-----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, JoS072xaY8YELsTMDGzH1lCIg8Spcto9KAPMfpTtRNk6dWMpvdT7apYDt2XaJJfc 4yTxJPZ2028NeUICY/NHvQ== 0001005477-97-000536.txt : 19970222 0001005477-97-000536.hdr.sgml : 19970222 ACCESSION NUMBER: 0001005477-97-000536 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970218 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970219 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECKSON ASSOCIATES REALTY CORP CENTRAL INDEX KEY: 0000930548 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 113233650 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13762 FILM NUMBER: 97537926 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 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT ------------- Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: February 18, 1997 RECKSON ASSOCIATES REALTY CORP. (Exact name of Registrant as specified in its Charter) Maryland (State of Incorporation) 1-13762 11-3233650 (Commission File Number) (IRS Employer Id. Number) 225 Broadhollow Road 11747 Melville, New York (Zip Code) (Address of principal executive offices) (516) 694-6900 (Registrant's telephone number, including area code) Item 2. Acquisition or Disposition of Assets Reckson Associates Realty Corp. (the "Company") entered into a contract in December 1996 to acquire five Class A office properties encompassing approximately 500,000 square feet in Northern New Jersey (the "New Jersey Portfolio") for approximately $56 million. The purchase price will be funded with a combination of cash and/or the issuance of partnership units of Reckson Operating Partnership, L.P. ("Units"). The New Jersey Portfolio is being acquired from various entities associated with Robert Heller, a Northern New Jersey developer. In connection with this acquisition, the Company established a Northern New Jersey Division, which includes staffing additions of senior executives and property operations personnel from the Northern New Jersey developer. The Company has also contracted to purchase a 10-building Class A industrial portfolio located in Hauppauge, Long Island (the "Hauppauge Portfolio"). The Hauppauge Portfolio is located within the Company's Vanderbilt Industrial Park. The Hauppauge Portfolio consists of 447,804 square feet of rentable space and has a purchase price of approximately $21.6 million. In addition, the Company has entered into a letter of intent to purchase a 221,350 square foot nine story Class A office property (the "Uniondale Office Property") located in Uniondale, Long Island. The purchase price for the Uniondale Office Property is approximately $19.0 million. Item 5. Other Events. The Company is negotiating to establish a three year unsecured credit facility with a syndicate of lenders to be led by two commercial banks (the "New Credit Facility"). It is expected that the New Credit Facility will provide for a maximum borrowing amount of up to $225 million and the Company's ability to borrow thereunder will be subject to the satisfaction of certain financial covenants, including covenants relating to limitations on unsecured and secured borrowings, minimum interest and fixed charge coverage ratios, a minimum equity value and a maximum dividend payout ratio. In addition, it is expected that borrowings under the New Credit Facility would bear interest at a floating rate equal to one, two, three or six month LIBOR (at the Company's election) plus a spread ranging from 1.125% to 1.50%, based on the Company's leverage ratio. The New Credit Facility would replace the Company's existing $150 million credit facility with Salomon Brothers Realty Corp. which is scheduled to mature on June 2, 1997 (the "Credit 2 Facility"). Borrowings under the Credit Facility bear interest at a floating rate equal to one-month LIBOR plus 1.75% and are guaranteed by Reckson FS Limited Partnership (the "Financing Partnership"). Such guarantee is secured by a mortgage on certain Properties contributed to the Financing Partnership by the Operating Partnership at the time of the IPO. Upon entering into the New Credit Facility, this mortgage lien will be discharged. Consummation of the New Credit Facility arrangement is subject to completion of the lenders' due diligence and completion of documentation satisfactory to the Company and such lenders. In addition, on February 12, 1996, the Board of Directors of the Company declared a two-for-one stock split distributable on April 15, 1997 to shareholders of record on April 4, 1997. Item 7. Financial Statements and Exhibits (a) and (b) Financial Statements of Properties Acquired and Pro Forma Financial Information UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS Pro Forma Condensed Balance Sheet (Unaudited) as of September 30, 1996............................................... Pro Forma Condensed Combining Statements of Operations (Unaudited) for the year ended December 31, 1995 and for the nine months ended September 30, 1996..................... Notes to Pro Forma Financial Statements........................... ACQUISITION PROPERTIES Report of Independent Auditors.................................... Combined Statement of Revenues and Certain Expenses of the New Jersey Portfolio for the year ended December 31, 1996 Notes to Combined Statements of Revenues and Certain Expenses of the New Jersey Portfolio............................. Report of Independent Auditors Statement of Revenues and Certain Expenses of the Hauppauge Portfolio for the year ended December 31, 1996.................. Notes to the Combined Statements of Revenues and Certain Expenses of the Hauppauge Portfolio...................... Report of Independent Auditors.................................... Statement of Revenues and Certain Expenses of the Uniondale Office Property for the year ended December 31, 1996.................... 