EXHIBIT 99.3
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
METROPOLIS REALTY TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
Page
HISTORICAL FINANCIAL STATEMENTS
Independent Auditors' Report......................................................................... 2
Consolidated Balance Sheets as of December 31, 2001 and 2000......................................... 3
Consolidated Statements of Income and Comprehensive Loss for the years ended December 31,
2001, 2000 and 1999.................................................................................. 4
Consolidated Statements of Stockholders' Equity for years ended December 31, 2001, 2000, and
1999................................................................................................. 5
Consolidated Statements of Cash Flows for years ended December 31, 2001, 2000 and 1999.... .......... 6
Notes to Year Ended December 31, 2001 Consolidated Financial Statements.............................. 7
Consolidated Balance Sheets as of March 31, 2002 (unaudited) and
December 31, 2001 (audited)......................................................................... 14
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Quarters Ended
March 31, 2002 and 2001 (unaudited) ................................................................. 15
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001
(unaudited).......................................................................................... 16
Notes to Quarter Ended March 31, 2002 Consolidated Financial Statements (unaudited).................. 17
F-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Metropolis Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of Metropolis
Realty Trust, Inc. and Subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of income and comprehensive loss, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Metropolis Realty Trust, Inc. and
Subsidiaries as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
Deloitte & Touche LLP
New York, New York
January 18, 2002
F-2
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS December 31,
2001 2000
--------- ---------
Rental property - net of accumulated depreciation of $48,077 and $37,601,
respectively $ 358,709 $ 368,152
Cash and cash equivalents 11,012 15,066
Escrow deposits and restricted cash 7,506 5,669
Tenant security deposits 203 228
Due from tenants - net of doubtful accounts of $0 and $2,745,
respectively 2,138 4,874
Deferred financing costs - net of amortization of $8,830 and $4,515,
respectively 4,101 8,401
Notes receivable 275 289
Deferred rent receivable 50,119 48,828
Prepaid real estate taxes 8,986 8,721
Deferred leasing costs, net of amortization of $4,132 and $2,627,
respectively 17,016 16,451
Other assets 281 397
--------- ---------
TOTAL ASSETS $ 460,346 $ 477,076
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage loan $ 425,000 $ 425,000
Accounts payable and accrued expenses 8,009 8,327
Tenants security deposits, unearned revenue and credits due tenants 2,135 5,463
Derivative investment 17,897 --
--------- ---------
Total Liabilities 453,041 438,790
--------- ---------
Subordinated Minority Interest -- 14,409
--------- ---------
Stockholders' Equity
Preferred Stock - $10 par value, 10,000,000 shares authorized, none issued or
outstanding Common Stock - $10 par value, 50,000,000 shares authorized,
(13,001,346 Class A shares outstanding as of December 31, 2001; 8,059,586
Class A shares and 4,936,060 Class B shares outstanding as of December 31,
2000) 130,013 130,012
Paid-in capital 175,847 175,847
Accumulated Other Comprehensive Loss (17,897) --
Deficit (280,658) (281,982)
--------- ---------
Total Stockholders' Equity 7,305 23,877
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 460,346 $ 477,076
========= =========
See notes to consolidated financial statements.
F-3
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS
(in thousands, except share amounts)
Years Ended December 31,
2001 2000 1999
------------ ------------ ------------
REVENUES:
Base rental income $ 86,165 $ 85,129 $ 114,983
Lease termination income -- -- 26,455
Operating escalation income 4,865 4,944 11,451
Miscellaneous income 2,936 5,245 4,669
------------ ------------ ------------
Total revenues 93,966 95,318 157,558
------------ ------------ ------------
OPERATING EXPENSES:
Real estate taxes 17,821 18,266 27,414
Operating and maintenance 5,518 5,173 6,756
Utilities 9,450 8,186 6,991
Payroll 3,480 3,091 4,323
Management fees 1,820 1,770 2,198
Professional fees 524 932 1,960
General and administrative 328 430 980
Bad debt expense 1,301 -- 585
Depreciation and amortization 11,981 11,680 16,245
------------ ------------ ------------
Total operating expenses 52,223 49,528 67,452
------------ ------------ ------------
OTHER ITEMS:
Interest income 973 2,917 3,759
Interest expense (41,400) (41,464) (33,582)
Write-off of note receivable -- -- (1,088)
Write-off of deferred financing costs -- -- (2,307)
------------ ------------ ------------
Total other items (40,427) (38,547) (33,218)
------------ ------------ ------------
GAIN ON SALE OF PROPERTY -- -- 50,445
------------ ------------ ------------
GAIN ON REPURCHASE OF MINORITY INTEREST 13,009 -- --
------------ ------------ ------------
NET INCOME 14,325 7,243 107,333
OTHER COMPREHENSIVE LOSS (17,897) -- --
------------ ------------ ------------
COMPREHENSIVE (LOSS) INCOME $ (3,572) $ 7,243 $ 107,333
============ ============ ============
NET INCOME PER COMMON SHARE:
Net income $ 1.10 $ .56 $ 8.27
------------ ------------ ------------
Weighted average common shares outstanding 13,001,307 12,997,699 12,971,262
------------ ------------ ------------
NET INCOME PER COMMON SHARE
(assuming dilution):
Net income $ 1.10 $ .56 $ 8.26
------------ ------------ ------------
Weighted average common shares outstanding
(including 3,000 shares of common stock issuable
upon the exercise of outstanding options as of
December 31, 2001, 2000, and 1999, respectively) 13,004,307 13,000,699 12,998,646
------------ ------------ ------------
See notes to consolidated financial statements.
