UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 22, 2003
Reckson Associates Realty Corp.
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(Exact name of registrant as specified in its charter)
Maryland 1-13762 11-3233650
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(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) file number) Identification No.)
225 Broadhollow Road, Melville, NY 11747
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(Address of principal executive office) (zip code)
(631) 694-6900
(Registrant's telephone number including area code)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 10, 2003, Reckson Associates Realty Corp. ("Reckson") announced
that it had entered into agreements relating to the disposition of its Long
Island industrial portfolio (the "Disposition") to members of the Rechler family
for approximately $315.5 million in cash and other consideration. Subject to the
terms and conditions of the agreements, at closing, Reckson will dispose of its
95 property, 5.9 million square foot, Long Island industrial building portfolio
for approximately $225.1 million in cash and debt assumption and 3,932,111
limited partnership units, valued at approximately $90.4 million in Reckson
Operating Partnership, L.P. In connection with the Disposition, Reckson
estimates that it will recognize for United States GAAP purposes a gain on the
sale of real estate of approximately $138 million. In addition, Reckson
estimates that it will recognize a taxable gain on the sale of real estate of
approximately $20 million.
Sales proceeds from the Disposition are anticipated to be used to repay
Reckson's unsecured credit facility and for transaction costs. Subsequent to the
Disposition Reckson anticipates it will redeem $50 million, or 100%, of its
outstanding 8.85% Series B cumulative preferred stock.
In addition, four of the five remaining options granted to Reckson at the time
of its IPO to purchase interests in properties owned by Rechler family members
(including three properties in which the Rechler family members hold
non-controlling interests and one industrial property) will be terminated. In
return Reckson will receive an aggregate payment from the Rechler family members
of $972,000. Rechler family members have also agreed to extend the term of the
remaining option on the property located at 225 Broadhollow Road, Melville, New
York (Reckson's current headquarters) for five years and to release Reckson from
approximately 16,000 square feet under its lease at this property. In
connection with the restructuring of the remaining option the Rechler family
members have agreed to pay Reckson $1 million in return for Reckson's agreement
not to exercise the option during the next three years. As part of the
agreement, the exercise price of the option payable by Reckson will be increased
by $1 million.
In recent weeks, a number of shareholder derivative actions have been commenced
against the Company and the Board of Directors in the Supreme Court of the State
of New York, County of Nassau ((Index No. 01 4162/03), the Supreme Court of the
State of New York, County of Suffolk (Index No. 03 32545 and Index No. 03 23593)
and in the United States District Court, Eastern District of New York (Case No.
cv 03 4917, Case No. cv 03 5008 and Case No. cv 03 5178), relating to the
recently announced sale of the Long Island Industrial Portfolio to certain
members of the Rechler family. The complaints allege, among other things, that
the process by which the directors agreed to the transaction was not
sufficiently independent of the Rechler family and did not involve a " market
check" or third party auction process and as a result was not for adequate
consideration. The Plaintiffs seek similar relief, including a declaration that
the directors violated their fiduciary duties, an injunction against the
transaction and damages. The Company believes that complaints are without merit.
The description of the Disposition contained in the Company's current reports on
Form 8-K filed with the Securities and Exchange Commission on September 18, 2003
and October 1, 2003 are incorporated herein by reference. The information in
this current report on Form 8-K supplements and amends the information contained
in those previously filed current reports.
Item. 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro forma financial information.
Reckson Associates Realty Corp.
Pro Forma Financial Information
(Unaudited)
The accompanying financial statements present the unaudited pro forma balance
sheet of Reckson Associates Realty Corp. as of June 30, 2003 and the unaudited
pro forma statements of income for the year ended December 31, 2002 and the six
months ended June 30, 2003.
The unaudited pro forma balance sheet as of June 30, 2003 is presented as if the
Disposition transaction had occurred on June 30, 2003. The unaudited pro forma
statements of income for the year ended December 31, 2002 and the six months
ended June 30, 2003 are presented as if the Disposition transaction had occurred
as of January 1, 2002 and carried forward through June 30, 2003.
The pro forma information is unaudited and is not necessarily indicative of the
results which actually would have occurred if the aforementioned Disposition had
been consummated at the beginning of the period presented, nor does it purport
to represent the financial position and results of operations for future
periods. The pro forma information should be read in conjunction with the
historical financial statements of Reckson Associates Realty Corp.
RECKSON ASSOCIATES REALTY CORP.
