UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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:
Common Stock, $.01 par value - 38,260,704 shares as of
April 29, 1994
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
ROCKEFELLER CENTER PROPERTIES, INC.
BALANCE SHEETS
($ in thousands)
MARCH 31, 1994 DECEMBER 31, 1993
(UNAUDITED)
<S> <C> <C>
ASSETS
Loan receivable, net of unamortized discount
of $39,534 and $40,636 $1,260,466 $1,259,364
Portfolio securities 11,000 14,300
Interest receivable 43,961 38,063
Deferred debt issuance costs, net 4,759 4,936
Cash 126 252
Other assets 470 594
$1,320,782 $1,317,509
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commercial paper outstanding, net of
unamortized discount of $369 and $427 $229,516 $247,223
Current coupon convertible debentures
due 2000 213,170 213,170
Zero coupon convertible debentures due
2000, net of unamortized discount of
$282,246 and $289,642 303,939 296,543
Distributions payable to stockholders 6,696
Accrued interest payable 40,657 33,662
Accounts payable and accrued expenses 1,668 1,746
795,646 792,344
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 (180,764) (180,735)
Total stockholders' equity 525,136 525,165
$1,320,782 $1,317,509
<FN>
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF INCOME
($ in thousands except per share data)
(UNAUDITED)
QUARTERS ENDED MARCH 31,
1994 1993
<S> <C> <C>
Revenues:
Loan interest income $27,030 $26,929
Portfolio income 240 3,220
Short term investment income 15
27,270 30,164
Expenses:
Interest expense:
Convertible debentures 12,891 12,093
Commercial paper, bank loan and other 6,381 8,621
General and administrative 1,155 899
Amortization of deferred debt issuance costs 176 176
20,603 21,789
Income before non-recurring income 6,667 8,375
Non-recurring income (gain on sales
of portfolio securities) 5,926
Net income $6,667 $14,301
Income per share:
Primary:
Net income per share $0.17 $0.38
Fully diluted:
Net income per share N/A $0.32
<FN>
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
($ in thousands)
(UNAUDITED)
QUARTERS ENDED MARCH 31,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Loan interest received $19,674 $19,186
Portfolio and other interest received 597 3,360
Interest paid on commercial paper, bank loan and
other (5,176) (8,119)
Payments for accounts payable, accrued expenses
and other assets (1,037) (912)
Net cash provided by operating activities 14,058 13,515
Cash flows from investing activities:
Portfolio maturities and redemptions 3,300
Sales of portfolio securities 49,633
Net cash provided by investing activities 3,300 49,633
Cash flows from financing activities:
Maturities of commercial paper, net (17,484) (42,390)
Repayment of bank loan, net (20,000)
Net cash used in financing activities (17,484) (62,390)
Net (decrease) increase in cash (126) 758
Cash at the beginning of the period 252 132
Cash at the end of the period $126 $890
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net Income $6,667 $14,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sales of portfolio securities (5,926)
Amortization of discount:
Zero coupon convertible debentures 7,396 6,710
Loan receivable (1,102) (1,014)
Portfolio securities (230)
Increase in interest receivable (5,898) (6,583)
Decrease in deferred debt issuance costs and
other assets, net 300 279
Increase in accrued interest payable and
amortized unpaid discount on commercial paper 6,773 5,979
Decrease in accounts payable and accrued expenses (78) (1)
Net cash provided by operating activities $14,058 $13,515
<FN>
See notes to financial statements
</TABLE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. LOAN INTEREST INCOME
Loan interest income of Rockefeller Center Properties, Inc. (the "Company")
is calculated on the basis of the average yield on the notes evidencing the
loan from the date of issuance through December 31, 2000 (the "Equity
Conversion Date" and the date at which the 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) the differing coupon rates of
base interest with the amortization of the original issue discount
applicable to the loan.
2. DEBT
CONVERTIBLE DEBENTURES
Interest expense recognized on the convertible debentures is based on the
average yields from the date of issuance through 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 March 31, 1994, there was $229,885,000 face amount of commercial paper
outstanding at a weighted average interest rate of 3.73% and a weighted
average maturity of 29 days. The Company's commercial paper, which as of
March 31, 1994 could be issued in amounts up to a total of $245,000,000, is
supported by two letters of credit having 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 $45,000,000 as of March 31,
1994 and is subject to further scheduled reductions as outlined below. The
other letter of credit in the amount of $200,000,000, is scheduled to expire
in June 1995 and is not subject to any scheduled reductions.
