<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
------------------
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 number 1-8971
Rockefeller Center Properties, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3280472
- ------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1270 Avenue of the Americas, New York, N.Y. 10020
-------------------------------------------------
(Address of principal executive offices)(Zip Code)
(212) 698-1440
------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 8, 1994
- ---------------------------- -------------------------------
Common Stock, $.01 par value 38,260,704
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
INDEX
PART I--FINANCIAL INFORMATION PAGE
ITEM 1. Financial Statements
The accompanying unaudited, interim financial statements
have been prepared in accordance with the instructions
to Form 10-Q. In the opinion of management, all
adjustments (consisting of normal recurring items)
necessary for a fair presentation have been included.
Balance Sheets as of September 30, 1994
(unaudited) and December 31, 1993 3
Statements of Income for the quarters and nine
months ended September 30, 1994 and 1993
(unaudited) 4
Statements of Cash Flows for the nine months
ended September 30, 1994 and 1993 (unaudited) 5
Notes to Financial Statements (unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Independent Accountant's Report 21
PART II--OTHER INFORMATION 22
SIGNATURES 23
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
ROCKEFELLER CENTER PROPERTIES, INC.
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ -----------------
ASSETS (UNAUDITED)
<S> <C> <C>
Loan receivable, net of unamortized
discount of $37,267 and $40,636 $1,262,733 $1,259,364
Portfolio securities 14,300
Interest receivable 56,624 38,063
Deferred debt issuance costs, net 4,407 4,936
Cash 201 252
Other assets 378 594
---------- ----------
$1,324,343 $1,317,509
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper outstanding, net of
unamortized discount of $425 and $427 $ 207,925 $ 247,223
Current coupon convertible debentures
due 2000 213,170 213,170
Zero coupon convertible debentures
due 2000, net of unamortized discount
of $267,086 and $289,642 319,099 296,543
Distributions payable to stockholders 5,739
Accrued interest payable 50,813 33,662
Uncovered swap liability 3,125
Accounts payable and accrued expenses 1,898 1,746
---------- ----------
801,769 792,344
---------- ----------
Contingencies
Stockholders' equity:
Common stock $.01 par value:
150,000,000 shares authorized,
38,260,704 shares issued and outstanding 383 383
Additional paid-in capital 705,517 705,517
Distributions to stockholders in excess
of net income (183,326) (180,735)
---------- -----------
Total stockholders' equity 522,574 525,165
---------- ----------
$1,324,343 $1,317,509
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-3-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF INCOME
($ in thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
------- ------- ------ ------
<S> <C> <C> <C> <C>
Revenues:
Loan interest income $27,336 $27,252 $81,396 $81,111
Portfolio income 81 563 553 4,568
Short term investment income 15
------- ------- ------- -------
27,417 27,815 81,949 85,694
------- ------- ------- -------
Expenses:
Interest expense:
Convertible debentures 13,508 12,671 39,290 36,857
Commercial paper, bank loan and other 5,989 6,863 18,886 22,263
Charge for uncovered swaps 3,125 3,125
General and administrative 1,328 1,227 3,611 3,042
Amortization of deferred debt issuance costs 177 176 529 529
------- ------- ------- -------
24,127 20,937 65,441 62,691
------- ------- ------- -------
Income before non-recurring income 3,290 6,878 16,508 23,003
Non-recurring income (gain on sales
of portfolio securities) 31 31 8,593
------- ------- ------- -------
Net income $ 3,321 $ 6,878 $16,539 $31,596
======= ======= ======= =======
Net income per share $0.09 $0.18 $0.43 $0.84
======= ======= ======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-4-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
($ in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
1994 1993
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Loan interest received $59,021 $57,559
Portfolio and other interest received 998 6,139
Interest paid on commercial paper,
bank loan and other (18,422) (22,518)
Payments for accounts payable, accrued
expenses and other assets (3,238) (2,986)
------- -------
Net cash provided by operating activities 38,359 38,194
------- -------
Cash flows from investing activities:
Sales of portfolio securities 8,031 102,518
Portfolio maturities and redemptions 6,300 8,750
------- -------
Net cash provided by investing activities 14,331 111,268
------- -------
Cash flows from financing activities:
Maturities of commercial paper, net (39,350) (110,309)
Dividends paid (13,391) (18,756)
Repayment of bank loan payable, net (20,000)
-------- --------
Net cash used in financing activities (52,741) (149,065)
-------- ---------
Net (decrease) increase in cash (51) 397
Cash at the beginning of the period 252 132
------- --------
Cash at the end of the period $201 $529
======= ========
Reconciliation of Net Income to Net Cash Provided
by Operating Activities:
Net Income $16,539 $31,596
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sales of portfolio securities (31) (8,593)
Amortization of discount:
Zero coupon convertible debentures 22,556 20,463
Loan receivable (3,369) (3,103)
Portfolio securities (305)
Increase in interest receivable (18,561) (18,796)
Decrease in deferred debt issuance costs and
other assets 745 210
Increase in accrued interest payable and amortized
unpaid discount on commercial paper 17,203 16,503
Increase in uncovered swap liability 3,125
Increase in accounts payable and accrued expenses 152 219
------- --------
Net cash provided by operating activities $38,359 $38,194
======= ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-5-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. LOAN RECEIVABLE AND INTEREST INCOME
Rockefeller Center Properties, Inc. (the "Company") was formed to permit
public investment in a portion of Rockefeller Center. From the proceeds of
its offering of Common Stock and the offerings of its Current Coupon
Convertible Debentures due 2000 and Zero Coupon Convertible Debentures due 2000
(collectively, the "Convertible Debentures"), the Company made a convertible,
participating mortgage loan to two partnerships, Rockefeller Center Properties
and RCP Associates (collectively, the "Borrower"). The partners of the
Borrower are Rockefeller Group, Inc. ("RGI") and Radio City Music
Hall Productions, Inc. ("RCMHP"), a wholly owned subsidiary of RGI.
The Borrower owns the real property interest comprising most of the land
and buildings known as Rockefeller Center (the "Property").
