- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 19, 1997 --------------------- CALI REALTY CORPORATION (Exact name of registrant as specified in its charter) MARYLAND 1-13274 22-3305147 (state or other jurisdiction (Commission (IRS Employer or incorporation) File Number) Identification Number)
11 COMMERCE DRIVE, CRANFORD, NEW JERSEY 07016 Registrant's telephone number, including area code (908) 272-8000 N/A (Former name or former address, if changed since last report) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (b) Pro Forma Financial Information (unaudited) The pro forma financial information for the Company previously presented as Item 5(b) of the Current Report on Form 8-K dated September 19, 1997 is hereby amended to reflect the actual pricing of, the number of shares issued in and the expected use of proceeds from the public offering priced on October 9, 1997: - Condensed consolidated balance sheet as of June 30, 1997. - Condensed consolidated statement of operations for the six month period ended June 30, 1997 and the year ended December 31, 1996. This current report on Form 8-K/A should be read in conjunction with the current report on Form 8-K dated September 19, 1997 which contains, among other things, Audited Combined Financial Statements of the Mack Group as of December 31, 1996 and 1995 and for the three years in the period ended December 31, 1996 and Unaudited Financial Information as of June 30, 1997 and for the six months ended June 30, 1997 and 1996. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Cali Realty Corporation has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. CALI REALTY CORPORATION October 10, 1997 By: /s/ THOMAS A. RIZK ------------------------------------------ Thomas A. Rizk PRESIDENT AND CHIEF EXECUTIVE OFFICER October 10, 1997 By: /s/ BARRY LEFKOWITZ ------------------------------------------ Barry Lefkowitz CHIEF FINANCIAL OFFICER 3 CALI REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1997 (DOLLARS IN THOUSANDS) (UNAUDITED) The following unaudited pro forma condensed consolidated balance sheet is presented as if the acquisition by the Company of the Moorestown Buildings, Shelton Place, 200 Corporate, Three Independence (collectively, the "Pre-Mack Events," which are discussed more fully in the Company's Current Report on Form 8-K, dated September 18, 1997), the Transaction (which is discussed more fully in the Company's Current Report on Form 8-K, dated September 19, 1997), and the Company's issuance of 13 million shares of its Common Stock at $39.8125 per share (the "1997 Offering") had occurred on June 30, 1997. This unaudited pro forma condensed consolidated balance sheet should be read in conjunction with the pro forma condensed consolidated statement of operations of the Company and the historical financial statements and notes thereto of the Company included in the Company's Form 10-K for the year ended December 31, 1996 and the Company's Form 10-Q for the six month period ended June 30, 1997, respectively. The pro forma condensed consolidated balance sheet is unaudited and is not necessarily indicative of what the actual financial position of the Company would have been had the aforementioned acquisition actually occurred on June 30, 1997, nor does it purport to represent the future financial position of the Company.
PRO FORMA PRO FORMA ADJ. FOR THE ADJUSTMENTS TRANSACTION COMPANY FOR PRE-MACK PRE-MACK EVENTS AND 1997 COMPANY ASSETS HISTORICAL EVENTS PRO FORMA OFFERING PRO FORMA (L) ------------ ------------ ---------------- ------------ -------------- Rental property, net............................ $ 1,307,365 $ 46,850(a) $ 1,354,215 $ 1,205,573(d) $ 2,559,788 Cash and cash equivalents....................... 6,090 -- 6,090 -- (e) 6,090 Unbilled rents receivable....................... 23,648 -- 23,648 -- 23,648 Deferred charges and other assets, net.......... 13,224 -- 13,224 -- 13,224 Restricted cash................................. 8,218 -- 8,218 -- 8,218 Accounts receivable, net........................ 3,547 -- 3,547 -- 3,547 Mortgage note receivable........................ 11,600 (4,350)(b) 7,250 -- 7,250 ------------ ------------ ---------------- ------------ -------------- Total assets.................................... $ 1,373,692 $ 42,500 $ 1,416,192 1,205,573 $ 2,621,765 ------------ ------------ ---------------- ------------ -------------- ------------ ------------ ---------------- ------------ -------------- LIABILITIES AND STOCKHOLDERS' EQUITY Mortgages and loans payable..................... $ 553,961 $ 42,500(c) $ 596,461 $ 340,301(f) $ 936,762 Dividends and distributions payable............. 18,334 -- 18,334 -- 18,334 Accounts payable and accrued expenses........... 10,582 -- 10,582 (422 (g) 10,160 Accrued interest payable........................ 1,916 -- 1,916 -- 1,916 Rents received in advance and security deposits...................................... 16,280 -- 16,280 10,465(h) 26,745 ------------ ------------ ---------------- ------------ -------------- Total liabilities............................... 601,073 42,500 643,573 350,344 993,917 ------------ ------------ ---------------- ------------ -------------- Minority interest of unitholders in Operating Partnership......................... 70,911 -- 70,911 391,523(i) 462,434 ------------ ------------ ---------------- ------------ -------------- Stockholders' equity Common stock, $.01 par value.................. 366 -- 366 130(j) 496 Other stockholders' equity...................... 701,342 -- 701,342 463,576(k) 1,164,918 ------------ ------------ ---------------- ------------ -------------- Total stockholders' equity...................... 701,708 -- 701,708 463,706 1,165,414 ------------ ------------ ---------------- ------------ -------------- Total liabilities and stockholders' equity...... $ 1,373,692 $ 42,500 $ 1,416,192 $ 1,205,573 $ 2,621,765 ------------ ------------ ---------------- ------------ -------------- ------------ ------------ ---------------- ------------ --------------
