Related Slide Show Presentation
MELVILLE, N.Y.--(BUSINESS WIRE)--Nov. 11, 2003--
Industrial Sale Proceeds Recycled into Core Growth Opportunity
Reckson Associates Realty Corp. (NYSE: RA) today announced that
the Company entered into a contract to acquire 1185 Avenue of the
Americas, a 42-story, 1.1 million square foot Class A office tower,
located in New York City. The building, which is subject to a ground
lease, will be acquired for a purchase price of $321 million, or $303
per square foot. Additionally, Reckson announced it has closed on a
substantial portion of the sale of its 95 property, 5.9 million square
foot, $315.5 million Long Island Industrial Building Portfolio, with
the remaining portion expected to close later this week.
These transactions are consistent with Reckson's recently
announced strategic plan to focus on Class A office product in the New
York Metropolitan region, restructure the Company's management team,
eliminate approximately $9.5 million of current annual overhead and
enhance the Company's corporate governance.
Commenting on the acquisition, Scott Rechler, Reckson's Chief
Executive Officer and President, stated, "The 1185 Avenue of the
Americas acquisition is the type of value-added transaction that
Reckson has built its reputation on. 1185 Avenue of the Americas is a
premier Class A office asset that offers the potential for significant
upside with 40% of the leases expiring through 2011 at rents that we
believe to be approximately 58% below market. Like other successful
Reckson value-added acquisitions, 1185 is going through a state of
transition with one of its largest tenants in bankruptcy, the rent on
the ground lease scheduled to be re-set in 2005 and the building
requiring certain infrastructure upgrades. We believe that the
circumstances surrounding 1185 offer us the opportunity to materially
increase the building's net operating income as we execute our
repositioning plan."
Located on Avenue of the Americas between 46th and 47th Streets,
the property is in midtown Manhattan's Rockefeller Center/Sixth Avenue
submarket and offers direct access to the Rockefeller Center Concourse
and Transportation Hub. This acquisition will increase Reckson's New
York City portfolio to over 4.6 million square feet of Class A office
space and greatly enhance Reckson's current New York City office
market penetration and franchise. Pro forma for 1185 Avenue of the
Americas, New York City would represent approximately 40% of the
Company's pro forma net operating income (property operating revenues
less property operating expenses) ("NOI").
Reckson expects to generate an average 2004 and 2005 cash NOI
yield of approximately 7.5% that, based on the Company's current
underwriting assumptions, is anticipated to grow to approximately 9%
in 2008 and to approximately 11% in 2011. GAAP (including
straight-line rent and adjustment for FAS 141) NOI yields are
projected to start at 9.3% in 2004 and increase to over 10.0% in 2007.
"The acquisition of 1185 Avenue of the Americas again demonstrates
our ability to effectively source and execute large, off market,
complex transactions in the New York City market. This property
provides our Manhattan and suburban tenant base an attractive, large
floor plate building in the Rockefeller Center/Sixth Avenue corridor,"
said, Philip Waterman III ("Tod"), Executive Vice President and head
of Reckson's New York City Division.
1185 Avenue of the Americas is presently encumbered by a $202
million mortgage and $48 million mezzanine debt that the Company would
assume upon closing. The floating rate mortgage and mezzanine debt
both mature in August 2004 and presently have a weighted average
interest rate of 4.95%. The property is also encumbered by a ground
lease which has a remaining term of approximately 40 years with rent
scheduled to be re-set to market at the end of 2005 and then remain
flat for the balance of the term. This transaction is subject to
customary consents and conditions.
A slide show presentation further outlining this transaction is
available on the Company's web site in the Investor Relations section
at www.reckson.com/investor/other/press.htm.
Based on the timing of closing the Long Island Industrial
Portfolio sale, related paydown of line of credit debt with proceeds
and the anticipated year-end closing of 1185 Avenue of the Americas,
the Company has adjusted fourth quarter 2003 funds from operations
("FFO") earnings guidance to $.35 per share and 2004 FFO earnings
guidance to $2.30 - $2.40 per share.
The Company's guidance for the fourth quarter of 2003 and full
year 2004 is reconciled from GAAP net income below:
Guidance for 2003
(Per Common Share)
----------------
Net income allocable to common shareholders $ 3.10
Less:
Gain on Sales of Depreciable Assets 2.61
Add:
Real Estate Depreciation and Amortization 1.55
-------
Funds from Operations $ 2.04
=======
Low End of High End of
Guidance for 2004 Guidance for 2004
(Per Common Share) (Per Common Share)
---------------- ----------------
Net income allocable to common
shareholders $ .70 $ .76
Add:
Real Estate Depreciation
and Amortization 1.60 1.64
------ ------
Funds from Operations $ 2.30 $ 2.40
====== ======
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, with 88 properties
comprised of approximately 15.8 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.
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; 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, 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.
CONTACT: Reckson Associates Realty Corp.
Scott Rechler, CEO
Michael Maturo, CFO
631-694-6900 (Phone)
631-622-6790 (Facsimile)
or
Beckerman Public Relations
Mira Matic (Media)
908-781-6420
SOURCE: Reckson Associates Realty Corp.
