-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LiPtKqlt+XiN8uqJl9Vgb9hwf50pumw4nVtHgDpIyzw2K9Nio+/xjxAwE55kZuIq UT8a2TMeLkd7pOr2JPvB9w== 0000928385-99-003396.txt : 19991117 0000928385-99-003396.hdr.sgml : 19991117 ACCESSION NUMBER: 0000928385-99-003396 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARRAMERICA REALTY CORP CENTRAL INDEX KEY: 0000893577 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 521796339 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11706 FILM NUMBER: 99753123 BUSINESS ADDRESS: STREET 1: 1850 K STREET NW STREET 2: SUITE 500 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2027297500 MAIL ADDRESS: STREET 1: 1700 PENNSYLVANIA AVENUE STREET 2: SUITE 700 CITY: WASHINGTON STATE: DC ZIP: 20006 FORMER COMPANY: FORMER CONFORMED NAME: CARR REALTY CORP DATE OF NAME CHANGE: 19940218 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20543 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED September 30, 1999 ------------------ COMMISSION FILE NO. 1-11706 ------- CARRAMERICA REALTY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-1796339 - -------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1850 K Street, N.W., Washington, D.C. 20006 - -------------------------------------------------------------------------------- (Address or principal executive office) (Zip code) Registrant's telephone number, including area code (202) 729-1000 -------------- N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Number of shares outstanding of each of the registrant's classes of common stock, as of November 12, 1999: -- Common Stock, par value $.01 per share: [66,823,469] shares - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or such shorter period that the Registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days. YES X NO ----------- ------------ Index -----
Page ---------- Part I: Financial Information - ----------------------------- Item 1. Financial Statements Condensed consolidated balance sheets of CarrAmerica Realty Corporation and subsidiaries as of September 30, 1999 (unaudited) and December 31, 1998......... 4 Condensed consolidated statements of operations of CarrAmerica Realty Corporation and subsidiaries for the three months ended September 30, 1999 and 1998 (unaudited)............................................................ 5 Condensed consolidated statements of operations of CarrAmerica Realty Corporation and subsidiaries for the nine months ended September 30, 1999 and 1998 (unaudited)............................................................ 6 Condensed consolidated statements of cash flows of CarrAmerica Realty Corporation and subsidiaries for the nine months ended September 30, 1999 and 1998 (unaudited)............................................................ 7 Notes to condensed consolidated financial statements (unaudited)................ 8 to 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 13 to 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................. 21 Part II: Other Information - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders......................... 22 Item 6. Exhibits and Reports on Form 8-K............................................ 22
2 Part I ------ ITEM 1. FINANCIAL INFORMATION --------------------- The information furnished in the accompanying condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows of CarrAmerica Realty Corporation and subsidiaries (the Company) reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the aforementioned financial statements for the interim periods. The aforementioned financial statements should be read in conjunction with the notes to the financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. 3 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets As Of September 30, 1999 and December 31, 1998 - -------------------------------------------------------------------------------- (In thousands, except per share and share amounts)
September 30, December 31, 1999 1998 -------------- ------------- (Unaudited) Assets - ------ Rental property: Land $ 647,402 $ 692,484 Buildings 2,019,098 2,051,734 Tenant improvements 272,064 192,211 Furniture, fixtures and equipment 100,862 57,140 ----------------- ------------ 3,039,426 2,993,569 Less - accumulated depreciation (312,686) (262,458) ----------------- ------------ Total rental property 2,726,740 2,731,111 Land held for development 123,999 119,141 Construction in progress 166,398 347,294 Cash and cash equivalents 58,206 36,499 Restricted cash and cash equivalents 24,708 48,640 Accounts and notes receivable 59,202 47,251 Investments 90,273 101,679 Accrued straight-line rents 43,251 39,273 Tenant leasing costs, net 52,772 42,552 Deferred financing costs, net 17,583 19,911 Goodwill, net 240,595 221,570 Prepaid expenses and other assets, net 33,148 38,563 ----------------- ------------ $3,636,875 $3,793,484 ================= ============ Liabilities, Minority Interest, and Stockholders' Equity - -------------------------------------------------------- Liabilities: Mortgages and notes payable $1,680,175 $1,704,359 Accounts payable and accrued expenses 102,022 133,767 Rent received in advance and security deposits 50,211 47,692 ----------------- ------------ Total liabilities 1,832,408 1,885,818 Minority interest 105,347 93,264 Stockholders' equity: Preferred Stock, $.01 par value, authorized 35,000,000 shares: Series A Cumulative Convertible Redeemable Preferred Stock, $.01 par value, 680,000 shares issued and outstanding with an aggregate liquidation preference of $17.0 million. 7 7 Series B, C and D Cumulative Redeemable Preferred Stock, 8,800,000 shares issued and outstanding with an aggregate liquidation preference of $400.0 million. 88 88 Common Stock, $.01 par value, authorized 180,000,000 shares, issued and outstanding 66,798,956 shares at September 30, 1999 and 71,760,172 shares at December 31, 1998. 668 718 Additional paid in capital 1,816,982 1,926,057 Accumulated other comprehensive (loss) income (109) 463 Cumulative dividends in excess of net income (118,516) (112,931) ----------------- ------------ Total stockholders' equity 1,699,120 1,814,402 ----------------- ------------ $3,636,875 $3,793,484 ================= ============
See accompanying notes to condensed consolidated financial statements 4 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Three Months Ended September 30, 1999 and 1998 - -------------------------------------------------------------------------------- (Unaudited and in thousands, except per share amounts)
