SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
-------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 4, 2003
RECKSON ASSOCIATES REALTY CORP.
and
RECKSON OPERATING PARTNERSHIP, L.P.
(Exact name of each Registrant as specified in its Charter)
Reckson Associates Realty Corp. -
Reckson Associates Realty Corp. - Maryland 11-3233650
Reckson Operating Partnership, L.P. - Delaware Reckson Operating Partnership, L.P. -
(State or other jurisdiction of incorporation or 11-3233647
organization) (IRS Employer ID Number)
225 Broadhollow Road 11747
Melville, New York (Zip Code)
(Address of principal executive offices)
1-13762
(Commission File Number)
(631) 694-6900
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Reckson Associates Realty Corp. Earnings Press Release dated
November 4, 2003
Item 12. Results of Operations and Financial Condition
On November 4, 2003, Reckson Associates Realty Corp. (the "Company")
issued a press release announcing its consolidated financial results for the
quarter ended September 30, 2003. A copy of this press release is furnished as
Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Current Report on Form 8-K, including
Exhibit 99.1, shall not be deemed "filed" with the Securities and Exchange
Commission for the purposes of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section, nor shall it be
incorporated by reference in any registration statement filed by the Company
or Reckson Operating Partnership, L.P. under the Securities Act of 1933, as
amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Michael Maturo
---------------------------------------
Michael Maturo
Executive Vice President
and Chief Financial Officer
RECKSON OPERATING PARTNERSHIP, L.P.
By: Reckson Associates Realty Corp.,
its General Partner
By: /s/ Michael Maturo
---------------------------------------
Michael Maturo
Executive Vice President
and Chief Financial Officer
Date: November 5, 2003
3
EXHIBIT INDEX
Exhibit Number Description
99.1 Reckson Associates Realty Corp. Earnings
Press Release dated November 4, 2003
4
Exhibit 99.1
PRESS RELEASE
- -------------
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, NY 11747
(631) 694-6900 (Phone)
(631) 622-6790 (Facsimile)
Contact: Scott Rechler, Co-CEO
Michael Maturo, CFO
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
- ---------------------
Reckson Associates Announces Third Quarter 2003 Results
-------------------------------------------------------
Reckson Reports Strong Leasing Activity and
Increased Same Property Office Occupancy
(MELVILLE, NEW YORK, November 4, 2003) - Reckson Associates Realty Corp.
(NYSE: RA) today reported diluted funds from operations ("FFO") of $41.2
million or $.56 per share for the third quarter of 2003, as compared to FFO of
$45.5 million or $.59 per share for the third quarter of 2002, representing a
decrease of (5.1%) on a per share basis.
Net income allocable to common shareholders totaled $10.0 million in the third
quarter of 2003, as compared to $16.1 million in the third quarter of 2002.
Diluted net income per Class A Common share, commonly referred to as earnings
per share ("EPS"), totaled $.16 per share in the third quarter of 2003, as
compared to $.25 per share in the third quarter of 2002, representing a
decrease of ($.09) per share. Diluted EPS per Class B Common share totaled
$.17 per share in the third quarter of 2003, as compared to $.26 per share in
the third quarter of 2002, representing a decrease of ($.09) per share.
A reconciliation of FFO to net income allocable to common shareholders, the
GAAP measure the Company believes to be the most directly comparable, is in
the financial tables accompanying this press release.
Commenting on the third quarter results, Scott Rechler, Reckson's Co-Chief
Executive Officer, stated, "While conditions remain competitive, we are
experiencing increased leasing activity in our markets and believe we have
reached market bottom. Effective leasing strategies and our quality product
enabled us to increase same property office occupancy by 30 basis points in
the third quarter and increase rents on renewal and replacement space by
12.5%." Mr. Rechler further commented, "I am very pleased
with the progress on our corporate restructuring. We announced proposed
management changes, identified our target G&A savings and are proceeding
toward a fourth quarter closing on the Long Island industrial sale."
Summary Portfolio Performance
- -----------------------------
The Company reported same property office occupancy at September 30, 2003 of
91.9%. This compares to 91.6% at June 30, 2003 and 95.0% at September 30,
2002. The Company reported same property overall portfolio occupancy of 92.1%
at September 30, 2003, as compared to 92.1% at June 30, 2003 and 94.1% at
September 30, 2002.
The Company also reported office occupancy at September 30, 2003 of 91.0%.
This compares to 91.7% at June 30, 2003 and 95.1% at September 30, 2002. The
Company also reported overall portfolio occupancy of 91.6% at September 30,
2003, as compared to 92.2% at June 30, 2003 and 94.2% at September 30, 2002.
