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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2005
RECKSON ASSOCIATES REALTY CORP.
and
RECKSON OPERATING PARTNERSHIP, L.P.
(Exact name of each Registrant as specified in its Charter)
PRESS RELEASE
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, NY 11747
(631) 694-6900 (Phone)
(631) 622-6790 (Facsimile)
Contact: Scott Rechler, CEO
Michael Maturo, CFO
- ----------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
Reckson Announces Third Quarter 2005 Results
Reported FFO Growth Per Share of Approximately 9% Fueled by Office Same
Property NOI Increasing by 4.7%
(MELVILLE, NEW YORK, October 31, 2005) - Reckson Associates Realty Corp.
(NYSE: RA) today reported diluted funds from operations (FFO) of $51.7 million
or $0.61 per share for the third quarter of 2005, representing a per share
increase of approximately 9% over diluted FFO of $44.9 million or $0.56 per
share for the third quarter of 2004 when adjusted for the $6.7 million
accounting charge recognized in connection with the redemption of Reckson's 7
5/8% Series A Preferred stock.
Reckson reported net income allocable to common shareholders of $113.6
million, including $96.4 million related to gains on sales of depreciable real
estate, or diluted earnings per share (EPS) of $1.37 for the third quarter of
2005, as compared to $8.8 million, including $2.2 million related to gains on
sales of depreciable real estate and the aforementioned $6.7 million
accounting charge, or diluted EPS of $0.13 for the third quarter of 2004.
Commenting on the Company's performance, Scott Rechler, Reckson's President
and Chief Executive Officer, stated, "I am extremely pleased with our third
quarter results and progress. During this quarter, we continued to produce
strong operating results while executing on a number of our previously
announced strategic initiatives. We reported 9% FFO growth, 4.7% office same
property NOI growth and 15.8% growth in office same space rents. This was the
sixth quarter in a row that we have produced positive same property NOI
growth." Mr. Rechler continued, "We also executed on a wide range of strategic
directives. We launched Reckson New York Property Trust, our newly-formed
property trust listed on the Australian Stock Exchange; we furthered our
recapitalization of One Court Square by entering into a contract to sell a
joint venture interest in the property; we completed the construction and
anticipate an accelerated lease-up at our
ground-up development project at 68 South Service Road; we closed on the
acquisition of the 1.1 million square foot Reckson Plaza; and we sold or
contracted to sell $158 million of non-core operating properties at attractive
pricing."
A reconciliation of net income allocable to common shareholders to FFO is in
the financial statements accompanying this press release. Net income allocable
to common shareholders is the GAAP measure the Company believes to be the most
directly comparable to FFO.
Michael Maturo, Reckson's Chief Financial Officer, noted, "Year to date we
have match funded over $1 billion of investments with approximately $900
million of non-core and core plus asset dispositions which is consistent with
our strategy of focusing our portfolio on strategic and value-added assets
which enhance growth and the quality of our cash flows. Additionally, our
successful capital recycling activities, as well as establishing a new equity
source in the Australian property trust market, provides our balance sheet
with significant flexibility and capacity to fund the company's future growth
initiatives."
Summary Portfolio Performance
The Company reported office occupancy at September 30, 2005 of 94.1%. This
compares to 93.7% at June 30, 2005 and 93.9% at September 30, 2004. The
Company reported portfolio occupancy of 93.0% at September 30, 2005, as
compared to 92.6% at June 30, 2005 and 93.1% at September 30, 2004.
The Company also reported same property office occupancy at September 30, 2005
of 93.3%. This compares to 92.9% at June 30, 2005 and 93.9% at September 30,
2004. The Company reported same property portfolio occupancy of 92.2% at
September 30, 2005, as compared to 91.8% at June 30, 2005 and 93.1% at
September 30, 2004.
Office same property net operating income (property operating revenues less
property operating expenses) (NOI), net of minority interests in joint
ventures, before termination fees for the third quarter of 2005 increased 5.3%
(on a straight-line rent basis) and 3.2% (on a cash basis), compared to the
third quarter of 2004. Portfolio same property NOI, net of minority interests
in joint ventures, before termination fees for the third quarter of 2005
increased 4.9% (on a straight-line rent basis) and 3.0% (on a cash basis),
compared to the third quarter of 2004.
Office same property NOI, including consolidated joint ventures, before
termination fees for the third quarter of 2005 increased 4.7% (on a
straight-line rent basis) and 2.5% (on a cash basis), compared to the third
quarter of 2004. Portfolio same property NOI, including consolidated joint
ventures, before termination fees for the third quarter of 2005 increased 4.3%
(on a straight-line rent basis) and 2.4% (on a cash basis), compared to the
third quarter of 2004.
