SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
No. 1
CURRENT REPORT
---------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report (Date of earliest reported); August 14, 1998
SL GREEN REALTY CORP.
(Exact name of Registrant specified its Charter)
Maryland
(State of Incorporation)
1-13199 13-3956775
(Commission File Number) (IRS Employer Id. Number)
70 West 36th Street 10018
New York, New York (Zip Code)
(Address of principal executive offices)
(212) 594-2700
(Registrant's telephone number, including area code)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant hereby amends the following items, financial statements, exhibits
or other portions of its Current Report on Form 8-K, dated August 14, 1998
(filed with the Securities and Exchange Commission on August 20, 1998), as set
forth in the pages attached hereto.
Item 7. Financial Statements and Exhibits
(a) and (b) Financial Statements of Property Acquired
and Pro Forma Financial Information
Unaudited Pro Forma Condensed Financial Information
Pro Forma Balance Sheet (unaudited) as of June 30, 1998.
Pro Forma Income Statement (unaudited) for the six months ended
June 30, 1998.
Pro Forma Income Statement (unaudited) for the year ended
December 31, 1997.
Notes to the Pro Forma Financial Information
1412 Broadway
Report of Independent Auditors
Statement of Revenues and Certain Expenses for the Fiscal Year
ended April 30, 1998
Notes to the Statement of Revenues and Certain Expenses
(c) Exhibits
None
2
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.
SL GREEN REALTY CORP.
By: /s/ Ann Iseley
----------------------------
Ann Iseley
Chief Financial Officer
Date: October 28, 1998
3
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma consolidated balance sheet of SL Green Realty
Corp. ("the Company") as of June 30, 1998 has been prepared as if the
acquisition of 1412 Broadway and the 711 Third Avenue Fee Interest had been
consummated on June 30, 1998. The unaudited pro forma consolidated statement
of operations for the year ended December 31, 1997 is presented as if the
Company's Initial Public Offering (the "IPO"), Formation Transactions (as
defined in the Company's registration statement on Form S-11 dated August 14,
1997), the secondary offering of common stock and initial offering of Preferred
Stock (the "1998 Offerings"), and the purchase of 110 East 92nd Street, 17
Battery Place and 633 Third Avenue, (the "1997 Acquired Properties"),
420 Lexington Avenue, 1466 Broadway, 321 West 44th Street (the "1998 Acquired
Properties"), 711 Third Avenue, 440 Ninth Avenue and 1412 Broadway occurred at
January 1, 1997 and the effect thereof was carried forward through the year.
The pro forma consolidated financial statements do not purport to
represent what the Company's financial position or results of operations
would have been assuming the completion of the IPO, Formation Transactions,
the 1998 Offerings and the purchase of the 1998 and 1997 Acquired Properties,
711 Third Avenue, 440 Ninth Avenue and 1412 Broadway had occurred at the
beginning of the period indicated, nor do they purport to project the
Company's financial position or results of operations at any future date or
for any future period. These pro forma consolidated financial statements
should be read in conjunction with Company's registration statements on Form
S-11 dated August 20, 1997 and May 13, 1998. The historical consolidated
financial statements for the period August 21,1997 to December 31, 1997 and
the historical SL Green Predecessor combined financial statements for the
period January 1, 1997 to August 20, 1997 should be read in conjunction with
the Company's report on Form 10-K. The historical consolidated financial
statements for the six months ended June 30, 1998 should be read in
conjunction with the Company's report on Form 10-Q for the quarterly period
ended June 30, 1998.
F-1
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
SL GREEN
REALTY CORP. PURCHASE OF ACQUIRED COMPANY
HISTORICAL 1412 BROADWAY FEE INTEREST PRO FORMA
(A) (B) (C) AS ADJUSTED
------------ -------------- ----------- -----------
ASSETS
Commercial real estate property, at cost:
Land............................................................. $ 76,395 $ 16,400 $ 92,795
Buildings and improvements....................................... 411,917 65,600 477,517
Building leasehold............................................... 83,263 83,263
Property under capital lease..................................... 12,208 12,208
------------ -------------- ----------- -----------
583,783 82,000 665,783
Less accumulated depreciation.................................. (29,523) (29,523)
------------ -------------- ----------- -----------
554,260 82,000 636,260
Cash and cash equivalents........................................ 38,478 $(20,000) 18,478
Restricted cash.................................................. 20,237 20,237
Receivables...................................................... 3,559 3,559
Related party receivables........................................ 2,382 2,382
Deferred rents receivable, net of provision for doubtful accounts
of $1,317...................................................... 14,698 14,698
Investment in Service Corporations............................... 1,432 1,432
Mortgage loan receivable......................................... 21,769 21,769
Investment in real estate partnership............................ 20,000 20,000
Deferred costs, net.............................................. 7,689 7,689
Other assets..................................................... 7,902 7,902
------------ -------------- ----------- -----------
Total assets................................................... $ 672,406 $ 82,000 $ 0 $ 754,406
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable........................................... $ 51,860 $ 51,860
Revolving credit facility........................................ 82,000 82,000
Accrued interest payable......................................... 363 363
Accounts payable and accrued expenses............................ 12,378 12,378
Accounts payable to related parties.............................. 690 690
Capitalized lease obligations.................................... 14,612 14,612
Dividend and distributions payable............................... 10,281 10,281
Deferred land lease payable...................................... 9,065 9,065
Security deposits................................................ 16,140 16,140
------------ -------------- ----------- -----------
Total liabilities.............................................. 115,389 82,000 197,389
------------ -------------- ----------- -----------
Minority interest in Operating Partnership....................... 40,699 40,699
8% Preferred Income Equity Redeemable Stock 109,771 109,771
STOCKHOLDERS' EQUITY
Common stock..................................................... 238 238
Additional paid-in capital....................................... 413,404 413,304
Officers' loans.................................................. (627) (627)