Scheduled Facility
Reductions Level
March 31, 1994 $45,000,000
May 31, 1994 $15,000,000 30,000,000
August 31, 1994 12,000,000 18,000,000
December 15, 1994 18,000,000 0
Reductions in the outstanding commercial paper borrowings supported by this
letter of credit have been and will continue to be funded with proceeds from
the sale of the Company's portfolio of investment securities and from
operating cash flow. The Company expects to liquidate all of the remainder
of its portfolio investments in 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 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.
Between 1987 and 1992, the Company repurchased and retired $366,065,000 face
amount of its Zero Coupon Convertible Debentures (38.4% of the original
issue) and $121,830,000 face amount of its Current Coupon Convertible
Debentures (36.4% of the original issue), (collectively, the "Convertible
Debentures"). The proceeds from the issuances of commercial paper were used
by the Company to finance its repurchases of its Convertible Debentures and
its acquisition of a portfolio of investment securities and are used for
other general corporate purposes.
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 March 31, 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 March 31, 1994) and receives a variable rate of interest
semiannually (weighted average of 3.47% at March 31, 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 March 31, 1994) and pays a
variable rate of interest quarterly (weighted average of 3.71% at March 31,
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 or expense associated with an interest rate swap is recognized over
the term of the swap arrangement 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 sale of a
substantial portion 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. Expiration information relating to interest rate swap
contracts, as of March 31, 1994, is as follows:
Expiring Notional Amounts
during year
Net Swaps
Asset Liability Outstanding
Swaps Swaps At End of Year
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
The net notional principal, weighted average interest rate of net swaps
outstanding and annualized net payment relating to interest rate swap
contracts, as of March 31, 1994, are as follows:
Net notional principal $245,000,000
Weighted average
interest rate
of net swaps
outstanding 6.345%
Annualized net payment $15,545,000
The current net settlement value of all swaps outstanding at March 31, 1994,
based on information supplied by the counter-parties to the swap contracts,
was a net liability for the Company of approximately $42 million.
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.
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. The Company has
agreed to apply 75% of any net proceeds received from common stock issuances
to reduce the duration of certain swaps. (See also Page 13 of "Management's
Discussion and Analysis of Financial Condition and Results of Operations".)
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 ended March 31, 1994 and
1993, respectively. For the quarter ended March 31, 1994, fully diluted net
income per share is not presented since the effect of the assumed conversion
of the Convertible Debentures would be anti-dilutive. For the quarter ended
March 31, 1993, fully diluted net income per share has been computed based
on the assumption that all of the Convertible Debentures are converted into
common shares. For purposes of calculating fully diluted net income per
share for the quarter ended March 31, 1993, net income has been increased by
the interest expense related to the Convertible Debentures and the
amortization of deferred debt issuance costs and the weighted average number
of shares outstanding has been increased by the weighted average of the
additional common shares that would be issued upon conversion of the
Convertible Debentures during the period. The weighted average number of
shares used in such calculation was 82,541,731.
On March 8, 1994 the Company declared a quarterly dividend of $0.175 per
share payable April 25, 1994 to stockholders of record at the close of
business on April 8, 1994. The Company's dividend declarations are oriented
to maintaining the Company's real estate investment trust status, which
requires that annual dividends total not less than 95% of annual net income
as computed for tax purposes.
4. LEGAL MATTERS
The Company is not a party to any material legal proceeding or environmental
litigation, nor is it aware of any such proceeding or litigation pending or
threatened against it.
5. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information concerning the results of operations of the
Property (as defined below) has been furnished to the Company by the
Borrower (as defined below) and is presented below:
($ in
thousands)
(unaudited)
Quarters ended March 31,
1994 1993
Gross Revenue $55,248 $58,354
Less:
Operating expenses (34,073) (35,127)
Depreciation and amortization (5,980) (5,450)
Interest expense, net (28,954) (28,605)
Net Loss ($13,759) ($10,828)
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 primary source of liquidity for the Company is interest income received
on its mortgage loan to two partnerships (collectively, the "Borrower").