1999 1998 ------------ -------- Operating revenues: Rental revenue: Minimum base rent $107,621 $ 98,127 Recoveries from tenants 14,530 12,175 Parking and other tenant charges 6,160 3,355 ------------ -------- Total rental revenue 128,311 113,657 Executive suites revenue 62,216 46,860 Real estate service revenue 4,202 4,471 ------------ -------- Total operating revenues 194,729 164,988 ------------ -------- Operating expenses: Property expenses: Operating expenses 30,862 30,033 Real estate taxes 10,887 9,897 Interest expense 25,924 19,560 Executive suites expenses 59,009 38,563 General and administrative 10,596 8,379 Depreciation and amortization 39,598 28,523 ------------ -------- Total operating expenses 176,876 134,955 ------------ -------- Operating income 17,853 30,033 ------------ -------- Other income: Interest Income 1,340 1,391 Equity in earnings of unconsolidated partnerships 1,160 1,285 ------------ -------- Total other income 2,500 2,676 ------------ -------- Net income before gain on sale of assets, income taxes and minority interest 20,353 32,709 Income tax benefit (expense) 2,012 (574) Minority Interest (4,262) (2,598) ------------ -------- Net income before gain on sale of assets 18,103 29,537 Gain on sale of assets 21,284 6,844 ------------ -------- Net income 39,387 36,381 Other comprehensive gain (loss)-foreign currency translation adjustment 2,154 685 ------------ -------- Comprehensive income $ 41,541 $ 37,066 ============ ======== Basic net income per common share $0.46 $0.38 ============ ======== Diluted net income per share $0.45 $0.37 ============ ========
See accompanying notes to condensed consolidated financial statements 5 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Nine Months Ended September 30, 1999 and 1998 - -------------------------------------------------------------------------------- (Unaudited and in thousands, except per share amounts)
1999 1998 ------------ --------- Operating revenues: Rental revenue: Minimum base rent $311,934 $276,199 Recoveries from tenants 42,501 35,391 Parking and other tenant charges 14,572 9,360 ------------ --------- Total rental revenue 369,007 320,950 Executive suites revenue 167,524 97,169 Real estate service revenue 13,049 10,985 ------------ --------- Total operating revenues 549,580 429,104 ------------ --------- Operating expenses: Property expenses: Operating expenses 90,974 78,223 Real estate taxes 33,750 28,858 Interest expense 71,536 54,137 Executive suites expenses 154,602 82,004 General and administrative 28,888 22,841 Depreciation and amortization 103,232 78,402 ------------ --------- Total operating expenses 482,982 344,465 ------------ --------- Operating income 66,598 84,639 ------------ --------- Other income: Interest Income 3,945 3,698 Equity in earnings of unconsolidated partnerships 3,791 3,753 Gain on settlement of treasury locks 4,489 -- ------------ --------- Total other income 12,225 7,451 ------------ --------- Net income before gain on sale of assets, income taxes and minority interest 78,823 92,090 Income taxes 1,760 (574) Minority Interest (14,430) (13,549) ------------ --------- Net income before gain on sale of assets 66,153 77,967 Gain on sale of assets 49,815 33,030 ------------ --------- Net income 115,968 110,997 Other comprehensive gain (loss) - foreign currency translation adjustment (572) 1,009 ------------ --------- Comprehensive income $115,396 $112,006 ============ ========= Basic net income per common share $1.31 $1.25 ============ ========= Diluted net income per share $1.31 $1.25 ============ =========
See accompanying notes to condensed consolidated financial statements 6 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 1999 and 1998 - -------------------------------------------------------------------------------- (Unaudited and in thousands)
1999 1998 ---------------- --------------- Cash flows from operating activities: Net income $ 115,968 $ 110,997 ---------------- --------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 103,232 78,402 Minority interest in income 14,430 13,549 Equity in earnings of unconsolidated partnerships (3,791) (3,753) Gain on sale of assets (49,815) (33,030) Change in assets and liabilities, net of acquisitions and dispositions: Increase in accounts and notes receivable (11,951) (14,886) Increase in accrued straight-line rents (3,978) (3,725) Additions to tenant leasing costs (7,206) (8,654) Decrease (increase) in prepaid expenses and other assets (23,534) 3,131 Increase (decrease) in accounts payable and accrued expenses (30,303) 44,358 Increase (decrease) in rent received in advance and security deposits 2,519 21,341 ---------------- --------------- Total adjustments (10,397) 96,773 ---------------- --------------- Net cash provided by operating activities 105,571 207,770 ---------------- --------------- Cash flows from investing activities: Acquisition and development of executive suites assets (44,459) (203,615) Acquisition and development of rental property (29,644) (323,670) Additions to land held for development (22,118) (126,915) Additions to construction in progress (199,595) (283,694) Distributions from unconsolidated partnerships 22,660 4,367 Investments in unconsolidated partnerships (7,462) (50,430) Decrease (increase) in restricted cash and cash equivalents 23,932 (76,014) Proceeds from sales of rental property 432,461 95,836 ---------------- --------------- Net cash provided (used) by investing activities 175,775 (964,135) ---------------- --------------- Cash flows from financing activities: Net proceeds from sales of common and preferred stock -- 335,960 Repurchase of common stock (109,757) -- Net borrowings (repayments) on unsecured credit facility (66,000) 388,000 Proceeds from issuance of unsecured notes -- 200,000 Proceeds from refinance of existing mortgages 51,977 -- Repayment of mortgages payable (10,160) (21,848) Dividends and distributions to minority interests paid (129,877) (120,163) Contributions from minority interests 6,044 5,331 Additions to deferred financing costs (1,478) (14,716) Other 184 41 ---------------- --------------- Net cash provided (used) by financing activities (259,067) 772,605 ---------------- --------------- Foreign currency translation adjustment (572) 1,472 ---------------- --------------- Increase in unrestricted cash and cash equivalents 21,707 17,712 Unrestricted cash and cash equivalents, beginning of the period 36,499 23,845 ---------------- --------------- Unrestricted cash and cash equivalents, end of the period $ 58,206 $ 41,557 ================ =============== Supplemental disclosure of cash flow information: Cash paid for interest (net of capitalized interest of $21,729 and $21,408 for the nine months ended September 30, 1999 and 1998, respectively) $ 69,620 $ 55,839 ================ =============== Supplemental disclosure of non-cash investing and financing activities: During the nine months ended September 30, 1998, the Company funded a portion of the aggregate purchase price of its property acquisitions by assuming $11.1 million of debt and liabilities and by issuing $10.0 million of Units.