Distributions in excess of earnings.............................. (6,468) (6,468)
------------ -------------- ----------- -----------
Total stockholders' equity..................................... 406,547 406,547
------------ -------------- ----------- -----------
Total liabilities and stockholders' equity..................... $ 672,406 $ 82,000 $ 754,406
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
F-2
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
SL GREEN
REALTY 1998 1998
CORP. ACQUIRED 1412 FINANCING
HISTORICAL PROPERTIES BROADWAY ADJUSTMENTS
(A) (B) (C) (D)
----------- ----------- ------------- -------------
Revenues
Rental revenue........................................... $ 48,730 $13,011 $4,082
Escalations and reimbursement revenues................... 6,150 2,046 552
Investment income........................................ 1,565
Other income............................................. 4 556 355
----------- ----------- ------------- -------------
Total revenues....................................... 56,449 15,613 4,989
----------- ----------- ------------- -------------
Equity in loss from Service Corporations............. (49)
----------- ----------- ------------- -------------
Expenses
Operating expenses....................................... 19,236 7,456 1,005
Interest................................................. 7,371 $ (4,378)
Depreciation and amortization............................ 6,644 1,696 820
Real estate taxes........................................ 8,754 3,084 872
Marketing, general and administrative.................... 2,382
----------- ----------- ------------- -------------
Total expenses....................................... 44,387 12,236 2,697 (4,378)
----------- ----------- ------------- -------------
Income before minority interest preferred stock
dividends and accretion and extraordinary item.......... 12,013 3,377 2,292 4,378
Minority interest in operating partnership............... (1,552)
----------- ----------- ------------- -------------
Income (loss) before preferred stock dividends and
accretion and extraordinary item........................ 10,461 $ 3,377 $2,292 4,378
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
Mandatory preferred stock dividends and accretion (H)...... (1,191)
Pro forma income before extraordinary item available to ----------
common shareholders...................................... $ 9,270
----------
----------
Pro forma/historical income before extraordinary item
available per common share - basic (I).....................$ 0.60
----------
----------
Pro forma/historical income before extraordinary item
available per common share - diluted (I)...................$ 0.60
----------
----------
PRO COMPANY
FORMA PRO
ADJUSTMENTS FORMA
----------- -----------
Revenues
Rental revenue........................................... $ 65,823
Escalations and reimbursement revenues................... 8,748
Investment income........................................ $ 368(E) 1,933
Other income............................................. 915
----------- -----------
Total revenues....................................... 368 77,419
----------- -----------
Equity in loss from Service Corporations................... (49)
----------- -----------
Expenses
Operating expenses....................................... 394(F) 28,091
Interest................................................. 2,870(C) 5,863
Depreciation and amortization............................ 9,160
Real estate taxes........................................ 12,710
Marketing, general and administrative.................... 2,382
----------- -----------
Total expenses....................................... 3,264 58,206
----------- -----------
Income (loss) before minority interest and extraordinary
item................................................... (2,896) 19,164
Minority interest in operating partnership............... 222(G) (1,330)
----------- -----------
Income (loss) before extraordinary item................ $ (2,674) 17,834
-----------
-----------
Mandatory preferred stock dividends and accretion (H)...... (4,864)
-----------
Pro forma income before extraordinary item available to
common shareholders...................................... $ 12,970
-----------
-----------
Pro forma/historical income before extraordinary item available per $ 0.55
common share - basic (I)................................. -----------
-----------
Pro forma/historical income before extraordinary item available per
common share - diluted (I)............................... $ 0.54
-----------
-----------
F-3
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
IPO/FORMATION TRANSACTIONS
-----------------------------------------
SL GREEN ACQUISITION EQUITY
REALTY SL GREEN OF CONVERSION IPO
CORP. PREDECESSOR PARTNERSHIPS' SERVICE ACQUISITION
HISTORICAL HISTORICAL INTERESTS CORPORATIONS PROPERTIES
(A) (B) (C) (D) (E)
----------- ------------- ------------- ------------- -----------
Revenues
Rental revenue........................................... $ 20,033 $ 4,107 $ 13,079 $ 12,254
Escalations and reimbursement revenues................... 2,205 792 859 1,644
Management revenues...................................... 1,268 $ (1,268)
Leasing commissions...................................... 484 3,464 (3,464)
Construction revenues.................................... 77 (77)
Investment income........................................ 485
Other income............................................. 16 89 (11) 1,582
----------- ------ ------------- ------------- -----------
Total revenues....................................... 23,207 9,724 14,027 (4,820) 15,480
----------- ------ ------------- ------------- -----------
Equity in net income (loss) in Service Corporations...... (101) 1,948
Equity in net (loss) from uncombined joint ventures...... (770) 770
----------- ------ ------------- ------------- -----------
Expenses
Operating expenses....................................... 7,077 2,722 4,984 (1,000) 3,679
Interest................................................. 2,135 1,062 5,320
Depreciation and amortization............................ 2,815 811 2,457 (48) 1,390
Real estate taxes........................................ 3,498 705 1,741 2,714
Marketing, general and administrative.................... 948 2,189 (1,521)
----------- ------ ------------- ------------- -----------
Total expenses....................................... 16,473 7,489 14,502 (2,569) 7,783
----------- ------ ------------- ------------- -----------
Income (loss) before minority interest and extraordinary
item................................................... 6,633 1,465 295 (303) 7,697
Minority interest in operating partnership............... (1,074)
----------- ------ ------------- ------------- -----------
Income (loss) before extraordinary item................ $ 5,559 $ 1,465 $ 295 $ (303) $ 7,697
----------- ------ ------------- ------------- -----------
----------- ------ ------------- ------------- -----------
Mandatory preferred stock dividends and accretion (Q)......