The mortgage loan is secured by the real property interests comprising most
of the land and buildings known as Rockefeller Center (the "Property").
During the three months ended March 31, 1994 and 1993, cash generated from
interest income on the mortgage loan was $19,674,000 and $19,186,000,
respectively. The increase of $488,000 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 according to a fixed schedule. Following is a schedule of
the rate of base interest and the amount of base interest expected to be
received by the Company in each of the following years ending December 31:
Rate Amount Rate Amount
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
While the mortgage loan coupon rate for the year 1994 is 8.115%, 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 interest
payment due for the whole year equal to the Company's original obligation
with respect to the original outstanding amount of its Current Coupon
Convertible Debentures ($26.8 million for 1994) and the remainder quarterly
on February 28, May 31, August 31 and November 30 of each such year
($19,674,000 for each such date for 1994).
The mortgage loan also provides for Additional Interest (as defined therein)
to be earned by the Company. 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 and whether or not the Company would earn Additional Interest would
depend upon the ability of the Borrower to re-lease the approximately 1.18
million remaining square feet (approximately 19.1% of all space at the
Property) covered by leases expiring during the remainder of 1994 at rates
significantly above the rental rates obtained for new and renewed leases in
1994 to date (see "Results of Operations--The Property"). Based on present
conditions in the Midtown Manhattan rental market, the Company does not
currently expect that it will earn Additional Interest.
Portfolio and other interest received during the three months ended March
31, 1994 and 1993 was $597,000 and $3,360,000, respectively. The decrease
in portfolio and other interest received of $2,763,000 was due primarily to
portfolio sales and maturities, the proceeds from which were used to reduce
the Company's short term debt during 1993 and the first three months of
1994. During such period the Company reduced short term debt by
approximately $166 million. During the three months ended March 31, 1994
the Company received $3,300,000 from the maturity of portfolio securities.
The balance of the investment portfolio is comprised of three securities
which are valued in total at $11,000,000 and which either mature or will be
sold in 1994. Accordingly, the Company expects to receive portfolio
interest in 1994 which 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.
Three Months ended March 31,
1994 1993
Interest rate swap agreements $2,350,000 $3,139,000
Commercial paper (including
commercial paper fees and
expenses) 2,826,000 4,762,000
Bank loan 218,000
$5,176,000 $8,119,000
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 March 31, 1994 was $15,545,000. 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. 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 which is scheduled to expire on December 15, 1994.
Accordingly, the average amount of commercial paper outstanding during 1994
is expected to 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 will be lower
in 1994 than that paid in 1993. The Company's second letter of credit which
is scheduled to expire in June 1995 is not subject to any scheduled
reductions. However, the Company's ability to continue to issue commercial
paper would cease if the Company were not able to renew or replace that
letter of credit. If the Company were not able to continue to issue
commercial paper backed by this facility 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. At
March 31, 1994, the net notional principal of outstanding interest rate swaps
($245 million) matched the total commercial paper issuable by the Company
under its two letters of credit backed commercial paper facilities ($200
million and $45 million).
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. The Company has
agreed to apply 75% of any net proceeds received from common stock issuances
to reduce the duration of certain swaps.
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 March 31, 1994 is 8%
per annum and will require payments totalling approximately $17,054,000 on
December 31, 1994. This rate will remain in effect until December 31, 1994,
after which it 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 March 31, 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 three 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 three months ended March 31, 1994 was $17,358,000, which was used
together with cash on hand by the Company to reduce commercial paper
borrowings in the amount of $17,484,000.
The Company is the beneficiary of standby irrevocable letters of credit
subject to specified reductions and which, 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
revert to the level originally required to be maintained as of such date
under the Loan Agreement, which the Company expects will be not less than
$90 million.
Results of Operations--The Company
The Company's principal source of income during each of the three-month
periods ended March 31, 1994 and 1993 was loan interest income recognized on
the mortgage loan. Loan interest income exceeded loan interest received by
$7,356,000 and $7,743,000 during the three-month periods ended March 31,
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 99.1% and 89.3% of total revenues during the three-month
periods ended March 31, 1994 and 1993, respectively.
