<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 14, 1995 (November
11, 1995)
ROCKEFELLER CENTER PROPERTIES, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8971 13-3280472
- -------- ------ ----------
(State or other (Commission File (IRS Employer
jurisdiction) Number) Identification No.)
1270 Avenue of the Americas, New York, New York 10022
------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (212) 698-1440
<PAGE>
2
Item 5. OTHER EVENTS.
The combined financial statements of Rockefeller Center
Properties and RCP Associates (collectively, the "Borrower") for the year ended
December 31, 1994 have been revised and reissued as a result of the Borrower's
filing of a voluntary petition for reorganization under Chapter 11, title 11 of
the United States Code, as amended.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit 20 Combined Financial Statements of Rockefeller Center
Properties and RCP Associates for the year ended December
31, 1994, together with the report thereon of Ernst & Young
LLP, independent auditors.
<PAGE>
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned hereunto
duly authorized.
ROCKEFELLER CENTER PROPERTIES, INC.
(Registrant)
By:/s/ RICHARD M. SCARLATA
---------------------------------
Name: Richard M. Scarlata
Title President and Chief Executive Officer
Dated: December 14, 1995
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO.
20 Combined Financial Statements of Rockefeller Center Properties and RCP
Associates for the year ended December 31, 1994, together with the
report thereon of Ernst & Young LLP, independent auditors.
<PAGE>
Exhibit 20
Report of Ernst & Young LLP, Independent Auditors
The Partners of
Rockefeller Center Properties and RCP Associates
We have audited the accompanying combined balance sheets of Rockefeller Center
Properties and RCP Associates (collectively, the Partnerships) as of December
31, 1994 and 1993, and the related combined statements of operations and
partners' capital deficiency and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Rockefeller
Center Properties and RCP Associates at December 31, 1994 and 1993, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared on a going
conern basis and accordingly, reflect the Partnerships' combined historical
cost basis in the assets and liabilities presented therein. As more fully
described in Note 4 to the combined financial statements, on May 11, 1995 the
Partnerships filed petitions for reorganization under Chapter 11 of the
Bankruptcy Code. On September 12, 1995, representatives of the Partnerships
and Rockefeller Center Properties, Inc. (RCPI), appeared jointly before the
United States Bankruptcy Court for the Southern District of New York (the
Court) and reported that the Partnerships and RCPI had reached a preliminary
agreement for an orderly transfer of the Property (which constitutes
substantially all of the combined assets of the Partnerships) to RCPI in
exchange for the release of the Partnerships from any continuing obligation
under the Loan to RCPI. The transfer of the Property to RCPI is subject to
approval by the Court. The transfer of the Property, and the release of the
Partnerships from any continuing obligation under the Loan, combined
with any cancellation of the Partnerships' indebtedness to RCPI and Rockefeller
Group, Inc. (RGI - currently, the ultimate owner of the Partnerships) and its
affiliates, if consummated, will result in substantial non-cash gains to the
Partnerships. Further, upon consummation of these transactions, the
Partnerships will either cease their business activities or control of the
Partnerships will vest with parties other than RGI. The accompanying
financial statements do not reflect the adjustments which would be required
to reflect the transfer of the Property to RCPI, the release or
cancellation of indebtedness, the wind-down of the affairs of the
Partnerships, or any change in control which may occur with respect
to the Partnerships. In the event that the transfer of Property is not
approved and, the Property is foreclosed upon, other adjustments would be
required. All such adjustments could be material.