Pro forma income before extraordinary item available to
common shareholders......................................
Pro forma/historical income before extraordinary item
available per common share - basic (R).................... $ 0.30
----------
----------
Pro forma/historical income before extraordinary item
available per common share - diluted (R).................. $ 0.30
----------
----------
IPO 1997 1998
FINANCING ACQUIRED ACQUIRED 711 AND 440 Purchase of PRO
ADJUSTMENTS PROPERTIES PROPERTIES ACQUISITIONS 1412 Broadway FORMA
(F) (G) (H) (I) (R) ADJUSTMENTS
----------- ---------- ---------- ------------ ------------- -----------
Revenues
Rental revenue.......................................... $ 17,725 $ 36,993 $ 14,766 $ 8,376
Escalations and reimbursement revenues.................. 1,390 7,628 1,498 619
Management revenues.....................................
Leasing commissions..................................... $ (484)(L)
Construction revenues...................................
Investment income....................................... 1,782 736 (M)
Other income............................................ 96 1,006 915 394
--------- --------- --------- --------- --------- ---------
Total revenues...................................... 20,993 45,627 17,179 9,389 252
--------- --------- --------- --------- --------- ---------
Equity in net income (loss) in Service Corporations..... 484(L)
Equity in net (loss) from uncombined joint ventures.....
--------- --------- --------- --------- --------- ---------
Expenses
Operating expenses...................................... 6,747 23,731 6,954 2,397 2,146(O)
Interest................................................ $ (3,008) 5,740(R)
Depreciation and amortization........................... (16) 2,269 4,146 2,220 1,640 504(J)
Real estate taxes....................................... 3,267 8,217 3,797 1,786
Marketing, general and administrative................... 961(K)
--------- --------- --------- --------- --------- ---------
Total expenses...................................... (3,024) 12,283 36,094 12,971 5,823 9,351
--------- --------- --------- --------- --------- ---------
Income (loss) before minority interest and extraordinary
item.................................................. 3,024 8,710 9,533 4,208 3,566 (8,615)
Minority interest in operating partnership.............. (1,389)(N)
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item............... $ 3,024 $ 8,710 $ 9,533 $ 4,208 $ 3,566 $ (10,004)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Mandatory preferred stock dividends and accretion (P).....
Pro forma income before extraordinary item available to
common shareholders.....................................
Pro forma income before extraordinary item available per
common share - basic (Q)................................
Pro forma income before extraordinary item available per
common share - diluted (Q)..............................
COMPANY
PRO
FORMA
-----------
Revenues
Rental revenue........................................... $ 127,333
Escalations and reimbursement revenues................... 16,635
Management revenues...................................... 0
Leasing commissions...................................... 0
Construction revenues.................................... 0
Investment income........................................ 3,003
Other income............................................. 4,087
-----------
Total revenues....................................... 151,058
-----------
Equity in net income (loss) in Service Corporations...... 2,331
Equity in net (loss) from uncombined joint ventures...... 0
-----------
Expenses
Operating expenses....................................... 59,438
Interest................................................. 11,249
Depreciation and amortization............................ 18,187
Real estate taxes........................................ 25,725
Marketing, general and administrative.................... 2,577
-----------
Total expenses....................................... 117,176
-----------
Income (loss) before minority interest and extraordinary
item................................................... 36,213
Minority interest in operating partnership............... (2,463)
-----------
Income (loss) before extraordinary item................ 33,750
Mandatory preferred stock dividends and accretion (P)...... 9,728
-----------
Pro forma income before extraordinary item available to
common shareholders...................................... $ 24,022
-----------
-----------
Pro forma income before extraordinary item available per
common share - basic (Q)................................. $ 1.01
-----------
-----------
Pro forma income before extraordinary item available per
common share - diluted (Q)............................... $ 1.00
-----------
-----------
F-4
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED BALANCE SHEET
(A) To reflect the consolidated balance sheet of SL Green Realty Corp. as of
June 30, 1998.
(B) To reflect the purchase of 1412 Broadway for $82,000. The Company
utilized its credit facility to fund the purchase.
(C) To reflect the acquisition for a 50% interest in a partnership that
owns the fee to 711 Third Avenue. The Company used cash on hand to acquire
this partnership interest.
F-5
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS TO THE PRO-FORMA STATEMENTS OF OPERATIONS
(A) To reflect the Historical Consolidated Statement of Operations of SL Green
Realty Corp. for the six months ended June 30, 1998
(B) To reflect the operations prior to the acquisition of 420 Lexington Avenue
and 1466 Broadway for the period January 1, 1998 to March 17, 1998, 321 West
44th Street for the period January 1, 1998 to March 31, 1998, 440 Ninth Avenue
for the period January 1, 1998 to May 31, 1998, 711 Third Avenue-Leasehold from
January 1, 1998 to May 19, 1998. Historical rental revenue was adjusted for
straight line rents as of the acquisition date, historical operating expenses
were reduced for management fees and depreciation was calculated based on
recorded costs. the 1998 Acquisitions were funded by proceeds from the 1998
Offerings.
