-----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, WFjEUe5gmtbEN3TBkYK6UXNi1Cg1AIRWCA/yCHgnTYjk9ofRkJ4WHrS1OgkAgYE/ ibzoxg7gAhRNzlMSuDYTMA== 0000912057-01-505898.txt : 20010402 0000912057-01-505898.hdr.sgml : 20010402 ACCESSION NUMBER: 0000912057-01-505898 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRINET CORPORATE REALTY TRUST INC CENTRAL INDEX KEY: 0000899162 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 943175659 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-11918 FILM NUMBER: 1588140 BUSINESS ADDRESS: STREET 1: ONE EMBARCADERO CENTER 33RD FLOOR STREET 2: STE 3150 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153914300 MAIL ADDRESS: STREET 1: ONE EMBARCADERO CENTER 33RD FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 10-K405 1 a2040517z10-k405.txt 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NO. 1-11918 ------------------------ TRINET CORPORATE REALTY TRUST, INC. (Exact name of registrant as specified in its charter) MARYLAND 94-3175659 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 1114 AVENUE OF THE AMERICAS, 27TH FLOOR 10036 NEW YORK, NY (Zip code) (Address of principal executive offices)
Registrant's telephone number, including area code: (212) 930-9400 ------------------------ Securities registered pursuant to Section 12 of the Act: NONE 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 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirement for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes /X/ The aggregate market value of the voting stock held by non-affiliates of the Registrant is $-0-. As of March 15, 2001, there were 100 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: NONE THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I (1) AND OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE -------- PART I Item 1. Business............................................ 3 Item 2. Properties.......................................... 4 Item 3. Legal Proceedings................................... 8 Item 4. Submission of Matters to a Vote of Security Holders................................................... 8 PART II Item 6. Selected Financial Data............................. 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 9 Item 7a. Quantitative and Qualitative Disclosures about Market Risk............................................... 12 Item 8. Financial Statements and Supplemental Data.......... 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................... 48 PART III Item 10. Directors and Executive Officers of the Registrant................................................ 48 Item 11. Executive Compensation............................. 48 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 48 Item 13. Certain Relationships and Related Transactions..... 48 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................... 48 SIGNATURES.................................................. 51
2 PART I ITEM 1. BUSINESS EXPLANATORY NOTE FOR PURPOSES OF THE "SAFE HARBOR PROVISIONS" OF SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which involve certain risks and uncertainties. Forward-looking statements are included with respect to, among other things, the Company's current business plan, business strategy and portfolio management. The Company's actual results or outcomes may differ materially from those anticipated. Important factors that the Company believes might cause such differences are discussed in the cautionary statements presented under the caption "Factors That May Affect the Company's Business Strategy" in Item 1 of this Form 10-K or otherwise accompany the forward-looking statements contained in this Form 10-K. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-K. OVERVIEW TriNet Corporate Realty Trust, Inc. (the "Company") is a wholly-owned subsidiary of iStar Financial Inc. (together with its predecessor, "iStar Financial"), a New York Stock Exchange listed commercial finance company (NYSE: SFI), which specializes in providing private and corporate real estate owners with structured mortgage, corporate and lease financing. The Company provides capital to major corporations and real estate owners nationwide by structuring purchase/leaseback transactions and acquiring corporate tenant lease assets subject to existing long-term leases to creditworthy customers occupying office and industrial facilities. As of December 31, 2000, the Company's investments consisted of 139 facilities, comprising 17.8 million square feet in 24 states, and which were 95% leased. The five largest customers collectively accounted for approximately 17.8% of the Company's annualized lease revenue, and the Company's largest single customer accounted for approximately 5.1% of the Company's annualized lease revenue. On November 4, 1999, iStar Financial, a Maryland corporation, acquired all of the Company's outstanding capital stock through a merger of the Company with and into a wholly-owned subsidiary of iStar Financial, with the Company surviving as a wholly-owned subsidiary of iStar Financial. Pursuant to the merger, each issued and outstanding share of common stock of the Company was converted into 1.15 shares of common stock of iStar Financial. Each issued and outstanding share of Series A, Series B and Series C Cumulative Redeemable Preferred Stock of the Company was converted into a share of Series B, Series C and Series D (respectively) Cumulative Redeemable Preferred Stock of iStar Financial. The iStar Financial preferred stock issued to the Company's former preferred stockholders have substantially the same terms as the Company's preferred stock, except that the new shares of Series B, C and D preferred stock have additional voting rights not associated with the Company's preferred stock. The merger was structured as a tax-free reorganization under federal tax law. On November 4, 1999, shares of iStar Financial's single class of common stock began trading on the New York Stock Exchange under the symbol "SFI." Prior to the merger, the Company elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). iStar Financial has elected to be taxed as a REIT under the Code and the Company is presently treated as a qualified REIT subsidiary. The Company is incorporated under the laws of the State of Maryland and commenced operations on June 3, 1993. The Company's principal executive and administrative offices are located at 1114 Avenue of the Americas, 27th Floor, New York, NY 10036. Its telephone number, general facsimile number and e-mail address are (212) 930-9400, (212) 930-9494 and istarfinancial.com, respectively. iStar Financial maintains super-regional corporate offices in San Francisco, California; Hartford, Connecticut; and Atlanta, Georgia; as well as regional offices in Boston, Massachusetts; Dallas, Texas; and Denver, Colorado. 3 The Company is engaged in a competitive business. In originating and acquiring assets, the Company competes with public and private companies, including finance companies, mortgage banks, pension funds, savings and loan associations, insurance companies, institutional investors, investment banking firms and other lenders and industry participants, as well as individual investors. Existing industry participants and potential new entrants compete with the Company for the available supply of investments suitable for origination or acquisition, as well as for debt and equity capital. Certain of the Company's competitors are larger than the Company, have longer operating histories, may have access to greater capital and other resources, may have management personnel with more experience than the officers of the Company, and may have advantages over the Company in conducting certain businesses and providing certain services. INVESTMENTS AND DISPOSITIONS INVESTMENTS--During 2000, the Company acquired one corporate tenant lease asset for a purchase price of $22.8 million and exercised an option to purchase another facility for $16.4 million by funding an additional $474,000 on an existing convertible mortgage loan. Construction was completed on five facilities under development in one of the Company's joint venture partnerships for a total development cost of $65.2 million. In addition, the TN-CP joint venture acquired one facility for a purchase price of $36.8 million. The Company also purchased 78.4 acres of land for approximately $80.7 million subject to a 20-year ground lease to a corporate customer, with the first year of operating lease payments equal to a return on cost of approximately 11.6%. In addition, the Company purchased 32.4 acres of land for approximately $2.3 million on which it is constructing a build-to-suit distribution facility for a corporate customer under a 15-year net lease. DISPOSITIONS--During 2000, the Company disposed of 14 facilities, of which eight were wholly-owned facilities and six were joint venture facilities. The eight wholly-owned facilities were sold for net proceeds of $146.2 million and a gain of $974,000. The sale of six joint venture facilities resulted in net proceeds to the Company of $53.1 million. The Company's share of gain on the sale of these facilities was $2.0 million. ITEM 2. PROPERTIES
NUMBER OF MAJOR CUSTOMERS CITY/STATE FACILITY TYPE FACILITIES SQUARE FEET - --------------- -------------------- -------------- ---------- ----------- AUTOMOTIVE, AEROSPACE AND DEFENSE Chrysler Motors Corporation Mansfield, MA Office 1 15,625 Nissan Motor Acceptance Corp. Irving, TX Office 1 174,421 TRW Space & Electronics Group Redondo Beach, CA Office 1 124,400 Unison Industries Jacksonville, FL Office 1 135,000 Volkswagen of America, Inc. Lincolnshire, IL Industrial 1 161,840 Volkswagen of America, Inc. City of Industry, CA Industrial 1 286,822 Volkswagen of America, Inc. Jacksonville, FL Industrial 1 180,054 --- ---------- 7 1,078,162 CONSUMER GOODS Dunham's Athleisure Marion, IN Industrial 1 249,920 REX Stores Corporation Dayton, OH Industrial 1 345,325 Sears Logistics Services Columbus, OH Industrial 1 398,471 Lever Brothers Company O'Fallon, MO Industrial 1 402,192 --- ---------- 4 1,395,908 ENERGY & UTILITES Bay State Gas Company Westborough, MA Office 1 88,000 Koch Membrane Systems San Diego, CA Industrial 1 90,500 Northern States Power Company Roseville, MN Office 1 41,574 Serono Laboratories, Inc. Norwell, MA Office 1 53,000 Serono Laboratories, Inc. Randolph, MA Industrial 1 47,586 --- ---------- 5 320,660
4
NUMBER OF MAJOR CUSTOMERS CITY/STATE FACILITY TYPE FACILITIES SQUARE FEET - --------------- -------------------- -------------- ---------- ----------- FINANCIAL SERVICES Arbella Capital Corporation Quincy, MA Office 1 132,160 Blue Cross Blue Shield of Wisconsin Milwaukee, WI Office 1 229,888 PNC Mortgage Vernon Hills, IL Office 1 102,208 Primerica Life Insurance Co. Duluth, GA Office 2 190,000 Wellpoint Health Networks, Inc. Newbury Park, CA Office 2 217,613 Wells Fargo Bank, N.A. Tempe, AZ Office 1 51,049 --- ---------- 8 922,918 FOOD & RELATED SERVICES Caterair International Astoria, NY Industrial 2 73,612 Caterair International Philadelphia, PA Industrial 1 31,218 Caterair International Bloomington, MN Industrial 1 22,536 Caterair International Burlingame, CA Industrial 1 35,375 Caterair International Millbrae, CA Industrial 1 20,019 Caterair International Reno, NV Industrial 1 20,066 Caterair International Seattle, WA Industrial 1 30,750 Caterair International Orlando, FL Industrial 1 49,148 Caterair International Miami, FL Industrial 3 210,893 International Food Solution Wichita, KS Industrial 1 105,600 Land O' Lakes, Inc. Arden Hills, MN Office 1 74,511 Pezrow New England Foxborough, MA Office 1 45,000 Ralph's Grocery Company East Los Angeles, CA Industrial 1 272,236 Shaw's Supermarkets, Inc. Lakeville, MA Industrial 1 104,723 Sunbelt Beverage Corporation Baltimore, MD Industrial 1 222,636 Unified Western Grocers Commerce, CA Office 1 108,000 Welch Foods, Inc. Concord, MA Office 1 68,077 --- ---------- 20 1,494,400 HEALTHCARE Fresenius USA, Inc. Walnut Creek, CA Industrial 1 85,000 Haemonetics Corporation Braintree, MA Office 1 43,708 Mentor O & O, Inc. Norwell, MA Office 1 35,500 --- ---------- 3 164,208 MANUFACTURING adidas AMERICA, Inc. Spartanburg, SC Industrial 1 563,210 Mast Industries, Inc. Andover, MA Office 1 122,000 Nike Distribution Warehouse Memphis, TN Industrial 1 812,697 --- ---------- 3 1,497,907 MULTI-CUSTOMER BUILDINGS Avitar; Electro Scientific Industries, Inc. Canton, MA Industrial 1 67,835 bioMerieux Vitek, Inc.; Blue Cross Blue Shield of Rockland, MA Office 1 125,366 Massachusetts Cisco Systems; Quantum Corp. (1) Milpitas, CA Industrial 1 197,604 Entergy Services, Inc.; Dean Whitter Reynold, Inc.; New Orleans, LA Office 1 523,664 Pricewaterhouse Coopers; WorldCom Network Services Entergy Services, Inc.; Mobil Oil Exploration; New Orleans, LA Office 1 421,342 Frontier Communication Services FutureTel, Inc.; Mitsubishi Electronics America; Sunnyvale, CA Industrial 1 215,481 Kanematsu USA, Inc. (1) GTECH Holdings Co.; Massachusetts Lottery Braintree, MA Office 1 108,085 Guardian Life Insurance Co.; AMS; Serono Norwell, MA Office 1 72,921 Laboratories; Massachusetts Lottery MaxServ, Inc.; Honeywell International, Inc. Tempe, AZ Office 3 225,827 Siemens Communications Systems; International Atlanta, GA Office 1 444,362 BusinessMachine; A.D.A.M. Software, Inc. SOESYS, Inc.; Conseco Finance Corp.; EMC Engineers, Alpharetta, GA Office 1 63,783 Inc.; Verizon Select Services, Inc. Western Digital Corp.; Xerox Corp. San Jose, CA Industrial 1 286,330 --- ---------- 14 2,752,600
5
NUMBER OF MAJOR CUSTOMERS CITY/STATE FACILITY TYPE FACILITIES SQUARE FEET - --------------- -------------------- -------------- ---------- ----------- OTHER Allright New Orleans, Inc. New Orleans, LA Parking Garage 1 n/a Andersen Consulting Palo Alto, CA Office 1 62,155 Kluwer Boston Norwell, MA Office 1 32,500 Modern Graphics Arts St. Petersburg, FL Industrial 1 87,500 Parsons Infrastructure Tech. Canton, MA Office 1 80,000 The Mitre Corporation Reston, VA Office 1 177,415 Universal Technical Institute Phoenix, AZ Industrial 2 106,763 Vacant Anaheim, CA Industrial 1 52,960 Vacant Jacksonville, FL Office 1 49,810 Vacant Coppell, TX Industrial 1 510,654 --- ---------- 11 1,159,757 TECHNOLOGY 3Com Mountain View, CA Office 1 131,580 Acosta Sales and Marketing Co. Fremont, CA Office 1 44,000 ADS Alliance Data Systems, Inc. Dallas, TX Office 1 61,750 Aristasoft Corp. (1) San Jose, CA Office 1 93,210 Atari Games Corporation (1) Milpitas, CA Industrial 1 67,968 Cirrus Logic Fremont, CA Industrial 2 121,582 Computer Sciences Corporation Lanham, MD Office 1 120,000 Electronic Data Systems Corp. Allen, TX Industrial 1 261,700 First American RE Solutions Anaheim, CA Office 1 100,049 First Health Strategies, Inc. Salt Lake City, UT Office 4 173,107 Galileo International Partners Englewood, CO Office 1 137,900 GIGA Information Group Norwell, MA Office 1 27,100 Hewlett Packard Company Richardson, TX Office 1 300,820 International Business Machines Corporation Farmers Branch, TX Industrial 1 222,267 Jabil Circuit, Inc. St. Petersburg, FL Industrial 1 91,500 Kulicke & Soffa, Inc. (I) Milpitas, CA Industrial 1 34,954 LAM Research Corporation Milpitas, CA Industrial 1 120,576 Lexmark International Seymour, IN Industrial 1 763,139 LSI Logic Corporation (1) Milpitas, CA Industrial 1 81,500 Lucent Technologies Aurora, CO Industrial 1 119,200 Maxtor Corporation (1) Milpitas. CA Office 1 180,086 Microsoft Corporation Irving, TX Office 1 88,066 MultiLink, Incorporated Andover, MA Office 1 77,048 Netigy Corp. (1) San Jose, CA Office 1 46,070 Polycom, Inc. Milpitas, CA Industrial 1 102,240 Quantum Corporation (1) Milpitas, CA Industrial 2 164,924 Rational Software Corporation Cupertino, CA Office 1 101,373 Read-Rite Corporation (1) Milpitas, CA Industrial 1 50,100 Redback Networks, Inc. (1) San Jose, CA Office 1 96,710 SenSym, Inc. (1) Milpitas, CA Industrial 1 46,416 Stream International Services Canton, MA Office 1 78,708 Sun Microsystems, Inc. Mountain View, CA Office 1 55,800 Sybase, Inc. Concord, MA Office 1 166,912 Tech Data Corporation South Bend, IN Industrial 3 225,000 Teradyne, Inc. Walnut Creek, CA Industrial 1 60,000 The Standard Register Company (2) Chicago, IL Industrial 1 140,000 Unisys Central Training Center Lisle, IL Office 1 236,000 Vital Processing Services, LLC Tempe, AZ Office 1 104,836 --- ---------- 45 5,094,191
6
NUMBER OF MAJOR CUSTOMERS CITY/STATE FACILITY TYPE FACILITIES SQUARE FEET - --------------- -------------------- -------------- ---------- ----------- TELECOMMUNICATIONS Alcatel Network Systems Richardson, TX Office 1 109,043 AT&T Wireless Anaheim, CA Office 1 156,135 Avaya, Inc. Englewood, CO Office 1 158,146 Digital Island (1) San Jose, CA Office 1 76,410 Empowertel Networks (I) Milpitas, CA Office 1 51,514 Equinix, Inc. San Jose, CA Ground Lease 1 n/a Global Crossing Westminster, CO Office 2 117,410 Verizon Select Service, Inc. Irving, TX Office 1 164,970 Harris Microwave Semiconductors (1) Milpitas, CA Industrial 1 36,669 ICG Holdings, Inc. Englewood, CO Office 1 239,749 Nokia, Inc. Irving, TX Office 1 293,890 Northern Telecom, Inc. Richardson, TX Office 2 181,068 Universal Card Services Jacksonville, FL Office 1 46,002 --- ---------- 15 1,631,006 TRANSPORTATION California Dept. of Transportation (1) San Jose, CA Office 1 19,550 Federal Express Corporation Memphis, TN Office 3 241,927 --- ---------- 4 261,477 --- ---------- 139 17,773,194 === ==========
EXPLANATORY NOTES: - ------------------------------ (1) The Company has a joint venture interest in this facility. (2) Facility was disposed in March 2001. 7 LEASE EXPIRATIONS The following table shows scheduled lease expirations for all facilities, including facilities owned by the Company's joint ventures, as of December 31, 2000:
PERCENT OF TOTAL ANNUAL OPERATING NUMBER OF ANNUALIZED LEASE PAYMENTS LEASES OPERATING LEASE REPRESENTED BY YEAR OF LEASE EXPIRATION EXPIRING PAYMENTS (1) EXPIRING LEASES - ------------------------ --------- --------------- ---------------- (IN THOUSANDS) 2001................................. 22 $ 11,018 6.0% 2002................................. 27 12,139 6.4% 2003................................. 19 19,623 10.4% 2004................................. 28 25,797 13.7% 2005................................. 15 13,550 7.2% 2006................................. 22 26,350 14.0% 2007................................. 14 17,740 9.4% 2008................................. 8 8,565 4.5% 2009................................. 10 12,740 6.8% 2010................................. 6 9,259 4.9% 2011 and thereafter.................. 21 31,544 16.7% --- --------- ----- Total.............................. 192 $ 188,325 100.0% === ========= =====
EXPLANATORY NOTE: - ------------------------------ (1) Reflects actual annualized monthly base lease rates in effect at December 31, 2000 (without giving effect to straight-line adjustments under GAAP). ASSET BASE The following table sets forth the composition of the Company's investments as of December 31, 2000:
PERCENT OF TOTAL ANNUAL OPERATING LEASE PAYMENTS PERCENTAGE OF NUMBER OF ANNUALIZED OPERATING REPRESENTED BY NET RENTABLE NET RENTABLE TYPE FACILITIES LEASE PAYMENTS (1) FACILITY TYPE SQUARE FEET SQUARE FEET - ---- ---------- -------------------- ---------------- ------------ ------------- (IN THOUSANDS) Office..................... 79 $121,566 64.5% 8,594,835 48.4% Industrial................. 58 55,725 29.6% 9,178,359 51.6% Parking Garage............. 1 1,450 0.8% -- -- Ground Lease............... 1 9,584 5.1% -- -- --- -------- ----- ---------- ----- Total.................... 139 $188,325 100.0% 17,773,194 100.0% === ======== ===== ========== =====
EXPLANATORY NOTE: - ------------------------------ (1) Reflects actual annualized monthly base lease rates at effect on December 31, 2000 (without giving effect to straight-line adjustments under GAAP). ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material litigation or legal proceedings, or to the best of its knowledge, any threatened litigation or legal proceedings which, in the opinion of management, individually or in the aggregate, would have a material adverse effect on its results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Omitted pursuant to General Instruction I(2)(c) of Form 10-K. 8 PART II ITEM 6. SELECTED FINANCIAL DATA Omitted pursuant to General Instruction I(2)(a) of Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K. Unless otherwise defined in this report, or unless the context otherwise requires, the capitalized words or phrases referred to in this section have the meanings ascribed to them in such financial statements and the notes thereto. GENERAL As a wholly-owned subsidiary of iStar Financial, the Company specializes in providing investment capital to major corporations and real estate owners nationwide by structuring purchase/leaseback transactions and acquiring corporate tenant lease assets subject to existing long-term leases to creditworthy customers occupying office and industrial facilities. The Company uses its corporate credit and real estate underwriting expertise to structure investments that it believes will generate attractive risk-adjusted returns. As of December 31, 2000, the Company's portfolio consisted of 139 facilities principally subject to net leases to more than 159 customers, comprising 17.8 million square feet in 24 states. Of the 139 total facilities, there are 17 facilities held in three joint venture partnerships. In addition, there are five facilities under development, three of which are in one of the joint venture partnerships. The three joint venture facilities become fully operational (with operating lease payments commencing) as of January 2001. On November 3, 1999, consistent with previously announced terms, the Company's stockholders and the shareholders of iStar Financial approved the merger of the Company with a wholly-owned subsidiary of iStar Financial. In the merger, each issued and outstanding share of the Company's common stock was converted into 1.15 shares of common stock of iStar Financial. Each issued and outstanding share of Series A, Series B and Series C Cumulative Redeemable Preferred Stock of the Company was converted into a share of Series B, Series C and Series D (respectively) Cumulative Redeemable Preferred Stock of iStar Financial. The iStar Financial preferred stock issued to the Company's former preferred stockholders have substantially the same terms as the Company's preferred stock, except that the new shares of Series B, C and D preferred stock have additional voting rights not associated with the Company's preferred stock. The holders of iStar Financial's Series A Preferred Stock received Series A Preferred Stock in the Incorporation Merger with the same rights and preferences as existed prior to the merger. The merger was structured as a tax-free reorganization under federal tax law. These transactions were consummated as of November 4, 1999, at which time iStar Financial's single class of common shares began trading on the New York Stock Exchange under the symbol "SFI." The merger was accounted for as a purchase of the Company by iStar Financial and the balance sheet of the Company on November 4, 1999 was adjusted to reflect the purchase price as required by Accounting Principles Board Opinion 16 ("APB 16"), "Accounting for Business Combinations." The purchase price was approximately $1.5 billion, which included the assumption of the outstanding preferred stock, debt and other liabilities of the Company. This purchase price was allocated to the assets and liabilities of the Company based on their relative fair values and resulted in no allocation to goodwill. The following schedule sets forth the Company's consolidated/combined results of operations. The period from January 1, 1999 to November 3, 1999 represents the Company's operations prior to the date of the merger on an historical basis. The period from November 4, 1999 to December 31, 1999 reflects the operations of the Company after the merger and therefore reflects the operating impact of purchase 9 accounting adjustments made to the assets and liabilities as previously described. In general, the recognition of straight-line operating lease revenue, depreciation, interest income and interest expense have been impacted by the new cost basis of the corresponding assets and liabilities on the balance sheet. The year ended December 31, 2000 has been compared to the combined 1999 pre- and post-merger periods for purposes of management's discussion and analysis of the results of operations. Any references below to the year ended 1999 refer to the combined periods. Material fluctuations in operations resulting from the effect of purchase accounting have been highlighted.
