Cali Realty Corporation Announces $440 Million Merger Agreement with Robert Martin Company

01/27/1997 Category: Acquisitions

Super-Regional REIT to Own 11.3 Million Square-Foot Portfolio Across Four States in the Northeast

CRANFORD, NJ--January 27, 1997--Cali Realty Corporation (NYSE:CLI), a fully integrated, self-managed real estate investment trust (REIT), today announced that it has entered into a $440 million merger agreement with Westchester, New York-based Robert Martin Company LLC. The transaction, which is believed to be one of the largest private real estate transactions in REIT history, is expected to close on or about January 31, 1997. The combined company will continue to operate as Cali Realty Corporation.

Cali will pay $211 million in cash, assume $185 million in debt, and issue $44 million in operating partnership units convertible into common stock of Cali Realty Corporation.

The Company anticipates that the merger will be immediately accretive to Cali's Funds From Operations (FFO), adding approximately $.26 per share or an increase of 12% from annualized third quarter 1996 FFO.

Robert Martin Company, headquartered in Elmsford, New York, is the largest real estate development company in the Westchester County, New York and Fairfield County, Connecticut region. The privately-held firm currently owns and manages a core portfolio of over 4.1 million square feet of office, office/flex, and industrial/warehouse space in prime locations throughout the region.

"This transaction enhances Cali's position as the premier REIT in the Northeast region, with properties stretching across four states," said Thomas A. Rizk, Cali's President and Chief Executive Officer. "This strategic merger brings together two companies with similar operating histories and successes and provides Cali an immediate, dominant position in Westchester County and a presence in Connecticut. This deal furthers Cali's strategic goal of expanding our presence in the Northeast region and becoming a super-regional REIT."

Cali Realty Corporation will own a portfolio of 11.3 million square feet of Class A office, office/flex, and industrial/warehouse properties. The Company will also manage an additional 1.9 million square feet of office space in which Robert Martin holds an equity interest. The portfolio will include 122 properties strategically located in a contiguous area from Philadelphia to Stamford, Connecticut.

ROBERT MARTIN EXECUTIVES TO JOIN CALI'S EXECUTIVE MANAGEMENT TEAM

As part of the agreement, Brad Berger, President and Chief Executive Officer of Robert Martin, and Tim Jones, Chief Operating Officer of Robert Martin, will become part of Cali's management team as Executive Vice Presidents. Specifically, both Berger and Jones will have three-year employment agreements with Cali, and will continue to be responsible for operations and growth in the Westchester, Rockland and Fairfield County regions. In addition, Berger and Jones will be an integral part of the management team responsible for developing the Company's long-term strategic plans.

Brad Berger, Chief Executive Officer of Robert Martin Company, said "Cali's tremendous acquisition track record has clearly demonstrated the competitive advantages of having proven access to the capital markets. We at Robert Martin look forward to joining Cali's management team and to helping build upon Cali's superb performance to-date as one of the top REITs in the country."

Robert Weinberg, co-founder and co-chairman of Robert Martin Company, and Brad Berger will serve on Cali's Board of Directors for an initial term of three years. Concurrent with the appointment of Berger and Weinberg to Cali's Board of Directors, the Company will also nominate two additional independent Board members to serve one and two-year terms, respectively, thereby increasing the size of the Board from nine members to thirteen members.

TERMS OF THE AGREEMENT

Under the terms of the agreement, Cali Realty Corporation will acquire 65 properties and the management operations of the Robert Martin Company for $211 million in cash, 1,401,225 operating partnership units convertible into approximately $44 million of Cali Realty Corporation stock, and the assumption of $185 million in debt, which has a remaining term of approximately seven years and bears interest at a rate of 7.18%. This debt, held by a major U.S. institutional pension fund, may be converted to an unsecured loan upon achievement by Cali of an investment credit rating of Baa3/BBB- or better. The assumed non-recourse debt encumbers 43 of the 65 properties acquired by Cali in the merger, leaving 22 properties unencumbered with an approximate value of $130 million.