See accompanying notes to condensed consolidated financial statements 7 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) BUSINESS CarrAmerica Realty Corporation (the "Company") is a self-administered and self-managed equity real estate investment trust ("REIT"), organized under the laws of Maryland, which owns, develops, acquires and operates office properties. The Company's office properties are located primarily in 14 suburban markets across the United States. HQ Global Workplaces, Inc., previously referred to as Omni Offices, Inc., ("HQ Global") and OmniOffices (UK) Limited and Omni Offices (Lux) 1929 Holding Company (collectively, "Omni UK/Europe"), the Company's executive suites affiliates, are engaged in the business of leasing commercial office space in the form of executive office suites and providing related communications technology and business services, including word processing, desktop publishing, digital color printing, conference rooms, training facilities and meeting support and scheduling. HQ Global and Omni UK/Europe offered short-term leases and service packages at 263 business centers located in over 80 cities in 17 countries as of September 30, 1999. (B) BASIS OF PRESENTATION The accounts of the Company and its majority-owned/controlled subsidiaries and affiliates are consolidated in the accompanying financial statements. The Company uses the equity method of accounting for its investments in and earnings and losses of unconsolidated partnerships not controlled by the Company. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (C) INTERIM FINANCIAL STATEMENTS The information furnished reflects all adjustments, which are, in the opinion of management, necessary to reflect a fair presentation of the results for the interim periods, and all such adjustments are of a normal, recurring nature. (D) NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", which requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company is evaluating and has not yet determined the impact of this pronouncement, if any. (E) PER SHARE DATA AND DIVIDENDS The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for net income:
Three Months Three Months Ended September 30, 1999 Ended September 30, 1998 --------------------------------------------------------------------------------------------- Income Per Income Per (000'S) Shares Share (000's) Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount --------------------------------------------------------------------------------------------- Basic EPS $30,454 66,795 $0.46 $27,418 71,665 $ 0.38 Effect of Dilutive Securities: Stock Options -- 105 (.01) -- 80 -- Units in Carr Realty, L.P. -- -- -- 1,234 4,774 (0.01) ----------- ------------- -------- ------------ ------------- -------- Diluted EPS $30,454 66,900 $0.45 $28,652 76,519 $ 0.37 =========== ============= ======== ============ ============= ========
8 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Notes to Condensed Financial Statements (Continued) (Unaudited)
Nine Months Nine Months Ended September 30, 1999 Ended September 30, 1998 --------------------------------------------------------------------------------------------- Income Per Income Per (000'S) Shares Share (000's) Shares Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount --------------------------------------------------------------------------------------------- Basic EPS $89,452 68,208 $1.31 $84,358 67,504 $1.25 Effect of Dilutive Securities: Stock Options -- 119 -- -- 154 -- ----------- ------------- -------- ------------ ------------- -------- Diluted EPS $89,452 68,327 $1.31 $84,358 67,658 $1.25 =========== ============= ======== ============ ============= ========
Net income has been reduced by preferred stock dividends of $8,933 and $8,963 for the three month periods ended September 30, 1999 and 1998, respectively and $26,516 and $26,639 for the nine month periods ended September 30, 1999 and 1998, respectively. The effects of stock options, units and Series A Preferred Stock are not included in the computation of diluted EPS for a given period if their effect is antidilutive. (F) RECLASSIFICATIONS Certain reclassifications of prior period amounts have been made to conform to the current period's presentation. (2) HEDGING TRANSACTIONS In 1998, the Company entered into forward treasury agreements in order to hedge against the impact that interest rate fluctuations would have on debt instruments the Company planned to issue in the future. At December 31, 1998, the Company determined that these agreements no longer represented effective hedges and recorded a loss of $13.7 million in anticipation of terminating the agreements. In February 1999, the Company settled these contracts for $9.2 million in cash and recorded a gain of $4.5 million. (3) COMMON STOCK In April 1998, the Company sold 5,000,000 shares of common stock to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), resulting in net proceeds to the Company of approximately $147 million, in what is commonly know as a "forward equity sale" transaction. In 1998, the Company paid Merrill Lynch $39.3 million and in March 1999 the Company settled this agreement with a final payment of $109.7 million, at which time the 5,000,000 shares were repurchased by the Company and cancelled. (4) GAIN ON SALE OF ASSETS The Company has disposed of certain assets that are inconsistent with its long-term strategic or return objectives or where market conditions for sale are favorable. During the nine months ended September 30, 1999, the Company disposed of 60 operating office properties recognizing gains totaling $49.8 million. Estimated income taxes of $13.7 million previously accrued on gains on sales were eliminated during the quarter when, based on revised estimates of REIT taxable income and expected dividend distributions, it was determined that the entire amount of these gains will be designated as having been distributed to the Company's shareholders, resulting in no tax liability at the corporate level on those gains. 9 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Notes to Condensed Financial Statements (Continued) (Unaudited) (5) HQ GLOBAL INITIAL PUBLIC OFFERING The Board of Directors of HQ Global decided to postpone an initial public offering of it's common stock. The Company expensed all costs associated with the postponed offering, approximately $1 million, in the third quarter ended September 30,1999. (6) SEGMENT INFORMATION The Company's reportable operating segments are real estate property operations, executive office suites operations and development operations. Development operations is primarily third-party development fee income and associated expenses. Other business activities and operating segments that are not reportable are included in other operations. The Company's operating segments' performances are measured using funds from operations. Funds from operations represent net income before minority interest and extraordinary items, excluding depreciation and amortization on real estate assets and the executive suites business, losses associated with the executive office suites centers under development, deferred taxes and gain on sale of assets.