F-4
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Retained Total
Common Stock Paid-in Earnings Stockholders'
at Par Value Capital (Deficit) Equity
--------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31, 1998 $ 129,706 $ 175,844 $ 21,522 $ 327,072
Shares issued under Directors' Stock Plan 250 -- -- 250
Net income -- -- 107,333 107,333
Dividends paid -- (408,950) (408,950) --
--------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31, 1999 129,956 175,844 (280,095) 25,705
Shares issued under Directors' Stock Plan 56 3 -- 59
Net income -- -- 7,243 7,243
Dividends paid -- -- (9,130) (9,130)
--------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31, 2000 130,012 175,847 (281,982) 23,877
Shares issued under Directors' Stock Plan 1 -- -- 1
Net income -- -- 14,325 14,325
Other comprehensive loss -- -- (17,897) (17,897)
Dividends paid -- -- (13,001) (13,001)
--------------- --------------- --------------- ---------------
BALANCE, DECEMBER 31, 2001 $ 130,013 $ 175,847 ($ 298,555) $ 7,305
=============== =============== =============== ===============
See notes to consolidated financial statements.
F-5
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2001 2000 1999
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,325 $ 7,243 $ 107,333
Adjustments to reconcile net income to net cash provided by operating
activities:
Gain on sale of property -- -- (50,445)
Gain on purchase of minority interest (13,009) -- --
Write-off of deferred financing costs -- -- 2,307
Depreciation and amortization 16,297 15,987 17,440
Bad debt expense 1,301 -- 585
Write-off of note receivable -- -- 1,088
Change in:
Increase in escrow deposits and restricted cash (1,836) (2,490) (2,516)
Decrease/(increase) in due from tenants 1,434 (2,427) 1,057
Decrease/(increase)in tenant security deposits 24 (2) 416
(Increase)/decrease in prepaid expenses and other assets (151) 149 5,345
Decrease in real estate tax refunds -- 3,175 2,421
Increase in deferred rent receivable (1,291) (2,719) (15,229)
(Decrease)/increase in accounts payable and accrued expenses (30) (373) 3,619
(Decrease)/increase in tenant security deposits, unearned
revenue and credits due tenants (3,326) 4,000 (990)
--------- --------- ---------
Net cash provided by operating activities 13,738 22,543 72,431
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of property -- -- 344,259
Additions to building and equipment (1,033) (4,155) (12,308)
Leasing costs (2,357) (2,982) (21,250)
Changes in notes receivable 14 (289) 8,218
--------- --------- ---------
Net cash (used) provided in investing activities (3,376) (7,426) 318,919
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of minority interest (1,400) -- --
Proceeds from mortgage note payable -- -- 425,000
Financing costs (16) (93) (12,823)
Payments on secured notes -- -- (410,625)
Dividends paid (13,001) (9,130) (408,950)
Distribution to subordinated minority interests -- -- (446)
Issuance of shares of common stock 1 59 250
--------- --------- ---------
Net cash used in financing activities (14,416) (9,164) (407,594)
--------- --------- ---------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (4,054) 5,953 (16,244)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 15,066 9,113 25,357
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,012 $ 15,066 $ 9,113
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 37,283 $ 34,046 $ 32,387
========= ========= =========
Dividends declared $ 13,001 $ 9,100 $ 408,950
========= ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Liabilities disposed of in connection with sale of property -- -- $ 170,009
========= ========= =========
See notes to consolidated financial statements.
F-6
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(in thousands, except share amounts)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization - Metropolis Realty Trust, Inc., a Maryland corporation
("Metropolis" or the "Company"), was formed on May 13, 1996 to facilitate
the consummation of the Second Amended Joint Plan of Reorganization of 237
Park Avenue Associates, L.L.C. ("237 LLC") and 1290 Associates, L.L.C.
("1290 LLC" and together with 237 LLC, the "Predecessors"), dated
September 20, 1996 (the "Plan"). Pursuant to the Plan, on October 10,
1996, the date operations commenced ("Effective Date"), the Company
acquired the interests of 237 LLC and 1290 LLC in the properties located
at 237 Park Avenue (the "237 Property") and 1290 Avenue of the Americas
(the "1290 Property," and together with the 237 Property, the
"Properties").
On November 22, 1999, the Company sold all of its interests in the 237
Property. Following such sale and as of December 31, 2000, the Company
owned a 94.05% partnership interest, as limited partner, in 1290 Partners,
L.P., a Delaware limited partnership (the "1290 Property Owning
Partnership"). The 1290 Property Owning Partnership owns the 1290
Property. A wholly-owned subsidiary of the Company ("1290 GP Corp.") owns
a 1% interest, as general partner, in the 1290 Property Owning
Partnership. The remaining 4.95% interest in the 1290 Property Owning
Partnership was owned by 237/1290 Upper Tier Associates, L.P., a Delaware
limited partnership (the "Upper Tier LP"). On March 23, 2001, the Company
acquired the limited partnership interest held by the Upper Tier LP for
$1,400 in accordance with the Agreement of Limited Partnership of the 1290
Property Owning Partnership. Upon consummation of such transaction, as of
December 31, 2001, the Company directly and indirectly owns 100% of the
1290 Property Owning Partnership.
Basis of Presentation - The consolidated financial statements include
Metropolis and each of the entities through which Metropolis indirectly
owns the Properties. All significant intercompany accounts and
transactions have been eliminated in consolidation. Actual results could
differ from those estimates. Certain 2000 and 1999 amounts have been
reclassified to conform with the 2001 presentation.
