Cali Realty Corporation Announces Second Quarter and First Half Results

08/15/1997 Category: Earnings

FFO per Share up 18%, Revenues Nearly Triple in Second Quarter

CRANFORD, NJ--August 15, 1997--Cali Realty Corporation (NYSE:CLI) today reported its results for the second quarter and the six months ended June 30, 1997.

Financial Highlights
For the quarter ended June 30, 1997, funds from operations (FFO) before minority interest and after adjustment for straight-lining of rents amounted to $26.5 million, or $.65 per share, versus $9.9 million, or $.55 per share, for the quarter ended June 30, 1996, representing an 18% increase on a per share basis in 1997 over 1996. For the six months ended June 30, 1997, FFO before minority interest and after adjustment for straight-lining of rents amounted to $50.5 million, or $1.25 per share, versus $19.0 million, or $1.06 per share, for the six months ended June 30, 1996, also showing an 18% increase in 1997 over 1996.

Cash available for distribution in the second quarter of 1997 amounted to $25.3 million, or $.62 per share, versus $8.7 million, or $.48 per share, for the same period last year, representing a 29% increase on a per share basis. For the six months ended June 30, 1997, cash available for distribution equaled $47.9 million, or $1.19 per share, versus $16.8 million, or $.94 per share, for the six months ended June 30, 1996, showing a 27% increase on a per share basis in 1997 over 1996.

Revenues increased 188% in the second quarter to $60.5 million from $21.0 million for the quarter ended June 30, 1996. For the six months ended June 30, 1997, revenues increased 178% to $112.7 million from $40.6 million for the same period in 1996.

For the quarter ended June 30, 1997, net income totaled $18.0 million, or $.49 per share, versus net income of $5.7 million, or $.37 per share, for the quarter ended June 30, 1996, representing a 32% increase on a per share basis. For the six months ended June 30, 1997, income before gain on sale of rental property and extraordinary item increased 34% to $34.5 million, or $.95 per share, versus $10.9 million, or $0.71 per share, for the six months ended June 30, 1996.

At June 30, 1997, Cali Realty had a total market capitalization of approximately $1.9 billion, with an equity market value of $1.4 billion, and a total debt-to-total market capitalization ratio of 28.6%.

Commenting on the results, Thomas A. Rizk, President and Chief Executive Officer, stated, "We are especially pleased with our positive financial results, which reflect our first complete quarter since the January 1997 acquisition of the Robert Martin Company. Our results truly demonstrate that the transaction was an excellent opportunity for Cali and its shareholders. Going forward, we will continue to make strategic acquisitions that will enhance our strategy for growth and create additional value for shareholders."

Summary of Recent Acquisitions
Including the Company's January acquisition of the Robert Martin Company, which added 65 properties totaling 4.1 million square feet, Cali has completed $555 million in acquisitions thus far in 1997, comprising 73 properties aggregating 4.9 million square feet. This represents a 69% increase in Cali's portfolio from its holdings at year-end 1996.

In the second quarter, Cali acquired four class A office buildings totaling 444,000 square feet in Westlakes Office Park, in suburban Philadelphia. More recently, the Company acquired two class A office buildings aggregating 150,000 square feet in Moorestown Corporate Center, in Moorestown, New Jersey, and Shelton Place, a 133,000 square-foot class A office building in Shelton, Connecticut.

Merger Planned with the Mack Company and Patriot American Office Group
In the Company's largest announced transaction to date, Cali yesterday reported plans to merge the office assets of the Mack Company and Patriot American Office Group into Cali for approximately $1.2 billion. The Mack Company, based in New Jersey, will contribute its 5.9 million square-foot class A office portfolio and related operations, and Dallas-based Patriot American Office Group will contribute its 3.6 million square-foot office portfolio and related operations.

The Company will be renamed Mack-Cali Realty Corporation, and will be one of the largest REITs in the country, with a total market capitalization of approximately $3.3 billion and over 21 million square feet of office space, primarily in the Northeast and Southwest. The merger is expected to close at year-end, based on regulatory and shareholder approval.

Financing Activity
In August, Cali announced a number of financing activities, including the addition of a new credit facility which brings the company's total borrowing capacity under its two revolving credit facilities to $500 million, as compared to Cali's previous facilities which totaled $225 million. The Company currently has $230 million of borrowings outstanding under its facilities.