See accompanying footnotes on subsequent pages. 4 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 (IN THOUSANDS) (UNAUDITED) (a) Represents the approximate aggregate cost of the acquisitions completed subsequent to June 30, 1997, consisting of the Moorestown Buildings on July 21, 1997 for $10,200; Shelton Place on August 1, 1997 for $15,500; 200 Corporate on August 15, 1997 for $8,000; and Three Independence on September 3, 1997 for $13,150. (See the Company's Current Report on Form 8-K, dated September 18, 1997 for additional information.) (b) Represents the partial prepayment of the RM Mortgage Note Receivable received from the sellers of 200 Corporate, certain RM principals, in conjunction with the Company's acquisition of such property. (See the Company's Current Report on Form 8-K, dated September 18, 1997 for additional information.) (c) Represents the approximate aggregate pro forma drawings on the Company's credit facilities, which were used as the primary means in funding the acquisitions subsequent to June 30, 1997, as listed in note (a) above. (See the Company's Current Report on Form 8-K, dated September 18, 1997 for additional information.) (d) Represents the estimated aggregate acquisition cost to be incurred by the Company to acquire the Mack Properties based upon the estimated market price of the consideration to be paid as of the time the Transaction was agreed to and announced. The total costs approximate the fair value of the rental property to be acquired and include the following: Cash............................................................ $ 476,106 Mack Assumed Debt............................................... 302,147 Common Units.................................................... 132,721 Preferred Units................................................. 256,075 Warrants........................................................ 8,524 Estimated Transaction-related costs............................. 30,000 --------- $1,205,573 --------- ---------
(e) The following schedule summarizes the pro forma sources and uses of funds in connection with the Transaction: Net proceeds to be received from the 1997 Offering after estimated underwriting discount and issuance costs of $28,020............. $ 489,542 Pro forma drawing on the Company's credit facilities.............. 38,154 Cash consideration paid (including estimated Transaction-related costs of $30,000)............................................... (506,106) Cash paid for executive compensation, bonuses and related tax obligation payments............................................. (32,055) Net cash from estimated closing adjustments at completion of Transaction..................................................... 10,465 --------- $ 0 --------- ---------
5 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED) AS OF JUNE 30, 1997 (IN THOUSANDS) (UNAUDITED) (f) Represents the Mack Assumed Debt expected to be assumed by the Company and additional drawings on the Company's credit facilities in connection with the consummation of the Transaction, as follows: Expected assumed debt with an estimated weighted average interest rate of 7.23 percent............................................ $ 302,147 Additional drawings on the Company's credit facilities............ 38,154 --------- $ 340,301 --------- ---------
(g) Represents amounts that were accrued in the Company's historical accounts as of June 30, 1997 for tax obligation payments in connection with the Company's executive compensation agreements, which are to be paid in connection with completion of the Transaction (see Note (l) below). (h) Represents adjustments for rents received in advance ($7,278) and security deposits ($3,187) to be received by the Company at the closing of the Transaction. (i) Reflects the adjustment to minority interest of the unitholders in the Operating Partnership computed as follows: Common Units...................................................... $ 132,721 Preferred Units................................................... 256,075 Warrants.......................................................... 8,524 Minority interest share of non-recurring charges [see Note (k) below].......................................................... (5,797) --------- $ 391,523 --------- ---------
