility is to
express an opinion on this historical statement based on our audit.
We conducted our audit of this historical statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the historical statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical statement. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall historical statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement was prepared 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) as described in Note
2, and is not intended to be a complete presentation of the Property's revenues
and expenses.
In our opinion, the historical statement referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in Note 2 for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
New York, New York
April 16, 1998
39
PRUDENTIAL BUSINESS CAMPUS
HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Gross income
Base rents $ 12,224,598
Escalations and recoveries from tenants 1,081,852
Parking and other 463,952
Interest income 141,136
Equity in earnings of investee 1,554,274
-------------
Total gross income 15,465,812
-------------
Direct operating expenses
Real estate taxes 2,530,728
Utilities 941,485
Operating services 828,286
General and administrative 948,623
Loss on assumption of lease 683,219
-------------
Total direct operating expenses 5,932,341
-------------
Gross income in excess of direct operating expenses $ 9,533,471
=============
The accompanying notes are an integral part of these Combined Statements of
Revenue and Certain Expenses.
40
PRUDENTIAL BUSINESS CAMPUS
NOTES TO HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
1. Organization
For the purpose of the accompanying historical statement of gross income
and direct operating expenses, the property known as the Prudential
Business Campus (the "Property") consists of four wholly-owned office
buildings (known as Hilton Court West, Arbor Circle North, Arbor Circle
South and Two Hilton Court), a 50% joint venture interest in a fifth
office building (9 Campus Drive or the "Investee"), a day care center and
approximately 312 acres of developable land located in Parsippany and East
Hanover, New Jersey. The Property was acquired by a subsidiary of
Mack-Cali Realty Corporation (the "Company") on March 27, 1998.
2. Summary of Significant Accounting Policies
Significant accounting principles and practices used in the preparation of
the accompanying historical statement of gross income and direct operating
expenses are summarized below.
Basis of presentation
The accompanying historical statement of gross income and direct operating
expenses has been prepared on the accrual basis of accounting.
The historical 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.
Income excluded consists of interest income earned on cash balances and
short-term investments. Expenses excluded consist of expenses unrelated to
the continuing operations of the Property, namely certain general and
administrative expenses, depreciation, amortization and interest expense.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
Equity in earnings of Investee
Earnings are recognized on the equity method, reflected by the Property's
share of the current year's gross income earned over direct operating
expenses incurred by the Investee.
Revenue recognition
Leases with tenants of the Property are classified as operating leases.
Base rents are recognized on a straight-line basis over the term of the
respective lease.
The Property receives reimbursements from tenants for certain costs as
provided in the lease agreements. These costs generally include real
estate taxes, utilities, insurance, common area maintenance and other
recoverable costs (see Note 5).
41
PRUDENTIAL BUSINESS CAMPUS
NOTES TO HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
3. Related Party Transactions
The Property entered into an Asset Management Agreement with the
Prudential Insurance Company of America (the "Asset Manager"). The Asset
Manager provides the Property with executive, supervisory and managerial
services in connection with the operation, management, maintenance and
leasing of the Property and the Investee. The Asset Manager is paid an
annual fee, which is increased annually based on increases in the Consumer
Price Index. The Property incurred asset management fees of $220,605 in
1997 which are excluded from these financial statements as they will not
be continuing.
The Property has also entered into development agreements with The
Prudential Insurance Company of America (the "Development Manager") and
U.S. West Real Estate, Inc. (the "Development Director") in relation to
development of infrastructure improvements to the Tract. The Development
Manager and Development Director earn fees equal to 4.25 percent and 0.75
percent, respectively, of approved project costs for the development of
the land, which amounted to $14,181 and $2,502, respectively, in 1997.
Approximately 26,400 sq. ft. of the 53,500 sq. ft. of the Assumed Lease
(see Note 4) space is sub-leased to two affiliates of Prudential. The
sub-leases run contemporaneously with the Assumed Lease which expires in
2000. Revenue recognized from the space sub-leased to the affiliates
amounted to $782,460 in 1997.
Approximately 66,600 sq. ft. of the Arbor Circle South building is leased
to a Prudential affiliate, with a lease term of ten years which runs until
2005. Revenue recognized from the space leased to this affiliate amounted
to $1,520,017 in 1997.
4. Loss on Assumption of Lease
During 1990, the Property agreed to lease, to a third party, office space
in the property known as Two Hilton Court. The tenant agreed to pay
$3,000,000 over a ten year period at 10 percent interest and the Property
assumed the tenant's pre-existing lease (the "Assumed Lease") with a
related party. At December 31, 1997, the Assumed Lease requires future
lease payments (excluding escalations) of approximately $4,500,000 through
the year 2000. The Property has estimated future rental income exclusive
of the payments on the Assumed Lease to be approximately $3,700,000. The
estimated loss on the Assumed Lease is recognized on a straight-line basis
over the remaining term of the lease at Two Hilton Court.
5. Leases
Leases for the Property have various remaining lease terms which expire
over periods ranging from one to eight years and contain various renewal
options. Substantially all of the leases provide for annual base rents
plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs, as defined, and the pass through of charges for
electrical usage.
42
PRUDENTIAL BUSINESS CAMPUS
NOTES TO HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
The future minimum rentals to be received under non-cancelable leases in
effect at December 31, 1997, excluding the Investee, are as follows:
Year ending December 31,
1998 $ 14,661,872
1999 14,347,410
2000 14,399,152
2001 5,306,760
2002 3,579,476
Thereafter 4,316,700
---------------
$ 56,611,370
===============
6. Major Tenants
For the year ended December 31, 1997 and the period January 1, 1998 to
March 26, 1998, Nabisco, Inc. accounted for approximately 24 percent of
total rental revenues.
7. Equity in Earnings of Investee
The Investee's gross income in excess of direct operating expenses for the
year ended December 31, 1997 and the period January 1, 1998 to March 26,
1998 are summarized as follows:
January 1, 1998 to
March 26, 1998
1997 (unaudited)
---- -----------
Gross income $ 4,604,637 $ 1,161,157
Direct operating expenses (1,496,089) (382,981)
-------------- ------------
Gross income in excess of direct
operating expenses $ 3,108,548 $ 778,176
============== ===========
8. Interim Statement
The interim financial data for the period January 1, 1998 to March 26,
1998 is unaudited. However, in the opinion of management, the interim data
includes all adjustments consisting of only normal, recurring adjustments
necessary for a fair statement of the results of 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 for any other period.