The mortgage loan, which is in the face amount of $1.3 billion, was made
pursuant to a Loan Agreement between the Company and the Borrower on
September 19, 1985 (as amended, the "Loan Agreement"), and is evidenced
by two notes (collectively, as amended, the "Note"). The mortgage loan
is secured by leasehold mortgages in the aggregate amount of approximately
$44.8 million which were assigned to the Company, consolidated, spread
and recorded as a first mortgage lien against the entire Property. Through
September 6, 1994, the mortgage loan also was secured by an unrecorded
mortgage in the amount of approximately $1,255.2 million. On September 6,
1994 the Company recorded this mortgage. The related recording tax was paid
by the Borrower. The mortgage loan is further secured by a recorded
assignment of rents pursuant to which the Borrower has assigned to the
Company, as security for repayment of the mortgage loan, the Borrower's
rights to collect certain rents with respect to the Property.
Loan interest income of Rockefeller Center Properties, Inc. is calculated
on the basis of the average yield on the Note through December 31, 2000
(the "Equity Conversion Date" and the date at which the mortgage loan will,
if not converted, begin to bear floating rates of interest). The average
yield is 8.51% per annum and combines (using the interest method) differing
coupon rates of base interest with the amortization of original issue
discount applicable to the loan.
2. DEBT
CONVERTIBLE DEBENTURES
Interest expense recognized on the convertible debentures is based on the
average yields to the maturity date, December 31, 2000. The average yields
are computed (using the interest method with semiannual compounding) by (1)
combining the differing coupon rates on the Current Coupon Convertible
Debentures and (2) amortizing the original issue discount related to the
Zero Coupon Convertible Debentures. The resulting effective annual
interest rates are 9.23% and 10.23% for the Current Coupon and Zero
Coupon Convertible Debentures, respectively.
COMMERCIAL PAPER OUTSTANDING
As of September 30, 1994, there was $208,350,000 face amount of commercial
paper outstanding at a weighted average interest rate of 4.93% and a
weighted average maturity of 36 days. The Company's commercial paper,
which as of September 30, 1994 could be issued in amounts up to a total
of $218,000,000, is supported by letters of credit from two leading
financial institutions and has the highest short term credit ratings.
One letter of credit originally in the amount of $200,000,000 was scheduled
to expire in May 1993, but has been extended to December 15, 1994. This letter
of credit has been reduced to $18,000,000 as of September 30, 1994 and will
-6-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
expire on December 15, 1994. The other letter of credit in the amount of
$200,000,000 is scheduled to expire on June 30, 1995 and is not subject to any
scheduled reductions. (See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Results of Operations --
The Company".)
Reductions in the outstanding commercial paper borrowings supported by the
letter of credit expiring on December 15, 1994 have been funded with proceeds
from the sale of the Company's portfolio of investment securities and from
operating cash flow. The Company completed the liquidation of its portfolio of
investments during the third quarter of 1994. The Company has also agreed that
during the term of this facility it will not repurchase any of its convertible
debentures or its common shares, and that it will limit its annual dividend to
the higher of $1.00 per share or 95% of annual net income as computed for tax
purposes.
The commercial paper borrowings are unsecured and upon maturity the Company has
refinanced them, and, except as discussed above and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources -- The Company", intends to continue to refinance them, with
other commercial paper borrowings. Commitment fees on each letter of credit
are payable quarterly in arrears and are charged to interest expense as
accrued.
INTEREST RATE SWAP AGREEMENTS
In connection with its issuance of commercial paper and the acquisition of its
portfolio of investment securities, the Company entered into interest rate swap
agreements with financial institutions that were intended either to fix a
portion of the Company's interest rate risk on floating rate debt ("Liability
Swaps"), or to fix the yield on its floating rate portfolio securities ("Asset
Swaps"). At September 30, 1994, the Company had in effect swap arrangements in
the notional principal amounts of $285 million in Liability Swaps and $40
million in Asset Swaps. Under the Liability Swaps, the Company pays a fixed
rate of interest semiannually (weighted average of 9.73% at September 30, 1994)
and receives a variable rate of interest semiannually (weighted average
of 4.90% at September 30, 1994) based on 180-day LIBOR. Under the Asset Swaps,
the Company receives a fixed rate of interest semiannually (weighted average of
9.47% at September 30, 1994) and pays a variable rate of interest quarterly
(weighted average of 5.06% at September 30, 1994) based on 90-day LIBOR.
The principal or notional amounts of interest rate swaps which are used for
hedging purposes are not reflected in the balance sheets. The incremental
revenue and expense associated with the interest rate swaps serving as hedges
are recognized over the terms of the related swap arrangements and through
March 31, 1993 had been presented in the statements of income as a component
of the interest revenue of the related asset or the interest expense of the
related liability. In connection with the continuing reduction in the
aggregate amount of commercial paper outstanding which commenced in April
1993 and the continuing sale of its portfolio of investment securities in
order to fund such reduction, beginning in the second quarter of 1993, the
Company has presented interest rate swaps on a net basis as a component of
interest expense on commercial paper, bank loan and other. Prior periods
have not been restated. Information on the expiration of such interest rate
swap contracts, as of September 30, 1994, is as follows:
-7-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Expiring during year Notional Amounts
- -------------------- ---------------------------------------------------
Net Swaps Outstanding
Asset Swaps Liability Swaps At End of Year
----------- --------------- --------------
<S> <C> <C> <C>
1994 $5,000,000 $250,000,000
1995 5,000,000 255,000,000
1996 20,000,000 275,000,000
1997 5,000,000 $30,000,000 250,000,000
1998 5,000,000 125,000,000 130,000,000
1999 130,000,000 0
----------- ------------
$40,000,000 $285,000,000
----------- ------------
----------- ------------
</TABLE>
The net notional principal, weighted average interest rate of net swaps
outstanding and annualized net payment relating to interest rate swap
contracts, as of September 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------------- ----------------
<S> <C> <C>
Net notional principal $245,000,000 $245,000,000
------------ ------------
------------ ------------
Weighted average interest
rate of net swaps
outstanding 4.9032% 6.3297%
------------ ------------
------------ ------------
Annualized net payment $12,013,000 $15,508,000
------------ ------------
------------ ------------
</TABLE>
The current net settlement value of all swaps outstanding at September 30,
1994, based on information supplied by the counter-parties to the swap
contracts, was a net liability for the Company of approximately $25 million
as compared to $51 million at December 31, 1993 and $64 million at
September 30, 1993. Generally, the net settlement value would decrease
with an increase in LIBOR rates and would increase as a result of a
decrease in LIBOR rates.