FOR THE POST-MERGER PRE-MERGER COMBINED YEAR ENDED NOVEMBER 4, 1999 TO JANUARY 1, 1999 TO TOTAL DECEMBER 31, 2000 DECEMBER 31, 1999 NOVEMBER 3, 1999 1999 ------------------ -------------------- ------------------- --------- REVENUES: Interest income............................. $ 8,303 $ 1,360 $ 6,731 $ 8,091 Operating lease income...................... 171,024 26,817 132,483 159,300 Other income................................ 5,097 715 8,281 8,996 -------- ------- -------- -------- Total revenue............................. 184,424 28,892 147,495 176,387 -------- ------- -------- -------- COSTS AND EXPENSES: Interest expense............................ 52,571 8,462 37,184 45,646 Operating costs-corporate tenant lease assets.................................... 12,809 2,246 5,590 7,836 Depreciation and amortization............... 28,795 4,880 24,069 28,949 General and administrative.................. 9,198 1,608 10,364 11,972 Provision for asset impairment.............. -- -- 3,400 3,400 -------- ------- -------- -------- Total costs and expenses.................. 103,373 17,196 80,607 97,803 -------- ------- -------- -------- Net income before minority interest, transaction costs, gain/(loss) on sale of corporate tenant lease assets, extraordinary loss and cumulative effect.................................... 81,051 11,696 66,888 78,584 Minority interest in consolidated entities.... (164) (41) (123) (164) Merger related transaction costs.............. -- -- (11,197) (11,197) Gain/(loss) on sales of corporate tenant lease assets...................................... 2,948 -- 2,471 2,471 -------- ------- -------- -------- Income before extraordinary items and cumulative effect........................... 83,835 11,655 58,039 69,694 Extraordinary loss on early extinguishment of debt........................................ (705) -- (665) (665) Cumulative effect of a change in accounting principle................................... -- -- (1,810) (1,810) -------- ------- -------- -------- Net income.................................. $ 83,130 $11,655 $ 55,564 $ 67,219 Preferred dividend requirements............. -- -- (11,758) (11,758) -------- ------- -------- -------- Earnings available to common shares......... $ 83,130 $11,655 $ 43,806 $ 55,461 ======== ======= ======== ========
10 RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 COMPARED TO COMBINED PRE- AND POST-MERGER PERIODS FOR 1999 INTEREST INCOME--Interest income increased $212,000 to $8.3 million in 2000 from $8.1 million in 1999. OPERATING LEASE INCOME--Operating lease income increased to $171.0 million for the year ended December 31, 2000 from $159.3 million in 1999. Of this increase, $13.0 million was attributable to the consolidation in the Company's financial statements of an asset which became wholly owned in the fourth quarter of 1999, $5.4 million was due to new corporate tenant lease investments made in 1999 and 2000, and $4.2 million resulted from additional operating lease income from corporate tenant lease assets owned in both years. In addition, joint venture income contributed $2.3 million to the increase for fiscal 2000 as compared to 1999. These increases were partially offset by a $12.0 million decrease resulting from corporate tenant lease asset dispositions during 1999 and 2000. OTHER INCOME--Other income decreased $3.9 million to $5.1 million for the year ended December 31, 2000, from $9.0 million in 1999. This decrease was due to the recognition in 1999 of a $6.8 million termination fee the Company received from a customer's early lease termination. Offsetting this decrease was an increase of $2.1 million from the recognition of the remaining portion of a loan discount in connection with the defeasance of the loan in 2000. INTEREST EXPENSE--The Company's interest expense increased $7.0 million to $52.6 million for the year ended December 31, 2000 from $45.6 million in 1999. This increase is primarily the result of the consolidation of a $78.6 million mortgage, which added $5.2 million to interest expense in 2000, and the result of higher average interest rates on the Company's variable-rate debt. Additional non-cash interest expense in the amount of $3.6 million was recognized through amortization of the notes payable discounts recorded as a result of the merger. Interest expense was reduced by $1.5 million from the write-off of previously amortizing loan fees and interest rate protection agreement costs in connection with the merger. The Company's weighted average interest rates for the years ended December 31, 2000 and 1999 were 7.50% and 7.05%, respectively. Cash interest paid in 2000 and 1999 was $49.4 million and $44.2 million, respectively. Interest costs incurred, capitalized interest and amortization of loan costs for the years ended December 31, 2000 and 1999 were as follows (in thousands):
2000 1999 -------- -------- Interest incurred......................................... $48,863 $45,312 Capitalized interest...................................... (513) (1,820) Amortization of loan costs: Loan origination costs and loan discounts............... 3,588 1,228 Interest rate protection agreements..................... 633 926 ------- ------- $52,571 $45,646 ======= =======
OPERATING COSTS-CORPORATE TENANT LEASE ASSETS--For the year ended December 31, 2000, operating costs associated with corporate tenant lease assets increased $5.0 million to $12.8 million in 2000 from $7.8 million in 1999. The increase is primarily due to the consolidation of an asset which became wholly owned in the fourth quarter of 1999, which contributed an increase of $4.8 million to operating costs in 2000 compared to 1999. DEPRECIATION AND AMORTIZATION--Depreciation and amortization decreased approximately $154,000 for the year ended December 31, 2000 over the same period in 1999 and was impacted by the purchase accounting adjustments recorded during the fourth quarter of 1999 in connection with the merger. Accordingly, the cost basis of the depreciable assets increased from the 1999 pre-merger amount, resulting in higher depreciation expense. In addition, depreciation expense increased due to the consolidation in the 11 Company's financial statements of an asset which became wholly owned in the fourth quarter of 1999. Offsetting this increase was a reduction of depreciation expense due to corporate tenant lease dispositions since December 31, 1999. GENERAL AND ADMINISTRATIVE--For the year ended December 31, 2000, general and administrative expenses decreased $2.8 million to $9.2 million, compared to $12.0 million in 1999. This decrease is primarily the result of an overall reduction in employee headcount and other overhead costs in 2000. GAIN / (LOSS) ON SALE OF CORPORATE TENANT LEASE ASSETS--During 2000, the Company disposed of 14 corporate tenant lease assets, including six assets held in joint venture partnerships, for total proceeds of $256.7 million, and recognized total gains of $2.9 million. In 1999, the Company disposed of six corporate tenant lease assets, including one asset held for sale, for total proceeds of $59.9 million, and recognized total gains of $2.5 million. EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT--In 2000, certain of the proceeds from an asset disposition were used to partially repay $8.1 million of a mortgage loan. In connection with this partial repayment, the Company incurred prepayment penalties, which resulted in an extraordinary loss of $317,000 during the first quarter of 2000. Additionally, proceeds from a joint venture asset disposition were used to repay the third-party debt of the joint venture of $16.4 million. In connection with this repayment, the venture incurred certain prepayment penalties, which resulted in an extraordinary loss to the Company of $388,000 during the third quarter of 2000. During 1999, the proceeds from the disposition of two assets, along with additional cash reserves, were used to partially repay $10.6 million of a mortgage loan. In connection with this partial repayment, the Company incurred certain prepayment penalties and wrote off a proportionate amount of unamortized loan costs, which resulted in an extraordinary charge of $665,000. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Omitted pursuant to General Instruction I(2)(a) of Form 10-K. LIQUIDITY AND CAPITAL RESOURCES Omitted pursuant to General Instruction I(2)(a) of Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MARKET RISKS Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Company is exposed is interest rate risk. The Company's operating results will depend in part on the interest expense incurred in connection with its variable rate interest bearing liabilities. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond the control of the Company. As more fully discussed in Notes 3 and 9 to the Company's Consolidated Financial Statements, the Company hedges to limit the effects of changes in interest rates on its operations by engaging in interest rate caps and swaps. While a REIT, or its qualified REIT subsidiary, may freely utilize certain types of derivative instruments to hedge interest rate risk on its liabilities, the use of derivatives for other purposes could generate income which is not qualified income for purposes of maintaining REIT status. As a qualified REIT subsidiary, the Company may only engage in such instruments to hedge such risk on a limited basis and does not enter into derivative contracts for speculative purposes. 12 There can be no assurance that the Company's profitability will not be adversely affected during any period as a result of changing interest rates. In addition, hedging transactions using derivative instruments involve certain additional risks such as counterparty credit risk, legal enforceability of hedging contracts and the risk that unanticipated and significant changes in interest rates will cause a significant loss of basis in the contract. With regard to loss of basis in a hedging contract, indices upon which contracts are based may be more or less variable than the indices upon which the hedged liabilities are based, thereby making the hedge less effective. The counterparties to these contractual arrangements are major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company is potentially exposed to credit loss in the event of nonperformance by these counterparties. However, because of their high credit ratings, the Company does not anticipate that any of the counterparties will fail to meet their obligations. There can be no assurance that the Company will be able to adequately protect against the foregoing risks and that the Company will ultimately realize an economic benefit from any hedging contract it enters into which exceeds the related costs incurred in connection with engaging in such hedges. The following table quantifies the potential changes in net investment income and net fair value of financial instruments should interest rates increase or decrease 200 basis points, assuming no change in the shape of the yield curve (i.e., relative interest rates). Net investment income is calculated as revenue from loans and other lending investments and operating leases (as of December 31, 2000), less related interest expense and operating costs on corporate tenant lease assets, for the year ended December 31, 2000. Net fair value of financial instruments is calculated as the sum of the value of off-balance sheet instruments and the present value of cash in-flows generated from interest-earning assets, less cash out-flows in respect of interest-bearing liabilities as of December 31, 2000. The base interest rate scenario assumes interest rates as of December 31, 2000. Actual results could differ significantly from those estimated in the table. ESTIMATED PERCENTAGE CHANGE IN
NET INVESTMENT NET FAIR VALUE OF CHANGE IN INTEREST RATES INCOME FINANCIAL INSTRUMENTS(1) - ------------------------ -------------- ------------------------ - -200 Basis Points.......................................... 3.73% 0.96% - -100 Basis Points.......................................... 1.87% 0.47% Base Interest Rate......................................... 0.00% 0.00% +100 Basis Points.......................................... (1.83)% (0.47)% +200 Basis Points.......................................... (2.25)% (1.00)%
EXPLANATORY NOTE: - ------------------------------ (1) Amounts exclude fair values of non-financial invesments, primarily assets under long-term operating leases and certain forms of corporate finance investments. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA Index to Financial Statements
PAGE -------- Financial Statements: Report of Independent Accountants......................... 15 Consolidated Balance Sheets at December 31, 2000 and 1999.................................................... 16 Consolidated Statements of Operations for the year ended December 31, 2000, for the periods November 4, 1999 to December 31, 1999 and January 1, 1999 to November 3, 1999, and for the year ended December 31, 1998.......... 17 Consolidated Statements of Changes in Shareholder's Equity for the year ended December 31, 2000, for the periods November 4, 1999 to December 31, 1999 and January 1, 1999 to November 3, 1999, and for the year ended December 31, 1998....................................... 18 Consolidated Statements of Cash Flows for the year ended December 31, 2000, for the periods November 4, 1999 to December 31, 1999 and January 1, 1999 to November 3, 1999, and for the year ended December 31, 1998.......... 19 Notes to Consolidated Financial Statements................ 20 Financial Statement Schedule: For the period ended December 31, 2000: Schedule III--Real Estate and Accumulated Depreciation.... 37 Notes to Schedule III..................................... 47
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Financial statements of six companies or joint ventures accounted for under the equity method have been omitted because the Company's proportionate share of the income from continuing operations before income taxes is less than 20% of the respective consolidated amount and the investments in and advances to each company are less than 20% of consolidated total assets. 14 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of TriNet Corporate Realty Trust, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of TriNet Corporate Realty Trust, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for the year ended December 31, 2000, for the periods November 4, 1999 to December 31, 1999 and January 1, 1999 to November 3, 1999, and for the year ended December 31, 1998 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, NY March 2, 2001 15 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AS OF DECEMBER 31, ----------------------- 2000 1999* ---------- ---------- ASSETS Loans and other lending investments, net.................... $ 90,796 $ 39,244 Real estate subject to operating leases, net................ 1,486,049 1,529,804 Cash and cash equivalents................................... 11,541 12,011 Restricted cash............................................. 7,032 6,697 Deferred operating lease income receivable.................. 10,235 1,147 Deferred expenses and other assets.......................... 18,527 11,741 ---------- ---------- Total assets.............................................. $1,624,180 $1,600,644 ========== ========== LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Accounts payable, accrued expenses and other liabilities.... $ 40,647 $ 44,556 Debt obligations............................................ 668,342 691,591 ---------- ---------- Total liabilities......................................... 708,989 736,147 ---------- ---------- Minority interest in consolidated entities.................. 2,565 2,565 Shareholder's equity: Common stock, $0.01 par value, 100 shares authorized: 100 shares issued and outstanding at December 31, 2000 and 1999, respectively...................................... -- -- Additional paid in capital.................................. 890,271 890,271 Retained earnings........................................... 62,651 11,655 Common stock of iStar Financial (parent) held in treasury (at cost)................................................. (40,296) (39,994) ---------- ---------- Total shareholder's equity................................ 912,626 861,932 ---------- ---------- Total liabilities and shareholder's equity................ $1,624,180 $1,600,644 ========== ==========
- ------------------------ * RECLASSIFIED TO CONFORM TO 2000 PRESENTATION. The accompanying notes are an integral part of the financial statements. 16 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
POST-MERGER PRE-MERGER FOR THE FOR THE NOVEMBER 4, 1999 JANUARY 1, 1999 TO YEAR ENDED YEAR ENDED TO DECEMBER 31, NOVEMBER 3, DECEMBER 31, DECEMBER 31, 2000 1999* 1999* 1998* ----------------- ---------------- ------------------ ------------ REVENUES: Interest income.............................. $ 8,303 $ 1,360 $ 6,731 $ 3,176 Operating lease income....................... 171,024 26,817 132,483 155,454 Other income................................. 5,097 715 8,281 2,572 -------- ------- -------- -------- Total revenue.............................. 184,424 28,892 147,495 161,202 -------- ------- -------- -------- COSTS AND EXPENSES: Interest expense............................. 52,571 8,462 37,184 40,535 Operating costs-corporate tenant lease assets..................................... 12,809 2,246 5,590 5,853 Depreciation and amortization................ 28,795 4,880 24,069 28,035 General and administrative................... 9,198 1,608 10,364 12,720 Provision for asset impairment............... -- -- 3,400 -- Special charge............................... -- -- -- 2,990 -------- ------- -------- -------- Total costs and expenses................... 103,373 17,196 80,607 90,133 -------- ------- -------- -------- Net income before minority interest, transaction costs, provision for asset held for sale, gain/(loss) on sale of corporate tenant lease assets, extraordinary loss and cumulative effect............................ 81,051 11,696 66,888 71,069 Minority interest in consolidated entities..... (164) (41) (123) (128) Merger related transaction costs............... -- -- (11,197) -- Provision for asset held for sale.............. -- -- -- (5,662) Gain/(loss) on sales of corporate tenant lease assets....................................... 2,948 -- 2,471 (1,436) -------- ------- -------- -------- Income before extraordinary items and cumulative effect............................ 83,835 11,655 58,039 63,843 Extraordinary loss on early extinguishment of debt......................................... (705) -- (665) (1,272) Cumulative effect of a change in accounting principle.................................... -- -- (1,810) -- -------- ------- -------- -------- Net income..................................... $ 83,130 $11,655 $ 55,564 $ 62,571 Preferred dividend requirements................ -- -- (11,758) (15,678) -------- ------- -------- -------- Earnings available to common shares............ $ 83,130 $11,655 $ 43,806 $ 46,893 ======== ======= ======== ======== Basic earnings available per common share: Income available before extraordinary items...................................... n/a n/a $ 1.85 $ 1.97 Earnings available........................... n/a n/a $ 1.75 $ 1.92 Diluted earnings available per common share: Income available before extraordinary items...................................... n/a n/a $ 1.85 $ 1.96 Earnings available........................... n/a n/a $ 1.75 $ 1.91 Weighted average number of common shares outstanding: Basic........................................ n/a n/a 24,978 24,387 Diluted...................................... n/a n/a 25,060 24,504
- -------------------------- * RECLASSIFIED TO CONFORM TO 2000 PRESENTATION. The accompanying notes are an integral part of the financial statements. 17 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (IN THOUSANDS)
PREFERRED STOCK COMMON STOCK RETAINED ------------------- ------------------- PAID-IN EARNINGS TREASURY ISSUED AMOUNT ISSUED AMOUNT CAPITAL (DEFICIT) STOCK -------- -------- -------- -------- --------- --------- -------- Balance, January 1, 1998............... 7,300 $ 73 20,853 $ 209 $ 710,798 $(35,857) $ -- Issuance of common stock, net of issuance costs..................... -- -- 3,906 39 140,762 -- -- Issuance of common stock, in conjunction with real estate acquired........................... -- -- 48 -- 1,864 -- -- Exercise of common stock options..... -- -- 13 -- 346 -- -- Issuance of stock under management purchase plan...................... -- -- 52 1 1,798 -- -- Net income........................... -- -- -- -- -- 62,571 -- Common stock dividends declared...... -- -- -- -- -- (63,466) -- Preferred stock dividends declared... -- -- -- -- -- (15,678) -- ------- ---- -------- ----- --------- -------- -------- Balance, December 31, 1998............. 7,300 73 24,872 249 855,568 (52,430) -- Exercise of common stock options..... -- -- 142 1 3,601 -- -- Issuance of stock under management purchase plan...................... -- -- 53 1 1,161 -- -- Incentive stock compensation......... -- -- -- -- 1,146 -- -- Net income........................... -- -- -- -- -- 55,564 -- Common stock dividends declared...... -- -- -- -- -- (48,756) -- Preferred stock dividends declared... -- -- -- -- -- (11,758) -- ------- ---- -------- ----- --------- -------- -------- Balance, November 3, 1999.............. 7,300 $ 73 25,067 $ 251 $ 861,476 $(57,380) $ -- ======= ==== ======== ===== ========= ======== ======== Investment by parent into subsidiary on November 4, 1999................ -- $ -- -- $ -- $ 890,271 $ -- $ -- Purchase of parent common stock...... -- -- -- -- -- -- (39,994) Net income........................... -- -- -- -- -- 11,655 -- ------- ---- -------- ----- --------- -------- -------- Balance, December 31, 1999............. -- -- -- -- 890,271 11,655 (39,994) Purchase of iStar Financial shares held in treasury................... -- -- -- -- -- -- (302) Dividends paid to iStar Financial.... -- -- -- -- -- (37,500) -- Dividends received on iStar Financial shares held in treasury............ -- -- -- -- -- 5,366 -- Net income for the period............ -- -- -- -- -- 83,130 -- ------- ---- -------- ----- --------- -------- -------- Balance, December 31, 2000............. -- $ -- -- $ -- $ 890,271 $ 62,651 $(40,296) ======= ==== ======== ===== ========= ======== ======== TOTAL SHAREHOLDER'S EQUITY ------------- Balance, January 1, 1998............... $ 675,223 Issuance of common stock, net of issuance costs..................... 140,801 Issuance of common stock, in conjunction with real estate acquired........................... 1,864 Exercise of common stock options..... 346 Issuance of stock under management purchase plan...................... 1,799 Net income........................... 62,571 Common stock dividends declared...... (63,466) Preferred stock dividends declared... (15,678) --------- Balance, December 31, 1998............. 803,460 Exercise of common stock options..... 3,602 Issuance of stock under management purchase plan...................... 1,162 Incentive stock compensation......... 1,146 Net income........................... 55,564 Common stock dividends declared...... (48,756) Preferred stock dividends declared... (11,758) --------- Balance, November 3, 1999.............. $ 804,420 ========= Investment by parent into subsidiary on November 4, 1999................ $ 890,271 Purchase of parent common stock...... (39,994) Net income........................... 11,655 --------- Balance, December 31, 1999............. 861,932 Purchase of iStar Financial shares held in treasury................... (302) Dividends paid to iStar Financial.... (37,500) Dividends received on iStar Financial shares held in treasury............ 5,366 Net income for the period............ 83,130 --------- Balance, December 31, 2000............. $ 912,626 =========