43
PRUDENTIAL BUSINESS CAMPUS
HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES (unaudited)
FOR THE PERIOD JANUARY 1, 1998 TO MARCH 26, 1998
Gross income
Base rents $ 3,032,760
Escalations and recoveries from tenants 252,295
Parking and other 195,421
Interest income 51,390
Equity in earnings of investee 389,088
-------------
Total gross income 3,920,954
-------------
Direct operating expenses
Real estate taxes 611,709
Utilities 285,117
Operating services 168,348
General and administrative 345,378
Loss on assumption of lease 150,777
-------------
Total direct operating expenses 1,561,329
-------------
Gross income in excess of direct operating expenses $ 2,359,625
=============
The accompanying notes are an integral part of these Combined Statements of
Revenue and Certain Expenses.
44
Report of Independent Accountants
To the Board of Directors and
Shareholders of Mack-Cali Realty Corporation
We have audited the accompanying Historical Statement of Gross Income and Direct
Operating Expenses of the property known as Morris County Financial Center (the
"Property"), for the year ended December 31, 1997. This historical statement is
the responsibility of the Property's management. Our responsibility is to
express an opinion on this historical 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 historical statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical 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 historical
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement was prepared 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) as described in Note
2, and is not intended to be a complete presentation of the Property's revenues
and expenses.
In our opinion, the historical statement referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in Note 2, for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
New York, New York
April 2, 1998
45
MORRIS COUNTY FINANCIAL CENTER
HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Gross income
Base rents $ 6,043,448
Escalations and recoveries from tenants 1,793,817
Other income 56,036
------------
Total gross income 7,893,301
------------
Direct operating expenses
Real estate taxes 788,676
Utilities 938,955
Operating services 1,229,191
General and administrative 329,184
------------
Total direct operating expenses 3,286,006
------------
Gross income in excess of direct operating expenses $ 4,607,295
============
The accompanying notes are an integral part of these Combined Statements of
Revenue and Certain Expenses.
46
MORRIS COUNTY FINANCIAL CENTER
NOTES TO HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
1. Organization
For the purpose of the accompanying historical statement of gross income
and direct operating expenses, the property known as Morris County
Financial Center, is comprised of two office buildings, One Sylvan Way and
Five Sylvan Way (collectively, the "Property") located in Parsippany, New
Jersey. The buildings contain 154,832 and 153,383 square feet,
respectively. The Property was acquired by a subsidiary of Mack-Cali
Realty Corporation ("the Company") on March 30, 1998.
2. Summary of Significant Accounting Policies
Significant accounting principles and practices used in preparation of the
accompanying historical statement of gross income and direct operating
expenses are summarized below.
Basis of presentation
The accompanying historical statement of gross income and direct operating
expenses has been prepared on the accrual basis of accounting.
The historical 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.
Expenses excluded consist of expenses unrelated to the continuing
operations of the Property, namely certain general and administrative
expenses, depreciation, amortization and interest expense.
Use of estimates
The preparation of financial statements in conformity 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 those estimates.
Revenue recognition
Leases with tenants of the Property are classified as operating leases.
Base rents are recognized on a straight-line basis over the term of the
respective lease.
The Property receives reimbursements from tenants for certain costs as
provided in the lease agreements. These costs generally include real
estate taxes, utilities, insurance, common area maintenance and other
recoverable costs (see Note 3).
Expense allocation
The Property is part of a three-building complex in the Morris County
Financial Center complex. A portion of the expenses included herein are
based on allocation of complex-wide common charges based on each
building's proportionate square footage of the total complex square
footage.
47
MORRIS COUNTY FINANCIAL CENTER
HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
3. Leases
Leases for the Property have various remaining lease terms which expire
over periods ranging from one to seven years and contain various renewal
options. Substantially all of the leases provide for annual base rents
plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in, real estate taxes and certain
operating costs, as defined, and pass-through of charges for electrical
usage.
The future minimum rentals to be received under non-cancellable leases in
effect at December 31, 1997 are as follows:
Year ending December 31,
1998 $ 5,936,522
1999 3,283,032
2000 1,832,984
2001 1,711,599
2002 1,675,502
Thereafter 1,403,151
------------
$ 15,842,790
============
4. Major Tenants
For the year ended December 31, 1997 and the period January 1, 1998 to
March 29, 1998 (unaudited), Coopers & Lybrand, LLP and Integrated
Communications accounted for 42 percent and 24 percent of total rental
revenues, respectively.
5. Interim Statement
The interim financial data for the period ended March 29, 1998 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.
48
MORRIS COUNTY FINANCIAL CENTER
HISTORICAL STATEMENT OF GROSS INCOME AND
DIRECT OPERATING EXPENSES (unaudited)
FOR THE PERIOD JANUARY 1, 1998 TO MARCH 29, 1998
Gross income
Base rents $ 1,510,862
Escalations and recoveries from tenants 498,552
Other income 2,319
--------------
Total gross income 2,011,733
--------------
Direct operating expenses
Real estate taxes 192,787
Utilities 252,155
Operating services 322,251
General and administrative 85,834
--------------
Total direct operating expenses 853,027
--------------
Gross income in excess of direct operating expenses $ 1,158,706
==============
The accompanying notes are an integral part of these Combined Statements of
Revenue and Certain Expenses.
49
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 3600 S. Yosemite, as more fully described in Note 1,
for the year ended December 31, 1997. The financial statement is the
responsibility of 3600 S. Yosemite'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 3600 S. Yosemite's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses for 3600 S. Yosemite
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
June 4, 1998
50
3600 S. YOSEMITE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $1,677,516
Escalations and recoveries from tenants 9,872
Parking and other 69,486
----------
1,756,874
----------
Certain Expenses
Real estate taxes 119,000
Utilities 195,128
Operating services 315,800
General and administrative (Note 4) 48,803
----------
678,731
----------
Revenue in excess of certain expenses $1,078,143
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
51
3600 S. YOSEMITE
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, 3600 S. Yosemite (the "Property") is an office building totaling
approximately 133,743 square feet in Denver, Denver County, Colorado which
was acquired by a subsidiary of Mack-Cali Realty Corporation (the
"Company") on May 13, 1998.