As a result of the liquidation of the Company's portfolio of investment
securities and the reductions in the amount of commercial paper outstanding
described above, all of the Asset Swaps in the notional principal amount of
$40 million and Liability Swaps in the notional principal amount of
$67 million are not currently being utilized for hedging purposes
("Uncovered Swaps"). During the quarter ended September 30, 1994,
the Company recorded a $3.1 million charge to reflect as a liability
the current net settlement value of such swaps.
3. NET INCOME PER SHARE AND DISTRIBUTIONS
Net income per share is based upon 38,260,704 and 37,510,000 average shares
of Common Stock outstanding during the quarters and nine months ended
September 30, 1994 and 1993, respectively. For the quarter and nine
month periods ended September 30, 1994 and 1993, fully diluted net income
per share is not presented since the effect of the assumed conversion of
the Convertible Debentures would be anti-dilutive or not materially different
from net income per share as reported.
-8-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
On September 26, 1994 the Company declared a quarterly dividend of $0.15 per
share, payable on October 31, 1994 to stockholders of record at the close of
business on October 11, 1994. The Company's dividend declarations are oriented
to maintaining the Company's real estate investment trust status, which
requires that annual dividends total not less than 95% of annual net income
as computed for tax purposes.
4. LEGAL MATTERS
The Company is not a party to any material legal proceeding or environmental
litigation, nor is it aware of any such proceeding or litigation threatened
against it.
5. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information concerning the results of operations of the
Property has been furnished to the Company by the Borrower and is presented
below:
<TABLE>
<CAPTION>
($ in thousands)
(unaudited)
Quarters ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross Revenue $57,680 $55,599 $168,713 $169,941
--------- --------- --------- --------
Operating Expenses 41,290 42,795 120,791 123,069
Interest expense, net 29,379 28,680 87,327 85,925
--------- --------- --------- ---------
Net Loss ($12,989) ($15,876) ($39,405) ($39,053)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6. STATUS OF THE BORROWER
The Borrower has experienced significant cash shortfalls and has informed the
Company that it expects to continue to experience significant cash shortfalls.
These cash shortfalls make it unlikely that the Borrower will be able to
fulfill all financial commitments to the Company under the Loan Agreement
for the foreseeable future from its own resources. The Borrower does not have
commitments from its partners or any related affiliate to fund these cash
shortfalls. The Borrower has also advised the Company that, for 1994, it
anticipates a breach of the covenant in the Loan Agreement requiring the net
operating income of the Borrower for any calendar year to be at least 80% of
the base interest payable as defined in the Loan Agreement. In October 1994,
the Borrower reissued its financial statements for the year ended December 31,
1993. These reissued financial statements indicate that these cash shortfalls
raise substantial doubt about the Borrower"s ability to continue as a going
concern. The Company is unable to determine what impact, if any, these
uncertainties could have on the mortgage loan and the Borrower"s ability
to fulfill its obligations under the Loan Agreement. In the event that
the Borrower does not make the required payments under the mortgage loan,
it may be appropriate for the Company to limit recognition of income to
an amount less than that accruing under the terms of the mortgage loan.
-9-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY
The discussion below relates primarily to the Company's financial condition and
results of operations for the first nine months of 1994. Investors are
encouraged to review the financial statements and the Management's Discussion
and Analysis of Financial Condition and Results of Operations for the year
ended December 31, 1993 contained in the Annual Report for 1993 for a
more complete understanding of the Company's financial condition and
results of operations.
The primary source of liquidity for the Company is interest income received on
its mortgage loan to the Borrower. The mortgage loan is secured by leasehold
mortgages in the aggregate amount of approximately $44.8 million which were
assigned to the Company, consolidated, spread and recorded as a first mortgage
lien against the entire Property. Through September 6, 1994, the mortgage loan
also was secured by an unrecorded mortgage in the amount of approximately
$1,255.2 million. On September 6, 1994 the Company recorded this mortgage.
The related recording tax was paid by the Borrower. The mortgage loan
is further secured by a recorded assignment of rents pursuant to which
the Borrower has assigned to the Company, as security for repayment of
the mortgage loan, the Borrower's rights to collect certain rents with
respect to the Property.
During the nine months ended September 30, 1994 and 1993, cash generated from
interest income on the mortgage loan was $59,021,000 and $57,559,000,
respectively. The increase of $1,462,000 in interest income received on the
mortgage loan is attributable to the scheduled increase in the annualized
coupon rate on the mortgage loan. The rate of base interest on the mortgage
loan increases each year until the year 2000 according to a fixed schedule.
Following is the schedule of the rate of base interest and the amount of base
interest scheduled to be received by the Company in each of the following years
ending December 31:
<TABLE>
<CAPTION>
Rate Amount Rate Amount
---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
1994 8.115% $105,495,000 1998 8.410% $109,330,000
1995 8.390% 109,070,000 1999 8.420% 109,460,000
1996 8.400% 109,200,000 2000 8.430% 109,590,000
1997 8.410% 109,330,000
</TABLE>
While the mortgage loan coupon rate for the year 1994 is 8.115%, base interest
is receivable from the Borrower in accordance with a schedule requiring the
Borrower to pay on November 30 of each year that portion of the base interest
payment due for the whole year equal to the interest that will accrue during
such year with respect to the Current Coupon Convertible Debentures of the
Company due 2000 and the remainder quarterly on February 28, May 31,
August 31 and November 30 of each such year. The Borrower has placed in a
special escrow account in favor of the Company securities with a value equal
to the amount of the interest payment due under the Loan Agreement in
November 1994 (approximately $46.5 million). This escrow will terminate upon
the payment to the Company of the November 1994 interest payment.