Rent performance on renewal and replacement space during the third quarter of
2003 increased 12.5% (cash) and 19.8% (including straight-line rent) in the
total portfolio and increased 13.1% (cash) and 19.9% (including straight-line
rent) in the office portfolio.
During the quarter, the Company executed 63 leases encompassing 646,070 square
feet, representing 3.1% of the total portfolio. In the office portfolio during
the quarter, the Company executed 52 leases encompassing 526,948 square feet.
Total portfolio core same property net operating income (property operating
revenues less property operating expenses) ("NOI") before termination fees for
the third quarter of 2003 decreased (1.0%) (cash) and (2.9%) (including
straight-line rent), compared to the third quarter of 2002. Office core same
property NOI before termination fees for the third quarter of 2003 decreased
(1.2%) (cash) and (3.2%) (including straight-line rent), compared to the third
quarter of 2002.
Net of minority interests in joint ventures, total portfolio core same
property NOI before termination fees for the third quarter of 2003 decreased
(0.6%) (cash) and (3.0%) (including straight-line rent), compared to the third
quarter of 2002.
Other Highlights
- ----------------
Completed acquisition activity totaling approximately $60 million which
included 1055 Washington Blvd., a 181,800 square foot, 10-story Class A office
building, located in Stamford, Connecticut; a joint venture partner's 49%
interest in 275 Broadhollow Road, Melville, Long Island; and a $15 million
participating interest in a $30 million junior mezzanine loan secured by a 1.1
million square foot Class A office complex located on Long Island.
Executed contracts for dispositions totaling approximately $340 million which
included the Company's 95 property, 5.9 million square foot Long Island
industrial portfolio and 538 Broadhollow Road, a 180,281 square foot, Class A
office building located in Melville, Long Island.
Executed two contracts for land dispositions with anticipated aggregate
proceeds up to $43 million for Eagle Rock III, 15 acres of land located in
East Hanover, New Jersey and Giralda Farms, up to 113 acres of land located in
Chatham, New Jersey. Closing and ultimate proceeds on both of these contracts
are subject to zoning changes from office to residential use and residential
unit yield.
Completed the restructuring of RSVP's capital structure and management
agreements.
Elected to exchange all outstanding Class B Common Stock into Class A Common
Stock effective November 25, 2003.
Non-GAAP Financial Measures
- ---------------------------
Funds from Operations ("FFO")
- -----------------------------
The Company believes that FFO is a widely recognized and appropriate measure
of performance of an equity REIT. Although FFO is a non-GAAP financial
measure, the Company believes it provides useful information to shareholders,
potential investors and management. The Company computes FFO in accordance
with standards established by the National Association of Real Estate
Investment Trusts ("NAREIT"). FFO is defined by NAREIT as net income or loss,
excluding gains or losses from debt restructuring and sales of depreciable
properties plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. FFO does not represent cash
generated from operating activities in accordance with GAAP and is not
indicative of cash available to fund cash needs. FFO should not be considered
as an alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity. Since
all companies do not calculate FFO in a similar fashion, the Company's
calculation of FFO presented herein may not be comparable to similarly titled
measures as reported by other companies.
Reckson Associates Realty Corp. is a self-administered and self-managed real
estate investment trust (REIT) specializing in the acquisition, leasing,
financing, management and development of office and industrial properties.
Reckson's core growth strategy is focused on the markets surrounding and
including New York City. The Company is one of the largest publicly traded
owners, managers and developers of Class A office and industrial properties in
the New York Tri-State area, with 182 properties comprised of approximately
20.7 million square feet either owned or controlled. For additional
information on Reckson Associates Realty Corp., please visit the Company's web
site at www.reckson.com.
Conference Call and Webcast
- ---------------------------
The Company's executive management team, led by Co-Chief Executive Officer
Scott Rechler, will host a conference call outlining third quarter results on
Wednesday, November 5, 2003 at 2:00 p.m. EST. The conference call may be
accessed by dialing (800) 553-5275 (internationally (651) 291-5254). No
passcode is required. The live conference call will also be webcast in a
listen-only mode on the Company's web site at www.reckson.com, in the Investor
Relations section, with an accompanying slide show presentation outlining the
Company's third quarter results.
A replay of the conference call will be available telephonically from November
5, 2003 at 8:00 p.m. EST through November 14, 2003 at 11:59 p.m. EST. The
telephone number for the replay is (800) 475-6701, passcode 701671. A replay
of the webcast of the conference call will also be available via the Company's
web site.
