Reckson Announces Fourth Quarter and Full Year 2004 Results; Continued

Reckson Announces Fourth Quarter and Full Year 2004 Results; Continued Strong Operating Performance and Increased Investment Activity

    Business Editors/Real Estate Writers

    MELVILLE, N.Y.--(BUSINESS WIRE)--March 2, 2005--Reckson Associates Realty Corp. (NYSE: RA) today reported diluted funds from operations ("FFO") of $35.3 million or $0.44 per share for the fourth quarter of 2004, including a $9.1 million or $0.11 per share accounting charge recognized in connection with the redemption of the Company's remaining Series A preferred stock, as compared to diluted FFO of $24.2 million or $0.38 per share for the fourth quarter of 2003, including $11.6 million or $0.18 per share of non-recurring restructuring charges.
    The Company also reported diluted FFO of $145.6 million or $1.99 per share for the year ended December 31, 2004, including a $15.8 million or $0.21 per share accounting charge recognized in connection with the redemption of the Company's Series A preferred stock, on total revenues of $543.6 million, as compared to diluted FFO of $136.0 million or $2.07 per share for the year ended December 31, 2003, including $11.6 million or $0.18 per share of non-recurring restructuring charges.
    Commenting on the Company's performance, Scott Rechler, Reckson's President and Chief Executive Officer, stated, "2004 was a milestone year for Reckson. We integrated a new management team without losing focus on our core business as demonstrated by our leasing of approximately 3 million square feet of office space and increasing our office occupancy to approximately 94%; we executed our investment strategy with the closing of $488 million of investments; and we greatly enhanced our balance sheet with the issuance of over $550 million of common equity at historically high offering prices and $300 million of unsecured debt at historically low interest rates. In short, we exceeded all expectations and positioned Reckson to continue to execute on its long-term growth plan."
    Reckson reported net income allocable to common shareholders of $4.5 million or diluted earnings per share ("EPS") of $0.06 for the fourth quarter of 2004, including $0.7 million related to gain on sales of real estate and a $9.1 million accounting charge recognized in connection with the redemption of the Company's remaining Series A preferred stock, as compared to $116.0 million or diluted EPS of $1.77 for the fourth quarter of 2003, including $115.8 million related to gain on sales of real estate and $11.6 million of non-recurring restructuring charges.
    The Company also reported net income allocable to common shareholders of $42.4 million or diluted EPS of $0.61 for the year ended December 31, 2004, including $11.8 million related to gain on sales of real estate and a $15.8 million accounting charge recognized in connection with the redemption of the Company's Series A preferred stock, as compared to $142.3 million or diluted EPS of $1.90 for the year ended December 31, 2003, including $115.8 million related to gain on sales of real estate and $11.6 million of non-recurring restructuring charges.
    A reconciliation of FFO to net income allocable to common shareholders, the GAAP measure the Company believes to be the most directly comparable, is in the financial statements accompanying this press release.

    Summary Portfolio Performance

    The Company reported office occupancy at December 31, 2004 of 94.1%. This compares to 91.5% at December 31, 2003 and 93.9% at September 30, 2004. The Company reported portfolio occupancy of 93.1% at December 31, 2004, as compared to 90.2% at December 31, 2003 and 93.1% at September 30, 2004.
    The Company also reported same property office occupancy at December 31, 2004 of 93.7%, as compared to 91.5% at December 31, 2003. The Company reported same property portfolio occupancy of 92.7% at December 31, 2004, as compared to 90.2% at December 31, 2003.
    Net of minority interests in joint ventures, office same property net operating income (property operating revenues less property operating expenses) ("NOI") before termination fees for the year ended December 31, 2004 increased 3.3% (on a cash basis) and 3.5% (on a straight-line rent basis), compared to the year ended December 31, 2003. Net of minority interests in joint ventures, portfolio same property NOI before termination fees for the year ended December 31, 2004 increased 3.4% (on a cash basis) and 3.7% (on a straight-line rent basis), compared to the year ended December 31, 2003.
    Net of minority interests in joint ventures, office same property NOI before termination fees for the fourth quarter of 2004 increased 2.0% (on a cash basis) and 1.7% (on a straight-line rent basis), compared to the fourth quarter of 2003. Net of minority interests in joint ventures, portfolio same property NOI before termination fees for the fourth quarter of 2004 increased 1.9% (on a cash basis) and 1.5% (on a straight-line rent basis), compared to the fourth quarter of 2003.
    Rent performance on renewal and replacement space during the year ended December 31, 2004 increased 2.5% (on a cash basis) and increased 15.6% (on a straight-line rent basis) in the office portfolio. Rent performance on renewal and replacement space during the fourth quarter of 2004 decreased (2.2%) (on a cash basis) and increased 25.9% (on a straight-line rent basis) in the office portfolio.