The mortgage loan also provides for Additional Interest (as defined therein) to
be earned by the Company under certain circumstances. For each year through
2000 in which Gross Revenues (as defined therein) of the Property exceed
$312.5 million, Additional Interest would accrue in an amount equal to the sum
of (i) 31.5% of such excess plus (ii) $42.95 million and would be payable
currently only to the extent of available cash of the Borrower. If cash were
not available, the payment of Additional Interest would be deferred (without
interest) until the Equity Conversion Date or such earlier time as cash became
available. No Additional Interest has been earned by the Company to date.
Based on present conditions in the Midtown Manhattan rental market, the Company
does
-10-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY (CONT'D)
not currently expect that it will earn Additional Interest.
The Borrower has experienced significant cash shortfalls and has informed the
Company that it expects to continue to experience significant cash shortfalls.
These cash shortfalls make it unlikely that the Borrower will be able to
fulfill all financial commitments to the Company under the Loan Agreement
for the foreseeable future from its own resources. The Borrower does not
have commitments from its partners or any related affiliate to fund these cash
shortfalls. The Borrower has also advised the Company that, for 1994, it
anticipates a breach of the covenant in the Loan Agreement requiring the net
operating income of the Borrower for any calendar year to be at least 80%
of the base interest payable as defined in the Loan agreement. In October
1994, the Borrower reissued its financial statements for the year ended
December 31, 1993. These reissued financial statements indicate that these
cash shortfalls raise substantial doubt about the Borrower's ability to
continue as a going concern. The Company is unable to determine what impact,
if any, these uncertainties could have on the mortgage loan and the Borrower's
ability to fulfill its obligations under the Loan Agreement. In the event
that the Borrower does not make the required payments under the mortgage
loan, it may be appropriate for the Company to limit recognition of income
to an amount less than that accruing under the terms of the mortgage loan.
Portfolio and other interest received during the nine months ended
September 30, 1994 and 1993 was $998,000 and $6,139,000, respectively.
The decrease in portfolio and other interest received of $5,141,000 was
due to portfolio sales and maturities, the proceeds from which were used
to reduce the Company's short term debt during 1993 and the first
nine months of 1994. During the first nine months of 1994 the Company
liquidated its investment portfolio realizing $14,331,000 which combined
with operating cash enabled the Company to reduce its short term debt
by $39 million. Due to the liquidation of the investment portfolio,
portfolio interest received in 1994 will be substantially less than
portfolio interest received in 1993.
The following schedule presents the components of commercial paper, bank loan
and other interest paid during the periods shown.
<TABLE>
<CAPTION>
Nine Months ended September 30,
1994 1993
------------ ------------
<S> <C> <C>
Interest rate swap agreements $10,150,000 $11,251,000
Commercial paper (including
commercial paper fees and expenses) 8,272,000 11,049,000
Bank loan 218,000
----------- -----------
$18,422,000 $22,518,000
----------- -----------
----------- -----------
</TABLE>
As discussed in Note 2 to the Financial Statements, the annualized net payment
relating to the $245,000,000 net notional principal of the interest rate swaps
outstanding at September 30, 1994 was $12,013,000. This amount may change
during the remainder of 1994 and in subsequent years, as the floating rates
receivable under the Company's Liability Swaps and the floating rates payable
under the Company's Asset Swaps are periodically re-set.
-11-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY (CONT'D)
Also, as discussed in Note 2 to the Financial Statements, the Company is
committed to scheduled reductions in its commercial paper borrowings issued
under the letter of credit scheduled to expire on December 15, 1994.
Accordingly, the average amount of commercial paper outstanding during 1994 to
date has been, and for the remainder of the year will be, substantially below
the average amount outstanding during 1993, and barring a substantial increase
in average commercial paper rates, the Company would expect that interest paid
on commercial paper for the remainder of 1994 will be lower than that paid in
1993.
The Company's second letter of credit, which is scheduled to expire on June 30,
1995, is not subject to any scheduled reductions. The Company's ability to
continue to issue commercial paper would cease if the Company were not able to
renew or replace such letter of credit. If the Company were not able to
continue to issue commercial paper, it would have to turn to commercial
bank loans or other sources to replace its current funding through the
commercial paper markets and there can be no assurance at this time that
such replacement funding would be available to the Company or as to the
terms upon which any such replacement funding, if available, could be
obtained.
As a result of the liquidation of the Company's portfolio of investment
securities and the reductions in the amount of commercial paper outstanding
described above, all of the Asset Swaps in the notional principal amount of $40
million and Liability Swaps in the notional principal amount of $67 million are
not currently being utilized for hedging purposes ("Uncovered Swaps"). During
the quarter ended September 30, 1994, the Company recorded a $3.1 million
charge to reflect as a liability the current net settlement value of
such swaps. Charges related to Uncovered Swaps are not deductible for
tax purposes until settled with the counter-parties to the swap contracts.
Therefore, the $3.1 million charge has no impact on the computation of
the Company's taxable income for purposes of determining the amounts
required to be distributed to shareholders.
The Company has undertaken a study of its overall capital structure and as part
of such study it will continue to explore and evaluate with the assistance of
Kidder Peabody & Co., its investment banking advisor, means to modify or reduce
its interest rate swap positions and address the commercial paper facility
expiration on June 30, 1995. The Company is currently considering several
financing alternatives including principally attempting to negotiate a complete
or partial extension of the commercial paper facility expiring on June 30, 1995
or a public or private refinancing of the commercial paper outstanding
thereunder. To the extent the alternative implemented does not result in the
continued utilization of all or a portion of the Company's Liability Swaps
which currently are utilized as hedges (notional principal amount of $218
million) to fix the rate of interest paid on floating rate debt, the
Company would be required to record additional charges to reflect as
a liability the current net settlement value of such swaps. Based on
the current net settlement value of the Company's Liability Swaps which
are being used as hedges as of September 30, 1994, the Company would
be required to record an additional liability in the amount of approximately
$22 million if it chose a financing option which did not continue to utilize
any of such Liability Swaps as hedges. The Company has agreed to apply 75%
of any net proceeds received from common stock issuances to reduce the
duration of certain of its Liability Swaps.