711 THIRD AVENUE--LEASEHOLD 440 NINTH AVENUE
----------------------------------- -----------------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- --------- ---------- ---------- ---------
Revenue:
Rental revenue................ $ 3,873 $ 196 $ 4,069 $1,290 $ 77 $1,367
Escalation & reimbursement
revenues.................... 135 135 376 376
Other income.................. 325 325 22 22
---------- ---------- --------- ---------- ----- ---------
Total revenues............ 4,333 196 4,529 1,688 77 1,765
---------- ---------- --------- ---------- ----- ---------
Expenses:
Operating expenses............ 2,085 (66) 2,019 640 (84) 556
Depreciation & amortization... 629 629 220 220
Real estate taxes............. 1,026 1,026 369 369
---------- ---------- --------- ---------- ----- ---------
Total expenses............ 3,111 563 3,674 1,009 136 1,145
---------- ---------- --------- ---------- ----- ---------
Income before minority
interest.................... $ 1,222 $ (367) $ 855 $ 679 $ (59) $ 620
---------- ---------- --------- ---------- ----- ---------
---------- ---------- --------- ---------- ----- ---------
420 LEXINGTON 1466 BROADWAY
----------------------------------- -----------------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- --------- ---------- ---------- ---------
Revenue:
Rental revenue................ $5,263 $ 182 $5,445 $1,613 $ 79 $1,692
Escalation & reimbursement
revenues.................... 1,189 1,189 158 158
Other income.................. 159 159 47 47
---------- ----- --------- ---------- ---------- ---------
Total revenues............ 6,611 182 6,793 1,818 79 1,897
---------- ----- --------- ---------- ---------- ---------
Expenses:
Operating expenses............ 4,255 (92) 4,163 532 (31) 501
Depreciation & amortization... 524 524 267 267
Real estate taxes............. 1,212 1,212 402 402
---------- ----- --------- ---------- ---------- ---------
Total expenses............ 5,467 432 5,899 934 236 1,170
---------- ----- --------- ---------- ---------- ---------
Income before minority
interest.................... $1,144 $(250) $ 894 $ 884 $ (157) $ 727
---------- ----- --------- ---------- ---------- ---------
---------- ----- --------- ---------- ---------- ---------
321 WEST 44th STREET
----------------------------------- TOTAL
HISTORICAL ADJUSTMENT PRO FORMA PRO FORMA
---------- ---------- --------- ---------
Revenue:
Rental revenue................ $406 $32 $438 $13,011
Escalation & reimbursement
revenues.................... 188 188 2,046
Other income.................. 3 3 556
---------- ----------- --------- ---------
Total revenues............ 597 32 629 15,613
---------- ----------- --------- ---------
Expenses:
Operating expenses............ 234 (17) 217 7,456
Depreciation & amortization... 56 56 1,696
Real estate taxes............. 75 75 3,084
---------- ----------- --------- --------
Total expenses............ 309 39 348 12,236
---------- ----------- --------- --------
Income before minority
interest.................... $288 $(7) $281 $ 3,377
---------- ----------- --------- ---------
---------- ----------- --------- ---------
(C) To reflect the operations of 1412 Broadway for the six months ended June
30, 1998, historical rental revenue was adjusted for straight line rents as
of the Acquisition Date, historical operating expenses were reduced for
management fees and depreciation was calculated based on recorded costs. The
acquisition was funded by proceeds from the Revolving Credit Facility at a
borrowing rate of 7% per annum.
1412 BROADWAY
----------------------------------------------------------------
1998 1998 PRO FORMA
HISTORICAL ADJUSTMENTS HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ----------- ----------- ------------
Revenues:
Rental revenue.......... $ 7,628 $ (3,756) $ 3,872 $ 210 $ 4,082
Escalation
reimbursement
revenues.............. 1,159 (607) 552 552
Investment income.......
Other income............ 559 (204) 355 355
----------- ----------- ----------- ----------- -----------
Total revenues...... 9,346 (4,567) 4,779 210 4,989
----------- ----------- ----------- ----------- -----------
Expenses:
Operating expenses...... 2,929 (1,751) 1,178 (173) 1,005
Interest expense........
Depreciation &
amortization.......... 820 820
Real estate taxes....... 1,778 (906) 872
----------- ----------- ----------- ----------- -----------
Total expenses...... 4,707 (2,657) 2,050 647 2,697
----------- ----------- ----------- ----------- -----------
Income before minority
interest................ $ 4,639 $ (1,910) $ 2,729 $ (437) $ 2,292
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
(D) To reduce interest expense for repayment of the Company's Credit Facility
and Bridge Facility with proceeds from the 1998 Offerings.
(E) To record interest income from excess proceeds from the 1998 Offerings at
a rate of 5% per annum.
(F) To adjust the provision for doubtful accounts based upon 2% of pro forma
rental revenue
(G) Represents the 9.3% interest of the minority interest holders in the
Operating Partnership less Unit holders 9.3% share of the Preferred Dividends
and accretion totaling $452.
(H) Represents additional dividends and accretion on the Preferred Income
Equity Mandatory Redeemable Shares being outstanding since January 1, 1997.
(I) Pro Forma income before extraordinary item per common share--basic is
based upon 23,792,311 shares of common stock outstanding as of June 30, 1998.
Pro Forma income before extraordinary item per common share--diluted is based
upon 23,884,311 weighted average shares of common stock outstanding as of
June 30, 1998, which gives effect to stock options (the preferred shares are
anti-dilutive). As each operating partnership Unit is redeemable for cash, or
at the Company's election, for one share of common stock, the calculation of
earnings per share upon redemption will be unaffected as unitholders and
stockholders share equally on a per unit and per share basis in the net
income of the Company. Pursuant to the terms of the Partnership Agreement,
the Unit holders that received Units at the IPO may not, for up to two years
from the IPO date, transfer any of their rights or redeem their Units as a
limited partner without the consent of the Company.
F-6
ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(A) To reflect the historical consolidated statement of operations of SL
Green Realty Corp. for the period August 21, 1997 to December 31, 1997.
(B) To reflect the historical combined statement of operations of SL Green
Predecessor for the period January 1, 1997 to August 20, 1997.