Portfolio income, which accounted for approximately 0.9% of total revenues
during the three months ended March 31, 1994, declined by $2,980,000 from
the comparable period in the prior year primarily as a result of sales and
maturities of portfolio securities. This source of revenue is expected to
be eliminated in 1994, as a result of future sales and maturities of
portfolio securities in order to fund together with operating income the
scheduled reductions in commercial paper borrowings (see Note 2 to the
Financial Statements). At March 31, 1994 the face amount of the Company's
portfolio of investment securities was $11,000,000, and the weighted average
annual interest rate receivable on these securities was 8.45%.
Interest expense on convertible debentures for the three months ended March
31, 1994 increased by $798,000, 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
$2,240,000, or 26.0%, from the comparable prior year period reflecting a
combination of lower average commercial paper borrowings and lower average
bank loans outstanding, both of which were partially offset by the higher
cost of servicing interest rate swaps due to lower variable interest rates
received on liability swaps 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, at March 31, 1994 the net notional
principal of outstanding interest rate swaps and the amount of the Company's
commercial paper which could be issued were matched. Also, as discussed the
Company has undertaken a study of its overall capital structure, and as part
of such study it will continue to explore and evaluate means to modify or
reduce its interest rate swap positions. During the second quarter of 1994,
the amount of the Company's commercial paper which could be issued will
decline to an amount which will be less than the net notional principal of
outstanding swaps. The Company may be required to take a non-cash charge to
earnings for the present value of future estimated payments required under
such "naked" swaps. The amount of any such charge is not presently
calculable and would not be deductible for tax purposes; accordingly, it
would have no impact on the Company's dividend.
General and administrative expenses for the three months ended March 31,
1994 increased by $256,000, or 28.5%, over that of the comparable prior year
period principally due to increases in financial advisory fees, legal fees
and general corporate administrative expenses.
Results of Operations--The Property
The financial information and analysis included in the following discussion
of the results of operations of the Property have been furnished to the
Company by the Borrower.
The operating results of the Property during the three months ended March
31, 1994 and 1993 are presented in summary form in the table below:
($ In Thousands)
(Unaudited)
Three Months Ended
March 31,
1994 1993
Gross revenue:
Fixed and percentage rents $37,186 $37,228
Operating and real estate
tax escalation 12,290 14,568
Consideration revenues 1,731 2,533
Sales and service revenues 4,041 4,025
55,248 58,354
Operating Expenses:
Real estate taxes 10,558 11,620
Utilities 4,915 4,710
Maintenance and engineering 7,539 7,446
Other operating expenses 9,474 9,599
Management fee 657 642
General and administrative 930 1,110
34,073 35,127
Operating income before interest,
depreciation and amortization 21,175 23,227
Depreciation and amortization 5,980 5,450
Interest expense, net 28,954 28,605
Net Loss ($13,759) ($10,828)
The gross revenue of the Property during the quarter ended March 31, 1994
decreased by $3.1 million when compared to the comparable prior year period.
The decrease in gross revenue during the quarter was primarily a result of
lower operating and real estate tax escalation revenue and decreased
consideration revenue. Consideration revenue principally consists of one
time negotiated payments by tenants for the right to cancel their leases
prior to scheduled termination. The decreases in operating and real estate
tax escalation revenue reflects the establishment of new escalation base
years in connection with new leases and lease renewals and a decrease in
escalatable real estate tax expense.
The following table shows the occupancy rates for the Property at specified
dates:
June 30, 1992 - 94.6% June 30, 1993 - 93.9%
September 30, 1992 - 94.3% September 30, 1993 - 94.1%
December 31, 1992 - 94.0% December 31, 1993 - 94.6%
March 31, 1993 - 93.9% March 31, 1994 - 95.6%
During the quarter ended March 31, 1994, 39 leases covering approximately
453,000 square feet of office, retail and storage space were concluded and
took effect at net effective annual rates averaging $30.84 per square foot.