Although the Company expects to be able to fund the repayment of the
commercial paper outstanding pursuant to the letter of credit facility
expiring on December 15, 1994 from the proceeds of the interest payment
due under the Loan Agreement on November 30, 1994, the next interest
payment under the Loan Agreement is not due until February 28, 1995.
Application of $18 million of the proceeds of the approximately $46.5
million interest payment due on November 30 to the repayment
of commercial paper will mean that unless the Company retires its
Liability Swaps by year end it will incur a cash shortfall of
approximately $3 million in the first two months of
-12-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY (CONT'D)
1995 prior to receipt of the February 28, 1995 interest payment. This
shortfall could be covered if the Company is able to access funds from
third parties or by the postponement of settlement payments to certain
banks holding Liability Swaps until after February 28. This shortfall
could also be covered by a reduction in the amount of the Company's
December 1994 dividend which could be made up by an increase in the
amount of the first quarter 1995 dividend without prejudice to
the Company's qualification as a REIT for the year 1994. The Company is not
able at this time to predict whether it will be possible to cover this early
1995 cash shortfall without reducing the December dividend.
Coupon payments on outstanding Current Coupon Convertible Debentures are made
annually on December 31. The interest rate payable on the $213,170,000 Current
Coupon Convertible Debentures outstanding as of September 30, 1994 is 8% per
annum and, assuming no change in the amount of Current Coupon Convertible
Debentures outstanding, the interest payment will total $17,054,000 on December
31, 1994. On January 1, 1995 this interest rate is scheduled to increase
to 13% per annum through December 31, 2000. As a result of this increase
in rate, the Company's annual disbursement for interest on these debentures,
assuming that all such debentures outstanding on September 30, 1994 remain
outstanding, would increase by $10,658,500 for 1995 and each subsequent
year. The Company did not repurchase any of its debentures during the
first nine months of 1994 and, pursuant to the agreement extending the
maturity of one of its commercial paper facilities to December 15, 1994
(see Note 2 to the Financial Statements), the Company has agreed not
to repurchase any of its debentures during the term of that agreement.
Combined net cash flow provided by operating and investing activities
during the nine months ended September 30, 1994 was $52,690,000, which
was used, together with cash on hand, by the Company to reduce commercial
paper borrowings in the amount of $39,350,000 and to pay dividends in
the amount of $13,391,000.
The Company is the beneficiary of standby irrevocable letters of credit
that are subject to specified reductions and that, among other things,
provide support for the Borrower's payment of base interest on the
mortgage loan. Subject to certain conditions, the Borrower is required
to maintain in effect similar letters of credit, or to pledge collateral
with a fair market value equal to the required amount of such letters
of credit, during the term of the mortgage loan. In April 1993, pursuant
to agreements between the Borrower and the Company, the level at which
such letters of credit or other collateral must be maintained was
increased to $200 million until December 31, 1994. On January 1, 1995, the
level of this support will decrease from $200 million to approximately $70
million and on April 1, 1995 to $50 million. Also, the Borrower has placed
in a special escrow account in favor of the Company securities with a
value equal to the amount of the interest payment due under the Loan
Agreement in November 1994 (approximately $46.5 million). This escrow
will terminate upon the payment to the Company of the November 1994
interest payment.
The Company has executed non-disturbance agreements with tenants that occupy at
least a full floor in any of the buildings comprising a part of the Property
and certain other tenants upon request. Such agreements provide that in
the event of a foreclosure of the mortgage loan, such tenant's possession
of space within the Property will not be disturbed so long as such tenant
is in compliance with the terms of its lease. In addition, certain of
these tenants, under their leases, may offset fixed rent otherwise payable
to the Borrower (up to specified maximum amounts, "Tenant Allowances") in
the event that the Borrower has failed to pay for certain alterations to
the leased property as provided for in such tenants' leases. In the event
the aggregate amount that all such tenants may offset
-13-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY (CONT'D)
(the "Rent Offset Amount") exceeds $37.5 million the Borrower is required to
maintain credit support facilities to provide additional security in an amount
equal to at least 50% of the positive excess, if any, of the aggregate of the
Borrower's obligations with respect to Tenant Allowances. If an event of
default was to occur under the mortgage loan and the mortgage loan to be
accelerated, the Company would be entitled to make drawings under or
withdrawals from the credit support facilities in payment of the mortgage
loan. As of September 30, 1994, the Company had executed seven rent
offset agreements with tenants. The total Rent Offset Amount at such date
was $46,547,000, and accordingly $4,523,000 had been placed in a rent
offset escrow account.
RESULTS OF OPERATIONS--THE COMPANY
The Company's principal source of income during each of the nine-month periods
ended September 30, 1994 and 1993 was loan interest income recognized on the
mortgage loan. Loan interest income exceeded loan interest received by
$22,375,000 and $23,552,000 during the nine-month periods ended September 30,
1994 and 1993, respectively. The difference in each period is attributable
partially to the aforementioned schedule of periodic interest payments,
partially to the amortization of original issue discount applicable to the
mortgage loan and partially to the recognition of interest income on the
mortgage loan according to the "interest method" by which interest is
calculated on the basis of the average yield on the notes evidencing
the mortgage loan through the Equity Conversion Date. Loan interest
income accounted for 99.3% and 94.7% of total revenues during the
nine-month periods ended September 30, 1994 and 1993, respectively.
Portfolio income, which accounted for approximately .7% of total revenues
during the nine months ended September 30, 1994, declined by $4,015,000
from the comparable period in the prior year as a result of sales and
maturities of portfolio securities. This source of revenue was eliminated
during the third quarter of 1994, as a result of sales and maturities of
the remaining portfolio securities in order to fund in part the scheduled
reductions in commercial paper borrowings (see Note 2 to the Financial
Statements).
Interest expense on Convertible Debentures for the nine months ended September
30, 1994 increased by $2,433,000, or 6.6%, over that of the comparable prior
year period, principally as a result of accruals of interest on the increasing
accretion of the principal amount of the Zero Coupon Convertible Debentures.