The accompanying notes are an integral part of the financial statements. 18 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE YEAR PRE-MERGER FOR THE YEAR ENDED POST-MERGER JANUARY 1, 1999 TO ENDED DECEMBER 31, NOVEMBER 4, 1999 TO NOVEMBER 3, DECEMBER 31, 2000 DECEMBER 31, 1999* 1999* 1998* ------------ ------------------- ------------------ ------------ Cash flows from operating activities: Net income............................................... $ 83,130 $ 11,655 $ 55,564 $ 62,571 Adjustments to reconcile net income to cash flows provided by operating activities: Minority interest...................................... 164 41 123 128 Equity in earnings of unconsolidated joint ventures.... (5,016) (373) (2,330) (2,299) Depreciation and amortization.......................... 33,008 4,880 24,069 28,035 Amortization of discounts/premiums..................... (4,299) 351 1,645 2,218 Distributions from operating joint ventures............ 4,511 470 4,708 1,442 Deferred operating lease income adjustments............ (9,130) (1,597) (4,441) (8,490) Gain on sale of corporate tenant lease assets.......... (2,948) -- (2,471) 1,436 Extraordinary loss on early extinguishment of debt..... 705 -- 665 1,272 Special charge, non-cash component..................... -- -- -- 1,146 Cumulative effect of a change in accounting principle............................................ -- -- 1,810 -- Provision for asset impairment......................... -- -- 3,400 -- Provision for asset held for sale...................... -- -- -- 5,662 Merger related transaction costs....................... -- -- 11,197 -- Changes in assets and liabilities: (Increase) decrease in restricted cash and investments........................................ (335) 723 10,348 (12,725) (Increase) decrease in other assets.................. (8,241) (321) 2,344 (8,661) Increase (decrease) in accounts payable.............. (4,989) (97) (7,483) 23,062 --------- -------- --------- --------- Cash flows provided by operating activities.......... 86,560 15,732 99,148 94,797 --------- -------- --------- --------- Cash flows from investing activities: New investment originations/acquisitions............... (187,995) -- (49,984) (261,588) Repayments from loans and other lending investments.... 15,898 -- 27,725 -- Proceeds from sale of corporate tenant lease assets.... 146,265 -- 56,690 48,222 Merger related transaction costs, net of cash acquired in merger transaction................................ -- (16,136) (4,628) -- Investments in and advances to unconsolidated joint ventures............................................. (23,540) (377) (1,401) (212,128) Distributions from unconsolidated joint ventures....... 31,129 -- 274 99,908 Capital expenditures on corporate tenant lease assets............................................... (9,011) (1,271) (6,434) (11,409) --------- -------- --------- --------- Cash flows (used in) provided by investing activities........................................... (27,254) (17,784) 22,242 (336,995) --------- -------- --------- --------- Cash flows from financing activities: Net borrowings (repayments) under revolving credit facility............................................. (13,250) 46,600 (48,800) 70,600 Repayments under term loans............................ (13,559) (150) (11,307) (612) Common dividends paid.................................. -- -- (64,922) (60,645) Preferred dividends paid............................... -- -- (11,758) (15,678) Minority interest...................................... (164) -- (164) 1,672 Payment for deferred financing costs................... (50) -- (478) (1,698) Early termination fees associated with debt paydown.... (317) -- (440) -- Proceeds from issuance of common stock................. -- -- 4,763 142,946 Proceeds from senior unsecured debt offering........... -- -- -- 124,633 Purchase of iStar Financial shares held in treasury.... (302) (39,994) -- -- Dividends paid to iStar Financial...................... (37,500) -- -- -- Dividends received on iStar Financial shares held in treasury............................................. 5,366 -- -- -- --------- -------- --------- --------- Cash flows (used in) provided by financing activities........................................... (59,776) 6,456 (133,106) 261,218 --------- -------- --------- --------- Increase (decrease) in cash and cash equivalents......... (470) 4,404 (11,716) 19,020 Cash and cash equivalents, at beginning of period........ 12,011 7,607 19,323 303 --------- -------- --------- --------- Cash and cash equivalents, at end of period.............. $ 11,541 $ 12,011 $ 7,607 $ 19,323 ========= ======== ========= ========= Suppplemental disclosure of cash flow information: Cash paid during the period for interest............... $ 49,409 $ 6,963 $ 37,247 $ 38,389 ========= ======== ========= =========
- ------------------------------ * RECLASSIFIED TO CONFORM TO 2000 PRESENTATION. The accompanying notes are an integral part of the financial statements. 19 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--ORGANIZATION AND BUSINESS ORGANIZATION--TriNet Corporate Realty Trust, Inc., a Maryland Corporation, (the "Company"), became a wholly-owned subsidiary of iStar Financial Inc., a Maryland Corporation ("iStar Financial") through a merger on November 4, 1999. As a wholly-owned subsidiary of iStar Financial, a real estate investment trust ("REIT"), the Company intends to operate as a qualified real estate investment trust subsidiary ("QRS") under the Internal Revenue Code of 1986, as amended (the "Code"). iStar Financial filed its annual report Form 10-K for the year ended December 31, 2000 with the Securities and Exchange Commission on March 30, 2001. BUSINESS--iStar Financial and its subsidiaries, including the Company, provide structured financing to private and corporate owners of real estate nationwide, including senior and junior mortgage debt, corporate mezzanine and subordinated capital, and corporate net lease financing. The Company typically provides capital by structuring purchase/leaseback transactions and acquiring corporate tenant lease assets subject to existing long-term net leases to creditworthy tenants. As of December 31, 2000, the Company's portfolio consisted of 139 facilities principally subject to net leases to approximately 159 customers, comprising 17.8 million square feet in 24 states. Of the 139 total facilities, there are 17 facilities held in three unconsolidated joint ventures. In addition, there are five facilities under development, three of which are held in one of the joint venture partnerships. The three joint venture facilities became fully operational (with operating lease payments commencing) as of January 2001. MERGER TRANSACTION--On November 3, 1999, the Company's stockholders and the shareholders of iStar Financial approved the merger of the Company with a wholly-owned subsidiary of iStar Financial. The shareholders of iStar Financial also approved: (1) the acquisition by iStar Financial, through a merger and contribution of interests, of 100% of the ownership interests in its external advisor; and (2) the change in form of its organization from a business trust to a corporation ("Incorporation Merger"). Pursuant to the merger, the Company merged with and into a subsidiary of iStar Financial, with the Company surviving as a wholly-owned subsidiary of iStar Financial. In the merger, each issued and outstanding share of the Company's common stock was converted into 1.15 shares of common stock of iStar Financial. Each issued and outstanding share of Series A, Series B and Series C Cumulative Redeemable Preferred Stock of the Company was converted into a share of Series B, Series C and Series D (respectively) Cumulative Redeemable Preferred Stock of iStar Financial. The iStar Financial preferred stock issued to the Company's former preferred stockholders has substantially the same terms as the Company's preferred stock, except that the new shares of Series B, C and D preferred stock have additional voting rights not associated with the Company's preferred stock. The holders of iStar Financial's Series A Preferred Shares received Series A Preferred Shares in the Incorporation Merger with the same rights and preferences as existed prior to the merger. The merger was structured as a tax-free reorganization under federal tax law. These transactions were consummated as of November 4, 1999, at which time iStar Financial's single class of common shares began trading on the New York Stock Exchange under the symbol "SFI." NOTE 2--BASIS OF PRESENTATION The accompanying audited Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles ("GAAP") for complete financial statements. The Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiary corporations and partnerships, and its majority-owned and controlled partnership. The Company has an investment in 20 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2--BASIS OF PRESENTATION (CONTINUED) TriNet Management Operating Company, Inc. ("TMOC"), a taxable noncontrolled subsidiary of the Company, which is accounted for under the equity method. Further, certain other investments in partnerships or joint ventures which the Company does not control are also accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying Consolidated Financial Statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company's consolidated financial position at December 31, 2000 and December 31, 1999 and the results of its operations, changes in shareholder's equity and its cash flows for the year ended December 31, 2000, the periods November 4, 1999 to December 31, 1999 and January 1, 1999 to November 3, 1999, and for the year ended December 31, 1998. Such operating results are not necessarily indicative of the results that may be expected for any other interim periods or the entire year. The merger was accounted for as a purchase of the Company by iStar Financial and the balance sheet of the Company on November 4, 1999 was adjusted to reflect the purchase price as required by Accounting Principles Board Opinion 16 ("APB 16"), "Accounting for Business Combinations." The purchase price was approximately $1.5 billion, which included the assumption of the outstanding preferred stock, debt and other liabilities of the Company. This purchase price was allocated to the net assets of the Company based on their relative fair values and resulted in no allocation to goodwill. The Company's consolidated results of operations for the period January 1, 1999 to November 3, 1999 and for the year ended December 31, 1998 reflect the historical operating results prior to the merger. The Company's consolidated results of operations for the year ended December 31, 2000 and for the period November 4, 1999 through December 31, 1999 reflect the operations of the Company after the merger and the impact of the required APB 16 purchase accounting adjustments, as previously described. In general, the recognition of straight-line operating lease revenue, depreciation, interest income and interest expense have been impacted by the new cost basis of the assets and liabilities on the balance sheet. NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES LOANS AND OTHER LENDING INVESTMENTS, NET--As described in Note 4, "Loans and Other Lending Investments," includes corporate/partnership loans/unsecured notes. In general, management considers its investments in this category as held-to-maturity and, accordingly, reflects such items at amortized historical cost. REAL ESTATE SUBJECT TO OPERATING LEASES AND DEPRECIATION--Real estate subject to operating leases is generally recorded at cost. On November 4, 1999, the effective date of the merger, adjustments were made to increase the book value of corporate tenant lease assets in the aggregate to reflect iStar Financial's purchase price and to eliminate prior period accumulated depreciation. The December 31, 2000 balances reflect these adjustments. Certain improvements and replacements are capitalized when they extend the useful life, increase capacity or improve the efficiency of the asset. Repairs and maintenance items are expensed as incurred. The Company capitalizes interest costs incurred during the land development or construction period on qualified development projects, including investments in joint ventures accounted for under the equity method. Beginning on November 4, 1999, real estate depreciation expense is computed using the straight-line method of cost recovery with an estimated remaining useful life of 40.0 years. Depreciation expense for all 21 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) periods prior to the merger was computed using the straight-line method of cost recovery over estimated useful lives of 31.5 or 40.0 years. Additionally, depreciation is computed using the straight-line method of cost recovery over the estimated useful lives of five years for furniture and equipment, the remaining lease term for tenant improvements, and the remaining life of the building for building improvements. Corporate tenant lease assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. The Company also periodically reviews long-lived assets to be held and used for an impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. In management's opinion, real estate assets to be held and used are not carried at amounts in excess of their estimated recoverable amounts. CASH AND CASH EQUIVALENTS--Cash and cash equivalents include all cash held in banks or invested in money market funds with original maturity terms of less than 90 days. NON-CASH ACTIVITY--The following schedule summarizes the significant non-cash activity for the combined pre- and post-merger periods for 1999. During the period from November 4, 1999 to December 31, 1999, the Company had non-cash activity including: (1) the impact to the Company's financial position resulting from the merger; and (2) the consolidation of an asset which was an unconsolidated joint venture prior to the merger.
Impact on assets (increase) decrease: Loans and other lending investments....................... $ 9,703 Real estate subject to operating leases................... (187,773) Deferred operating lease income receivable................ 29,643 Loan costs................................................ 10,913 Other assets.............................................. 1,833 Impact on liabilities and equity increase (decrease): Debt obligations.......................................... 56,932 Accounts payable, accrued expenses and other liabilities............................................... (3,373) Shareholder's equity...................................... 85,851 --------- Net cash impact of merger transaction....................... $ 3,729 =========
In addition, the Company assumed existing mortgage notes of $18.9 million in conjunction with investments made during 1998. Also, during 1998, the Company issued 1.9 million common shares in conjunction with the investments acquired. REVENUE RECOGNITION--Operating lease revenue is recognized on the straight-line method of accounting from the later of the date of the origination of the lease or the date of acquisition of the facility subject to existing leases. Accordingly, contractual lease payment increases are recognized evenly over the lease term. The cumulative difference between lease revenue recognized under this method and contractual lease payment terms is recorded as deferred operating lease income receivable on the balance sheet. On November 4, 1999, the effective date of the merger, certain purchase accounting adjustments were made to eliminate the deferred operating lease income receivable. Additionally, for purposes of calculating 22 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the average lease rates over the remaining lives of the leases, the term of all leases in place at the time of the merger has been adjusted to reflect a new start date beginning November 4, 1999. INCOME TAXES--For the period ending December 31, 2000, the Company will be taxed as a QRS under the Code. As a QRS, the Company is included in the consolidated tax return of iStar Financial. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. Prior to the merger, the Company was taxed as a REIT under the Code. INTEREST RATE RISK MANAGEMENT--The Company has entered into various interest rate protection agreements that, together with a swap agreement, fix the interest rate on a portion of the Company's LIBOR-based borrowings. The related cost of these agreements is amortized over their respective lives and such amortization is recorded as interest expense. The Company enters into interest rate risk management arrangements with financial institutions meeting certain minimum financial criteria, and the related credit risk of non-performance by counterparties is not considered to be significant. CONCENTRATION OF CREDIT RISK--The Company underwrites the credit of prospective customers and may require them to provide some form of credit support such as corporate guarantees or letters of credit. Although the Company's assets are geographically diverse and its customers operate in a variety of industries, to the extent the Company has a significant concentration of lease revenues from any single customer, the inability of that customer to make its lease payments could have an adverse effect on the Company. As of December 31, 2000, the Company's five largest customers collectively accounted for approximately 17.8% of the Company's annualized lease revenue. The Company's largest customer accounted for approximately 5.1% of the Company's annualized lease revenue. RECLASSIFICATIONS--Certain prior year amounts have been reclassified in the Consolidated Financial Statements and the related notes to conform to the 2000 presentation. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. NEW ACCOUNTING STANDARDS--In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). On June 23, 1999, the FASB voted to defer the effectiveness of SFAS No. 133 for one year. SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000, but earlier application is permitted as of the beginning of any fiscal quarter subsequent to June 15, 1998. SFAS No. 133 establishes accounting and reporting standards for derivative financial instruments and hedging activities. It 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. If certain conditions are met, a derivative may be specifically designated as: (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment; (2) a hedge of the exposure to variable cash flows of a forecasted transaction; or (3) in certain circumstances a hedge of a foreign currency exposure. The Company adopted this pronouncement, as amended by Statement of Financial Accounting Standards No. 137 "Accounting for Derivative Instruments and Hedging Activities-deferral of the Effective Date of FASB Statement No. 133" 23 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) and Statement of Financial Accounting Standards No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities-an Amendment of FASB Statement No. 133," on January 1, 2001. Because the Company has primarily used derivatives as cash flow hedges of interest rate risk only, the adoption of SFAS No. 133 did not have a material financial impact on the financial position and results of operations of the Company. However, should the Company change its current use of such derivatives (see Note 9), the adoption of SFAS No. 133 could have a more significant effect on the Company prospectively. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." In June 2000, the SEC staff amended SAB 101 to provide registrants with additional time to implement SAB 101. The Company has adopted SAB 101 in the fourth quarter of fiscal 2000. The adoption of SAB 101 did not have a material financial impact on the financial position or results of operations of the Company. In April 1998, the Accounting Standards Executive Committee issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 is effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires all costs of start-up activities, including organization costs, to be charged to operations as incurred. The initial application and effect of adopting SOP 98-5 is reported as a cumulative effect of a change in accounting principle and is recorded to net income in the period of change. Accordingly, the Company charged unamortized start-up costs of approximately $1.8 million to net income during the first quarter of 1999. NOTE 4--LOANS AND OTHER LENDING INVESTMENTS On December 20, 2000, the Company originated a $60.0 million corporate loan with a 10.6% interest rate. This loan was repaid in full subsequent to year end. In addition, the Company has a $34.4 million loan bearing a 6.1% pay rate and an 18.2% effective rate, which matures in December 2001 (see Note 5). NOTE 5--REAL ESTATE SUBJECT TO OPERATING LEASES The Company's investments in real estate subject to operating leases, at cost, were as follows (in thousands):
DECEMBER 31, ----------------------- 2000 1999 ---------- ---------- Buildings and improvements........................... $1,126,418 $1,223,015 Land and land improvements........................... 318,412 251,794 Less: accumulated depreciation....................... (31,764) (5,111) ---------- ---------- 1,413,066 1,469,698 Investments in unconsolidated joint ventures......... 72,983 60,106 ---------- ---------- Real estate subject to operating leases, net..... $1,486,049 $1,529,804 ========== ==========
On November 4, 1999, the effective date of the merger, the purchase accounting adjustments required under APB 16 were made to increase the costs of the land and buildings and to eliminate prior period accumulated depreciation. The Company's facilities are leased to customers under operating leases with current expiration dates from 2001 to 2020. Future operating lease payments under non-cancelable operating leases, excluding 24 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5--REAL ESTATE SUBJECT TO OPERATING LEASES (CONTINUED) customer reimbursements of expenses, in effect at December 31, 2000, are approximately as follows (in thousands):