F-7
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(C) To reflect the period January 1, 1997 to August 20, 1997 operations of
673 First Avenue, 470 Park Avenue South, 29 West 35th Street and 36 West 44th
Street (the "Equity Properties") as consolidated entities rather than equity
method investees due to the acquistion of 100% of the partnership interests.
ACQUISITION OF PARTNERSHIPS' INTERESTS AND
PURCHASE ACCOUNTING ADJUSTMENTS
------------------------------------------------------
ELIMINATE
HISTORICAL UNCOMBINED 673 470 29 36
AMOUNTS TOTAL FIRST AVE PARK AVE WEST 35TH WEST 44TH
----------- ------------- ----------- ----------- ------------- -------------
REVENUES:
Rental revenue(a)........................ $ 12,604 $ 247 $ 152 $ 64 $ 12
Escalations and reimbursement revenues... 859
Other income............................. 89
----- ------------- ----- ----- ----- --
Total revenues..................... 13,552 247 152 64 12
----- ------------- ----- ----- ----- --
Equity in net income/(loss) of
investees.............................. $ 770
----- ------------- ----- ----- ----- --
EXPENSES:
Operating expenses(b).................... 2,976 (221) (128) (37) (62)
Real estate taxes........................ 1,741
Ground rent(c)........................... 2,425 31
Interest................................. 5,320
Depreciation and amortization(c)......... 2,510 24 (64) (11) (2)
----- ------------- ----- ----- ----- --
Total expenses..................... 14,972 (166) (192) (48) (64)
----- ------------- ----- ----- ----- --
Income (loss) before minority interest... $ 770 $ (1,420) $ 413 $ 344 $ 112 $ 76
----- ------------- ----- ----- ----- --
----- ------------- ----- ----- ----- --
TOTAL
ADJUSTMENTS
-------------
REVENUES:
Rental revenue(a)........................ $ 13,079
Escalations and reimbursement revenues... 859
Other income............................. 89
-------------
Total revenues..................... 14,027
-------------
Equity in net income/(loss) of
investees.............................. 770
-------------
EXPENSES:
Operating expenses(b).................... 2,528
Real estate taxes........................ 1,741
Ground rent(c)........................... 2,456
Interest................................. 5,320
Depreciation and amortization(c)......... 2,457
-------------
Total expenses..................... 14,502
-------------
Income (loss) before minority interest... $ 295
-------------
-------------
- ------------------------
(a) Rental income is adjusted to reflect straight line amounts as of the
acquisition date.
(b) Operating expenses are adjusted to eliminate management fees paid to the
Service Corporations (Management fee income received by the Service
Corporations was also eliminated.)
(c) Ground rent and depreciation and amortization were adjusted to reflect the
purchase of the assets.
F-8
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(D) To reflect the operations of the Service Corporations pursuant to the
equity method of accounting for the period January 1, 1997 to August 20, 1997.
EXPENSES
HISTORICAL ATTRIBUTABLE EQUITY
SERVICE TO REIT CONVERSION TOTAL
CORPORATIONS (A) (B) ADJUSTMENT
------------- ------------- ----------- -----------
STATEMENT OF OPERATIONS:
Management revenues.......................... $ 1,268 $ (1,268)
Leasing commissions.......................... 3,464 (3,464)
Construction revenues........................ 77 (77)
Equity in net income of Service
Corporations............................... $ (1,948) 1,948
Other income................................. 11 (11)
------ ----- ----------- -----------
Total revenues........................... 4,820 (1,948) (2,872)
------ ----- ----------- -----------
EXPENSES
Operating expenses........................... 1,000 (1,000)
Depreciation and amortization................ 48 (48)
Marketing, general and administrative........ 2,189 $ (668) (1,521)
------ ----- ----------- -----------
Total expenses........................... 3,237 (668) (2,569)
------ ----- ----------- -----------
Income (loss)............................ $ 1,583 $ 668 $ (1,948) $ (303)
------ ----- ----------- -----------
------ ----- ----------- -----------
- ------------------------
(a) Expenses are allocated to the Service Corporations and the Management LLC
based upon the job functions of the employees.
(b) The equity in net income of the Service Corporations is computed as follows:
Historical Service Corporations income............................................. $ 1,583
Adjustment for management fees eliminated in the combined
historical financial statements due to acquisition of
partnerships interests........................................................... (201)
Expenses attributable to REIT...................................................... 668
---------
Income............................................................................. $ 2,050
---------
---------
Equity in net income of Service Corporations' at 95 percent........................ $ 1,948
---------
---------
F-9
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(E) To reflect the operations of 1372 Broadway, 1140 Avenue of the Americas
and 50 West 23rd Street for the period January 1, 1997 to August 20, 1997.
Historical rental revenue was adjusted for straight line rents as of the
acquisition date, historical operating expenses were reduced for management
fees, the land lease on 1140 Avenue of the Americas was recorded, and
depreciation and amortization based on cost was recorded.