3 Notes to Statement of Revenues and Certain Expenses of the Uniondale Office Property.................................... 4 Reckson Associates Realty Corp. Pro Forma Condensed Combining Balance Sheet As of September 30, 1996 (unaudited) The following unaudited pro forma condensed combining balance sheet is presented as if the The Company had acquired (i) Landmark Square and the Certain Option Properties and (ii) the New Jersey Portfolio, the Hauppauge Portfolio, and the Uniondale Office Property collectively (the "1997 Acquisition Properties") on September 30, 1996. This pro forma condensed combining balance sheet should be read in conjunction with the pro forma condensed combining statement of operations of the Company and the historical financial statements and notes thereto of the Company as filed on Form 10-K for the year ended December 31,1995 and on Form 10 Q for the nine months ended September 30, 1996. The pro forma condensed combining balance sheet is unaudited and is not necessarily indicative of what the actual financial position would have been had the Company acquired the 1997 Acquisition Properties on September 30,1996, nor does it purport to represent the future financial position of the Company. (Amounts below are in thousands)
Certain Landmark Option New Jersey Hauppauge Historical (a) Square (b) Properties (c) Portfolio (d) Portfolio (d) ----------------------------------------------------------------------------------- Assets Real estate, net $344,820 $77,000 $12,000 $56,000 $21,600 Cash and cash equivalents 11,766 Tenant Receivables 1,714 Affiliate receivables 1,992 Deferred rent receivable 10,958 Investment in mortgage note receivable 22,783 Deferred acquisition costs,prepaid expenses and other assets 17,719 Investments in joint ventures 5,302 Deferred lease fees and loan costs, net 10,055 ----------------------------------------------------------------------------------- Total Assets $427,109 $77,000 $12,000 $56,000 $21,600 =================================================================================== Liabilities and Stockholders' equity Mortgage notes payable $110,757 $50,000 $ 4,700 Credit Facility and other loans 109,000 27,000 2,239 56,000 21,600 Accrued expenses and other liabilities 9,715 Dividends payable 8,342 Affiliate payables 180 ----------------------------------------------------------------------------------- Total Liabilities 237,994 77,000 6,939 56,000 21,600 Minority interests in consolidated partnership 9,200 Minority interests in Operating Partnership 37,696 5,061 Stockholder's Equity: Common Stock 105 Additional paid-in-capital 142,114 Retained Earnings - ----------------------------------------------------------------------------------- Total Stockholders' Equity 142,219 ----------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $427,109 $ 77,000 $12,000 $56,000 $21,600 ===================================================================================
Uniondale September 30, Office 1996 Property (d) Pro Forma -------------------------------- Assets Real estate, net $19,000 $530,420 Cash and cash equivalents 11,766 Tenant Receivables 1,714 Affiliate receivables 1,992 Deferred rent receivable 10,958 Investment in mortgage note receivable 22,783 Deferred acquisition costs,prepaid expenses and other assets 17,719 Investments in joint ventures 5,302 Deferred lease fees and loan costs, net 10,055 -------------------------------- Total Assets $19,000 $612,709 ================================ Liabilities and Stockholders' equity Mortgage notes payable $165,457 Credit Facility 19,000 234,839 Accrued expenses and other liabilities 9,715 Dividends payable 8,342 Affiliate payables 180 -------------------------------- Total Liabilities 19,000 418,533 Minority interests in consolidated partnership 9,200 Minority interests in Operating Partnership 42,757 Stockholder's Equity: Common Stock 105 Additional paid-in-capital 142,114 Retained Earnings -------------------------------- Total Stockholders' Equity 0 142,219 -------------------------------- Total Liabilities and Stockholders' Equity $19,000 $612,709 ================================ 5 Reckson Associates Realty Corp. Pro Forma Condensed Combining Statement of Operations For the Nine Months Ended September 30, 1996 (UNAUDITED) The following unaudited pro forma condensed combining Statement of Operations is presented as if (i) the Company had acquired the Westchester Properties, Landmark Square, the Certain Option Properties, and (ii) the Company had acquired the New Jersey Portfolio, the Hauppauge Portfolio and the Uniondale Office Property collectively, (the "1997 Acquisition Properties") as of January 1, 1996 and the Company qualified as a REIT, distributed all its taxable income and, therefore, incurred no income tax expense during the period. This pro forma condensed combining Statement of Operations should be read in conjunction with the pro forma condensed combining balance sheet of the Company and the historical financial statements and notes thereto of the Company as filed on Form 10Q for the nine months ended September 30, 1996. The pro forma condensed combining Statement of Operations is unaudited and is not necessarily indicative of what the actual financial position would have been had the Company acquired Landmark Square, the Westchester Properties, the Certain Option Properties, and the 1997 Acquisition Properties as of January 1,1996, nor does it puport to represent the operations of the Company for future periods (Amounts below are in thousands, except per share data)