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 revenue and certain expenses, which may
not be comparable to the revenue and certain expenses to be earned
or incurred by the Company in the future operations of the Property
have been excluded. Revenue excluded consists of interest and other
revenue 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 requires management to make estimates
and assumptions that affect disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and certain expenses during the reporting 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.
52
3600 S. YOSEMITE
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
3. LEASES
Leases for the Property have various remaining lease terms up to three
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, or increases in, real estate taxes, operating
expenses, and utilities.
Future minimum rentals to be received under non-cancelable operating
leases at December 31, 1997 are as follows:
1998 $ 1,545,683
1999 406,873
2000 96,930
-----------
$ 2,049,486
===========
For the year ended December 31, 1997, three tenants contributed 80.5
percent of base rents, comprised of: 55.3 percent for MDC Holdings, Inc.,
14.8 percent for Key Bank of Colorado, N.A., and 10.4 percent for Sevo
Miller.
For the three months ended March 31, 1998 (unaudited) three tenants
contributed 83.5 percent of base rents, comprised of: 57.4 percent for MDC
Holdings, Inc., 15.3 percent for Key Bank of Colorado, N.A., and 10.8
percent for Sevo Miller.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees based on two percent of gross
revenues which approximated $36,000 for the year ended December 31, 1997
and $9,000 for the three months ended March 31, 1998 (unaudited).
5. INTERIM STATEMENT
The interim financial data for the three months ended March 31, 1998 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.
53
3600 S. YOSEMITE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
Revenue
Base rents (Note 2) $404,883
Parking and other 18,243
--------
423,126
--------
Certain Expenses
Real estate taxes 29,750
Utilities 51,832
Operating services 81,589
General and administrative (Note 4) 9,767
--------
172,938
--------
Revenue in excess of certain expenses $250,188
========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
54
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 College Road East, as more fully
described in Note 1, for the year ended December 31, 1997. 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 500 College Road East revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of 500 College Road
East for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
May 29, 1998
55
500 COLLEGE ROAD EAST
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $2,828,316
Escalation and recoveries from tenants 437,249
----------
3,265,565
----------
Certain Expenses
Real estate taxes 317,854
Utilities 479,607
Operating services 407,250
General and administrative (Note 4) 160,659
----------
1,365,370
----------
Revenue in excess of certain expenses $1,900,195
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
56
500 COLLEGE ROAD EAST
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 College Road East (the "Property") is an office building
located at 500 College Road East, Princeton, Middlesex County, New Jersey
consisting of approximately 158,235 square feet which was acquired by a
subsidiary of Mack-Cali Realty Corporation (the "Company") on May 22,
1998.
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 revenue and expenses, which may
not be comparable to the revenue and certain expenses to be earned
or incurred by the Company in the future operations of the Property
have been excluded. Revenue excluded consists of interest and other
revenue unrelated to the continuing operations of the Property.
Expenses excluded consist of depreciation of the buildings and
improvements, 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 the financial statement in conformity 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 statement and the reported amounts of
revenue and expenses during the reported 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 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 their
proportionate share of, and/or increases in, real estate taxes, operating
expenses, and utilities.
Future minimum rents to be received over the next five years and
thereafter from tenants as of December 31, 1997 are as follows:
1998 $ 3,064,758
1999 2,831,400
2000 2,877,251
2001 2,988,237
2002 3,099,818
Thereafter 5,558,758
------------
$ 20,420,222
============
57
500 COLLEGE ROAD EAST
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
3. LEASES (Continued)
For the year ended December 31, 1997, three tenants contributed 100.0
percent of base rents comprised of: 70.0 percent for Merrill Lynch Asset
Management, L.P., 17.1 percent for Buchanan Ingersoll Professional
Corporation, and 12.9 percent for Chemical Bank of New Jersey.
For the three months ended March 31, 1998 (unaudited), three tenants
contributed 100.0 percent of base rents comprised of: 70.0 percent for
Merrill Lynch Asset Management, L.P., 17.1 percent for Buchanan Ingersoll
Professional Corporation, and 12.9 percent for Chemical Bank of New
Jersey.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees based on two percent of gross
revenues which totaled $81,889 for the year ended December 31, 1997 and
$17,206 (unaudited) for the three months ended March 31, 1998.
5. INTERIM STATEMENT
The interim financial data for the three months ended March 31, 1998 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 year or any other
period.
58
500 COLLEGE ROAD EAST
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(unaudited)
Revenue
Base rents (Note 2) $707,079
Escalation and recoveries from tenants 117,056
--------
824,135
--------
Certain Expenses
Real estate taxes 79,464
Utilities 152,505
Operating services 85,673
General and administrative (Note 4) 33,199
--------
350,841
--------
Revenue in excess of certain expenses $473,294
========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Mack-Cali Realty Corporation
Cranford, New Jersey
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses, for the properties known as the D.C. Portfolio, as more fully
described in Note 1, for the twelve months ended December 31, 1997. The
financial statement is the responsibility of the property's management. Our
responsibility is to express an opinion on this combined 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 Combined 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 the inclusion in the
Form 8-K of Mack-Cali Realty Corporation) and is not intended to be a complete
presentation of the D.C. Portfolio revenue and expenses.
In our opinion, the combined statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of the D.C. Portfolio
for the twelve months ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
May 29, 1998
60
D.C. PORTFOLIO
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $ 12,738,992
Escalations and recoveries from tenants 999,789
Parking and other 577,408
------------
14,316,189
------------
Certain Expenses
Real estate taxes 1,486,685
Utilities 898,757
Operating services 2,361,524
General and administrative (Note 4) 486,415
------------
5,233,381
------------
Revenue in excess of certain expenses $ 9,082,808
============
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
61
D.C. PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND OPERATION OF PROPERTY
For the purpose of the accompanying Combined Statement of Revenue and
Certain Expenses, the properties known as the D.C. Portfolio (the
"Property") is comprised of three office buildings totaling approximately
447,000 square feet and is expected to be acquired by a subsidiary of
Mack-Cali Realty Corporation (the "Company"). The address and approximate
square footage of the buildings are as follows:
Square
Property Address Footage
-------- ------- -------
1709 New York 1709 New York Avenue, Washington, DC 166,000
1400 L Street 1400 L Street, Washington, DC 159,000
East Pointe I and II 4200 Parliament Place, Lanham, MD 122,000
-------
447,000
=======
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses
has been prepared on the accrual basis of accounting. The
accompanying combined financial statement is not representative of
the actual operations for the period presented, as certain revenue
and expenses, which may not be comparable to the revenue and
expenses to be earned or incurred by the Company in the future
operations of the Property have been excluded. Revenue excluded
consist of interest and other revenue unrelated to the continuing
operations of the Property. Expenses excluded consist of
depreciation of the buildings and improvements, 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 the financial statement in conformity 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 statement and the reported amounts of
revenue and expenses during the reported 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 up to eight
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, or increases in, real estate taxes, operating
expenses, and utilities.