Rental Property - Rental property is carried at cost, net of accumulated
depreciation and amortization, and includes land, building, tenant
improvements and building improvements. Land is carried at $63,500, as of
December 31, 2001 and 2000. Building, tenant improvements and building
improvements are carried at $343,286 and $342,253 as of December 31, 2001
and December 31, 2000, respectively. If a property is determined to be
impaired, it must be written down to its estimated fair value. Fair value
is defined as the amount for which the asset could be bought or sold in a
current transaction, that is, other than a forced or liquidation sale. No
impairment of the 1290 Property exists as of December 31, 2001 and 2000.
Cash and Cash Equivalents - Cash and cash equivalents includes investments
purchased with an original maturity of three months or less.
Depreciation and Amortization - Building and building improvements are
depreciated over their useful lives of 40 years using the straight-line
method. Furniture and fixtures are depreciated over their useful lives,
ranging from 5 to 7 years. Tenant improvements are amortized on a
straight-line basis over the terms of the respective leases.
F-7
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
Deferred Charges - Deferred financing costs are amortized over the term of
the related loan. Direct costs related to leasing are amortized over the
related lease term.
Rental Income - Rental income is recognized on a straight-line basis over
the terms of the related leases. Differences between actual base amounts
due from tenant leases and the straight-line basis are included in
deferred rent receivable.
Escrow Deposits and Restricted Cash - Escrow deposits and restricted cash
for the years ended December 31, 2001 and 2000 includes reserves for
tenant improvements, leasing commissions, insurance, real estate taxes and
real estate tax refunds.
Recent Pronouncement - Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities, was implemented by the Company on January 1, 2001. SFAS No.
133, as amended and interpreted, establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. All
derivatives, whether designated as hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the
derivative is designated as a fair-value hedge, the changes in the fair
value of the derivative and the hedged item are recognized in earnings. If
the derivative is designated as a cash-flow hedge, the effective portion
of changes in the fair value of the derivative is recorded in other
comprehensive (loss) income and will be recognized in the income statement
when the hedged item affects earnings. The ineffective portion of changes
in the fair value of the derivative designated as a cash flow hedge is
recognized in the income statement. SFAS No. 133 defines new requirements
for designation and documentation of hedging relationships as well as
ongoing effectiveness assessments in order to use hedge accounting. For a
derivative that does not qualify as a hedge, changes in fair value are
recognized in earnings.
At January 1, 2001 the Company recorded approximately $6,900 in other
comprehensive loss as a cumulative transition adjustment to record the
1290 Swap Agreement (See Note 4) at its estimated fair value as of that
date.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long Lived Assets (effective January 1, 2002).
SFAS No. 144 supersedes existing accounting literature dealing with
impairment and disposal of long-lived assets, including discontinued
operations. It addresses financial accounting and reporting for the
impairment of long-lived assets and for long-lived assets to be disposed
of, and expands current reporting for discontinued operations to include
disposals of a "component" of an entity that has been disposed of or is
classified as held for sale. The Company is in the process of evaluating
the financial statement impact of the adoption of this standard.
Use of Estimates - The presentation of the financial statements requires
estimates and assumptions that affect the reported amounts of assets and
liabilities as of December 31, 2001 and 2000 and the reported amounts of
revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
Fair Value of Financial Instruments - The carrying amount of cash and cash
equivalents, escrow deposits and restricted cash, tenant security
deposits, accounts receivable and accounts payable are a reasonable
estimate of their fair value due to their short-term nature. Management
believes the fair market value of the mortgage loan payable approximates
the carrying value at December 31, 2001 and 2000. The fair value estimates
presented herein are based on pertinent information available to
management as of December 31, 2001 and 2000.
F-8
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
Income Taxes - The Company qualifies as a REIT under the Internal Revenue
Code, as amended, and will generally not be taxed at the corporate level
on income it currently distributes to its stockholders so long as it,
among other things, distributes at least 90% of its REIT taxable income.
2. SALE OF PROPERTY
On September 23, 1999, the Company entered into an Interest Purchase
Agreement with 237 Park Investors, L.L.C., pursuant to which the Company
agreed to sell all of its interests in the 237 Property for an aggregate
purchase price of $372,000, subject to customary prorations and certain
adjustments (the "237 Property Sale").
On November 22, 1999, the Company consummated the 237 Property Sale and
recognized a gain of $50,445. Net assets as of the date of sale were
$293,814. The following represents the results of operations for the 237
Property for the period January 1, 1999 through November 21, 1999:
REVENUES:
Base rental income $ 34,261
Lease termination income 25,855
Operating escalation income 9,357
Miscellaneous income 495
--------
Total revenues 69,968
--------
OPERATING EXPENSES:
Real estate taxes 9,324
Operating and maintenance 2,300
Utilities 572
Payroll 1,539
Management fees 635
Professional fees 515
General and administrative 285
Depreciation and amortization 5,624
--------
Total operating expenses 20,794
--------
OTHER ITEMS:
Interest income 1,100
Interest expense (11,801)
--------
Total other items (10,701)
--------
NET INCOME $ 38,473
========
3. REAL ESTATE TAX REFUNDS
Tax certiorari proceedings have been settled with the City of New York for
over-assessment of property taxes for the tax years ending June 30, 1991
through June 30, 1996 with respect to the 1290 Property. The Company
received net proceeds of approximately $6,519 in December 2000 after
payment of approximately $876 of fees and expenses incurred in connection
with such proceedings. Of this amount, approximately $3,211 was expected
to be reimbursed to tenants and was included in escrow deposits and
restricted cash at December 31, 2000. During 2001, approximately $2,027
was reimbursed to tenants. The remaining balance to be reimbursed of
approximately $1,184 is included in escrow deposits and restricted cash as
of December 31, 2001. Such net proceeds were approximately $3,800 in
excess of estimated net proceeds and are included in miscellaneous income
in 2000.
