Quarterly report pursuant to Section 13 or 15(d)

Recent Transactions

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Recent Transactions
 6 Months Ended
Jun. 30, 2015
Recent Transactions [Abstract]  
Recent Transactions

3.    RECENT TRANSACTIONS

 

Appointment of executive officers

On June 3, 2015, the Company announced the appointments of Mitchell E. Rudin as chief executive officer and Michael J. DeMarco as president and chief operating officer of the Company, effective immediately.  The Company entered into employment agreements dated June 3, 2015 with each of Messrs. Rudin and DeMarco (together, the “Executive Employment Agreements”) that each provide as follows:

 

·

A term that ends on December 31, 2018 (the “Employment Term”) unless earlier terminated;

·

An annual base salary for each of Messrs. Rudin and DeMarco of $700,000, subject to potential merit increases (but not decreases) each year;

·

A target annual bonus opportunity of one hundred percent (100%) of base salary, or $700,000, for each of Messrs. Rudin and DeMarco, with a threshold bonus of fifty percent (50%) of base salary, or $350,000, and a maximum bonus of two hundred percent (200%) of base salary, or $1,400,000, a pro rata bonus opportunity for 2015 based on the assessment of the Executive Compensation and Option Committee of the Board of Directors (“Committee”) of each executive’s development of a strategic plan for the Company and bonuses for 2016 and subsequent years to be based on objective performance goals to be established annually by the Committee;

·

2015 long-term incentive (“LTI”) awards under the Company’s 2013 Incentive Stock Plan (the “2015 LTI Awards”), consisting of the granting to each of Messrs. Rudin and DeMarco on June 5, 2015 of 18,775.27 restricted stock units subject to time-based vesting over three years, and of 56,325.82 performance share units (“PSUs”) which will vest from 0 to 150 percent of the number of PSUs granted based on the Company’s total shareholder return relative to a peer group of equity office REITs over a three-year performance period; and

·

The grant on June 5, 2015 (the “Grant Date”) to each of Messrs. Rudin and DeMarco of options to purchase 400,000 shares of the Company’s common stock, exercisable for a period of ten years with an exercise price equal to the closing price of the Company’s common stock on the NYSE on the Grant Date (which price was $17.31 per share), with 200,000 of such options vesting in three equal annual installments commencing on the first anniversary of the Grant Date, and 200,000 of such options vesting if the Company’s common stock trades at or above $25.00 per share for 30 consecutive trading days while Mr. Rudin and Mr. DeMarco is employed, as applicable, or on or before June 30, 2019 if Mr. Rudin and Mr. DeMarco is employed for the entire Employment Term (except if the executive’s employment has been terminated by the Company for cause following expiration of the Employment Term).

 

Acquisition

On April 1, 2015, the Company acquired vacant land to accommodate the development of 365 multi-family residential units located in Worcester, Massachusetts (the “CitySquare Project”) for a purchase price of $3.1 million with an additional $1.25 million to be paid (which is accrued as of June 30, 2015), subject to certain conditions, in accordance with the terms of the purchase and sale agreement.  The purchase price for the acquisition was funded primarily through borrowing under the Company’s unsecured revolving credit facility.  The Company is required to begin construction of the CitySquare Project within 12 months of closing.  The Company plans to start construction in the third quarter 2015 and the total development costs are estimated to be approximately $91.4 million. 

 

Dispositions

On June 26, 2015, the Company sold its 203,506 square foot office property located at 14 Sylvan Way in Parsippany, New Jersey for net sales proceeds of approximately $80 million, with a gain of approximately $24.7 million from the sale.

 

On June 1, 2015, the Company sold its 25 percent equity interest in Rosewood Lafayette Holdings L.L.C., a joint venture which owns the Highlands at Morristown Station, a 217-unit multi-family property located in Morristown, New Jersey, to its joint venture partner and realized a gain on the sale of $6.4 million. 

 

On January 15, 2015, the Company sold its 21,600 square foot office/flex property located at 1451 Metropolitan Drive in West Deptford, New Jersey for net sales proceeds of approximately $1.1 million, with a gain of approximately $0.1 million from the sale. 

 

During the quarter ended June 30, 2015, the Company transferred the deeds for two of its office properties to the lender in satisfaction of its mortgage loan obligations. The properties transferred consisted of 4 Sylvan Way in Parsippany, New Jersey, aggregating 105,135 square feet, which was collateral for a $14.6 million mortgage loan that matured on August 11, 2014, and 10 Independence Boulevard in Warren, New Jersey, aggregating 120,528 square feet, which was collateral for a $16.9 million mortgage loan that matured on August 11, 2014.   The Company had previously recorded impairment charges on the properties totaling $12.2 million at September 30, 2013. As a result, the Company recorded a gain on the disposal of the two office properties for a total of $9.7 million during the quarter.

 

On January 1, 2014, the Company early adopted the new discontinued operations accounting standard and as the properties disposed of during the six months ended June 30, 2015 will not represent a strategic shift (as the Company is not entirely exiting markets or property types), they have not been reflected as part of discontinued operations.

 

The following table summarizes income for the three and six month periods ended June 30, 2015 and 2014 from the properties disposed of during the six months ended June 30, 2015 and the 16 properties sold during the year ended December 31, 2014: (dollars in thousands)    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

             Three Months Ended

 

 

             Six Months Ended

 

 

 

 

 June 30,

 

 

 

 June 30,

 

 

 
2015 

 

 
2014 

 

 
2015 

 

 
2014 

Total revenues

 

$
2,728 

 

$
14,424 

 

$
5,647 

 

$
32,797 

Operating and other expenses

 

 
(688)

 

 
(7,025)

 

 
(1,544)

 

 
(17,320)

Depreciation and amortization

 

 
(912)

 

 
(3,045)

 

 
(2,034)

 

 
(7,035)

Interest income

 

 
(557)

 

 
(880)

 

 
(1,355)

 

 
(1,767)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from properties disposed of

 

$
571 

 

$
3,474 

 

$
714 

 

$
6,675 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains on dispositions

 

 
34,399 

 

 
54,584 

 

 
34,543 

 

 
54,584 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income from properties disposed of

 

$
34,970 

 

$
58,058 

 

$
35,257 

 

$
61,259