(j) Reflects the issuance of 13 million shares of the Company's Common Stock with a par value of $.01 per share. 6 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED) AS OF JUNE 30, 1997 (IN THOUSANDS) (UNAUDITED) (k) Reflects the issuance of 13 million shares of the Company's Common Stock with a par value of $.01 per share, at $39.8125 per share. The following table sets forth the adjustments to Other stockholders' equity: Net proceeds to be received from the 1997 Offering after estimated underwriting discount and issuance costs of $28,020, (net of $130 for par value)............................................. $ 489,412 Recording of the financial accounting value ascribed to the beneficial conversion feature inherent in the Preferred Units upon issuance. The Preferred Units are immediately convertible into Common Units at $34.65 per Common Unit, which is an amount that is expected to be less than the market price of the Common Stock (assumed to be $39.8125 per share for purposes of this pro forma information) as of the date the Preferred Units are issued.......................................................... 37,196 Recording of amortization for the beneficial conversion feature inherent in the Preferred Units as they are immediately convertible into Common Units upon consummation of the Transaction (1)................................................. (37,196) Expensing of previously unamortized stock compensation recorded in connection with the Company's executive compensation agreements, which will fully vest on an accelerated basis as a result of the consummation of the Transaction (1)............................. (10,063) Tax obligation payments related to stock compensation (net of $422 previously accrued) (1)......................................... (4,648) Elimination of unamortized stock compensation previously recorded in equity....................................................... 10,063 Additional executive compensation and bonuses to be paid only upon consummation of the Transaction (1)............................. (26,985) Allocation to minority interest based upon post-Transaction ownership....................................................... 5,797 --------- $ 463,576 --------- ---------
(l) See following Estimated Pro Forma Results for Permitted Transaction Alternatives. - ------------------------ (1) Reflects the adjustments to historical net earnings for non-recurring charges, which will be incurred in connection with the Transaction and will be recorded in the Company's statement of operations for the period in which they are incurred. 7 CALI REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996 The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 1997 and for the year ended December 31, 1996 are presented as if each of the following had occurred on January 1, 1996: (i) the partial prepayment by the Company of its Mortgage Financing ("Partial Prepayment") in 1996, (ii) the disposition by the Company of its property at 15 Essex Road in Paramus, New Jersey ("Essex Road") in 1996, (iii) the acquisition by the Company of the properties known as 103 Carnegie, Rose Tree, the Mount Airy Road Buildings, Five Sentry Parkway, Harborside, Whiteweld Centre, One Bridge Plaza and Airport Center in 1996, (iv) the net proceeds received by the Company as a result of its common stock offering of 3,450,000 shares on August 13, 1996 (the "August Offering"), (v) the net proceeds received by the Company as a result of the Company common stock offering of 17,537,500 shares on November 22, 1996 (the "November Offering"), (vi) completion by the Company of the Pre-Mack Events, (which are more fully discussed in the Company's Current Report on Form 8-K, dated September 18, 1997), (vii) completion by the Company of the Transaction (which is more fully discussed in the Company's Current Report on Form 8-K, dated September 19, 1997), and (viii) the 1997 Offering. Items (i) through (v) above are to be collectively referred to as the "1996 Events." Such pro forma information is based upon the historical consolidated results of operations of the Company for the six months ended June 30, 1997 and for the year ended December 31, 1996, after giving effect to the transactions described above. The pro forma condensed consolidated statements of operations should be read in conjunction with the pro forma condensed consolidated balance sheet of the Company and the historical financial statements and notes thereto of the Company included in the Company's Form 10-Q for the six months ended June 30, 1997 and in the Company's Form 10-K for the year ended December 31, 1996. 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. 8 CALI REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
PRO FORMA ADJ. FOR THE TRANS- ACTION AND PRO FORMA ADJ. PRE-MACK HISTORICAL 1997 COMPANY FOR PRE-MACK EVENTS THE MACK OFFERING COMPANY REVENUES HISTORICAL EVENTS PRO FORMA GROUP (G) PRO FORMA(M) ----------- -------------- ----------- ----------- ----------- ------------- Base rents....................... $ 93,180 $ 10,734(a) $ 103,914 $ 64,521 $ 3,963(e) $ 172,398 Escalations and recoveries from tenants........................ 14,279 1,198(a) 15,477 7,774 -- 23,251 Parking and other................ 3,598 524(a) 4,122 5,587 -- 9,709 (956) (350) Interest income.................. 1,640 (b) 684 350 (f) 684 ----------- ------- ----------- ----------- ----------- ------------- Total revenues................... 112,697 11,500 124,197 78,232 3,613 206,042 ----------- ------- ----------- ----------- ----------- ------------- EXPENSES Real estate taxes................ 11,929 1,339(a) 13,268 7,833 -- 21,101 Utilities........................ 7,940 939(a) 8,879 6,782 -- 15,661 Operating services............... 13,773 1,634(a) 15,407 9,960 -- 25,367 General and administrative....... 6,927 730(a) 7,657 3,531 -- 11,188 (1,661) Depreciation and amortization.... 16,844 1,873(a) 18,717 13,717 (h) 30,773 (17,746) Interest expense................. 