    Other Highlights

    Leasing Activity

--	Executed 61 lease transactions totaling 793,977 square feet during the fourth quarter of 2004 of which 225,504 square feet related to the early extension and expansion of King & Spaulding at 1185 Avenue of the Americas, New York City
--	Executed office leasing transactions during the fourth quarter of 2004 that resulted in a 74% renewal rate, excluding 225,504 square feet that related to the early extension and expansion of King & Spaulding at 1185 Avenue of the Americas, New York City

    Investment Activity

    2004 Activity -

    -- Completed approximately $488 million of investments in total
    during 2004, including two investments during the fourth
    quarter of 2004 totaling approximately $75 million

    2005 Activity -

    -- Closed on the acquisition of a 150,000 square foot, Class A
    office building located at One Giralda Farms in Madison, New
    Jersey, for approximately $24.3 million

    -- Closed on the acquisition of a 203,000 square foot, Class A
    office building located at Seven Giralda Farms in Madison, New
    Jersey, for approximately $53.7 million, representing
    Reckson's third acquisition since July of 2004 in Giralda
    Farms, one of New Jersey's premier office parks

    Capital Markets Activity

    -- Issued 4.5 million shares of common stock in the fourth
    quarter of 2004 raising approximately $148.1 million of net
    proceeds from the offering, representing $32.90 per share. The
    Company used the net proceeds from the sale of the common
    shares to repay borrowings under the Company's revolving
    credit facility.

    -- Upgraded by Moody's Investors Service to an investment grade
    rating of Baa3 from Ba1 for the senior unsecured debt of
    Reckson Operating Partnership, L.P. The ratings outlook
    remains stable.

    -- Redeemed or converted the Company's remaining 7 5/8% Series A
    preferred stock resulting in an accounting charge of
    approximately $9.1 million for the fourth quarter of 2004 and
    approximately $15.8 million for the year ended December 31,
    2004

    Earnings Guidance

    After taking into account the Company's recent equity offering of 4.5 million shares of common stock in the fourth quarter of 2004, the Company is narrowing 2005 FFO guidance from a range of $2.32 to $2.44 to a range of $2.32 to $2.40 per share. This guidance is in-line with the Company's target annual FFO growth per share of 5% to 10%, adjusted for the accounting charges recognized during 2004 in connection with the redemption of the Company's Series A preferred stock. During the Company's quarterly earnings conference call on Thursday, March 3rd, management will discuss 2005 FFO guidance.

    Reconciliation of Earnings Guidance

    The Company's guidance for 2005 FFO is reconciled from GAAP net income below:

Low End of FFO High End of FFO Guidance for 2005 Guidance for 2005 ----------------- -----------------

Net income allocable to common shareholders $0.95 $1.03

Add: Real estate depreciation and amortization 1.43 1.43

Less: Gain on sales of depreciable real estate 0.06 0.06 ----- ----- FFO Per Share $2.32 $2.40 ===== =====

    This guidance is based upon management's current estimates. Actual results may differ materially. This information involves forward-looking statements which are subject to uncertainties noted below under Forward-Looking Statements.