1372 BROADWAY 1140 AVENUE OF THE AMERICAS
----------------------------------------- ---------------------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA
----------- --------------- ----------- ----------- ------------- -----------
REVENUES:
Rental revenue....................... $ 5,154 $ 578 $ 5,732 $ 2,768 $ 230 $ 2,998
Escalations & reimbursement
revenues........................... 713 713 440 440
Other income......................... 1,520 1,520 61 61
----------- ----- ----------- ----------- ----- -----------
Total revenues................... 7,387 578 7,965 3,269 230 3,499
----------- ----- ----------- ----------- ----- -----------
EXPENSES:
Operating expenses................... 1,701 (181) 1,520 1,261 (130) 1,131
Ground rent.......................... 268 268
Depreciation & amortization.......... 658 658 271 271
Real estate taxes.................... 1,396 1,396 660 660
----------- ----- ----------- ----------- ----- -----------
Total expenses................... 3,097 477 3,574 1,921 409 2,330
----------- ----- ----------- ----------- ----- -----------
Income before minority interest...... $ 4,290 $ 101 $ 4,391 $ 1,348 $ (179) $ 1,169
----------- ----- ----------- ----------- ----- -----------
----------- ----- ----------- ----------- ----- -----------
50 WEST 23RD STREET
--------------------------------------- TOTAL
HISTORICAL ADJUSTMENT PRO FORMA PRO FORMA
----------- ------------- ----------- ---------
REVENUES:
Rental revenue....................... $ 3,303 $ 221 $ 3,524 $ 12,254
Escalations & reimbursement
revenues........................... 491 491 1,644
Other income......................... 1 1 1,582
----------- ----- ----------- ---------
Total revenues................... 3,795 221 4,016 15,480
----------- ----- ----------- ---------
EXPENSES:
Operating expenses................... 876 (116) 760 3,411
Ground rent.......................... 268
Depreciation & amortization.......... 461 461 1,390
Real estate taxes.................... 658 658 2,714
----------- ----- ----------- ---------
Total expenses................... 1,534 345 1,879 7,783
----------- ----- ----------- ---------
Income before minority interest...... $ 2,261 $ (124) $ 2,137 $ 7,697
----------- ----- ----------- ---------
----------- ----- ----------- ---------
(F) To reflect the changes in interest expense as the result of the IPO
financing transactions and the related adjustments to deferred financing
expense.
470 29 36 70
673 1ST AVE PAS W 35TH W 44TH W 36TH
----------- --------- ----------- ----------- -----------
Interest................................................ $ (1,123) $ (1,025) $ (593) $ (339)
Depreciation and amortization........................... 30 9 $ 3 (47)
----------- --------- -- ----- -----
Total expenses.................................... (1,093) (1,016) 3 (593) (386)
----------- --------- -- ----- -----
Income before minority interest................... $ 1,093 $ 1,016 $ (3) $ 593 $ 386
----------- --------- -- ----- -----
----------- --------- -- ----- -----
NEW
1414 MORTGAGE
AVE. AMERICAS LOAN TOTAL
--------------- ----------- ---------
Interest................................................ $ (591) $ 663 $ (3,008)
Depreciation and amortization........................... (29) 18 (16)
----- ----- ---------
Total expenses.................................... (620) 681 (3,024)
----- ----- ---------
Income before minority interest................... $ 620 $ (681) $ 3,024
----- ----- ---------
----- ----- ---------
F-10
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(G) To reflect the operations of 110 East 42nd Street for the period January
1, 1997 to September 15, 1997, 17 Battery Place including the mortgage loan
receivable for the period January 1, 1997 to December 18, 1997, and 633 Third
Avenue for the period January 1, 1997 to December 31, 1997. Historical rental
revenue was adjusted for straight line rents as of the acquisition date,
historical operating expenses were reduced for management fees, and depreciation
based on recorded cost. These acquisitions were funded by proceeds from the IPO
and Revolving Credit Facility.
633 THIRD
110 EAST 42ND STREET 17 BATTERY PLACE AVENUE
------------------------------------- ------------------------------------- -------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL
----------- ----------- ----------- ----------- ----------- ----------- -------------
REVENUES:
Rental revenue.......... $ 3,499 $ (166) $ 3,333 $ 12,458 $ 742 $ 13,200 $ 809
Escalation &
reimbursement
revenues.............. 501 501 889 889
Investment income....... 1,782 1,782
Other income............ 14 14 82 82
----------- ----------- ----------- ----------- ----------- ----------- -----
Total revenues...... 4,014 (166) 3,848 13,429 2,524 15,953 809
----------- ----------- ----------- ----------- ----------- ----------- -----
EXPENSES:
Operating expenses...... 1,839 (147) 1,692 5,264 (410) 4,854 201
Interest expense........
Depreciation &
amortization.......... 426 426 1,627 1,627
Real estate taxes....... 1,000 1,000 2,075 2,075 192
----------- ----------- ----------- ----------- ----------- ----------- -----
Total expenses...... 2,839 279 3,118 7,339 1,217 8,556 393
----------- ----------- ----------- ----------- ----------- ----------- -----
Income before minority
interest................ $ 1,175 $ (445) $ 730 $ 6,090 $ 1,307 $ 7,397 $ 416
----------- ----------- ----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- ----------- ----------- -----
TOTAL
PRO
ADJUSTMENT PRO FORMA FORMA
------------- ----------- ---------
REVENUES:
Rental revenue.......... $ 383 $ 1,192 $ 17,725
Escalation &
reimbursement
revenues.............. 1,390
Investment income....... 1,782
Other income............ 96
----- ----------- ---------
Total revenues...... 383 1,192 20,993
----- ----------- ---------
EXPENSES:
Operating expenses...... 201 6,747
Interest expense........
Depreciation &
amortization.......... 216 216 2,269
Real estate taxes....... 192 3,267
----- ----------- ---------
Total expenses...... 216 609 12,283
----- ----------- ---------
Income before minority
interest................ $ 167 $ 583 $ 8,710
----- ----------- ---------
----- ----------- ---------
F-11
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(H) To reflect three of the Acquired Properties operations purchased after
December 31, 1997 (420 Lexington Avenue, 1466 Broadway and 321 West 44th
Street) for the year ended December 31, 1997. Historical rental revenue was
adjusted for straight line rents and historical operating expenses were reduced
for management fees and depreciation was recorded based on the recorded
acquisition cost.
