-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VBYV8vn1YNcoTufaWeKQ/ofh6OeDeUIX0bh54RiR+Vd87DbnWY0F2DDOuAvXzXBl ItnXEvmym8qOQi9QL42BfA== /in/edgar/work/20000811/0001005150-00-001141/0001005150-00-001141.txt : 20000921 0001005150-00-001141.hdr.sgml : 20000921 ACCESSION NUMBER: 0001005150-00-001141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECKSON ASSOCIATES REALTY CORP CENTRAL INDEX KEY: 0000930548 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 113233650 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13762 FILM NUMBER: 692984 BUSINESS ADDRESS: STREET 1: 225 BROADHOLLOW RD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5166946900 MAIL ADDRESS: STREET 1: 225 BROADHOLLOW RD CITY: MELVILLE STATE: NY ZIP: 11747 10-Q 1 0001.txt FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 COMMISSION FILE NUMBER: 1-13762 ---------------- RECKSON ASSOCIATES REALTY CORP. (Exact name of registrant as specified in its charter) MARYLAND 11-3233650 (State other jurisdiction of incorporation (IRS. Employer Identification Number) of organization) 225 BROADHOLLOW ROAD, MELVILLE, NY 11747 (Address of principal executive office) (zip code)
(631) 694-6900 (Registrant's telephone number including area code) ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) Yes X No__, and (2) has been subject to such filing requirements for the past 90 days. Yes X No__. ---------------- The company has two classes of common stock, issued at $.01 par value per share with 45,125,839 and 10,283,513 shares of Class A common stock and Class B common stock outstanding, respectively as of August 9, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RECKSON ASSOCIATES REALTY CORP. QUARTERLY REPORT FOR THE THREE MONTHS ENDED JUNE 30, 2000 TABLE OF CONTENTS
INDEX PAGE - ------- ----- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999 ........................................................ 2 Consolidated Statements of Income for the three and six months ended June 30, 2000 and 1999 (unaudited) ....................................... 3 Consolidated Statements of Cash Flows for the six months ended June30, 2000 and 1999 (unaudited) ........................................ 4 Notes to the Consolidated Financial Statements (unaudited) ............... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................................... 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk ............... 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings ........................................................ 25 Item 2. Changes in Securities and Use of Proceeds ................................ 25 Item 3. Defaults Upon Senior Securities .......................................... 25 Item 4. Submission of Matters to a Vote of Securities Holders .................... 25 Item 5. Other Information ........................................................ 25 Item 6. Exhibits and Reports on Form 8-K ......................................... 25 SIGNATURES ....................................................................... 25
1 PART I -- FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
JUNE 30, 2000 DECEMBER 31, (UNAUDITED) 1999 --------------- ------------- ASSETS: Commercial real estate properties, at cost: Land ............................................................................. $ 291,510 $ 276,204 Building and improvements ........................................................ 1,916,027 1,802,611 Developments in progress: Land ............................................................................. 61,013 60,894 Development costs ................................................................ 93,719 68,690 Furniture, fixtures and equipment ................................................. 7,157 6,473 ---------- ---------- 2,369,426 2,214,872 Less accumulated depreciation ..................................................... (254,595) (218,385) ---------- ---------- 2,114,831 1,996,487 Investment in real estate joint ventures .......................................... 37,548 31,531 Investment in mortgage notes and notes receivable ................................. 356,642 352,466 Cash and cash equivalents ......................................................... 27,135 21,368 Tenants receivables ............................................................... 3,340 5,117 Investments in and advances to affiliates ......................................... 174,734 178,695 Deferred rents receivable ......................................................... 44,666 32,132 Prepaid expenses and other assets ................................................. 70,907 66,977 Contract and land deposits and pre-acquisition costs .............................. 7,727 9,585 Deferred leasing and loan costs ................................................... 47,137 39,520 ---------- ---------- TOTAL ASSETS ...................................................................... $2,884,667 $2,733,878 ========== ========== LIABILITIES: Mortgage notes payable ............................................................ $ 527,466 $ 459,174 Unsecured credit facility ......................................................... 373,600 297,600 Unsecured term loan ............................................................... 75,000 75,000 Senior unsecured notes ............................................................ 449,348 449,313 Accrued expenses and other liabilities ............................................ 90,507 82,079 Dividends and distributions payable ............................................... 28,356 27,166 ---------- ---------- TOTAL LIABILITIES ................................................................. 1,544,277 1,390,332 ---------- ---------- Commitments and other comments .................................................... -- -- Minority partners' interests in consolidated partnerships ......................... 92,071 93,086 Preferred unit interest in the operating partnership .............................. 42,518 42,518 Limited partners' minority interest in the operating partnership .................. 97,304 90,986 ---------- ---------- 231,893 226,590 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred Stock, $.01 par value, 25,000,000 shares authorized Series A preferred stock, 9,192,000 shares issued and outstanding ................ 92 92 Series B preferred stock, 2,000,000 and 6,000,000 shares issued and outstanding, respectively ................................................................... 20 60 Common Stock, $01 par value, 100,000,000 shares authorized Class A Common Stock, 45,045,573 and 40,375,506 shares issued and outstanding, respectively ................................................................... 451 401 Class B Common Stock, 10,283,513 and 10,283,763 shares issued and outstanding, respectively ................................................................... 103 103 Additional paid in capital ........................................................ 1,107,831 1,116,300 ---------- ---------- Total Stockholders' Equity ........................................................ 1,108,497 1,116,956 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................................ $2,884,667 $2,733,878 ========== ==========
(see accompanying notes to financial statements) 2 RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ----------------------------- 2000 1999 2000 1999 -------------- -------------- -------------- -------------- REVENUES: Base rents .......................................... $ 96,099 $ 77,192 $ 190,499 $ 139,285 Tenant escalations and reimbursements ............... 12,984 8,586 25,830 17,129 Equity in earnings of real estate joint ventures and service companies .................................. 1,775 512 3,187 889 Interest income on mortgage notes and notes receivable ......................................... 2,190 2,299 4,476 5,107 Gain on sales of real estate ........................ 6,662 -- 6,662 -- Other ............................................... 5,745 2,650 12,459 4,938 ----------- ----------- ----------- ----------- Total Revenues ..................................... 125,455 91,239 243,113 167,348 ----------- ----------- ----------- ----------- EXPENSES: Property operating expenses ......................... 36,368 27,539 74,523 50,446 Marketing, general and administrative ............... 6,649 5,045 13,221 9,437 Interest ............................................ 24,176 18,902 48,016 32,846 Depreciation and amortization ....................... 22,426 19,127 43,437 34,218 ----------- ----------- ----------- ----------- Total Expenses ..................................... 89,619 70,613 179,197 126,947 ----------- ----------- ----------- ----------- Income before preferred dividends and distributions and minority interests ............................. 35,836 20,626 63,916 40,401 Minority partners' interests in consolidated partnerships ....................................... (1,925) (1,615) (3,899) (2,783) Distributions to preferred unit holders ............. (660) (660) (1,321) (1,321) Limited partners' minority interest in the operating partnership ........................................ (3,083) (1,827) (5,361) (4,068) ----------- ----------- ----------- ----------- Income before dividends to preferred shareholders . 30,168 16,524 53,335 32,229 Dividends to preferred shareholders ................. (7,197) (5,329) (14,521) (9,710) ----------- ----------- ----------- ----------- Net income available to common shareholders ......... $ 22,971 $ 11,195 $ 38,814 $ 22,519 =========== =========== =========== =========== Net Income available to: Class A common shareholders ........................ $ 16,655 $ 9,464 $ 28,101 $ 20,788 Class B common shareholders ........................ 6,316 1,731 10,713 1,731 ----------- ----------- ----------- ----------- Total ............................................... $ 22,971 $ 11,195 $ 38,814 $ 22,519 =========== =========== =========== =========== Basic net income per weighted average common share: Class A common shareholders ........................ $ .40 $ .23 $ .69 $ .52 =========== =========== =========== =========== Class B common shareholders ........................ $ .61 $ .35 $ 1.04 $ .71 =========== =========== =========== =========== Basic weighted average common shares outstanding: Class A common shareholders ........................ 41,343,118 40,284,511 40,862,650 40,167,445 Class B common shareholders ........................ 10,283,513 4,883,446 10,283,556 2,455,213 Diluted net income per weighted average common share: Class A common shareholders ........................ $ .40 $ .23 $ .68 $ .51 =========== =========== =========== =========== Class B common shareholders ........................ $ .44 $ .24 $ .75 $ .52 =========== =========== =========== =========== Diluted weighted average common shares outstanding: Class A common shareholders ........................ 41,700,478 40,704,147 41,204,762 40,577,871 Class B common shareholders ........................ 10,283,513 4,883,446 10,283,556 2,455,213
(see accompanying notes to financial statements) 3 RECKSON ASSOCIATES REALTY CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED AND IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, --------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Income before dividends to preferred shareholders ............................ $ 53,335 $ 32,229 Adjustments to reconcile income before dividends to preferred shareholders to net cash provided by operating activities: Depreciation and amortization ............................................... 43,437 34,218 Gain on sales of real estate ................................................ (6,662) -- Minority partners' interests in consolidated partnerships ................... 3,899 2,783 Loss reserve on real estate held for sale ................................... -- 4,450 Gain on mortgage redemption ................................................. -- (4,492) Limited partners' minority interest in the operating partnership ............ 5,361 4,068 Equity in earnings of real estate joint ventures and service companies ...... (3,187) (889) Changes in operating assets and liabilities: Tenant receivables .......................................................... 1,777 2,181 Real estate tax escrows ..................................................... 3,387 (618) Prepaid expenses and other assets ........................................... (3,857) (15,593) Deferred rents receivable ................................................... (12,534) (2,429) Accrued expenses and other liabilities ...................................... 8,552 13,138 ---------- ---------- Net cash provided by operating activities ................................... 93,508 69,046 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in deposits and pre-acquisition costs .............................. (6,079) (1,889) Increase in developments in progress ........................................ (15,923) (8,073) Purchase of commercial real estate properties ............................... (154,573) (194,871) Increase in real estate held for sale ....................................... -- (57,095) Investment in mortgage notes and notes receivable ........................... -- (262,643) Proceeds from mortgage note repayments ...................................... 2,157 -- Investments in real estate joint ventures ................................... (4,770) (6,223) Distribution from a real estate joint venture ............................... 226 173 Additions to commercial real estate properties .............................. (22,108) (16,389) Purchase of furniture, fixtures and equipment ............................... (676) (447) Payment of leasing costs .................................................... (9,379) (7,377) Proceeds from sales of property and mortgage redemption ..................... 42,595 25,929 ---------- ---------- Net cash used in investing activities ....................................... (168,530) (528,905) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock net of issuance costs ................ 1,486 1,300 Proceeds from issuance of preferred stock net of issuance costs ............. -- 148,000 Principal payments on secured borrowings .................................... (23,708) (1,495) Payment of loan and equity issuance costs ................................... (2,399) (5,368) (Increase) decrease in investments in and advances to affiliates ............ 5,646 (40,544) Proceeds from issuance of senior unsecured notes net of issuance costs ...... -- 299,262 Proceeds from secured borrowings ............................................ 92,000 -- Proceeds from unsecured credit facility ..................................... 125,000 299,000 Repayment of unsecured credit facility ...................................... (49,000) (230,750) Contributions of minority partners' in consolidated partnerships ............ -- 75,000 Distributions to minority partners' in consolidated partnerships ............ (4,914) (2,450) Distributions to limited partners' in the operating partnership ............. (5,714) (5,222) Distributions to preferred unit holders ..................................... (1,321) (1,321) Dividends to common shareholders ............................................ (41,638) (27,111) Dividends to preferred shareholders ......................................... (14,649) (8,762) ---------- ---------- Net cash provided by financing activities .................................... 80,789 499,539 ---------- ---------- Net increase in cash and cash equivalents .................................... 5,767 39,680 Cash and cash equivalents at beginning of period ............................. 21,368 2,349 ---------- ---------- Cash and cash equivalents at end of period ................................... $ 27,135 $ 42,029 ========== ==========