/s/ ERNST & YOUNG LLP
New York, New York
February 3, 1995 except for Note 4 as to which the date is November 11, 1995
F-1
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Current assets:
Cash $ 3 $ 4
Accounts receivable, less allowance for
doubtful accounts of $2,833 and $4,193 4,027 4,343
Due from RGI affiliates 1,286 60
Other current assets 856 622
---------- ----------
6,172 5,029
Fixed assets, at cost:
Land 402,419 402,419
Buildings 499,226 487,378
Furniture, fixtures and equipment 26,422 23,847
---------- ----------
928,067 913,644
Less accumulated depreciation (214,035) (198,675)
---------- ----------
714,032 714,969
Deferred renting expenses, less accumulated
amortization of $20,659 and $44,998 93,735 37,149
Lease incentives 31,327 13,949
Deferred financing expenses, less accumulated
amortization of $1,285 and $6,169 30,094 235
Other assets 2,960 2,699
---------- ----------
Total assets $ 878,320 $ 774,030
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 26,848 $ 23,617
Due to RGI affiliates 273,778 128,653
---------- ----------
300,626 152,270
Mortgage payable, net of unamortized original
issue discount of $36,101 and $40,639 1,263,899 1,259,361
Loans payable to RGI 160,715 149,654
Non-current mortgage interest payable 36,321 37,619
Partners' capital deficiency (883,241) (824,874)
---------- ----------
Total liabilities and partners'
capital deficiency $ 878,320 $ 774,030
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
F-2
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
COMBINED STATEMENTS OF OPERATIONS
AND PARTNERS' CAPITAL DEFICIENCY
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Rental revenue:
Fixed and percentage $159,757 $152,187 $153,492
Operating and real estate tax escalations 42,201 55,643 57,029
-------- -------- --------
Total rental revenue 201,958 207,830 210,521
Sales of services 18,893 18,767 18,479
-------- -------- --------
Gross revenues 220,851 226,597 229,000
-------- -------- --------
Real estate taxes 40,884 44,336 44,481
Maintenance and engineering 32,062 33,657 30,509
Other operating expenses 26,025 26,026 25,208
Utilities 16,386 16,553 16,360
Cost of service sales 13,060 13,919 14,884
Depreciation and amortization 25,761 21,821 19,834
General and administrative 4,322 5,871 6,231
Management fees 2,636 2,579 2,491
Ground rent 754 694 700
-------- -------- --------
161,890 165,456 160,698
-------- -------- --------
Operating profit 58,961 61,141 68,302
Interest expense 117,328 114,599 114,040
-------- -------- --------
Net loss (58,367) (53,458) (45,738)
Partners' capital deficiency, beginning of year (824,874) (771,416) (725,678)
-------- -------- --------
Partners' capital deficiency, end of year ($883,241) ($824,874) ($771,416)
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
F-3
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($58,367) ($53,458) ($45,738)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 25,761 21,821 19,834
Non-current portion of interest expense 6,016 6,893 8,538
Amortization of original issue discount
and deferred financing expenses 5,827 4,176 3,839
Lease incentives, net (17,378) (6,826) (2,738)
Changes in certain assets and liabilities (3,531) 9,671 (2,051)
-------- -------- --------
NET CASH USED IN OPERATING ACTIVITIES (41,672) (17,723) (18,316)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,423) (27,317) (24,890)
Deferred renting expenses paid (48,737) (16,358) (6,385)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (63,160) (43,675) (31,275)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from RGI affiliates, principally
relating to cash management system, net 135,601 45,938 44,076
Loans from RGI 3,747 15,457 5,515
Deferred financing expenses paid (34,517) -- --
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 104,831 61,395 49,591
-------- -------- --------
NET CHANGE IN CASH (1) (3) --
CASH, BEGINNING OF YEAR 4 7 7
-------- -------- --------
CASH, END OF YEAR $3 $4 $7
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $105,495 $103,545 $101,660
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
F-4
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
1. BASIS OF PRESENTATION
The accompanying financial statements include the combined accounts of two
partnerships, Rockefeller Center Properties (RCP) and RCP Associates
(Associates) (collectively, the Partnerships), in which Rockefeller Group,
Inc. (RGI) and one of its subsidiaries, Radio City Music Hall Productions,
Inc. (RCMHPI), are the sole partners (the Partners). The Partnerships
together own the real property interests constituting most of the land and
buildings in the landmarked portion of Rockefeller Center (the Property).
Transactions between the Partnerships have been eliminated in the
accompanying combined financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEPRECIATION AND AMORTIZATION - Buildings and improvements are depreciated
using the straight-line method over their useful lives, which range from 15
to 50 years. Capital replacements are depreciated using the straight-line
method over their estimated useful lives, which range from 3 to 15 years.
Deferred renting expenses represent expenditures associated with obtaining
new tenants and preparing the premises for occupancy. These costs are
amortized on a straight-line basis over the related lease terms.
Deferred financing expenses at December 31, 1994 represent mortgage
recording taxes paid (see Note 4), net of an accrued mortgage recording tax
credit. The cost is being amortized over the initial term of the RCPI
mortgage loan which extends until December 31, 2000 using the interest
method.
LEASE INCENTIVES - Lease incentives represent primarily the value of free
rental periods granted to tenants upon initiation or renewal of lease
commitments. Once rental payments begin, the lease incentives are reduced
over the remainder of the lease term.
INTEREST EXPENSE - Interest expense on the Rockefeller Center Properties,
Inc. Mortgage Loan (see Note 3) is recognized based on the average yield of
the mortgage notes through December 31, 2000 (the Equity Conversion Date).
The average yield combines the differing coupon rates of interest (Base
Interest) with the amortization (using the interest method) of the original
issue discount.