YEAR AMOUNT - ---- ---------- 2001........................................................ $ 161,429 2002........................................................ 157,811 2003........................................................ 149,401 2004........................................................ 131,279 2005........................................................ 112,867 Thereafter.................................................. 526,177 ---------- $1,238,964 ==========
The Company receives reimbursements from customers for certain operating expenses including common area costs, insurance and real estate taxes. No single customer represents more than 5.1% of annualized lease revenues as of December 31, 2000. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES--At December 31, 2000, the Company had investments in four joint ventures: (1) TriNet Sunnyvale Partners, L.P. ("Sunnyvale"), whose external partners are John D. O'Donnell, Trustee, John W. Hopkins, and Donald S. Grant; (2) Corporate Technology Centre Associates LLC ("CTC I"), whose external member is Corporate Technology Centre Partners LLC; (3) Sierra Land Ventures ("Sierra"), whose external joint venture partner is Sierra-LC Land, Ltd.; and (4) TriNet Milpitas Associates, LLC ("Milpitas"), whose external member is The Prudential Insurance Company of America. These ventures were formed for the purpose of operating, acquiring and, in certain cases, developing corporate tenant lease facilities. At December 31, 2000, all the facilities held by CTC II and TN-CP had been sold. The Company previously had an equity investment in CTC II which was sold for approximately $66.0 million in September 2000. In connection with this sale, the note receivable from the venture was modified to mature on December 31, 2001. The note receivable and related accrued interest are included in Loans and Other Lending Investments at December 31, 2000. Effective November 22, 1999, the joint venture partners, who are affiliates of Whitehall Street Real Estate Limited Partnership, IX and The Goldman Sachs Group L.P. (the "Whitehall Group") in W9/TriNet Poydras, LLC ("Poydras"), elected to exercise their right under the partnership agreement, which was accelerated as a result of the acquisition by iStar Financial, to exchange all of their membership units for 350,746 shares of common stock of iStar Financial and a $767,000 distribution of available cash. As a consequence, Poydras is now wholly owned and is reflected on a consolidated basis in these financial statements. Subsequent to November 4, 1999, the Company's equity and notes receivable investments in joint ventures have been adjusted to reflect the impact of the required APB 16 purchase accounting adjustments resulting from the merger. The Company's share of joint venture income and interest income are recorded on an historical basis through November 3, 1999, and for the period from November 4, 1999 through December 31, 1999, joint venture income and interest income include the required purchase accounting adjustments. 25 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 5--REAL ESTATE SUBJECT TO OPERATING LEASES (CONTINUED) At December 31, 2000, the ventures comprised 20 facilities, three of which were under development (these three facilities became fully operational with lease payments commencing as of January 2001). Additionally, 17.7 acres of land are held for sale. The Company's combined investment in these joint ventures at December 31, 2000 was $73.0 million. The joint ventures' purchase price for the 20 facilities owned at December 31, 2000 was $264.3 million. The purchase price of the land held for sale was $6.8 million. In the aggregate, the joint ventures had total assets of $325.7 million and total liabilities of $236.8 million as of December 31, 2000, and net income of $6.9 million for the year ended December 31, 2000. The Company accounts for these investments under the equity method because its joint venture partners have certain participating rights which limit the Company's control. The Company's investments in and advances to unconsolidated joint ventures, its percentage ownership interests, its respective income and pro rata share of its ventures' third-party debt as of December 31, 2000 are presented below (in thousands):
PRO RATA ACCRUED JOINT SHARE OF UNCONSOLIDATED OWNERSHIP EQUITY NOTE INTEREST TOTAL VENTURE INTEREST THIRD-PARTY JOINT VENTURE % INVESTMENT RECEIVABLE RECEIVABLE INVESTMENT INCOME INCOME DEBT - ----------------------------- ---------- ---------- ---------- ---------- ---------- -------- -------- ----------- Operating: Sunnyvale.................. 44.7% $12,772 $ -- $ -- $ 12,772 $1,163 $ -- $10,728 CTC I...................... 50.0% 32,440 -- -- 32,440 1,053 -- 43,789 CTC II..................... 50.0% -- 24,874 6,222 31,096 (755) 5,371 -- Milpitas................... 50.0% 24,289 -- -- 24,289 2,941 -- 40,641 TN-CP...................... 50.0% -- -- -- -- 397 -- -- Development: Sierra..................... 50.0% 3,482 -- -- 3,482 217 -- 724 ------- ------- ------ -------- ------ ------ ------- Total.................... $72,983 $24,874 $6,222 $104,079 $5,016 $5,371 $95,882 ======= ======= ====== ======== ====== ====== =======
Effective September 29, 2000, iStar Sunnyvale Partners, LP entered into an interest rate cap agreement with Bear Stearns Financial Products, limiting the venture's exposure to interest rate movements on its $24.0 million LIBOR-based mortgage loan to an interest rate cap of 9.0% through November 9, 2003. Currently, the limited partners of the Sunnyvale partnership have the option to convert their partnership interest into cash; however, the Company may elect to deliver 297,728 shares of common stock of iStar Financial in lieu of cash. Additionally, commencing in February 2002, subject to acceleration under certain circumstances, partnership units held by certain partners of Milpitas may be converted into 984,476 shares of common stock of iStar Financial. Income generated from the above joint venture investments is included in Operating Lease Income in the Consolidated Statements of Operations. NOTE 6--RESTRICTED CASH Under the terms of one of its mortgage loan liabilities, the Company is required to maintain restricted cash reserves for debt service and leasing cost obligations. At December 31, 2000 and 1999, the Company had $5.9 million and $6.1 million, respectively, of restricted cash related to these obligations. NOTE 7--LOAN COSTS AND INTEREST EXPENSE Included in deferred expenses and other assets are loan fees and other financing costs. On November 4, 1999, purchase accounting adjustments were made to eliminate loan origination costs and revalue 26 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 7--LOAN COSTS AND INTEREST EXPENSE (CONTINUED) interest rate protection agreements to fair market value. These costs are amortized over the remaining term of the related debt. The following table summarizes the costs and accumulated amortization associated with the loan origination costs and interest rate protection agreements (in thousands):
FOR THE PERIOD FOR THE PERIOD FOR THE NOVEMBER 4, JANUARY 1, YEAR ENDED 1999 TO 1999 TO DECEMBER, 31 DECEMBER 31, NOVEMBER 3, ------------ -------------- -------------- 2000 1999 1999 ------------ -------------- -------------- Loan origination costs................................. $ 50 $ (7,345) $ 7,345 Interest rate protection agreements.................... 3,127 (6,718) 9,845 ------ -------- ------- 3,177 (14,063) 17,190 Accumulated amortization............................... (757) 6,956 (7,061) ------ -------- ------- $2,420 $ (7,107) $10,129 ====== ======== =======
During 2000 and 1999, interest expense was $52.6 million and $45.6 million, respectively, which was net of capitalized interest of $513,000 and $1.8 million, respectively. Amortization of loan origination costs, interest rate protection agreements and loan discounts included in interest expense was $4.2 million for the year ended December 31, 2000, $509,000 for the post-merger period November 4, 1999 to December 31, 1999, and $1.6 million for the pre-merger period January 1, 1999 to November 3, 1999. NOTE 8--OTHER ASSETS AND OTHER LIABILITIES Other assets at December 31, 2000 and 1999, includes an investment of $4.0 million consisting of 250,000 shares of the corporate stock of Fortress Investment Corp., a private real estate investment company. An investment in TriNet Management Operating Company, Inc. ("TMOC"), a taxable decontrolled subsidiary of the Company, totaled $2.3 million and $1.9 million at December 31, 2000 and 1999, respectively. Also included in other assets at December 31, 2000 is $5.0 million in accounts receivable, $2.7 million in prepaid leasing commissions, and $1.9 million in corporate furniture, fixtures and equipment. At December 31, 1999, other assets also included $4.4 million in accounts receivable and $1.1 million in leasing commissions and other prepaid expenses. Accumulated depreciation/amortization related to other assets aggregated approximately $533,000 and $16,000 at December 31, 2000 and 1999, respectively. Included in other liabilities at December 31, 2000 is $9.3 million in interest payable, $11.0 million in security deposits from customers, $8.2 million of prepaid lease income, $11.3 million of accounts payable and accrued liabilities, and $876,000 of deferred liabilities which primarily relate to tenant improvements. Other liabilities as of December 31, 1999 included $9.9 million in interest payable, $10.8 million in security deposits from customers, $9.4 million of prepaid lease income, $12.1 million of accounts payable and accrued liabilities, and $2.3 million of deferred liabilities, related primarily to tenant improvements. NOTE 9--DEBT OBLIGATIONS On November 4, 1999, purchase accounting adjustments were made to the Company's debt balances to reflect the present value of amounts to be paid based on estimated market interest rates for obligations with similar terms. These adjustments, whether discounts or premiums, are amortized into interest expense over the remaining term of the loan to reflect an estimated market interest rate as of the merger date. 27 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9--DEBT OBLIGATIONS (CONTINUED) The table below summarizes the contract amount, the carrying value, the contract interest rate and the effective interest rate on the various debt instruments as of December 31, 2000, (in thousands). The carrying value represents the debt balance after taking into consideration the discounts or premiums. The effective interest rate represents the estimated market interest rate as of the merger date for similar term debt instruments.
CARRYING VALUE AS OF MAXIMUM --------------------------- STATED EFFECTIVE AMOUNT DECEMBER 31, DECEMBER 31, INTEREST INTEREST AVAILABLE 2000 1999 RATES RATES ---------- ------------ ------------ ------------------ ----------------- UNSECURED REVOLVING CREDIT FACILITY: Line of credit............. $350,000 $173,450 $186,700 LIBOR + 1.55% LIBOR + 1.55% ======== NON-RECOURSE SECURED TERM LOANS: Poydras Mortgage Loan (2).. 77,860 78,610 LIBOR + 1.38% LIBOR + 2.50% 1994 Mortgage Loan......... 36,296 44,426 LIBOR + 1.00% LIBOR + 1.00% Other Mortgage Loans....... 24,175 28,856 6.00% - 11.38% 7.29% - 8.50% -------- -------- 138,331 151,892 Less: debt premium/ (discount)............... 51 (520) -------- -------- Total secured term loans..... 138,382 151,372 -------- -------- UNSECURED NOTES (5): 6.75% Dealer Remarketable Securities (6)........... 125,000 125,000 6.75% 8.81% 7.30% Notes................ 100,000 100,000 7.30% 8.75% 7.70% Notes................ 100,000 100,000 7.70% 9.51% 7.95% Notes................ 50,000 50,000 7.95% 9.04% -------- -------- Total unsecured notes........ 375,000 375,000 Less: debt discount........ (18,490) (21,481) -------- -------- Total unsecured notes........ 356,510 353,519 -------- -------- TOTAL DEBT OBLIGATIONS....... $668,342 $691,591 ======== ======== SCHEDULED MATURITY DATE ------------------ UNSECURED REVOLVING CREDIT FACILITY: Line of credit............. May 2001 (1) NON-RECOURSE SECURED TERM LOANS: Poydras Mortgage Loan (2).. June 2001 1994 Mortgage Loan......... December 2004 (3) Other Mortgage Loans....... (4) Less: debt premium/ (discount)............... Total secured term loans..... UNSECURED NOTES (5): 6.75% Dealer Remarketable Securities (6)........... March 2013 7.30% Notes................ May 2001 7.70% Notes................ July 2017 7.95% Notes................ May 2006 Total unsecured notes........ Less: debt discount........ Total unsecured notes........ TOTAL DEBT OBLIGATIONS.......
EXPLANATORY NOTES: - ---------------------------------- (1) Subsequent to year end, the Company extended the maturity of this credit facility to May 2002. (2) The Company provides a guarantee for 25% of the principal balance outstanding. (3) On March 1, 2001, the Company repaid this mortgage loan obligation. (4) These mortgage loans mature at various dates through 2010. (5) The notes are callable by the Company at any time for an amount equal to the total of principal outstanding, accrued interest and the applicable make-whole prepayment premium. (6) Subject to mandatory tender on March 1, 2003 to either the dealer or the Company. The initial coupon of 6.75% applies to first five-year term through the mandatory tender date. If tendered to the dealer, the notes must be remarketed. The rates reset upon remarketing. The 30-day LIBOR rate as of December 29, 2000 was 6.56%. The Company has entered into an interest rate swap agreement which, together with an existing LIBOR interest rate cap agreement struck at 7.75%, effectively fixes the interest rate on $75.0 million of the Company's LIBOR-based borrowings at 5.58% plus the applicable margin through December 1, 2004. The actual borrowing cost to the Company with respect to indebtedness covered by the protection agreements will depend upon the applicable margin 28 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9--DEBT OBLIGATIONS (CONTINUED) over LIBOR for such indebtedness, which will be determined by the terms of the relevant debt instruments. The Company has also entered into LIBOR interest rate caps struck at 7.75% and 7.50% in notional amounts of $35.0 million and $75.0 million, respectively, which expire in December 2004 and June 2001, respectively. UNSECURED REVOLVING CREDIT FACILITY--The $350.0 million credit facility (as extended subsequent to year end) matures on May 31, 2002. Borrowing rates under the facility are based on the Company's credit ratings. The credit facility also has a $225.0 million competitive bid feature, which allows banks in the syndicate group to bid on certain borrowings at more competitive rates. All of the available commitment under the credit facility may be borrowed for general corporate and working capital needs, as well as for investment purposes. The credit facility requires interest-only payments until maturity, at which time outstanding borrowings are due and payable. The current LIBOR-based borrowing rate, which is based on the Company's credit rating, is LIBOR plus 1.55%. The credit facility's covenants include limitations on corporate leverage, unsecured debt and minimum cash flow coverage tests against debt service and fixed charges. The credit facility, as amended, provides for the limitation on the Company's dividend payments to 85% of cash flow from operations for any 12-month period. Future maturities of outstanding long-term debt and mortgages stated in terms of the contractual obligation are as follows (in thousands): 2001 (1).................................................... $215,012 2002 (2).................................................... 188,585 2003........................................................ 125,568 2004........................................................ 619 2005........................................................ 3,054 Thereafter.................................................. 153,943 -------- Total principal maturities.................................. 686,781 Net unamortized debt (discounts)/premiums................... (18,439) -------- Total debt obligations...................................... $668,342 ========
EXPLANATORY NOTES: - ------------------------------ (1) Includes the 1994 Mortgage Loan balance of $36.3 million which had an original maturity date in 2004 and was repaid on March 1, 2001. (2) Reflects the one-year extension on the unsecured revolving credit facility to mature in 2002. 29 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9--DEBT OBLIGATIONS (CONTINUED) The following table sets forth the components of interest expense for the periods presented (in thousands):
FOR THE PERIOD FOR THE PERIOD FOR THE YEAR NOVEMBER 4, JANUARY 1, ENDED 1999 TO 1999 TO DECEMBER 31, DECEMBER 31, NOVEMBER 3, 2000 1999 1999 ------------ -------------- -------------- Cash interest incurred................................. $48,863 $8,330 $36,982 Amortization of loan costs, interest rate protection agreements, and loan discounts....................... 4,221 509 1,645 Less: capitalized interest............................. (513) (377) (1,443) ------- ------ ------- $52,571 $8,462 $37,184 ======= ====== =======
NOTE 10--SPECIAL CHARGE During the third quarter of 1998, the Company recognized a one-time charge of approximately $3.0 million in connection with the expected reduction of its investment activity. This charge met the criteria set forth in Emerging Issues Task Force Issue ("EITF") 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." Accordingly, the Company recorded a liability for the estimated costs resulting from this change. The 1998 third quarter charge was comprised of $1.9 million of severance costs and related compensation, $209,000 in lease termination fees, $561,000 of abandoned pursuit costs and $344,000 of other restructuring costs. As of December 31, 2000, there was no liability remaining related to this charge. NOTE 11--COMMITMENTS AND CONTINGENCIES The Company is subject to expansion option agreements with three existing customers which could require the Company to fund and to construct up to 166,000 square feet of additional adjacent space on which the Company would receive additional lease revenue under the terms of the option agreements. The Company also has commitments relating to partially guaranteed debt related to an asset that became wholly owned in the fourth quarter of 1999. NOTE 12--DIVIDENDS As described in Note 3, prior to the merger with iStar Financial, the Company qualified as a REIT for federal income tax purposes. Subsequent to the merger, the Company will be included as a QRS in iStar Financial's consolidated tax return. The following summarizes the tax components of common dividends 30 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12--DIVIDENDS (CONTINUED) paid by the Company prior to the merger with iStar Financial in 1999 and for the year ended December 31, 1998:
1999 1998 -------- -------- Per common share: Ordinary income........................................... $1.59 $1.81 Return of capital......................................... 1.01 0.75 ----- ----- Total................................................... $2.60 $2.56(1) ===== =====
EXPLANATORY NOTE: - ------------------------------ (1) The fourth quarter 1998 common stock dividend of $0.65, which was payable on January 15, 1999 to shareholders of record on December 31, 1998, was treated as a 1999 dividend distribution for federal income tax reporting purposes and, accordingly, was not included in this column of the above table. All of the dividends declared on the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock for the pre-merger periods described above represented ordinary income for income tax purposes. NOTE 13--STOCK INCENTIVE PLANS AND EMPLOYEE BENEFITS IMPACT OF MERGER--The Company's stock incentive plans were terminated effective with the merger, at which time each holder of a stock option, with the exception of the Company's directors and certain senior executives described below, elected to receive one of the following for each stock option: (1) cash equal to the difference between the market price and the exercise price of the stock option, whether vested or unvested; or (2) a number of options to purchase iStar Financial common stock on substantially the same terms, in each case giving effect to the 1.15 exchange ratio. Unvested options were exchanged for unvested iStar Financial options and resumed the same vesting schedules. Certain senior executives of the Company elected to receive one of the following for each stock option: (1) cash equal to the difference between the market price and the exercise price of the stock option, whether vested or unvested; or (2) a number of options to purchase iStar Financial common stock on substantially the same terms, in each case giving effect to the 1.15 exchange ratio, except that both vested and unvested stock options were exchanged for vested iStar Financial options. The Company's directors received a number of iStar Financial options to purchase iStar Financial common stock vested substantially the same as their options in the Company, in each case giving effect to the 1.15 exchange ratio for their options in the Company. Also as a result of the merger, the Company terminated its dividend equivalent rights program. The program called for immediate vesting of all dividend equivalent rights upon a change of control of 50% or more of the Company's voting common stock. Coincident with the merger, all dividend equivalent rights were vested and amounts due to employees of approximately $8.3 million were paid by the Company. Such payments were included as part of the purchase price paid by iStar Financial to acquire the Company for financial reporting purposes. STOCK INCENTIVE PLANS--PRE-MERGER--The Company established the 1993 Stock Incentive Plan (the "1993 Stock Plan") for the purpose of encouraging and enabling the Company's officers, employees and 31 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13--STOCK INCENTIVE PLANS AND EMPLOYEE BENEFITS (CONTINUED) directors to acquire a proprietary interest in the Company. The 1993 Stock Plan provided for administration by the Compensation Committee (the "Committee") of the Board of Directors. A maximum of 500,000 common shares were reserved for issuance under the 1993 Stock Plan. The 1993 Stock Plan authorized: (1) the grant of stock options that qualified as incentive stock options ("ISOs") under Section 422 of the Code; (2) the grant of stock options that do not so qualify ("Non-Qualified Options"); and (3) grants of shares contingent upon the attainment of performance goals or subject to other restrictions. Options granted under the 1993 Stock Plan vested ratably over four years for employees and after one year for non-employee directors. In addition, in connection with the Company's initial public offering, options were granted separately from the 1993 Stock Plan to executive officers to purchase an aggregate of 290,000 shares at the initial offering price of $24.25 per share. Options granted in connection with the initial public offering vested ratably over three years. During 1995, the Company adopted the 1995 Stock Incentive Plan (the "1995 Stock Plan"). The 1995 Stock Plan provided for the issuance of, or grant of options to purchase, up to 1,000,000 shares of common stock. Options under the 1995 Stock Plan were ISOs or Non-Qualified Options. Options granted under the 1995 Stock Plan vested ratably over four years for employees and after one year for non-employee directors. During 1997, the Company adopted the 1997 Stock Incentive Plan (the "1997 Stock Plan"). The 1997 Stock Plan provided for the issuance of, or grant of options to purchase, up to 800,000 shares of common stock. Options under the 1997 Stock Plan were ISOs or Non-Qualified Options. No options were granted under the 1997 plan. Also during 1997, the Company adopted the dividend equivalent rights program as part of its long-term incentive compensation plans. Dividend equivalent rights were issued to employees and directors in conjunction with options grants to purchase Company stock and vested in equal annual installments over a period of four years for employees and one year for directors. Dividend equivalent rights expired after five years or when the underlying stock option was exercised, forfeited or canceled. Payments on the dividend equivalent rights units awarded accrued and accumulated in amounts equal to the dividends declared and paid on the underlying options, and the actual payments on vested dividend equivalent rights were made in annual installments on the vesting dates. Dividend equivalent rights units were issued in tandem with all options granted to directors and officers of the Company in 1997 and employees in 1998 (with the exception of two grants in December 1998 in the aggregate amount of 130,000 options). 32 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13--STOCK INCENTIVE PLANS AND EMPLOYEE BENEFITS (CONTINUED) Changes during 1998 and 1999 (pre merger) in options outstanding for the combined plans were as follows:
NUMBER OF SHARES ------------------------- NON-EMPLOYEE AVERAGE EMPLOYEES DIRECTORS STRIKE PRICE ---------- ------------ ------------ OPTIONS OUTSTANDING, DECEMBER 31, 1997................... 976,809 122,000 $28.80 Granted, 1998.......................................... 567,500 24,000 $32.89 Exercised, 1998........................................ -- (12,000) $28.88 Canceled, 1998......................................... (328,584) (4,000) $32.54 ---------- -------- OPTIONS OUTSTANDING, DECEMBER 31, 1998................... 1,215,725 130,000 $29.67 Granted, 1999.......................................... 277,000 16,000 $27.00 Exercised, 1999........................................ (141,666) -- $25.43 Canceled, 1999......................................... (1,351,059) (146,000) $29.49 ---------- -------- OPTIONS OUTSTANDING, DECEMBER 31, 1999................... -- -- $ -- ========== ========
The Company applied Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense was recognized for its stock-based compensation plans. Had compensation costs for the Company's stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per common share would have been reduced by approximately $557,000, or $0.02 per common share, for the period from January 1, 1999 to November 3, 1999, and by approximately $618,000, or $0.03 per common share, for the year ended December 31, 1998. The fair value of the options granted during 1999 (pre-merger) was estimated at $2.31 per share on the date of grant using the Black-Scholes option pricing model with the following assumptions, which are based on historical performance: dividend yield of 10.0%, volatility of 25.0%, risk free interest rate of 5.5%, actual forfeitures, and an expected life of approximately five years. The fair value of the options granted during 1998 was estimated as $2.88 per share on the date of grant using the Black-Scholes option pricing model with the following assumptions, which are based on historical performance: dividend yield of 7.5%, volatility of 20.0%, risk-free interest rates of 4.6% to 5.5%, actual forfeitures, and an expected life of approximately five years. Effective January 1, 1994, the Company implemented the TriNet Corporate Realty Trust, Inc. Savings and Retirement Plan (the "401(k) Plan"), which is a voluntary, defined contribution plan. All employees are eligible to participate in the 401(k) Plan following completion of six months of continuous services with the Company. Each participant may contribute on a pretax basis between 2% and 15% of such participant's compensation. At the discretion of the Board of Directors, the Company may make matching contributions on the participant's behalf up to 50% of the first 10% of the participant's annual contribution. The Company made contributions of approximately $199,000, $210,000 and $183,000, to the 401(k) Plan for the years ended December 31, 2000, 1999 and 1998, respectively. Effective January 1, 2000, the 401(k) Plan was expanded to include employees of, and adopted by, iStar Financial and was renamed the iStar Financial Inc. Savings and Retirement Plan. 33 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14--EARNINGS PER SHARE The basic and diluted earnings per share calculations are based on the following weighted average shares outstanding during the periods indicated:
FOR THE PERIOD FOR THE JANUARY 1, 1999 TO YEAR ENDED NOVEMBER 3, DECEMBER 31, 1999 1998 ------------------- ------------- (IN THOUSANDS) Weighted average common shares outstanding for basic earnings per common share................................. 24,978 24,387 Add effect of assumed shares issued under treasury stock method for stock options.................................. 8 117 Add effect of assumed shares issued in exchange for land.... 74 -- ------- ------- Weighted average common shares outstanding for diluted earnings per common share................................. 25,060 24,504 ======= =======
For the period January 1, 1999 to November 3, 1999 and for the year ended December 31, 1998, there were 1,357,043 and 995,303 weighted average partnership units outstanding, respectively, on an as-converted basis that were not assumed converted into common shares since they were antidilutive to earnings per share. As discussed in Note 5, 350,746 of these units were converted to shares in iStar Financial on November 22, 1999. The remaining partnership units outstanding would also be converted to iStar Financial shares if the conversion rights are exercised. Earnings per share is not calculated for the period November 4, 1999 through December 31, 1999 or for the year ended December 31, 2000 since all 100 shares outstanding are held entirely by iStar Financial. NOTE 15--SHAREHOLDER'S EQUITY iStar Financial initiated a share repurchase program to buy back up to 5.0 million shares of its common stock. During 2000, the Company repurchased 16,000 shares of iStar Financial's common stock for $302,000, and during 1999 repurchased 2.26 million shares for $40.0 million, resulting in an average per share cost of $17.66. On April 29, 1998, the Company completed a public offering of 701,754 shares of common stock, priced at $33.7547 per share in an underwritten offering with Merrill Lynch & Co. Merrill Lynch deposited these common shares with the trustee of the Equity Investor Funds Cohen & Steers Realty Majors Portfolio, a unit investment trust. Net proceeds from the offering were approximately $23.7 million, before issuance costs, and were used to pay down debt and for working capital. On March 18, 1998, the Company completed a direct placement of 800,000 shares of common stock priced at $37.50 per share. The $30.0 million of proceeds were used to pay down debt. On January 30, 1998, the Company issued 47,956 common shares at $38.90 per share in conjunction with the acquisition of an asset. On January 8, 1998, the Company completed a follow-on equity offering of 2,405,000 shares of common stock at a price of $37.00 per share. Proceeds from this offering, net of issuance costs, were approximately $87.5 million and were used to pay down debt. 34 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 16--FAIR VALUES OF FINANCIAL INSTRUMENTS SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" ("SFAS No.107"), requires the disclosure of the estimated fair values of financial instruments. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Quoted market prices, if available, are utilized as estimates of the fair values of financial instruments. Because no quoted market prices exist for a significant part of the Company's financial instruments, the fair values of such instruments have been derived based on management's assumptions, the amount and timing of future cash flows and estimated discount rates. The estimation methods for individual classifications of financial instruments are described more fully below. Different assumptions could significantly affect these estimates. Accordingly, the net realizable values could be materially different from the estimates presented below. The provisions of SFAS No. 107 do not require the disclosure of the fair value of non-financial instruments, including intangible assets or the Company's real estate assets under operating leases. In addition, the estimates are only indicative of the value of individual financial instruments and should not be considered an indication of the fair value of the Company as an operating business. SHORT-TERM FINANCIAL INSTRUMENTS--The carrying values of short-term financial instruments including cash and cash equivalents and short-term investments approximate the fair values of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities, or have an average maturity of less than 90 days and carry interest rates which approximate market. LOANS AND OTHER LENDING INVESTMENTS--For the Company's interests in loans and other lending investments, the fair values were estimated by discounting the future contractual cash flows (excluding participation interests in the sale or refinancing proceeds of the underlying collateral) using estimated current market rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. OTHER FINANCIAL INSTRUMENTS--The carrying value of other financial instruments including, restricted cash, accrued interest receivable, accounts payable, accrued expenses and other liabilities approximate the fair values of the instruments. DEBT OBLIGATIONS--A portion of the Company's existing debt obligations bear interest at fixed margins over LIBOR. Such margins or spreads may be higher or lower than those at which the Company could currently replace the related financing arrangements. Other obligations of the Company bear interest at fixed rates, which may differ from prevailing market interest rates. As a result, the fair values of the Company's debt obligations were estimated by discounting current debt balances from December 31, 2000 or 1999 to maturity using estimated current market rates at which the Company could enter into similar financing arrangements. INTEREST RATE PROTECTION AGREEMENTS--The fair value of interest rate protection agreements such as interest rate caps, floors, collars and swaps used for hedging purposes is the estimated amount the Company would receive or pay to terminate these agreements at the reporting date, taking into account current interest rates and current creditworthiness of the respective counterparties. 35 TRINET CORPORATE REALTY TRUST, INC. (A WHOLLY-OWNED SUBSIDIARY OF ISTAR FINANCIAL INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 16--FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) The book and fair values of financial instruments as of December 31, 2000 and 1999 were (in thousands):
2000 1999 ------------------- ------------------- BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE -------- -------- -------- -------- FINANCIAL ASSETS: Loans and other lending investments............... $ 90,796 $ 94,592 $ 39,244 $ 36,757 FINANCIAL LIABILITIES: Debt obligations.................................. 668,342 666,922 691,591 690,113 Interest rate protection agreements............... 2,420 602 3,022 4,603
NOTE 17--SUBSEQUENT EVENTS On March 1, 2001, the 1994 mortgage loan balance of $36.3 million was repaid in full. The original maturity date was in December 2004. In addition, subsequent to year end, the Company extended the maturity of its $350.0 million unsecured revolving credit facility to May 2002. NOTE 18--QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table sets forth the selected quarterly financial data for the Company (in thousands, except per share amounts).
QUARTER ENDED -------------------------------------------------- DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 ------------ ------------ -------- --------- 2000: Revenue..................................................... $47,320 $46,275 $46,035 $44,794 Income before extraordinary item and cumulative effect...... 23,053 23,023 20,091 17,668 Extraordinary loss.......................................... -- (388) -- (317) Cumulative effect........................................... -- -- -- -- Net income.................................................. 23,053 22,635 20,091 17,351 Net income per common share................................. n/a n/a n/a n/a 1999: Revenue..................................................... $43,289 $48,107 $42,566 $42,425 Income before extraordinary item and cumulative effect...... 5,657 23,313 19,698 21,026 Extraordinary loss.......................................... -- (665) -- -- Cumulative effect........................................... -- -- -- (1,810) Net income.................................................. 5,657 22,648 19,698 19,216 Net income allocable to common shares....................... 5,657 18,729 15,778 15,297 Earnings available per common share Extraordinary loss per share.............................. n/a $ (0.02) $ -- $ (0.07) Earnings available per common share....................... n/a $ 0.75 $ 0.63 $ 0.61 Weighted average common shares outstanding.................. n/a 25,067 24,957 24,876
EXPLANATORY NOTE: - ------------------------------ (1) The summarized consolidated quarterly information for the year ended December 31, 1999 represents the combined pre- and post-merger periods. 36 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- UNISYS CENTRAL TRAINING CENTER 1 2611 Corporate West Drive Lisle, IL $ 5,805 $ 6,153 $ 14,993 $ -- $ 6,153 $ 14,993 $ 21,146 REX STORES CORPORATION 2 2875 Needmore Road Dayton, OH 1,890 873 4,614 -- 873 4,614 5,487 THE STANDARD REGISTER COMPANY 3 4000 South Racine Avenue Chicago, IL -- 409 2,893 -- 409 2,893 3,302 RALPHS GROCERY COMPANY 4 2652 East Long Beach Avenue Los Angeles, CA -- 9,334 12,501 -- 9,334 12,501 21,835 UNIVERSAL TECHNICAL INSTITUTE 5-6 3002 North 27th Avenue Phoenix, AZ -- 1,000 1,997 -- 1,000 1,997 2,997 CATERAIR INTERNATIONAL CORPORATION 7 50 Adrian Court Burlingame, CA -- 1,219 3,470 -- 1,219 3,470 4,689 8 370 Adrian Road Millbrae, CA -- 741 2,107 -- 741 2,107 2,848 9 3500 N.W. 24th Street Miami, FL -- 3,048 8,676 -- 3,048 8,676 11,724 10 3630 N.W. 25th Street Miami, FL -- 1,612 4,586 -- 1,612 4,586 6,198 11 4101 N.W. 25th Street Miami, FL -- 1,393 3,967 -- 1,393 3,967 5,360 12 221 West 79th Street Bloomington, MN -- 403 1,147 -- 403 1,147 1,550 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- UNISYS CENTRAL TRAINING CENTER 1 2611 Corporate West Drive Lisle, IL $ (437) 1999 40.0 REX STORES CORPORATION 2 2875 Needmore Road Dayton, OH (135) 1999 40.0 THE STANDARD REGISTER COMPANY 3 4000 South Racine Avenue Chicago, IL (84) 1999 40.0 RALPHS GROCERY COMPANY 4 2652 East Long Beach Avenue Los Angeles, CA (365) 1999 40.0 UNIVERSAL TECHNICAL INSTITUTE 5-6 3002 North 27th Avenue Phoenix, AZ (58) 1999 40.0 CATERAIR INTERNATIONAL CORPORATION 7 50 Adrian Court Burlingame, CA (101) 1999 40.0 8 370 Adrian Road Millbrae, CA (61) 1999 40.0 9 3500 N.W. 24th Street Miami, FL (253) 1999 40.0 10 3630 N.W. 25th Street Miami, FL (134) 1999 40.0 11 4101 N.W. 25th Street Miami, FL (116) 1999 40.0 12 221 West 79th Street Bloomington, MN (33) 1999 40.0
37 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- 13 1085 Bible Way Reno, NV -- 248 707 -- 248 707 955 14 18850 28th Avenue, South Seattle, WA -- 828 2,355 -- 828 2,355 3,183 15 2800 Collingswood Drive Orlando, FL -- 1,476 4,198 -- 1,476 4,198 5,674 16 45-10 19th Avenue Astoria, NY -- 1,796 5,109 -- 1,796 5,109 6,905 17 24-20 49th Street Astoria, NY -- 897 2,555 -- 897 2,555 3,452 18 8401 Escort Street Philadelphia, PA -- 619 1,765 -- 619 1,765 2,384 SEARS LOGISTICS SERVICES 19 4150 Lockbourne Industrial Parkway Columbus, OH 2,390 375 7,191 -- 375 7,191 7,566 NORTHERN STATES POWER COMPANY 20 3115 Centre Point Drive Roseville, MN 1,205 1,113 4,452 -- 1,113 4,452 5,565 PNC MORTGAGE CORPORATION OF AMERICA, INC. 21 440 North Fairway Drive Vernon Hills, IL -- 1,400 12,597 -- 1,400 12,597 13,997 VOLKSWAGEN OF AMERICA, INC. 22 450 Barclay Boulevard Lincolnshire, IL 2,896 3,192 7,508 -- 3,192 7,508 10,700 23 500 South Seventh Avenue City of Industry, CA 2,258 5,002 11,766 -- 5,002 11,766 16,768 24 11650 Central Parkway Jacksonville, FL 1,621 2,310 5,435 -- 2,310 5,435 7,745 LAND O LAKES 25 1275 Red Fox Road Arden Hills, MN 1,557 719 6,541 -- 719 6,541 7,260 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- 13 1085 Bible Way Reno, NV (21) 1999 40.0 14 18850 28th Avenue, South Seattle, WA (69) 1999 40.0 15 2800 Collingswood Drive Orlando, FL (122) 1999 40.0 16 45-10 19th Avenue Astoria, NY (149) 1999 40.0 17 24-20 49th Street Astoria, NY (75) 1999 40.0 18 8401 Escort Street Philadelphia, PA (51) 1999 40.0 SEARS LOGISTICS SERVICES 19 4150 Lockbourne Industrial Parkway Columbus, OH (210) 1999 40.0 NORTHERN STATES POWER COMPANY 20 3115 Centre Point Drive Roseville, MN (130) 1999 40.0 PNC MORTGAGE CORPORATION OF AMERICA, INC. 21 440 North Fairway Drive Vernon Hills, IL (367) 1999 40.0 VOLKSWAGEN OF AMERICA, INC. 22 450 Barclay Boulevard Lincolnshire, IL (219) 1999 40.0 23 500 South Seventh Avenue City of Industry, CA (343) 1999 40.0 24 11650 Central Parkway Jacksonville, FL (159) 1999 40.0 LAND O LAKES 25 1275 Red Fox Road Arden Hills, MN (191) 1999 40.0
38 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- MICROSOFT CORPORATION 26 1321 Greenway Irving, TX 1,248 1,804 5,815 131 1,804 5,946 7,750 UNIVERSAL CARD SERVICES 27 7595 Oak Grove Plaza Jacksonville, FL 2,040 1,384 3,911 -- 1,384 3,911 5,295 VACANT 28 7585 Oak Grove Plaza Jacksonville, FL 1,055 877 2,237 39 877 2,276 3,153 UNISON INDUSTRIES, L.P. 29 7575 Oak Grove Plaza Jacksonville, FL 3,465 2,366 6,072 -- 2,366 6,072 8,438 NIKE DISTRIBUTION WAREHOUSE 30 8400 Winchester Road Memphis, TN 5,316 1,486 23,279 -- 1,486 23,279 24,765 CIRRUS LOGIC, INC. 31 46702 Bayside Parkway Fremont, CA 1,046 654 4,591 -- 654 4,591 5,245 32 46831 Lakeview Blvd. Fremont, CA -- 1,086 7,964 -- 1,086 7,964 9,050 UNIFIED WESTERN GROCERS 33 5200 Sheila Street Commerce, CA 2,504 3,454 12,915 -- 3,454 12,915 16,369 FIRST HEALTH STRATEGIES, INC. 34-37 Decker Lake Lane Center Salt Lake City, UT -- 1,179 12,861 -- 1,179 12,861 14,040 TRW SPACE AND ELECTRONICS GROUP 38 3701 Doolittle Drive Redondo Beach, CA -- 2,598 9,212 -- 2,598 9,212 11,810 DUNHAM'S ATHLEISURE CORPORATION 39 2201 E. Loew Road Marion, IN -- 131 4,254 -- 131 4,254 4,385 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- MICROSOFT CORPORATION 26 1321 Greenway Irving, TX (171) 1999 40.0 UNIVERSAL CARD SERVICES 27 7595 Oak Grove Plaza Jacksonville, FL (113) 1999 40.0 VACANT 28 7585 Oak Grove Plaza Jacksonville, FL (66) 1999 40.0 UNISON INDUSTRIES, L.P. 29 7575 Oak Grove Plaza Jacksonville, FL (177) 1999 40.0 NIKE DISTRIBUTION WAREHOUSE 30 8400 Winchester Road Memphis, TN (679) 1999 40.0 CIRRUS LOGIC, INC. 31 46702 Bayside Parkway Fremont, CA (134) 1999 40.0 32 46831 Lakeview Blvd. Fremont, CA (232) 1999 40.0 UNIFIED WESTERN GROCERS 33 5200 Sheila Street Commerce, CA (377) 1999 40.0 FIRST HEALTH STRATEGIES, INC. 34-37 Decker Lake Lane Center Salt Lake City, UT (375) 1999 40.0 TRW SPACE AND ELECTRONICS GROUP 38 3701 Doolittle Drive Redondo Beach, CA (269) 1999 40.0 DUNHAM'S ATHLEISURE CORPORATION 39 2201 E. Loew Road Marion, IN (124) 1999 40.0
39 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- ACOSTA SALES & MARKETING CO. 40 6300 Dumbarton Circle Fremont, CA -- 880 4,846 -- 880 4,846 5,726 INTERNATIONAL FOOD SOLUTION 41 5015 South Water Circle Wichita, KS -- 213 3,189 -- 213 3,189 3,402 TECH DATA CORPORATION 42 3900 William Richardson Drive South Bend, IN -- 140 4,640 -- 140 4,640 4,780 PRIMERICA LIFE INSURANCE COMPANY 43-44 3120 Breckinridge Boulevard Duluth, GA -- 1,655 14,484 38 1,655 14,522 16,177 LUCENT TECHNOLOGIES 45 Capstone Building Aurora, CO -- 453 3,060 49 453 3,109 3,562 KOCH MEMBRANE SYSTEMS 46 10054 Old Grove Road San Diego, CA -- 1,530 3,060 -- 1,530 3,060 4,590 NISSAN MOTOR ACCEPTANCE CORPORATION 47 2901 Kinwest Parkway Irving, TX -- 1,363 10,628 -- 1,363 10,628 11,991 LEVER BROTHERS COMPANY 48 3501 E. Terra Drive O'Fallon, MO -- 1,388 12,700 -- 1,388 12,700 14,088 FEDERAL EXPRESS CORPORATION 49-51 NonConnah Corporate Center Memphis, TN -- 2,702 25,129 -- 2,702 25,129 27,831 VACANT 52 500 Airline Drive Coppell, TX -- 1,664 12,471 33 1,664 12,504 14,168 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- ACOSTA SALES & MARKETING CO. 40 6300 Dumbarton Circle Fremont, CA (141) 1999 40.0 INTERNATIONAL FOOD SOLUTION 41 5015 South Water Circle Wichita, KS (93) 1999 40.0 TECH DATA CORPORATION 42 3900 William Richardson Drive South Bend, IN (135) 1999 40.0 PRIMERICA LIFE INSURANCE COMPANY 43-44 3120 Breckinridge Boulevard Duluth, GA (424) 1999 40.0 LUCENT TECHNOLOGIES 45 Capstone Building Aurora, CO (91) 1999 40.0 KOCH MEMBRANE SYSTEMS 46 10054 Old Grove Road San Diego, CA (89) 1999 40.0 NISSAN MOTOR ACCEPTANCE CORPORATION 47 2901 Kinwest Parkway Irving, TX (310) 1999 40.0 LEVER BROTHERS COMPANY 48 3501 E. Terra Drive O'Fallon, MO (370) 1999 40.0 FEDERAL EXPRESS CORPORATION 49-51 NonConnah Corporate Center Memphis, TN (733) 1999 40.0 VACANT 52 500 Airline Drive Coppell, TX (364) 1999 40.0
40 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- FRESENIUS USA, INC. 53 2637 Shadelands Drive Walnut Creek, CA -- 808 8,306 -- 808 8,306 9,114 TERADYNE, INC. 54 2625 Shadelands Drive Walnut Creek, CA -- 571 5,874 -- 571 5,874 6,445 LAM RESEARCH CORPORATION 55 1210 California Circle Milpitas, CA -- 4,095 8,323 -- 4,095 8,323 12,418 BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN 56 401 West Michigan Street Milwaukee, WI -- 1,875 13,914 -- 1,875 13,914 15,789 NORTHERN TELECOM INC. 57 2021 Lakeside Boulevard Richardson, TX -- 1,230 5,660 8 1,230 5,668 6,898 adidas AMERICA, INC. 58 5675 North Blackstock Road Spartanburg, SC -- 943 16,836 -- 943 16,836 17,779 GLOBAL CROSSING 59 12110 North Pecos Street Westminster, CO -- 307 3,524 -- 307 3,524 3,831 RATIONAL SOFTWARE 60 18880 Homestead Road Cupertino, CA -- 7,994 19,037 -- 7,994 19,037 27,031 GALILEO INTERNATIONAL PARTNERSHIP 61 6901 S. Havana Street Englewood, CO -- 2,967 15,008 -- 2,967 15,008 17,975 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- FRESENIUS USA, INC. 53 2637 Shadelands Drive Walnut Creek, CA (242) 1999 40.0 TERADYNE, INC. 54 2625 Shadelands Drive Walnut Creek, CA (171) 1999 40.0 LAM RESEARCH CORPORATION 55 1210 California Circle Milpitas, CA (243) 1999 40.0 BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN 56 401 West Michigan Street Milwaukee, WI (406) 1999 40.0 NORTHERN TELECOM INC. 57 2021 Lakeside Boulevard Richardson, TX (165) 1999 40.0 adidas AMERICA, INC. 58 5675 North Blackstock Road Spartanburg, SC (491) 1999 40.0 GLOBAL CROSSING 59 12110 North Pecos Street Westminster, CO (103) 1999 40.0 RATIONAL SOFTWARE 60 18880 Homestead Road Cupertino, CA (555) 1999 40.0 GALILEO INTERNATIONAL PARTNERSHIP 61 6901 S. Havana Street Englewood, CO (438) 1999 40.0