Description - ------------ The 1997 Certain Westchester Acquisition Landmark Option Historical (p) Properties (t) Properties(w) Square (q) Properties (r) ------------------------------------------------------------------------------- Revenues: Base rent $56,815 $3,137 $10,097 $9,672 $2,661 Tenant escalations 7,492 100 1,502 1,286 235 Equity in earnings of real estate partnerships 166 347 Equity in earnings of service companies 934 Other income 1,073 574 ------------------------------------------------------------------------------- Total Revenues 66,480 3,584 11,599 11,532 2,896 Expenses: Opearting Expenses: Property expenses 13,519 1,496 3,377 5,638 680 Real estate taxes 9,595 626 2,460 1,216 793 Ground rents 803 Marketing, general and administrative 3,720 ------------------------------------------------------------------------------- Total Operating Expenses 27,637 2,122 5,837 6,854 1,473 Interest 8,765 Depreciation and Amortization 12,359 304 2,053 1,636 765 ------------------------------------------------------------------------------- Total expenses 48,761 2,426 7,890 8,490 2,238 ------------------------------------------------------------------------------- Minority partners' interest in consolidated partnership income (638) ------------------------------------------------------------------------------- Income (loss) before Limited partners' minority interest in the Operating Partnership and extraordinary item $17,081 $1,158 $3,709 $3,042 $658 =============================================================================== Limited partners' minority interest in the Operating Partnership Net income before extraordinary item Net income per common share before extraordinary item Weighted average common shares outstanding
Description Reckson - ------------ Associates Pro Forma Realty Corp. Adjustments (s) Pro Forma (x) ------------------------------ Revenues: Base rent $82,382 Tenant escalations 10,615 Equity in earnings of real estate partnerships 513 Equity in earnings of service companies 934 Other income 1,647 ------------------------------ Total Revenues 96,091 Expenses: Opearting Expenses: Property expenses 24,710 Real estate taxes 14,690 Ground rents 803 Marketing, general and administrative 3,720 ------------------------------ Total Operating Expenses 43,923 Interest 11,289 20,054 Depreciation and Amortization 17,117 ------------------------------ Total expenses 11,289 81,094 ------------------------------ Minority partners' interest in consolidated partnership income (638) ------------------------------ Income (loss) before Limited partners' minority interest in the Operating Partnership and extraordinary item ($11,289) $14,359 ======== Limited partners' minority interest in the Operating Partnership (3,662)(u) ---------------- Net income before extraordinary item $10,697 Net income per common share before extraordinary item $1.02(v) Weighted average common shares outstanding 10,441 Reckson Associates Realty Corp. Pro Forma Condensed Combining Statement of Operations For the Year Ended December 31, 1995 (UNAUDITED) The following unaudited pro forma condensed combining Statement of Operations is presented as if (i) the Company had acquired the 1995 Acquisition Properties, the Westchester Properties, the 1996 Acquisition Properties, Landmark Square, the Certain Option Properties and (ii) the Company had acquired the New Jersey Portfolio, the Hauppauge Portfolio and the Uniondale Office Building collectively (the "1997 Acquisition Properties") as of January 1, 1995 and the Company qualified as a REIT, distributed all its taxable income and, therefore, incurred no income tax expense during the period. This pro forma condensed combining Statement of Operations should be read in conjunction with the pro forma condensed combining balance sheet of the Company and the historical financial statements and notes thereto of the Company as filed on Form 10K for the year ended December 31,1995. The pro forma condensed combining Statement of Operations is unaudited and is not necessarily indicative of what the actual financial position would have been had the Company acquired the 1995 Acquisition Properties, the Westchester Properties, the 1996 Acquisition Properties, Landmark Square, the Certain Option Properties and (ii) the Company acquired the 1997 Acquisition Properties on January 1, 1995, nor does it purport to represent the operations of the Company for future periods (Amounts below are in thousands, except per share data)
Total Reckson Adjusted Reckson Associates Realty Reckson Associates Initial Public Corp. Combined Group (e) Realty Corp. (f) Offering and The 1995 Pro Forma Jan.1, 1995 June 3, 1995 to Formation Acquisition January 1, 1995 to Description to June 2, 1995 December 31, 1995 Transactions (g) Properties (h) December 31,1995 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues: Base rent $19,680 $32,661 $6,034 $58,375 Tenant escalations 3,417 5,246 566 9,229 Construction and management company income 2,950 (2,950)(1) Equity in earnings of service companies 100 220 (1) 320 Other income 548 448 (548)(3) 25 473 ------------------------------------------------------------------------------------------- Total Revenues 26,595 38,455 (3,278) 6,625 68,397 ------------------------------------------------------------------------------------------- Expenses: Opearting Expenses: Property expenses 4,918 7,144 (408)(2) 1,204 12,858 Real estate taxes 3,858 5,755 1,172 10,785 Ground rents 411 579 990 Rent expense to an affiliate 99 (99)(1) Construction costs and expenses 1,929 (1,929)(1) Marketing, general and administrative 1,767 1,859 (389)(5) 3,237 ------------------------------------------------------------------------------------------- Total Operating Expenses 12,982 15,337 (2,825) 2,376 27,870 Interest 8,423 5,331 13,754 Depreciation and Amortization 4,455 7,233 146 (4) 1,300 13,134 ------------------------------------------------------------------------------------------- 25,860 27,901 (2,679) 3,676 