Other Highlights
Leasing Activity
- Executed 72 lease transactions totaling 433,588 square feet during
the third quarter of 2005
- Rent performance on renewal and replacement space during the third
quarter of 2005 increased 15.8% (on a straight-line rent basis) and
3.9% (on a cash basis) in the office portfolio
Executed a Number of Strategic Initiatives
- Closed tranche I of a public offering in Australia of approximately
A$263 million (approximately US$202 million) of units in Reckson New
York Property Trust, a newly-formed, Reckson-sponsored property
trust (the LPT) trading on the Australian Stock Exchange (ASX). Upon
completion of all the related transactions, the LPT will own a 75%
indirect interest in 25 suburban core plus office properties
acquired from Reckson, containing approximately 3.4 million square
feet, for a total purchase price of approximately US$563 million.
Reckson will retain a 25% indirect interest in these properties. The
transaction has been structured to be completed in three tranches.
The LPT has a two-year option to purchase an additional ten suburban
core plus office properties from Reckson, comprising approximately
1.2 million square feet, to be priced at fair market value at the
time the option is exercised. Reckson anticipates that it will
continue to maintain a 25% indirect interest in future core plus
investments with the LPT. The Australian LPT structure will enable
Reckson to achieve a strategic objective of increasing scale without
diluting existing Reckson shareholders. Affiliates of Reckson shall
provide asset management, property management and leasing services
to the LPT and earn additional fees relating to certain future
transactions including acquisitions, dispositions and financings.
- Entered into a contract for the recapitalization of One Court
Square, Long Island City. Reckson acquired the building in May 2005,
for a total investment of $471 million, at a 6.5% initial
unleveraged cash flow yield and 6.8% GAAP yield. In June 2005,
Reckson refinanced its acquisition bridge facility with a $315
million, 10-year, interest-only mortgage, at an interest rate of
4.9%. In October 2005, Reckson entered into a contract to sell a
65%-70% joint venture interest to a group of institutional investors
led by JPMorgan Asset Management. Based on a promoted structure and
the sale of a 70% interest, Reckson anticipates an unleveraged GAAP
yield of approximately 8% and a leveraged GAAP return on equity of
approximately 13%. It is anticipated that the transaction will close
during the fourth quarter of 2005. The contract is subject to
customary closing conditions, including due diligence.
- Completed construction of the base building at 68 South Service Road
in Melville, Long Island, ahead of schedule. The total anticipated
investment is
approximately $61 million. Reckson anticipates an accelerated
lease-up of the building and is currently negotiating a long-term
lease for a substantial portion of the building. The Company
anticipates a stabilized NOI yield of approximately 10%.
Acquisition Activity
- Acquired a 1.1 million square foot, Class A trophy office complex
consisting of two 15-story office towers located in Uniondale, Long
Island, for approximately $240 million. Reckson Plaza, formerly
known as EAB Plaza, is the largest and most recognizable office
complex on Long Island and is approximately 90% occupied and is
leased to high credit quality tenants. Reckson expects to generate
an initial GAAP NOI yield of approximately 6.5% and anticipates that
its property operating initiatives will result in cumulative annual
NOI growth in excess of 5.0%. Reckson utilized this acquisition as
the replacement property in like-kind (1031) exchanges to defer
approximately $108 million of tax gains on the sale of properties.
In addition, Reckson has purchased the adjoining 8.2-acre
development site, for $19.0 million, which is anticipated to be
contributed into a joint venture between Reckson and the owner of
the New York Islanders in connection with the proposed redevelopment
of the Nassau Coliseum site.
- Acquired a 118,000 square foot, four-story, Class A office building,
located at 711 Westchester Avenue, White Plains, Westchester, for
approximately $24.8 million, or $210 per square foot. Built in 1978,
and fully renovated in 1997, the building is a high quality asset
situated on 10 acres and offers a superior quality amenity package.
The property is well-located off I-287, at the intersection of I-684
and the Hutchinson River Parkway, along the I-287 Platinum Mile
Corridor. The property is currently 94% occupied and after the
rollover of leases totaling approximately 50,000 square feet in
2007, Reckson expects to generate a stabilized NOI yield of
approximately 8.2%. This acquisition was partially financed through
the assumption of approximately $12.5 million of existing first
mortgage debt with an interest rate of 5.4% per annum and a maturity
date of January 1, 2015. Reckson currently owns and operates
approximately 622,000 square feet of space in the White Plains
submarket in Westchester.
Disposition of Non-Strategic Operating Assets
- Entered into a contract for the sale of 100 Wall Street, New York
City, a 462,000 square foot office building located in downtown
Manhattan, for approximately $134 million, or $290 per square foot.
100 Wall Street is Reckson's only asset in the downtown submarket
and has substantial rollover in the near-term. Reckson will provide
the purchaser with a mezzanine loan in the amount of $30.0 million
which will bear interest at 15% per annum and have a term of two
years. Reckson estimates a GAAP gain of $50.5 million on the sale.