17,152 2,058(c) 19,210(c) 29,975 (i) 31,439 ----------- ------- ----------- ----------- ----------- ------------- Total expenses................... 74,565 8,573 83,138 71,798 (19,407) 135,529 ----------- ------- ----------- ----------- ----------- ------------- Income before minority interest....................... 38,132 2,927 41,059 6,434 23,020 70,513 Minority interest................ 3,648 491(d) 4,139 -- 12,919(j) 17,058 ----------- ------- ----------- ----------- ----------- ------------- Net income....................... $ 34,484 $ 2,436 $ 36,920 $ 6,434 $ 10,101 $ 53,455 ----------- ------- ----------- ----------- ----------- ------------- ----------- ------- ----------- ----------- ----------- ------------- Weighted average common shares outstanding (k)................ 36,475 49,674 ----------- ------------- Net income per common share (l)............................ $ 0.95 $ 1.08 ----------- -------------
9 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS) (a) Reflects: Revenues and expenses for the properties acquired in 1997 by the Company (as reported by the Company on previously-filed Current Reports on Form 8-K and 8-K/A) for the period January 1, 1997 through the earlier of the date of acquisition/completion or June 30, 1997, as follows:
REAL ACQUISITION/ BASE ESCALATIONS/ OTHER ESTATE OPERATING PROPERTY/TRANSACTION (1) COMPLETION DATE RENTS (2) RECOVERIES INCOME TAXES UTILITIES SERVICES - ---------------------------- ----------------- ----------- ------------- ----------- --------- ----------- ----------- 1345 Campus Parkway......... January 28, 1997 $ 58 $ 19 -- $ 7 $ 1 $ 4 RM Transaction.............. January 31, 1997 5,209 195 $ 524 817 379 858 Westlakes................... May 8, 1997 3,126 866 -- 258 362 449 Shelton Place (4)........... July 31, 1997 982 105 -- 80 138 141 200 Corporate............... August 15, 1997 386 12 -- 55 5 73 Three Independence.......... September 3, 1997 973 1 -- 122 54 109 ----------- ------ ----- --------- ----- ----------- Total Pro Forma Adj. for 1997 Events............... $ 10,734 $ 1,198 $ 524 $ 1,339 $ 939 $ 1,634 ----------- ------ ----- --------- ----- ----------- ----------- ------ ----- --------- ----- ----------- GENERAL AND PROPERTY/TRANSACTION (1) ADMINISTRATIVE DEPRECIATION (3) - ---------------------------- ----------------- ----------------- 1345 Campus Parkway......... $ 1 $ 12 RM Transaction.............. 410 864 Westlakes................... 246 607 Shelton Place (4)........... 51 165 200 Corporate............... 1 85 Three Independence.......... 21 140 ----- ------ Total Pro Forma Adj. for 1997 Events............... $ 730 $ 1,873 ----- ------ ----- ------
- ------------------------ (1) The Moorestown Buildings were vacant during 1996 and for the six months ended June 30, 1997. (2) Pro forma base rents are presented on a straight-line basis calculated from January 1, 1996 forward. (3) Depreciation is based on the building-related portion of the purchase price and associated costs depreciated using the straight-line method over a 40-year life. (4) Total revenues of $444 and Revenue in excess of certain expenses of $234 for the three months ended March 31, 1997 have been included in both the Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 1997 and year ended December 31, 1996. 10 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS) (b) Represents reduction for (i) interest income earned on investments of proceeds from the November 1996 offering ($835) and (ii) interest income earned on the RM Mortgage Receivable as a result of the prepayment in connection with the 200 Corporate acquisition ($121). (c) The Pre-Mack Events pro forma adjustment to interest expense for the six months ended June 30, 1997 reflects interest on mortgage debt assumed with certain acquisitions and additional borrowings from the Company's credit facilities to fund certain acquisitions. Pre-Mack Events pro forma interest expense for the six months ended June 30, 1997 is computed as follows: Interest expense on the Initial Mortgage Financing, after the Partial Prepayment (fixed interest rate of 8.02 percent on $44,313; and variable rate of 30-day LIBOR plus 100 basis points on $20,195--weighted average interest rate used is 6.60 percent)...... $ 2,443 Interest expense on loan assumed with Fair Lawn acquisition on March 3, 1995 (fixed interest rate of 8.25 percent on average outstanding principal balance of approximately $18,605)............ 767 Interest expense on mortgages in connection with the Harborside acquisition in 1996 (fixed interest rate of 7.32 percent on $107,912 and initial rate of 6.99 percent on $42,088).............. 5,421 Interest expense on outstanding borrowings on the Company's credit lines (a variable rate of 30-day LIBOR plus 125 basis points during the period on $114,655; weighted average interest rate used is 6.85 percent)........................................................... 3,927 Interest expense on the Teachers Mortgage assumed with the RM Transaction on January 31, 1997 (fixed interest rate of 7.18 percent on $185,283)............................................... 6,652 --------- Total Pre-Mack Events pro forma interest expense for the six months ended June 30, 1997:............................................... $ 19,210 --------- ---------