F-9
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
Tax certiorari proceedings have been commenced which remain outstanding
against the City of New York for over-assessment of property taxes for the
tax years ending June 30, 1997 through June 30, 2001 with respect to the
1290 Property. The outcome of these proceedings cannot be presently
estimated.
4. MORTGAGE LOAN
In December 1999, the 1290 Property Owning Partnership refinanced mortgage
indebtedness secured by the 1290 Property of approximately $224,900,000
and obtained a $425,000 mortgage loan (the "1290 Mortgage Loan"). Interest
on the 1290 Mortgage Loan is based on LIBOR plus 2% and requires interest
only payments through maturity on January 2, 2003. The 1290 Property
Owning Partnership has a one time right (subject to achieving certain
conditions, including a debt service coverage ratio, loan to value ratio
and the payment of a 25 basis point extension fee), at its option, to
extend the maturity for a period of twelve months. The 1290 Mortgage Loan
may be repaid in whole without penalty. The costs associated with securing
the 1290 Mortgage Loan of approximately $12,916 are included in deferred
financing costs and are amortized over the term of the 1290 Mortgage Loan
as a component of interest expense. Unamortized costs associated with the
prior mortgage indebtedness of approximately $2,307 were written off in
1999.
The 1290 Property Owning Partnership and Morgan Stanley Derivative
Products, Inc. entered into an Interest Rate Exchange Agreement effective
December 13, 1999 (the "1290 Swap Agreement"). The 1290 Swap Agreement
provides that the 1290 Property Owning Partnership will pay interest at an
effective rate of 8.4995% per annum on the notional amount of $425,000.
Management believes that the risk of incurring losses related to the
credit risk is remote and that any losses would be immaterial.
The 1290 Swap Agreement has been designated as a cash flow hedge and was
deemed to be perfectly effective during 2001. As such, changes in the fair
value of the 1290 Swap Agreement during the year ended December 31, 2001
have been reflected as other comprehensive loss in the accompanying
statement of income and comprehensive loss. The difference between accrued
interest expense calculated at the effective rate under the 1290 Swap
Agreement and accrued interest expense calculated at the interest rate
under the 1290 Mortgage Loan is recognized currently in earnings as
interest.
The maturity date of the 1290 Mortgage Loan and the termination date of
the 1290 Swap Agreement are identical. The estimate of the cost to unwind
the 1290 Swap Agreement is approximately $19,439 at December 31, 2001. The
Company has no intention of unwinding the 1290 Swap Agreement. The Company
estimates that approximately $18,254 of net derivative loss included in
accumulated other comprehensive loss will be reclassified into earnings
within the next 12 months.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of December 31, 2001 and 2000
include property operating expenses payable and tenant claims against real
estate tax proceeds.
6. SUBORDINATED MINORITY INTEREST
The Subordinated Minority Interest represented the 99% limited partnership
interest that JMB/NYC Office Building Associates, L.P. owned of the Upper
Tier LP which in turn owned a subordinated 4.95% limited partnership
interest in the 1290 Property Owning Partnership (the "Subordinated
Minority Interest"). On March 23, 2001, the Company exercised its right to
acquire the Subordinated Minority Interest held by the Upper Tier LP for
$1,400 in accordance with the Agreement of Limited Partnership of the 1290
Property Ownership Partnership.
F-10
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
7. STOCKHOLDERS' EQUITY
The Company has the authority to issue 50,000,000 shares of common stock,
par value $10 per share (the "Common Stock"), and 10,000,000 shares of
Preferred Stock, par value $10 per share. On October 10, 2001, the
classification of the Common Stock into two classes of Common Stock
terminated pursuant to the terms of the Charter. All shares of Class A and
Class B Common Stock were automatically converted into a single class of
Class A Common Stock. As of December 31, 2001, there were 13,001,346
shares of the Company's Class A Common Stock issued and outstanding.
8. STOCK PLAN AND REGISTRATION RIGHTS
The Board of Directors of the Company adopted a Directors' Stock Plan
effective October 10, 1996. Pursuant to the Stock Plan, the Board of
Directors of the Company has the authority to issue to members of the
Company's Board of Directors options to purchase, in the aggregate,
100,000 shares of Common Stock. On the Effective Date, the initial members
of the Company's Board of Directors were granted options entitling each
director to purchase an aggregate of 3,000 shares of Common Stock at an
exercise price of $25 per share.
Pursuant to the Stock Plan, each Director received 400 shares of Common
Stock at the annual meetings in 1997, 1998 and 2000 in consideration for
services rendered to the Company during such years. The value of such
shares was based upon the most recent price at which shares of the
Company's Common Stock were traded prior to such grant of shares and is
included as an operating expense.
As of December 31, 2001, there were outstanding options to acquire an
aggregate of 3,000 shares of Common Stock at an exercise price of $12.50
per share.
The Company has entered into a Registration Rights Agreement between the
Company and certain holders of Common Stock. The Registration Rights
Agreement permits such stockholders to demand, subject to certain
conditions, that the Company register their Common Stock for sale and
provides all of the Company's stockholders with the right to participate
proportionally in any public offering of the Company's securities.