    Non-GAAP Financial Measures

    Funds from Operations ("FFO")

    The Company believes that FFO is a widely recognized and appropriate measure of performance of an equity REIT. The Company presents FFO because it considers it an important supplemental measure of the Company's operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. As a result, FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities, interest costs and other matters without the inclusion of depreciation and amortization, providing perspective that may not necessarily be apparent from net income. The Company computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO is defined by NAREIT as net income or loss, excluding gains or losses from sales of depreciable properties plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with GAAP and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. Since all companies and analysts do not calculate FFO in a similar fashion, the Company's calculation of FFO presented herein may not be comparable to similarly titled measures as reported by other companies.
    Reckson Associates Realty Corp. is a self-administered and self-managed real estate investment trust (REIT) specializing in the acquisition, leasing, financing, management and development of Class A office properties.
    Reckson's core growth strategy is focused on the markets surrounding and including New York City. The Company is one of the largest publicly traded owners, managers and developers of Class A office properties in the New York Tri-State area, with 89 properties comprised of approximately 16.3 million square feet either owned or controlled, or under contract. For additional information on Reckson Associates Realty Corp., please visit the Company's web site at www.reckson.com.

    Conference Call and Webcast

    The Company's executive management team, led by President and Chief Executive Officer Scott Rechler, will host a conference call outlining fourth quarter results on Thursday, March 3, 2005 at 2:00 p.m. EST. The conference call may be accessed by dialing (800) 611-1147 (internationally (612) 332-0802). No passcode is required. The live conference call will also be webcast in a listen-only mode on the Company's web site at www.reckson.com, in the Investor Relations section, with an accompanying slide show presentation outlining the Company's fourth quarter results.
    A replay of the conference call will be available telephonically from March 3, 2005 at 7:30 p.m. EST through March 10, 2005 at 11:59 p.m. EST. The telephone number for the replay is (800) 475-6701, passcode 768836. A replay of the webcast of the conference call will also be available via the Company's web site.

    Financial Statements Attached

    The Supplemental Package and Slide Show Presentation outlining the Company's fourth quarter 2004 results will be available prior to the Company's quarterly conference call on the Company's web site at www.reckson.com in the Investor Relations section, by e-mail to those on the Company's distribution list, as well as by mail or fax, upon request. To be added to the Company's e-mail distribution list or to receive a copy of the quarterly materials by mail or fax, please contact Susan McGuire, Senior Vice President Investor Relations, Reckson Associates Realty Corp., 225 Broadhollow Road, Melville, New York 11747-4883, investorrelations@reckson.com or (631) 622-6746.

    Forward-Looking Statements

    Certain matters discussed herein, including guidance concerning the Company's future performance, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of results and no assurance can be given that the expected results will be delivered. Such forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those expected. Among those risks, trends and uncertainties are the general economic climate, including the conditions affecting industries in which our principal tenants compete; financial condition of our tenants; changes in the supply of and demand for office properties in the New York Tri-State area; changes in interest rate levels; changes in the Company's credit ratings; changes in the Company's cost of and access to capital; downturns in rental rate levels in our markets and our ability to lease or re-lease space in a timely manner at current or anticipated rental rate levels; the availability of financing to us or our tenants; changes in operating costs, including utility, real estate taxes, security and insurance costs; repayment of debt owed to the Company by third parties; risks associated with joint ventures; liability for uninsured losses or environmental matters; and other risks associated with the development and acquisition of properties, including risks that development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. For further information on factors that could impact Reckson, reference is made to Reckson's filings with the Securities and Exchange Commission. Reckson undertakes no responsibility to update or supplement information contained in this press release.