LARGEST TRANSACTION IN CALI'S HISTORY FOLLOWS YEAR OF EXPLOSIVE GROWTH

"This transaction, which is the largest in Cali's history, follows what has been by all measures a truly extraordinary year for Cali Realty Corporation," said Rizk. During 1996, Cali acquired approximately 3.3 million square feet of Class A office properties for approximately $455 million, including the acquisition of the 1.9 million square-foot Harborside Financial Center in Jersey City, New Jersey for $287 million. The Company also successfully raised over $545 million in two public offerings of the company's common stock during the year. The most recent offering, which was completed in November, was the largest secondary offering of any REIT to date.

Over the course of 1996, Cali's market capitalization grew by 178% to over $1.4 billion and its equity capitalization grew by 208% to over $1.2 billion. For the second year in a row, its total return to shareholders was approximately 50%.

Upon completion of the Robert Martin merger, the Company's total market capitalization will reach over $1.7 billion, and the company will have closed approximately $850 million in transactions since November.

"Robert Martin is in many ways the perfect fit for Cali; there exist significant synergies in both companies' portfolios, relative market position, leasing capabilities and management style. In addition, both companies have very strong regional franchises upon which to build," added Rizk.

Highlights of the merger include:

  • COMPLEMENTARY MARKETS - Like Cali, Robert Martin is the dominant owner of office properties in its core market, which covers Westchester County, New York and Fairfield County, Connecticut. Cali will continue to do business under the Robert Martin name in those markets.

    Westchester County, New York contains approximately 32 million square feet of office space with an overall vacancy rate of approximately 17% for Class A space as well as for all classes of space. Fairfield County, Connecticut contains approximately 37 million square feet of office space with an overall Class A vacancy rate of 11% and an overall vacancy rate for all classes of space of 13.4%.

    This area, which is contiguous to Cali's New Jersey base, has significant upside potential as the Westchester/Fairfield County region experiences increasing occupancy rates and a tightening real estate market.
  • BENEFICIAL PORTFOLIO MIX - Robert Martin's core portfolio consists of 4.1 million square feet of Class A office, office/flex and industrial/warehouse properties, serving approximately 600 tenants. The properties are located primarily in established business parks which have excellent locations with direct highway access to the region's major arteries, and most are served by Metro North Railways. Over the past decade, the portfolio occupancy rates have been consistently higher than market occupancy rates. Additionally, Robert Martin has third-party management contracts for approximately 1.9 million square feet of office space.

    Among Robert Martin's properties are the 1.4 million-square-foot Cross Westchester Executive Park in Elmsford, NY, the 700,000 square-foot Mid-Westchester Executive Park in Hawthorne, NY, and the 670,000 square-foot South Westchester Executive Park in Yonkers, NY. Other properties range from 45,000 to 314,000 square feet, in locations including White Plains and Tarrytown, NY, and Stamford, CT. Robert Martin's 600 tenants, including IBM, America On-Line, Bank of America, Eastman Kodak, Ford Motor Company, McGraw Hill, NYNEX, Texaco, and Time Warner, will further add to the diversity and stability of Cali's property portfolio.
  • STRONG MARKET PRESENCE - As a super-regional REIT, Cali Realty Corporation will have the unique ability to service major tenants' space demands throughout the New York, New Jersey, Connecticut and suburban Philadelphia regions.
  • SIMILAR CORPORATE CULTURE - Founded in 1957 by co-chairmen Robert Weinberg and Martin Berger, Robert Martin has built a dominant market position with strong relationships with the brokerage and banking communities, its tenants and local municipalities. Robert Martin Company, like Cali, is also a fully integrated firm, offering in-house architectural, engineering, construction, leasing and management services for its portfolio. Also similar to Cali, Robert Martin Company was founded as a family business and is now led by a second generation of management.
  • LOW DEBT-TO-MARKET CAP RATIO - Based upon a $31.25 common stock price, upon completion of this merger, Cali's debt-to-market cap ratio will be approximately 27%, with many unencumbered assets. As a result, the Company anticipates that it can complete significant additional acquisitions without the necessity of accessing the equity markets.

Mr. Rizk concluded remarks by observing, "This transaction adds to Cali's position as the dominant REIT in the northeast region and as one of the few super-regional REITs in the United States. There are significant opportunities for growth within our current markets, and we will continue to make selective acquisitions in neighboring markets which meet our stringent criteria."