9. RELATED PARTY TRANSACTIONS
Sale of 237 Property/Refinancing of 1290 Property - John R. Klopp, a
director, officer and stockholder of the Company, is employed by Capital
Trust, Inc., the parent company of Victor Capital Group L.P. ("VCG"). VCG
acted as one of the Company's representatives in connection with the sale
of the 237 Property in November 1999. Pursuant to the terms of the
retention agreement between VCG and the Company, VCG was paid a fee equal
to $930 (0.25% of the total transaction value). In addition, VCG was paid
approximately $1,594 by the Company in December 1999 as a fee in
connection with the refinancing of the debt pertaining to the 1290
Property.
Asset Management - The Company has entered into an Asset Management
Agreement with a company ("Asset Manager") that is directly affiliated
with two of Metropolis' stockholders. One of these stockholders is also a
Director and Officer of the Company. The Asset Manager provides asset
advisory, consultation and management services for the Company. Fees for
such services are payable in arrears, at a rate of $25 per month. The
Asset Management Agreement also provides for reimbursement for costs and
expenses for contractors and professional fees, payable as incurred. Asset
management fees incurred for the years ended December 31, 2001, 2000, and
1999 were approximately $300 each year.
F-11
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
Property Management - The Company has also entered into a Management and
Leasing Agreement with a company ("Property Manager/Leasing Agent") that
is an affiliate of a stockholder. The Property Manager/Leasing Agent
managed, operated and provided all supervisory, management and leasing
services for the 1290 Property for the years ended December 31, 2001, 2000
and 1999 and for the 237 Property for the year ended December 31, 1999.
The Management and Leasing Agreement provides for a fee of 1.5% of gross
revenues, payable monthly, and reimbursement for overhead and all
reasonable out-of-pocket expenses incurred. The Management and Leasing
Agreement also provides for leasing commissions to be calculated on a
sliding scale percentage basis of the lease's base rent. Fees incurred
under the Management and Leasing Agreement for the years ended December
31, 2001, 2000, and 1999 totaled approximately $2,071, $2,295, and $5,528,
respectively.
An affiliate of the Property Manager/Leasing Agent provided the cleaning
services for the 1290 Property for the months January through February of
2001 and the years ended December 31, 2000 and 1999 and for the 237
Property for the year ended December 31, 1999. Fees incurred for cleaning
services for the years ended December 31, 2001, 2000, and 1999 totaled
$405, $2,499, and $3,680, respectively.
REIT Management - The Company has entered into a REIT Management Agreement
with the Property Manager/Leasing Agent ("REIT Manager"). The REIT Manager
performs certain accounting, administrative and monitoring services. The
REIT Management Agreement provides for compensation to the REIT Manager of
a monthly fee and reimbursement of documented out-of-pocket expenses. Fees
incurred under the REIT Management Agreement for the years ended December
31, 2001, 2000, and 1999 were $126, $137, and $125, respectively.
10. LEASES
Minimum future rents (excluding escalation rentals) due to the Company
under noncancellable leases as of December 31, 2001 are as follows:
2002 $ 82,256
2003 84,260
2004 77,837
2005 72,567
2006 69,135
Thereafter 360,736
---------
$ 746,791
=========
F-12
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(In Thousands, Except Per Share Amounts)
Fiscal Quarters Ended
2001 1Q 2Q 3Q 4Q
- ------------------------------------ ---------- ---------- ---------- ----------
Total revenues 22,787 23,718 23,275 24,186
Net income 13,604 344 120 257
Net income per share $ 1.05 $ 0.03 $ 0.01 $ 0.01
Net income per share assuming
dilution $ 1.05 $ 0.03 $ 0.01 $ 0.01
2000 1Q 2Q 3Q 4Q
- ------------------------------------ ---------- ---------- ---------- ----------
Total revenues 21,875 23,777 22,495 27,171
Net income (loss) 475 2,117 (315) 4,966
Net income (loss) per share $ 0.04 $ 0.16 $ (0.02) $ 0.38
Net income (loss) per share assuming
dilution $ 0.04 $ 0.16 $ (0.02) $ 0.38
1999 1Q 2Q 3Q 4Q
- ------------------------------------ ---------- ---------- ---------- ----------
Total revenues 32,813 59,145 33,631 31,969
Net income 8,772 35,126 5,532 57,903
Net income per share $ 0.68 $ 2.71 $ 0.43 $ 4.45
Net income per share assuming
dilution $ 0.68 $ 2.70 $ 0.43 $ 4.45
F-13
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
March 31, 2002 December 31, 2001
(Unaudited) (Audited)
-------------- -----------------
ASSETS
Rental property - net of accumulated depreciation of $50,669 and
$48,077, respectively $ 356,142 $ 358,709
Cash and cash equivalents 15,859 11,012
Escrow deposits and restricted cash 13,883 7,506
Tenant security deposits 204 203
Due from tenants 1,239 2,138
Deferred financing costs - net of amortization of $9,914 and
$8,830, respectively 3,018 4,101
Note receivable 271 275
Deferred rent receivable 50,084 50,119
Prepaid real estate taxes 4,493 8,986
Deferred leasing costs, net of amortization of $4,491 and $4,132,
respectively 16,657 17,016
Other assets 268 281
------------ ------------
TOTAL ASSETS $ 462,118 $ 460,346
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Mortgage loan $ 425,000 $ 425,000
Accounts payable and accrued expenses 7,843 8,009
Dividends payable 3,251 --
Tenant security deposits, unearned revenue and credits due tenants 2,887 2,135
Derivative investment 12,433 17,897
------------ ------------
Total Liabilities 451,414 453,041
------------ ------------
Stockholders' Equity
Preferred Stock - $10 par value, 10,000,000 shares authorized, none
issued or outstanding
Common Stock - $10 par value, 50,000,000 shares authorized (13,004,946 Class A
shares outstanding as of March 31, 2002;
13,001,346 Class A shares outstanding as of December 31, 2001) 130,049 130,013
Paid-in-capital 175,851 175,847
Accumulated other comprehensive loss (12,433) (17,897)
Deficit (282,763) (280,658)
------------ ------------
Total Stockholders' Equity 10,704 7,305
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 462,118 $ 460,346
============ ============
See notes to consolidated financial statements.