Reckson Associates Realty Corp. (NYSE: RA) Consolidated Balance Sheets (in thousands, except share amounts)

December December 31, 31, 2004 2003 ----------- ----------- Assets: Commercial real estate properties, at cost: Land $ 401,350 $ 370,942 Buildings and improvements 2,681,742 2,183,055 Developments in progress: Land 90,609 89,045 Development costs 21,363 46,770 Furniture, fixtures, and equipment 12,083 11,338 ----------- ----------- 3,207,147 2,701,150 Less: accumulated depreciation (560,307) (457,492) ----------- ----------- Investment in real estate, net of accumulated depreciation 2,646,840 2,243,658

Properties and related assets held for sale, net of accumulated depreciation 56,205 107,340

Investment in real estate joint venture 6,657 5,904 Investment in notes receivable 85,855 54,986 Investments in affiliate loans and joint ventures 60,951 71,614 Cash and cash equivalents 25,137 22,831 Tenant receivables 9,532 11,724 Deferred rents receivable 132,251 111,267 Prepaid expenses and other assets 64,013 34,432 Contract and land deposits and pre-acquisition costs 121 20,203 Deferred leasing and loan costs (net of accumulated amortization) 80,046 63,036 ----------- -----------

Total Assets $3,167,608 $2,746,995 ----------- -----------

Liabilities: Mortgage notes payable $ 609,518 $ 721,635 Unsecured credit facility 235,500 169,000 Senior unsecured notes 697,974 499,445 Liabilities associated with properties held for sale 785 1,874 Accrued expenses and other liabilities 73,564 69,417 Deferred revenues and tenant security deposits 50,373 23,975 Dividends and distributions payable 35,924 28,290 ----------- ----------- Total Liabilities 1,703,638 1,513,636 ----------- -----------

Minority partners' interests in consolidated partnerships 210,678 232,570 Preferred unit interest in the operating partnership 1,200 19,662 Limited partners' minority interest in the operating partnership 53,231 44,518 ----------- ----------- 265,109 296,750 ----------- -----------

Commitments and contingencies - -

Stockholders' Equity: Preferred Stock, $.01 par value, 25,000,000 shares authorized Series A - 0 and 8,834,500 shares issued and outstanding, respectively - 88 Series B - 0 and 2,000,000 shares issued and outstanding, respectively - 20 Common Stock, $.01 par value, 100,000,000 shares authorized 80,618,339 and 58,275,367 shares issued and outstanding, respectively 806 583 Treasury Stock, 3,318,600 shares (68,492) (68,492) Retained earnings - 35,757 Additional paid in capital 1,266,547 968,653 ----------- ----------- Total Stockholders' Equity 1,198,861 936,609 ----------- -----------

Total Liabilities and Stockholders' Equity $3,167,608 $2,746,995 ----------- -----------

Total debt to market capitalization (a): 33.8% 41.2% ----------- -----------

(a) Total debt includes the Company's pro rata share of consolidated and unconsolidated joint venture debt.

Reckson Associates Realty Corp. (NYSE: RA) Consolidated Statements of Income (in thousands, except share amounts)

Three Months Ended Twelve Months Ended December 31, December 31, ---------------------- ---------------------- 2004 2003 2004 2003 ---------------------- ---------------------- Property Operating Revenues: Base rents $113,560 $93,585 $440,953 $371,019 Tenant escalations and reimbursements 19,106 15,112 73,862 58,900 ---------------------- ---------------------- Total property operating revenues 132,666 108,697 514,815 429,919 ---------------------- ----------------------

Property Operating Expenses: Operating expenses 31,215 26,440 124,236 104,531 Real estate taxes 22,701 17,456 84,518 69,486 ---------------------- ---------------------- Total property operating expenses 53,916 43,896 208,754 174,017 ---------------------- ----------------------

Net Operating Income 78,750 64,801 306,061 255,902 ---------------------- ----------------------

Gross Margin percentage 59.4% 59.6% 59.5% 59.5% ---------------------- ----------------------

Other Income 3,069 5,949 19,889 24,436 ---------------------- ----------------------

Other Expenses Interest Expense 23,662 21,059 98,050 81,185 Amortization of deferred financing costs 990 824 3,822 3,337 Restructuring charges - net - 11,580 - 11,580 Depreciation and amortization 31,510 24,719 116,480 102,502 Marketing, general and administrative 8,831 7,896 30,879 32,310 ---------------------- ---------------------- Total other expenses 64,993 66,078 249,231 230,914 ---------------------- ----------------------