Interest expense on commercial paper, bank loan and other declined by
$3,377,000, or 15.2%, from the comparable prior year period reflecting a
combination of lower average commercial paper borrowings, lower average bank
loan outstanding, and the lower cost of servicing interest rate swaps due to
higher variable interest rates received on Liability Swaps. These savings were
partially offset by the higher cost of commercial paper interest due to higher
interest rates and to increased commercial paper fees incurred in connection
with the agreement to extend to December 15, 1994 the commercial paper facility
originally scheduled to expire in May 1993.
As discussed above in "Liquidity and Capital Resources -- The Company" and in
Note 2 to the Financial Statements, during the quarter ended September 30, 1994
the Company recorded $3,125,000 as a charge for the fair value of the Asset
Swaps and Liability Swaps which are not currently serving as hedges.
General and administrative expenses for the nine months ended September 30,
1994 increased by $569,000, or 18.7%, over that of the comparable prior
year period, principally due to increases in financial advisory fees,
professional fees, and general corporate administrative expenses.
-14-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
THE PROPERTY
The financial information and analysis included in the following discussions of
the "Financial Condition and Outlook - The Property", "Results of Operations -
The Property", and "Cash Flow - The Property" have been furnished to the
Company by the Borrower.
FINANCIAL CONDITION AND OUTLOOK - THE PROPERTY
For the nine months ended September 30, 1994, the Property experienced a net
cash outflow of $83.4 million consisting of; an operating cash deficit of $17.6
million (including interest payments of $59 million to the Company), a mortgage
recording tax payment of $34.5 million, and disbursements totaling $31.3
million for capital improvements, tenant improvements, and leasing
commissions. This amount compared with a net cash outflow of $33.4 million
for the nine months ended September 30, 1993 which was comprised of; a
cash outflow from operations totaling $9.9 million (including interest
payments of $57.6 million to the Company) and expenditures aggregating
$23.5 million for capital and leasing disbursements.
These cash outflows brought the cumulative cash flow shortfall of the Property
since 1985 to $516.6 million at September 30, 1994. To date, these shortfalls
have been funded by capital contributions ($185.2 million),
non-interest-bearing advances from an affiliate ($181.7 million), and loans,
including accrued interest, from the Borrower's partners ($149.7 million).
Based upon the Borrower's projections, the Property will continue to experience
significant cash shortfalls. These cash shortfalls have occurred primarily as
a result of changes in the real estate market from levels anticipated when
the mortgage loan was initiated, including lower rental rates, greater rent
abatements granted to tenants upon initiation or renewal of lease commitments,
and higher expenditures associated with obtaining new and renewal tenants.
These cash flow conditions have made it unlikely that the Borrower will be able
to fulfill all financial commitments to the Company for the foreseeable future
from its own resources.
Notwithstanding the previous funding which has occurred, the Borrower does not
have a commitment from its partners or any related affiliate to continue to
fund future cash shortfalls.
On May 20, 1994, the Borrower agreed to provide additional security for the
payment of interest due November 30, 1994 under the mortgage loan. A total of
$46.5 million has been placed in an escrow account as additional security for
this interest payment.
On September 6, 1994, the Company, citing material adverse changes with respect
to the financial condition of the Borrower, perfected its lien by recording the
$1,255.2 million previously unrecorded portion of the mortgage loan at the
Borrower's expense. The mortgage recording tax totaled $34.5 million. The
funds were loaned to the Borrower by an affiliate of the Borrower.
In addition, the Borrower has advised the Company that, for 1994, it
anticipates a breach of the covenant requiring that net operating
income of the Property for any calendar year be at least 80% of the
base interest payable as defined in the Loan Agreement. To date,
no waiver of this provision has been requested by the Borrower,
and none has been granted by the Company.
-15-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
FINANCIAL STATEMENT PRESENTATION
These conditions raise substantial doubt about the Borrower's ability to
continue as a going concern. The Borrower's financial statements have been
prepared on a going concern basis. The financial statements do not contain any
adjustments to reflect the possible future effects from the outcome of this
uncertainty.
RESULTS OF OPERATIONS - THE PROPERTY
The operating results of the Property during the quarter and nine months ended
September 30, 1994 and 1993 are presented in summary form in the table below:
<TABLE>
<CAPTION>
($ In Thousands)
(Unaudited)
------------
Quarters Ended Nine Months Ended
September 30, September 30,
--------------- -----------------
1994 1993 1994 1993
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Gross revenue:
Fixed and percentage
rents $38,256 $37,072 $114,207 $112,133
Operating and real
estate tax escalation 11,961 12,907 36,724 41,210
Consideration revenues 1,144 - 3,157 2,637
Sales and service revenues 6,319 5,620 14,625 13,961
------- ------- -------- ---------
57,680 55,599 168,713 169,941
------- ------- -------- ---------
Operating Expenses:
Real estate taxes 9,837 10,563 30,953 33,767
Utilities 4,538 4,544 12,842 12,574
Maintenance and
engineering 8,328 8,539 24,112 24,323
Other operating expenses 10,840 10,764 30,070 29,821
Depreciation and
amortization 5,769 5,320 17,615 16,057
Management fee 657 642 1,971 1,926
General and administrative 1,321 2,423 3,228 4,601
------- ------- -------- ---------
41,290 42,795 120,791 123,069
------- ------- -------- ---------
Operating income before
interest 16,390 12,804 47,922 46,872
Interest expense, net 29,379 28,680 87,327 85,925
------- ------- -------- ---------
Net Loss ($12,989) ($15,876) ($39,405) ($39,053)
------- ------- -------- ---------
------- ------- -------- ---------
</TABLE>
The gross revenue of the Property during the quarter ended September 30, 1994
increased by $2.1 million from the comparable prior-year period. During the
nine months ended September 30, 1994, the gross revenue of the Property
decreased by $1.2 million from the comparable prior-year period. The increase
in gross revenue during the quarter ended September 30, 1994 was primarily a
result of higher consideration revenue, increased fixed rent related to new
leases and lease renewals, and increased sales and service revenues. These
increases were offset partially by lower operating and real estate tax
escalation revenue. Consideration revenue consists principally of one-time
payments negotiated by tenants for the right to cancel their leases prior to
scheduled termination dates. The decrease in operating and real estate tax
escalation revenue reflects the establishment of new escalation base years in
connection with new leases and lease renewals. To the extent to which the
revenue decrease was
-16-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
attributable to reduced escalation income, this factor was offset in large
measure by lower real estate tax costs recorded in the operating expense
category.