41 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- AVAYA INC. 62 6162 S. Willow Drive Englewood, CO -- 1,757 16,930 5 1,757 16,935 18,692 INTERNATIONAL BUSINESS MACHINES CORP. 63 13800 Diplomat Drive Farmers Branch, TX -- 1,314 8,903 -- 1,314 8,903 10,217 RIVEREDGE SUMMIT 64 1500-1600 RiverEdge Parkway Atlanta, GA -- 5,709 49,091 3,657 5,709 52,748 58,457 NORTHERN TELECOM INC. 65 Cardinal Commerce Center Richardson, TX -- 858 8,556 -- 858 8,556 9,414 CANYON CORPORATE CENTER 66 5515 East La Palma Avenue Anaheim, CA -- 3,512 13,379 46 3,512 13,425 16,937 67 5601 East La Palma Avenue Anaheim, CA -- 2,227 8,519 -- 2,227 8,519 10,746 68 5605 East La Palma Avenue Anaheim, CA -- 622 2,346 155 622 2,501 3,123 SUNBELT BEVERAGE CORP. 69 7621 Energy Parkway Baltimore, MD -- 1,535 9,324 4 1,535 9,328 10,863 GLOBAL CROSSING 70 1499 West 121st. Street Westminister, CO -- 616 7,291 -- 616 7,291 7,907 CHARLESTON PLACE 71 1545 Charleston Road Mountain View, CA -- 5,798 12,720 -- 5,798 12,720 18,518 72 1565-1585 Charleston Road Mountain View, CA -- 12,834 28,158 -- 12,834 28,158 40,992 BAY STATE GAS 73 300 Friberg Parkway Westborough, MA -- 1,651 10,758 -- 1,651 10,758 12,409 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- AVAYA INC. 62 6162 S. Willow Drive Englewood, CO (494) 1999 40.0 INTERNATIONAL BUSINESS MACHINES CORP. 63 13800 Diplomat Drive Farmers Branch, TX (260) 1999 40.0 RIVEREDGE SUMMIT 64 1500-1600 RiverEdge Parkway Atlanta, GA (1,516) 1999 40.0 NORTHERN TELECOM INC. 65 Cardinal Commerce Center Richardson, TX (250) 1999 40.0 CANYON CORPORATE CENTER 66 5515 East La Palma Avenue Anaheim, CA (392) 1999 40.0 67 5601 East La Palma Avenue Anaheim, CA (248) 1999 40.0 68 5605 East La Palma Avenue Anaheim, CA (69) 1999 40.0 SUNBELT BEVERAGE CORP. 69 7621 Energy Parkway Baltimore, MD (272) 1999 40.0 GLOBAL CROSSING 70 1499 West 121st. Street Westminister, CO (213) 1999 40.0 CHARLESTON PLACE 71 1545 Charleston Road Mountain View, CA (371) 1999 40.0 72 1565-1585 Charleston Road Mountain View, CA (821) 1999 40.0 BAY STATE GAS 73 300 Friberg Parkway Westborough, MA (314) 1999 40.0
42 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- WARNER CROSSING 74 1120 West Warner Road Tempe, AZ -- 701 4,339 -- 701 4,339 5,040 75 1130 West Warner Road Tempe, AZ -- 1,033 6,652 -- 1,033 6,652 7,685 76 1140 West Warner Road Tempe, AZ -- 1,033 6,652 -- 1,033 6,652 7,685 77 8440 South Hardy Drive Tempe, AZ -- 1,033 6,652 -- 1,033 6,652 7,685 78 8320 South Hardy Drive Tempe, AZ -- 1,512 9,732 -- 1,512 9,732 11,244 GATEWAY LAKES 79 1551 102nd Avenue St. Petersburg, FL -- 722 3,061 -- 722 3,061 3,783 80 1527 102nd Avenue St. Petersburg, FL -- 634 2,685 8 634 2,693 3,327 EDENVALE BUSINESS PARK 81 5853-5863 Rue Ferrari Drive San Jose, CA -- 9,677 23,288 -- 9,677 23,288 32,965 ELECTRONIC DATA SYSTEMS CORP. 82 105 West Bethany Drive Allen, TX -- 1,238 9,224 -- 1,238 9,224 10,462 COMPUTER SCIENCES CORP 83 7700-7720 Hubble Drive Lanham, MD -- 2,486 12,047 164 2,486 12,211 14,697 POLYCOM, INC. 84 1565 Barber Lane Milpitas, CA -- 4,880 12,367 1,498 4,880 13,865 18,745 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- WARNER CROSSING 74 1120 West Warner Road Tempe, AZ (127) 1999 40.0 75 1130 West Warner Road Tempe, AZ (194) 1999 40.0 76 1140 West Warner Road Tempe, AZ (194) 1999 40.0 77 8440 South Hardy Drive Tempe, AZ (194) 1999 40.0 78 8320 South Hardy Drive Tempe, AZ (284) 1999 40.0 GATEWAY LAKES 79 1551 102nd Avenue St. Petersburg, FL (89) 1999 40.0 80 1527 102nd Avenue St. Petersburg, FL (78) 1999 40.0 EDENVALE BUSINESS PARK 81 5853-5863 Rue Ferrari Drive San Jose, CA (679) 1999 40.0 ELECTRONIC DATA SYSTEMS CORP. 82 105 West Bethany Drive Allen, TX (269) 1999 40.0 COMPUTER SCIENCES CORP 83 7700-7720 Hubble Drive Lanham, MD (355) 1999 40.0 POLYCOM, INC. 84 1565 Barber Lane Milpitas, CA (506) 1999 40.0
43 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- ALLIANCE DATA SYSTEMS 85 17201 Waterview Parkway Dallas, TX -- 1,918 4,632 -- 1,918 4,632 6,550 HEWLETT PACKARD 86 3000 Waterview Parkway Richardson, TX -- 2,932 31,235 -- 2,932 31,235 34,167 MULTILINK 87 Six Riverside Drive Andover, MA -- 639 7,176 -- 639 7,176 7,815 WELLPOINT HEALTH NETWORK, INC. 88-89 2000 Corporate Center Drive Newbury Park, CA -- 4,563 24,911 -- 4,563 24,911 29,474 TRINET PROPERTY PARTNERS, L.P. 90 1022 Hingham Street Rockland, MA -- 2,010 11,761 18 2,010 11,779 13,789 91 65 Dan Road Canton, MA -- 742 3,155 86 742 3,241 3,983 92 One Longwater Circle Norwell, MA -- 1,140 1,658 33 1,140 1,691 2,831 93 100 Longwater Circle Norwell, MA -- 973 3,805 12 973 3,817 4,790 94 101 Philip Drive Norwell, MA 2,232 506 2,277 11 506 2,288 2,794 95 30 Dan Road Canton, MA -- 1,409 3,890 42 1,409 3,932 5,341 96 85 Dan Road Canton, MA -- 1,077 2,746 67 1,077 2,813 3,890 97 300 Foxborough Boulevard Foxborough, MA 3,191 1,218 3,756 -- 1,218 3,756 4,974 98 105 Forbes Boulevard Mansfield, MA 1,005 584 1,443 -- 584 1,443 2,027 99 60 Columbian Street Braintree, MA -- 2,225 7,403 9 2,225 7,412 9,637 100 76 Pacella Park Drive Randolph, MA 2,754 615 3,471 -- 615 3,471 4,086 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- ALLIANCE DATA SYSTEMS 85 17201 Waterview Parkway Dallas, TX (135) 1999 40.0 HEWLETT PACKARD 86 3000 Waterview Parkway Richardson, TX (911) 1999 40.0 MULTILINK 87 Six Riverside Drive Andover, MA (209) 1999 40.0 WELLPOINT HEALTH NETWORK, INC. 88-89 2000 Corporate Center Drive Newbury Park, CA (727) 1999 40.0 TRINET PROPERTY PARTNERS, L.P. 90 1022 Hingham Street Rockland, MA (343) 1999 40.0 91 65 Dan Road Canton, MA (92) 1999 40.0 92 One Longwater Circle Norwell, MA (49) 1999 40.0 93 100 Longwater Circle Norwell, MA (111) 1999 40.0 94 101 Philip Drive Norwell, MA (67) 1999 40.0 95 30 Dan Road Canton, MA (113) 1999 40.0 96 85 Dan Road Canton, MA (80) 1999 40.0 97 300 Foxborough Boulevard Foxborough, MA (109) 1999 40.0 98 105 Forbes Boulevard Mansfield, MA (42) 1999 40.0 99 60 Columbian Street Braintree, MA (216) 1999 40.0 100 76 Pacella Park Drive Randolph, MA (101) 1999 40.0
44 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- 101 260 Kenneth W. Welch Drive Lakeville, MA -- 1,012 4,048 -- 1,012 4,048 5,060 102 700 Longwater Drive Norwell, MA -- 1,357 5,429 -- 1,357 5,429 6,786 103 3000 Longwater Drive Norwell, MA 2,004 1,155 1,651 300 1,155 1,951 3,106 ICG HOLDINGS, INC. 104 161 Inverness Drive West Englewood, CO -- 8,572 27,428 -- 8,572 27,428 36,000 CONCORD FARMS 105 Three Concord Farms Concord, MA -- 1,024 4,367 502 1,024 4,869 5,893 106 Four Concord Farms Concord, MA -- 1,852 10,839 64 1,852 10,903 12,755 107 Five Concord Farms Concord, MA -- 2,206 11,715 108 2,206 11,823 14,029 108 Six Concord Farms Concord, MA -- 1,834 10,483 64 1,834 10,547 12,381 Two Concord Farms--Under development Concord, MA -- 1,656 -- 297 1,656 297 1,953 Seven Concord Farms--Land Concord, MA -- 1,266 -- 7 1,266 7 1,273 ARBELLA CAPITAL CORP. 109 1100 Crown Colony Drive Quincy, MA 12,989 3,562 23,420 237 3,562 23,657 27,219 MAST INDUSTRIES 110 100 Old River Road Andover, MA -- 1,787 8,486 -- 1,787 8,486 10,273 HAEMONETICS CORP. 111 355 Wood Road Braintree, MA -- 792 4,929 43 792 4,972 5,764 NOKIA 112 6000 Connection Drive Irving, TX -- 6,083 42,016 -- 6,083 42,016 48,099 DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- 101 260 Kenneth W. Welch Drive Lakeville, MA (118) 1999 40.0 102 700 Longwater Drive Norwell, MA (158) 1999 40.0 103 3000 Longwater Drive Norwell, MA (48) 1999 40.0 ICG HOLDINGS, INC. 104 161 Inverness Drive West Englewood, CO (800) 1999 40.0 CONCORD FARMS 105 Three Concord Farms Concord, MA (132) 1999 40.0 106 Four Concord Farms Concord, MA (317) 1999 40.0 107 Five Concord Farms Concord, MA (344) 1999 40.0 108 Six Concord Farms Concord, MA (308) 1999 40.0 Two Concord Farms--Under development Concord, MA 1999 Seven Concord Farms--Land Concord, MA 1999 ARBELLA CAPITAL CORP. 109 1100 Crown Colony Drive Quincy, MA (683) 1999 40.0 MAST INDUSTRIES 110 100 Old River Road Andover, MA (248) 1999 40.0 HAEMONETICS CORP. 111 355 Wood Road Braintree, MA (145) 1999 40.0 NOKIA 112 6000 Connection Drive Irving, TX (1,225) 1999 40.0
45 TRINET CORPORATE REALTY TRUST, INC. SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS GROSS AMOUNT AT CLOSE OF PERIOD ----------------------- CAPITALIZED ------------------------------------ BUILDING AND SUBSEQUENT TO BUILDING AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL - ---------------------------------- ------------ -------- ------------ ------------- -------- ------------ ---------- ANDERSEN CONSULTING 113 1661 Page Mill Road Palo Alto, CA -- -- 19,168 -- -- 19,168 19,168 WINDWARD FOREST 114 960 Northpoint Parkway Alpharetta, GA -- 905 6,744 -- 905 6,744 7,649 THE MITRE CORPORATION 115 11493 Sunset Hills Road Fairfax, VA -- 4,436 22,362 52 4,436 22,414 26,850 VERIZON SELECTED SERVICES, INC. 116 Sierra I at Los Colinas Irving, TX -- 3,363 21,376 -- 3,363 21,376 24,739 POYDRAS PLAZA 117 Entergy Building New Orleans, LA 77,860 1,427 24,252 603 1,427 24,855 26,282 118 Mobil Building New Orleans, LA -- 1,664 16,653 1,149 1,664 17,802 19,466 119 Parking Garage New Orleans, LA -- 4,239 6,462 5 4,239 6,467 10,706 ALCATEL 120 Campbell Commoms -- 1,233 15,160 -- 1,233 15,160 16,393 EQUINIX 121 Great Oaks--Land San Jose, CA -- 82,220 -- -- 82,220 -- 82,220 FEDERAL EXPRESS--Under development 3201 Columbia Road Richfield, OH -- 2,327 -- 4,724 2,327 4,724 7,051 LEXMARK 122 1510 East 4th Street Seymour, IN -- 550 22,239 -- 550 22,239 22,789 -------- -------- ---------- ------- -------- ---------- ---------- Total real estate subject to operating leases $138,331 $318,412 $1,112,150 $14,268 $318,412 $1,126,418 $1,444,830 ======== ======== ========== ======= ======== ========== ========== DEPRECIABLE ACCUMULATED DATE LIFE DESCRIPTION DEPRECIATION ACQUIRED (YEARS) - ---------------------------------- ------------ -------- ----------- ANDERSEN CONSULTING 113 1661 Page Mill Road Palo Alto, CA (559) 1999 40.0 WINDWARD FOREST 114 960 Northpoint Parkway Alpharetta, GA (197) 1999 40.0 THE MITRE CORPORATION 115 11493 Sunset Hills Road Fairfax, VA (654) 1999 40.0 VERIZON SELECTED SERVICES, INC. 116 Sierra I at Los Colinas Irving, TX (623) 1999 40.0 POYDRAS PLAZA 117 Entergy Building New Orleans, LA (703) 1999 40.0 118 Mobil Building New Orleans, LA (499) 1999 40.0 119 Parking Garage New Orleans, LA (181) 1999 40.0 ALCATEL 120 Campbell Commoms (158) 1999 40.0 EQUINIX 121 Great Oaks--Land San Jose, CA -- 2000 FEDERAL EXPRESS--Under development 3201 Columbia Road Richfield, OH -- 2000 LEXMARK 122 1510 East 4th Street Seymour, IN (6) 2000 40.0 -------- ---- Total real estate subject to operating leases $(31,764) ========
46 TRINET CORPORATE REALTY TRUST, INC. NOTES TO SCHEDULE III DECEMBER 31, 2000 (DOLLARS IN THOUSANDS) 1. RECONCILIATION OF REAL ESTATE SUBJECT TO OPERATING LEASES: The following table reconciles Real Estate from January 1, 1998 to December 31, 2000:
2000 1999 1998 ---------- ---------- ---------- Balance at January 1..................................... $1,474,809 $1,353,326 $1,158,295 Additions................................................ 137,995 40,296 256,331 Dispositions............................................. (146,715) (59,129) (55,638) Provision for asset held for sale........................ -- -- (5,662) Provision for asset impairment........................... -- (3,400) -- Impact of purchase accounting adjustments................ (21,259) 143,716 -- ---------- ---------- ---------- Balance at December 31................................... $1,444,830 $1,474,809 $1,353,326 ========== ========== ==========
2. RECONCILIATION OF ACCUMULATED DEPRECIATION: The following table reconciles Accumulated Depreciation from January 1, 1998 to December 31, 2000:
2000 1999 1998 -------- -------- -------- Balance at January 1........................................ $ (5,111) $(71,950) $(54,152) Additions................................................... (28,277) (29,004) (27,628) Dispositions................................................ 1,624 4,007 9,830 Impact of purchase accounting adjustments................... -- 91,836 -- -------- -------- -------- Balance at December 31...................................... $(31,764) $ (5,111) $(71,950) ======== ======== ========
47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Omitted pursuant to General Instruction I(2)(c) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Omitted pursuant to General Instruction I(2)(c) of Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Omitted pursuant to General Instruction I(2)(c) of Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Omitted pursuant to General Instruction I(2)(c) of Form 10-K. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) and (d) Financial Statements and Schedules--See Index to Financial Statements and Schedules included in Item 8. (b) Reports on Form 8-K None. (c) Exhibits--see index on following page. 48
EXHIBIT NUMBER DOCUMENT DESCRIPTION - --------------------- ------------------------------------------------------------ 3.1 Amended and Restated Charter. 3.2 Amended and Restated Bylaws. Definitive Indenture, dated as of May 22, 1996. (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, dated June 14, 1996, of TriNet Corporate Realty Trust, Inc.) 4.1 Definitive Supplemental Indenture No. 1, dated as of May 22, 1996, relating to the 7.30% Notes due 2001 and the 7.95% Notes due 2006. (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, dated June 14, 1996, of TriNet Corporate Realty Trust, Inc.) 4.2 Definitive Supplemental Indenture No. 2, dated as of July 14, 1997, relating to the 7.70% Notes due 2017 and including the form of the 7.70% Notes due 2006. (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, dated July 9, 1997, of TriNet Corporate Realty Trust, Inc.) 4.3 Remarketing Agreement, dated February 27, 1998 (Incorporated by reference to Exhibit 1.2 to the Current Report on Form 8-K, dated March 4, 1998, of TriNet Corporate Realty Trust, Inc.) 4.4 Senior Debt Securities Indenture, dated February 27, 1998 (Incorporated by reference to Exhibit 1.3 to the Current Report on Form 8-K, dated March 4, 1998, of TriNet Corporate Realty Trust, Inc.) 4.5 Supplemental Indenture No. 1, dated February 27, 1998 (Incorporated by reference to Exhibit 1.4 to the Current Report on Form 8-K, dated March 4, 1998, of TriNet Corporate Realty Trust, Inc.) 4.6 Loan Agreement dated December 6, 1994, by and among Nomura Asset Capital Corporation, Pacific Mutual Life Insurance Company and TriNet Essential Facilities XII, Inc. (Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3 of TriNet Corporate Realty Trust, Inc., Registration No. 33-87256.) 10.1 Interest Rate Protection Agreement dated May 21, 1993, between certain of the Company's subsidiaries and UBS Securities (Swaps), Inc. (Incorporated by reference to Exhibit 10.32 to the Registration Statement on Form S-11 of TriNet Corporate Realty Trust, Inc., Registration No. 33-74284.) 10.2 Interest Rate Protection Agreement dated December 6, 1994, between TriNet Essential Facilities XII, Inc. and Morgan Guaranty Trust Company of New York. (Incorporated by reference to Exhibit 4.6 to the 1997 Annual Report on Form 10-K, dated March 30, 1998, of TriNet Corporate Realty Trust, Inc.) 10.3 Amended and Restated Agreement of Limited Partnership between TriNet Corporate Realty Trust, Inc. and the O'Donnell Revocable Trust, the Donald S. Grant Revocable Trust and John W. Hopkins, dated June 26, 1996. (Incorporated by reference to Exhibit 10.1 of Form 8-K of TriNet Corporate Realty Trust, Inc., and dated July 3, 1996, filed with the Securities and Exchange Commission on July 17, 1996 and as amended by Form 8-K/A of TriNet Corporate Realty Trust, Inc., dated July 3, 1996, filed with the Securities and Exchange Commission on August 7, 1996.) 10.4 Agreement of Limited Partnership of TriNet Property Partners, L.P. (Incorporated by reference to Exhibit 4.6 to the 1997 Annual Report on Form 10-K, dated March 30, 1998, of TriNet Corporate Realty Trust, Inc.) 10.5
49
EXHIBIT NUMBER DOCUMENT DESCRIPTION - --------------------- ------------------------------------------------------------ Registration Rights Agreement between TriNet Corporate Realty Trust, Inc. and Ronald A. Davis, Joseph P. Keller, Dean M. Boylan, Stephen G. Mack and Lewis L. Whitman dated December 31, 1997. (Incorporated by reference to Exhibit 4.6 to the 1997 Annual Report on Form 10-K, dated March 30, 1998, of TriNet Corporate Realty Trust, Inc.) 10.6 Registration Rights Agreement dated March 16, 1998 between TriNet Corporate Realty Trust, Inc. and Whitehall Street Real Estate Limited Partnership IX. (Incorporated by reference to Exhibit 4.3 to Form S-3 dated March 21, 2000 of iStar Financial Inc.) 10.7 Third Amended and Restated Revolving Credit Agreement among TriNet Corporate Realty Trust, Inc., as borrower, the banks listed therein, Morgan Guaranty Trust Company of New York, as lead agent and arranger, and certain banks named as co-agents, dated as of June 1, 1998. (Incorporated by reference to Exhibit 10.1 of Form 8-K, dated June 19, 1998, of TriNet Corporate Realty Trust, Inc.) 10.8 First Amendment to Revolving Credit Agreement among TriNet Corporate Realty Trust, Inc., as borrower, Morgan Guaranty Trust Company of New York, as administrative agent, Bank of America N.A. and certain banks dated November 5, 1999. 10.9
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15 OF THE SECURITIES AND EXCHANGE ACT OF 1934 BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT No annual report covering the registrant's last fiscal year has been sent to security holders, nor has any proxy soliciting material been sent to security holders. 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TriNet Corporate Realty Trust, Inc. REGISTRANT Date: March 30, 2001 /s/ JAY SUGARMAN --------------------------------------------- CHAIRMAN OF THE BOARD DIRECTORS, CHIEF EXECUTIVE OFFICER AND PRESIDENT
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 30, 2001 /s/ JAY SUGARMAN --------------------------------------------- CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR Date: March 30, 2001 /s/ SPENCER B. HABER --------------------------------------------- CHIEF FINANCIAL OFFICER, SECRETARY AND DIRECTOR (EXECUTIVE VICE PRESIDENT--FINANCE) Date: March 30, 2001 /s/ WILLIS ANDERSEN, JR. --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ BETSY Z. COHEN --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ JEFFREY G. DISHNER --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ JONATHAN D. EILIAN --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ MADISON F. GROSE --------------------------------------------- DIRECTOR
51 Date: March 30, 2001 /s/ ROBERT W. HOLMAN, JR. --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ ROBIN JOSEPHS --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ MERRICK R. KLEEMAN --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ WILLIAM M. MATTHES --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ JOHN G. MCDONALD --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ MICHAEL G. MEDZIGIAN --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ STEPHEN B. ORESMAN --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ GEORGE R. PUSKAR --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ BARRY S. STERNLICHT --------------------------------------------- DIRECTOR Date: March 30, 2001 /s/ KNEELAND C. YOUNGBLOOD --------------------------------------------- DIRECTOR