(see accompanying notes to financial statements) 4 RECKSON ASSOCIATES REALTY CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) 1. ORGANIZATION AND FORMATION OF THE COMPANY Reckson Associates Realty Corp. (the "Company") is a self-administered and self-managed real estate investment trust ("REIT") which was incorporated in Maryland in September 1994. In June, 1995 the Company completed an initial public offering (the "IPO") and commenced operations. The Company became the sole general partner of Reckson Operating Partnership L.P. (the "Operating Partnership") by contributing substantially all of the net proceeds of the IPO, in exchange for an approximate 73% interest in the Operating Partnership. All properties acquired by the Company are held by or through the Operating Partnership. In conjunction with the IPO, the Operating Partnership executed various option and purchase agreements whereby it issued common units of limited partnership interest in the Operating Partnership ("OP Units") to certain continuing investors in exchange for (i) interests in certain property partnerships, (ii) fee simple and leasehold interests in properties and development land, (iii) certain business assets of executive center entities and (iv) 100% of the non-voting preferred stock of the management and construction companies. As of June 30, 2000, the Company owned and operated 78 office properties comprising approximately 13.7 million square feet, 105 industrial properties comprising approximately 6.9 million square feet and two retail properties comprising approximately 20,000 square feet, located in the New York tri-state area (the "Tri-State Area"). The Company also owns a 357,000 square foot office building located in Orlando, Florida and approximately 346 acres of land in16 separate parcels of which the Company can develop approximately 1.9 million square feet of office space and approximately 350,000 square feet of industrial space. The Company also has invested approximately $301.5 million in mortgage notes encumbering two Class A office properties encompassing approximately 1.6 million square feet, approximately 403 acres of land located in New Jersey and approximately $17.1 million in a note receivable secured by a partnership interest in Omni Partner's, L.P., owner of the Omni, a 575,000 square foot Class A office property located in Uniondale, New York. During July 1998, the Company formed Metropolitan Partners, LLC ("Metropolitan") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. All of the assets acquired in the merger located outside of the Tri-State Area, other than a 357,000 square foot office property located in Orlando, Florida, have been sold. 2. BASIS OF PRESENTATION The accompanying consolidated financial statements include the consolidated financial position of the Company and the Operating Partnership at June 30, 2000 and December 31, 1999 and the results of their operations for the three and six months ended June 30, 2000 and 1999 respectively, and, their cash flows for the six months ended June 30, 2000 and 1999, respectively. The Operating Partnership's investments in Metropolitan, Omni Partner's, L. P. ("Omni") and certain industrial joint venture properties formerly owned by Reckson Morris Operating Partnership, L. P. ("RMI") are reflected in the accompanying financial statements on a consolidated basis with a reduction for minority partners' interest. The Operating Partnership's investment in RMI was reflected in the accompanying financial statements on a consolidated basis with a reduction for minority partner's interest through September 26, 1999. On September 27, 1999, the Operating Partnership sold its interest in RMI to Keystone Property Trust ("KTR"). The operating results of the service businesses currently conducted by Reckson Management Group, Inc., and Reckson Construction Group, Inc., are reflected in the accompanying financial statements on the equity method of accounting. The Operating Partnership also invests in real estate joint ventures where it may own less than a controlling interest, such investments are also reflected in the accompanying financial statements on the equity method of accounting. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. 5 The minority interests at June 30, 2000 represent an approximate 12% limited partnership interest in the Operating Partnership, a convertible preferred interest in Metropolitan and a 40% interest in Omni. The accompanying interim unaudited financial statements have been prepared by the Company's management pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in the financial statements prepared in accordance with generally accepted accounting principles ("GAAP") may have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The unaudited financial statements as of June 30, 2000 and for the three and six month periods ended June 30, 2000 and 1999 include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth herein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. These financial statements should be read in conjunction with the Company's audited financial statements and the notes thereto included in the Company's Form 10K for the year ended December 31, 1999. The Company intends to qualify as a REIT under Section 856 through 869 of the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company will not generally be subject to corporate Federal income taxes as long as it satisfies certain technical requirements of the Code relating to composition of its income and assets and requirements relating to distributions of taxable income to shareholders. In June 1999, the Financial Accounting Standards Board issued Statement No. 137, amending Statement No. 133, "accounting for Derivative Instruments and Hedging Activities", which extended the required date of adoption to the years beginning after June 15, 2000. The Statement permits early adoption as of the beginning of any fiscal quarter after its issuance. The Company expects to adopt the new Statement effective January 1, 2001. The Company does not anticipate that the adoption of this Statement will have any effect on its results of operations or financial position. Certain prior period amounts have been reclassified to conform to the current period presentation. 3. MORTGAGE NOTES PAYABLE As of June 30, 2000, the Company had approximately $457.5 million of fixed rate mortgage notes which mature at various times between 2000 and 2027. The notes are secured by 22 properties and have a weighted average interest rate of approximately 7.6%. In addition, the Company had a $70 million variable rate mortgage note which matures in August 2001. The note is secured by one property and bears interest at LIBOR plus 165 basis points. 4. SENIOR UNSECURED NOTES As of June 30, 2000, the Operating Partnership had outstanding approximately $449.3 million (net of issuance discounts) of senior unsecured notes (the "Senior Unsecured Notes"). The following table sets forth the Operating Partnership's Senior Unsecured Notes and other related disclosures (dollars in thousands):
FACE ISSUANCE AMOUNT COUPON RATE TERM MATURITY - ---------------------- ----------- ------------- ------ ---------------- August 27, 1997 $150,000 7.20% 10 years August 28, 2007 March 26, 1999 $100,000 7.40% 5 years March 15, 2004 March 26, 1999 $200,000 7.75% 10 years March 15, 2009
Interest on the Senior Unsecured Notes is payable semiannually with principal and unpaid interest due on the scheduled maturity dates. In addition, the Senior Unsecured Notes issued on March 26, 1999 were issued at an aggregate discount of $738,000. 6 5. UNSECURED CREDIT FACILITY AND UNSECURED TERM LOAN As of June 30, 2000, the Company had a three year $500 million unsecured revolving credit facility (the "Credit Facility") from Chase Manhattan Bank, Union Bank of Switzerland and PNC Bank as co-managers of the Credit Facility bank group which matures in July, 2001. Interest rates on borrowings under the Credit Facility are priced off of LIBOR plus 90 basis points. The Company utilizes the Credit Facility primarily to finance the acquisitions of properties and other real estate investments, fund its development activities and for working capital purposes. At June 30, 2000, the Company had availability under the Credit Facility to borrow an additional $126.4 million (of which, $49.1 million has been reserved for outstanding undrawn letters of credit). As of June 30, 2000, the Company had outstanding an 18 month, $75 million unsecured term loan (the "Term Loan") from Chase Manhattan Bank which matures in June, 2001. Interest rates on borrowings under the Term Loan are priced off of LIBOR plus 150 basis points. 6. COMMERCIAL REAL ESTATE INVESTMENTS On January 13, 2000, the Company acquired 1350 Avenue of the Americas, a 540,000 square foot, 35 story, Class A office property, located in New York City, for a purchase price of approximately $126.5 million. This acquisition was financed through a $70 million secured debt financing and a draw under the Credit Facility. On June 15, 1999, the Company acquired the first mortgage note secured by a 47 story, 1.4 million square foot Class A office property located at 919 Third Avenue in New York City for approximately $277.5 million. The first mortgage note entitles the Company to all the net cash flow of the property and to substantial rights regarding the operations of the property, with the Company anticipating to ultimately obtain title to the property. This acquisition was financed with proceeds from the issuance of six million shares of Series B Convertible Cumulative Preferred Stock and through draws under the Credit Facility. Current financial accounting guidelines provide that where a lender has virtually the same risks and potential rewards as those of a real estate owner it should recognize the full economics associated with the operations of the property. As such, the Company has recognized the real estate operations of the 919 Third Avenue in the accompanying consolidated statements of income from the date of acquisition. On July 28, 2000, the Company consented to the filing of a consensual, pre-packaged bankruptcy plan with the current fee owner and expects to take title to this property by November 30, 2000. On August 9, 1999, the Company executed a contract for the sale of its interest in RMI, which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to KTR. In addition, the Company also entered into a sale agreement with Matrix relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sale price is $310 million ($41.6 million of which is payable to and of which $10.4 million of debt relief is attributable to the Morris Companies and its affiliates) and consists of a combination of (i) cash, (ii) convertible preferred and common stock of KTR, (iii) preferred units of KTR's operating partnership, (iv) relief of debt and (v) a purchase money mortgage note secured by certain land that is being sold to Matrix. As of June 30, 2000, the Matrix Sale and the sale of the Company's interest in RMI was completed for a combined sales price of approximately $258 million (net of minority partner's interest). The combined consideration consisted of approximately (i) $159.7 million in cash, (ii) $60 million of preferred stock and operating partnership units of KTR, (iii) $1.5 million in common stock of KTR, (iv) approximately $26.7 million of debt relief and (v) approximately $10.1 million in purchase money mortgages. As a result, the Company incurred a gain of approximately $16.7 million of which approximately $6.7 million was recognized during the three months ended June 30, 2000. Cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. During July 2000, the Company redeemed approximately $20 million of the preferred stock of KTR. 7 In July 1998, the Company formed a joint venture, Metropolitan Partners LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT ("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. All of the assets acquired in the merger located outside of the Tri-State Area, other than a 357,000 square foot office property located in Orlando, Florida, have been sold. The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity investment in Metropolitan. Crescent's investment accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by Metropolitan at any time during that period for $85 million, plus an amount sufficient to provide a 9.5% internal rate of return. If Metropolitan does not redeem the preferred interest, upon the expiration of the two-year period, Crescent must convert its $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's Class A common stock at a conversion price of $24.61 per share. 7. STOCKHOLDERS' EQUITY On May 24, 1999, the Company issued 11,694,567 shares of Class B Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class B common stock"), which were valued for GAAP purposes at $26 per share for total consideration of approximately $304.1 million. The shares of Class B common stock were entitled to receive an initial annual dividend of $2.24 per share, which dividend is subject to adjustment annually. The shares of Class B common stock are exchangeable at any time, at the option of the holder, into an equal number of shares of Class A common stock, par value $.01 per share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B common stock in exchange for an equal number of shares of the Company's Class A common stock at any time following the four year, six-month anniversary of the issuance of the Class B common stock. On July 1, 2000, the annual dividend on the Class B Common Stock was increased to $2.40 per share. On June 14, 2000, the Board of Directors of the Company declared the following dividends on the Company's securities:
ANNUALIZED DIVIDEND/ RECORD PAYMENT THREE MONTHS DIVIDEND/ SECURITY DISTRIBUTION DATE DATE ENDED DISTRIBUTION - -------------------------- ----------------- --------------- --------------- --------------- ---------------- Class A common stock $ .38600 July 10, 2000 July 21, 2000 June 30, 2000 $ 1.544 Class B common stock $ .59400 (a) July 14, 2000 July 31, 2000 July 31, 2000 $ 2.377 (a) Series A preferred stock $ .47660 July 14, 2000 July 31, 2000 July 31, 2000 $ 1.906 Series B preferred stock $ .52188 July 14, 2000 July 31, 2000 July 31, 2000 $ 2.088