Income before minority interests, preferred dividends and distributions and discontinued operations 16,826 4,672 76,719 49,424

Minority partners' interests in consolidated partnerships (3,766) (4,278) (18,507) (16,857) Distributions to preferred unitholders - (273) (541) (1,093) Limited partners' minority interest in the operating partnership (161) 453 (1,517) (1,161) ---------------------- ----------------------

Income before discontinued operations and preferred dividends 12,899 574 56,154 30,313 Discontinued operations (net of minority interests) Gain on sales of real estate 706 115,771 11,776 115,771 Income from discontinued operations 390 4,969 2,498 17,437 ---------------------- ----------------------

Net income 13,995 121,314 70,428 163,521 Dividends to preferred shareholders (367) (5,317) (12,236) (21,267) Redemption charges on Series A preferred stock (9,095) - (15,812) - ---------------------- ----------------------

Net income allocable to common shareholders $ 4,533 $115,997 $ 42,380 $142,254 ====================== ======================

Common shareholders $ 4,533 $104,989 $ 42,380 $124,966 Class B common shareholders - 11,008 - 17,288 ---------------------- ----------------------

Net income allocable to common shareholders $ 4,533 $115,997 $ 42,380 $142,254 ====================== ======================

Basic weighted average common shares outstanding: Common 76,887,000 52,125,000 68,871,000 49,092,000 Class B common - 5,928,000 - 8,910,000

Basic net income per weighted average common share: Common stock - income from continuing operations $0.05 ($0.09) $0.41 $0.13 Discontinued operations 0.01 2.10 0.21 2.42 ---------------------- ---------------------- Basic net income per common share $0.06 $2.01 $0.62 $2.55 ====================== ======================

Class B common stock - income from continuing operations - ($0.07) - $0.32 Discontinued operations - 1.93 - 1.62 ---------------------- ---------------------- Basic net income per Class B common share - $1.86 - $1.94 ====================== ======================

Diluted weighted average common shares outstanding: Common 77,281,000 52,400,000 69,235,000 49,262,000 Class B common - 5,928,000 - 8,910,000

Diluted net income per weighted average common share: Common $0.06 $2.00 $0.61 $2.54 ====================== ====================== Class B common - $1.77 - $1.90 ====================== ======================

Reckson Associates Realty Corp. (NYSE: RA) Funds From Operations (in thousands, except per share amounts)

Three Months Twelve Months Ended Ended December 31, December 31, ----------------- ------------------ 2004 2003 2004 2003 ----------------- ------------------

Net income allocable to common shareholders $ 4,533 $115,997 $ 42,380 $142,254 Add: Real estate depreciation and amortization 29,707 23,044 107,945 101,435 Minority partners' interests in consolidated partnerships 6,627 7,545 30,427 30,477 Limited partners' minority interest in the operating partnership 221 11,038 2,303 14,110

Less: Amounts distributable to minority partners in consolidated partnerships 5,758 6,684 26,743 26,598 Gain on sales of depreciable real estate - 126,789 11,322 126,789 ----------------- ------------------ Basic Funds From Operations ("FFO") 35,330 24,151 144,990 134,889

Add: Dividends and distributions on dilutive shares and units - - 590 1,093 ----------------- ------------------ Diluted FFO $35,330 $ 24,151 $145,580 $135,982 ================= ==================

Diluted FFO calculations: Weighted average common shares outstanding 76,887 58,053 68,871 58,002 Weighted average units of limited partnership interest outstanding 3,583 5,434 3,559 6,882 ----------------- ------------------ Basic weighted average common shares and units outstanding 80,470 63,487 72,430 64,884

Adjustments for dilutive FFO weighted average shares and units outstanding:

Common stock equivalents 394 275 364 171 Series B preferred stock - - 28 - Limited partners' preferred interest 41 - 341 661 ----------------- ------------------ Total diluted weighted average shares and units outstanding 80,905 63,762 73,163 65,716 ================= ==================