52 EX-3.1 2 a2040517zex-3_1.txt EXHIBIT 3.1 Exhibit 3.1 TRINET CORPORATE REALTY TRUST, INC. AMENDED AND RESTATED CHARTER ------------------------------------ FIRST: James R. Reinhart, whose post office address is Four Embarcadero Center, Suite 3150, San Francisco, CA 94111, being at least (18) eighteen years of age, does hereby form a corporation (the "Corporation") under the general laws of the State of Maryland. SECOND: The name of the corporation (which is hereinafter called the "Corporation") is: TRINET CORPORATE REALTY TRUST, INC. THIRD: The purposes for which, and any of which, the Corporation is formed and the business and objects to be carried on and promoted by it are: (1) To engage in any lawful act or activity for which corporations may be organized under the Maryland General Corporation Law. (2) To engage in any one or more businesses or transactions, or to acquire all or any portion of any entity engaged in any one or more businesses or transactions, which the Board of Directors may from time to time authorize or approve, whether or not related to the business described elsewhere in this Article or to any other business at the time or theretofore engaged in by the Corporation. The foregoing enumerated purposes and objects shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of this or any other Article of the Charter of the Corporation, and each shall be regarded as independent; and they are intended to be and shall be construed as powers as well as purposes and objects of the Corporation and shall be in addition to and not in limitation of the general powers of corporations under the General Laws of the State of Maryland. FOURTH: The present address of the principal office of the Corporation in the State of Maryland is c/o Patricia McGowan, Ballard Spahr Andrews & Ingersoll, LLP, 300 East Lombard Street, Baltimore, Maryland 21202. FIFTH: The name and address of the resident agent of the Corporation in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 11 East Chase Street, Baltimore, Maryland 21202. Said resident agent is a Maryland corporation. SIXTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 100, all of which shall be shares of Common Stock, par value $.01 per share (the "Common Stock"). The aggregate par value of all authorized shares having a par value is $1.00. SEVENTH: The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation shall be not less than three, nor more than twenty, which number may be increased or decreased by at least two-thirds of the entire Board of Directors pursuant to the Bylaws of the Corporation, but shall never be less than the minimum number permitted by the General Laws of the State of Maryland now or hereafter in force. For so long as the Corporation is a party to the Third Amended and Restated Revolving Credit Agreement, dated as of June 1, 1998, between the Corporation, Morgan Guaranty Trust Company of New York, Bank of America, N.A., and the other banks party thereto, as the same may be amended from time to time (the "Credit Agreement"), the Board of Directors shall include one director (the "Special Director") who qualifies as "independent" in accordance with Standard & Poor's standard requirement as in effect from time to time. For so long as the Corporation is a party to the Credit Agreement, a unanimous vote of all members of the Board of Directors of the Corporation, including the Special Director, shall be required for the Corporation to (i) file a voluntary insolvency proceeding, (ii) sell, transfer or convey in any three month period, any real property assets to Starwood Financial Inc. or any wholly-owned subsidiary of Starwood Financial Inc. or any Affiliate of Starwood Financial Inc., that exceed, either individually or in the aggregate, five percent (5%) of the Combined Asset Value (as such term is defined in the Credit Agreement) or (iii) amend this Charter in any way which would have the effect of modifying or deleting any provision relating to the Special Director. For purposes of this paragraph, an Affiliate of Starwood Financial Inc. is any person that directly or indirectly controls or is controlled by, or is under common control with, Starwood Financial Inc. Control means the possession, directly or indirectly, of the power to vote fifteen percent (15%) or more of the equity securities having voting power for the election of directors or otherwise to direct or control the management of a company. The initial directors of the Corporation are: Barry S. Sternlicht Jeffrey G. Dishner Robin Josephs Jay Sugarman Jonathan D. Eilian Merrick R. Kleeman Spencer B. Haber Madison F. Grose William M. Matthes Willis Andersen, Jr. Robert W. Holman, Jr. John G. McDonald Stephen B. Oresman Kneeland C. Youngblood Betsy Cohen George R. Puskar EIGHTH: The Corporation elects not to be governed by: (i) the Maryland Business Combination Statute, which is Section 3-602 of the Maryland General Corporation Law ("MGCL"), pursuant to Section 3-603(e)(1)(iii) of the MGCL, or (ii) the Maryland Control Share Acquisition Statute, which is Section 3-701 et seq. of the MGCL with respect to the acquisition by any person of shares of stock of the Corporation pursuant to Section 3-702(b) of the MGCL. NINTH: The duration of the Corporation shall be perpetual. TENTH: In the event any term, provision, sentence or paragraph of the charter of the Corporation is declared by a court of competent jurisdiction to be invalid or unenforceable, such term, provision, sentence or paragraph shall be deemed severed from the remainder of the charter, and the balance of the charter shall remain in effect and be enforced to the fullest extent permitted by law and shall be construed to preserve the intent and purposes of the charter. Any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, provision, sentence or paragraph of the charter in any other jurisdiction. EX-3.2 3 a2040517zex-3_2.txt EXHIBIT 3.2 Exhibit 3.2 TRINET CORPORATE REALTY TRUST, INC. BYLAWS -------------------------------------- ARTICLE I OFFICES Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of TriNet Corporate Realty Trust, Inc. (the "Company") shall be located at such place or places as the Board of Directors may designate. Section 2. ADDITIONAL OFFICES. The Company may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Company may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. PLACE. All meetings of stockholders shall be held at the principal office of the Company or at such other place within the United States as shall be stated in the notice of the meeting. Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Company shall be held on such date as shall be set by the Board of Directors. Except as the Articles of Incorporation of the Company, as amended (the "Charter") or statute provides otherwise, any business may be considered at an annual meeting without the purpose of the meeting having been specified in the notice. Failure to hold an annual meeting does not invalidate the Company's existence or affect any otherwise valid corporate acts. Section 3. SPECIAL MEETINGS. The president, chief executive officer or Board of Directors may call special meetings of the stockholders. Special meetings of stockholders shall also be called by the secretary of the Company upon the written request of the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. The secretary shall inform such stockholders of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Company by such stockholders of such costs, the secretary shall give notice to each stockholder entitled to notice of the meeting. Section 4. NOTICE OF MEETINGS; WAIVER OF NOTICE. Not less than ten nor more than 90 days before each stockholders' meeting, the Secretary shall give written notice of the meeting to each stockholder entitled to vote at the meeting and each other 1 stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to him or her, left at his or her residence or usual place of business, or mailed to him or her at his or her address as it appears on the records of the Company. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if he or she before or after the meeting signs a waiver of the notice which is filed with the records of stockholders' meetings, or is present at the meeting in person or by proxy. Section 5. ORGANIZATION. At every meeting of stockholders, the Chairman of the Board, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following officers present shall conduct the meeting in the order stated: the Vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a Chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast, shall act as Chairman, and the secretary of the Company, or, in his absence, an assistant secretary of the Company, or in the absence of both the Secretary and assistant secretaries, a person appointed by the Chairman shall act as Secretary. Section 6. QUORUM; ADJOURNMENTS. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the Charter of the Company for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. VOTING. A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Charter. Unless otherwise provided in the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Section 8. PROXIES. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, a telegram, cablegram, datagram, or other means of electronic transmission to the person authorized to act as proxy or to a proxy solicitation firm, proxy support service organization, or other person authorized by the person who will act as proxy to receive the transmission. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for so long as it is coupled with an 2 interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Company or its assets or liabilities. Section 9. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the Company registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy. Shares of stock of the Company directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Company that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Company; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification. Section 10. INSPECTORS. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be PRIMA FACIE evidence thereof. Section 11. NOMINATIONS AND STOCKHOLDER BUSINESS 3 (a) ANNUAL MEETINGS OF STOCKHOLDERS. Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Company's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Company who was a stockholder of record at the time notice of such meeting was sent. (b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Company's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Company's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Company who is a stockholder of record at the time of giving of notice provided for in this Section 11(b), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 11(b). In the event the Company calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Company's notice of meeting. (c) GENERAL. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 11 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 11. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 11 and, if any proposed nomination or business is not in compliance with this Section 11, to declare that such defective nomination or proposal be disregarded. (2) Notwithstanding the foregoing provisions of this Section 11, a stockholder shall also comply with all applicable requirements of state law with respect to the matters set forth in this Section 11. Section 12. VOTING BY BALLOT. Voting on any question or in any election may be VIVA VOCE unless the presiding officer shall order or any stockholder shall demand that voting be by ballot. Section 13. LIST OF STOCKHOLDERS. At each meeting of stockholders, a full, true and complete list of all stockholders entitled to vote at such meeting, showing the number and class of shares held by each and certified by the transfer agent for such class or by the secretary of the Company, shall be furnished by the secretary of the Company. Section 14. INFORMAL ACTION BY STOCKHOLDERS. Any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if there is filed with the records of stockholders meetings a unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter and a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote at it. 4 Section 15. MEETING BY CONFERENCE TELEPHONE. Stockholders may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes presence in person at a meeting. ARTICLE III DIRECTORS Section 1. GENERAL POWERS; QUALIFICATIONS. The business and affairs of the Company shall be managed under the direction of its Board of Directors. All powers of the Company may be exercised by or under authority of the Board of Directors, except as conferred on or reserved to the stockholders by statute or by the Charter or By-Laws. Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting or at any special meeting called for that purpose, two-thirds of the entire Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof shall never be less than minimum nor more than the maximum number provided in the Charter, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors. At each successive annual meeting of stockholders, the holders of stock present in person or by proxy at such meeting and entitled to vote thereat shall elect members of such successive class to serve for three year terms and until their successors are elected and qualify. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class shall, subject to Section 10, hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors shorten the term of any incumbent director. Section 3. RESIGNATION. Any director may resign at any time by sending a written notice of such resignation to the principal executive office of the Company addressed to the Chairman of the Board or the President. Unless otherwise specified therein such resignation shall take effect upon receipt thereof by the Chairman of the Board or the President. Section 4. REMOVAL OF DIRECTOR. Any director or the entire Board of Directors may be removed only in accordance with the provisions of the Charter. Section 5. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice than such resolution. Section 6. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board (or any co-chairman of the board if more than one), president or by a majority of the directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. 5 Section 7. NOTICE. Except as provided in Sections 5 and 6, the Secretary shall give notice to each director of each regular and special meeting of the Board of Directors. The notice shall state the time and place of the meeting. Notice is given to a director when it is delivered personally to him or her, left at his or her residence or usual place of business, or sent by telegraph, facsimile transmission or telephone, at least 24 hours before the time of the meeting or, in the alternative by mail to his or her address as it shall appear on the records of the Company, at least 72 hours before the time of the meeting. Unless these By-Laws or a resolution of the Board of Directors provides otherwise, the notice need not state the business to be transacted at or the purposes of any regular or special meeting of the Board of Directors. No notice of any meeting of the Board of Directors need be given to any director who attends except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened, or to any director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Any meeting of the Board of Directors, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement. Section 8. QUORUM. A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the Charter of the Company or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. The Board of Directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. Section 9. VOTING. The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable statute. Section 10. PRESUMPTION OF ASSENT. A director of the Company who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Company immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who votes in favor of such action. Section 11. TELEPHONE MEETINGS. Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 12. INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, 6 if a consent in writing to such action is signed by each director and such written consent is filed with the minutes of proceedings of the Board of Directors. Section 13. VACANCIES. If for any reason any or all the directors cease to be directors, such event shall not terminate the Company or affect these Bylaws or the powers of the remaining directors hereunder (even if fewer than three directors remain). Any vacancy on the Board of Directors for any cause other than an increase in the number of directors shall be filled by a majority of the remaining directors, although such majority is less than a quorum. Any vacancy in the number of directors created by an increase in the number of directors may be filled by a majority vote of the entire Board of Directors. Any individual so elected as director shall hold office for the unexpired term of the director he is replacing. Section 14. COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive fixed sums per year and/or per meeting and/or per visit to real property owned or to be acquired by the Company and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Company in any other capacity and receiving compensation therefor. Section 15. LOSS OF DEPOSITS. No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or stock have been deposited. Section 16. SURETY BONDS. Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties. Section 17. RELIANCE. Each director, officer, employee and agent of the Company shall, in the performance of his duties with respect to the Company, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Company, upon an opinion of counsel or upon reports made to the Company by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Company, regardless of whether such counsel or expert may also be a director. Section 18. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The directors shall have no responsibility to devote their full time to the affairs of the Company. Any director or officer, employee or agent of the Company, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to or in competition with those of or relating to the Company. ARTICLE IV COMMITTEES 7 Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Compensation Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors; provided, however, that the Audit Committee, if formed, shall consist only of independent directors and the Compensation Committee, if formed, shall consist of two or more Independent Directors. For purposes of this section, an "Independent Director" shall mean any person if, in the opinion of the Board of Directors such person will exercise independent judgment and will materially assist in the function of the committee, except that such person shall not be an officer or employee of the Company, or a director who represents a close relative of a person who would not qualify as an Independent Director. Section 2. POWERS. The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except the power to authorize dividends on stock, elect directors, issue stock other than as provided in the next sentence, recommend to the stockholders any action which requires stockholder approval, amend these By-Laws, or approve any merger or share exchange which does not require stockholder approval. If the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number or shares to be issued, a committee of the Board of Directors, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or any two members of any committee may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings. Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing to such action is signed by each member of the committee and such written consent is filed with the minutes of proceedings of such committee. Section 6. VACANCIES. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all 8 vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee. ARTICLE V OFFICERS Section 1. GENERAL PROVISIONS. The officers of the Company shall include a chief executive officer, a president, a secretary and a chief financial officer and may include a chairman of the board (or one or more co-chairmen of the board), a vice chairman of the board, one or more executive vice presidents, one or more senior vice presidents, one or more vice presidents, a chief operating officer, a treasurer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable or authorize any committee or officer to appoint assistant or subordinate officers. The officers of the Company shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders, except that the chief executive officer may appoint one or more vice presidents, assistant secretaries and assistant treasurers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office at the pleasure of the Board of Directors or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. In its discretion, the Board of Directors may leave unfilled any office except that of president, treasurer and secretary. Election of an officer or agent shall not of itself create contract rights between the Company and such officer or agent. Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Company may be removed by the Board of Directors if in its judgment the best interests of the Company would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Company may resign at any time by giving written notice of his resignation to the Board of Directors, the chairman of the board (or any co-chairman of the board if more than one), the president or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Company. Section 3. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a chief executive officer. In the absence of such designation, the chairman of the board (or, if more than one, the co-chairmen of the board in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall be the chief executive officer of the Company. The chief executive officer shall have general responsibility for implementation of the policies of the Company, as determined by the Board of Directors, and for the management of the business and affairs of the Company. Section 4. CHIEF OPERATING OFFICER. The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer. 9 Section 5. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer. Section 6. CHAIRMAN OF THE BOARD. The Board of Directors shall designate a chairman of the board (or one or more co-chairmen of the board). The chairman of the board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. If there be more than one, the co-chairmen designated by the Board of Directors will perform such duties. The chairman of the board shall perform such other duties as may be assigned to him or them by the Board of Directors. Section 7. CHAIRMAN OF THE BOARD EMERITUS. The directors may elect by a majority vote, from time to time, a chairman of the board emeritus (or one or more co-chairmen of the board emeritus). The chairman of the board emeritus shall be an honorary position and shall have no vote on any matter considered by the directors. The chairman of the board emeritus shall serve for such term as determined by the Board of Directors and may be removed by a majority role of directors with or without cause. Section 8. PRESIDENT. The president or chief executive officer, as the case may be, shall in general supervise and control all of the business and affairs of the Company. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Company or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. Section 9. VICE PRESIDENTS. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to him by the president or by the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility. Section 10. SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Company; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the share transfer books of the Company; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, the president or by the Board of Directors. 10 Section 11. TREASURER. The treasurer shall have the custody of the funds and securities of the Company and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Company. The treasurer shall disburse the funds of the Company as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his transactions as treasurer and of the financial condition of the Company. If required by the Board of Directors, the treasurer shall give the Company a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Company, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Company. Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors. Section 13. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director. ARTICLE VI CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. CONTRACTS. The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Company and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person shall be valid and binding upon the Board of Directors and upon the Company when authorized or ratified by action of the Board of Directors. Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Company shall be signed by such officer or agent of the Company in such manner as shall from time to time be determined by the Board of Directors. 11 Section 3. DEPOSITS. All funds of the Company not otherwise employed shall be deposited from time to time to the credit of the Company in such banks, trust companies or other depositories as the Board of Directors may designate. ARTICLE VII STOCK Section 1. CERTIFICATES. The Board of Directors may determine to issue certificated or uncertificated shares of capital stock and other securities of the Company. Section 2. TRANSFERS. Upon surrender to the Company or the transfer agent of the Company of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Company shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Company shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the Charter of the Company and all of the terms and conditions contained therein. Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Company alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner's legal representative to advertise the same in such manner as he shall require and/or to give bond, with sufficient surety, to the Company to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate. Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock 12 transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein. Section 5. STOCK LEDGER. The Company shall maintain at its principal executive office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder. Section 6. CERTIFICATION OF BENEFICIAL OWNERS. The Board of Directors may adopt by resolution a procedure by which a stockholder of the Company may certify in writing to the Company that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may certify; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Company; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt of a certification which complies with the procedure adopted by the Board of Directors in accordance with this Section, the person specified in the certification is, for the purpose set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification. Section 7. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Company. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Company, except that the Board of Directors may provide that for a specified period securities of the Company issued in such unit may be transferred on the books of the Company only in such unit. 13 ARTICLE VIII ACCOUNTING YEAR The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Company by a duly adopted resolution. ARTICLE IX DISTRIBUTIONS Section 1. AUTHORIZATION. Dividends and other distributions upon the stock of the Company may be authorized and declared by the Board of Directors, subject to the provisions of law and the Charter of the Company. Dividends and other distributions may be paid in cash, property or stock of the Company, subject to the provisions of law and the Charter. Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Company available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Company or for such other purpose as the Board of Directors shall determine to be in the best interest of the Company, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE X INVESTMENT POLICY Subject to the provisions of the Charter of the Company, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Company as it shall deem appropriate in its sole discretion. ARTICLE XI SEAL Section 1. SEAL. The Board of Directors may authorize the adoption of a seal by the Company. The seal shall contain the name of the Company and the year of its incorporation. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. Section 2. AFFIXING SEAL. Whenever the Company is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Company. ARTICLE XII INDEMNIFICATION AND ADVANCES FOR EXPENSES 14 Section 1. PROCEDURE. Any indemnification, or payment of expenses in advance of the final disposition of any proceeding, shall be made promptly, and in any event within 60 days, upon the written request of the director or officer entitled to seek indemnification (the "Indemnified Party"). The right to indemnification and advances hereunder shall be enforceable by the Indemnified Party in any court of competent jurisdiction, if (i) the Company denies such request, in whole or in part, or (ii) no disposition thereof is made within 60 days. The Indemnified Party's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be reimbursed by the Company. It shall be a defense to any action for advance for expenses that (a) a determination has been made that the facts then known to those making the determination would preclude indemnification or (b) the Company has not received both (i) an undertaking as required by law to repay such advance sin the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the Indemnified Party of such Indemnified Party's good faith belief that the standard of conduct necessary for indemnification by the Company has been met. Section 2. EXCLUSIVITY, ETC. The indemnification and advance of expenses provided by the Charter and these By-Laws shall not be deemed exclusive of any other rights to which a person seeking indemnification or advance of expenses may be entitled under any law (common or statutory), or any agreement, vote of stockholders or disinterested directors or other provision that is consistent with law, both as to action in his or her official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Company, shall continue in respect of all events occurring while a person was as director or officer after such person has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. The Company shall not be liable for any payment under this By-Law in connection with a claim made by a director or officer to the extent such director or officer has otherwise actually received payment under insurance policy, agreement, vote or otherwise, of the amounts otherwise indemnifiable hereunder. All rights to indemnification and advance of expenses under the Charter of the Company and hereunder shall be deemed to be a contract between the Company and each director or officer of the Company who serves or served in such capacity at any time while this By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law, provided that no such amendment shall diminish the rights of any person hereunder with respect to events occurring or claims made before its adoption or as to claims made after its adoption in respect of events occurring before its adoption. Any repeal or modification of this By-Law shall not in any way diminish any rights to indemnification or advance of expenses of such director or officer or the obligations of the Company arising hereunder with respect to events occurring, or claims made, while this By-Law or any provision hereof is in force. Section 3. SEVERABILITY; DEFINITIONS. The invalidity or unenforceability of any provision of this Article XII shall not affect the validity or enforceability of any other provision hereof. The phrase "this By-Law" in this Article XII means this Article XII in its entirety. ARTICLE XIII WAIVER OF NOTICE 15 Whenever any notice is required to be given pursuant to the Charter of the Company or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE XIV AMENDMENT OF BYLAWS In accordance with the Charter, these By-Laws may be repealed, altered, amended or rescinded (a) by the stockholders of the Company but only by the affirmative vote of not less than 80% of all the votes entitled to be cast by the outstanding shares of capital stock of the Company entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose (provided that notice of such proposed repeal, alteration, amendment or rescission is included in the notice of such meeting) or (b) by affirmative vote of not less than two-thirds of the Board of Directors at a meeting held in accordance with the provisions of these By-Laws. ARTICLE XV MISCELLANEOUS Section 1. BOOKS AND RECORDS. The Company shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any executive or other committee when exercising any of the powers of the Board of Directors. The books and records of the Company may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these By-laws shall be kept at the principal office of the Company. Section 2. VOTING STOCK IN OTHER COMPANIES. Stock of other corporations or associations, registered in the name of the Company, may be voted by the President, a Vice-President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution. Section 3. MAIL. Any notice or other document which is required by these By-Laws to be mailed shall be deposited in the United States mails, postage prepaid. Section 4. EXECUTION OF DOCUMENTS. A person who holds more than one office in the Company may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. 16 EX-10.9 4 a2040517zex-10_9.txt EXHIBIT 10.9 Exhibit 10.9 FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "AMENDMENT") is made as of October 29, 1999, by and among TRINET CORPORATE REALTY TRUST (the "BORROWER"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "LEAD AGENT"), BANK OF AMERICA, N.A. ("BAC"), and the BANKS listed on the signature pages hereof. W I T N E S S E T H: ------------------- WHEREAS, the Borrower and the Banks have entered into the Third Amended and Restated Revolving Credit Agreement, dated as of June 1, 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. LEAD AGENT. Simultaneously herewith, Morgan has assigned and transferred its Commitment to BAC and Bank One, NA, and, in accordance with Section 7.8 of the Credit Agreement, hereby resigns as Lead Agent. The Required Banks, with the approval of the Borrower, hereby appoint BAC 257582.08-New York S3A as successor Lead Agent, and Bank One, NA, as "syndication agent". The syndication agent has no right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. From and after the date hereof, all references to Morgan shall be deemed to be references to BAC. 3. BAS. The Required Banks acknowledge and agree that Banc of America Securities LLC ("BAS") is hereby appointed "book manager" and "lead arranger". 4. APPLICABLE MARGIN. The grid set forth in the definition "Applicable Margin" is hereby deleted and the following substituted therefor:
Range of Applicable Borrower's Margin for Applicable Applicable Credit Rating Base Rate Margin for Margin for Euro (S&P/Moody's Loans CD Loans Dollar Loans Ratings) (% per annum) (% per annum) (% per annum) - ------------- -------------- ------------- --------------- BBB+/Baa1 0.25 0.975 0.85 BBB/Baa2 0.25 1.125 1.00 BBB-/Baa3 0.25 1.1875 1.0625 Non-Invest- ment Grade 0.50 1.675 1.55
5. LETTERS OF CREDIT. The references in Sections 2.2(b) and 2.6(c) to "10:00 A.M., New York City time" are hereby deleted, and "11:00 A.M., New York City time" substituted therefor. In addition, the following is hereby inserted after the second sentence of Section 2.2(b): "In addition, together with such notice, the Borrower shall deliver to the designated Fronting Bank an "Application and Agreement for Standby Letter of Credit" in the form attached hereto as EXHIBIT A, or in such other form as may reasonably be required by the designated Fronting Bank." 6. EXTENSION FEE. Section 2.9(c) is hereby deleted, and the following substituted therefor: (c) EXTENSION FEE. Simultaneously with the delivery by Borrower of the Notice to Extend pursuant to Section 2.10(b), the Borrower shall pay to the Lead Agent for the account of the Banks ratably in proportion to their Commitments an extension fee (each, the "EXTENSION FEE") of .20% of the Commitments then outstanding (provided, with respect to any Bank's share of such fee, such Bank has honored its Commitment in accordance herewith). 7. EXTENSION OPTION. Section 2.10(c) of the Credit Agreement, and all references to Section 2.10(c) and to the Request to Extend, are hereby deleted. 8. REPRESENTATIONS. Section 4.15 of the Credit Agreement is hereby deleted. 9. FINANCIAL INFORMATION. The reference to "Borrower" in Section 5.1(k) of the Credit Agreement is hereby deleted and "Starwood" substituted therefor. 10. DIVIDENDS. Section 5.8(d) is hereby deleted and the following substituted therefor: (d) DIVIDENDS. The Borrower will not, as determined as of the last day of each quarter, with respect to the previous four quarters, pay or declare any dividends on common stock in excess of 85% of CFFOA (as hereinafter defined) for such previous four quarters, provided, however, that dividends may exceed 85% of CFFOA if required in order for Starwood Financial Inc. ("STARWOOD") to maintain its status as a real estate investment trust under the Code, assuming, however, that all other Subsidiaries of Starwood shall have dividended or distributed 100% of their disposable cash during the applicable twelve (12) month period to Starwood. For purposes hereof, "CFFOA" means the "net cash provided by operating activity", as shown on the Borrower's consolidated statements of cash flows, and calculated in a manner consistent with the Borrower's historical methods of calculating the same. 11. ACQUISITION. Notwithstanding the provisions of Section 5.9 of the Credit Agreement, the Required Banks hereby consent to the acquisition by merger (the "MERGER") of 100% of the stock of the Borrower by Starwood and hereby waive any Event of Default that would otherwise arise under Sections 6.1(i), (j) and (k) of the Credit Agreement. 12. CHANGES IN BUSINESS. Section 5.10 is hereby amended by adding after the reference to "Section 5.17" the following: "and Section 5.23". 13. BORROWER STATUS. Section 5.13 of the Credit Agreement is hereby deleted and the following substituted therefor: "Borrower shall at all times maintain its status as a "qualified REIT subsidiary" of Starwood." 14. ASSET SALES AND TRANSFERS. The following Section 5.20 is hereby added to the Credit Agreement: SECTION 5.20 ASSET SALES AND TRANSFERS. The Borrower shall not sell, transfer or otherwise convey any Real Property Asset to any Affiliate, other than a wholly-owned Subsidiary or a newly formed joint venture with an unaffiliated third party, except that any such sale, transfer or conveyance shall be permitted if the same is for a price not less than the then fair market value of the applicable Real Property Asset, shall be on an all cash basis, and shall otherwise be on fair market, arms' length terms. For purposes of this Section, the term "AFFILIATE" shall mean as applied to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, that Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to vote fifteen percent (15%) or more of the equity securities having voting power for the election of directors of such Person or otherwise to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting equity securities or by contract or otherwise. 15. INTERCOMPANY DEBT. The following Section 5.21 is hereby added to the Credit Agreement: SECTION 5.21. The Borrower may not incur any Debt from Starwood or any Affiliate of Starwood ("AFFILIATE DEBT"), unless repayment of such Debt, by its express written terms, is fully subordinated to the repayment of the Loans and all other Obligations, as well as all other Debt from un-Affiliated third parties. In addition, all Affiliate Debt shall be on then market terms, and at no time shall, in the aggregate, exceed fifteen percent (15%) of the total Debt permitted pursuant to Section 5.8(b) of the Credit Agreement. In addition, at no time may the Borrower or any Subsidiary of the Borrower lend any amounts to Starwood or any of its wholly-owned Subsidiaries or any Affiliates of Starwood that in the aggregate would exceed five percent (5%) of Consolidated Tangible Net Worth. 16. BOARD OF DIRECTORS. The following Section 5.22 is hereby added to the Credit Agreement: SECTION 5.22. From and after the Effective Date, the members of the board of directors of the Borrower (the "BOARD") shall at all times be identical with the members of the board of directors of Starwood, except that at all times there shall be one additional member of the Board (the "SPECIAL DIRECTOR"), which member shall be "independent" (in accordance with S&P's standard requirement from time to time). A unanimous vote of all members of the Board, including the Special Director, shall be required in accordance with the organizational documents of the Borrower (the "UNANIMOUS VOTING REQUIREMENT", for the Borrower to (i) file a voluntary insolvency proceeding, or (ii) to sell, transfer or convey in any three (3) month period, any Real Property Asset(s) to Starwood or any wholly-owned Subsidiary of Starwood or any Affiliates of Starwood other than a wholly-owned Subsidiary of the Borrower or a newly formed joint venture of the Borrower with an unaffiliated third party, that exceed, either individually or in the aggregate, five percent (5%) of Combined Asset Value as of the last day of the most recently ended fiscal quarter for which financial information has been delivered in accordance with Section 5.1 (a) and (b). 17. ALTERNATIVE INVESTMENTS. The following Section 5.23 is hereby added to the Credit Agreement: SECTION 5.23. ALTERNATIVE INVESTMENTS. Borrower may use proceeds of the Loans to make Alternative Investments, provided, however, that as of the last day of each calender quarter, the total book value, calculated in accordance with GAAP but without deduction for depreciation, of Alternative Investments made from and after the closing of the Merger shall not exceed 20% of Combined Asset Value. For purposes hereof, "ALTERNATIVE INVESTMENTS" means any investment other than (i) the acquisition of a Real Property Asset more than 75% of the rentable area of which is leased to a single tenant, whether directly or through a joint venture, or (ii) development activities as described in Section 5.17. Whether directly or through a joint venture. 18. EVENTS OF DEFAULT. (a) Section 6.1(i) of the Credit Agreement is hereby deleted and the following substituted therefor: "(i) Starwood shall cease to own, directly or indirectly, 100% of the issued and outstanding shares of stock of the Borrower;". (b) Section 6.1(j) of the Credit Agreement is hereby deleted and the following substituted therefor: "(j) there shall not be at all times at least one Special Director on the Board, or the Unanimous Voting Requirements shall be amended, modified or terminated without the prior written consent of the Required Banks;" (c) Section 6.1(k) of the Credit Agreement is hereby deleted and the following substituted therefor: "(k) Starwood shall cease at any time to qualify as a real estate investment trust under the Code;". 19. NOTICES. The reference in Section 9.1 of the Credit Agreement to "One Embarcadero Center, 33rd Floor, San Francisco, CA 94111, Attn.: A. William Stein" is hereby deleted and the following substituted therefor: "1114 Avenue of the Americas, 27th Floor, New York, NY 10036, Attn.: Spencer Haber, with a copy to Nina Matis, Esq." 20. ADDITIONAL COMMITMENT. Section 9.18 of the Credit Agreement is hereby deleted. 21. EFFECTIVE DATE. This Amendment shall become effective when each of the following conditions is satisfied (or waived by the Required Banks) (the date such conditions are satisfied or waived being deemed the "EFFECTIVE DATE"): (a) the Borrower shall have executed and delivered to the Lead Agent a duly executed original of this Amendment; (b) the Required Banks shall have executed and delivered to the Lead Agent a duly executed original of this Amendment; (c) the Lead Agent shall have received all documents the Lead Agent may reasonably request relating to the existence of the Borrower, the authority for and the validity of this Amendment, and the other documents executed in connection therewith, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Lead Agent. Such documentation shall include, without limitation, the organizational documents of the Borrower, as amended, modified or supplemented prior to the Effective Date, each certified to be true, correct and complete by an officer of the Borrower, as of a date not more than twenty (20) days prior to the Effective Date, together with a good standing certificate from the Secretary of State (or the equivalent thereof) of the State of Maryland with respect to the Borrower, to be dated not more than twenty (20) days prior to the Effective Date; (d) the Lead Agent shall have received all certificates, agreements and other documents and papers referred to in this Amendment, unless otherwise specified, in sufficient counterparts, satisfactory in form and substance to the Administrative Agent in its reasonable discretion; (e) the Borrower shall have taken all actions required to authorize the execution and delivery of this Amendment and the performance hereof by the Borrower; (f) the Lead Agent shall have received from the Borrower, for the account of the Banks, an amendment fee equal to .30% of the Commitments; (g) the Lead Agent shall have received the reasonable fees and expenses accrued through the Effective Date of Skadden, Arps, Slate, Meagher & Flom LLP, together with any other fees or expenses of the Lead Agent; (h) the representations and warranties of the Borrower contained in the Credit Agreement, as amended hereby, shall be true and correct in all material respects on and as of the Effective Date, as the same may be amended by virtue of the Merger transactions with Starwood described in the Proxy, dated September 22, 1999, a copy of which has previously been delivered by the Borrower to the Banks (the "PROXY"); (i) receipt by the Lead Agent and the Banks of a certificate of an officer of the Borrower certifying that the Borrower is in compliance with all covenants of the Borrower contained in the Credit Agreement, as amended hereby, including, without limitation, the requirements of Section 5.8, as of the Effective Date, as the same may be amended by virtue of the Merger transactions with Starwood described in the Proxy; and (j) receipt by the Lead Agent of proof reasonably satisfactory to the Lead Agent that Starwood shall have acquired by merger 100% of the stock of the Borrower. 22. 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. 23. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the law of the State of New York. 24. 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. 25. 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. 26. 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: TRINET CORPORATE REALTY TRUST, INC. By:______________________________ Name: Title: Facsimile number: (415) 391-6259 Address: One Embarcadero Center 33rd Floor San Francisco, CA 94111 Attn: Chief Financial Officer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Bank and as resigning Lead Agent By: ______________________________ Name: Title: BANK OF AMERICA, N.A., as a Bank and as successor Lead Agent By: _____________________________ Name: Title: 600 Montgomery Street 37th Floor Mail Code: CA5-801-37-01 San Francisco, CA 94111 Attention: Telecopy: DOMESTIC AND EURO-CURRENCY LENDING OFFICE: Attention: Telecopy: BANKERS TRUST COMPANY, as Co-Agent and as a Bank By: ______________________________ Name: Title: DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Bank and as Co-Agent By: ______________________________ Name: Title: By: ______________________________ Name: Title: BANK ONE, NA ( f/k/a The First National Bank of Chicago, as a Bank, as Co-Agent, and as Syndication Agent By: ______________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION, as a Bank and as Co-Agent By: ______________________________ Name: Title: AMSOUTH BANK By: ______________________________ Name: Title: BANK OF MONTREAL, CHICAGO BRANCH By: ______________________________ Name: Title: FIRST UNION NATIONAL BANK By: ______________________________ Name: Title: UBS AG, STAMFORD BRANCH By: ______________________________ Name: Title: By: ______________________________ Name: Title: KEY BANK NATIONAL ASSOCIATION (f/k/a Society Bank) By: ______________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: ______________________________ Name: Title: COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK AND GRAND CAYMAN BRANCHES By: ______________________________ Name: Title: By: ______________________________ Name: Title: BANQUE NATIONALE DE PARIS By: ______________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----