Financial Statements Attached
- -----------------------------
The Supplemental Package and Slide Show Presentation outlining the Company's
third quarter 2003 results will be available prior to the Company's quarterly
conference call on the Company's web site at www.reckson.com in the Investor
Relations section, by e-mail to those on the Company's distribution list, as
well as by mail or fax, upon request. To be added to the Company's e-mail
distribution list or to receive a copy of the quarterly materials by mail or
fax, please contact Susan McGuire, Investor Relations, Reckson Associates
Realty Corp., 225 Broadhollow Road, Melville, New York 11747-4883,
investorrelations@reckson.com or telephone number (631) 622-6746.
Certain matters discussed herein, including guidance concerning the Company's
future performance, are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Although the Company
believes the expectations reflected in such forward-looking statements are
based on reasonable assumptions, forward-looking statements are not guarantees
of results and no assurance can be given that the expected results will be
delivered. Such forward-looking statements are subject to certain risks,
trends and uncertainties that could cause actual results to differ materially
from those expected. Among those risks, trends and uncertainties are the
general economic climate, including the conditions affecting industries in
which our principal tenants compete; financial condition of our tenants;
changes in the supply of and demand for office and industrial/R&D properties
in the New York Tri-State area; changes in interest rate levels; downturns in
rental rate levels in our markets and our ability to lease or re-lease space
in a timely manner at current or anticipated rental rate levels; the
availability of financing to us or our tenants; changes in operating costs,
including utility, security and insurance costs; repayment of debt owed to the
Company by third parties (including FrontLine Capital Group); risks associated
with joint ventures; liability for uninsured losses or environmental matters;
and other risks associated with the development and acquisition of properties,
including risks that 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 that
could impact Reckson, reference is made to Reckson's filings with the
Securities and Exchange Commission. Reckson undertakes no responsibility to
update or supplement information contained in this press release.
Reckson Associates Realty Corp. (NYSE: RA)
Consolidated Statements of Income
(in thousands, except share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
2003 2002 2003 2002
------------------------- ------------------------
Property Operating Revenues:
Base rents $ 95,239 $ 100,730 $ 288,202 $ 295,137
Tenant escalations and reimbursements 16,466 13,994 44,817 40,794
------------------------- ------------------------
Total property operating revenues 111,705 114,724 333,019 335,931
------------------------- ------------------------
Property Operating Expenses:
Operating expenses 28,065 26,589 80,788 72,630
Real estate taxes 19,145 16,500 53,999 47,973
------------------------- ------------------------
Total property operating expenses 47,210 43,089 134,787 120,603
------------------------- ------------------------
Net Operating Income 64,495 71,635 198,232 215,328
------------------------- ------------------------
Gross Margin percentage 57.7% 62.4% 59.5% 64.1%
------------------------- ------------------------
Other Income 6,534 2,243 18,553 6,320
------------------------- ------------------------
Other Expenses
Interest expense 20,231 20,684 61,170 59,860
Depreciation and amortization 26,273 26,690 82,845 75,654
Marketing, general and administrative 8,239 7,402 24,755 20,923
------------------------- ------------------------
Total other expenses 54,743 54,776 168,770 156,437
------------------------- ------------------------
Income before minority interests, preferred
dividends and distributions, gain
on sales of depreciable real estate
and discontinued operations 16,286 19,102 48,015 65,211
Minority partners' interests in consolidated
partnerships (4,379) (4,446) (13,404) (14,379)
Distributions to preferred unitholders (273) (273) (820) (1,014)
Limited partners' minority interest in the
operating partnership (678) (845) (1,869) (3,527)
Gain on sales of depreciable real estate assets - - - 537
------------------------- ------------------------
Income before discontinued operations and
preferred dividends 10,956 13,538 31,922 46,828
Discontinued operations (net of limited
partners' minority interest) 4,369 8,083 10,285 15,554
------------------------- ------------------------
Net income 15,325 21,621 42,207 62,382
Dividends to preferred shareholders (5,316) (5,487) (15,950) (16,461)