(In millions) For the Three Months Ended September 30, 1999 ----------------------------------------------------------------------------------------------- Real Estate Executive Property Office Suites Development Other Operations Operations Operations Operations Total --------------------- ----------------- ----------------- ---------------- -------- Operating revenue $128.3 62.2 1.6 2.6 $194.7 Segment expense 41.7 55.1 1.6 9.1 107.5 --------------------- ----------------- ----------------- ---------------- -------- Net segment revenue (expense) 86.6 7.1 -- (6.5) 87.2 Interest expense 13.0 2.4 -- 10.5 25.9 Other income (expense), net 6.0 (0.6) -- (4.4) 1.0 --------------------- ----------------- ----------------- ---------------- -------- Funds from operations $ 79.6 4.1 -- (21.4) 62.3 ===================== ================= ================= ================ ======== Adjustments: Depreciation and amortization (38.1) Other, net (3.9) -------- Net income before gain on sale of assets, incomes taxes and minority interest $ 20.3 ========
10 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Notes to Condensed Financial Statements (Continued) (Unaudited)
(In millions) For the Three Months Ended September 30, 1998 ----------------------------------------------------------------------------------------------- Real Estate Executive Property Office Suites Development Other Operations Operations Operations Operations Total --------------------- ----------------- ----------------- ---------------- -------- Operating revenue $113.7 46.8 .7 3.8 $165.0 Segment expense 39.9 37.1 .8 7.7 85.5 --------------------- ----------------- ----------------- ---------------- -------- Net segment revenue (expense) 73.8 9.7 (.1) (3.9) 79.5 Interest expense 11.7 (.1) -- 7.9 19.5 Other income (expense), net 6.5 1.5 -- (5.9) 2.1 --------------------- ----------------- ----------------- ---------------- -------- Funds from operations $ 68.6 11.3 (.1) (17.7) 62.1 ===================== ================= ================= ================ ======== Adjustments: Depreciation and amortization (28.4) Other, net (1.0) -------- Net income before gain on sale of assets, incomes taxes and minority interest $ 32.7 ========
(In millions) For the Nine Months Ended September 30, 1999 ----------------------------------------------------------------------------------------------- Real Estate Executive Property Office Suites Development Other Operations Operations Operations Operations Total --------------------- ----------------- ----------------- ---------------- -------- Operating revenue $369.0 167.5 4.7 8.4 $ 549.6 Segment expense 124.7 143.2 3.3 25.7 296.9 --------------------- ----------------- ----------------- ---------------- -------- Net segment revenue (expense) 244.3 24.3 1.4 (17.3) 252.7 Interest expense 37.7 6.9 -- 26.9 71.5 Other income (expense), net 6.4 -- -- (1.5) 4.9 --------------------- ----------------- ----------------- ---------------- -------- Funds from operations $213.0 $ 17.4 1.4 (45.7) 186.1 ===================== ================= ================= ================ ======== Adjustments: Depreciation and amortization (100.9) Gain on settlement of treasury locks 4.5 Other, net (10.9) -------- Net income before gain on sale of assets, income taxes and minority interest $ 78.8 ========
11 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES Notes to Condensed Financial Statements (Continued) (Unaudited)
(In millions) For the Nine Months Ended September 30, 1998 ----------------------------------------------------------------------------------------------- Real Estate Executive Property Office Suites Development Other Operations Operations Operations Operations Total --------------------- ----------------- ----------------- ---------------- -------- Operating revenue $321.0 97.1 1.6 9.4 $429.1 Segment expense 107.1 79.0 1.9 21.0 209.0 --------------------- ----------------- ----------------- ---------------- -------- Net segment revenue (expense) 213.9 18.1 (.3) (11.6) 220.1 Interest expense 35.0 1.5 -- 17.6 54.1 Other income (expense), net 7.2 .6 -- (1.5) 6.3 --------------------- ----------------- ----------------- ---------------- -------- Funds from operations $186.1 17.2 (.3) (30.7) 172.3 ===================== ================= ================= ================ ======== Adjustments: Depreciation and amortization (77.3) Other, net (2.9) -------- Net income before gain on sale of assets, income taxes and minority interest $ 92.1 ========
12 Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company - -------------------------------------------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion is primarily based on the Condensed Consolidated Financial Statements of CarrAmerica Realty Corporation and its subsidiaries (the "Company") as of September 30, 1999 and December 31, 1998, and for the three and nine months ended September 30, 1999 and 1998. The comparability of the periods is significantly impacted by acquisitions completed, development properties placed in service and dispositions made during 1999 and 1998. As of September 30, 1998, the Company owned 288 properties. This number was reduced to 258 at September 30, 1999. The Company's reportable operating segments are real estate property operations, executive office suites operations and development operations. Development operations is primarily third-party development fee income and associated expenses. Other business activities and operating segments that are not reportable are included in other operations. This information should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto. These condensed consolidated financial statements include all adjustments, which are, in the opinion of management, necessary to reflect a fair statement of the periods presented, and all such adjustments are of a normal, recurring nature. RESULTS OF OPERATIONS - Three Months Ended September 30, 1999 and 1998 Real Estate Property Operations Total real estate property operating revenue increased $14 million, or 12%, to $128 million for the three months ended September 30, 1999, compared to $114 million for the three months ended September 30, 1998. This increase resulted from development properties placed in service and same store rental growth which exceeded the loss of rental revenue due to dispositions. Same store operating income grew by 5% or $3 million over the same period in 1998, primarily as a result of a 6% increase in rental revenue. The occupancy rate for same store properties increased to 96.2% for the third quarter of 1999 from 96.0% for the third quarter of 1998. Real estate property operating expenses increased $2 million primarily as a result of development properties placed in service. Same store operating expenses increased by $2 million or 7.9% over the third quarter of 1998 primarily as a result of higher real estate taxes and nonrecurring costs associated with Y2K compliance work on building facilities. Interest expense increased by $1.3 million over the three months ended September 30, 1998 as a result of the refinancing of properties with increased leverage. Executive Office Suites Operations Executive office suites operating revenue increased by $15 million to $62 million, or 32% in the third quarter of 1999 as a result of additional centers in operation from acquisitions and development of new centers. The number of stabilized centers owned and managed increased 34% from 109 centers at September 30, 1998 to 146 centers at September 30, 1999. In addition to the rental of executive suites, HQ Global provides services to customers including communications technology, word processing, desktop publishing, digital color printing, conference rooms, training centers and meeting support and scheduling. Operating expenses increased by $18 million, or 49%, primarily due to the addition of new centers. Interest expense increased $2 million in the third quarter of 1999 as a result of higher borrowing levels under the HQ Global unsecured line of credit to fund acquisition and development of new centers. Development Operations Development fee income increased $0.9 million to $1.6 million and development operating expenses increased $0.8 million to $1.6 million for the third quarter of 1999. These increases are the result of an increase over the prior period in the number of development fee projects the Company is managing. 