Office space, which accounted for approximately 439,000 square feet was
leased at net effective annual rental rates averaging $29.82 per square foot
(compared to $31.54 per square foot for office space leases signed in all of
1993). Net effective annual rental rates are net of tenant improvements,
concessions and brokerage commissions. The gross rental rates for office
space leases which were concluded and took effect during the quarter ended
March 31, 1994 averaged $43.07 per square foot (compared to $38.01 per
square foot for office space leases signed in all of 1993). The actual
rates at which each lease was executed depended upon location within the
Property, type of space leased, lease length and other factors. Of the
approximately 439,000 square feet of office space leased during the quarter
ended March 31, 1994, approximately 345,000 square feet represented renewals
of existing tenants at an average gross rental rate of $43.30 per square
foot. The combined fixed rent and escalation payments prior to lease
renewal for these renewing tenants averaged $39.31 per square foot.
In addition to the leases discussed above, during 1992 and 1993, leases
representing 841,000 square feet of rental space scheduled to become
available on October 1, 1994 (of which approximately 801,000 square feet was
accounted for by office space) were concluded and will take effect on
October 1, 1994. The rental rates achieved on these leases met or exceeded
existing market conditions at the time of lease signing; nevertheless,
because these leases were concluded principally with major tenants, the
average net effective rental rates achieved for these leases was $29.37 per
square foot ($28.98 per square foot for office space). The gross rental
rates for office space under these leases averaged $37.84 per square foot.
Of the approximately 801,000 square feet of office space referred to above,
approximately 730,000 square feet represented renewals of existing tenants
at an average gross rental rate of $37.64 per square foot. The combined
fixed rent and escalation payments prior to lease renewal for these renewing
leases averaged $32.63 per square foot.
The following table shows selected lease expiration information for the
Property as of March 31, 1994 and has been furnished to the Company by the
Borrower. Lease turnover during the term of the 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
resulting therefrom will be significantly affected by market conditions at
the time and by the terms on which the Borrower can then lease space.
Number of Percentage
Year leases Area of total
expiring (sq.ft.) rentable area
1994 208 1,181,629 19.1
1995 112 364,042 5.9
1996 67 174,111 2.8
1997 37 75,507 1.2
1998 48 183,668 3.0
1999 30 114,898 1.9
2000 23 327,374 5.3
2001 12 35,702 0.6
2002 22 133,470 2.2
2003 22 64,693 1.0
2004 27 248,575 4.0
2005-2019 66 1,490,866 24.1
2020 1 98,577 1.6
2022 4 1,282,936 20.7
Space under temporary
occupancy N/A 49,209 0.8
Vacant space N/A 272,846 4.4
Space occupied by the
Borrower N/A 88,186 1.4
679 6,186,289 100.0%
The operating expenses of the Property decreased by $1.1 million, or 3%,
during the quarter ended March 31, 1994, when compared to the comparable
prior year period. This decrease was principally a result oflower real
estate taxes ($1.1 million) and decreased general and administrative expense
($.2 million). These decreases were partially offset by higher utility
costs ($.2 million).
The decrease in real estate taxes for the quarter ended March 31, 1994 was
primarily a result of a decrease in the assessed valuation of the Property.
The decreases in general and administrative expense resulted from a decrease
in the provision for doubtful accounts. Higher utility costs reflect
increased usage as a result of colder weather for the quarter ended March
31, 1994 as compared to the comparable period in 1993 and increased rates.
As a result of the foregoing, operating income before interest, depreciation
and amortization for the quarter ended March 31, 1994 decreased by $2.1
million or 9% when compared to the comparable prior year period.
Depreciation and amortization for the quarter ended March 31, 1994 increased
$.5 million, or 10%, as a result of a higher fixed asset base which included
expenditures required by the mortgage loan agreement, other capital
expenditures and improvements to tenant spaces.
Interest expense, net during the quarter ended March 31, 1994 increased $.3
million, or 1%, as a result of scheduled increases in interest expense on
the Company's Loan and increased interest expense as a result of additional
loans made to the Borrower by its partners to fund certain of the Property's
capital improvements.