PRO FORMA BALANCE
SHEET
JUNE 30, 2003
(UNAUDITED AND IN THOUSANDS)
Reckson Pro Forma Pro Forma
Historical Adjustments Condensed
(A) (B)
---------- ----------- ---------
ASSETS:
Commercial real estate properties, at cost:
Land $ 423,036 $ (28,911) $ 394,125
Building and improvements 2,448,379 (201,926) 2,246,453
Developments in progress:
Land 88,388 88,388
Development costs 23,743 23,743
Furniture, fixtures and equipment 12,572 (1,392) 11,180
---------- --------- ----------
2,996,118 (232,229) 2,763,889
Less accumulated depreciation (501,122) 74,701 (426,421)
---------- --------- ----------
2,494,996 (157,528)(e) 2,337,468
Investments in real estate joint ventures 5,709 5,709
Investments in mortgage notes and notes receivable 54,600 54,600
Investments in service companies and affiliate loans and joint ventures 72,440 72,440
Cash and cash equivalents 23,996 2000 (a,b,g) 25,996
Tenant receivables 7,724 7,724
Deferred rents receivable 116,573 (10,303)(e) 106,270
Prepaid expenses and other assets 56,021 (4,551)(e) 51,470
Contract and land deposits and pre-acquisition costs 208 208
Deferred leasing and loan costs 68,727 (4,988)(e) 63,739
---------- --------- ----------
TOTAL ASSETS $2,900,994 $(175,370) $2,725,624
========== ========= ==========
LIABILITIES:
Mortgage notes payable $ 734,134 $ (6,137)(a) $ 727,997
Unsecured credit facility 322,000 (163,000)(a,b) 159,000
Senior unsecured notes 499,374 499,374
Accrued expenses and other liabilities 82,357 8,687 (c,g) 91,044
Dividends and distributions payable 31,471 31,471
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TOTAL LIABILITIES 1,669,336 (160,450) 1,508,886
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Minority partners' interests in consolidated partnerships 240,452 240,452
Preferred unit interest in the operating partnership 19,662 19,662
Limited partners' minority interest in the operating partnership 66,261 (33,888)(a,d) 32,373
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326,375 (33,888) 292,487
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Commitments and contingencies -- -- --
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 25,000,000 shares authorized
Series A preferred stock, 8,834,500 shares issued and outstanding 88 88
Series B preferred stock, 2,000,000 shares and 0, issued and outstanding,
respectively 20 (20)(b) 0
Common Stock, $.01 par value, 100,000,000 shares authorized
Class A common stock, 48,000,995 shares issued and outstanding 480 480
Class B common stock, 9,915,313 shares issued and outstanding 99 99
(50,980)(b)
Additional paid in capital 973,089 69,968 (a,c,d,f,g) 992,077
Treasury stock (68,493) (68,493)
---------- --------- ----------
Total Stockholders Equity 905,283 18,968 924,251
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Total Liabilities and Stockholders' Equity $2,900,994 $(175,370) $2,725,624
========== ========= ==========
The accompanying notes and management's assumptions are
an integral part of this statement
RECKSON ASSOCIATES REALTY CORP.
NOTES TO PRO FORMA BALANCE SHEET
JUNE 30, 2003
(UNAUDITED)
(A) Represents the historical balance sheet of Reckson Associates Realty
Corp. at June 30, 2003.
(B) Represent adjustments to remove the assets and liabilities as a result
of the Disposition as if the Disposition occurred on June 30, 2003.
(a) To record the Disposition transaction as if the Disposition
occurred on June 30, 2003.
Sales Price $ 315,500
Repayment on unsecured credit facility (214,000)
Assignment of secured debt to purchaser (6,137)
Retirement of limited partners minority interest (90,439)
Estimated transactional costs (4,924)
(b) To record the redemption of the outstanding 8.85% Cumulative
Series B preferred stock with proceeds from borrowings under the
unsecured credit facility.
Borrowing under the unsecured credit facility $ 51,000
$.01 par value, 2,000,000 shares (20)
Additional paid in capital (50,980)
(c) To accrue $11.0 million, for the future settlement of employment
contracts and for anticipated restructure costs related to the
Disposition net of $3.3 million of accrued expenses and other
liabilities related to the properties being disposed of.
(d) To record the reallocation of general and limited partnership
interests in the operating partnership, at June 30, 2003 of
approximately $56.6 million, based on percentage of ownership
giving effect to the Disposition transaction and retirement of
3,932,111 common units of limited partnership interest.
(e) To record the disposition of the assets as a result of the
Disposition transaction as if the Disposition occurred on June 30,
2003.
(f) To record the anticipated realized gain resulting from the
Disposition transaction.
Sales Price $ 315,500
Estimated transaction costs (4,924)
Assets disposed of net of liabilities (173,057)
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$ 137,519
==========
(g) To record cash proceeds anticipated to be received in
consideration for the termination by Reckson of four options to
acquire interests in properties owned by Rechler family members
and to amend the terms on which Reckson can exercise a fifth
option to acquire the property located at 225 Broadhollow Road,
Melville, N.Y. (Reckson's current headquarters).