(d) Represents Pre-Mack Events pro forma income allocated to the pro forma weighted average minority interest (Units) in Cali Realty L.P. (the Operating Partnership) for the period of 10.08 percent. (e) Represents adjustment necessary to reflect rental income for the Mack Properties on a straight-lined basis assuming that the Transaction was consummated as of January 1, 1996. (f) Represents reduction of interest income, which was recorded in the Mack Group Historical Financial Statements. (g) In connection with the consummation of the Transaction, the Company estimates that it will also recognize the following non-recurring charges, before minority interest, in the Company's Statements 11 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS) of Operations for the period in which the Transaction is completed, which have been excluded from the Company's pro forma operating results: Expensing of previously unamortized stock compensation recorded in connection with the Company's executive compensation plans which will vest on an accelerated basis as a result of the consummation of the Transaction................................................. $ 10,063 Related tax obligation payments (net of $422 previously accrued)... 4,648 Additional executive compensation and bonuses to be paid only upon consummation of the Transaction.................................... 26,985 Amortization of the beneficial conversion feature inherent in the Preferred Units (as an allocation to minority interest) as they are immediately convertible into Common Units upon consummation of the Transaction........................................................ 37,196 --------- $ 78,892 --------- ---------
(h) Represents adjustment to reflect depreciation expense related to the Mack Properties to be acquired by the Company based on estimated relative fair value of buildings and improvements ($964,458) as of the date of acquisition, as follows:
Pro forma depreciation expense..................................................... $ 12,056 Mack Group Historical.............................................................. 13,717 --------- $ 1,661 --------- ---------
(i) Reflects reduction of interest expense relating to the Transaction. Proforma interest expense is computed as follows:
Interest on expected assumed debt ($302,147) with a weighted average interest rate of 7.23 percent.................................................................... $ 10,923 Interest on drawings on the Company's credit facilities of $38,154 at a weighted average interest rate of 6.85 percent.............................................. 1,306 --------- $ 12,229 Mack Group Historical.............................................................. $ 29,975 --------- $ 17,746 --------- ---------
12 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS) (j) Represents minority interest computed as follows:
Income before extraordinary item and minority interest.................. $ 70,513 Dividend yield of 6.75 percent on the Preferred Units with a par value of $249,656............................................................. $ 8,426 Income allocable to common stockholders in the Company and unitholders in the Operating Partnership............................................ $ 62,087 --------- Allocation to minority interest based upon weighted average percentage of Common Units outstanding of 13.90 percent............................ 8,632 --------- Total minority interest................................................. 17,058 --------- Pre-Mack Events pro forma............................................... 4,139 --------- $ 12,919 --------- ---------
(k) The following is a reconciliation of the historical weighted average shares outstanding to the pro forma primary weighted average shares outstanding (shares in thousands):
Historical weighted average shares outstanding....................................... 36,475 Shares issued in connection with the 1997 Offering................................... 13,000 Vesting of 199 shares on an accelerated basis as a result of the Transaction......... 199 --------- Pro forma weighted average shares outstanding........................................ 49,674 --------- ---------
(l) Fully-diluted pro forma net income per share is not presented since common stock equivalents and the Preferred Units are not dilutive. (m) See following Estimated Pro Forma Results for Permitted Transaction Alternatives. 13 CALI REALTY CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
PRO FORMA PRO FORMA PRO FORMA THE MACK ADJ. FOR THE ADJ. FOR ADJ. FOR PRE-MACK GROUP TRANSACTION AND COMPANY COMPANY 1996 PRE-MACK EVENTS HISTORICAL 1997 OFFERING PRO FORMA HISTORICAL EVENTS (A) EVENTS (B) PRO FORMA (C) (H) (N) ----------- ----------- ----------- ----------- ------------ --------------- ----------- REVENUES Base rents..................... $ 76,922 $ 49,087 $ 76,655 $ 202,664 $ 128,066 $ 7,559(f) $ 338,289 Escalations and recoveries from tenants...................... 14,429 8,870 8,230 31,529 16,984 -- 48,513 Parking and other.............. 2,204 190 4,428 6,822 3,233 -- 10,055 Interest income................ 1,917 -- (738)(c) 1,179 469 (469)(g) 1,179 ----------- ----------- ----------- ----------- ------------ --------------- ----------- Total revenues................. 95,472 58,147 88,575 242,194 148,752 7,090 398,036 ----------- ----------- ----------- ----------- ------------ --------------- ----------- EXPENSES Real estate taxes.............. 9,395 5,144 11,039 25,578 15,367 -- 40,945 Utilities...................... 8,138 3,313 6,619 18,070 14,143 -- 32,213 Operating Services............. 