------------------------- ------------------------
Net income allocable to common shareholders $ 10,009 $ 16,134 $ 26,257 $ 45,921
========================= ========================
Allocable to Class A common $ 7,613 $ 12,334 $ 19,977 $ 35,041
Allocable to Class B common 2,396 3,800 6,280 10,880
------------------------- ------------------------
Net income allocable to common shareholders $ 10,009 $ 16,134 $ 26,257 $ 45,921
========================= ========================
Basic weighted average common shares outstanding:
Class A common 48,009,000 49,525,000 48,070,000 50,103,000
Class B common 9,915,000 10,010,000 9,915,000 10,191,000
Basic net income per weighted average common share:
Class A common stock - income from
continuing operations $0.09 $0.13 $0.26 $0.46
Gain on sales of depreciable real
estate assets - - - -
Discontinued operations 0.07 0.12 0.16 0.24
------------------------- ------------------------
Basic net income per Class A common $0.16 $0.25 $0.42 $0.70
========================= ========================
Class B common stock - income from
continuing operations $0.13 $0.19 $0.38 $0.71
Gain on sales of depreciable
real estate assets - - - -
Discontinued operations 0.11 0.19 0.25 0.36
------------------------- ------------------------
Basic net income per Class B common $0.24 $0.38 $0.63 $1.07
========================= ========================
Diluted weighted average common shares
outstanding:
Class A common 48,179,000 49,825,000 48,205,000 50,445,000
Class B common 9,915,000 10,010,000 9,915,000 10,191,000
Diluted net income per weighted average common share:
Class A common $0.16 $0.25 $0.41 $0.69
======================== ========================
Class B common $0.17 $0.26 $0.45 $0.75
======================== ========================
Reckson Associates Realty Corp. (NYSE: RA)
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2003 2002
-------------- --------------
Assets: (Unaudited)
Commercial real estate properties, at cost:
Land $ 386,512 $ 418,040
Buildings and improvements 2,241,511 2,415,252
Developments in progress:
Land 89,450 92,924
Development costs 61,372 28,311
Furniture, fixtures, and equipment 11,300 13,595
------------ ------------
2,790,145 2,968,122
Less: accumulated depreciation (446,522) (454,018)
------------ ------------
Investment in real estate, net of accumulated depreciation 2,343,623 2,514,104
Properties and related assets held for sale, net of
accumulated depreciation 202,521 -
Investments in real estate joint ventures 5,844 6,116
Investments in mortgage notes and notes receivable 70,425 54,547
Investments in service companies and affiliate loans and
joint ventures 72,054 73,332
Cash and cash equivalents 24,623 30,827
Tenant receivables 14,842 14,050
Deferred rents receivable 109,622 107,366
Prepaid expenses and other assets 33,773 37,235
Contract and land deposits and pre-acquisition costs 128 240
Deferred leasing and loan costs (net of accumulated
amortization) 64,619 70,103
------------ ------------
Total Assets $ 2,942,074 $ 2,907,920
============ ============
Liabilities:
Mortgage notes payable $ 725,002 $ 740,012
Mortgage notes payable and other liabilities associated
with properties held for sale 9,107 -
Unsecured credit facility 374,000 267,000
Senior unsecured notes 499,409 499,305
Accrued expenses and other liabilities 84,860 93,783
Dividends and distributions payable 31,606 31,575
------------ ------------
Total Liabilities 1,723,984 1,631,675
------------ ------------
Minority partners' interests in consolidated partnerships 234,377 242,934
Preferred unit interest in the operating partnership 19,662 19,662
Limited partners' minority interest in the operating 69,410 71,420
partnership ------------ ------------
323,449 334,016
------------ ------------
Commitments and contingencies - -
Stockholders' Equity:
Preferred Stock, $.01 par value, 25,000,000 shares authorized
Series A - 8,834,500 shares issued and outstanding 88 88
Series B - 2,000,000 shares issued and outstanding 20 20
Common Stock, $.01 par value, 100,000,000 shares authorized
Class A - 48,012,988 and 48,246,083 shares issued and
outstanding, respectively 481 482
Class B - 9,915,313 shares issued and outstanding 99 99
Treasury Stock, Class A common, 2,950,400 and 2,698,400
shares, respectively and Class B common, 368,200 shares (63,954) (63,954)
Additional paid in capital 957,907 1,005,494
------------ ------------
Total Stockholders' Equity 894,641 942,229
------------ ------------
Total Liabilities and Stockholders' Equity $ 2,942,074 $ 2,907,920
============ ============
Total debt to market capitalization (a): 44.9% 44.9%
============ ============
- -------------
(a) Total debt includes the Company's pro rata share of consolidated and
unconsolidated joint venture debt.