INCOME TAXES - The net income or loss of the Partnerships is included in
determining the net income of their partners which have the responsibility
to pay any related income taxes.
F-5
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
3. RCPI MORTGAGE LOAN
Rockefeller Center Properties, Inc. (RCPI), a real estate investment trust
(REIT), used the net proceeds of its initial public offerings to make a $1.3
billion participating mortgage loan (the Loan) to the Partnerships. The net
proceeds of the offerings totaled $1,233,752,000 and were loaned to the
Partnerships on September 19, 1985, thus creating original issue discount of
$66,248,000 with respect to the Loan.
Prior to the Equity Conversion Date, the Loan provides for specified
quarterly Base Interest payments during its remaining term with annualized
coupon rates increasing from 7.82% in 1992 to 8.43% in 2000.
The combination of the varying rates of Base Interest with the amortization
of the original issue discount results in an effective annual interest rate
approximating 8.51% over the term of the Loan. Through the year 2000, the
Loan provides for Additional Interest for each year in which gross revenues
(as defined) of the Property exceed $312.5 million. Additional Interest is
to accrue in an amount equal to the sum of (i) 31.5% of the excess over
$312.5 million plus (ii) $42.95 million. Through December 31, 1994, no
Additional Interest has been accrued. In accordance with an Internal
Revenue Service private letter ruling, effective as of October 26, 1990, the
formula used to calculate additional interest was revised. The revised
formula is intended to provide the REIT with the same amount of additional
interest as it would have received had the NBC transaction (see Note 5) been
a gross (as opposed to a net) rent transaction.
Under the revised formula for determination of additional interest, actual
gross revenues are increased by the amount of any real estate taxes and
operating expenses payable by a tenant to a third party (e.g., to New York
City or the provider of the services) instead of to the Partnerships. Gross
revenues are also increased to include any rent credits NBC receives for
capital improvements which qualify toward the Partnerships' obligation to
make $197,618,000 of capital improvements to the Property. Under the
revised formula, it is estimated that 1994 gross revenues for the purpose of
computing additional interest would have been $229.2 million.
In connection with the Loan, RCPI has been granted an option, exercisable on
the Equity Conversion Date (the Equity Option), to convert the outstanding
principal amount of the Loan into a 71.5% equity interest in the partnership
(representing the combination of RCP and Associates) then owning the
Property. There is no scheduled amortization of the Loan prior to the
Equity Conversion Date.
F-6
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
In the event that the Equity Option is not exercised, the Loan will mature
in a single installment on December 31, 2007, will bear interest (after
2000) equal to the London Interbank Offered Rate (LIBOR) plus a spread of as
much as 1%, and can be prepaid at the option of the Partnerships (or
successor partnership) at 100% of its principal amount plus accrued
interest, if any.
As of December 31, 1994, the Loan is secured by leasehold mortgages in the
aggregate amount of approximately $1.3 billion. Through September 6, 1994,
the Loan was secured by a recorded mortgage in the amount of approximately
$44.8 million and an unrecorded mortgage in the amount of approximately
$1,255.2 million. The Loan is further secured by a recorded Assignment of
Rents pursuant to which the Partnerships have assigned to RCPI, as security
for repayment of the Loan, the Partnerships' rights to collect certain
rents with respect to the Property.
The Loan Agreement requires the Partnerships to maintain a standby,
irrevocable letter of credit, or to deposit with a trustee either cash or
specified types of collateral of an equivalent fair market value
(collectively, "Security"). This Security supports the Partnerships'
payment of Base Interest due on the Loan. Letters of credit in favor of
RCPI have been obtained by RGI to satisfy this requirement.
During 1992, RCPI entered into a Stipulation and Agreement of Settlement in
settlement of a class action suit brought against RCPI. Under the terms of
this agreement, the Security was increased from $126 million to $200
million until December 31, 1994. On January 1, 1995, the level of Security
reverted to the level originally required to be maintained under the Loan
Agreement, which is $70.4 million. This amount will be further reduced
to $50 million on April 1, 1995. As additional security for the Loan,
100,000 square feet of development rights associated with Rockefeller Center
were added to the Loan.
The Loan Agreement also contains covenants with respect to the operation
and maintenance of the Property and limitations on the Partnerships' right
to dispose of the Property and incur debt or liens.
As noted above, the Loan has many unusual characteristics including the
lack of principal amortization, a variable interest rate, and the
Property's unique commercial, historic, and aesthetic attributes.
While in the past the Partnerships have estimated that the Loan's carrying
value approximated its fair value, continued volatility in both interest
rates and the New York commercial real estate market have resulted in a
conclusion by the Partnerships that only an investment banker, appraiser,
or similar expert could make an appropriate evaluation at this time. The
Partnerships have declined to incur the significant expense for an
appraisal. Accordingly, it is not practicable at this time for the
Partnerships to estimate the fair value of the Loan.
