Reckson contracts to buy Westchester portfolio.

Reckson Associates Realty Corp. (NYSE:RA) has announced the execution of a contract to acquire the Cappelli organization's Westchester office portfolio for $183 million. The portfolio consists of six Class A office buildings totaling 980,000 square feet.

Reckson also received an option on the remaining 50 percent interest in 360 Hamilton Avenue, d 365,000 square-foot vacant office tower located in downtown White Plains, in which Reckson currently owns a 50 percent interest.

This core acquisition includes five buildings in two trophy quality office parks, Summit at Westchester and Mount Pleasant Corporate Center, located in Valhalla, NY, totalling 850,000 square feet, and Courthouse square, a 130,000 square-foot Class A office building located in White Plains. As part of this transaction, Reckson will receive options to acquire the remaining development parcels within the Summit, on which approximately 870,000 square feet of office space can be developed.

Reckson estimates the discount to replacement cost on the stabilized portion of this acquisition to be approximately 20 percent, and expects to generate an initial yield of 10.5 percent.

This acquisition will increase Reckson's Westchester portfolio by approximately 40 percent to 3.5 million square feet. Upon closing, Reckson will dominate the three strongest sub-markets in Westchester, with 80 percent of the Valhalla sub-market, 55 percent of the Tarrytown sub-market and 15 percent of the highly fragmented Eastern Westchester sub-market, company officials say.

"This acquisition, consisting of some of the New York tri-state areas highest quality suburban assets, firmly establishes Reckson as the dominant owner and operator of Class A office properties in Westchester County," said Salvatore Campofranco, managing director of Reckson's Westchester Division. "The Valhalla portfolio is one of the top performing office portfolios in Westchester County in terms of occupancy and rental achievement. The exceptional design quality and location have established this portfolio as one of the preeminent addresses in the County and dramatically expands our market dominance."

The Valhalla portfolio includes three buildings which are located in the 102-acre master-planned Summit office park. The park was designed to accommodate large corporate users, as evidenced by the high quality credit tenant roster which includes such tenants as Bell Atlantic, Northern Telecom, BDO Seidman and Towers Perrin. All of the properties in this portfolio feature structured parking and many of the state-of-the-art amenities that are typical of Reckson buildings, including health and fitness centers, full service cafeterias and technologically advanced energy systems.

The Cappelli acquisition will be funded through the assumption of approximately $45 million of secured debt, common operating partnership units, cash and approximately $40 million of two series of convertible preferred operating partnership units which carry dividend rates ranging from 6.25 to 7 percent and conversion premiums of 17.5 and 30 percent.

As part of this transaction, Louis R. Cappelli will be nominated to Reckson's Board of Directors. It is anticipated that the transaction will close within the next 15 days.

"This acquisition demonstrates Reckson's ability to source and execute relationship based acquisitions using its operating partnership units as a currency to acquire some of the highest quality assets at reasonable valuations," said Scott Rechler, Reckson's president and Chief Operating Officer. "We are extremely pleased to add the Cappelli family's portfolio to our Westchester division and we look forward to having Louis Cappelli join our Board of Directors and share in Reckson's continued expansion."

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 office and industrial properties.

Reckson's core growth strategy is focused on the suburban markets surrounding New York City. Since the completion of its initial public offering in May 1995, Reckson has acquired or contracted to acquire approximately $1.29 billion of properties comprising approximately 17 million square feet of space.

Reckson is one of the largest publicly-traded owners and managers of Class A suburban office and industrial properties in the New York "tri-state" area, with 200 properties comprised of approximately 21.5 million square feet either owned and controlled, directly or indirectly, or under contract.