54,758 Equity in net income of investees Minority partners' interest in consolidated partnership income (261) (184) (445) ------------------------------------------------------------------------------------------- Income (loss) before Limited partners' minority interest in the Operating Partnership and extraordinary item $474 $10,370 ($599) $2,949 $13,194 =========================================================================================== Limited partners' minority interest in the Operating Partnership Net income before extraordinary item Net income per common share before extraordinary item Weighted average common shares outstanding The 1996 (j) Certain Westchester Acquisition Pro forma (k) Landmark Option Description Properties (i) Properties Adjustments Square (n) Properties (o) - ------------------------------------------------------------------------------------------------------------------ Revenues: Base rent $13,883 (1) $1,617 $12,596 $5,341 Tenant escalations 509 (1) 21 2,521 438 Construction and management company income Equity in earnings of service companies 70 (3) Other income --------------------------------------------------------------------- Total Revenues 14,462 1,638 15,117 5,779 --------------------------------------------------------------------- Expenses: Opearting Expenses: Property expenses 4,632 (1) 641 7,029 665 Real estate taxes 2,697 (1) 435 1,776 1,208 Ground rents 136 Rent expense to an affiliate Construction costs and expenses Marketing, general and administrative 637 278 --------------------------------------------------------------------- Total Operating Expenses 7,329 1,076 9,442 2,287 Interest 12,767 Depreciation and Amortization 2,061 (2) 164 1,925 900 --------------------------------------------------------------------- 9,390 1,240 12,767 11,367 3,187 Equity in net income of investees 989 (4) Minority partners' interest in consolidated partnership income --------------------------------------------------------------------- Income (loss) before Limited partners' minority interest in the Operating Partnership and extraordinary item $6,061 $398 ($12,767) $3,750 $2,592 ===================================================================== Limited partners' minority interest in the Operating Partnership Net income before extraordinary item Net income per common share before extraordinary item Weighted average common shares outstanding
Reckson 1997 Associates Acquisition Realty Corp. Description Properties (y) Pro Forma (x) - ---------------------------------------------------------------------- Revenues: Base rent $12,887 $104,699 Tenant escalations 1,454 14,172 Construction and management company income Equity in earnings of service companies 390 Other income 473 ---------------------------- Total Revenues 14,341 119,734 ---------------------------- Expenses: Opearting Expenses: Property expenses 4,208 30,033 Real estate taxes 3,083 19,984 Ground rents 1,126 Rent expense to an affiliate Construction costs and expenses Marketing, general and administrative 4,152 ---------------------------- Total Operating Expenses 7,291 55,295 Interest 26,521 Depreciation and Amortization 2,737 18,184 ---------------------------- 10,028 100,000 Equity in net income of investees 989 Minority partners' interest in consolidated partnership income (445) ---------------------------- Income (loss) before Limited partners' minority interest in the Operating Partnership and extraordinary item $4,313 $20,278 ============================ Limited partners' minority interest in the Operating Partnership ($5,132)(l) Net income before extraordinary item $15,146 ============= Net income per common share before $1.45(m) extraordinary item ============= Weighted average common shares outstanding 10,441 ============= 7 RECKSON ASSOCIATES REALTY CORP. NOTES TO PRO FORMA FINANCIAL STATEMENT (UNAUDITED) (in thousands, except shares and units) Pro Forma Condensed Combining Balance Sheet a. Reflects the Company's historical balance sheet as of September 30, 1996 (Unaudited). b. Reflects the acquisition of Landmark Square with mortgage debt of $50 million and additional borrowings under the credit facility. c. Reflects the purchase of certain properties under option with related parties with borrowings under the credit facility, assumption of a mortgage debt and issuance of approximately 123,000 operating partnership units (based on a weighted average unit price of $41.15 per share). d. Reflect's the acquisition of the Hauppauge Portfolio, the New Jersey Portfolio and the Uniondale Office Portfolio collectively (the "1997 Acquisition Properties") with additional borrowings under the credit facility. Pro Forma Condensed Combining Statement of Operations - for the year ended December 31, 1995 and the nine months ended September 30, 1996. e. The following reflects the historical operations of The Reckson Group for the period January 1, 1995 to June 2, 1995, adjusted to include the Omni and exclude properties that were not transferred to the Company:
Reckson Group Add: Less: Properties Adjusted Historical Omni Not Transferred Reckson Group ------------- ---- ---------------- ------------- REVENUES: Base Rents ................................... $16,413 $4,812 $1,545 $19,680 Tenant escalations and reimbursements ........ 2,907 602 92 3,417 Construction and management revenues ......... 2,950 -- -- 2,950 Other Income ................................. 548 -- -- 548 ------- ------ ------ ------- 22,818 5,414 1,637 26,595 ------- ------ ------ ------- EXPENSES: Property operating ........................... 3,985 1,212 279 4,918 Real estate taxes ............................ 3,390 897 429 3,858 Ground Rent .................................. 234 233 56 411 Rent expense to an affiliate ................. 99 -- -- 99 Construct costs and expenses ................. 1,929 -- -- 1,929 Marketing, general and administrative ............................. 1,759 21 13 1,767 Interest ..................................... 7,622 1,549 748 8,423 Depreciation ................................. 3,606 1,181 332 4,455 ------- ------ ------ ------- 22,624 5,093 1,857 25,860 ------- ------ ------ ------- Income before Limited partners' minority interest and extraordinary item ............ $ 194 $ 321 $ (220) $ 735 ======= ====== ====== =======