13 Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company - -------------------------------------------------------------------------------- Other Operations Operating revenues decreased $1.2 million for the three months ended September 30, 1999 compared to the same period in 1998 primarily from decreases in leasing fee income and other income. Other operations expenses increased $1.4 million primarily as a result of professional fees associated with the Company's program Project Excellence. The project's mission is primarily to examine the Company's current finance, technology and business processes in order to identify and implement changes needed to improve them to the level of best practice. Interest expense increased from $7.9 million for the three months ended September 30, 1998 to $10.5 million for the comparable period in 1999. This increase resulted primarily from an additional $150 million of senior unsecured notes outstanding during the quarter and additional borrowings on the Company's unsecured line of credit. RESULTS OF OPERATIONS - Nine Months Ended September 30, 1999 and 1998 Real Estate Property Operations Total real estate property operating revenue increased $48 million, or 15%, to $369 million for the nine months ended September 30, 1999 as the effect of development properties placed in service and same store rental growth exceeded the loss of rental revenue due to dispositions. Same store operating income grew by 6% or $9 million over the same period of 1998, primarily as a result of a 5% increase in rental revenue. The same store occupancy rate increased to 96.1% from 96.0% for the same period of 1998. Real estate operating expenses increased $18 million primarily as a result of development properties placed in service. Same store operating expenses increased by $4 million or 5% over the same period of 1998, primarily as a result of an increase in real estate taxes and additional costs associated with Y2K compliance work. Interest expense increased $3 million over the first nine months of 1998 as a result of the refinancing of properties with increased leverage. Executive Office Suites Operations Executive office suites operating revenue increased by $70 million to $168 million for the first nine months of 1999 over the comparable period of 1998 as a result of additional centers in operation from acquisitions and development of new centers. The number of stabilized operating centers owned and managed increased 34% from 109 at September 30, 1998 to a total of 146 as of September 30, 1999. Operating expenses increased $64 million, primarily due to the addition of new centers. Interest expense increased from $1.5 million in 1998 to $6.9 million in 1999 as a result of higher borrowing levels under the HQ Global unsecured line of credit to fund acquisition and development of new centers. Development Operations Development fee income increased $3.1 million to $4.7 million and development operating expenses increased $1.4 million to $3.3 million for the nine months ended September 30, 1999 compared to 1998. These increases are the result of an increase over the prior period in the number of development fee projects the company is managing. Other Operations Operating revenues decreased $1.0 million for the nine months ended September 30, 1999 compared to the same period in 1998 primarily from reductions in management and leasing fee income. 14 Other operations expenses increased $4.7 million primarily as a result of professional fees associated with Project Excellence and Y2K compliance work. Interest expense increased from $17.6 million for the nine months ended September 30, 1998 to $26.9 million for the comparable period in 1999. This increase resulted primarily from an additional $150 million of Senior Unsecured Notes outstanding during the nine months ended September 30, 1999 and additional borrowings on the Company's unsecured line of credit. Liquidity and Capital Resources The Company seeks to create and maintain a capital structure that will enable it to diversify its capital sources and thereby allow the Company to obtain additional capital from a number of different sources, including additional equity offerings of common and/or preferred stock, public and private debt financings, and, where appropriate, asset dispositions. Management believes that the Company will have access to the capital resources necessary to expand and develop its business, to fund its operating and administrative expenses, to continue debt service obligations, to pay dividends in accordance with REIT requirements, to acquire additional properties and land as market conditions permit, and to pay for construction in progress in both the short and long term. The Company's debt and preferred stock offerings have been rated by three rating agencies. Duff & Phelps Credit Rating Co. (DCR) and Standard & Poors (S&P) have each assigned their BBB rating to senior unsecured debt offerings of the Company and their BBB- rating to cumulative preferred stock offerings of the Company. As of September 30, 1999, Moody's Investor Service (Moody's) has assigned its Baa3 rating to senior unsecured debt offerings of the Company and its Ba2 rating to cumulative preferred stock offerings of the Company . The Company's total indebtedness at September 30, 1999 was approximately $1.7 billion, of which $416.5 million, or 25%, bears a LIBOR-based floating interest rate. The Company has a $450 million revolving credit facility, and HQ Global has a $200 million revolving credit facility, which is guaranteed by the Company. Currently, these unsecured credit facilities bear interest at 90 basis points over 30 day LIBOR. The Company's mortgages payable fixed rate indebtedness bears an effective weighted average interest rate of 8.0% at September 30, 1999 and has a weighted average term to maturity of 7.5 years. Based upon the Company's total market capitalization at September 30, 1999 of $3.7 billion (the common stock price was $21.94 per share; the total shares of common stock, convertible preferred stock and Units outstanding was 73,975,000 and the aggregate liquidation value of the cumulative redeemable preferred stock was $400 million), the Company's debt represented 45% of its total market capitalization. As of September 30, 1999, the Company had $416.5 million outstanding under the unsecured credit facilities, leaving $233.5 million available under these unsecured credit facilities. Rental revenue, executive suites revenue and real estate service revenue have been the principal sources of cash to fund the Company's operating expenses, debt service and routine capital expenditures. The Company and its affiliates also require capital to invest in their existing portfolio of operating assets for major capital projects such as large-scale renovations and tenant related capital expenditures, such as tenant improvements and allowances and leasing commissions. The Company believes that these sources of revenue will continue to provide the funds necessary for these expenditures. Additionally, the Company and its affiliates (including CarrAmerica Development, Inc.) will require a substantial amount of capital for development projects currently underway and planned for the future. As of September 30, 1999, the Company had approximately 2.0 million square feet of office space in 28 development projects under construction which are expected to require a total investment by the Company of approximately $296 million. As of September 30, 1999, the Company had expended $216 million, or 73 percent of the total expected investment. In addition, CarrAmerica Development has made commitments of $34.3 million for three additional development projects that will start construction in the fourth quarter of 1999. HQ Global and Omni UK/Europe are also developing 38 executive office suite centers. The total estimated cost of these projects is approximately $89.5 million. In addition, HQ Global and Omni UK/Europe will periodically consider acquisitions of existing executive office suite centers. Future cash 15 needs for expansion of HQ Global are expected to