The nine month decrease in gross revenue was primarily a result of lower
operating and real estate tax escalation revenue offset partially by increased
fixed rent, higher sales and service revenues, and increased consideration
revenue.
The following table shows the occupancy rates for the Property at specified
dates:
<TABLE>
<S> <C> <C> <C> <C> <C>
December 31, 1992 - 94.0% December 31, 1993 - 94.6%
March 31, 1993 - 93.9% March 31, 1994 - 95.6%
June 30, 1993 - 93.9% June 30, 1994 - 96.1%
September 30, 1993 - 94.1% October 1, 1994 - 90.4%
</TABLE>
As of October 1, 1994, the occupancy rate decreased to 90.4% as a result of the
significant turnover of leases which expired on September 30, 1994.
During the nine months ended September 30, 1994, 220 leases covering
approximately 1.8 million square feet of office, retail, and storage space took
effect on or before October 1, 1994, at net effective annual fixed rents
averaging $31.89 per square foot. The net effective annual rental rates for
office space, which accounted for approximately 1.7 million square feet of the
total area leased, averaged $30.75 per square foot. This amount compared to a
net effective rental rate of $31.54 per square foot for office space leases
which took effect during all of 1993. Net effective annual rental rates
reflect the present value effect of base rental payments less the current and
future expenditures for tenant improvements, concessions, and brokerage
commissions. The gross rental rates for the office space leases that were
concluded and took effect during the nine months ended September 30, 1994
averaged $40.22 per square foot (compared with $38.01 per square foot for
office space leases which took effect during all of 1993.) The actual rate at
which each lease was executed depended upon its location within the Property,
type of space leased, length of lease term, and other factors. Of the
approximately 1.7 million square feet of office space leased during the nine
months ended September 30, 1994, approximately 1.3 million square feet
represented renewals of existing tenants at an average gross rental rate of
$40.01 per square foot. The combined fixed rent and escalation payments prior
to lease renewal for these renewing tenants had averaged $42.01 per square
foot.
The following table shows selected lease expiration and vacant space
information for the Property as of October 1, 1994 and has been furnished to
the Company by the Borrower. Lease turnover during the term of the mortgage
loan could offer an opportunity to increase the revenue of the Property or
might have a negative impact on the Property's revenue. Actual renewal
rents and rental income will be affected significantly by market conditions
at the time and by the terms at which the Borrower can then lease space.
-17-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
<TABLE>
<CAPTION>
Number of Percentage of
Year leases expiring Area (sq.ft.) total rentable area
- ---- --------------- ------------- -------------------
<S> <C> <C> <C>
1994 (October 1 -
December 31) 39 155,730 2.5
1995 134 631,318 10.2
1996 67 146,556 2.4
1997 39 78,855 1.3
1998 49 186,727 3.0
1999 55 164,024 2.6
2000 19 293,227 4.7
2001 13 36,584 0.6
2002 22 133,742 2.2
2003 25 84,593 1.4
2004 62 374,586 6.0
2005-2019 100 1,742,040 28.2
2020 1 98,577 1.6
2022 3 1,283,576 20.7
Space under temporary
occupancy N/A 97,689 1.6
Vacant space N/A 591,867 9.6
Space occupied by the
Borrower N/A 89,829 1.4
--- --------- -----
628 6,189,520 100.0%
--- --------- -----
--- --------- -----
</TABLE>
During the quarter ended September 30, 1994, the operating expenses of the
Property decreased by $1.5 million or 4% from the comparable prior-year
period. This decrease was a result of reduced general and administrative
expense ($1.1 million), lower real estate taxes ($.7 million), and decreased
maintenance and engineering expenses ($.2 million). These decreases were
offset partially by increased charges for depreciation and amortization
($.5 million).
During the nine months ended September 30, 1994, the operating expenses of
the Property decreased by $2.3 million or 2% from the comparable prior-year
period. This decrease was a result of lower real estate taxes ($2.8 million),
reduced general and administrative expense ($1.4 million), and decreased
maintenance and engineering expenses ($.2 million). These decreases were
offset partially by increased charges for depreciation and amortization
($1.6 million), higher utility costs ($.3 million), and increases in other
operating expenses ($.2 million).
The decrease in general and administrative expense was attributable to a
reduction in the required provision for doubtful accounts. Lower real estate
taxes resulted primarily from a decrease in the assessed valuation of the
Property. The lower maintenance and engineering expenses were primarily a
result of decreased building facade cleaning costs.
Depreciation and amortization charges increased as a result of a higher fixed
asset base which included expenditures required by the Loan Agreement, other
capital expenditures, and improvements to tenant spaces necessitated by lease
commitments. Higher utility costs reflected increased usage as a result of the
colder winter. The increase in other operating expenses was primarily
attributable to increased security services.
-18-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
As a result of the foregoing, operating income before interest for the quarter
and nine months ended September 30, 1994 increased by $3.6 million or 28% and
$1.1 million or 2%, respectively, from the comparable prior-year periods.
Interest expense, net during the quarter and nine months ended September 30,
1994 increased $.7 million or 2% and $1.4 million or 2%, respectively, as a
result of additional loans made to the Borrower by its partners in order to
fund certain of the Property's capital improvements together with increased
interest expense as a result of the payment of the mortgage recording tax.
CASH FLOW-THE PROPERTY
For the nine months ended September 30, 1994, the property experienced an
operating cash deficit of $17.6 million. During the nine-month period ended
September 30, 1993, the operating cash deficit amounted to $9.9 million. These
cash flow data reflect the payment of interest to the Company totaling $59
million and $57.6 million, respectively, during the quarter and nine months
ended September 30, 1994 and 1993. The increase of $7.7 million in the
operating cash deficit for the first three quarters of 1994 compared with the
similar period during 1993 reflected higher levels of net working capital ($7.3
million), and increased interest paid to the Company ($1.5 million). These
increases were offset partially by increased operating income before interest
($1.1 million).