- ------------------ (a) adjusted to $.60 per share quarterly and $2.40 per share annually on July 1, 2000. On June 20, 2000, the Company issued 4,181,818 shares of Class A common stock in exchange for four million shares of Series B Convertible Cumulative Preferred Stock with a liquidation preference value of $100 million. The Board of Directors of the Company has authorized the purchase of up to three million shares of the Company's Class B common stock. In addition, the Board of Directors has also authorized the purchase of up to an additional three million shares of the Company's Class B common stock and/or its Class A common stock. The buy-back program will be effected in accordance with the safe harbor provisions of the Securities Exchange Act of 1934 and may be terminated by the Company at any time. As of June 30, 2000, the Company had purchased and retired 1,410,804 shares of Class B common stock for approximately $30.3 million. 8 Basic net income per share on the Company's Class A common stock was calculated using the weighted average number of shares outstanding of 41,343,118 and 40,284,511 for the three months ended June, 2000 and 1999, respectively and 40,862,650 and 40,167,445 for the six months ended June 30, 2000 and 1999, respectively. Basic net income per share on the Company's Class B common stock was calculated using the weighted average number of shares outstanding of 10,283,513 and 4,883,446 for the three months ended June 30, 2000 and 1999, respectively and 10,283,556 and 2,455,213 for the six months ended June 30, 2000 and 1999, respectively. The following table sets forth the Company's reconciliation of numerators and denominators of the basic and diluted earnings per weighted average common share and the computation of basic and diluted earnings per share for the Company's Class A common stock (in thousands except for earnings per share data):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Numerator: Income before, dividends to preferred shareholders and income allocated to Class B common shareholders ......... $ 30,168 $ 16,524 $ 53,335 $ 32,229 Dividends to preferred shareholders ....................... (7,197) (5,329) (14,521) (9,710) Income allocated to Class B common shareholders ........... (6,316) (1,731) (10,713) (1,731) -------- -------- --------- -------- Numerator for basic and diluted earnings per Class A common share ............................................ $ 16,655 $ 9,464 $ 28,101 $ 20,788 ======== ======== ========= ======== Denominator: Denominator for basic earnings per share- weighted-average Class A common shares .................. 41,343 40,285 40,863 40,167 Effect of dilutive securities: Employee stock options .................................. 357 419 342 411 -------- -------- --------- -------- Denominator for diluted earnings per Class A common share-adjusted weighted-average shares and assumed conversions ............................................. 41,700 40,704 41,205 40,578 ======== ======== ========= ======== Basic earnings per Class A common share: Net income per Class A common share ....................... $ .40 $ .23 $ .69 $ .52 ======== ======== ========= ======== Diluted earnings per Class A common share: Diluted net income per Class A common share ............... $ .40 $ .23 $ .68 $ .51 ======== ======== ========= ========
The following table sets forth the Company's reconciliation of numerators and denominators of the basic and diluted earnings per weighted average common share and the computation of basic and diluted earnings per share for the Company's Class B common stock (in thousands except for earnings per share data):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Numerator: Income before dividends to preferred shareholders and income allocated to Class A common shareholders ......... $ 30,168 $ 16,524 $ 53,335 $ 32,229 Dividends to preferred shareholders ....................... (7,197) (5,329) (14,521) (9,710) Income allocated to Class A common shareholders ........... (16,655) (9,464) (28,101) (20,788) --------- -------- --------- --------- Numerator for basic earnings per Class B common ........... 6,316 1,731 10,713 1,731 Add back: Income allocated to Class A common shareholders ........... 16,655 9,464 28,101 20,788
9
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ----------------------------- 2000 1999 2000 1999 ------------- ------------ ------------- ------------- Limited partners' minority interest in the operating partnership ................................................ 3,083 1,827 5,361 4,068 --------- -------- --------- --------- Numerator for diluted earnings per Class B common share ...................................................... $ 26,054 $ 13,022 $ 44,175 $ 26,587 ========= ======== ========= ========= Denominator: Denominator for basic earnings per share- weighted-average Class B common shares ..................... 10,284 4,883 10,284 2,455 Effect of dilutive securities: Weighted average Class A common shares outstanding ......... 41,343 40,285 40,863 40,167 Weighted average OP Units outstanding ...................... 7,695 7,705 7,697 7,708 Employee stock options ..................................... 357 419 342 411 --------- -------- --------- --------- Denominator for diluted earnings per Class B common share-adjusted weighted-average shares and assumed conversions .................................................. 59,679 53,292 59,186 50,741 ========= ======== ========= ========= Basic earnings per Class B common share: Net income per Class B common share .......................... $ .61 $ .35 $ 1.04 $ .71 ========= ======== ========= ========= Diluted earnings per Class B common share: Diluted net income per Class B common share .................. $ .44 $ .24 $ .75 $ .52 ========= ======== ========= =========
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION (in thousands)
SIX MONTHS ENDED JUNE 30, ----------------------- 2000 1999 ---------- ---------- Cash paid during the period for interest ......... $52,135 $30,062 ======= ======= Interest capitalized during the period ........... $ 5,173 $ 4,400 ======= =======
On June 20, 2000, the Company issued 4,181,818 shares of Class A common stock in exchange for four million shares of Series B Convertible Cumulative Preferred Stock with a liquidation preference value of $100 million. 9. SEGMENT DISCLOSURE The Company owns all of the interests in its real estate properties by or through the Operating Partnership. The Company's portfolio consists of Class A office properties located within the New York City metropolitan area and Class A suburban office and industrial properties located and operated within the Tri-State Area (the "Core Portfolio"). The Company's portfolio also includes one office property located in Orlando, Florida, certain industrial joint venture properties formerly owned by RMI and for the period commencing January 6, 1998 and ending September 26, 1999, industrial properties which were owned by RMI and subsequently sold to KTR. The Company has managing directors who report directly to the Chief Operating Officer and Chief Financial Officer who have been identified as the Chief Operating Decision Makers because of their final authority over resource allocation, decisions and performance assessment. In addition, as the Company expects to meet its short-term liquidity requirements in part through the Credit Facility and Term Loan, interest incurred on borrowings under the Credit Facility and Term Loan is not considered as part of property operating performance. Further, the Company does not consider the property operating performance of the office property located in Orlando, Florida as a part of its Core Portfolio. Additionally, commencing January 1, 2000, the Company does not consider the operating performance of the industrial joint venture properties formerly owned by RMI as part of its Core Portfolio. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. 10 The following table sets forth the components of the Company's revenues and expenses and other related disclosures for the three months ended June 30, 2000 and 1999 (in thousands):
THREE MONTHS ENDED --------------------------------------------- JUNE 30, 2000 --------------------------------------------- CONSOLIDATED CORE PORTFOLIO OTHER TOTALS ---------------- ------------- -------------- REVENUES: Base rents, tenant escalations and reimbursements ..................... $ 106,852 $ 2,231 $ 109,083 Equity in earnings of real estate joint ventures and service companies .......................... -- 1,775 1,775 Interest and other income ........... 257 14,340 14,597 ----------- --------- ---------- Total Revenues ...................... 107,109 18,346 125,455 ----------- --------- ---------- EXPENSES: Property operating expenses ......... 35,810 558 36,368 Marketing, general and administrative ..................... 4,928 1,721 6,649 Interest ............................ 9,403 14,773 24,176 Depreciation and amortization ....... 20,055 2,371 22,426 ----------- --------- ---------- Total Expenses ...................... 70,196 19,423 89,619 ----------- --------- ---------- Income (loss) before preferred dividends and distributions and minority interests ................. $ 36,913 $ (1,077) $ 35,836 =========== ========= ========== Total assets ........................ $ 2,054,183 $ 830,484 $2,884,667 =========== ========= ========== THREE MONTHS ENDED --------------------------------------------------------- JUNE 30, 1999 --------------------------------------------------------- CONSOLIDATED CORE PORTFOLIO RMI OTHER TOTALS ---------------- ------------ ------------- ------------- REVENUES: Base rents, tenant escalations and reimbursements ..................... $ 76,943 $ 5,287 $ 3,548 $ 85,778 Equity in earnings of real estate joint ventures and service companies .......................... -- -- 512 512 Interest and other income ........... 144 -- 4,805 4,949 ----------- --------- --------- ----------- Total Revenues ...................... 77,087 5,287 8,865 91,239 ----------- --------- --------- ----------- EXPENSES: Property operating expenses ......... 25,554 816 1,169 27,539 Marketing, general and administrative ..................... 3,858 167 1,020 5,045 Interest ............................ 5,191 940 12,771 18,902 Depreciation and amortization ....... 16,212 1,287 1,628 19,127 ----------- --------- --------- ----------- Total Expenses ...................... 50,815 3,210 16,588 70,613 ----------- --------- --------- ----------- Income (loss) before preferred dividends and distributions and minority interests ................. $ 26,272 $ 2,077 $ (7,723) $ 20,626 =========== ========= ========= =========== Total assets ........................ $ 2,082,784 $ 194,898 $ 618,673 $ 2,896,355 =========== ========= ========= ===========
The following table sets forth the components of the Company's revenues and expenses and other related disclosures for the six months ended June 30, 2000 and 1999 (in thousands):
SIX MONTHS ENDED --------------------------------------------- JUNE 30, 2000 --------------------------------------------- CONSOLIDATED CORE PORTFOLIO OTHER TOTALS ---------------- ------------- -------------- REVENUES: Base rents, tenant escalations and reimbursements ...................... $ 211,672 $ 4,657 216,329 Equity in earnings of real estate joint ventures and service companies ........................... -- 3,187 3,187 Interest and other income ............ 664 22,933 23,597 --------- --------- ------- Total Revenues ....................... 212,336 30,777 243,113 --------- --------- ------- EXPENSES: Property operating expenses .......... 73,297 1,226 74,523 Marketing, general and administrative ...................... 10,029 3,192 13,221 Interest ............................. 18,595 29,421 48,016 Depreciation and amortization ........ 39,388 4,049 43,437 --------- --------- ------- Total Expenses ....................... 141,309 37,888 179,197 --------- --------- ------- Income (loss) before preferred dividends and distributions and minority interests .................. $ 71,027 $ (7,111) $ 63,916 ========= ========= ======== SIX MONTHS ENDED -------------------------------------------------------- JUNE 30, 1999 -------------------------------------------------------- CONSOLIDATED CORE PORTFOLIO RMI OTHER TOTALS ---------------- ---------- -------------- ------------- REVENUES: Base rents, tenant escalations and reimbursements ...................... $ 142,966 $ 9,900 $ 3,548 $ 156,414 Equity in earnings of real estate joint ventures and service companies ........................... -- -- 889 889 Interest and other income ............ 213 2 9,830 10,045 --------- ------- ---------- --------- Total Revenues ....................... 143,179 9,902 14,267 167,348 --------- ------- ---------- --------- EXPENSES: Property operating expenses .......... 47,710 1,567 1,169 50,446 Marketing, general and administrative ...................... 7,800 298 1,339 9,437 Interest ............................. 9,751 1,217 21,878 32,846 Depreciation and amortization ........ 28,993 2,367 2,858 34,218 --------- ------- ---------- --------- Total Expenses ....................... 94,254 5,449 27,244 126,947 --------- ------- ---------- --------- Income (loss) before preferred dividends and distributions and minority interests .................. $ 48,925 $ 4,453 $ (12,977) $ 40,401 ========= ======= ========== =========
10. OTHER INVESTMENTS AND ADVANCES During 1997, the Company formed FrontLine Capital Group ("FrontLine") (formerly Reckson Service Industries, Inc.) and Reckson Strategic Venture Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce and e-services 11 operations and other general corporate purposes. As of June 30, 2000, the Company had advanced approximately $92.7 million under the FrontLine Facility. In addition, the Operating Partnership has approved the funding of investments of up to $100 million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled joint venture REIT-qualified investments or advances made to FrontLine under terms similar to the FrontLine Facility. As of June 30, 2000, approximately $67.9 million had been invested through the RSVP Commitment, of which $29.4 million represents RSVP-controlled joint venture REIT-qualified investments and $38.5 million represents advances to FrontLine under the RSVP Commitment. Both the FrontLine Facility and the RSVP Commitment have a term of five years and advances under each are recourse obligations of FrontLine. Interest accrues on advances made under the credit facilities at a rate equal to the greater of (a) the prime rate plus two percent and (b) 12% per annum, with the rate on amounts that are outstanding for more than one year increasing annually at a rate of four percent of the prior year's rate. Prior to maturity, interest is payable quarterly but only to the extent of net cash flow and on an interest-only basis. During November 1999, the Board of Directors of the Company approved an amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine to incur secured debt and to pay interest thereon and to issue preferred stock and to pay dividends thereon. In consideration of the amendments, FrontLine paid the Operating Partnership a fee of approximately $3.6 million in the form of shares of FrontLine common stock. Such fee is being recognized in income over an estimated nine month benefit period. FrontLine identifies, acquires interests in and develops a network of e-commerce and e-services companies that service small to medium sized enterprises, independent professionals and entrepreneurs and the mobile workforce of larger companies. FrontLine serves as the managing member of RSVP. RSVP was formed to provide the Company with a research and development vehicle to invest in alternative real estate sectors. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Company's core office and industrial focus. RSVP's strategy is to identify and acquire interests in established entrepreneurial enterprises with experienced management teams in market sectors which are in the early stages of their growth cycle or offer unique circumstances for attractive investments as well as a platform for future growth. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements of Reckson Associates Realty Corp. (the "Company") and related notes thereto. The Company considers certain statements set forth herein to be forward-looking statements within the meaning of Section 27A or the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the Company's expectations for future periods. Certain forward-looking statements, including, without limitation, statements relating to the timing and success of acquisitions, the financing of the Company's operations, the ability to lease vacant space and the ability to renew or relet space under expiring leases, involve certain risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the actual results may differ materially from those set forth in the forward-looking statements and the Company can give no assurance that its expectation will be achieved. Certain factors that might cause the results of the Company to differ materially from those indicated by such forward-looking statements include, among other factors, general economic conditions, general real estate industry risks, tenant default and bankruptcies, loss of major tenants, the impact of competition and acquisition, redevelopment and development risks, the ability to finance business opportunities and local real estate risks such as an oversupply of space or a reduction in demand for real estate in the Company's real estate markets. Consequently, such forward-looking statements should be regarded solely as reflections of the Company's current operating and development plans and estimates. These plans and estimates are subject to revisions from time to time as additional information becomes available, and actual results may differ from those indicated in the referenced statements. OVERVIEW AND BACKGROUND The Company is a self-administered and self-managed real estate investment trust ("REIT") specializing in the acquisition, leasing, financing, management and development of office and industrial properties. The Company's growth strategy is focused on the real estate markets in and around the New York tri-state area (the "Tri-State Area"). The Company owns all of the interests in its real properties through Reckson Operating Partnership, L.P. (the "Operating Partnership"). As of June 30, 2000, the Company owned and operated 78 office properties comprising approximately 13.7 million square feet, 105 industrial properties comprising approximately 6.9 million square feet and two retail properties comprising approximately 20,000 square feet, located in the Tri-State Area. The Company also owns a 357,000 square foot office building located in Orlando, Florida and approximately 346 acres of land in 16 separate parcels of which the Company can develop approximately 1.9 million square feet of office space and approximately 350,000 square feet of industrial space. The Company also has invested approximately $301.5 million in mortgage notes encumbering two Class A office properties encompassing approximately 1.6 million square feet, approximately 403 acres of land located in New Jersey and approximately $17.1 million in a note receivable secured by a partnership interest in Omni Partner's, L.P., owner of the Omni, a 575,000 square foot Class A office property located in Uniondale, New York. During 1997, the Company formed FrontLine Capital Group ("FrontLine") (formerly Reckson Service Industries, Inc.) and Reckson Strategic Venture Partners, LLC ("RSVP"). In connection with the formation of FrontLine, the Operating Partnership established a credit facility with FrontLine (the "FrontLine Facility") in the amount of $100 million for FrontLine's e-commerce and e-services operations and other general corporate purposes. As of June 30, 2000, the Company had advanced approximately $92.7 million under the FrontLine Facility. In addition, the Operating Partnership has approved the funding of investments of up to $100 million with or in RSVP (the "RSVP Commitment"), through RSVP-controlled joint venture REIT-qualified investments or advances made to FrontLine under terms similar to the FrontLine Facility. As of June 30, 2000, approximately $67.9 million had been invested through the RSVP Commitment, of which $29.4 million represents RSVP-controlled joint venture REIT-qualified investments and $38.5 million represents advances to FrontLine under the RSVP Commitment. Both the FrontLine Facility and the RSVP Commitment have a term of five years and 13 advances under each are recourse obligations of FrontLine. Interest accrues on advances made under the credit facilities at a rate equal to the greater of (a) the prime rate plus two percent and (b) 12% per annum, with the rate on amounts that are outstanding for more than one year increasing annually at a rate of four percent of the prior year's rate. Prior to maturity, interest is payable quarterly but only to the extent of net cash flow of FrontLine and on an interest-only basis. During November 1999, the Board of Directors of the Company approved an amendment to the FrontLine Facility and the RSVP Commitment to permit FrontLine to incur secured debt and to pay interest thereon and to issue preferred stock and to pay dividends thereon. In consideration of the amendments, FrontLine paid the Operating Partnership a fee of approximately $3.6 million in the form of shares of FrontLine common stock. Such fee is being recognized in income over an estimated nine month benefit period. FrontLine identifies, acquires interests in and develops a network of e-commerce and e-services companies that service small to medium sized enterprises, independent professionals and entrepreneurs and the mobile workforce of larger companies. FrontLine serves as the managing member of RSVP. RSVP was formed to provide the Company with a research and development vehicle to invest in alternative real estate sectors. RSVP invests primarily in real estate and real estate related operating companies generally outside of the Company's core office and industrial focus. RSVP's strategy is to identify and acquire interests in established entrepreneurial enterprises with experienced management teams in market sectors which are in the early stages of their growth cycle or offer unique circumstances for attractive investments as well as a platform for future growth. On August 9, 1999, the Company executed a contract for the sale of its interest in Reckson Morris Operating Partnership, L. P. ("RMI"), which consisted of 28 properties, comprising approximately 6.1 million square feet and three other big box industrial properties to Keystone Property Trust ("KTR"). In addition, the Company also entered into a sale agreement with Matrix relating to a first mortgage note and certain industrial land holdings (the "Matrix Sale"). The combined total sale price is $310 million ($41.6 million of which is payable to, and of which $10.4 million of debt relief is attributable to the Morris Companies and its affiliates) and consists of a combination of (i) cash, (ii) convertible preferred and common stock of KTR, (iii) preferred units of KTR's operating partnership, (iv) relief of debt and (v) a purchase money mortgage note secured by certain land that is being sold to Matrix. As of June 30, 2000, the Matrix Sale and the sale of the Company's interest in RMI was completed for a combined sales price of approximately $258 million (net of minority partner's interest). The combined consideration consisted of approximately (i) $159.7 million in cash, (ii) $60 million of preferred stock and operating partnership units of KTR, (iii) $1.5 million in common stock of KTR, (iv) approximately $26.7 million of debt relief and (v) approximately $10.1 million in purchase money mortgages. As a result, the Company incurred a gain of approximately $16.7 million of which approximately $6.7 million was recognized during the three months ended June 30, 2000. Cash proceeds from the sales were used primarily to repay borrowings under the Credit Facility. During July 2000, the Company redeemed approximately $20 million of the preferred stock of KTR. In July 1998, the Company formed a joint venture, Metropolitan Partners LLC ("Metropolitan"), with Crescent Real Estate Equities Company, a Texas REIT ("Crescent") for the purpose of acquiring Tower Realty Trust, Inc. ("Tower"). On May 24, 1999 the Company completed the merger with Tower and acquired three Class A office properties located in New York City totaling 1.6 million square feet and one office property located on Long Island totaling approximately 101,000 square feet. In addition, pursuant to the merger, the Company also acquired certain office properties, a property under development and land located outside of the Tri-State Area. All of the assets acquired in the merger located outside of the Tri-State Area, other than a 357,000 square foot office property located in Orlando, Florida, have been sold. The Company controls Metropolitan and owns 100% of the common equity; Crescent owns a $85 million preferred equity investment in Metropolitan. Crescent's investment accrues distributions at a rate of 7.5% per annum for a two-year period (May 24, 1999 through May 24, 2001) and may be redeemed by Metropolitan at any time during that period for $85 million, plus an amount sufficient to provide a 14 9.5% internal rate of return. If Metropolitan does not redeem the preferred interest, upon the expiration of the two-year period, Crescent must convert its $85 million preferred interest into either (i) a common membership interest in Metropolitan or (ii) shares of the Company's Class A common stock at a conversion price of $24.61 per share. The market capitalization of the Company at June 30, 2000 was approximately $3.33 billion. The Company's market capitalization is based on the sum of (i) the market value of the Company's Class A common stock and common units of limited partnership interest in the Operating Partnership ("OP Units") (assuming conversion) of $23.77 per share/unit (based on the closing price of the Company's Class A common stock on June 30, 2000), (ii) the market value of the Company's Class B common stock of $25.44 per share (based on the closing price of the Company's Class B common stock on June 30, 2000), (iii) the liquidation preference value of the Company's Series A preferred and Series B preferred stock of $25 per share, (iv) the liquidation preference value of the Operating Partnership's preferred units of $1,000 per unit, (v) the contributed value of Metropolitan's preferred interest of $85 million and (vi) the approximately $1.41 billion (including its share of joint venture debt and net of minority partners' interests) of debt outstanding at June 30, 2000. As a result, the Company's total debt to total market capitalization ratio at June 30, 2000 equaled approximately 42.3%. RESULTS OF OPERATIONS The Company's total revenues increased by $34.2 million or 37.5% for the three months ended June 30, 2000 as compared to the 1999 period. Property operating revenues, which include base rents and tenant escalations and reimbursements ("Property Operating Revenues") increased by $23.3 million or 27.2% for the three months ended June 30, 2000 as compared to the 1999 period. The increase in Property Operating Revenues is substantially attributable to the Tower portfolio acquisition in May 1999, the acquisition of the first mortgage note secured by 919 Third Avenue (which revenue was reflected in Property Operating Revenues) in June 1999 and the acquisition of 1350 Avenue of the Americas in January 2000. In addition, Property Operating Revenues were also positively impacted by approximately $3.6 million from increases in occupancies and rental rates in our "same store" properties. The Company's base rent reflects the positive impact of the straight-line rent adjustment of $8.3 million for the three months ended June 30, 2000 as compared to $3.2 million for the 1999 period. The remaining balance of the increase in total revenues is attributable to the gain on sales of real estate, interest income and fees relating to the FrontLine Facility and the RSVP Commitment and earnings generated by RSVP-controlled joint venture REIT-qualified investments. Property operating expenses, real estate taxes and ground rents ("Property Expenses") increased by $8.8 million or 32.1% for the three months ended June 30, 2000 as compared to the 1999 period. These increases are primarily due to the acquisition of the Tower portfolio in May 1999, the acquisition of the first mortgage note secured by 919 Third Avenue in June 1999, (which operations were reflected in Property Expenses) and the acquisition of 1350 Avenue of the Americas in January 2000. Gross operating margins (defined as Property Operating Revenues less Property Expenses, taken as a percentage of Property Operating Revenues) for the three months ended June 30 , 2000 and 1999 were 66.7% and 67.9% respectively. The decrease in gross operating margins is primarily attributable to a larger proportionate share of gross operating margin derived from office properties, which has a lower gross margin percentage, in 2000 compared to 1999. The higher proportionate share of the gross operating margins is attributable to the office properties acquired during the period May 1999 through January 2000 and the disposition of net leased industrial properties in September 1999 and April 2000. This shift in the composition of the portfolio was offset by increases in rental rates and operating efficiencies realized. Marketing, general and administrative expenses increased by $1.6 million for the three months ended June 30, 2000 as compared to the 1999 period. The increase is due to the increased costs of managing the acquisition properties and the increase in corporate management and administrative costs associated with the growth of the Company including the opening of its New York City division. Marketing, general and administrative expenses as a percentage of total revenues were 5.3% for the three months ended June 30, 2000 as compared to 5.5% for the 1999 period. 15 Interest expense increased by $5.3 million for the three months ended June 30, 2000 as compared to the 1999 period. The increase is due to secured borrowings assumed in the Tower acquisition as well as new debt incurred with the Tower and 1350 Avenue of the Americas acquisitions. Additionally, the increase is due to an increase cost attributable to an increased balance on the Company's credit facility and term loan. The weighted average balance outstanding on the Company's credit facility and term loan was $464.1 million for the three months ended June 30, 2000 as compared to $352.1 million for the three months ended June 30, 1999. The Company's total revenues increased by $75.8 million or 45.3% for the six months ended June 30, 2000 as compared to the 1999 period. Property Operating Revenues, which include base rents and tenant escalations and reimbursements increased by $59.9 million or 38.3% for the six months ended June 30, 2000 as compared to the 1999 period. The increase in Property Operating Revenues is substantially attributable to the Tower portfolio acquisition in May 1999, the acquisition of the first mortgage note secured by 919 Third Avenue (which revenue was reflected in Property Operating Revenues) in June 1999 and the acquisition of 1350 Avenue of the Americas in January 2000. In addition, Property Operating Revenues were also positively impacted by approximately $5.4 million from increases in occupancies and rental rates in our "same store" properties. The Company's base rent reflects the positive impact of the straight-line rent adjustment of $12.8 million for the six months ended June 30, 2000 as compared to $4.6 million for the 1999 period. The remaining balance of the increase in total revenues is attributable to the gain on sales of real estate, interest income and fees relating to the FrontLine Facility and the RSVP Commitment and earnings generated by RSVP-controlled joint venture REIT-qualified investments. Property Expenses increased by $24.1 million or 47.7% for the six months ended June 30, 2000 as compared to the 1999 period. These increases are primarily due to the acquisition of the Tower portfolio in May 1999, the acquisition of the first mortgage note secured by 919 Third Avenue in June 1999, (which operations were reflected in Property Expenses) and the acquisition of 1350 Avenue of the Americas in January 2000. Gross Operating Margins for the six months ended June 30 , 2000 and 1999 were 65.6% and 67.8% respectively. The decrease in gross operating margins is primarily attributable to a larger proportionate share of gross operating margin derived from office properties, which has a lower gross margin percentage, in 2000 compared to 1999. The higher proportionate share of the gross operating margins is attributable to the office properties acquired during the period May 1999 through January 2000 and the disposition of net leased industrial properties in September 1999. This shift in the composition of the portfolio was offset by increases in rental rates and operating efficiencies realized. Marketing, general and administrative expenses increased by $3.8 million for the six months ended June 30, 2000 as compared to the 1999 period. The increase is due to the increased costs of managing the acquisition properties and the increase in corporate management and administrative costs associated with the growth of the Company including the opening of its New York City division. Marketing, general and administrative expenses as a percentage of total revenues were 5.4% for the six months ended June 30, 2000 as compared to 5.6% for the 1999 period. Interest expense increased by $15.2 million for the six months ended June 30, 2000 as compared to the 1999 period. The increase is primarily due to secured borrowings assumed in the Tower acquisition as well as new debt incurred with the Tower and 1350 Avenue of the Americas acquisitions. Additionally, the increase is also due to $300 million of Senior Unsecured Notes issued on March 26, 1999 and an increased cost attributable to an increased average balance on the Company's credit facility and term loan. The weighted average balance on the Company's credit facility and term loan was $464.8 million for the six months ended June 30, 2000 as compared to $429.0 million for the six months ended June 30, 1999. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2000 the Company had a three year $500 million unsecured revolving credit facility (the "Credit Facility") with Chase Manhattan Bank, Union Bank of Switzerland and PNC Bank as co-managers of the Credit Facility bank group which matures in July, 2001. Interest rates on borrowings under the Credit Facility are priced off of LIBOR plus 90 basis points. 16 The Company utilizes the Credit Facility primarily to finance the acquisitions of properties and other real estate investments, fund its development activities and for working capital purposes. At June 30, 2000, the Company had availability under the Credit Facility to borrow an additional $126.4 million (of which, $49.1 million has been reserved for outstanding undrawn letters of credit). As of June 30, 2000, the Company had an 18 month, $75 million unsecured term loan (the "Term Loan") from Chase Manhattan Bank which matures during June, 2001. Interest rates on borrowings under the Term Loan are priced off of LIBOR plus 150 basis points. On May 24, 1999, the Company issued 11,694,567 shares of Class B Exchangeable Common Stock, par value $.01 per share, of the Company (the "Class B common stock"), which were valued for generally accepted accounting principles ("GAAP") purposes at $26 per share for total consideration of approximately $304.1 million. The shares of Class B common stock were entitled to receive an initial annual dividend of $2.24 per share, which dividend is subject to adjustment annually. The shares of Class B common stock are exchangeable at any time, at the option of the holder, into an equal number of shares of Class A common stock, par value $.01 per share, of the Company subject to customary antidilution adjustments. The Company, at its option, may redeem any or all of the Class B common stock in exchange for an equal number of shares of the Company's Class A common stock at any time following the four year, six-month anniversary of the issuance of the Class B common stock. On July 1, 2000, the annual dividend on the Class B Common Stock was increased to $2.40 per share. On June 20, 2000, the Company issued 4,181,818 shares of Class A common stock in exchange for four million shares of Series B Convertible Cumulative Preferred Stock with a liquidation preference value of $100 million. The Board of Directors of the Company has authorized the purchase of up to three million shares of the Company's Class B common stock. In addition, the Board of Directors has also authorized the purchase of up to an additional three million shares of the Company's Class B common stock and/or its Class A common stock. The buy-back program will be effected in accordance with the safe harbor provisions of the Securities Exchange Act of 1934 and may be terminated by the Company at any time. As of June 30, 2000, the Company had purchased and retired 1,410,804 shares of Class B Common Stock for approximately $30.3 million. The Company's indebtedness at June 30, 2000 totaled approximately $1.41 billion (including its share of joint venture debt and net of minority partners' interests) and was comprised of $373.6 million outstanding under the Credit Facility, $75 million outstanding under the Term Loan, approximately $449.3 million of senior unsecured notes and approximately $513.3 million of mortgage indebtedness. Based on the Company's total market capitalization of approximately $3.33 billion at June 30, 2000 (calculated based on the sum of (i) the market value of the Company's Class A common stock and OP Units, assuming conversion, (ii) the market value of the Company's Class B common stock, (iii) the liquidation preference value of the Company's preferred stock, (iv) the liquidation preference value of the Operating Partnership's preferred units, (v) the contributed value of Metropolitan's preferred interest and (vi) the $1.41 billion of debt), the Company's debt represented approximately 42.3% of its total market capitalization. Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and capital expenditures, excluding non-recurring capital expenditures of the Company. The Company expects to meet its short-term liquidity requirements generally through its net cash provided by operating activities along with the Credit Facility previously discussed. The Company expects to meet certain of its financing requirements through long-term secured and unsecured borrowings and the issuance of debt and equity securities of the Company. In addition, the Company also believes that it will, from time to time, generate funds from the sale of certain of its real estate properties or interests therein. The Company will refinance existing mortgage indebtedness or indebtedness under the Credit Facility at maturity or retire such debt through the issuance of additional debt securities or additional equity securities. The Company anticipates that the current balance of cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and equity offerings, will be adequate to meet the capital and liquidity requirements of the Company in both the short and long-term. 17 In order to qualify as a REIT for federal income tax purposes, the Company is required to make distributions to its stockholders of at least 95% of REIT taxable income. The Company expects to use its cash flow from operating activities for distributions to stockholders and for payment of recurring, non-incremental revenue-generating expenditures. The Company intends to invest amounts accumulated for distribution in short-term investments. INFLATION The office leases generally provided for fixed base rent increases or indexed escalations. In addition, the office leases provide for separate escalations of real estate taxes and electric costs over a base amount. The industrial leases generally provide for fixed base rent increases, direct pass through of certain operating expenses and separate real estate tax escalations over a base amount. The Company believes that inflationary increases in expenses will be offset by contractual rent increases and expense escalations described above. The Credit Facility and Term Loan bear interest at a variable rate, which will be influenced by changes in short-term interest rates, and is sensitive to inflation. FUNDS FROM OPERATIONS Management believes that funds from operations ("FFO") is an appropriate measure of performance of an equity REIT. FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income or loss, excluding gains or losses from debt restructuring and sales of properties plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. In November 1999, NAREIT issued a "White Paper" analysis to address certain interpretive issues under its definition of FFO. The White Paper provides that FFO should include both recurring and non-recurring operating results, except those results defined as "extraordinary items" under GAAP. This revised definition is effective for all periods beginning on or after January 1, 2000. Since all companies and analysts do not calculate FFO in a similar fashion, the Company's calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies. 18 The following table presents the Company's FFO calculation (unaudited and in thousands, except per share/unit data):
THREE MONTHS ENDED JUNE 30, ------------------------- 2000 1999 ------------ ------------ Net income available to common shareholders ...................................... $ 22,971 $ 11,195 Add: Real estate depreciation and amortization ....................................... 21,937 18,406 Minority partners' interests in consolidated partnerships ....................... 1,925 1,615 Limited partners' minority interest in the operating partnership ................ 3,083 1,827 Less: Gain on sales of real estate .................................................... 6,662 -- Amounts distributable to minority partners' in consolidated partnerships ........ 2,136 1,980 -------- -------- Funds From Operations (FFO) -- basic ............................................. 41,118 31,063 Less: Straight line rents ............................................................. 8,300 3,178 Non-Incremental capitalized tenant improvements and leasing commissions ......... 1,873 1,236 Non-Incremental capitalized improvements ........................................ 1,446 838 -------- -------- Cash available for distribution ("CAD") -- basic ................................. $ 29,499 $ 25,811 ======== ======== Computation of diluted FFO and CAD: Basic FFO ........................................................................ $ 41,118 $ 31,063 Add: Dividends and distributions on dilutive shares and units ........................ 9,451 6,663 -------- -------- FFO -- diluted ................................................................... 50,569 37,726 Less: Straight line rents, non incremental capitalized improvements, tenant improvements and leasing commissions ........................................... 11,619 5,252 -------- -------- CAD -- diluted ................................................................... $ 38,950 $ 32,474 ======== ======== Basic FFO and CAD calculations: Weighted average shares outstanding ............................................. 51,627 45,168 Weighted average units of limited partnership interest outstanding .............. 7,695 7,705 -------- -------- Weighted average shares and units outstanding ................................... 59,322 52,873 ======== ======== FFO per weighted average share or unit .......................................... $ .69 $ .59 ======== ======== CAD per weighted average share or unit .......................................... $ .50 $ .49 ======== ======== Weighted average dividends or distributions per share or unit ................... $ .42 $ .39 ======== ======== FFO payout ratio ................................................................ 60.8% 66.2% ======== ======== CAD payout ratio ................................................................ 84.7% 79.6% ======== ======== Diluted FFO and CAD calculations: Basic GAAP weighted average shares and units outstanding ........................ 59,322 52,873 Add GAAP weighted average dilutive securities ................................... 357 419 -------- -------- Dilutive GAAP weighted average shares and units ................................. 59,679 53,292 Adjustments for dilutive FFO and CAD weighted average shares and units: Add: Weighted average shares of Series A Preferred Stock ............................ 8,060 8,060 Weighted average shares of Series B Preferred Stock ............................ 5,294 1,835 Weighted average shares of minority partner's preferred interest ............... 3,454 1,443 Weighed average shares of preferred units of limited partnership interest . 1,367 1,367 -------- -------- Dilutive FFO and CAD weighted average shares and units outstanding ............... 77,854 65,997 ======== ======== FFO per weighted average share or unit ........................................... $ .65 $ .57 ======== ======== CAD per weighted average share or unit ........................................... $ .50 $ .49 ======== ======== Weighted average dividends or distributions per share or unit .................... $ .41 $ .39 ======== ======== FFO payout ratio ................................................................. 63.6% 67.4% ======== ======== CAD payout ratio ................................................................. 82.5% 78.3% ======== ======== SIX MONTHS ENDED JUNE 30, ------------------------- 2000 1999 ------------ ------------ Net income available to common shareholders ...................................... $ 38,814 $ 22,519 Add: Real estate depreciation and amortization ....................................... 42,552 33,094 Minority partners' interests in consolidated partnerships ....................... 3,899 2,783 Limited partners' minority interest in the operating partnership ................ 5,361 4,068 Less: Gain on sales of real estate .................................................... 6,662 -- Amounts distributable to minority partners' in consolidated partnerships ........ 4,517 3,424 -------- -------- Funds From Operations (FFO) -- basic ............................................. 79,447 59,040 Less: Straight line rents ............................................................. 12,838 4,514 Non-Incremental capitalized tenant improvements and leasing commissions ......... 4,743 2,055 Non-Incremental capitalized improvements ........................................ 2,697 1,479 -------- -------- Cash available for distribution ("CAD") -- basic ................................. $ 59,169 $ 50,992 ======== ======== Computation of diluted FFO and CAD: Basic FFO ........................................................................ $ 79,447 $ 59,040 Add: Dividends and distributions on dilutive shares and units ........................ 19,029 11,704 -------- -------- FFO -- diluted ................................................................... 98,476 70,744 Less: Straight line rents, non incremental capitalized improvements, tenant improvements and leasing commissions ........................................... 20,278 8,048 -------- -------- CAD -- diluted ................................................................... $ 78,198 $ 62,696 ======== ======== Basic FFO and CAD calculations: Weighted average shares outstanding ............................................. 51,146 42,623 Weighted average units of limited partnership interest outstanding .............. 7,697 7,707 -------- -------- Weighted average shares and units outstanding ................................... 58,843 50,330 ======== ======== FFO per weighted average share or unit .......................................... $ 1.35 $ 1.17 ======== ======== CAD per weighted average share or unit .......................................... $ 1.01 $ 1.01 ======== ======== Weighted average dividends or distributions per share or unit ................... $ .83 $ .73 ======== ======== FFO payout ratio ................................................................ 61.2% 62.1% ======== ======== CAD payout ratio ................................................................ 82.1% 71.9% ======== ======== Diluted FFO and CAD calculations: Basic GAAP weighted average shares and units outstanding ........................ 58,843 50,330 Add GAAP weighted average dilutive securities ................................... 342 411 -------- -------- Dilutive GAAP weighted average shares and units ................................. 59,185 50,741 Adjustments for dilutive FFO and CAD weighted average shares and units: Add: Weighted average shares of Series A Preferred Stock ............................ 8,060 8,060 Weighted average shares of Series B Preferred Stock ............................ 5,526 923 Weighted average shares of minority partner's preferred interest ............... 3,454 724 Weighed average shares of preferred units of limited partnership interest . 1,367 1,367 -------- -------- Dilutive FFO and CAD weighted average shares and units outstanding ............... 77,592 61,815 ======== ======== FFO per weighted average share or unit ........................................... $ 1.27 $ 1.14 ======== ======== CAD per weighted average share or unit ........................................... $ 1.01 $ 1.01 ======== ======== Weighted average dividends or distributions per share or unit .................... $ .81 $ .73 ======== ======== FFO payout ratio ................................................................. 63.8% 63.4% ======== ======== CAD payout ratio ................................................................. 80.3% 71.5% ======== ========