Diluted FFO per weighted average share or unit $ 0.44 $ 0.38 $ 1.99 $ 2.07 Diluted weighted average dividends per share $ 0.42 $ 0.42 $ 1.70 $ 1.70 Diluted FFO payout ratio 97.3% 112.2% 85.4% 81.9%

FFO Data excluding redemption charges incurred on Series A preferred stock:

Diluted FFO per weighted average share or unit $ 0.55 $ 0.38 $ 2.20 $ 2.07 Diluted weighted average dividends per share $ 0.42 $ 0.42 $ 1.70 $ 1.70 Diluted FFO payout ratio 77.4% 112.2% 77.2% 81.9%

Reconciliation from Net Income allocable to common shareholders to Diluted FFO excluding redemption charges:

Net income allocable to common shareholders $ 4,533 $115,997 $ 42,380 $142,254 Add: Redemption charges incurred on Series A preferred stock 9,095 - 15,812 - Real estate depreciation and amortization 29,707 23,044 107,945 101,435 Minority partners' interests in consolidated partnerships 6,627 7,545 30,427 30,477 Limited partners' minority interest in the operating partnership 221 11,038 2,303 14,110 Dividends and distributions on dilutive shares and units 368 - 12,771 1,093

Less: Amounts distributable to minority partners in consolidated partnerships 5,758 6,684 26,743 26,598 Gain on sales of depreciable real estate - 126,789 11,322 126,789 ----------------- ------------------ Diluted FFO excluding redemption charges $44,793 $ 24,151 $173,573 $135,982 ================= ==================

Diluted weighted average shares and units outstanding 81,592 63,762 78,821 65,716 ================= ==================

Reckson Associates Realty Corp. (NYSE: RA) Cash Available for Distribution (in thousands, except per share amounts)

Three Months Twelve Months Ended Ended December 31, December 31, ---------------- ------------------ 2004 2003 2004 2003 ---------------- ------------------

Basic Funds From Operations $35,330 $24,151 $144,990 $134,889 Adjustments for basic cash available for distribution: Less: Straight line rents and other FAS 141 non-cash rent adjustments 6,503 3,878 24,944 17,267 Committed non-incremental capitalized tenant improvements and leasing costs 10,017 4,989 35,378 27,634 Actual non-incremental capitalized improvements 3,188 3,263 9,172 10,388

Add: Redemption charges on Series A preferred stock 9,095 - 15,812 - Restructuring charges - net - 11,580 - 11,580 ---------------- ------------------ Basic Cash Available for Distribution ("CAD") 24,717 23,601 91,308 91,180

Add: Dividends and distributions on dilutive shares and units - - - - ---------------- ------------------ Diluted CAD $24,717 $23,601 $91,308 $91,180 ================ ==================

Diluted CAD calculations: Weighted average common shares outstanding 76,887 58,053 68,871 58,002 Weighted average units of limited partnership interest outstanding 3,583 5,434 3,559 6,882 ---------------- ------------------ Basic weighted average common shares and units outstanding 80,470 63,487 72,430 64,884

Adjustments for dilutive CAD weighted average shares and units outstanding: Common stock equivalents 394 275 364 171 Limited partners' preferred interest 41 - - - ---------------- ------------------ Total diluted weighted average shares and units outstanding 80,905 63,762 72,794 65,055 ================ ==================

Diluted CAD per weighted average share or unit $ 0.31 $ 0.37 $ 1.25 $ 1.40 Diluted weighted average dividends per share $ 0.42 $ 0.42 $ 1.70 $ 1.70 Diluted CAD payout ratio 139.1% 114.8% 135.5% 120.9%

--30--SS/ny*

CONTACT: Reckson Associates Realty Corp. Scott Rechler, CEO, 631-694-6900 OR Michael Maturo, CFO, 631-694-6900 Facsimile: 631-622-6790

KEYWORD: NEW YORK INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION BANKING EARNINGS CONFERENCE CALLS SOURCE: Reckson Associates Realty Corp.

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