On September 6, 1994, the Company, perfected its lien by recording the
previously unrecorded portion of the Loan at the Borrower's expense. The
mortgage recording tax totaled $34.5 million. The funds were loaned to the
Borrower by an affiliate of the Borrower.
The Borrower also expended funds for capital improvements to the Property,
tenant improvements, and leasing commissions as follows:
<TABLE>
<CAPTION>
(In thousands) Nine Months ended September 30,
-------------------------------
1994 1993
-------------- ---------------
<S> <C> <C>
Capital improvements $ 7,943 $10,676
Tenant improvements 9,974 7,224
Leasing commissions (including
legal fees) 13,356 5,549
------- -------
$31,273 $23,449
------- -------
------- -------
</TABLE>
While the mortgage loan coupon rate for the year 1994 is 8.115%, base interest
is payable to the Company in accordance with a schedule requiring the Borrower
to pay on November 30 of each year that portion of the interest payment due for
the whole year equal to the interest that will accrue during such year with
respect to the Current Coupon Convertible Debentures of the Company due 2000
and the remainder quarterly on February 28, May 31, August 31, and
November 30 of each such year.
The mortgage loan agreement provides for the establishment of loans for the
cumulative portion of capital improvements made by the Borrower in excess of
amounts specified in the mortgage loan agreement. The
-19-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
cumulative amounts of excess capital improvements totaled $123 million and
$107.5 million at September 30, 1994 and 1993, respectively. These excess
capital improvement loans are deemed to be made to the Borrower by its partners
and bear interest at 80% of the prime rate (as defined), compounded quarterly.
Interest charges on excess capital improvement loans are added to the loan
principal at the end of each year. At September 30, 1994 and 1993, the amount
of excess capital improvement loans (including accrued interest) totaled $149.7
million and $127.9 million, respectively.
The results of operations of the Property as of September 30, 1994 and 1993
reflect non-cash interest charges of $5.4 million and $4.6 million,
respectively, relating to interest on these excess capital improvement loans.
Both the excess capital improvement loans and the non-interest bearing advances
are subordinated to the mortgage loan; however, if, on the Equity Conversion
Date, the Company exercises its option to convert the mortgage loan into an
equity interest in the partnership which will then own the Property, any
outstanding loans for excess capital improvements (including accrued interest)
will become the obligation of the partnership.
The Borrower is committed to expend significant funds for tenant improvements
and leasing commissions in connection with the renegotiated and/or new 1994
leases. In order to renew and/or re-lease the remaining space coming due
during the remainder of 1994, significant expenditures also could be required.
Additionally, the Borrower has committed and may be required to commit to rent
abatements in connection with the renewal and/or re-leasing of space.
Certain leases grant tenants the right to reduce or offset rent payable if the
Borrower breaches certain obligations under the leases, including the funding
of tenant improvements and other items. An amendment to the Loan Agreement
dated February 22, 1994 requires RGI to provide additional collateral security
in connection with these leases. The minimum security amount, which at any
time is equal to 50% of the excess of the tenants' right to offset rent over
$37.5 million, is required to be placed in an escrow account. At
September 30, 1994, these obligations totaled $46.5 million, resulting in a
minimum security amount of $4.5 million.
The letters of credit previously discussed under "Liquidity and Capital
Resources-The Company", support the payment of base interest on the mortgage
loan in the event of cash flow shortfalls from the Property. This letter of
credit will be reduced from its present level of $200 million to $70.4 million
on January 1, 1995 and to $50 million on April 1, 1995.
-20-
<PAGE>
Independent Accountant's Report
Board of Directors
Rockefeller Center Properties, Inc.
We have reviewed the accompanying financial statements of Rockefeller Center
Properties, Inc. (the "Company") as of September 30, 1994, and for the three-
month and nine-month periods ended September 30, 1994 and 1993. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit in accordance with generally accepted auditing standards,
which will be performed for the full year, the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
As more fully described in Note 6 to the financial statements, the borrowers
under the mortgage note, the Company's principal asset, have experienced
significant cash shortfalls. These cash shortfalls make it unlikely that the
borrowers will be able to fulfill all financial commitments to the Company for
the foreseeable future from their own resources. The borrowers do not have
commitments from their partners to fund these cash shortfalls. These
uncertainties could impact the value of the mortgage note, the Company's
results of operations and the Company's ability to satisfy its obligations.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements of Rockefeller Center
Properties, Inc. referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the financial statements of Rockefeller Center Properties, Inc. at
December 31, 1993 and for the year then ended (not presented separately herein)
and in our report dated January 19, 1994, we expressed an unqualified opinion
on those financial statements. In our opinion, the information set forth in
the accompanying balance sheet as of December 31, 1993 is fairly stated in all
material respects in relation to the balance sheet from which it has been
derived.
/s/ERNST & YOUNG
November 10, 1994
New York, New York
-21-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
PART II.--OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not a party to any material legal
proceeding or environmental litigation, nor is it aware of
any such proceeding or litigation threatened against it.
ITEM 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
A report on Form 8-K was filed on August 30, 1994,
reporting events under Item 5 and Item 7 of Form 8-K.
-22-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKEFELLER CENTER PROPERTIES, INC.
Date: November 14, 1994 By: /s/RICHARD M. SCARLATA
--------------------------
Richard M. Scarlata
President and Chief Executive
Officer (Principal Financial
Officer and Principal Accounting
Officer)
-23-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 201
<SECURITIES> 0
<RECEIVABLES> 1,262,733<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,324,343
<CURRENT-LIABILITIES> 0<F3>
<BONDS> 532,269
<COMMON> 383
0
0
<OTHER-SE> 522,191
<TOTAL-LIABILITY-AND-EQUITY> 1,324,343
<SALES> 0
<TOTAL-REVENUES> 81,949
<CGS> 0
<TOTAL-COSTS> 3,611
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,830
<INCOME-PRETAX> 16,508
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,539
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,539
<EPS-PRIMARY> .43
<EPS-DILUTED> 0
<FN>
<F1>Loan receivable does not include accrued interest.
<F2>Classified Balance Sheet is not presented.
<F3>Classified Balance Sheet is not presented.
</FN>
</TABLE>