62
D.C. PORTFOLIO
NOTES TO COMBINED 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, 1997 are as follows:
1998 $13,783,949
1999 11,795,707
2000 11,177,599
2001 10,334,032
2002 9,584,735
Thereafter 12,012,875
-----------
$68,688,897
===========
For the year ended December 31, 1997, two tenants contributed 38.2 percent
of base rents comprised of: 24.9 percent for Winston & Strawn and 13.3
percent for the Board of Governors.
For the three months ended March 31, 1998 (unaudited) two tenants
contributed 38.4 percent of base rents comprised of: 25.0 percent for
Winston & Strawn and 13.4 percent for the Board of Governors.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees based on three percent of gross
revenues, which totaled $440,068 for the year ended December 31, 1997 and
$108,609 (unaudited) for the three monthds ended March 31, 1998.
5. RELATED PARTY TRANSACTIONS
The owner of the Property is an affiliate of the management company, which
operates the parking garage at 1400 L Street pursuant to the terms of an
operating agreement, and which charged the Property approximately $21,000
for the year ended December 31, 1997 and approximately $5,400 (unaudited)
for the three months ended March 31, 1998.
6. INTERIM STATEMENT
The interim financial data for the three months ended March 31, 1998 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 year or any other
period.
63
D.C. PORTFOLIO
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1998 TO MARCH 31, 1998
(unaudited)
Revenue
Base rents (Note 2) $3,032,099
Escalation and other recoveries from tenants 251,391
Parking income, net 150,793
----------
3,434,283
----------
Certain Expenses
Real estate taxes 370,700
Utilities 186,181
Operating services 509,259
General and administrative (Note 4) 123,333
----------
1,189,473
----------
Revenue in excess of certain expenses $2,244,810
==========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
64
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 400 South Colorado Boulevard, as more fully
described in Note 1, for the year ended December 31, 1997. 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 the inclusion in the Form 8-K of
Mack-Cali Realty Corporation) and is not intended to be a complete presentation
of 400 South Colorado Boulevard's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of 400 South Colorado
Boulevard for the year ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
----------------------------------------------------
SCHONBRAUN SAFRIS McCANN BEKRITSKY & CO., L.L.C.
Roseland, New Jersey
May 30, 1998
65
400 SOUTH COLORADO
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenue
Base rents (Note 2) $ 1,388,722
Escalation and recoveries from tenants 95,215
-----------
1,483,937
-----------
Certain Expenses
Real estate taxes 184,796
Utilities 231,061
Operating services 381,923
General and administrative (Note 4) 108,521
-----------
906,301
-----------
Revenue in excess of certain expenses $ 577,636
===========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
66
400 SOUTH COLORADO
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, 400 South Colorado (the "Property") is an office building
located at 400 South Colorado Boulevard, Denver, Denver County, Colorado
consisting of approximately 125,415 square feet which was acquired by a
subsidiary of Mack-Cali Realty Corporation (the "Company") on June 3,
1998.
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 financial statement
is not representative of the actual operations for the period
presented, as certain revenue and expenses, which may not be
comparable to the revenue and expenses to be earned or incurred by
the Company in the future operations of the Property have been
excluded. Revenue excluded consists of interest and other revenue
unrelated to the continuing operations of the Property. Expenses
excluded consist of depreciation of the buildings and improvements,
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 the financial statement in conformity 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 statement and the reported amounts of
revenue 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 up to 21 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, or increases in, real estate taxes, operating
expenses, and utilities.
Future minimum rentals to be received under non-cancelable operating
leases at December 31, 1997 are as follows:
1998 $1,696,511
1999 1,623,520
2000 1,081,199
2001 658,201
2002 322,020
Thereafter 977,825
----------
$6,359,276
==========
67
400 SOUTH COLORADO
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
3. LEASES (Continued)
For the year ended December 31, 1997, two tenants contributed 28.5 percent
of base rent comprised of: 16.7 percent for Norwest Bank and 11.8 percent
for Community Health Plan of the Rockies.
For the three months ended March 31, 1998 (unaudited) two tenants
contributed 33.3 percent of base rent comprised of: 20.7 percent for
Colorado Department of Revenue and 12.6 percent for Norwest Bank.
4. GENERAL AND ADMINISTRATIVE
The Property incurred management fees based on three percent of gross
revenues, which totaled $78,834 for the year ended December 31, 1997 and
$16,628 for the three months ended March 31, 1998 (unaudited).
5. INTERIM STATEMENT
The interim financial data for the three months ended March 31, 1998 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 year or any other
period.
68
400 SOUTH COLORADO
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(unaudited)
Revenue
Base rents (Note 2) $438,900
Escalation and recoveries from tenants 26,550
--------
465,450
--------
Certain Expenses
Real estate taxes 48,564
Utilities 49,584
Operating services 99,920
General and administrative (Note 4) 25,537
--------
223,605
--------
Revenue in excess of certain expenses $241,845
========
The accompanying notes are an integral part of this Statement of Revenue and
Certain Expenses.
69
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of March 31, 1998 (in thousands)
- --------------------------------------------------------------------------------
The following unaudited pro forma condensed consolidated balance sheet is
presented as if the completion by the Company of the acquisitions of the
remaining properties in the McGarvey Portfolio (not yet acquired), the remaining
properties in the Pacifica Portfolio not yet acquired at March 31, 1998, 3600 S.