12,129 6,452 12,277 30,858 19,507 -- 50,365 General and administrative..... 5,800 3,020 4,965 13,785 7,309 -- 21,094 Depreciation and amortization................. 15,812 8,133 13,021 36,966 28,069 (3,958)(i) 61,077 Interest expense............... 12,677 -- 25,608(d) 38,285(d) 58,621 (34,206)(j) 62,700 ----------- ----------- ----------- ----------- ------------ --------------- ----------- Total expenses........... 63,951 26,062 73,529 163,542 143,016 (38,164) 268,394 ----------- ----------- ----------- ----------- ------------ --------------- ----------- Income before gain on sale of rental property, minority interest and extraordinary item......................... 31,521 32,085 15,046 78,652 5,736 45,254 129,642 Gain on sale of rental property..................... 5,658 (5,658) -- -- -- -- -- ----------- ----------- ----------- ----------- ------------ --------------- ----------- Income before minority interest and extraordinary item....... 37,179 26,427 15,046 78,652 5,736 45,254 129,642 Minority interest.............. 4,760 -- 3,263(e) 8,023(e) -- 24,622(k) 32,644 ----------- ----------- ----------- ----------- ------------ --------------- ----------- Income before extraordinary item......................... $ 32,419 $ 26,427 $ 11,783 $ 70,629 $ 5,736 $ 20,632 $ 96,998 ----------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ----------- ----------- ----------- ------------ --------------- ----------- Weighted average common shares outstanding (l).............. 18,461 49,400 ----------- ----------- Income before extraordinary item per common share (m).... $ 1.76 $ 1.96 ----------- -----------
14 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (a) Reflects: Revenues and expenses of the properties acquired in 1996 for the period January 1, 1996 through the date of acquisition, (as reported by the Company on previously-filed Current Reports on Form 8-K) as follows:
REAL ACQUIS./COMPLETION BASE ESCALATIONS/ OTHER ESTATE PROPERTY/TRANSACTION DATE RENTS (2) RECOVERIES INCOME TAXES - -------------------------------------------------- ----------------- ----------- ------------- ----------- --------- Carnegie.......................................... March 20, 1996 $ 386 $ 31 -- $ 54 Rose Tree......................................... May 2, 1996 1,312 115 -- 165 Mt. Airy Bldgs. .................................. July 23, 1996 665 101 -- 101 Harborside........................................ November 4, 1996 30,884 7,037 $ 166 3,096 Five Sentry....................................... November 7, 1996 1,663 -- -- 148 December 10, Whiteweld......................................... 1996 3,890 326 -- 430 December 16, One Bridge Plaza.................................. 1996 3,597 293 -- 420 December 17, Airport Center.................................... 1996 6,953 1,004 24 780 ----------- ------ ----- --------- Total Pro Forma Adj. for 1996 acquisitions........ $ 49,350 $ 8,907 $ 190 $ 5,194 ----------- ------ ----- --------- Revenues and expenses of the property disposed of in 1996 for the period January 1, 1996 through the date of disposition, as follows: Essex Road........................................ March 20, 1996 (263) (37) -- (50) ----------- ------ ----- --------- Reduction of expense as a result of the Partial Prepayment in 1996, for the period January 1, 1996 through the Partial Payment date, as follows: Partial Prepayment................................ March 12, 1996 -- -- -- -- ----------- ------ ----- --------- Total Pro Forma Adj. for 1996 Events.............. $ 49,087 $ 8,870 $ 190 $ 5,144 ----------- ------ ----- --------- ----------- ------ ----- --------- OPERATING GENERAL AND PROPERTY/TRANSACTION UTILITIES SERVICES ADMINISTRATIVE DEPRECIATION (3) - -------------------------------------------------- ----------- ----------- --------------- ----------------- Carnegie.......................................... $ 56 $ 58 $ 11 $ 49 Rose Tree......................................... 180 179 43 215 Mt. Airy Bldgs. .................................. -- 4 51 107 Harborside........................................ 906 3,633 2,048 5,332 Five Sentry....................................... 32 325 88 246 Whiteweld......................................... 748 543 158 733 One Bridge Plaza.................................. 412 659 237 585 Airport Center.................................... 1,035 1,129 395 953 ----------- ----------- ------ ------ Total Pro Forma Adj. for 1996 acquisitions........ $ 3,369 $ 6,530 $ 3,031 $ 8,220 ----------- ----------- ------ ------ Revenues and expenses of the property disposed of as follows: Essex Road........................................ (56) (78) (11) (81) ----------- ----------- ------ ------ Reduction of expense as a result of the Partial Pr Payment date, as follows: Partial Prepayment................................ -- -- -- (6) ----------- ----------- ------ ------ Total Pro Forma Adj. for 1996 Events.............. $ 3,313 $ 6,452 $ 3,020 $ 8,133 ----------- ----------- ------ ------ ----------- ----------- ------ ------
15 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (b) Reflects: Revenues and expenses for the properties acquired in 1997 by the Company (as reported by the Company on previously-filed Current Reports on Form 8-K and 8-K/A), for the year ended December 31, 1996, as follows:
REAL AQUIS./COMPLETION BASE ESCALATIONS/ OTHER ESTATE PROPERTY/TRANSACTION (1) DATE RENTS (2) RECOVERIES INCOME TAXES - ----------------------------------- -------------------------------- ----------- ------------- ----------- --------- 1345 Campus Parkway................ January 28, 1997 $ 698 $ 165 -- $ 90 RM Transaction..................... January 31, 1997 63,083 5,483 $ 4,393 9,870 Westlakes.......................... May 8, 1997 8,659 2,347 -- 610 Shelton Place (4).................. July 31, 1997 2,180 193 -- 161 200 Corporate...................... August 15, 1997 850 38 35 85 Three Independence................. September 3, 1997 1,185 4 -- 223 ----------- ------ ----------- --------- Total Pro Forma Adj. for Pre-Mack Events........................... $ 76,655 $ 8,230 $ 4,428 $ 11,039 ----------- ------ ----------- --------- ----------- ------ ----------- --------- OPERATING GENERAL AND DEPRECIATION PROPERTY/TRANSACTION (1) UTILITIES SERVICES ADMINISTRATIVE (3) - ----------------------------------- ----------- ----------- --------------- --------------- 1345 Campus Parkway................ $ 25 $ 103 $ 20 $ 143 RM Transaction..................... 4,944 9,876 3,997 10,364 Westlakes.......................... 1,216 1,627 772 1,734 Shelton Place (4).................. 320 292 93 329 200 Corporate...................... -- 146 36 170 Three Independence................. 114 233 47 281 ----------- ----------- ------ ------- Total Pro Forma Adj. for Pre-Mack Events........................... $ 6,619 $ 12,277 $ 4,965 $ 13,021 ----------- ----------- ------ ------- ----------- ----------- ------ -------
- ------------------------ (1) The Moorestown Buildings were vacant during 1996. (2) Pro Forma base rents are presented on a straight-line basis calculated from January 1, 1996 forward. (3) Depreciation is based on the building-related portion of the purchase price and associated costs depreciated using the straight-line method over a 40-year life. (4) Revenues and certain expenses for Shelton Place reasonably reflect the operations of the property for the period April 1, 1996 through March 31, 1997. Total revenues of $444 and Revenue in excess of certain expenses of $234 for the three months ended March 31, 1997 have been included in both the Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 1997 and year ended December 31, 1996. 16 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (c) Represents reduction for interest income earned on investments of proceeds from the November 1996 Offering ($1,463), net of additional interest income earned on the RM Mortgage Receivable ($725). (d) The pro forma adjustment to interest expense for the year ended December 31, 1996 (for the Pre-Mack Events) reflects interest on mortgage debt assumed with certain acquisitions and additional borrowings from the Company's credit facilities to fund acquisitions. Pro forma interest expense for the year ended December 31, 1996 is computed as follows: Interest expense on the Initial Mortgage Financing, after the Partial Prepayment (fixed interest rate of 8.02 percent on $44,313 and variable rate of 30-day LIBOR plus 100 basis points on $20,195; weighted average interest rate used is 6.46 percent)......................................................... $ 4,867 Interest expense on loan assumed with Fair Lawn acquisition on March 3, 1995 (fixed interest rate of 8.25 percent on average outstanding principal balance of approximately $18,605).......... 1,535 Interest expense on mortgages in connection with the Harborside 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)......................................................... 10,841 Interest expense on outstanding borrowings on the Company's credit lines (a variable rate of 30-day LIBOR plus 125 basis points during the period on $114,655; weighted average interest rate used is 6.75 percent)............................................ 7,739 Interest expense on Teachers Mortgage assumed with the RM Transaction on January 31, 1997 (fixed interest rate of 7.18 percent on $185,283)............................................. 13,303 --------- Pre-Mack Events pro forma interest expense for the year ended December 31, 1996................................................ $ 38,285 --------- ---------
(e) Represents pro forma income for 1996 Events and Pre-Mack Events allocated to the pro forma weighted average minority interest (Units) in Cali Realty L.P. (the Operating Partnership) of 10.20 percent. (f) Represents adjustment necessary to reflect rental income on a straight line basis assuming that the Transaction was consummated as of January 1, 1996. (g) Represents reduction of interest income, which was recorded in the Mack Group Historical Financial Statements. (h) In connection with the consummation of the Transaction, the Company estimates that it will also recognize the following non-recurring charges before minority interest in the Company's Statement of 17 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Operations for the period in which the Transaction is completed, which have been excluded from the Company's pro forma operating results: Expensing of previously unamortized stock compensation recorded in connection with the Company's executive compensation plans which will vest on an accelerated basis as a result of the consummation of the Transaction............................................... $ 10,063 Related tax obligation payments (net of $422 previously accrued)... 4,648 Additional executive compensation and bonuses to be paid only upon consummation of the Transaction.................................. 26,985 Amortization of the beneficial conversion feature inherent in the Preferred Units (as an allocation to minority interest) as they are immediately convertible into Common Units upon consummation of the Transaction............................................... 37,196 --------- $ 78,892 --------- ---------