RECKSON ASSOCIATES REALTY CORP.
PRO FORMA STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED AND IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Reckson Pro Forma Adjustments
Historical --------------------- Pro Forma
(A) (B) Condensed
---------- -------- -------- -----------
REVENUES:
Property operating revenues:
Base rents $ 214,605 $(19,869) $ $ 194,736
Tenant escalations and reimbursements 31,340 (2,933) 28,407
----------- -------- ------- -----------
Total property operating revenues 245,945 (22,802) -- 223,143
Interest income on mortgage notes and notes receivable 3,090 3,090
Investment and other income 9,137 (42) 1,016 (C) 10,111
----------- -------- ------ -----------
TOTAL REVENUES 258,172 (22,844) 1,016 236,344
----------- -------- ------ -----------
EXPENSES:
Property operating expenses 94,402 (6,013) 88,389
Marketing, general and administrative 17,649 (1,053) (2,720)(C) 13,876
Interest 45,746 (296) (2,816)(D) 43,307
673 (D)
Depreciation and amortization 61,887 (4,926) 56,961
----------- -------- ------ -----------
TOTAL EXPENSES 219,684 (12,288) (4,863) 202,533
----------- -------- ------ -----------
Income before minority interests, preferred dividends and distributions, equity
(loss) in earnings of real estate joint ventures and service companies,
gain on sales of depreciable real estate assets and discontinued operations 38,488 (10,556) 5,879 33,811
Minority partners' interests in consolidated partnerships (9,025) (9,025)
Distributions to preferred unit holders (547) (547)
Limited partners' minority interest in the operating partnership (1,870) 1,083 (E) (787)
Equity (loss) in earnings of real estate joint ventures and service
companies (164) (164)
----------- -------- ------ -----------
Net income 26,882 (10,556) 6,962 23,288
Dividends to preferred shareholders (10,634) 2,212 (F) (8,422)
----------- -------- ------ -----------
Net income allocable to common shareholders $ 16,248 $(10,556) $9,174 $ 14,866
=========== ======== ====== ===========
Net income allocable to:
Class A common $ 12,364 $ 11,313
Class B common 3,884 3,553
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Total $ 16,248 $ 14,866
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Basic net income per weighted average share:
Class A common $ 0.26 $ 0.24
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Class B common $ 0.39 $ 0.36
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Basic weighted average common shares outstanding:
Class A common 48,100,418 48,100,418
Class B common 9,915,313 9,915,313
Diluted net income per weighted average common share:
Class A common $ 0.26 $ 0.23
=========== ===========
Class B common $ 0.28 $ 0.25
=========== ===========
Diluted weighted average common shares outstanding:
Class A common 48,218,598 48,218,598
Class B common 9,915,313 9,915,313
The accompanying notes and management's assumptions are an
integral part of this statement
RECKSON ASSOCIATES REALTY CORP.
NOTES TO PRO FORMA STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
(A) Represents the historical statement of income of Reckson Associates
Realty Corp. for the six months ended June 30, 2003.
(B) Represent adjustments to remove the results of operations from the
Disposition properties as if such Disposition occurred on January 1,
2002.
(C) To adjust for general and administrative expenses and service company
overhead included in other income, which would be avoided as a result
of the Disposition had the Disposition occurred on January 1, 2002
(D) To adjust for interest expense which would have been avoided if the
unsecured credit facility had been repaid using the proceeds from the
Disposition had the Disposition occurred on January 1, 2002. In
addition, to adjust for interest expense which would have been incurred
had Reckson borrowed under its unsecured credit facil;ity to redeem its
outstanding 8.85% Convertible Series B preferred stock.
(E) To adjust the allocation of income under the limited partnership
agreement had the Disposition occurred on January 1, 2002.
(F) To adjust for preferred dividends on the 8.85% Cumulative Series B
preferred stock as if such preferred stock were redeemed on January 1,
2002.