F-7
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
Certain leases grant tenants the right to reduce or offset rent payable if
the Partnerships breach 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 December 31, 1994, these obligations totaled $39.3
million, resulting in a minimum security amount of $907,000.
4. FINANCIAL CONDITION, OUTLOOK AND BASIS OF PRESENTATION
The Partnerships have experienced significant cash shortfalls and, based
upon management's projections, will continue to experience significant cash
shortfalls through the Equity Conversion Date. These cash shortfalls have
occurred primarily as a result of changes in the real estate market from
levels anticipated when the Loan was initiated. These factors include
lower rental rates, greater rent abatements granted to tenants upon
initiation or renewal of lease commitments, and higher other expenditures
associated with obtaining new and renewal tenants. These cash flow
conditions have made it unlikely that the Partnerships will be able to
fulfill all financial commitments to RCPI for the foreseeable future from
their own resources. The Partnerships do not have a commitment from the
Partners to fund these cash shortfalls.
On September 6, 1994, RCPI, citing material adverse changes with respect to
the financial condition of the Partnerships, perfected their lien at the
Partnerships' expense by recording the $1,255.2 million previously
unrecorded portion of the Loan. The mortgage recording taxes totaled $34.5
million. Funds to pay these taxes were loaned to the Partnerships by RGI.
On May 11, 1995 (the Filing Date), the Partnerships petitioned for relief
under Chapter 11 of the United States Bankruptcy Code. The case is being
heard in the United States Bankruptcy Court for the Southern District of
New York (the Court). Concurrent with the Filing Date, the Partnerships
discontinued accrual or payment of interest in connection with the Loan.
On June 1 and June 5, 1995, RCPI exercised its rights under the $50
million letter of credit which served as Security for the Loan. These
payments were accounted for by the Partnerships as reductions in the
principal amount of the Loan.
Subsequent to the Filing Date, the Partnerships have continued in
possession of the Property and are operating and managing the Property as
debtors-in-possession pursuant to Sections 1107 and 1008 of the Bankruptcy
Code. The Partnerships have sought and obtained orders from the Court
intended to stabilize the business and minimize the disruption caused by
the Chapter 11 proceedings. These orders have (1) authorized the
Partnerships to pay certain pre-petition liabilities, wages, and other
employee obligations and (2) approved the use of cash collateral.
On September 12, 1995, representatives of the Partnerships and RCPI
appeared jointly before the Court and reported that the Partnerships and
RCPI had reached preliminary agreement on an orderly transfer of the
Property to RCPI in exchange for release of the Partnerships from any
continuing obligations under the Loan. A preliminary plan of
reorganization was presented to the Court on November 11, 1995 and the
next hearing date has been set for December 12, 1995 for the filing of a
more complete plan. Negotiations continue between the Partnerships and RCPI
as to the terms of the plan of reorganization. The date of the transfer is
uncertain at this time.
The Court set September 13, 1995 as the last day for filing proofs of
claim for pre-petition claims. With certain exceptions, creditors have
been barred from filing pre-petition claims subsequent to that date. The
Partnerships have received claims which aggregate amounts substantially in
excess of those recorded at the Filing Date. The Partnerships are
reconciling these claims to their records and do not expect that the
resolution of these matters will result in liabilities materially in
excess of those recorded at the Filing Date.
On October 30, 1995, the Court approved an $80 million Debtor-in-Possession
Revolving Credit Agreement (the Facility) which may be used to fund tenant
improvements, leasing commissions, required capital expenditures and other
permitted working capital needs for the Partnerships. The Facility is
secured by a first mortgage on the Property, which is senior to the existing
mortgage held by RCPI. The Facility matures on the earlier of December 31,
1996 or upon the substantial consummation of a plan of reorganization.
These financial statements have been prepared on a going concern basis and
reflect the combined historical cost basis of the Partnerships in their
assets and liabilities. The transfer of the Property to RCPI is subject to
the approval of the Court. This transfer
F-8
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
of the Property and related release of the Loan and cancellation of
indebtedness to RCPI and RGI and its affiliates, if consummated, will result
in substantial non-cash gains to the Partnerships. Further, upon
consummation of these transactions, the Partnerships will either cease their
business activities or control of the Partnerships will vest with parties
other than RGI. These financial statements do not include any adjustments
which would be required to reflect the transfer of the Property to RCPI, the
release or cancellation of indebtedness, the winding-down of the affairs of
the Partnerships or any change in control which may occur with respect to
the Partnerships. In the event that the transfer of the Property is not
approved and the Property is foreclosed upon, other adjustments would be
required. All such adjustments could be material.