19 SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES, TENANT IMPROVEMENTS AND LEASING COMMISSIONS The following table summarizes the expenditures incurred for non-incremental capital expenditures, tenant improvements and leasing commissions for the Company's office and industrial properties for the six month period ended June 30, 2000 and the historical average of such non-incremental capital expenditures, tenant improvements and leasing commissions for the years 1996 through 1999. NON-INCREMENTAL REVENUE GENERATING CAPITAL EXPENDITURES
SIX MONTHS 1998-1999 ENDED 1996 1997 1998 1999 AVERAGE JUNE 30, 2000 ------------- --------------- --------------- --------------- --------------- -------------- SUBURBAN OFFICE PROPERTIES Total ................... $ 375,026 $ 1,108,675 $ 2,004,976 $ 2,298,899 $ 1,446,894 $ 1,698,839 Per Square Foot ......... 0.13 0.22 0.23 0.23 0.20 0.17 CBD OFFICE PROPERTIES Total ................... N/A N/A N/A N/A N/A $ 746,275 Per Square Foot ......... N/A N/A N/A N/A N/A 0.35 INDUSTRIAL PROPERTIES Total ................... $ 670,751 $ 733,233 $ 1,205,266 $ 1,048,688 $ 914,485 $ 431,699 Per Square Foot ......... 0.18 0.15 0.12 0.11 0.14 0.05
NON-INCREMENTAL REVENUE GENERATING TENANT IMPROVEMENTS AND LEASING COMMISSIONS
SIX MONTHS 1998-1999 ENDED 1996 1997 1998 1999 AVERAGE JUNE 30, 2000 ------------- -------------- --------------- --------------- -------------- -------------- LONG ISLAND OFFICE PROPERTIES Tenant Improvements .............. $ 523,574 $ 784,044 $ 1,140,251 $ 1,009,357 $ 864,307 $ 778,333 Per Square Foot Improved ......... 4.28 7.00 3.98 4.73 5.00 5.06 Leasing Commissions .............. $ 119,047 $ 415,822 $ 418,191 $ 551,762 $ 376,206 $ 936,595 Per Square Foot Leased ........... 0.97 4.83 1.46 2.59 2.46 4.92 --------- ---------- ----------- ----------- ---------- --------- Total Per Square Foot ............ $ 5.25 $ 11.83 $ 5.44 $ 7.32 $ 7.46 $ 9.98 ========= ========== =========== =========== ========== ========= WESTCHESTER OFFICE PROPERTIES Tenant Improvements .............. $ 834,764 $1,211,665 $ 711,160 $ 1,316,611 $1,018,550 $ 712,852 Per Square Foot Improved ......... 6.33 8.90 4.45 5.62 6.33 7.33 Leasing Commissions .............. $ 264,388 $ 366,257 $ 286,150 $ 457,730 $ 343,631 $ 131,402 Per Square Foot Leased ........... 2.00 2.69 1.79 1.96 2.11 3.00 --------- ---------- ----------- ----------- ---------- --------- Total Per Square Foot ............ $ 8.33 $ 11.59 $ 6.24 $ 7.58 $ 8.44 $ 10.33 ========= ========== =========== =========== ========== ========= CONNECTICUT OFFICE PROPERTIES (A) Tenant Improvements .............. $ 58,000 $1,022,421 $ 202,880 $ 179,043 $ 449,952 $ 230,365 Per Square Foot Improved ......... 12.45 13.39 5.92 4.88 9.16 5.44 Leasing Commissions .............. $ 0 $ 256,615 $ 151,063 $ 110,252 $ 159,363 $ 113,263 Per Square Foot Leased ........... 0.00 3.36 4.41 3.00 2.69 2.67 --------- ---------- ----------- ----------- ---------- --------- Total Per Square Foot ............ $ 12.45 $ 16.75 $ 10.33 $ 7.88 $ 11.85 $ 8.11 ========= ========== =========== =========== ========== ========= NEW JERSEY OFFICE PROPERTIES Tenant Improvements .............. N/A N/A $ 654,877 $ 454,054 $ 554,466 $ 914,789 Per Square Foot Improved ......... N/A N/A 3.78 2.29 3.04 7.03 Leasing Commissions .............. N/A N/A $ 396,127 $ 787,065 $ 591,596 $ 739,594 Per Square Foot Leased ........... N/A N/A 2.08 3.96 3.02 5.83 --------- ---------- ----------- ----------- ---------- --------- Total Per Square Foot ............ N/A N/A $ 5.86 $ 6.25 $ 6.06 $ 12.86 ========= ========== =========== =========== ========== ========= NEW YORK OFFICE PROPERTIES Tenant Improvements .............. N/A N/A N/A N/A N/A $ 11,977 Per Square Foot Improved ......... N/A N/A N/A N/A N/A 1.18 Leasing Commissions .............. N/A N/A N/A N/A N/A $ 21,031 Per Square Foot Leased ........... N/A N/A N/A N/A N/A 2.07 --------- ---------- ----------- ----------- ---------- --------- Total Per Square Foot ............ N/A N/A N/A N/A N/A $ 3.25 ========= ========== =========== =========== ========== ========= INDUSTRIAL PROPERTIES Tenant Improvements .............. $ 380,334 $ 230,466 $ 283,842 $ 375,646 $ 317,572 $ 263,746 Per Square Foot Improved ......... 0.72 0.55 0.76 0.25 0.57 0.50 Leasing Commissions .............. $ 436,213 $ 81,013 $ 200,154 $ 835,108 $ 388,122 $ 115,590 Per Square Foot Leased ........... 0.82 0.19 0.44 0.56 0.50 0.22 --------- ---------- ----------- ----------- ---------- --------- Total Per Square Foot ............ $ 1.54 $ 0.74 $ 1.20 $ 0.81 $ 1.07 $ 0.72 ========= ========== =========== =========== ========== =========
- ---------- (A) 1996 -- 1999 average weighted to reflect October 1996 acquisition date 20 LEASE EXPIRATIONS The following table sets forth scheduled lease expirations for executed leases as of June 30, 2000: LONG ISLAND OFFICE PROPERTIES (EXCLUDING OMNI):
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 21 57,738 1.9% $ 20.43 $ 22.65 2001 ........................ 42 193,716 6.3% $ 22.44 $ 24.45 2002 ........................ 35 287,016 9.3% $ 21.86 $ 24.21 2003 ........................ 50 310,620 10.1% $ 22.17 $ 25.08 2004 ........................ 45 275,654 9.0% $ 23.04 $ 25.73 2005 ........................ 56 557,431 18.2% $ 22.87 $ 25.16 2006 AND THEREAFTER ......... 78 1,389,520 45.2% -- -- -- --------- ----- TOTAL ....................... 327 3,071,695 100.0% === ========= =====
OMNI:
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ -- -- -- -- -- 2001 ........................ 4 32,680 5.8% $ 27.39 $ 32.92 2002 ........................ 4 129,351 22.8% $ 30.00 $ 38.62 2003 ........................ 6 81,809 14.4% $ 29.60 $ 33.87 2004 ........................ 4 112,414 19.8% $ 26.05 $ 33.44 2005 ........................ 6 59,115 10.4% $ 27.91 $ 34.38 2006 AND THEREAFTER ......... 6 152,411 26.8% -- -- -- ------- ----- TOTAL ....................... 30 567,780 100.0% == ======= =====
INDUSTRIAL PROPERTIES:
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 18 276,554 5.6% $ 5.43 $ 6.10 2001 ........................ 30 624,759 12.6% $ 5.79 $ 7.00 2002 ........................ 26 240,344 4.8% $ 6.43 $ 7.19 2003 ........................ 29 728,234 14.6% $ 5.29 $ 6.10 2004 ........................ 34 634,085 12.8% $ 6.40 $ 7.07 2005 ........................ 15 368,464 7.4% $ 5.65 $ 7.91 2006 AND THEREAFTER ......... 44 2,097,360 42.2% -- -- -- --------- ----- TOTAL ....................... 196 4,969,800 100.0% === ========= =====
21 LEASE EXPIRATIONS -- (CONTINUED) RESEARCH AND DEVELOPMENT PROPERTIES:
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 3 22,501 1.8% $ 12.49 $ 11.06 2001 ........................ 7 96,120 7.5% $ 11.61 $ 13.21 2002 ........................ 3 118,620 9.3% $ 10.19 $ 11.80 2003 ........................ 6 301,064 23.5% $ 5.72 $ 6.71 2004 ........................ 10 129,218 10.1% $ 11.98 $ 13.43 2005 ........................ 3 293,704 23.0% $ 8.08 $ 8.86 2006 AND THEREAFTER ......... 13 317,457 24.8% -- -- -- ------- ----- TOTAL ....................... 45 1,278,684 100.0% == ========= =====
WESTCHESTER OFFICE PROPERTIES:
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 22 118,125 3.9% $ 20.53 $ 21.07 2001 ........................ 38 253,217 8.3% $ 20.79 $ 21.07 2002 ........................ 48 459,216 15.1% $ 20.12 $ 20.37 2003 ........................ 42 259,105 8.5% $ 21.90 $ 23.14 2004 ........................ 26 164,609 5.4% $ 21.27 $ 22.01 2005 ........................ 29 302,342 9.9% $ 22.52 $ 23.57 2006 AND THEREAFTER ......... 40 1,483,874 48.9% -- -- -- --------- ----- TOTAL ....................... 245 3,040,488 100.0% === ========= =====
STAMFORD OFFICE PROPERTIES:
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 18 83,909 8.0% $ 21.52 $ 22.39 2001 ........................ 23 112,738 10.7% $ 24.46 $ 24.16 2002 ........................ 19 100,029 9.5% $ 27.15 $ 28.31 2003 ........................ 13 94,448 9.0% $ 31.61 $ 32.41 2004 ........................ 21 224,424 21.3% $ 22.85 $ 23.71 2005 ........................ 12 80,132 7.6% $ 26.79 $ 29.02 2006 AND THEREAFTER ......... 19 357,199 33.9% -- -- -- ------- ----- TOTAL ....................... 125 1,052,879 100.0% === ========= =====
22 LEASE EXPIRATIONS -- (CONTINUED) NEW JERSEY OFFICE PROPERTIES:
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 7 29,478 1.5% $ 17.20 $ 17.68 2001 ........................ 21 247,144 12.8% $ 17.68 $ 17.95 2002 ........................ 21 180,187 9.4% $ 19.92 $ 20.41 2003 ........................ 21 337,598 17.5% $ 20.02 $ 20.21 2004 ........................ 35 248,891 12.9% $ 22.69 $ 23.13 2005 ........................ 28 343,777 17.9% $ 22.47 $ 23.12 2006 AND THEREAFTER ......... 17 539,228 28.0% -- -- -- ------- ----- TOTAL ....................... 150 1,926,303 100.0% === ========= =====
NEW YORK CITY OFFICE
YEAR OF TOTAL RENTABLE % OF TOTAL PER PER LEASE NUMBER SQUARE FEET RENTABLE SQUARE SQUARE FOOT SQUARE FOOT EXPIRATION OF LEASES EXPIRING FEET EXPIRING S/L RENT (1) RENT (2) - ----------------------------- ----------- ---------------- ----------------- -------------- ------------ 2000 ........................ 8 85,054 2.6% $ 30.12 $ 31.68 2001 ........................ 21 172,930 5.3% $ 37.24 $ 35.12 2002 ........................ 18 184,130 5.6% $ 31.98 $ 32.83 2003 ........................ 7 115,726 3.5% $ 31.89 $ 32.34 2004 ........................ 18 215,648 6.6% $ 35.83 $ 36.97 2005 ........................ 30 437,437 13.3% $ 34.63 $ 35.94 2006 AND THEREAFTER ......... 110 2,072,808 63.1% -- -- --- --------- ----- TOTAL ....................... 212 3,283,733 100.0% === ========= =====
(1) Per square foot rental rate represents annualized straight line rent as of the lease expiration date. (2) Per square foot rental rate represents annualized base rent as of the lease expiration date plus non-recoverableoperating expense pass-throughs. 23 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The primary market risk facing the Company is interest rate risk on its long term debt, mortgage notes and notes receivable. The Company does not hedge interest rate risk using financial instruments nor is the Company subject to foreign currency risk. The Company manages its exposure to interest rate risk on its variable rate indebtedness by borrowing on a short-term basis under its Credit Facility or Term Loan until such time as it is able to retire the short-term variable rate debt with a long-term fixed rate debt offering or an equity offering through accessing the capital markets on terms that are advantageous to the Company. The following table sets forth the Company's long term debt obligations by scheduled principal cash flow payments and maturity date, weighted average interest rates and estimated fair market value ("FMV" ) at June 30, 2000 (dollars in thousands):
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 2000 2001 2002 2003 2004 ------------ ------------ ------------- ------------ -------------- Long term debt: Fixed rate ..................... $ 11,577 $ 23,048 $ 16,820 $ 8,698 $ 112,146 Weighted average interest rate . 7.49% 7.59% 7.80% 7.78% 7.50% Variable rate .................. $ -- $518,600 $ -- $ -- $ -- Weighted average interest rate . -- 7.62% -- -- -- THEREAFTER TOTAL(1) FMV -------------- -------------- ------------ Long term debt: Fixed rate ..................... $ 735,177 $ 907,466 $ 907,466 Weighted average interest rate . 7.56% 7.56% Variable rate .................. $ -- $ 518,600 $ 518,600 Weighted average interest rate . -- 7.62%
- ---------------- (1) Includes unamortized issuance discounts of $652,000 on the 5 and 10 year senior unsecured notes issued on March 26, 1999 which are due at maturity. In addition, the Company has assessed the market risk for its variable rate debt, which is based upon LIBOR, and believes that a one percent increase in the LIBOR rate would have an approximate $5.2 million annual increase in interest expense based on approximately $518.6 million outstanding at June 30, 2000. The following table sets forth the Company's mortgage notes and note receivables by scheduled maturity date, weighted average interest rates and estimated FMV at June 30, 2000 (dollars in thousands):
FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------- 2000 2001 2002 2003 2004 THEREAFTER TOTAL (2) FMV ------------- ---------- ----------- ------ ------------ ------------ ------------- ----------- Mortgage notes and Notes receivable: Fixed rate ..................... $ 283,116 $ 15 $ 9,361 $ -- $ 36,500 $ 16,990 $ 345,982 $345,982 Weighted average Interest rate . 9.42% 9.00% 10.31% -- 10.23% 11.65% 9.64%
The fair value of the Company's long term debt, mortgage notes and notes receivable is estimated based on discounting future cash flows at interest rates that management believes reflects the risks associated with long term debt, mortgage notes and notes receivable of similar risk and duration. - ---------------- (2) Excludes mortgage note receivable acquisition costs and interest receivables aggregating approximately $10.7 million. 24 PART II -- OTHER INFORMATION Item 1. Legal Proceedings -- None Item 2. Changes in Securities and use of proceeds On June 20, 2000, the Company issued 4,181,818 shares of Class A common stock in exchange for four million shares of Series B Convertible Cumulative Preferred Stock with a liquidation preference value of $100 million. In connection with this transaction the Company granted registration rights with respect to the Class A common stock. This transaction was exempt from registration pursuant to section 4(2) of the Securities Act of 1933. Item 3. Defaults Upon Senior Securities -- None Item 4. Submission of Matters to a Vote of Securities Holders On May 18, 2000 the Company held its annual meeting of stockholders. The matters on which the stockholders voted, in person or by proxy, were (1) the election of three nominees as class II directors to serve until the 2003 annual meeting of stockholders and until their respective successors are duly elected and qualified and (2) to ratify the selection of the independent auditors of the Company. The three nominees were elected and the auditors were ratified. The results of the voting are set forth below:
ELECTION OF DIRECTORS VOTES CAST FOR VOTES CAST AGAINST - -------------------------------- ---------------- ------------------- Donald J. Rechler 38,062,442 -- Mitchell D. Rechler 38,062,442 -- Leonard Feinstein 38,062,442 -- RATIFICATION OF AUDITORS 37,902,465 20,126 - --------------------------------
Item 5. Other information -- None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