Prudential Securities Incorporated acted as financial advisor to Cali and Lazard Freres & Co. LLC acted as financial advisor to Robert Martin in connection with this merger.

Cali Realty Corporation is a 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 Robert Martin transaction, the Company will own 122 properties totaling over 11.3 million square feet, serving over 1,200 tenants, and will manage an additional 1.9 million square feet of space. By property type, Cali's portfolio will consist of 8 million square feet of class A office space, 2.9 million square feet of office/flex space, 400,000 square feet of industrial/warehouse space, 453 multi-family residential units, and land for development of 6 million square feet of space. All of the properties are located in New Jersey, New York, Connecticut and Pennsylvania. Further information on Cali Realty Corporation is available at the company's Internet site at http:/www.calirealty.com.

Certain information discussed in this press release may constitute forward-looking statements within the meaning of the Federal Securities law. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are the general economic climate; the supply of and demand for office, office/flex and industrial/warehouse properties in the Northeast; interest rate levels; the availability of financing; and other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. For further information on factors which could impact the Company and the statements contained herein, reference should be made to the Company's filings with the Securities and Exchange Commission including quarterly reports on Form 10-Q, reports on Form 8-K, and annual reports on Form 10-K.

FACT SHEET

CALI REALTY CORPORATION NYSE: CLI

(After its merger with the Robert Martin Company)

Company Profile

Upon completion of the merger with the Robert Martin Company, Cali Realty Corporation (NYSE:CLI), a leading office real estate investment trust (REIT) and one of the top performing REITs in the industry, will become one of the largest publicly traded REITs in the country. With a combined total of 122 properties and 11.3 million square feet stretching across four states, this super-regional REIT's premier properties, operating expertise and outstanding financial performance will drive its market leadership. The company is traded on the New York Stock Exchange under the symbol CLI.

Since becoming a public company in 1994, Cali Realty has increased its property holdings from 13 buildings comprising 2.2 million square feet to 122 buildings totaling 11.3 million square feet. Cali Realty's 17.5 million share equity offering concluded in November 1996 was the largest post-IPO equity offering by a publicly traded REIT to date.

Cali's stock price has risen from $17.25 at the time of its IPO in August 1994 to a recent stock price of over $32. Cali Realty Corporation has been one of the top-performing office REITs in 1995 and 1996, with a total return on investment of 50% in both years.

Cali Realty Corporation provides leasing, management, acquisition, development, construction and tenant-related services to its portfolio of class A office, office/flex and industrial properties in New Jersey, New York, Pennsylvania and Connecticut. Cali's properties primarily consist of low-rise suburban buildings, executive parks and office/flex buildings.

Market Capitalization

The Company currently has 36.3 million common shares outstanding, as well as 4 million operating partnership units. At a recent stock price of $31.25, the Company's total market capitalization is approximately $1.7 billion. In 1996, Cali completed two equity offerings totaling 21 million common shares, including the underwriter's over-allotment. The net proceeds of approximately $545 million were used to pay down existing debt on the Company's credit facilities, to acquire properties and for general corporate purposes.

The Company currently has $478 million in long term debt, with a debt to total market capitalization ratio of 27%.

Distribution

Currently, the Company pays an annual dividend of $1.80, which yields 5.8% to the common shareholder at a share price of $31.25.

Management

Co-founder and Chairman of the Board John J. Cali
President and Chief Executive Officer Thomas A. Rizk
Chief Operating Officer Brant B. Cali
Chief Administrative Officer John R. Cali
Chief Financial Officer Barry Lefkowitz
Vice President and General Counsel Roger W. Thomas
Vice President-Leasing James Nugent
Vice President-Operations Albert Spring


Brad Berger and Tim Jones of Robert Martin will join Cali as Executive Vice Presidents and will be responsible for operations, acquisitions and development in the Westchester/Rockland/Fairfield market. Additionally, Brad Berger and Robert Weinberg will assume two of four newly created seats on Cali's Board of Directors. Insider ownership will be 10%.

