Cali Realty Corporation to Purchase Harborside Financial Center for $282 Million

09/30/1996 Category: Acquisitions

CRANFORD, NJ--September 30, 1996--Cali Realty Corporation (NYSE:CLI) today announced that the Company has entered into a contract to purchase Harborside Financial Center, a 1.9 million square foot office complex, located in Jersey City, New Jersey for $282.4 million. The purchase of this property, which is located on the Hudson River waterfront across from downtown Manhattan, will increase Cali's total portfolio by 40 percent to approximately 6.4 million square feet.

The contract, which is subject to completion of due diligence, was executed by Cali Realty Corporation and Jones Lang Wootton Realty Advisors on behalf of an institutional seller. The acquisition is expected to close within 45 days. As part of the purchase, Cali will also acquire 11.3 acres of land fully zoned and permitted for an additional 4.1 million square feet of development and the water rights associated with 27.4 acres of land extending into the Hudson River immediately east of the existing property, including two piers with an area of 5.8 acres.

Commenting on the purchase, Thomas A. Rizk, the Company's President and Chief Executive Officer said, "This transaction is the largest and most important in Cali's history. We're very excited about the quality of this property, the caliber of its tenants, and the potential to develop an additional 4.1 million square feet of office space."


Harborside Financial Center, located adjacent to the Exchange Place Port Authority Trans-Hudson ("PATH") train station, is a completely redeveloped, three-building office complex containing approximately 1.9 million square feet of office and retail space. The buildings, known as Plazas l, ll. and lll, were developed as a complete reconstruction of existing buildings in two phases, completed in 1983 and 1990. The three buildings are connected via an enclosed waterfront promenade with over 50,000 square feet of restaurants, retail shops, a food court, and an atrium which provides space for tenant-related social functions. These state-of-the-art buildings were designed to accommodate tenants' high-tech needs, and therefore have large floor plates and extensive structural, computer, electronic and power capabilities. Rizk added, "Jones Lang Wootton Realty Advisors, investment manager for the owner, has done a superb job of developing and managing this first-class property."


Financing for the Harborside acquisition will be realized in part through the assumption of existing and seller-provided financing aggregating $150 million. The existing financing of $100 million bears interest at a fixed rate of 7.32% for a term of approximately nine years. The seller-provided financing of $50 million will also have a term of nine years and will bear interest at a rate equal to the three year treasury obligation plus 90 basis points. The interest rate will be reset at the end of the third and sixth loan years based on the three year treasury with spreads of 110 basis points in years four through six, and 130 basis points in years seven through maturity.

In addition to the assumption of $150 million in long-term debt, Cali has also obtained a commitment from Prudential Securities Credit Corp. for an $80 million revolving credit facility, which will bear interest at a rate of LIBOR plus 125 basis points. The Company expects to draw the full $80 million from this credit facility as part of the financing for this acquisition. The balance of the purchase price, totaling $52.4 million, will be drawn from the Company's existing credit facilities.


The acquisition of Harborside Financial Center will further establish Cali's dominance of the New Jersey real estate market. The property, which is currently 97% leased, is located in the Exchange Place sub-market of Jersey City. Encompassing approximately 6.4 million square feet of Class A office space, the sub-market's vacancy rate was approximately 5% at June 30, 1996. Absorption has been strong during the last eight years, with 5.8 million square feet of total positive absorption or an average of more than 700,000 square feet per year.

Commenting on the market, Rizk said, "The experience we've gained in this waterfront market -- by developing, constructing, leasing and managing our 622,000 square foot International Financial Tower- will be invaluable to the success of Harborside." The acquisition of Harborside Financial Center will increase the Company's holdings in Jersey City to 2.5 million square feet, which represents approximately 40% of the Class A office space in the Jersey City waterfront market. Rizk added, "This acquisition positions Cali as the dominant player in yet another top market in New Jersey."


Harborside Financial Center is primarily occupied by the support operations and technical divisions of financial institutions. Harborside's largest tenant is Bankers Trust Company, the ninth largest commercial bank in the United States, which leases 385,000 square feet of space. Other major tenants include Dow Jones/Telerate, the American Institute of Certified Public Accountants (AICPA), Dean Witter, and Bank of Tokyo.


Upon completion of the Harborside acquisition, Cali's portfolio will total 6.4 million square feet, compared with 3.9 million square feet at the end of 1995 and 2.2 million square feet at the time of the Company's IPO in August 1994. Prior to this acquisition, the Company acquired over $200 million of properties and has more than doubled its total market capitalization since the IPO. The acquisitions have been financed by the Company's credit facilities, assumption of existing indebtedness, and the successful completion of two common stock offerings in October 1995 and August 1996. Cali's second quarter 1996 earnings showed a 14% increase in funds from operations per share over the same period in 1995. The Company currently pays a annual cash dividend of $1.80 per share, which at Friday's closing stock price of $ 26.50 represents a 6.8% yield.

Cali Realty Corporation is a fully integrated, self-administered, self-managed real estate investment trust (REIT) providing leasing, management, acquisition, development, construction and tenant related services for its portfolio. Upon completion of the Harborside purchase, the Company will own 48 properties, primarily Class A office and office/flex buildings, totaling approximately 6.4 million square feet. All of the properties are located in New Jersey, New York and Pennsylvania.