(Footnotes continued on following page) 8 RECKSON ASSOCIATES REALTY CORP. NOTES TO PRO FORMA FINANCIAL STATEMENTS (continued) (UNAUDITED) (in thousands, except shares and units) f. Reflects the historical operations of Reckson Associates Realty Corp. for the period June 3, 1995 to December 31, 1995. g. Reflects the following adjustments related to the IPO and the formation transaction: 1. Adjustment required to record the Company's investment in the Subsidiary Corporations under the equity method of accounting. 2. An estimated decrease in operating expenses ($408) principally as a result of certain non-Rechler family partners of certain Reckson Group entities receiving management fees and related cost reimbursements ($297) in lieu of cash distributions for their respective ownership interests and the elimination of separate insurance coverage ($111) on properties covered under the Company's umbrella policy. 3. A reduction in income resulting from the distribution of available-for-sale securities and other investments to partners and elimination of gain on sale or real estate. 4. Additional depreciation on an increase in basis of the real estate, additional amortization on deferred financing costs related to new debt, less amortization relating to deferred financing costs written-off as a result of the debt repaid with proceeds from IPO. 5. Adjustment to the historical marketing, general and administrative expenses for incremental costs of doing business as a public company and savings from operating all properties on a combined self-managed basis, less administrative costs attributable to the service companies, as follows: Reckson Group historical expenses for the period from January 1, 1995 to June 2, 1995 $1,767 Reckson Associates Realty Corp. expenses for the period from June 3, 1995 to December 3, 1995 1,859 ----- 3,626 ----- Incremental cost of doing business as a public company for the period January 1, 1995 to June 2, 1995 $416 Incremental costs incurred during the period January 1, 1995 to June 2, 1995 (125) Estimated savings from operating all properties on a combined, self-managed basis (92) 199 ---- Less: Administrative costs relating to Subsidiary Corporations described in (g-1 above) (588) ----- Adjustment (389) ----- Marketing, general and administrative expenses - Reckson Associates Realty Corp. Combined Pro Forma $3,237 ===== (Footnotes continued on following page) 9 RECKSON ASSOCIATES REALTY CORP. NOTES TO PRO FORMA FINANCIAL STATEMENTS (continued) (UNAUDITED) (in thousands, except shares and units) h. Reflects the preacquisition revenues and certain expenses of certain properties acquired during the period from the date of the IPO to December 31, 1995. i. Reflects the operations of eight class A suburban office properties encompassing an aggregate of approximately 935,000 square feet located in Westchester County, New York (the "Westchester Properties"), as follows: 1. The revenues and certain expenses of seven of the Westchester Properties 2. Depreciation expenses on the buildings (30 years) and tenant costs (life of lease) 3. Equity in the earnings of the management and construction business. 4. Equity in earnings of the eighth Westchester Property in which the Company acquired a 60% interest in an LLC entity which owns the property. j. Reflects the revenues and certain expenses of an office property and an industrial property purchased in 1996, located in Westchester, and Hauppauge, New York, respectively (the "1996 Acquisition Properties"). k. Reflects the net effect of (i) a reduction in mortgage interest costs associated with repayment of certain mortgage debt with proceeds from the IPO and a modification of certain loan terms in the remaining mortgages after the IPO and (ii) an increase in interest costs associated with a $50 million mortgage debt expected to be incurred with an estimated interest rate of 8% to finance the acquisition of Landmark Square, a $4.7 million mortgage debt with an interest rate of 9.125% to be assumed in connection with the acquisition of one of the Certain Option Properties, a $9.2 million mortgage debt with an interest rate of 7.375% assumed in connection with the acquisition of one of the Westchester Properties and additional borrowings under the Credit Facility. l. Represents the minority interest of the Limited Partners in the Operating Partnership at an effective pro forma rate of approximately 25.3%. m. Pro Forma net income per share of common stock before extraordinary item is based upon 10,441,166 shares of common stock. n. Reflects the combined revenues and certain expenses of Landmark Square located in Stamford, Connecticut for the year ended December 31, 1995. o. Reflects the combined revenues and certain expenses of the Certain Option Properties for the year ended December 31, 1995. 