420 LEXINGTON AVE 1466 BROADWAY 321 WEST 44TH STREET
------------------------------------- ------------------------------------- ------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Revenue:
Rental revenue......... $ 25,278 $ 876 $ 26,154 $ 7,749 $ 380 $ 8,129 $ 2,511 $ 199
Escalation &
reimbursement
revenues............. 5,708 5,708 760 760 1,160
Other income........... 763 763 225 225 18
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues..... 31,749 876 32,625 8,734 380 9,114 3,689 199
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Operating expenses..... 20,431 (442) 19,989 2,554 (151) 2,403 1,450 (111)
Depreciation &
amortization......... 2,516 2,516 1,280 1,280 350
Real estate taxes...... 5,823 5,823 1,931 1,931 463
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses..... 26,254 2,074 28,328 4,485 1,129 5,614 1,913 239
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before minority
interest............. $ 5,495 $ (1,198) $ 4,297 $ 4,249 $ (749) $ 3,500 $ 1,776 $ (40)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL
PRO FORMA PRO FORMA
----------- -----------
Revenue:
Rental revenue......... $ 2,710 $ 36,993
Escalation &
reimbursement
revenues............. 1,160 7,628
Other income........... 18 1,006
----------- -----------
Total revenues..... 3,888 45,627
----------- -----------
Expenses:
Operating expenses..... 1,339 23,731
Depreciation &
amortization......... 350 4,146
Real estate taxes...... 463 8,217
----------- -----------
Total expenses..... 2,152 36,094
----------- -----------
Income before minority
interest............. $ 1,736 $ 9,533
----------- -----------
----------- -----------
F-12
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(I) To reflect the Acquisitions of 711 Third Avenue--Leasehold and
440 Ninth Avenue for the year ended December 31, 1997. Historical rental
revenue was adjusted for straight line rents and historical operating
expenses were reduced for management fees and ground lease adjustment and
depreciation was calculated based on the estimated purchase prices.
711 THIRD AVENUE--LEASEHOLD 440 NINTH AVENUE
------------------------------------- --------------------------------------- TOTAL
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA PRO FORMA
----------- ----------- ----------- ----------- ------------- ----------- -----------
Revenue:
Rental revenue.................... $ 10,097 $ 541 $ 10,638 $ 3,923 $ 205 $ 4,128 14,766
Escalation & reimbursement
revenues........................ 353 353 1,145 1,145 1,498
Other income...................... 847 847 68 68 915
----------- ----------- ----------- ----------- ----- ----------- -----------
Total revenues................ 11,297 541 11,838 5,136 205 5,341 17,179
----------- ----------- ----------- ----------- ----- ----------- -----------
Expenses:
Operating expenses................ 5,434 (172) 5,262 1,948 (256) 1,692 6,954
Depreciation & amortization....... -- 1,640 1,640 580 580 2,220
Real estate taxes................. 2,674 2,674 1,123 1,123 3,797
----------- ----------- ----------- ----------- ----- ----------- -----------
Total expenses................ 8,108 1,468 9,576 3,071 324 3,395 12,971
----------- ----------- ----------- ----------- ----- ----------- -----------
Income before minority interest... $ 3,189 $ (927) $ 2,262 $ 2,065 $ (119) $ 1,946 $ 4,208
----------- ----------- ----------- ----------- ----- ----------- -----------
----------- ----------- ----------- ----------- ----- ----------- -----------
F-13
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(J) To reflect for 70 West 36th Street and 1414 Avenue of the Americas,
depreciation expense adjustments for real property transfer taxes capitalized in
connection with the Formation Transactions which are amortized over the
remaining life of the commercial property ($4).
To reflect the amortization of deferred loan costs for the Revolving Credit
Facility from January 1, 1997 ($500).
(K) To reflect the increase in marketing, general and administrative
expenses related to operations of a public company for the period January 1,
1997 to August 20, 1997 which includes the following:
Officers' compensation and related costs............................. $ 446
Professional fees.................................................... 203
Directors' fees and insurance........................................ 174
Printing and distribution costs...................................... 87
Other................................................................ 51
---------
$ 961
---------
---------
The additional officers' compensation and related costs are attributable
primarily to Employment Agreements with the officers as further described under
the caption "Employment and Non Competition Agreement on Form S-11.
(L) Represents the reclassifications of leasing commissions attributable to
the Service Corporations since all leasing commissions are presently being
recorded in the Service Corporations.
(M) Represents the interest income from the excess cash on hand from
proceeds from 1998 Offerings.
(N) Represents the 9.3% interest of the minority shareholders in the
Operating Partnership less Unit Holders 9.3% share of the preferred dividends
and accretion totalling $905.
(O) To adjust the provision for doubtful accounts based upon 2% of Pro Forma
rental revenue.
(P) Represents the 8% dividends and accretion on the Preferred Income Equity
Mandatory Redeemable Shares. The difference between the carrying value and the
redemption amount is being accreted using the interest method over ten years.
(Q) Pro Forma income before extraordinary item per common share--basic is
based upon 23,792,311 shares of common stock outstanding as of December 31,
1997. Pro Forma income before extraordinary item per common share--diluted is
based upon 23,904,412 weighted average shares of common stock outstanding as of
December 31, 1997, which gives effect to stock options (the preferred shares are
anti-dilutive). As each operating partnership Unit is redeemable for cash,
or at the Company's election, for one share of common stock, the calculation
of earnings per share upon redemption will be unaffected as unitholders and
stockholders share equally on a per unit and per share basis in the net
income of the Company. Pursuant to the terms of the Partnership Agreement,
the Unit holders that received Units at the IPO may not, for up to two years
from the IPO date, transfer any of their rights or redeem their Units as a
limited partner without the consent of the Company.