Most notably, on August 6, 1997, the Company obtained a new $400 million unsecured revolving credit facility with a group of 13 lenders led by Fleet National Bank. The new facility, which has a three-year term, currently carries an interest rate equal to LIBOR plus 125 basis points. In conjunction with the closing of the $400 million unsecured facility, Cali retired two of the Company's existing secured revolving credit facilities.

Barry Lefkowitz, Chief Financial Officer, stated, "The addition of the unsecured facility, in combination with the retiring of our $64.5 million REMIC mortgage financing, will provide Cali with greater financial flexibility in which to pursue an aggressive acquisition program. We continue to evaluate all aspects of our balance sheet and financial performance in an effort to further enhance our already strong financial health."

Following Cali's recent financing transactions, the Company now has 83 unencumbered properties totaling 7 million square feet, representing approximately 58% of the Company's portfolio.

Leasing Summary
Cali Realty's portfolio of office buildings was 96.5 percent leased at June 30, 1997 compared to 96.3 percent at March 31, 1997.

During the second quarter 1997, the Company executed 83 leases totaling 428,121 square feet, consisting of 241,398 square feet of office space and 186,723 square feet of office/flex space; 202,702 square feet for new leases and 225,419 square feet for lease renewals.

A schedule is attached highlighting the second quarter's leasing statistics.

About the Company
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. The Company owns 130 properties, primarily office and office/flex buildings, totaling approximately 12 million square feet. All of the properties are located in New Jersey, New York, Pennsylvania and Connecticut.

Additional information on Cali Realty Corporation is available on the Company's website 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.


Cali Realty Corporation
Condensed Statements of Operations
(in thousands, except per share amounts)


Quarter Ended June 30,
1997 1996


Revenues $60,542 $21,013


Operating and other expenses (18,068) (6,579)
General and administrative (3,754) (1,128)
Depreciation and amortization (9,080) (3,614)
Interest expense (9,603) (2,999)


Total expenses (40,505) (14,320)


Income before minority interest 20,037 6,693
Minority interest (2,012) (1,009)


Net income $18,025 $ 5,684


Weighted average shares
outstanding 36,489 15,203


Net income per common share $ 0.49 $ 0.37


Dividends declared per
common share $ 0.45 $ 0.425
Cali Realty Corporation
Statements of Funds from Operations and
Cash Available for Distribution
(in thousands, except per share amounts)


Quarter Ended June 30,
1997 1996
Income before minority interest,
gain on sale of rental property
and extraordinary item $20,037 $ 6,693
Add:
Real estate depreciation and amortization 8,786 3,334
Deduct:
Adjustment to rental income for
straight line rents (2,337) (135)
Funds from Operations(1)after adjustment
for straight-lining of rents $26,486 $ 9,892
Deduct:
Non-incremental revenue generating
capital expenditures:
Capital improvements (341) (364)
Tenant improvements and lease
commissions (871) (869)


Cash available for distribution $25,274 $ 8,659


Weighted average shares/units
outstanding(2) 40,579 17,902


Per share/unit:
Funds from Operations $ 0.65 $ 0.55


Cash available for distribution $ 0.62 $ 0.48


Dividend $ 0.45 $ 0.425


Dividend payout ratios:
Funds from Operations(1) 68.94% 76.91%
Cash available for distribution 72.25% 87.87%


(1) Funds from Operations for both periods are calculated in
accordance with the National Association of Real Estate
Investment Trusts (NAREIT) definition, as published in March
1995.


(2) Assumes conversion of 4,091 (1997) and 2,751 (1996) weighted
average limited partnership units in Cali Realty, L.P. to
shares of Cali Realty Corporation.


Cali Realty Corporation
Condensed Statements of Operations
(in thousands, except per share amounts)


Six Months Ended June 30,
1997 1996


Revenues $112,697 $40,584
Gain on sale of rental property -- 5,658


Operating and other expenses (33,642) (13,223)
General and administrative (6,927) (2,064)
Depreciation and amortization (16,844) (6,908)
Interest expense (17,152) (5,568)


Total expenses (74,565) (27,763)


Income before minority interest
and extraordinary item 38,132 18,479
Minority interest (3,648) (2,821)
Extraordinary item-loss on early
retirement of debt(1) -- (475)


Net income $ 34,484 $ 15,183


Weighted average shares
outstanding 36,475 15,175


Net income per common share:
Before gain on sale of
rental property and
extraordinary item(2) $ 0.95 $ 0.71
Gain on sale of
rental property(3) -- $ 0.32
Extraordinary item -- (.03)
Net income: $ 0.95 $ 1.00


Dividends declared per
common share $ 0.90 $ 0.85


(1) Net of minority interest's share of $86 in 1996.


