SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 3, 2001
CarrAmerica Realty Corporation
(Exact name of registrant as specified in its charter)
Maryland 1-11706 52-1796339
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
1850 K Street, NW, Suite 500
Washington, DC 20006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(202) 729-7500
Not applicable
(Former name or former address, if changed since last report)
Item 5. Other Events
This Current Report on Form 8-K is being filed to provide information
to investors regarding developments in our investment in HQ Global Holdings,
Inc.
In June 2000, we sold a substantial portion of our equity interest in
HQ Global Holdings, Inc., our executive office suites affiliate, and our debt
and equity interests in two European executive suites affiliates, in connection
with the merger of HQ Global with VANTAS Incorporated. We received $377.3
million in cash, and recognized a gain net of tax of $31.9 million, in
connection with these transactions. Our remaining investment in the merged
entity is carried at $42.2 million and is accounted for using the cost method.
We own approximately 16% of the equity of the merged entity on a fully-diluted
basis.
As previously disclosed in our quarterly report for the quarter ended
September 30, 2001, FrontLine Capital Group, the majority stockholder of HQ
Global, recently announced that HQ Global is in default with respect to certain
covenant and payment obligations under its senior and mezzanine indebtedness. HQ
Global is in active negotiations with its lenders regarding the restructuring of
its long-term indebtedness. A forbearance period that was agreed to by the
senior loan lenders expires on December 14, 2001, or earlier under certain
circumstances. At the end of the forbearance period, if HQ Global does not cure
all of its existing defaults or obtain an extension of the forbearance period,
the lenders may immediately exercise any rights and remedies available to them.
Following the filing of our quarterly report, FrontLine filed its quarterly
report, in which it disclosed that it took an impairment charge of $294.1
million with respect to its investment in HQ Global.
Although no final decision has been made at this time, we are
continuing to evaluate our investment in HQ Global. In light of the impairment
charge taken by FrontLine and other factors, including that no agreement has
been reached with HQ Global's lenders as of the date of this prospectus
supplement, we believe that it is likely that we will write-off our remaining
$42.2 million investment in HQ Global during the fourth quarter of 2001. If such
a write-off occurs, a non-cash, one-time charge would be taken against our net
income in the fourth quarter of 2001, which would result in our net income and
funds from operations for the fourth quarter and 2001 being substantially below
our previous guidance for those periods.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CarrAmerica Realty Corporation
Date: December 3, 2001 By: /s/ Stephen E. Riffee
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Stephen E. Riffee
Senior Vice President, Controller and Treasurer