10 p. Reflects the historical operations of the Company for the nine months ended September 30, 1996. q. Reflects the combined revenues and certain expenses of Landmark Square for the nine months ended September 30, 1996. r. Reflects the combined revenues and certain expenses of the Certain Option Properties for the nine months ended September 30, 1996. s. Reflects the increase in interest costs associated with a $50 million mortgage debt expected to be incurred with an estimated interest rate of 8% to finance the acquisition of Landmark Square, a $4.7 million mortgage debt with an interest rate of 9.125% to be assumed in connection with the acquisition of one of the Certain Option Properties, a $9.2 million mortgage debt with an interest rate of 7.375% assumed in connection with the acquisition of one of the Westchester Properties and additional borrowings under the Credit Facility. t. Reflects the combined revenues and certain expenses of the Westchester Properties for the period of time during 1996 prior to the acquisition by the Company. u. Represents the minority interest of the Limited Partners in the Operating Partnership at an effective pro forma rate of approximately 25.3%. v. Pro forma net income per share of common stock before extraordinary item is based upon 10,441,166 shares of common stock. w. Reflects the combined revenues and certain expenses of the New Jersey Portfolio, the Hauppauge Portfolio and the Uniondale Office Property for the nine months ended September 30, 1996. x. The revenues and certain expenses of certain insignificant property acquisitions, including vacant buildings have been excluded from the pro forma condensed combining Statement of Operations for the year ended December 31, 1995 and the nine months ended September 30, 1996. y. Reflects the combined revenues and certain expenses of the New Jersey Portfolio, the Hauppauge Portfolio and the Uniondale Office Property for the year ended December 31, 1995. 11 Report of Independent Auditors Board of Directors and Stockholders Reckson Associates Realty Corp. We have audited the combined statement of revenues and certain expenses of properties to be acquired from 100 Executive Drive, L.L.C., 200 Executive Drive, L.L.C., 300 Executive Drive, L.L.C., 10 Rooney Circle, L.L.C. and One Paragon Drive, L.L.C. (collectively "Paragon") by Reckson Associates Realty Corp. (the "New Jersey Portfolio"), as described in Note 1, for the year ended December 31, 1996. The financial statement is the responsibility of the New Jersey Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Form 8-K of Reckson Associates Realty Corp. and is not intended to be a complete presentation of the New Jersey Portfolio's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined revenues and certain expenses of the New Jersey Portfolio as described in Note 1 for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP New York, New York February 4, 1997 New Jersey Portfolio Combined Statement of Revenues and Certain Expenses (in thousands) (Note 1) For the Year ended December 31, 1996 Revenues: (Note 2) Base rents $ 7,299 Tenant escalations, reimbursements and sundry charges 873 ------------ Total revenues 8,172 ------------ Certain expenses: Property operating expenses (Note 3) 1,974 Real estate taxes 1,201 ------------ Total certain expenses 3,175 ------------ Revenues in excess of certain expenses $ 4,997 ============ See accompanying notes to financial statement. New Jersey Portfolio Notes to Combined Statement of Revenues and Certain Expenses 1. Basis of Presentation Presented herein is the combined statement of revenues and certain expenses related to the operations of five commercial real estate properties owned by 100 Executive Drive, L.L.C., 200 Executive Drive, L.L.C., 300 Executive Drive, L.L.C., 10 Rooney Circle, L.L.C. and One Paragon Drive, L.L.C. (collectively "Paragon"). These properties are located in West Orange and Montvale, New Jersey and are identified as the New Jersey Portfolio. The New Jersey Portfolio is not a legal entity but rather a combination of the operations of certain real estate properties subject to purchase contracts by Reckson Associates Realty Corp. (the "Company"). The accompanying combined statement of revenues and certain expenses includes the accounts of the commercial real estate properties consisting of 100, 200, and 300 Executive Drive, One Paragon Drive and 10 Rooney Circle. The accompanying financial statement has been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission for the acquisition of real estate properties. Accordingly, the financial statement excludes certain expenses that may not be comparable to those expected to be incurred by the Company in the proposed future operations of the aforementioned properties. Items excluded consist of interest, depreciation, general and administrative expenses and fees to Paragon of approximately $1,000,000, not directly related to the future operations. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ from those estimates. 2. Lease and Revenue Recognition The New Jersey Portfolio is being leased to tenants under operating leases. Minimum rental income is generally recognized on a straight-line basis over the term of the lease. The amounts so recognized were less than amounts due pursuant to the underlying leases by approximately $290,000 for the year ended December 31, 1996. The lease agreements generally contain provisions for reimbursement of real estate taxes and operating expenses over base year amounts, as well as fixed increases in rent. The New Jersey Portfolio is principally multi-tenant office buildings whose leases expire at various dates over the next ten years. New Jersey Portfolio Notes to Combined Statement of Revenues and Certain Expenses 3. Property Operating Expenses Property operating expenses for the year ended December 31, 1996 include approximately $74,000 in insurance costs, $901,000 for utilities, $158,000 in payroll costs, $822,000 in repair and maintenance costs, and $19,000 in miscellaneous operating costs. Report of Independent Auditors Board of Directors and Stockholders Reckson Associates Realty Corp. We have audited the statement of revenues and certain expenses of the property ("Uniondale Office Property") to be acquired