F-14
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands, except share amounts)
Quarters Ended March 31,
2002 2001
------------ ------------
REVENUES:
Base rental income $ 20,749 $ 21,182
Operating escalation income 1,309 913
Miscellaneous income 1,071 692
------------ ------------
Total revenues 23,129 22,787
------------ ------------
OPERATING EXPENSES:
Real estate taxes 4,495 4,363
Operating and maintenance 1,363 1,175
Utilities 1,611 2,384
Payroll 925 848
Management fees 481 470
Professional fees 119 109
General and administrative 38 55
Depreciation and amortization 2,950 3,060
------------ ------------
Total operating expenses 11,982 12,464
------------ ------------
OTHER ITEMS:
Interest income 90 326
Interest expense (10,046) (10,054)
Gain on repurchase of minority interest -- 13,009
------------ ------------
Total other items (9,956) 3,281
------------ ------------
NET INCOME 1,191 13,604
OTHER COMPREHENSIVE INCOME/(LOSS) 5,463 (13,610)
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ 6,654 $ (6)
============ ============
NET INCOME PER COMMON SHARE:
Net Income $ .09 $ 1.05
============ ============
Weighted Average Common Shares Outstanding 13,004,443 13,001,246
============ ============
NET INCOME PER COMMON SHARE (assuming dilution):
Net Income $ .09 $ 1.05
============ ============
Weighted Average Common Shares Outstanding (including 3,000
shares of Common Stock issuable upon the exercise of
outstanding options as of March 31, 2002 and 2001) 13,007,443 13,004,246
============ ============
See notes to consolidated financial statements.
F-15
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Quarters Ended March 31,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,191 $ 13,604
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,034 4,144
Gain on repurchase of minority interest -- (13,009)
Change in operating assets and liabilities:
Increase in escrow deposits and restricted cash (6,377) (5,220)
Decrease in due from tenants 899 714
Decrease in prepaid expenses and other assets 4,506 4,448
Decrease/(increase) in deferred rent receivable 35 (104)
Decrease in accounts payable and accrued expenses (159) (949)
Increase/(decrease) in tenant security deposits, unearned revenue and
credits due tenants 849 (305)
------------ ------------
Net cash provided by operating activities 4,978 3,323
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to building and equipment (25) (756)
Additions to leasing costs (156) (22)
Changes in note receivable 4 4
------------ ------------
Net cash used in investing activities (177) (774)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of minority interest -- (1,400)
Other 46 (16)
------------ ------------
Net cash used in financing activities 46 (1,416)
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 4,847 1,133
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,012 15,066
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,859 $ 16,199
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during period $ 7,751 $ 9,038
============ ============
Dividends declared $ 3,251 $ 3,250
============ ============
See notes to consolidated financial statements.
F-16
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except share information)
1. BACKGROUND, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization - Metropolis Realty Trust, Inc., a Maryland corporation
("Metropolis" or the "Company"), was formed on May 13, 1996 to facilitate
the consummation of the Second Amended Joint Plan of Reorganization of 237
Park Avenue Associates, L.L.C. ("237 LLC") and 1290 Associates, L.L.C.
("1290 LLC," and together with 237 LLC, the "Predecessors"), dated
September 20, 1996 (the "Plan"). Pursuant to the Plan, on October 10,
1996, the date operations commenced ("Effective Date"), the Company
acquired the interests of 237 LLC and 1290 LLC in the properties located
at 237 Park Avenue (the "237 Property") and 1290 Avenue of the Americas
(the "1290 Property").
On November 22, 1999, the Company sold all of its interests in the 237
Property. Following such sale, the Company owned a 94.05% partnership
interest, as limited partner, in 1290 Partners, L.P., a Delaware limited
partnership (the "1290 Property Owning Partnership"). The 1290 Property
Owning Partnership owns the 1290 Property. A wholly-owned subsidiary of
the Company ("1290 GP Corp.") owns a 1% interest, as general partner, in
the 1290 Property Owning Partnership. The remaining 4.95% interest in the
1290 Property Owning Partnership was owned by 237/1290 Upper Tier
Associates, L.P., a Delaware limited partnership (the "Upper Tier LP"). On
March 23, 2001, the Company acquired the limited partnership interest held
by the Upper Tier LP for $1,400 in accordance with the Agreement of
Limited Partnership of the 1290 Property Owning Partnership. Upon
consummation of such transaction, and as of March 31, 2002, the Company
directly and indirectly owns 100% of the 1290 Property Owning Partnership.
Basis of Presentation - The consolidated financial statements include
Metropolis and each of the entities through which Metropolis indirectly
owns the 1290 Property. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Rental Property - Rental property is carried at cost, net of accumulated
depreciation and amortization, and includes land, building, tenant
improvements and building improvements. Land is carried at $63,500 as of
March 31, 2002 and December 31, 2001. Building, tenant improvements and
building improvements are carried at $343,310 and $343,286 as of March 31,
2002 and December 31, 2001, respectively. If a property is determined to
be impaired, it must be written down to its estimated fair value. Fair
value is defined as the amount for which the asset could be bought or sold
in a current transaction, that is, other than a forced or liquidation
sale. No impairment of the 1290 Property exists as of March 31, 2002.