NUMBER - ----------- 10.1 Registration rights agreement, dated June 16, 2000, between Reckson Associates Realty Corp. and Stichting Pensioenfonds ABP 27.0 Financial Data Schedule
b) During the three months ended June 30, 2000, the Registrant did not file any reports on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. RECKSON ASSOCIATES REALTY CORP. By: \s\ Scott H. Rechler \s\ Michael Maturo ---------------------------------- ----------------------------------- Scott H. Rechler, Co-Chief Executive Officer Michael Maturo, Executive Vice President, and President Treasurer and Chief Financial Officer
DATE: August 9, 2000 25 EX-10.1 2 0002.txt EXHIBIT 10.1 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of June 16, 2000 between RECKSON ASSOCIATES REALTY CORP., a Maryland corporation (the "Company") and STICHTING PENSIOENFONDS ABP, a Dutch pension fund (the "Purchaser"). This Agreement is made pursuant to the Exchange Agreement, dated June 16, 2000 (the "Exchange Agreement"), between the Company, as issuer of 4,181,818 shares of Class A common stock, par value $.01 per share (the "Securities") and the Purchaser. In order to induce the Purchaser to enter into the Exchange Agreement, the Company has agreed to provide to the Purchaser and its direct and indirect transferees the registration rights set forth in this Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Advice" shall have the meaning set forth in the last paragraph of Section 3 hereof. "Affiliate" has the same meaning as given to that term in Rule 405 under the Securities Act or any successor rule thereunder. "Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in The City of New York are authorized or required by law, executive order or regulation to remain closed. "Company" shall have the meaning set forth in the preamble to this Agreement and also includes the Company's successors and permitted assigns. "Closing Time" shall mean the date of Closing, as defined in the Exchange Agreement. "Effectiveness Period" shall have the meaning set forth in Section 2(a) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Holder" shall mean the Purchaser, for so long as it owns any Registrable Securities, and each of its respective successors, assigns and direct and indirect transferees who become holders of record of Registrable Securities. "Inspectors" shall have the meaning set forth in Section 3(m) hereof. "Issue Date" shall mean June 20, 2000, the date of original issuance of the Securities. "Liquidated Damages" shall have the meaning set forth in Section 2(c) hereof. "Majority Holders" shall mean the Holders of a majority of the Registrable Securities. "Operating Partnership" shall mean Reckson Operating Partnership, L.P., a Delaware limited partnership. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, limited liability corporation, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Shelf Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and, in each case, including all documents incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble to this Agreement. "Purchaser" shall have the meaning set forth in the preamble to this Agreement. "Records" shall have the meaning set forth in Section 3(m) hereof. "Registrable Securities" shall mean the Securities; provided, however, that Securities shall cease to be Registrable Securities when the earlier of the following occurs (i) a Shelf Registration Statement with respect to such Securities for the resale thereof shall have been declared effective under the Securities Act and such Securities shall have been disposed of pursuant to such Shelf Registration Statement, (ii) such Securities shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act or are eligible to be sold without restriction as contemplated by Rule 144(k) or (iii) such Securities shall have ceased to be outstanding. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC or National Association of Securities Dealers, Inc. (the "NASD") registration and filing fees, including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained by any Holder of Registrable Securities in accordance with the rules and regulations of the NASD, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of one counsel for all underwriters or Holders as a group in connection with blue sky qualification of any of the Registrable Securities) and compliance with the rules of the NASD, (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Shelf Registration Statement, any Prospectus and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) the fees and 2 disbursements of counsel for the Company and of the independent certified public accountants of the Company, including the expenses of any "cold comfort" letters required by or incident to the performance of and compliance with this Agreement, and (vi) the reasonable fees and expenses of any special experts retained by the Company in connection with the Shelf Registration Statement. "Rule 144(k) Period" shall mean the period of two years (or such shorter period as may hereafter be referred to in Rule 144(k) under the Securities Act (or similar successor rule)) commencing on the Issue Date. "SEC" shall mean the Securities and Exchange Commission. "Securities" shall mean the Preferred Securities and the Common Stock. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Shelf Registration" shall mean a registration effected pursuant to Section 2(a) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(a) hereof which covers all of the Registrable Securities on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein. 2. Registration Under the Securities Act. (a) Shelf Registration. The Company shall file or cause to be filed, on or prior to September 20, 2000, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities and shall use its best efforts to have such Shelf Registration Statement declared effective by the SEC as promptly as practicable after filing thereof. No Holder of Registrable Securities shall be entitled to include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder and furnishes to the Company in writing, within 15 days after receipt of a request therefor, such information as the Company may, after conferring with counsel with regard to information relating to Holders that would be required by the SEC to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish to the Company all information with respect to such Holder necessary to make the information previously furnished to the Company by such Holder not materially misleading. The Company agrees to use its best efforts to keep the Shelf Registration Statement continuously effective and the Prospectus usable for resales during the Rule 144(k) Period (subject to extension pursuant to the last paragraph of Section 3 hereof), or for such shorter period which will terminate when all of the Securities covered by the Shelf Registration 3 Statement have been sold pursuant to the Shelf Registration Statement or cease to be Registrable Securities (the "Effectiveness Period"); provided, however, that for 60 days or less (whether or not consecutive) in any twelve-month period, the Company shall be permitted to suspend sales of Securities if the Shelf Registration Statement is no longer effective or the Prospectus usable for resales due to circumstances relating to pending developments, public filings with the SEC and similar events, or because the Prospectus includes an untrue statement of a material fact or omits to state a material fact necessary in order to make statements therein, in the light of the circumstances under which they were made, not misleading. The Company will, in the event a Shelf Registration Statement is declared effective, provide to each Holder a reasonable number of copies of the Prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement has become effective and take such other actions as are required to permit unrestricted resales of the Registrable Securities. The Company further agrees to supplement or amend the Shelf Registration Statement if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registrations, and the Company agrees to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (b) Expenses. The Company, as issuer of the Securities, shall pay all Registration Expenses in connection with any Shelf Registration Statement filed pursuant to Section 2(a) hereof and will reimburse any single counsel designated in writing by the Majority Holders to act as counsel for the Holders of the Registrable Securities in connection with a Shelf Registration Statement, which other counsel shall be reasonably satisfactory to the Company. Except as provided herein, each Holder shall pay all expenses of its counsel, underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. (c) Effective Shelf Registration Statement. A Shelf Registration Statement will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Securities pursuant to such Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Shelf Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Registrable Securities pursuant to such Shelf Registration Statement may legally resume. The Company will be deemed not to have used its reasonable best efforts to cause a Shelf Registration Statement to become, or to remain, effective during the requisite period if it voluntarily takes any action that would result in any such Shelf Registration Statement not being declared effective or that would result in the Holders of Registrable Securities covered thereby not being able to offer and sell such Registrable Securities during that period, unless such action is required by applicable law. (d) Specific Enforcement. Without limiting the remedies available to the Holders, the Company acknowledges that any failure by it to comply with its obligations under Section 2(a) hereof may result in material irreparable injury to the Holders for 4 which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) hereof. 3. Registration Procedures. In connection with the obligations of the Company with respect to the Shelf Registration Statement pursuant to Section 2(a) hereof, the Company shall use its best efforts to: (a) prepare and file with the SEC a Shelf Registration Statement as prescribed by Section 2(a) hereof within the relevant time period specified in Section 2(a) hereof on the appropriate form under the Securities Act, which form shall (i) be selected by the Company, (ii) be available for the sale of the Registrable Securities by the selling Holders thereof, and (iii) comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; the Company shall use its best efforts to cause such Shelf Registration Statement to become effective and remain effective and the Prospectus usable for resales in accordance with Section 2 hereof; provided, however, that, before filing any Shelf Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford the Holders of the Registrable Securities covered by such Shelf Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed; and the Company shall not file any Shelf Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document, other than filings required under the Exchange Act, if the Majority Holders, their counsel or the managing underwriters, if any, shall reasonably object in a timely manner; (b) prepare and file with the SEC such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement effective for the Effectiveness Period, subject to the proviso contained in the second paragraph in Section 2(a), and cause each Prospectus to be supplemented, if so determined by the Company or requested by the SEC, by any required prospectus supplement and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Securities Act, and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder applicable to it with respect to the disposition of all securities covered by a Shelf Registration Statement during the Effectiveness Period in accordance with the intended method or methods of distribution by the selling Holders thereof described in this Agreement; (c) (i) notify each Holder of Registrable Securities included in the Shelf Registration Statement, at least three Business Days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with the method selected by the Majority Holders, (ii) furnish to each Holder 5 of Registrable Securities included in the Shelf Registration Statement and to each underwriter of an underwritten offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary prospectus, and any amendment or supplement thereto, and such other documents as such Holder or underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities and (iii) consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities included in the Shelf Registration Statement in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (d) register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions by the time the applicable Shelf Registration Statement is declared effective by the SEC as any Holder of Registrable Securities covered by a Shelf Registration Statement and each underwriter of an underwritten offering of Registrable Securities shall reasonably request in writing in advance of such date of effectiveness, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process in any jurisdiction where it would not otherwise be subject to such service of process or (iii) subject itself to taxation in any such jurisdiction if it is not then so subject; (e) promptly notify each Holder of Registrable Securities, their counsel and the managing underwriters, if any, and promptly confirm such notice in writing (i) when a Shelf Registration Statement has become effective and when any post-effective amendments thereto become effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Shelf Registration Statement or Prospectus or for additional information after the Shelf Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Shelf Registration Statement or the qualification of the Registrable Securities in any jurisdiction described in Section 3(d) hereof or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Shelf Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any purchase agreement, securities sales agreement or other similar agreement cease to be true and correct in all material respects, (v) of the happening of any event or the failure of any event to occur or the discovery of any facts, during the Effectiveness Period, which makes any statement made in a Shelf Registration Statement or the related Prospectus untrue in any material respect or which causes such Shelf Registration Statement or Prospectus to omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) of the reasonable determination of the Company that a post-effective amendment to the Shelf Registration Statement would be appropriate; 6 (f) obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible moment; (g) furnish to each Holder of Registrable Securities included within the coverage of a Shelf Registration Statement, without charge, at least one conformed copy of the Shelf Registration Statement relating to such Shelf Registration and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and registered in such names as the selling Holders or the underwriters may reasonably request at least two Business Days prior to the closing of any sale of Registrable Securities pursuant to the Shelf Registration Statement; (i) promptly after the occurrence of any event specified in Section 3(e)(ii), 3(e)(iii), 3(e)(v) (subject to a 60 day grace period within any twelve-month period) or 3(e)(vi) hereof, prepare a supplement or post-effective amendment to the Shelf Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company shall notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any document which is to be incorporated by reference into a Shelf Registration Statement or a Prospectus after the initial filing of a Shelf Registration Statement, provide a reasonable