RECKSON ASSOCIATES REALTY CORP.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2002
(UNAUDITED AND IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Reckson Pro Forma Adjustments
Historical --------------------- Pro Forma
(A) (B) Condensed
---------- --------- --------- ----------
REVENUES:
Property operating revenues:
Base rents $ 437,393 $(38,841) $ $ 398,552
Tenant escalations and reimbursements 60,689 (5,030) 55,659
----------- ------- -------- --------
Total property operating revenues 498,082 (43,871) -- 454,211
Interest income on mortgage notes and notes receivable 6,279 6,279
Investment and other income 1,731 (682) 1,788 (C) 2,837
----------- ------- -------- --------
TOTAL REVENUES 506,092 (44,553) 1,788 463,327
----------- ------- -------- --------
EXPENSES:
Property operating expenses 175,041 (10,530) 164,511
Marketing, general and administrative 31,578 (2,160) (4,168)(C) 25,250
Interest 88,585 (611) (6,532)(D) 83,002
1,560 (D)
Depreciation and amortization 112,341 (9,140) 103,201
----------- ------- -------- --------
TOTAL EXPENSES 407,545 (22,441) (9,140) 375,964
----------- ------- -------- --------
Income before minority interests, preferred dividends and distributions, equity
in earnings of real estate joint ventures and service companies, gain on sales
of real estate, discontinued operations and extraordinary loss 98,547 (22,112) 10,928 87,363
Minority partners' interests in consolidated partnerships (18,730) (18,730)
Distributions to preferred unit holders (1,288) (1,288)
Limited partners' minority interest in the operating partnership (6,238) 3,536 (E) (2,702)
Equity in earnings of real estate joint ventures and service companies 1,113 1,113
Gain on sales of real estate 537 537
----------- ------- -------- ----------
Income before discontinued operations, extraordinary loss and preferred dividends 73,941 (22,112) 14,464 66,293
Discontinued operations (net of limited partners' minority interest):
Income from discontinued operations 495 38 (E) 533
Gain on sales of real estate 4,267 328 (E) 4,595
----------- ------- -------- -----------
Income before extraordinary loss and dividends to preferred shareholders 78,703 (22,112) 14,830 71,421
Extraordinary loss on extinguishment of debts (net of limited partners'
minority interest) (2,335) (138)(E) (2,473)
----------- ------- -------- -----------
Net income 76,368 (22,112) 14,692 68,948
Dividends to preferred shareholders (21,835) 4,425 (F) (17,410)
----------- ------- -------- ----------
Net income allocable to common shareholders $ 54,533 $(22,112) $ 19,117 $ 51,538
=========== ======= ======== ==========
Net income allocable to:
Class A common $ 41,604 $ 39,322
Class B common 12,929 12,216
----------- ----------
Total $ 54,533 $ 51,538
=========== ==========
Basic net income per weighted average share:
Class A common $ 0.79 $ 0.74
Gain on sales of real estate 0.01 0.01
Discontinued operations 0.07 0.08
Extraordinary loss (0.03) (0.04)
----------- ----------
Basic net income per Class A common $ 0.84 $ 0.79
=========== ==========
Class B common $ 1.21 $ 1.14
Gain on sales of real estate 0.01 0.01
Discontinued operations 0.11 0.12
Extraordinary loss (0.05) (0.06)
----------- ----------
Basic net income per Class B common $ 1.28 $ 1.21
=========== ==========
Basic weighted average common shares outstanding:
Class A common 49,669,000 49,669,000
Class B common 10,122,000 10,122,000
Diluted net income per weighted average common share:
Class A common $ 0.83 $ 0.79
=========== ===========
Class B common $ 0.90 $ 0.84
=========== ===========
Diluted weighted average common shares outstanding:
Class A common 49,968,000 49,968,000
Class B common 10,122,000 10,122,000
The accompanying notes and management's assumptions are an
integral part of this statement
RECKSON ASSOCIATES REALTY CORP.
NOTES TO PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2002
(UNAUDITED)
(A) Represents the historical statement of income of Reckson Associates
Realty Corp. for the year ended December 31, 2002.
(B) Represents adjustment to remove the results of operations from the
Disposition properties as if such Disposition occurred on January 1,
2002.
(C) To adjust for general and administrative expenses and service company
overhead, included in other income, which would be avoided as a result
of the Disposition had the Disposition occurred on January 1, 2002
(D) To adjust for interest expense which would have been avoided if the
unsecured credit facility had been repaid using the proceeds from the
Disposition had the Disposition occurred on January 1, 2002. In
addition, to adjust for interest expense which would have been incurred
had Reckson borrowed under its unsecured credit facil;ity to redeem its
outstanding 8.85% Convertible Series B preferred stock.
(E) To adjust the allocation of income under the limited partnership
agreement had the Disposition occurred on January 1, 2002.
(F) To adjust for preferred dividends on the 8.85% Cumulative Series B
preferred stock as if such preferred stock were redeemed on January 1,
2002.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to the signed on its behalf by the
undersigned hereunto duly authorized.
RECKSON ASSOCIATES REALTY CORP.
BY: /s/ Michael Maturo
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Michael Maturo, Executive Vice President &
Chief Financial Officer
Date: October 22, 2003