(2) 1996 amount calculated by taking net income, adding back the
extraordinary item, and deducting the gain on sale of rental
property (net of minority interest's share of $864), divided by
weighted average shares outstanding.

(3) 1996 amount calculated by taking the gain on sale of rental
property (net of minority interest's share of $864), divided
by weighted average shares outstanding.

Cali Realty Corporation
Statements of Funds from Operations and
Cash Available for Distribution
(in thousands, except per share amounts)


Six Months Ended June 30,
1997 1996
Income before minority interest,
gain on sale of rental property
and extraordinary item $ 38,132 $ 12,821
Add:
Real estate depreciation and amortization 16,265 6,355
Deduct:
Adjustment to rental income for
straight line rents (3,944) (204)
Funds from Operations(1) after adjustment
for straight-lining of rents $ 50,453 $ 18,972
Deduct:
Non-incremental revenue generating
capital expenditures:
Capital improvements (633) (551)
Tenant improvements and lease
commissions (1,926) (1,610)


Cash available for distribution $ 47,894 $ 16,811


Weighted average shares/units
outstanding(2) 40,334 17,900


Per share/unit:
Funds from Operations $ 1.25 $ 1.06


Cash available for distribution $ 1.19 $ .94


Dividend $ .90 $ .85


Dividend payout ratios:
Funds from Operations(1) 71.95% 80.20%
Cash available for distribution 75.79% 90.50%


(1) Funds from Operations for both periods are calculated in
accordance with the new National Association of Real Estate
Investment Trusts (NAREIT) definition, as published in March
1995.


(2) Assumes conversion of 3,859 (1997) and 2,725 (1996) weighted
average limited partnership units in Cali Realty, L.P. to
shares of Cali Realty Corporation.


Cali Realty Corporation
Leasing Statistics
For Quarter Ended June 30, 1997


Leased Area Percentage
Rentable S.F. Leased


March 31, 1997 10,889,919 96.3%
2nd quarter leasing, net 17,589
2nd quarter acquisitions 441,668
June 30, 1997 11,349,176 96.5%

Second Quarter Leasing Activity:


OFFICE SPACE

Number Weighted Average
of Rentable Average Term
Leases S.F. Base Rent (Years)


New Leases:
Second generation space 36 116,417 $21.79 4.90

Total new leasing 36 116,417


Renewals & extensions 19 124,981 $20.65 3.60

Total leasing 55 241,398



Capital Expenditures- Tenant Leasing
Second Generation Space: Improvements Commissions Total
Expend. committed-2nd qtr.(1) $1,535,711(2) $ 904,166 $2,439,877
Rentable s.f. leased-2nd qtr. 241,398 241,398 241,398
Cap ex. committed per r.s.f. $6.36 $3.75 $10.11


(1) Represents amounts committed but not necessarily expended during period.
(2) Equals estimated workletter costs, net of estimated profit and overhead.
Cali Realty Corporation
Leasing Statistics
For Quarter Ended June 30, 1997
(continued)


OFFICE/FLEX SPACE


Number Weighted Average
of Rentable Average Base Term
Leases S.F. Net Rent (3) (Years)
New leases:
First generation space 2 16,654 $15.63 5.0
Second generation space 15 69,631 $13.00 4.3


Total new leasing: 17 86,285


Renewals & extensions: 11 100,438 $13.80 2.9
Total leasing: 28 186,723

Capital Expenditures- Tenant Leasing
Second Generation Space: Improvements(2) Commissions Total
Expend. committed-2nd qtr.(1) $611,595 $321,796 $933,391
Rentable s.f. leased-2nd qtr. 170,069 170,069 170,069
Cap ex.committed per r.s.f.: $3.60 $1.89 $5.49


(1) Represents amounts committed, but not necessarily expended during period.
(2) Equals estimated workletter costs, net of estimated profit and overhead.
(3) Equals "triple net" rent plus common area costs and real estate taxes.


Lease Renewals


Number of
Leases Rentable S.F.


Leases expiring-2nd quarter(4) 74 411,054
Leases renewed and relet-2nd quarter 30 225,419


Renewal percentage per r.s.f. 41% 55%
Expiring in future periods and
renewed in 2nd quarter 17 192,025


Expiring in future periods and
relet in 2nd quarter 2 4,100


(4) Includes leases expiring in future periods for which leases were renewed
or relet in 2nd quarter.