Cash and Cash Equivalents - Cash and cash equivalents includes investments
purchased with an original maturity of three months or less.
Depreciation and Amortization - Building and building improvements are
depreciated over their useful lives of 40 years using the straight-line
method. Furniture and fixtures are depreciated over their useful lives,
ranging from 5 to 7 years. Tenant improvements are amortized on a
straight-line basis over the terms of the respective leases.
Deferred Charges - Deferred financing costs are amortized over the term of
the related loan. Direct costs related to leasing are amortized over the
related lease term.
F-17
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
Rental Income - Rental income is recognized on a straight-line basis over
the terms of the related leases. Differences between actual base amounts
due from tenant leases and the straight-line basis are included in
deferred rent receivable.
Escrow Deposits and Restricted Cash - Escrow deposits and restricted cash
as of March 31, 2002 and December 31, 2001 includes amounts held in
reserve for tenant improvements, leasing commissions, insurance, real
estate taxes and real estate tax refunds due to former tenants.
Accounts Payable and Accrued Expenses - Accounts payable and accrued
expenses as of March 31, 2002 and December 31, 2001 include property
operating expenses payable and tenant claims against real estate tax
proceeds.
Derivative Instruments - Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities, was implemented by the Company on January 1, 2001. SFAS No.
133, as amended and interpreted, establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. All
derivatives, whether designated as hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the
derivative is designated as a fair-value hedge, the changes in the fair
value of the derivative and the hedged item are recognized in earnings. If
the derivative is designated as a cash-flow hedge, the effective portion
of changes in the fair value of the derivative is recorded in other
comprehensive income (loss) and will be recognized in the income statement
when the hedged item affects earnings. The ineffective portion of changes
in the fair value of the derivative designated as a cash flow hedge is
recognized in the income statement. SFAS No. 133 defines new requirements
for designation and documentation of hedging relationships as well as
ongoing effectiveness assessments in order to use hedge accounting. For a
derivative that does not qualify as a hedge, changes in fair value are
recognized in earnings.
On January 1, 2001, the Company recorded approximately $6,900 in other
comprehensive loss as a cumulative transition adjustment to record its
interest rate swap agreement (see Note 2) at its estimated fair value as
of that date.
Recent Pronouncement - In August 2001, the FASB issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long Lived Assets (effective
January 1, 2002). SFAS No. 144 supercedes existing accounting literature
dealing with impairment and disposal of long-lived assets, including
discontinued operations. It addresses financial accounting and reporting
for the impairment of long-lived assets and for long-lived assets to be
disposed of, and expands current reporting for discontinued operations to
include disposals of a "component" of an entity that has been disposed of
or is classified as held for sale. Implementation of this standard did not
have a material impact on the Company's consolidated financial statements.
Use of Estimates - The presentation of the financial statements requires
estimates and assumptions that affect the reported amounts of assets and
liabilities as of March 31, 2002 and December 31, 2001 and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Fair Value of Financial Instruments - The carrying amount of cash and cash
equivalents, escrow deposits and restricted cash, tenant security
deposits, accounts receivable and accounts payable are a reasonable
estimate of their fair value due to their short-term nature. Management
believes the fair market value of the mortgage loan payable approximates
the carrying value at March 31, 2002 and December 31, 2001. The fair value
estimates presented herein are based on pertinent information available to
management as of March 31, 2002 and December 31, 2001.
Income Taxes - The Company qualifies as a REIT under the Internal Revenue
Code, as amended, and will generally not be taxed at the corporate level
on income it currently distributes to its
F-18
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
stockholders so long as it, among other things, distributes at least 90%
of its REIT taxable income.
2. MORTGAGE LOAN
The mortgage loan represents a $425,000 mortgage loan (the "1290 Mortgage
Loan") secured by the 1290 Property. Interest on the 1290 Mortgage Loan is
based on LIBOR plus 2% and requires interest only payments through
maturity on January 2, 2003. The 1290 Property Owning Partnership has a
one time right (subject to achieving certain conditions, including a debt
service coverage ratio, loan to value ratio and the payment of a 25 basis
point extension fee) at its option to extend the maturity for a period of
twelve months. The 1290 Mortgage Loan may be repaid in whole without
penalty. The costs associated with securing the 1290 Mortgage Loan of
approximately $12,932 are included in deferred financing costs and are
amortized over the term of the 1290 Mortgage Loan as a component of
interest expense.
The 1290 Property Owning Partnership and Morgan Stanley Derivative
Products, Inc. entered into an Interest Rate Exchange Agreement effective
December 13, 1999 (the "1290 Swap Agreement"). The 1290 Swap Agreement
provides that the 1290 Property Owning Partnership will pay interest at an
effective rate of 8.4995% per annum on the notional amount of $425,000.
Management believes that the risk of incurring losses related to the
credit risk is remote and that any losses would be immaterial.
The 1290 Swap Agreement has been designated as a cash flow hedge and was
deemed to be perfectly effective. As such, changes in the fair value of
the 1290 Swap Agreement have been reflected as other comprehensive income
in the accompanying statement of operations and comprehensive income
(loss). The difference between accrued interest expense calculated at the
effective rate under the 1290 Swap Agreement and accrued interest expense
calculated at the interest rate under the 1290 Mortgage Loan is recognized
currently in earnings as interest.