(i) Represents adjustment to reflect depreciation expense related to the Mack Properties to be acquired by the Company based on estimated relative fair value of buildings and improvements ($964,458) as of the date of acquisition as follows:
Pro forma depreciation expense..................................................... $ 24,111 Mack Group Historical.............................................................. 28,069 --------- $ 3,958 --------- ---------
(j) Reflects reduction of interest expense relating to the Transaction. Proforma interest expense is computed as follows:
Interest on expected assumed debt ($302,147) with an estimated weighted average interest rate of 7.23 percent.................................................... $ 21,845 Interest on drawings on the Company's credit facilities of $38,154 at a weighted average interest rate of 6.75 percent............................................ 2,570 --------- 24,415 Mack Group Historical.............................................................. 58,621 --------- $ 34,206 --------- ---------
18 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (k) Represents minority interest computed as follows:
Income before extraordinary item and minority interest................. $ 129,642 Dividend yield of 6.75 percent on the preferred units with a par value of $249,656............................................................ $ 16,852 Income allocable to common stockholders in the Company and unitholders in the Operating Partnership........................................... $ 112,790 ---------- Allocation to minority interest based upon weighted average percentage of Common Units outstanding of 14.00 percent, respectively............. 15,792 --------- Minority interest...................................................... 32,644 Pre-Mack Events pro forma.............................................. 8,023 --------- $ 24,621 --------- ---------
(l) The following is a reconciliation of the historical primary weighted average shares outstanding to the pro forma weighted average shares outstanding (shares in thousands):
Historical weighted average shares outstanding..................................... 18,461 Shares issued in connection with the the November 1996 offering.................... 17,538 Issued in connection with the August 1996 offering................................. 3,450 Adjustment for period of year during which shares issued with the 1996 offerings were outstanding................................................................... (3,248) Shares issued in connection with the 1997 Offering................................. 13,000 Vesting of 199 shares on an accelerated basis as a result of the Transaction....... 199 --------- Pro forma weighted average shares outstanding...................................... 49,400 --------- ---------
(m) Fully-diluted pro forma income before extraordinary item per share is not presented since common stock equivalents and the Preferred Units are not dilutive. (n) See following Estimated Pro Forma Results for Permited Transaction Alternatives. 19 CALI REALTY CORPORATION NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ESTIMATED PRO FORMA RESULTS FOR PERMITTED TRANSACTION ALTERNATIVES Consummation of the transaction is conditioned upon, among other things, the receipt by Mack of certain partner, tenant and third party consents. To the extent Mack cannot obtain such consents, Mack may eliminate certain properties from the Transaction. Such eliminated properties are not to exceed 20 percent of the aggregate value of the Mack properties. If the maximum amount of such properties (20 percent) were excluded from the Transaction, estimated pro forma total assets, total liabilities, minority interest and stockholders' equity as of June 30, 1997 may approximate $2,387,937, $806,404, $416,414 and $1,165,119, respectively. Under the Agreement, a reduction in the purchase price due to exclusion of properties is allocated to (1) reduce debt assumed by the greater of 26 percent of the allocated purchase price for such property or the outstanding debt on such property to be assumed (assumed to be 26 percent for this pro forma), (2) reduce cash paid up to $79,904, subject to certain elections by Mack to lower the cash reduction and take fewer Preferred and Common Units ($79,904 cash reduction assumed for this pro forma) and (3) reduce cash paid, Preferred and Common Units by 51.5 percent, 32.3 percent and 16.2 percent of the remaining price reduction. In this situation, estimated total revenues, income before minority interest, net income and net income per common share may be $189,673, $68,641, $53,138 and $1.07, respectively for the six months ended June 30, 1997 and $366,867, $127,361, $97,558 and $1.97, respectively for the year ended December 31, 1996. Also, as described in the Agreement, Mack may elect to further reduce the amount of cash consideration, in exchange for additional debt assumption, up to $60,429. Such a situation would result in lower borrowings under the Company's credit facility. 20