from the Metropolitan Life Insurance Company ("MetLife") by Reckson Associates Realty Corp., as described in Note 1, for the year ended December 31, 1996. The financial statement is the responsibility of the Uniondale Office Property's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Form 8-K of Reckson Associates Realty Corp. and is not intended to be a complete presentation of the Uniondale Office Property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Uniondale Office Property as described in Note 1 for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP New York, New York January 16, 1997 Uniondale Office Property Statement of Revenues and Certain Expenses (in thousands) (Note 1) For the Year Ended December 31, 1996 Revenues: (Notes 2 and 6) Base rents $ 3,586 Tenant escalations 556 ------------ Total revenues 4,142 ------------ Certain Expenses: Real estate taxes 1,476 Management fees (Note 3) 109 Property operating expenses (Note 5) 1,734 ------------ Total certain expenses 3,319 ------------ Revenues in excess of certain expenses $ 823 ============ See accompanying notes to financial statement. Uniondale Office Property Notes to Statement of Revenues and Certain Expenses For the Year Ended December 31, 1996 1. Basis of Presentation Presented herein is the statement of revenues and certain expenses related to the operation of an office building, the Uniondale Office Property, owned by Metropolitan Life Insurance Company ("MetLife"). The property is located in East Meadow, New York. The Uniondale Office Property is not a legal entity but rather certain real estate subject to a purchase contract by Reckson Associates Realty Corp. (the "Company"). The accompanying statement of revenues and certain expenses includes the accounts of the Uniondale Office Property. The accompanying financial statement has been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission for the acquisition of real estate property. Accordingly, the financial statement excludes certain expenses that may not be comparable to those expected to be incurred by Reckson Associates Realty Corp. in the proposed future operations of the aforementioned property. Items excluded consist of interest, depreciation and general and administrative expenses not directly related to the future operations. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ from those estimates. 2. Lease and Revenue Recognition The Uniondale Office Property is being leased to tenants under operating leases. Minimum rental income is generally recognized on a straight-line basis over the term of the lease. The excess of amounts so recognized over amounts due pursuant to the underlying leases amounted to approximately $472,000 for the year ended December 31, 1996. The lease agreements generally contain provisions for reimbursement of real estate taxes and operating expenses over base year amounts, as well as fixed increases in rent. The Uniondale Office Property is a multi-tenant office building whose leases expire at various dates over the next ten years. Uniondale Office Property Notes to Statement of Revenues and Certain Expenses (continued) 3. Management and leasing Agreements The Uniondale Office Property is managed and leased by Koll Management Services Inc. ("Koll"). Koll provides property management services to the Uniondale Office Property at the rate of 3% of gross cash receipts or $8,000 per month, whichever is greater. 4. Ground Lease On January 25, 1983, a prior owner of the Uniondale Office Property entered into a thirty-seven year non-cancelable ground lease, with six renewal options totaling sixty-four years, for the Uniondale Office Property with the County of Nassau. The ground lease was subsequently transferred to MetLife. 5. Property Operating Expenses Property operating expenses for the year ended December 31, 1996 include approximately $209,000 in ground rent, $36,000 for insurance, $608,000 for utilities, $287,000 in payroll costs and $594,000 in repair and maintenance costs. 6. Significant Tenants Three tenants, Medical Liability Inc., Certilman Balin Alder & Hyman Associates, and Travelers Insurance Company accounted for 19%, 25% and 26% of the 1996 rents on a straight line basis, respectively. Report of Independent Auditors Board of Directors and Stockholders Reckson Associates Realty Corp. We have audited the combined statement of revenues and certain expenses of properties ("Hauppauge Portfolio") to be acquired from RREEF USA Fund-I ("Rreef") by Reckson Associates Realty Corp., as described in Note 1, for the year ended December 31, 1996. The financial statement is the responsibility of the Hauppauge Portfolio's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Form 8-K of Reckson Associates Realty Corp. and is not intended to be a complete presentation of the Hauppauge Portfolio's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined revenues and certain expenses of the Hauppauge Portfolio as described in Note 1 for the year ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP New York, New York January 17, 1997 Hauppauge Portfolio Combined Statement of Revenues and Certain Expenses (Note 1) For the Year Ended December 31, 1996 (in thousands) Revenues (Note 2) Base rents $2,748 Tenant escalations and reimbursements 563 ---------- Total revenues 3,311 Certain expenses Real estate taxes 605 Management fees (Note 3) 107 Property operating expenses (Note 5) 580 ---------- Total certain expenses 1,292 ---------- Revenues in excess of certain expenses $2,019 ========== See accompanying notes to financial statement. Hauppauge Portfolio Notes to Combined Statement of Revenues and Certain Expenses For the Year Ended December 31, 1996 1. Basis of Presentation Presented herein is the combined statement of revenues and certain expenses related