The maturity date of the 1290 Mortgage Loan and the termination date of
the 1290 Swap Agreement are identical. The estimate of the cost to unwind
the 1290 Swap Agreement is approximately $14,182 at March 31, 2002. The
1290 Property Owning Partnership expects to reclassify all net losses on
cash flow hedges included in accumulated other comprehensive loss into
earnings within the next 12 months. As of March 31, 2002, this amount is
approximately $12,433.
3. SUBORDINATED MINORITY INTEREST
The Subordinated Minority Interest represented the 99% limited partnership
interest of JMB/NYC Office Building Associates, L.P. in the Upper Tier LP
which owned a subordinated 4.95% limited partnership interest in the 1290
Property Owning Partnership (the "Subordinated Minority Interest"). On
March 23, 2001, the Company exercised its right to repurchase the
Subordinated Minority Interest that was owned by the Upper Tier LP in
accordance with the Agreement of Limited Partnership of the 1290 Property
Owning Partnership. The exercise of such repurchase right resulted in a
payment of $1,400 by the Company to the Upper Tier LP and a gain to the
Company of $13,009.
4. STOCKHOLDERS' EQUITY
The Company has the authority to issue 50,000,000 shares of common stock,
par value $10 per share (the "Common Stock"), and 10,000,000 shares of
Preferred Stock, par value $10 per share. On October 10, 2001, the
classification of the Common Stock into two classes of Common Stock
terminated pursuant to the terms of the Charter. All shares of Class A and
Class B Common Stock were automatically converted into a single class of
Class A common stock. As of March
F-19
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
31, 2002, there were 13,004,946 shares of the Company's Class A Common
Stock issued and outstanding.
5. STOCK PLAN AND REGISTRATION RIGHTS
The Board of Directors of the Company adopted a Directors' Stock Plan (the
"Stock Plan") effective October 10, 1996. Pursuant to the Stock Plan, the
Board of Directors of the Company has the authority to issue to members of
the Company's Board of Directors options to purchase, in the aggregate,
100,000 shares of Common Stock. On the Effective Date, the initial members
of the Company's Board of Directors were granted options entitling each
Director to purchase an aggregate of 3,000 shares of Common Stock at an
exercise price of $25 per share.
Pursuant to the Stock Plan, each Director received 400 shares of Common
Stock at the annual meetings for fiscal years 1997, 1998, 2000 and 2001 in
consideration for services rendered to the Company during such years. The
value of such shares was based upon the most recent price at which shares
of the Company's Common Stock were traded prior to such grant of shares
and is included as an operating expense.
As of March 31, 2002, there were outstanding options to acquire an
aggregate of 3,000 shares of Common Stock at an exercise price of $12.50
per share.
The Company has entered into a Registration Rights Agreement between the
Company and certain holders of Common Stock. The Registration Rights
Agreement permits such stockholders to demand, subject to certain
conditions, that the Company register their Common Stock for sale and
provides all of the Company's stockholders with the right to participate
proportionally in any public offering of the Company's securities.
6. RELATED PARTY TRANSACTIONS
Asset Management - The Company has entered into an Asset Management
Agreement with a company ("Asset Manager") that is directly affiliated
with two of Metropolis' stockholders. One of these stockholders is also a
Director and Officer of the Company. The Asset Manager provides asset
advisory, consultation and management services for the Company. Fees for
such services are payable in arrears at a rate of $25 per month. The Asset
Management Agreement also provides for reimbursement of costs and expenses
for contractors and professional fees, as incurred. Asset management fees
incurred for each of the quarters ended March 31, 2002 and 2001 aggregated
approximately $75.
Property Management - The Company has also entered into a Management and
Leasing Agreement with a company ("Property Manager/Leasing Agent") that
is an affiliate of a stockholder. The Property Manager/Leasing Agent
manages and operates the 1290 Property and provides all supervisory,
management and leasing services. The Management and Leasing Agreement
provides for a fee of 1.5% of gross revenues, payable monthly, and
reimbursement for overhead and all reasonable out-of-pocket-expenses
incurred. The Management and Leasing Agreement also provides for leasing
commissions to be calculated on a sliding scale percentage basis of a
lease's base rent. Fees incurred under the Management and Leasing
Agreement for the quarters ended March 31, 2002 and 2001 aggregated $374
and $352, respectively.
An affiliate of the Property Manager/Leasing Agent provided cleaning
services for the 1290 Property through February 2001. Fees paid for
cleaning services for the quarters ended March 31, 2002 and 2001 totaled
$0 and $405, respectively.
REIT Management - The Company has entered into a REIT Management Agreement
with the Property Manager/Leasing Agent ("REIT Manager"). The REIT Manager
performs certain accounting, administrative and monitoring services. The
REIT Management Agreement provides
F-20
METROPOLIS REALTY TRUST, INC.
AND SUBSIDIARIES
for compensation to the REIT Manager of a monthly fee and reimbursement of
documented out-of-pocket expenses. Fees incurred under the REIT Management
Agreement for each of the quarters ended March 31, 2002 and 2001
aggregated approximately $31.
Participation in Sale of 1290 Property - As described in the Note titled
"Subsequent Events", the Company has entered into a definitive amended and
restated agreement to sell all of its interests in the 1290 Property to an
affiliate of Jamestown (the "Jamestown Partnership") for $745.5 million,
subject to certain adjustments and customary prorations. Certain existing
directors and officers of the Company are partners of Apollo Real Estate
Advisors, L.P. ("AREA") and officers of the general partner of AREA. AREA
is the general partner of Apollo Real Estate Investment Fund, L.P.
("AREIF"). AREIF owns 100% of the limited liability company interests of
AP-1290 Partners LLC, which in turn owns a 25% limited partnership
interest in the Jamestown Partnership.
F-21