Reckson Associates Realty Corp. (NYSE: RA)
Funds From Operations
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
2003 2002 2003 2002
------------------------ -----------------------
Net income allocable to common shareholders $ 10,009 $ 16,134 $ 26,257 $ 45,921
Add: Real estate depreciation
and amortization 27,465 28,208 87,919 80,570
Minority partners'
interests in consolidated
partnerships 4,379 4,446 13,404 14,379
Limited partners'
minority interest in the
operating partnership 1,202 1,941 3,072 5,538
Less: Gain on sales of
depreciable real estate
assets - 4,896 - 5,433
Amounts distributable to
minority partners in
consolidated partnerships 6,339 6,050 19,914 18,943
------------------------ ------------------------
Basic Funds From Operations ("FFO") 36,716 39,783 110,738 122,032
Add: Dividends and
distributions on dilutive
shares and units 4,485 5,761 13,452 17,476
------------------------ ------------------------
Diluted FFO (Note - a) $ 41,201 $ 45,544 $124,190 $ 139,508
======================== ========================
Diluted FFO calculations:
Weighted average common
shares outstanding 57,924 59,535 57,985 60,294
Weighted average units of
limited partnership
interest outstanding 7,554 7,276 7,370 7,427
------------------------ ------------------------
Basic weighted average
common shares and units
outstanding 65,478 66,811 65,355 67,721
Adjustments for dilutive FFO weighted
average shares and units
outstanding:
Common stock equivalents 170 300 136 342
Series A preferred stock 7,747 8,060 7,747 8,060
Series B preferred stock - 1,919 - 1,919
Limited partners' preferred interest 661 661 661 770
------------------------ ------------------------
Total diluted weighted average
shares nd units outstanding 74,056 77,751 73,899 78,812
======================== ========================
Diluted FFO per weighted average
share or unit $ 0.56 $ 0.59 $ 1.68 $ 1.77
Diluted weighted average Class A
dividends per share $ 0.42 $ 0.42 $ 1.27 $ 1.27
Diluted FFO payout ratio - Class A 76.4% 72.5% 75.8% 72.0%
Diluted weighted average Class A
& B dividends per share or unit $ 0.45 $ 0.45 $ 1.36 $ 1.36
Diluted FFO payout ratio (Class A
& B combined) 81.7% 77.4% 81.1% 76.9%
- ------------------------------------------------------------------------------------------------------
Notes:
a - Includes $3.3 million and $13.4 million for the three and nine month
periods ended September 30, 2003, respectively attributable to
the sale of land.
Reckson Associates Realty Corp. (NYSE: RA)
Cash Available for Distribution
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ---------------------
2003 2002 2003 2002
----------------------- ---------------------
Basic Funds From Operations $ 36,716 $ 39,783 $ 110,738 $ 122,032
Adjustments for basic cash available
for distribution:
Less: Straight line rents 4,712 6,683 13,389 19,718
Committed non-incremental
capitalized tenant improvements
and leasing costs 7,049 19,274 22,645 27,177
Actual non-incremental
capitalized improvements 3,070 2,738 7,125 6,179
----------------------- ---------------------
Basic Cash Available for Distribution ("CAD") 21,885 11,088 67,579 68,958
Add: Dividends and distributions on
dilutive shares and units - - - -
----------------------- ---------------------
Diluted CAD (Note - a) $ 21,885 $ 11,088 $ 67,579 $ 68,958
======================= =====================
Diluted CAD calculations:
Weighted average common shares
outstanding 57,924 59,535 57,985 60,294
Weighted average units
of limited partnership
interest outstanding 7,554 7,276 7,370 7,427
Basic weighted average common
shares and units outstanding 65,478 66,811 65,355 67,721
Adjustments for dilutive CAD weighted
average shares and units outstanding:
Common stock equivalents 170 300 136 342
Series A preferred stock - - - -
Series B preferred stock - - - -
Limited partners' preferred interest - - - -
----------------------- ---------------------
Total diluted weighted average
shares and units outstanding 65,648 67,111 65,491 68,063
======================= =====================
Diluted CAD per weighted average
share or unit $ 0.33 $ 0.17 $ 1.03 $ 1.01
Diluted weighted average Class A
dividends per share $ 0.42 $ 0.42 $ 1.27 $ 1.27
Diluted CAD payout ratio - Class A 127.4% 257.0% 123.5% 125.7%
Diluted weighted average Class A
& B dividends per share or unit $ 0.46 $ 0.46 $ 1.37 $ 1.37
Diluted CAD payout ratio (Class
A & B combined) 137.5% 277.1% 133.3% 135.6%
- ------------------------------------------------------------------------------------------------------
Notes:
a - Includes $3.3 million and $13.4 million for the three and nine month
periods ended September 30, 2003, respectively attributable to
the sale of land.