Yosemite, Ramland Road, 500 College Road, D.C. Portfolio and 400 South Colorado,
(collectively, the "Second Quarter 1998 Acquisitions"), as well as the Company's
1998 stock offerings from April 1, 1998 through May 29, 1998, had all occurred
on March 31, 1998. 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-Q for the
three months ended March 31, 1998.
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 acquisitions and stock offerings actually
occurred on March 31, 1998, nor does it purport to represent the future
financial position of the Company.
Pro Forma
Adjustments for
Company the Second Quarter Company
ASSETS Historical 1998 Acquisitions Pro Forma
- ------------------------------------------------------------------------------------------------------
Rental property, net $2,965,384 $263,414(a) $3,228,798
Cash and cash equivalents 11,717 (6,700)(b) 5,017
Investment in partially-owned entity 18,034 -- 18,034
Unbilled rents receivable 30,641 -- 30,641
Deferred charges and other assets, net 21,672 -- 21,672
Restricted cash 6,791 -- 6,791
Accounts receivable, net 3,826 -- 3,826
Mortgage note receivable 27,250 -- 27,250
- ------------------------------------------------------------------------------------------------------
Total assets $3,085,315 $256,714 $3,342,029
======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------
Mortgages and loans payable $1,207,592 $167,146(c) $1,374,734
Dividends and distributions payable 35,139 -- 35,139
Accounts payable and accrued expenses 31,510 -- 31,510
Accrued interest payable 1,935 -- 1,935
Rents received in advance
and security deposits 29,651 -- 29,651
- ------------------------------------------------------------------------------------------------------
Total liabilities 1,305,827 167,146 1,472,973
- ------------------------------------------------------------------------------------------------------
Minority interest of unitholders in
Operating Partnership 404,830 20,753(d) 425,583
- ------------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock, $0.01 par value 558 20(e) 578
Other stockholders' equity 1,374,100 68,795(e) 1,442,895
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,374,658 68,815 1,443,473
- ------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $3,085,315 $256,714 $3,342,029
======================================================================================================
See accompanying footnotes on subsequent page
70
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Balance Sheet (unaudited)
As of March 31, 1998 (in thousands, except share/unit amounts )
- --------------------------------------------------------------------------------
(a) Represents the approximate aggregate cost of the Second Quarter 1998
Acquisitions, comprised of: the remaining properties in the McGarvey
Portfolio not yet acquired ($11,997), remaining properties in the Pacifica
Portfolio not yet acquired at March 31, 1998 ($92,567), 3600 S. Yosemite
($13,500), Ramland Road ($6,700), 500 College Road ($21,200), D.C.
Portfolio ($105,450) and 400 S. Colorado ($12,000).
(b) Represents the acquisition of Ramland Road on May 14, 1998 funded from
the Company's cash reserves.
(c) Represents the Company's approximate aggregate pro forma drawings on the
Company's credit facilities of $167,146, which are to be, or have been
used, as the primary means in funding the cash portion of the Second
Quarter 1998 Acquisitions.
(d) Represents the issuance of approximately 567,024 common operating
partnership units, valued at approximately $20,753, in connection with the
acquisition of certain of the Pacifica Portfolio properties.
(e) Represents the issuance of 1,978,843 shares of common stock in two stock
offerings, raising total net proceeds of approximately $68,815, which
proceeds were used, for pro forma purposes, as part of the funding of the
Second Quarter 1998 Acquisitions.
71
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended March 31, 1998
And the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
The unaudited pro forma condensed consolidated statements of operations for the
three months ended March 31, 1998 and for the year ended December 31, 1997 are
presented as if each of the following had occurred on January 1, 1997: (i) the
completion by the Company of the Robert Martin Company transaction (the "RM
Transaction"), (ii) the acquisition by the Company of the properties known as
1345 Campus Parkway, Westlakes Office Park, Moorestown Buildings, Shelton Plaza,
200 Corporate Boulevard, Three Independence Way, The Trooper Building, Princeton
Overlook and Concord Plaza, (iii) the completion by the Company of the October
1997 13 million share stock offering, (iv) the completion by the Company of the
acquisition of the properties of the Mack Company and Patriot American Office
Group (the "Mack Transaction") and (v) the completion by the Company of the 1998
Offerings and the 1998 Acquisitions (collectively, the "Reported Events"). Items
(i), (ii), (iii) and (iv) are to be collectively hereinafter referred to as the
1997 Events.
Such pro forma information is based upon the historical consolidated results of
operations of the Company for the three months ended March 31, 1998 and for the
year ended December 31, 1997, 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 three months ended March 31,
1998, and in the Company's Form 10-K for the year ended December 31, 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,
nor does it purport to represent the Company's results of operations for future
periods.
72
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended March 31, 1998
(in thousands, except per share amounts)
- --------------------------------------------------------------------------------
Pro Forma Adj.
Company for Reported Company
REVENUES Historical Events Pro Forma
- ------------------------------------------------------------------------------------------
Base rents $92,916 $15,808(a) $108,724
Escalations and recoveries from tenants 10,357 1,797(a) 12,154
Parking and other 2,006 825(a) 2,831
Interest income 544 -- 544
- ------------------------------------------------------------------------------------------
Total revenues 105,823 18,430 124,253
- ------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------
Real estate taxes 10,073 1,945(a) 12,018
Utilities 8,301 1,340(a) 9,641
Operating services 12,693 1,782(a) 14,475
General and administrative 6,196 974(a) 7,170
Depreciation and amortization 16,231 2,972(a) 19,203
Interest expense 18,480 6,590(b) 25,070(b)
- ------------------------------------------------------------------------------------------
Total expenses 71,974 15,603 87,577
- ------------------------------------------------------------------------------------------
Income before minority interest 33,849 2,827 36,676
Minority interest 7,306 248(c) 7,554(c)
- ------------------------------------------------------------------------------------------
Net income $26,543 $2,579 $29,122
==========================================================================================
Basic weighted average common shares
outstanding (d) 51,363 57,768(d)
------- -------
Net income per basic and diluted
common share (e) $ 0.52 $ 0.50
------- -------
73
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended March 31, 1998
(in thousands)
- --------------------------------------------------------------------------------
(a) Reflects:
Revenues and expenses for the 1998 Acquisitions for the period from January 1,
1998 through the earlier of the date of acquisition or March 31, 1998, as
follows:
Parking Real
Base Escalations/ and Estate Operating General and
Property (1) Acquis. Date Rents(2) Recoveries Other Taxes Utilities Services Administrative Depreciation(3)
- ------------------------------------------------------------------------------------------------------------------------------------
McGarvey Portfolio Jan. 30, 1998(4) $ 731 $ 146 -- $ 109 $ 11 $ 34 $ 1 $ 109
500 West Putnam Feb. 5, 1998 244 38 -- 17 26 27 15 35
Mountainview Feb. 25, 1998 425 34 -- 35 68 70 14 88
Cielo Center Mar. 12, 1998 1,031 43 $19 124 89 138 73 172
Pacifica Portfolio Mar. 27, 1998(5) 3,278 372 19 326 168 246 98 736
Prudential Bus. Campus Mar. 27, 1998 3,496 252 636 612 285 168 496 743
Morris County Fin. Ctr Mar. 30, 1998 1,484 499 -- 193 252 322 86 280
3600 S. Yosemite May 13, 1998 388 18 -- 30 52 82 10 72
500 College Road East May 22, 1998 759 117 -- 79 153 86 33 113
D.C. Portfolio June 1, 1998(6) 3,548 251 151 371 186 509 123 560
400 S. Colorado June 3, 1998 424 27 -- 49 50 100 25 64
- ------------------------------------------------------------------------------------------------------------------------------------
Total Pro Forma Adj.