(R) To reflect the operations of 1412 Broadway for the year ended
December 31, 1997, historical rental revenue was adjusted for straight line
rents as of the Acquisition Date, historical operating expenses were reduced
for management fees and depreciation was calculated based on recorded costs.
The Acquisition was funded by proceeds from the revolving credit facility at
a borrowing rate of 7% per annum.
1412 BROADWAY--LEASEHOLD
-----------------------------------------------------------------
1998 ADJUSTED PRO FORMA
HISTORICAL ADJUSTMENTS HISTORCAL ADJUSTMENT PRO FORMA
--------- ---------- --------- ---------- ---------
Revenues:
Rental revenue........ $ 7,628 $ 309 $ 7,937 $ 439 $ 8,376
Escalation &
reimbursement
revenues............ 1,159 (540) 619 619
Investment income.....
Other income.......... 559 (165) 394 394
------- ------ --------- ---------- ---------
Total revenues..... 9,346 (396) 8,950 439 9,389
------- ------ --------- ---------- ---------
Expenses:
Operating expenses.... 2,929 (292) 2,637 (240) 2,397
Interest expense.....
Depreciation &
amortization........ 1,640 1,640
Real estate taxes..... 1,778 8 1,786 1,786
------- ------ --------- ---------- ---------
Total expenses..... 4,707 (284) 4,423 1,400 5,823
------- ------ --------- ---------- ---------
Income before minority
interest.............. $ 4,639 $ (112) $ 4,527 $ (961) $ 3,566
------- ------- --------- ---------- ---------
------- ------- --------- ---------- ---------
F-14
Report of Independent Auditors
To the Board of Directors of
SL Green Realty Corp.
We have audited the statement of revenues and certain expenses of the property
at 1412 Broadway as described in Note 1, for the fiscal year ended April 30,
1998. The financial statement is the responsibility of 1412 Broadway'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 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 SL Green Realty Corp., and is
not intended to be a complete presentation of 1412 Broadway'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 1412 Broadway as
described in Note 1, for the fiscal year ended April 30, 1998, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
June 5, 1998
F-15
1412 Broadway
Statement of Revenues and Certain Expenses
(Note 1)
TWO MONTHS FISCAL YEAR
ENDED ENDED
JUNE 30, APRIL 30,
1998 1998
-------------- --------------
(unaudited)
Revenues (Notes 2 and 4):
Base rents $ 1,637,498 $ 7,627,820
Tenant reimbursements 183,853 1,159,413
Other service income 132,754 558,768
-------------- --------------
Total revenues 1,954,105 9,346,001
-------------- --------------
Certain expenses:
Real estate taxes 290,702 1,778,330
Management fees (Note 5) 59,308 298,038
Property operating expenses (Note 3) 545,300 2,631,433
-------------- --------------
Total certain expenses 895,310 4,707,801
-------------- --------------
Revenues in excess of certain expenses $ 1,058,795 $ 4,638,200
-------------- --------------
-------------- --------------
See accompanying notes to statement of revenue and certain expenses.
F-16
1412 Broadway
Notes to Statement of Revenues and Certain Expenses
April 30, 1998
1. Basis of Presentation
Presented herein is the statement of revenues and certain expenses related to
the operation of an office building, located at 1412 Broadway (the "Property"),
owned by Bruce S. Brickman & Associates, Inc. The Property is located in
Manhattan, New York. Macklowe Properties, Inc. entered into a contract to
purchase this Property, which was subsequently purchased by SL Green Realty
Corp.
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 SL Green 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.
The statement of revenues and certain expenses for the two months ended June 30,
1998 is unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the statement of revenues and certain expenses for this interim
period have been included. The results of interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year.
2. Lease and Revenue Recognition
The 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 $408,000 and $82,000 (unaudited) for
the fiscal year ended April 30, 1998 and the two months ended June 30, 1998,
respectively. 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.
F-17
1412 Broadway
Notes to Statement of Revenues and Certain Expenses (continued)
2. Lease and Revenue Recognition (continued)
The Property consists of a multi-tenant office building with retail space whose
tenant leases expire at various dates through January 2012.
3. Property Operating Expenses
Property operating expenses for the fiscal year ended April 30, 1998 include
$64,764 for insurance, $813,905 for utilities, $307,890 in repair and
maintenance costs, $71,944 in administrative costs, $202,397 for security,
$639,828 for cleaning and $530,705 in payroll (maintenance). For the two months
ended June 30, 1998 (unaudited) property operating expenses includes $12,964 for
insurance $172,216 for utilities, $81,766 in repair and maintenance costs,
$7,299 in administrative costs, $30,848 for security, $153,238 for cleaning and
$86,969 for payroll (maintenance).
4. Significant Tenants
Approximately 46% and 45% of revenue for the fiscal year ended April 30, 1998
and for the two months ended June 30, 1998 (unaudited), respectively, was
derived from five tenants.
5. Management and Leasing Agreement
The Property is managed and leased by Bruce S. Brickman & Associates, Inc. This
management company provides property management services to the Property for a
base amount and a certain percentage of cash collections. The services provided
by the management company are terminable within 60 days by either party in
writing.
F-18
1412 Broadway
Notes to Statement of Revenues and Certain Expenses (Continued)
6. Future Minimum Rents Schedule
Future minimum lease payments to be received by the Property as of April 30,
1998 under noncancelable operating leases are as follows:
May 1, 1998 - December 31, 1998 $ 5,110,373
Year ended December 31
1999 7,085,851
2000 6,534,488
2001 5,943,009
2002 4,693,671
2003 4,020,362
Thereafter 12,645,346
----------------
----------------
Total $ 46,033,100
----------------
----------------
F-19