History

Cali Associates, a New Jersey real estate development company founded in 1949 by two brothers, John J. Cali and Angelo R. Cali, and their associate Edward Leshowitz, evolved into the $1.7 billion full service office REIT known today as Cali Realty Corporation. Throughout its history, Cali has anticipated opportunity and led the industry in realizing the rewards of that opportunity; from the early days when Cali Associates was developing single-family housing units, to the late '60s when Cali Associates quickly recognized the growing opportunity presented by the development of suburban office buildings. In the early '90s, Cali Associates expanded its range of services and changed its strategy to grow through the acquisition and management of office properties. Taking advantage of growing capital markets, Cali Associates went public as Cali Realty Corporation in August 1994. Today, Cali Realty is one of the largest publicly-traded REITs in the country.

FACT SHEET

CALI REALTY CORPORATION NYSE: CLI

(After its merger with the Robert Martin Company)

Company Profile

Upon completion of the merger with the Robert Martin Company, Cali Realty Corporation (NYSE:CLI), a leading office real estate investment trust (REIT) and one of the top performing REITs in the industry, will become one of the largest publicly traded REITs in the country. With a combined total of 122 properties and 11.3 million square feet stretching across four states, this super-regional REIT's premier properties, operating expertise and outstanding financial performance will drive its market leadership. The company is traded on the New York Stock Exchange under the symbol CLI.

Since becoming a public company in 1994, Cali Realty has increased its property holdings from 13 buildings comprising 2.2 million square feet to 122 buildings totaling 11.3 million square feet. Cali Realty's 17.5 million share equity offering concluded in November 1996 was the largest post-IPO equity offering by a publicly traded REIT to date.

Cali's stock price has risen from $17.25 at the time of its IPO in August 1994 to a recent stock price of over $32. Cali Realty Corporation has been one of the top-performing office REITs in 1995 and 1996, with a total return on investment of 50% in both years.

Cali Realty Corporation provides leasing, management, acquisition, development, construction and tenant-related services to its portfolio of class A office, office/flex and industrial properties in New Jersey, New York, Pennsylvania and Connecticut. Cali's properties primarily consist of low-rise suburban buildings, executive parks and office/flex buildings.

Market Capitalization

The Company currently has 36.3 million common shares outstanding, as well as 4 million operating partnership units. At a recent stock price of $31.25, the Company's total market capitalization is approximately $1.7 billion. In 1996, Cali completed two equity offerings totaling 21 million common shares, including the underwriter's over-allotment. The net proceeds of approximately $545 million were used to pay down existing debt on the Company's credit facilities, to acquire properties and for general corporate purposes.

The Company currently has $478 million in long term debt, with a debt to total market capitalization ratio of 27%.

Distribution

Currently, the Company pays an annual dividend of $1.80, which yields 5.8% to the common shareholder at a share price of $31.25.

Management

Co-founder and Chairman of the Board John J. Cali
President and Chief Executive Officer Thomas A. Rizk
Chief Operating Officer Brant B. Cali
Chief Administrative Officer John R. Cali
Chief Financial Officer Barry Lefkowitz
Vice President and General Counsel Roger W. Thomas
Vice President-Leasing James Nugent
Vice President-Operations Albert Spring


Brad Berger and Tim Jones of Robert Martin will join Cali as Executive Vice Presidents and will be responsible for operations, acquisitions and development in the Westchester/Rockland/Fairfield market. Additionally, Brad Berger and Robert Weinberg will assume two of four newly created seats on Cali's Board of Directors. Insider ownership will be 10%.

History

Cali Associates, a New Jersey real estate development company founded in 1949 by two brothers, John J. Cali and Angelo R. Cali, and their associate Edward Leshowitz, evolved into the $1.7 billion full service office REIT known today as Cali Realty Corporation. Throughout its history, Cali has anticipated opportunity and led the industry in realizing the rewards of that opportunity; from the early days when Cali Associates was developing single-family housing units, to the late '60s when Cali Associates quickly recognized the growing opportunity presented by the development of suburban office buildings. In the early '90s, Cali Associates expanded its range of services and changed its strategy to grow through the acquisition and management of office properties. Taking advantage of growing capital markets, Cali Associates went public as Cali Realty Corporation in August 1994. Today, Cali Realty is one of the largest publicly-traded REITs in the country.