for Reported Events $15,808 $1,797 $825 $1,945 $1,340 $1,782 $974 $2,972
====================================================================================================================================
(1) 2115 Linwood, Ramland Road and certain of the properties in the Pacifica
Portfolio (aggregate cost of $26,761) were not in operation, due to being
vacant and/or under development, during the three months ended March 31,
1998.
(2) Pro forma base rents are presented on a straight-line basis calculated from
January 1, 1997 forward.
(3) Depreciation is based on the building-related portion of the purchase price
and associated costs (for those properties in operation during the period),
depreciated using the straight-line method over a 40-year useful life.
(4) Acquisition of four of the 21 properties in this portfolio has not yet been
completed: results for period include full quarter operations for those
pending acquisitions.
(5) Acquisition of six of the 18 properties was completed on June 8, 1998 and
acquisition of two of the 18 properties in this portfolio has not yet been
completed: results for period include full quarter operations for those
pending acquisitions.
(6) Acquisition of one of the three properties in this portfolio has not yet
been completed: results for period include full quarter operations for those
pending acquisitions.
74
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended March 31, 1998
(in thousands)
- --------------------------------------------------------------------------------
(b) Pro forma adjustment to interest expense for the three months ended March
31,1998 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 three months ended March 31, 1998 is computed as follows:
Interest expense on loan assumed with Fair Lawn acquisition on $ 371
March 3, 1995 (fixed interest rate of 8.25 percent on
average outstanding principal balance of approximately
$18,185)
Interest expense on mortgages assumed in connection with the 2,708
Harborside acquisition in 1996 (fixed interest rate of
7.32 percent on $107,912 and initial rate of 6.99 percent
on $42,088)
Interest expense on the Teachers Mortgage assumed with the RM 3,326
Transaction on January 31, 1997 (fixed interest rate of
7.18 percent on $185,283)
Interest expense on the Mack Transaction Assumed Debt during the 5,288
period
Interest expense on West Putnam Mortgage ($12,104) with an 197
effective interest rate of 6.52 percent
Interest expense on McGarvey Mortgages ($8,354) with a weighted 130
average effective interest rate of 6.24 percent
Interest expense on Prudential Term Loan ($200,000) with an 3,395
interest rate of 6.79 percent
Interest expense on pro forma drawings on the Company's credit 9,401
facilities of $545,772 at a weighted average interest rate
of 6.89 percent
Historical amortization of deferred mortgage, finance and title 254
costs for the three months ended March 31,1998 ------
Pro forma interest expense for the three months ended 25,070
March 31, 1998:
Company historical interest expense: 18,480
------
Pro Forma Adjustment $6,590
======
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 $264 change for the three months ended March 31, 1998.
75
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Three Months Ended March 31, 1998
(in thousands)
- --------------------------------------------------------------------------------
(c) Represents minority interest computed as follows:
Income before minority interest $36,676
Preferred unit dividend $ 3,911
Income allocable to common stockholders of the $32,765
Company and unitholders in the Operating -------
Partnership
Allocation to minority interest based upon 3,643
weighted average percentage of Common --------
Units outstanding of 11.12 percent
Pro forma minority interest for the three 7,554
months ended March 31, 1998 --------
Company historical 7,306
Pro Forma Adjustment: $ 248
========
(d) The following is a reconciliation of the historical basic weighted average
common shares outstanding to the pro forma basic weighted average common
shares outstanding (shares in thousands):
Historical basic weighted average common shares 51,363
outstanding
Effect of pro forma adjustment for shares issued 6,405
in connection with the 1998 stock ------
offerings
Pro forma basic weighted average common shares 57,768
outstanding ======
(e) Diluted pro forma net income per share is not presented since common stock
equivalents and the Preferred Units are not dilutive.