number of copies of such document to the Holders and make such of the representatives of the Company as shall be reasonably requested by the Holders of Registrable Securities or the Purchaser on behalf of such Holders available for discussion of such document; (k) enter into such agreements (including underwriting agreements) as are customary in underwritten offerings and take all such other appropriate actions in connection therewith as are reasonably requested by the Holders of at least 25% of the Registrable Securities in order to expedite or facilitate the registration or the disposition of the Registrable Securities; (l) whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, if requested by the Holders of at least 25% of the Registrable Securities covered thereby: (i) make such representations and warranties to Holders of such Registrable Securities and the underwriters (if any), with respect to the business of the Company and its subsidiaries as then conducted and with 7 respect to the Shelf Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Company and updates thereof (which may be in the form of a reliance letter) in form and substance reasonably satisfactory to the managing underwriters (if any) and the Holders of a majority of the Registrable Securities being sold, addressed to each selling Holder and the underwriters (if any) covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such underwriters (it being agreed that the matters to be covered by such opinion may be subject to customary qualifications and exceptions); (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings and such other matters as reasonably requested by such underwriters in accordance with Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 4 hereof (or such other provisions and procedures acceptable to Holders of a majority of Registrable Securities covered by such Shelf Registration Statement and the managing underwriters) customary for such agreements with respect to all parties to be indemnified pursuant to said Section (including, without limitation, such underwriters and selling Holders); and in the case of an underwritten registration, the above requirements shall be satisfied at each closing under the related underwriting agreement or as and to the extent required thereunder; (m) make reasonably available for inspection by any selling Holder of Registrable Securities who certifies to the Company that it has a current intention to sell Registrable Securities pursuant to the Shelf Registration, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during the Company's normal business hours, all financial and other records, pertinent organizational and operational documents and properties of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, trustees and employees of the Company and its subsidiaries to supply all relevant information in each case reasonably requested by any such Inspector in connection with such Shelf Registration Statement; records and information which the Company, in good faith, to be confidential and any Records and information which it notifies the Inspectors are confidential shall not be disclosed to any Inspector except where (i) the disclosure of such Records or information is necessary to avoid or correct a material misstatement or omission in such Shelf Registration Statement, (ii) the release of such Records or information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or is necessary in 8 connection with any action, suit or proceeding or (iii) such Records or information previously has been made generally available to the public; each selling Holder of such Registrable Securities will be required to agree in writing that Records and information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such is made generally available to the public through no fault of an Inspector or a selling Holder; and each selling Holder of such Registrable Securities will be required to further agree in writing that it will, upon learning that disclosure of such Records or information is sought in a court of competent jurisdiction, or in connection with any action, suit or proceeding, give notice to the Company and allow the Company at its expense to undertake appropriate action to prevent disclosure of the Records and information deemed confidential; (n) comply with all applicable rules and regulations of the SEC so long as any provision of this Agreement shall be applicable and make generally available to its securityholders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any twelve-month period (or 90 days after the end of any twelve-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Shelf Registration Statement, which statements shall cover said twelve-month periods, provided that the obligations under this Section 3(n) shall be satisfied by the timely filing of quarterly and annual reports on Forms 10-Q and 10-K under the Exchange Act; (o) cooperate with each seller of Registrable Securities covered by a Shelf Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; (p) take all other steps necessary to effect the registration of the Registrable Securities covered by a Shelf Registration Statement contemplated hereby; and (q) the Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to it such information regarding such seller as may be required by the staff of the SEC to be included in a Shelf Registration Statement; the Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request; and the Company shall have no obligation to register under the Securities Act the Registrable Securities of a seller who so fails to furnish such information. Each Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event specified in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Shelf 9 Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in such Holder's possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Shelf Registration Statement, the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable after the resolution of the related matters an amendment or supplement to the Shelf Registration Statement and related Prospectus and shall extend the period during which such Shelf Registration Statement is required to be maintained effective and the Prospectus usable for resales pursuant to this Agreement by the number of days in the period from and including the date of the giving of such notice to and including the date when the Company shall have made available to the Holders (x) copies of the supplemented or amended Prospectus necessary to resume such dispositions or (y) the Advice. 4. Indemnification and Contribution. (a) The Company and the Operating Partnership hereby agree, jointly and severally, to indemnify and hold harmless each Holder, each underwriter who participates in an offering of the Registrable Securities, each Person, if any, who controls any of such parties within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act and each of their respective directors, officers, employees and agents, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in a Shelf Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact required to be stated therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 4(d) hereof) such settlement is effected with the prior written consent of the Company and the Operating Partnership; and (iii) against any and all expenses whatsoever, as incurred (including the reasonable fees and disbursements of counsel chosen by such Holder), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) of this Section 4(a); 10 provided, however, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished in writing to the Company and the Operating Partnership by such Holder or underwriter for use in the Shelf Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) The Purchaser and each Holder or underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its trustees and officers (including each officer of the Company who signed the Shelf Registration Statement), and the Operating Partnership and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in such Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have under this Section 4 to the extent that it is not materially prejudiced by such failure as a result thereof, and in any event shall not relieve it from liability which it may have otherwise on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 4(a) or (b) above, counsel to the indemnified parties shall be selected by such parties. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel (in addition to local counsel), separate from their own counsel, for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional written release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim 11 and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have validly requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement set forth in this Section 4 is for any reason held to be unenforceable by an indemnified party although applicable in accordance with its terms, the Company and the Operating Partnership, on the one hand, and the Holders, on the other hand, shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company, the Operating Partnership and the Holders, as incurred; provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person that was not guilty of such fraudulent misrepresentation. As between the Company and the Operating Partnership, on the one hand, and the Holders, on the other hand, such parties shall contribute to such aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect the relative fault of the Company and the Operating Partnership, on the one hand, and the Holders, on the other hand, with respect to the statements or omissions which resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault of the Company and the Operating Partnership, on the one hand, and of the Holders, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Operating Partnership, on the one hand, or by or on behalf of the Holders, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Operating Partnership and the Holders of the Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 4 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the relevant equitable considerations. For purposes of this Section 4, each Affiliate of a Holder, and each director, officer and employee and Person, if any, who controls a Holder or such Affiliate within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such Holder, and each trustee and officer of the Company and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company and the Operating Partnership. 12 5. Participation in an Underwritten Registration. No Holder may participate in an underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Securities on the basis provided in the underwriting arrangement approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents reasonably required under the terms of such underwriting arrangements. 6. Selection of Underwriters. The Holders of Registrable Securities covered by the Shelf Registration Statement who desire to do so may sell the Securities covered by such Shelf Registration in an underwritten offering, subject to the provisions of Section 3(l) hereof. In any such underwritten offering, the underwriter or underwriters and manager or managers that will administer the offering will be selected by the Holders of a majority of the Registrable Securities included in such offering; provided, however, that such underwriters and managers must be reasonably satisfactory to the Company. 7. Miscellaneous. (a) Rule 144. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the Exchange Act and any Registrable Securities remain outstanding, the Company will file the reports required to be filed by it under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the SEC thereunder; provided, however, that if the Company ceases to be so required to file such reports, it will, upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales of its securities pursuant to Rule 144 under the Securities Act and (b) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. (b) No Inconsistent Agreements. The Company has not entered into, and will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. (c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or departure; provided that no amendment, modification or supplement or waiver or consent to 13 the departure with respect to the provisions of Section 4 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities. Notwithstanding the foregoing sentence, (i) this Agreement may be amended, without the consent of any Holder of Registrable Securities, by written agreement signed by the Company, the Operating Partnership and the Purchaser, to cure any ambiguity, correct or supplement any provision of this Agreement that may be inconsistent with any other provision of this Agreement or to make any other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with other provisions of this Agreement, (ii) this Agreement may be amended, modified or supplemented, and waivers and consents to departures from the provisions hereof may be given, by written agreement signed by the Company, the Operating Partnership and the Purchaser to the extent that any such amendment, modification, supplement, waiver or consent is, in their reasonable judgment, necessary or appropriate to comply with applicable law (including any interpretation of the Staff of the SEC) or any change therein and (iii) to the extent any provision of this Agreement relates to the Purchaser, such provision may be amended, modified or supplemented, and waivers or consents to departures from such provisions may be given, by written agreement signed by the Purchaser, the Operating Partnership and the Company. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 7(d), which address initially is, with respect to the Purchaser, the address set forth in the Purchase Agreement; and (ii) if to the Company or the Operating Partnership, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(d). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Purchaser, including, without limitation and without the need for an express assignment, subsequent Holders; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or amended charter of the Company. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. 14 (f) Third Party Beneficiaries. Each Holder shall be a third party beneficiary of the agreements made hereunder among the Company, the Operating Partnership and the Purchaser, and the Purchaser shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to any provisions relating to conflicts of laws. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Securities Held by the Company or its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or any Affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Very truly yours, RECKSON ASSOCIATES REALTY CORP. By:/s/ Jason M. Barnett ------------------------------------------ Name: Jason M. Barnett Title: Executive Vice President RECKSON OPERATING PARTNERSHIP, L.P. By: Reckson Associates Realty Corp., its General Partner, solely with respect to Section 4 hereof By:/s/ Jason M. Barnett ---------------------------------------- Name: Jason M. Barnett Title: Executive Vice President CONFIRMED AND ACCEPTED, as of the date first above written: STICHTING PENSIOENFONDS ABP By: ABP Investments US, Inc., as Agent By: /s/ Barden N. Gale ------------------------- Name: Barden N. Gale Title: Executive Vice President 16 EX-27 3 0003.txt FDS
5 (Replace this text with the legend) 0000930548 RECKSON ASSOCIATES REALTY CORP. 1 US DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 26,514 0 224,573 0 0 251,087 2,369,426 (254,595) 2,885,772 117,892 1,426,414 0 313,126 937,269 0 2,886,772 216,329 243,105 0 87,172 0 0 48,016 64,480 0 64,480 0 0 0 44,739 .70 0
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