to the operations of ten industrial real estate properties owned by Rreef USA Fund-I ("Rreef"). These properties are located in Hauppauge, Long Island, and are identified as the Hauppauge Portfolio. The Hauppauge Portfolio is not a legal entity but rather a combination of the operations of certain real estate assets subject to purchase contracts by Reckson Associates Realty Corp. (the "Company"). The accompanying combined statement of revenues and certain expenses includes the accounts of these commercial real estate properties. The accompanying financial statements have been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission for the acquisition of real estate properties. Accordingly, the financial statements exclude certain expenses that may not be comparable to those expected to be incurred by Reckson Associates Realty Corp. in the proposed future operations of the aforementioned properties. Items excluded consist of interest, depreciation and certain general and administrative expenses. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ from those estimates. 2. Lease Revenue Recognition The Hauppauge Portfolio is being leased to tenants under operating leases. Minimum rental income is generally recognized on a straight-line basis over the term of the lease. The amounts so recognized were less than amounts due pursuant to the underlying leases by approximately $21,000 for the year ended December 31, 1996. The lease agreements for 400 Oser, 180 Oser and 85 Adams, generally contain provisions for reimbursement of real estate taxes and operating expenses over base year amounts, as well as fixed increases in rent and all other properties are net leased. All of the Hauppauge Portfolio is either single tenant or multi-tenant industrial buildings whose leases expire at various dates over the next twelve years. Hauppauge Portfolio Notes to Combined Statement of Revenues and Certain Expenses (estimates) 3. Management Agreement Rreef Management Company provides property management services for a fee equal to 3.25% of the total revenues (as defined). 4. Ground Lease On June 14, 1991, Rreef entered into a fourteen year noncancellable ground lease for one of the properties in the Hauppauge Portfolio with Heartland Associates. Net rent was $44,651. 5. Property Operating Expenses Property operating expenses for the year ended December 31, 1996 include approximately $32,700 in insurance costs which have been allocated from Rreef. In addition, property operating expenses also include approximately $153,000 for water and sewer, $62,000 for electricity, $19,000 for HVAC, $52,000 in payroll costs and $217,000 in repair and maintenance costs. (c) Exhibits Exhibit Number Description - ------ ----------- 23 Consent of Independent Auditors SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RECKSON ASSOCIATES REALTY CORP. /s/ J. Michael Maturo ----------------------------------------- J. Michael Maturo Executive Vice President and Chief Financial Officer Date: February 18, 1997 Consent of Independent Accountants We consent to the reference to our firm under the caption "Experts" in Amendment No. 1 to the Registration Statement (Form S-3 No. 333-13213) and related Prospectus Supplement of Reckson Associates Realty Corp. (the "Company") for the registration of $250,00O,000 of common stock, preferred stock, common stock warrants, and preferred stock warrants and to the incorporation by reference therein of our report dated February 22, 1996, with respect to the consolidated financial statements and schedule of the Company for the period June 3, 1995 to December 31, 1995 and the combined financial statements of the Reckson Group for the period January 1, 1995 to June 2, 1995 and for the years ended December 31, 1994 and 1993, included in the Company's Annual Report (Form 10-K) for the fiscal year ended December 31, 1995 filed with the Securities and Exchange Commission. We also consent to the incorporation by reference therein of (i) our report dated February 23, 1996, with respect to the combined statement of revenues and certain expenses of the Westchester Properties for the year ended December 31, 1995, included in the Company's Form 8-K/A filed with the Securities and Exchange Commission on March 27, 1996, (ii) our report dated September 20, 1996, with respect to the combined statement of revenues and certain expenses of the Landmark Square Properties for the year ended December 31, 1995, included in the Company's Form 8-K filed with the Securities and Exchange Commission on October 1, 1996, (iii) our report dated September 16, 1996, with respect to the combined statements of revenues and certain expenses of the Certain Option Properties for the years ended December 31, 1995, 1994 and 1993, included in the Company's Form 8-K filed with the Securities and Exchange Commission on October 1, 1996, (iv) our report dated February 4, 1997, with respect to the combined statement of revenues and certain expenses of the New Jersey Portfolio for the year ended December 31, 1996, included in the Company's Form 8-K filed with the Securities and Exchange Commission on February 18, 1997, (v) our report dated January 16, 1997, with respect to the statement of revenues and certain expenses of the Uniondale Office Property for the year ended December 31, 1996, included in the Company's Form 8-K filed with the Securities and Exchange Commission on February 18, 1997 and (vi) our report dated January 17, 1997, with respect to the combined statement of revenues and certain expenses of the Hauppauge Portfolio for the year ended December 31, 1996, included in the Company's Form 8-K filed with the Securities and Exchange Commission on February 18, 1997. /s/ Ernst & Young LLP New York, New York February 18, 1997 -----END PRIVACY-ENHANCED MESSAGE-----