Cash Flow--The Property
For the quarter ended March 31, 1994, the property experienced an operating
cash deficit of $14.3 million after payments of interest to the Company of
$19.7 million. For the quarter ended March 31, 1993, the Property
experienced an operating cash deficit of $9.1 million after payments of
interest to the Company of $19.2 million. This increase in operating cash
deficit of $5.2 million was a result of lower operating income before
interest, depreciation and amortization ($2 million), increases in net
working capital ($2.7 million) and increased interest paid to the Company
($.5 million). The Borrower also expended funds for capital improvements
to the Property, tenant improvements and leasing commissions as follows:
(In thousands) Quarters ended
March 31,
1994 1993
Capital improvements $2,170 $2,704
Tenant improvements 2,408 1,481
Leasing commissions (including
legal fees) 5,726 1,601
$10,304 $5,786
While the mortgage loan coupon rate for the year 1994 is 8.115%, interest is
payable in accordance with a schedule requiring the Borrower to pay on
November 30 of each year that portion equal to the Company's original
obligation with respect to the original outstanding amount of its Current
Coupon Convertible Debentures ($26.8 million for 1994) and the remainder
quarterly on February 28, May 31, August 31 and November 30 of each such
year ($19.7 million for each such date for 1994).
The Borrower experienced a cash flow shortfall of $24.6 million for the
first quarter of 1994 as compared to a cash flow shortfall of $14.9 million
for the first quarter of 1993. The cumulative cash flow shortfall of the
Borrower since the inception of the mortgage loan in September 1985 ($457.8
million) has been funded by capital contributions ($185.2 million), loans
from its partners ($123 million) and non-interest bearing advances from an
affiliate ($149.6 million). The 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 Loan Agreement.
The cumulative amounts of excess capital improvements totaled $123 million
and $107.5 million at March 31, 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, which is added to the loan principal at the end of each year. At
March 31, 1994 and 1993, the amount of such 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 March 31,
1994 and 1993 reflect non-cash interest charges of $1.8 million and $1.5
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 Company's mortgage loan;
however, if the Company exercises its option to convert the loan into an
equity interest in the Partnership, any outstanding loans for excess capital
improvements (including accrued interest) will become the obligation of the
Partnership.
The Borrower is committed to expend significant amounts of 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 in 1994, significant funds could also be required to be
expended. 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.
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.
Independent Accountant's Report
Board of Directors
Rockefeller Center Properties, Inc.
We have reviewed the accompanying financial statements of Rockefeller Center
Properties, Inc. as of March 31, 1994, and for the three-month period ended
March 31, 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, 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.
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
New York, New York
April 19, 1994
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 pending or threatened against it.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(3(i)) Restated Certificate of Incorporation of the registrant,
as amended June 15, 1988, is incorporated by reference
to Exhibit 3.4 to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1988.
(3(ii)) By-laws of the registrant, as amended through March 8,
1994, are incorporated by reference to Exhibit 4.5 of
the registrant's Annual Report on Form 10-K dated
March 11, 1994.
(4.1) Indenture dated as of September 15, 1985 between
the registrant and Manufacturers Hanover Trust Company,
as Trustee (the "Trustee"), including the forms of
Current Coupon Convertible Debenture, Zero Coupon
Convertible Debenture and Floating Rate Note, is
incorporated by reference to Exhibit 4 to the
registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1985, File No. 1-8971.
(4.2) First Supplemental Indenture dated as of December 15,
1985 between the registrant and the Trustee, is
incorporated by reference to Exhibit 4.2 to the
registrant's Annual Report on Form 10-K for the
period ended December 31, 1985, File No. 1-8971.
(4.3) Form of definitive share certificate for Common Stock,
is incorporated by reference to Exhibit 4.3 to the
registrant's Annual Report on Form 10-K for the period
ended December 31, 1985, File No. 1-8971.
(b) Reports on Form 8-K
A report on Form 8-K, dated February 16, 1994 was filed on
February 22, 1994 reporting events under Item 5 and Item 7 of
Form 8-K.
A report on Form 8-K/A, was filed on March 23, 1994 to amend the
report on Form 8-K filed on February 22, 1994.
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: May 12, 1994 By:/s/RICHARD M. SCARLATA
Richard M. Scarlata
Senior Vice President
Finance & Administration
(Principal Financial Officer and
Principal Accounting Officer)