76
MACK-CALI REALTY CORPORATION
Pro Forma Condensed Consolidated Statement Of Operations (unaudited)
For the Year Ended December 31, 1997
(in thousands, except per share amounts)
- --------------------------------------------------------------------------------
Pro Forma Pro Forma Pro Forma
Company Adj. for Adj. for Company
Historical 1997 Events Reported Events Pro Forma
- ---------------------------------------------------------------------------------------------------------------
Base rents $206,215 $152,770 (a) $63,800 (b) $422,785
Escalations and recoveries
from tenants 31,130 18,632 (a) 7,117 (b) 56,879
Parking and other 6,910 7,152 (a) 3,016 (b) 17,078
Interest income 5,546 (835)(g) -- 4,711
- ---------------------------------------------------------------------------------------------------------------
Total revenues 249,801 177,719 73,933 501,453
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------
Real estate taxes 25,992 17,674 (a) 8,281 (b) 51,947
Utilities 18,246 14,884 (a) 5,451 (b) 38,581
Operating services 30,912 21,585 (a) 8,379 (b) 60,876
General and administrative 15,862 8,250 (a) 3,572 (b) 27,684
Depreciation and amortization 36,825 24,372 (a) 13,062 (b) 74,259
Interest expense 39,078 -- 66,589 (c) 105,667 (c)
Non-recurring merger -
related charges 46,519 (46,519)(h) -- --
- ---------------------------------------------------------------------------------------------------------------
Total expenses 213,434 40,246 105,334 359,014
- ---------------------------------------------------------------------------------------------------------------
Income before minority
interest and extraordinary item 36,367 137,473 (31,401) 142,439
Minority interest 31,379 -- (2,456)(d) 28,923 (d)
- ---------------------------------------------------------------------------------------------------------------
Income before extraordinary
item $4,988 $ 137,473 $(28,945) $113,516
===============================================================================================================
Basic weighted average common
shares outstanding (e) 39,266 57,510 (e)
------ ------
Income before extraordinary
item per basic and diluted
common share (f) $ 0.13 $ 1.97
------ ------
77
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1997 (in thousands)
- --------------------------------------------------------------------------------
(a) Reflects:
Revenues and expenses for the 1997 Events for the year ended December 31,
1997, as follows:
Real
Base Escalations/ Other Estate Operating General and
Transaction (1) Date Completed Rents(2) Recoveries Income Taxes Utilities Services Administrative Depreciation(3)
- ------------------------------------------------------------------------------------------------------------------------------------
1345 Campus Parkway Jan. 28, 1997 $ 58 $ 19 -- $ 7 $ 1 $ 4 $ 1 $ 12
RM Transaction Jan. 31, 1997 5,209 195 $ 524 817 379 858 410 864
Westlakes May 8, 1997 3,126 866 -- 258 362 449 246 607
Shelton Place July 31, 1997 1,146 123 -- 94 168 162 57 192
200 Corporate Blvd Aug. 15, 1997 482 15 -- 68 6 91 1 106
Three Independence Way Sept. 3, 1997 1,309 2 -- 163 72 147 28 189
The Trooper Buildings Nov. 19, 1997 1,396 537 -- 113 228 172 54 303
The Mack Transaction Dec. 11, 1997 133,007 16,099 6,500 15,099 13,210 18,679 7,043 20,797
Princeton Overlook Dec. 19, 1997 3,315 265 -- 436 209 302 183 578
Concord Plaza Dec. 19, 1997 3,722 511 128 619 249 721 227 724
- ------------------------------------------------------------------------------------------------------------------------------------
Total Pro Forma Adj
for 1997 Events $152,770 $18,632 $7,152 $17,674 $14,884 $21,585 $8,250 $24,372
====================================================================================================================================
(b) Reflects:
Revenues and expenses for the 1998 Events for the year ended December 31,
1997, as follows:
Real
Base Escalations/ Other Estate Operating General and
Acquisition (1) Date Acquired Rents(2) Recoveries Income Taxes Utilities Services Administrative Depreciation(3)
- -----------------------------------------------------------------------------------------------------------------------------------
McGarvey Portfolio Jan. 30, 1998(4) $ 5,309 $ 1,009 -- $ 780 $ 90 $ 376 $ 2 $ 1,308
500 West Putnam Feb. 5, 1998 2,420 482 -- 170 269 314 167 426
Mountainview Feb. 25, 1998 2,664 211 $ 4 221 421 508 110 525
Cielo Center Mar. 12, 1998 4,603 206 106 597 492 849 264 825
Pacifica Portfolio Mar. 27, 1998(5) 8,049 791 53 1,084 495 808 263 2,470
Prudential Bus. Campus Mar. 27, 1998 14,138 1,082 2,159 2,531 941 828 1,632 3,153
Morris County Fin. Ctr. Mar. 30, 1998 6,048 1,794 48 789 939 1,229 329 1,121
3600 S. Yosemite May 13, 1998 1,661 10 69 119 195 316 49 287
500 College Road East May 22, 1998 3,036 437 -- 318 479 407 161 451
D.C. Portfolio June 1, 1998 (6) 14,460 1,000 577 1,487 899 2,362 486 2,241
400 S. Colorado June 3, 1998 1,412 95 -- 185 231 382 109 255
- -----------------------------------------------------------------------------------------------------------------------------------
Total Pro Forma Adj.
for 1998 Events $63,800 $7,117 $3,016 $8,281 $5,451 $8,379 $3,572 $13,062
====================================================================================================================================
See footnotes to this page on subsequent page
78
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1997
(in thousands)
- --------------------------------------------------------------------------------
Notes to Footnote "(a)" and Footnote "(b)"
- ----------
(1) Moorestown Properties, 2115 Linwood, Ramland Road and certain of the
properties in the Pacifica Portfolio (aggregate cost of $49,047) were not
in operations, due to being vacant and/or under development, during the
year ended December 31, 1997.
(2) Pro forma base rents are presented on a straight-line basis calculated
from January 1, 1997 forward.
(3) Depreciation is based on the building-related portion of the purchase
price and associated costs (for those properties operation during the
period) depreciated using the straight-line method over a 40-year life.
(4) Acquisition of four of the 21 properties in this portfolio has not yet
been completed.
(5) Acquisition of six of the 18 properties was completed on June 8, 1998 and
acquisition of two of the 18 properties in this portfolio has not yet
been completed.
(6) Acquisition of one of the three properties in this portfolio has not yet
been completed.
- ----------
(c) The pro forma adjustment to interest expense for the year ended December
31, 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 year ended December 31, 1997 is computed as follows:
Interest expense on the Initial Mortgage Financing, after the $4,858
Partial 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 6.46 percent)
Interest expense on loan assumed with Fair Lawn acquisition on 1,500
March 3, 1995 (fixed interest rate of 8.25 percent on average
outstanding principal balance of approximately $18,185)
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 13,303
Transaction on January 31, 1997 (fixed interest rate of 7.18
percent on $185,283)
Interest expense on Mack Assumed Debt ($291,883) with a weighted 22,530
average interest rate of 7.72 percent
Interest expense on West Putnam Mortgage ($12,104) with an 789
effective interest rate of 6.52 percent
Interest expense on McGarvey Mortgage ($8,354) with a weighted 519
average effective interest rate of 6.24 percent
Interest expense on Prudential Term Loan ($200,000) at a 13,700
weighted average interest rate of 6.85 percent
79
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1997
(in thousands)
- --------------------------------------------------------------------------------
Interest expense on pro forma drawings on the 36,644
Company's credit facilities of $523,486 at a weighted
average rate of 7.00 percent
Historical amortization of deferred mortgage, finance 983
and title costs for the year ended December 31, 1997
-------
Pro forma interest expense for the year ended December 105,667
31, 1997:
Company historical interest expense 39,078
-------
Pro Forma Adjustment: $66,589
=======
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 $1,055 change for the year ended December 31, 1997.