The tax gain of approximately $48 million from the sale of this
property will be deferred as part of a like-kind (1031) exchange in
conjunction with the aforementioned purchase
of Reckson Plaza. It is anticipated the closing will take place
during the fourth quarter of 2005. The contract is subject to
customary closing conditions and the removal of the existing
mortgage which Reckson intends to transfer to replacement
collateral.
- Sold two medical office buildings totaling 69,000 square feet,
located at 310 and 333 East Shore Road, Great Neck, Long Island for
approximately $17.3 million, or approximately $250 per square foot.
The GAAP gain on sale is $14.1 million.
- Entered into a contract to sell a single story flex-use office
building totaling 35,000 square feet, located at 48 Harbor Park
Drive, Port Washington, Long Island, to a user, for approximately
$6.4 million, or approximately $182 per square foot. Reckson
estimates a GAAP gain of $3.0 million on the sale. It is anticipated
the closing will take place during the fourth quarter of 2005.
Development Activity
- Entered into a letter of intent with the owner of the New York
Islanders to enter into a 50/50 joint venture to potentially develop
over 5 million square feet of office, residential, retail and hotel
space in the Mitchel Field, Long Island sub-market in and around
Nassau Veterans Memorial Coliseum where Reckson is currently the
largest owner of office properties. The joint venture is currently
participating in the Nassau County request for proposal process. In
addition, if selected Reckson would serve as the master developer of
the development project. The development, which has other competing
proposals, is subject to numerous governmental approvals,
compliance, zoning and other customary approvals.
Earnings Guidance
During the Company's quarterly earnings conference call on November 1, 2005,
management will discuss earnings guidance. The Company is providing fourth
quarter 2005 diluted FFO guidance in the range of $0.59 to $0.60 per share
which reflects accelerated dispositions and full-year 2006 diluted FFO
guidance in the range of $2.45 to $2.57, representing 5% to 10% growth over
2005.
For detailed information pertaining to the assumptions used for estimating the
Company's forecasted earnings guidance range please refer to Reckson's third
quarter 2005 presentation which can be found on the Company's web site at
www.reckson.com.
Reconciliation of Earnings Guidance
The Company's guidance for diluted FFO is reconciled from GAAP net income
below:
Fourth Quarter 2005 Full Year 2006
------------------- ------------------
Low End High End Low End High End
------- -------- ------- --------
Net income allocable to common shareholders $0.25 $0.26 $2.11 $2.23
Add: Real estate depreciation and amortization 0.34 0.34 1.22 1.22
Less: Gain on sales of depreciable real estate 0.00 0.00 0.88 0.88
------- -------- ------- --------
Diluted FFO Per Share $0.59 $0.60 $2.45 $2.57
======= ======== ======= ========
This guidance is based upon management's current estimates. Actual results may
differ materially. This information involves forward-looking statements which
are subject to uncertainties noted below under Forward-Looking Statements.
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. The Company presents FFO because it
considers it an important supplemental measure of the Company's operating
performance and believes it is frequently used by securities analysts,
investors and other interested parties in the evaluation of REITs, many of
which present FFO when reporting their results. FFO is intended to exclude
GAAP historical cost depreciation and amortization of real estate and related
assets, which assumes that the value of real estate diminishes ratably over
time. Historically, however, real estate values have risen or fallen with
market conditions. As a result, FFO provides a performance measure that, when
compared year over year, reflects the impact to operations from trends in
occupancy rates, rental rates, operating costs, development activities,
interest costs and other matters without the inclusion of depreciation and
amortization, providing perspective that may not necessarily be apparent from
net income. 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 sales
of depreciable properties plus real estate 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 and analysts 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 Class A office 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 properties in the New York
Tri-State area, and wholly owns, has substantial interests in, or has under
contract, a total of 89 properties comprised of approximately 18.5 million
square feet. 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 President and Chief Executive
Officer Scott Rechler, will host a conference call outlining third quarter
results on November 1, 2005 at 12:00 p.m. EST. The conference call may be
accessed by dialing (800) 553-0318 (internationally (612) 332-0335). 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
1, 2005 at 5:30 p.m. EST through November 9, 2005 at 11:59 p.m. EST. The
telephone number for the replay is (800) 475-6701, passcode 797057. 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 2005 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, Senior Vice President Investor Relations,
Reckson Associates Realty Corp., 225 Broadhollow Road, Melville, New York
11747-4883, investorrelations@reckson.com or (631) 622-6746.
Forward-Looking Statements
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 properties in the New York
Tri-State area; changes in interest rate levels; changes in the Company's
credit ratings; changes in the Company's cost of and access to capital;
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, real estate taxes, security and insurance
costs; repayment of debt owed to the Company by third parties; 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.