be met by cash flow from operations and draws on the HQ Global line of credit facility. Future cash needs of Omni UK/Europe are expected to be met primarily through third party financings or through debt or equity investments by the Company. The Company recently announced that the Board of Directors of HQ Global Services, Inc. has delayed the planned initial public offering of HQ Global's common stock. Prior to the second quarter of 1998, the Company met its capital requirements primarily by accessing the public equity and debt capital markets. As a general matter, conditions in the public equity and debt capital markets for most REITs have not been favorable since that time. In response to these unfavorable conditions, the Company has curtailed its acquisition program and satisfied its cash needs through the disposition of selected assets, the refinancing of selected assets, prudent use of joint ventures that reduce the Company's investment requirement and utilization of the Company's existing credit facilities. During the third quarter of 1999, the Company disposed of 9 operating properties, generating net proceeds of $75 million. As of November 14, 1999, the Company has 3 projects under contract for sale which are projected to produce net proceeds of $36.8 million of which $27.6 million is projected for the fourth quarter 1999. Due to uncertainties in the disposition process, there can be no assurance that these sales will close or that they will achieve the expected net proceeds. In addition, during the third quarter of 1999, the Company refinanced one loan totaling $12 million at a rate of 7.50% secured by one property located in Washington, D.C., which resulted in net proceeds to the Company of $6 million. In March 1999, the Company settled all obligations outstanding under its forward equity transaction with Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Company made a final payment of approximately $109.7 million, in addition to the $39.3 million paid in 1998, to settle the transaction. The 5,000,000 shares originally issued in the transaction in April 1998 were repurchased by the Company and cancelled. As a result of the Company's disposition and refinancing efforts, the Company believes that funding is available for all capital requirements thru the first quarter of 2000, including firm commitments for development projects. The Company expects to continue to rely on asset dispositions, asset refinancings, joint ventures and access to its credit facilities to fund capital requirements for the foreseeable future. Net cash provided by operating activities was $105.6 million for the nine months ended September 30, 1999, compared to $207.8 million for the nine months ended September 30, 1998. The decrease in net cash provided by operating activities resulted primarily from an increase in prepaid assets related to acquisition of executive suites centers and the timing of payments for accounts payable. The Company's investing activities provided $175.8 million for the nine months ended September 30, 1999 compared to the Company's investing activities using $964.1 million for the nine months ended September 30, 1998. The Company's investment activities included sales of office buildings, acquisitions of executive office suites businesses (through HQ Global and OmniUK/Europe), and land acquired for future development and additions to construction in progress. Net proceeds from the sales of rental property was $432.5 million for the nine months ended September 30, 1999. The Company invested approximately $29.6 million in improvements to existing real estate assets for the nine months ended September 30, 1999 and $323.7 million in acquisitions and improvements for the comparable period of 1998. Net of dividends paid, the Company's financing activities used net cash of $129.2 million for the nine months ended September 30, 1999 compared to net cash provided of $892.8 million for the nine months ended September 30, 1998. During the nine months ended September 30, 1999, the Company repurchased 5,000,000 common shares issued in its forward equity sale transaction for $109.7 million. Proceeds from the sale of rental properties were used to fund this transaction and to repay amounts on the unsecured credit facility. For the nine months ended September 30, 1999, the Company's net repayments on its unsecured credit facility were approximately $66 million. Net cash provided for the nine months ended September 30, 1998 was primarily due to $335.9 million of proceeds from the sale of common and preferred stock, $200 million from the issuance of unsecured notes, and $388 million from borrowings on the unsecured credit facility. 16 The Company's dividends are paid quarterly. Amounts accumulated for distribution are primarily invested by the Company in short-term investments that are collateralized by securities of the United States Government or certain of its agencies. Year 2000 Compliance The Year 2000 issue results from a programming convention in which computer programs use two digits rather than four to define the applicable year. Software and hardware may recognize a date using "00" as the year 1900, rather than the year 2000. Such an inability of computer programs to recognize a year that begins with "20" could result in business or building system failures, miscalculations or errors causing disruptions of operations or other business problems, including, among other things, a temporary inability to process transactions, send invoices or engage in other normal business activities. The Company has undertaken a comprehensive program to address the Year 2000 issue. In the second quarter of 1998, the Company expanded its program and appointed a Year 2000 Steering Committee to manage centrally its Year 2000 compliance program (known internally as "Project 2000"). The Steering Committee includes representatives of senior level management representing a wide array of the organization and is charged with overseeing the Company's comprehensive action plan designed to address Year 2000 issues. During the second quarter of 1998, the Company's Steering Committee engaged the independent consulting firm of Computer Technology Associates, Inc. ("CTA") to serve as the Project Manager for Project 2000. During the first quarter of 1999 and after completion of the assessment phase, CTA's role as Project Manager was modified and the Company designated two full-time employees as the Project Managers to oversee the remainder of Project 2000. As of the end of the second quarter, the Company ended its engagement of CTA and does not anticipate the need to use its services during the remainder of Project 2000. Project 2000 is organized into two areas of concentration: (i) Property Operations Embedded Systems and (ii) Internal Business Operations Technology. The Property Operations segment of the program focuses primarily on equipment and systems present in the Company's operating properties that may contain embedded microprocessor technology (such as elevators and HVAC systems). The Internal Business Operations segment focuses primarily on the Company's information technology, operating systems (such as billing, accounting and financial reporting systems) and certain systems of the Company's major vendors and material service providers. As described below, Project 2000 involves (i) the assessment of the Year 2000 problems that may affect the Company, (ii) the development of remedies to address the problems discovered in the assessment phase, (iii) the testing of such remedies and (iv) the preparation of contingency plans to deal with the potential failure of important and critical systems. Assessment. During the course of its assessment phase, the Company identified substantially all of the major components of its property and business operations systems which may be vulnerable to the Year 2000 issue. In terms of Property Operations, the Company has conducted a comprehensive inventory of all the buildings' systems and equipment. Systems were risk ranked (1-3) based upon each system's importance to the properties' operations. Those systems classified as level 2 or 3 (the highest levels of importance) were compared to CTA's existing embedded systems database to