(d) Represents minority interest computed as follows:
Income before extraordinary item and minority interest $142,439
Pro forma dividend yield of 6.75 percent on the $15,563
Preferred Units with a par value of $230,562
Income allocable to common stockholders of the Company 126,876
and unitholders in the Operating Partnership --------
Allocation to minority interest based upon weighted 13,360
average percentage of Common Units outstanding of -------
10.53 percent
Pro Forma minority interest for the Year Ended 28,923
December 31, 1997
Company historical including amount related to the 31,379
beneficial conversion feature of the Preferred -------
Units of $26,801(h)
Pro Forma Adjustment: $(2,456)
=======
(e) The following is a reconciliation of the historical basic weighted average
common shares outstanding to the pro forma basic weighted average common
shares outstanding (shares in thousands):
Historical basic weighted average shares outstanding 39,266
Effect of shares issued in connection with the 1997 18,045
and 1998 stock offerings
Effect of vesting of 199 shares on an accelerated 199
basis as a result of the Mack Transaction -------
Pro forma basic weighted average shares outstanding 57,510
=======
80
MACK-CALI REALTY CORPORATION
Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1997
(in thousands)
- --------------------------------------------------------------------------------
(f) Diluted pro forma net income before extraordinary item per share is not
presented since common stock equivalents and the Preferred Units are not
dilutive
(g) Represents reduction for interest income earned on investments of proceeds
from the Company's November 1996 stock offering ($835)
(h) The charge related to the beneficial conversion feature of the preferred
units ($26,801) and the non-recurring merger-related charges ($46,519)
were excluded for pro forma purposes
81
MACK-CALI REALTY CORPORATION
Estimated Twelve Month Pro Forma Statement of (unaudited)
Taxable Net Operating Income and Operating Funds Available
- --------------------------------------------------------------------------------
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 March 31, 1998, adjusted for historical operations
of the properties acquired or to be acquired during the period April 1, 1997 to
June 5, 1998 (as reported in this Current Report and previous Form 8-K and 8-K/A
filings of the Company dated January 16, 1998, December 11, 1997, September 19,
1997, and September 18, 1997) 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):
Mack-Cali Realty Corporation Pro Forma income before minority interest for the
twelve month period ended March 31, 1998,
exclusive of depreciation and amortization (Note 1)................. 218,403
Net adjustment for tax basis revenue recognition (Note 2)............. (1,121)
Estimated tax deduction from the exercise and sale of stock
options under the Company's Employee Stock Option Plan.............. (5,158)
Estimated tax depreciation and amortization (Note 3).................. (67,560)
---------
Pro Forma taxable income before allocation to minority interest and...
dividends deduction................................................. 144,564
Estimated allocation to minority interest (Note 4).................... (30,766)
Estimated dividends deduction (Note 5)................................ (115,629)
---------
$ (1,831)
=========
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 $ 144,564
Add: Pro Forma depreciation and amortization 67,560
---------
Estimated Pro Forma operating funds available (Note 6) $ 212,124
=========
- ----------
Note 1 - The Pro Forma income before minority interest represents the
Company's income before minority interest for the twelve month
period ended March 31, 1998.
Note 2 - Represents the net adjustment to (i) recognize prepaid rent and (ii)
reverse the effect of rental revenue recognition on a straight line
basis.
Note 3 - 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 4 - Estimated allocation of taxable income to minority interests is
based on a 18.84 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 5 - Estimated dividends deduction is based on 57,814,529 shares
outstanding at the dividend rate of $2.00 per share. Shares
outstanding, on a Pro Forma basis, are 57,814,529.
Note 6 - 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.
82
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Mack-Cali Realty Corporation on Forms S-3 (File Nos. 333-44433, 333-44441,
333-25475, 333-09875, 333-19101, 333-09081, 33-96542, and 33-96538) and Forms
S-8 (File Nos. 333-44443, 33-91822, 333-18725, 333-19831 and 333-32661) of our
report dated April 6, 1998 on our audit of the Statement of Revenue and Certain
Expenses for McGarvey Portfolio, of our report dated March 29, 1998 on our audit
of the Statement of Revenue and Certain Expenses for 500 West Putnam, of our
report dated March 27, 1998 on our audit of the Statement of Revenue and Certain
Expenses for Mountainview, of our report dated March 30, 1998 on our audit of
the Statement of Revenue and Certain Expenses for Cielo Center, of our report
dated April 8, 1998 on our audit of the Statement of Revenue and Certain
Expenses for the Pacifica Portfolio, of our report dated May 29, 1998 on our
audit of the Statement of Revenue and Certain Expenses for 500 College Road
East, of our report dated May 29, 1998 on our audit of the Statement of Revenue
and Certain Expenses for the D.C. Portfolio, of our report dated May 30, 1998 on
our audit of the Statement of Revenue and Certain Expenses for 400 South
Colorado, and of our report dated June 4, 1998 on our audit of the Statement of
Revenue and certain expenses for 3600 S. Yosemite, which reports are included in
this Current Report on Form 8-K.
/s/ Schonbraun Safris McCann Bekritsky & Co., L.L.C.
- ----------------------------------------------------
Schonbraun Safris McCann Bekritsky & Co., L.L.C.
Roseland, New Jersey
June 8, 1998
83
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (Nos. 333-44433,
333-44441, 333-25475, 333-09875, 333-19101, 333-09081, 33-96542, and 33-96538)
and Forms S-8 (Nos. 33-91822, 333-18725, 333-19831, 333-32661 and 333-44443) of
Mack-Cali Realty Corporation of our report dated April 16, 1998, relating to the
Historical Statement of Gross Income and Direct Operating Expenses for
Prudential Business Campus, and of our report dated April 2, 1998 relating to
the Historical Statement of Gross Income and Direct Operating Expenses for
Morris County Financial Center, appearing in this Current Report on Form 8-K.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
New York, New York
June 8, 1998
84