determine the status of Year 2000 compliance if it was not already known by the Company. If relevant information was not contained in the existing database, the system was then identified for processing through vendor management coordinated by CTA. Vendor management involved concentrated communication with the vendor in an attempt to determine the status of a systems Year 2000 compliance and any available remedies. As of the fourth quarter of 1998, inventory of the Company's then existing operating properties was complete. Assessment of property operations was complete as of the end of the first quarter of 1999. In terms of Internal Business Operations Technology, team leaders have been selected from each business unit and market office to assist in identifying software, hardware and external interfaces which may be vulnerable to Year 2000 issues. Inventorying of both core business units and all market offices was substantially completed by the end of the fourth quarter of 1998. A routine application upgrade of the Company's primary billing and accounting software was complete as of the end of the first quarter of 1999. The vendor of the software has 17 received the Information Technology Association of America (ITAA) 2000 Certification and represents that the system is Year 2000 ready, and the Company tested the system during the third quarter of 1999. In addition, the Company continued to communicate with other significant hardware, software and other material services providers and requested them to provide the Company with detailed, written information concerning existing or anticipated Year 2000 compliance of their systems insofar as the systems relate to such parties' business activities with the Company. Relying upon information received from its service providers, the Company rated the providers as favorable or unfavorable as to their Year 2000 compliance. As of the third quarter of 1999, substantially all of the Company's critical service providers stated they are currently ready or will be Year 2000 ready before December 31, 1999. Based upon these ratings the Company is developing contingencies and identifying back up vendors in the event any significant provider should fail to be Year 2000 compliant. The Company expects to continue to communicate with these vendors throughout 1999. Remediation and Testing Phase. Based upon the results of its assessment efforts, the Company initiated remediation and testing activities. The Company completed remediation on important and critical systems by the end of the second quarter of 1999. Selective validation testing of systems has been completed during the third quarter of 1999. The activities conducted during the remediation and testing phase were intended to provide assurance from both the Property Operation and the Internal Business perspectives that critical and important applications, systems and equipment will be substantially Year 2000 compliant on a timely basis. In this phase, the Company first evaluated applications, systems and equipment. If a potential Year 2000 problem was identified, the Company took steps to attempt to remediate the problem and, where applicable, has tested to confirm that the remediating changes were effective and will not adversely affect the functionality of that application. After the various applications, system components and equipment had undergone remediation and testing phases, the Company, where applicable, conducted integrated testing for the purpose of demonstrating functional integrated systems operations. Contingency Plans. The Company continues to update its contingency plans to handle its most reasonably likely worst case Year 2000 scenarios. The Company completed its determination of worst case scenarios after it had received and analyzed responses to the inquiries it had made of third parties. The Company expects to complete contingency plans by the end of November of 1999. Costs Related to the Year 2000 Issue. As of September 30, 1999, the Company has incurred approximately $4.3 million in costs for its Year 2000 program. The Company currently estimates that it will incur additional costs, which are not expected to exceed approximately $0.6 million, to complete its Year 2000 compliance work. The Company believes that a portion of these costs may be recoverable from tenants but has not determined at this time the extent to which such recovery can be realized. Risks Related to the Year 2000 Issue. Although the Company's Year 2000 efforts are intended to minimize the adverse effects of the Year 2000 issue on the Company's business and operations, the actual effects of the Year 2000 issue and the success or failure of the Company's efforts described above cannot be known until the year 2000. Failure by the Company and its major vendors, other material service providers and material clients to address adequately their respective Year 2000 issues in a timely manner (insofar as such issues relate to the Company's business) could have a material adverse effect on the Company's business, results of operations and financial condition. 18 Funds From Operations The Company believes that funds from operations is helpful to investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities and investing activities, it provides investors with an indication of the ability of the Company to incur and service debt, to make capital expenditures and to fund other cash needs. In accordance with the final National Association of Real Estate Investment Trusts (NAREIT) White Paper on funds from operations as approved by the Board of Governors of NAREIT on March 3, 1995, funds from operations represents net income (loss) (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring or sales of property, plus depreciation and amortization of assets uniquely significant to the real estate industry and after adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. The Company calculates its funds from operations by combining the funds from operations from its real estate operations, calculated in accordance with NAREIT's definition of funds from operations, and the earnings before depreciation, amortization and deferred taxes ("EBDADT") of the Company's executive suites business, excluding operating losses from centers under development. The Company's funds from operations may not be comparable to funds from operations reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company. Funds from operations does not represent net income or cash flow generated from operating activities in accordance with generally accepted accounting principles and, as such, should not be considered an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity or the Company's ability to make distributions. The following table provides the calculation of the Company's Funds From Operations:
(In thousands) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------------------------- 1999 1998 1999 1998 --------- --------- ---------- ---------- Net income before minority interest $ 43,649 $38,979 $130,398 $124,546 Adjustments to derive funds from operations: Add: Depreciation and amortization 38,115 28,382 100,912 77,306 Losses associated with executive suites centers under development 3,888 1,410 11,360 2,952 Deferred taxes (1,825) 248 (1,760) 248 Deduct: Minority interests' (non Unitholders) share of depreciation, amortization and net income (195) (60) (479) (255) Gain on settlement of treasury locks -- -- (4,489) -- (Gain) loss on sale of assets (21,284) (6,844) (49,815) (32,450) ------------ --------- ---------- --------- Funds from Operations before allocations to the minority Unitholders 62,348 62,115 186,127 172,347 Less: Funds from operations allocable to the minority Unitholders (4,025) (3,677) (12,563) (11,565) ------------ --------- ---------- --------- Funds from operations allocable to CarrAmerica Realty Corporation 58,323 58,438 173,564 160,782 Less: Preferred stock dividends (8,933) (8,963) (26,516) (26,639) ------------ --------- ---------- --------- Funds from operations attributable to common shareholders $ 49,390 $49,475 $147,048 $134,143 ============ ========= ========== =========
19 FORWARD-LOOKING STATEMENTS Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company and its affiliates or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: national and local economic, business and real estate conditions that will, among other things, affect demand for office properties, availability and creditworthiness of tenants, the level of lease rents and the availability of financing for both tenants and the Company, adverse changes in the real estate markets, including, among other things, competition with other companies, risks of real estate acquisition and development (including the failure of pending acquisitions to close and pending developments to be completed on time and within budget), actions, strategies and performance of affiliates that the Company may not control, governmental actions and initiatives, and environmental/safety requirements. 20 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in the Company's market risk have occurred since the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 21 PART II OTHER INFORMATION - ----------------- Item 4. Submission of Matters to a Vote of Security Holders None Item 6. Exhibits and Reports on Form 8-K (a.) Exhibits 10.1 Amendment to Fourth Amended and Restated Revolving Credit Agreement dated as of August 31, 1999 by and among CarrAmerica Realty Corporation, CarrAmerica Realty, L.P., Carr Realty, L.P., Morgan Guaranty Trust Company and the other banks listed therein. 27 Financial Data Schedule - Nine Months Ended September 30, 1999. (b.) Reports on Form 8-K a. Current Report on Form 8-K filed on August 16, 1999 regarding certain supplemental data included in the Company's press release dated August 6, 1999. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARRAMERICA REALTY CORPORATION - ------------------------------------------- Thomas A. Carr, President and Chief Executive Officer - ------------------------------------------------- Richard F. Katchuk, Chief Financial Officer - ------------------------------------------------- Stephen E. Riffee Senior Vice President, Controller and Treasurer Principal Accounting Officer Date: November 15, 1999 23 Exhibit Index -------------
Exhibit Description Page - ------- ----------- ---- 10.1 Amendment to Fourth Amended and Restated Revolving Credit Agreement dated as of August 31, 1999 by and among CarrAmerica Realty Corporation, CarrAmerica Realty, L.P., Carr Realty, L.P., Morgan Guaranty Trust Company and the other banks listed therein. 27 Financial Data Schedule - Nine Months Ended September 30, 1999. [27]
24 EX-10.1 2 EXHIBIT 10.1 AMENDMENT TO FOURTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS AMENDMENT TO FOURTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Amendment") is made as of August 31, 1999, by and among CARRAMERICA --------- REALTY CORPORATION, CARR REALTY, L.P., and CARRAMERICA REALTY, L.P. (collectively, the "Borrower"), the BANKS listed on the signature pages hereof, -------- and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Lead Agent. W I T N E S S E T H: ------------------- WHEREAS, the Borrower and the Banks have entered into the Fourth Amended and Restated Revolving Credit Agreement, dated as of August 27, 1998 (the "Credit Agreement"); and ---------------- WHEREAS, the parties desire to modify the Credit Agreement upon the terms and conditions set forth herein. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: 1. Definitions. All capitalized terms not otherwise defined herein ----------- shall have the meanings ascribed to them in the Credit Agreement. 2. Amendments. Notwithstanding the provisions of Section 5.21 of the ---------- Credit Agreement, Carr and CarrAmerica LP may transfer its interests in those Real Property Assets more particularly set forth on Schedule 1 annexed hereto ---------- and made a part hereof, to Carr LP. 3. Effective Date. This Amendment shall become effective upon receipt -------------- by the Lead Agent of counterparts hereof signed by the Borrower and the Required Banks (the date of such receipt being deemed the "Effective Date"). -------------- 4. Entire Agreement. This Amendment constitutes the entire and final ---------------- agreement among the parties hereto with respect to the subject matter hereof and there are no other agreements, understandings, undertakings, representations or warranties among the parties hereto with respect to the subject matter hereof except as set forth herein. 5. Governing Law. This Amendment shall be governed by, and construed ------------- in accordance with, the law of the State of New York. 6. Counterparts. This Amendment may be executed in any number of ------------ counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. 7. Headings, Etc. Section or other headings contained in this -------------- Amendment are for reference purposes only and shall not in any way affect the meaning or interpretation of this Amendment. 8. No Further Modifications. Except as modified herein, all of the ------------------------ terms and conditions of the Credit Agreement, as modified hereby shall remain in full force and effect and, as modified hereby, the Borrower confirms and ratifies all of the terms, covenants and conditions of the Credit Agreement in all respects. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. BORROWER: CARRAMERICA REALTY CORPORATION By: /s/ Karen B. Dorigan -------------------- Name: Karen B. Dorigan Title: Managing Director CARR REALTY, L.P. By: CarrAmerica Realty Corporation, General Partner By: /s/ Karen B. Dorigan -------------------- Name: Karen B. Dorigan Title: Managing Director CARRAMERICA REALTY, L.P. By: CarrAmerica Realty GP Holdings, Inc., General Partner By: /s/ Karen B. Dorigan -------------------- Name: Karen B. Dorigan Title: Vice President 2 BANKS: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Bank and as Lead Agent By: /s/ Kathryn Sayko-Yanes ----------------------- Name: Kathryn Sayko-Yanes Title: Vice President BANK OF AMERICA, NATIONAL ASSOCIATION, as a Bank and as Co-Agent By: /s/ Leslie D. Furst ------------------- Name: Leslie D. Furst Title: Principal COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH, as a Bank and as Co-Agent By: /s/ Christian Berry ------------------- Name: Christian Berry Title: Assistant Treasurer By: /s/ Douglas P. Traynor ---------------------- Name: Douglas P. Traynor Title: Vice President BANK AUSTRIA CREDITANSTALT By: ------------------------ Name: Title: By: ------------------------ Name: Title: 3 BAYERISCHE HYPO-VEREINSBANK AG, NEW YORK BRANCH By: /s/ Christine Elcik ------------------- Name: Christine Elcik Title: Associate Director By: /s/ Meggan W. Walsh ------------------- Name: Meggan W. Walsh Title: Managing Director PNC BANK, NATIONAL ASSOCIATION By: /s/ Richard B. Tezdinski ------------------------ Name: Richard B. Tezdinski Title: Vice President WACHOVIA BANK, N.A. By: /s/ Judith A. Nunn ------------------ Name: Judith A. Nunn Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Fran Nuchims ----------------- Name: Fran Nuchims Title: Vice President FIRST UNION NATIONAL BANK By: /s/ Rex S. Ridy --------------- Name: Rex S. Ridy Title: Vice President 4 LASALLE BANK, N.A. By: /s/ Peter Massolin ------------------ Name: Peter Massolin Title: Associate Vice President SOCIETE GENERALE, A FRENCH BANKING CORPORATION, ACTING THROUGH ITS SOUTHWEST AGENCY By: /s/ Jeffrey C. Schultz ---------------------- Name: Jeffrey C. Schultz Title: Vice President KBC BANK N.V. By: ----------------------- Name: Title: By: ----------------------- Name: Title: SOUTHTRUST BANK, NATIONAL ASSOCIATION By: /s/ Lynn W. Feuerlein --------------------- Name: Lynn W. Feuerlein Title: Group Vice President 5 ERSTE BANK DER OESTERREICHISCHEN SPARKASSEN AG By: /s/ Paul Judicke ---------------- Name: Paul Judicke Title: Vice President By: /s/ John Runnion ----------------- Name: John Runnion Title: First Vice President 6 SCHEDULE 1 ---------- 1. Sunrise Corporate Center, Reston, Virginia 2. Reston Crossing, Reston, Virginia 7 EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND FROM CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 82,914 0 59,202 0 0 0 3,039,426 312,686 3,636,875 0 1,680,175 0 95 668 1,698,357 3,636,875 0 549,580 0 482,982 0 0 0 78,823 (1,760) 66,153 0 0 0 115,968 1.31 1.31
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