5. NBC TRANSACTION
National Broadcasting Company, Inc. (NBC) leases approximately 1.3 million
square feet of space in three Rockefeller Center buildings (the GE Building,
the Studio Building, and the GE West Building).
Under agreements signed in 1988, the NBC lease has been extended to the year
2022. Through 1997, NBC will continue to pay rent on the basis of its prior
lease. The agreements, however, provide that, prior to 1997, NBC will have
the right to directly pay a portion of the operating expenses and real
estate taxes on its leased space and reduce its lease payments accordingly.
From 1997 to 2022, NBC will pay rent at fixed rates varying according to the
types of space involved (such as office or studio) and location within the
three buildings. This rent, which will increase by 15% in 2007 and again in
2017, has been determined on a "net" basis, that is, without including
amounts normally payable with regard to real estate taxes and operating
expenses. Further, NBC has options for one 10-year renewal period and one
9-year and five-month renewal period, at net rents determined according to
then fair market rental value. At NBC's option, the first renewal period
can be split into two renewal periods, the first of three years and the
second of seven years.
The agreements also grant to NBC options to lease, beginning in 1994, up to
approximately 910,000 square feet of office space in the GE Building which
is currently leased to other tenants. To date, NBC has exercised its right
to lease 108,000 square feet at a fixed net rate, increasing by 15% in 2007
and again in 2017. The remaining 802,000 square feet will be offered to NBC
for lease at then fair market net rental rates.
The transaction was structured to accommodate arrangements between New York
City and NBC for certain financial assistance in connection with the
project. The three affected buildings were subjected to a condominium
regime, and the NBC occupied areas were conveyed to the City's Industrial
Development Agency (IDA) for nominal consideration. These areas were then
leased back to the Partnerships at nominal rents, with NBC becoming a
subtenant of the Partnerships. Upon the expiration of the period of City
benefits, ownership will revert to the Partnerships. IDA ownership is a
technical structuring required to effectuate the transaction and will have
no economic effect upon the Partnerships.
F-9
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
6. RELATED PARTY TRANSACTIONS
RGI and affiliates occupy approximately 2% of the total rentable space
within the Property. The terms of the leases with RGI provide for an annual
base rent of approximately $4,402,000.
The Property includes Radio City Music Hall and the land on which it is
situated. Radio City Music Hall is operated by an RGI affiliate which pays
a nominal rent for this facility and is responsible for paying all costs
(including real estate taxes) related to its operation.
The Property includes a six-story parking garage. The garage is leased to
Rockefeller Center Management Corporation (RCMC) for an annual base rent of
approximately $2,300,000.
Rental revenue in the accompanying combined statements of operations and
partners' capital deficiency included $8,223,000, $7,778,000, and $7,712,000
earned during 1994, 1993, and 1992, respectively, under the terms of the
above mentioned leases. In addition to the base rent, the rental revenue
includes $1,521,000, $1,544,000, and $1,572,000 in 1994, 1993, and 1992,
respectively, relating to their proportionate share of increases in certain
costs and expenses of the Property.
Under the terms of a management agreement, RCMC provides management and
administrative services for the Property. During 1994, 1993, and 1992, RCMC
charged the Partnerships $2,636,000, $2,579,000, and $2,491,000,
respectively, in management fees under the terms of this agreement.
This management agreement also allows RCMC to receive commissions with
respect to leases negotiated within the Property, including overrides when
another broker is the procuring broker. During 1994, 1993, and 1992, RCMC
earned $22,389,000, $2,888,000, and $1,563,000 in commissions for leases
negotiated within the Property. Cushman & Wakefield, Inc., an RGI
subsidiary, was paid $1,673,000, $571,000, and $138,000 in leasing
commissions by the Partnerships during 1994, 1993, and 1992, respectively.
Under the terms of a franchise agreement with RCMC (as agent for the
Partnerships), Rockefeller Group Telecommunications Services, Inc., a
subsidiary of RGI, is permitted to provide shared telecommunication services
to tenants within the Property. No fees are paid to the Partnerships
relating to the right to provide these services. The Partnerships have
committed to pay for certain of the capital additions associated with
providing these services up to an aggregate of $13,000,000. During 1994,
1993, and 1992, the cost of capital additions borne by the Partnerships
approximated $1,153,000, $658,000, and $451,000, respectively. Total
expenditures through December 31, 1994 approximated $9,588,000.
The Partnerships participate in a cash management system under which their
funds, together with the funds of other related companies, are managed by a
subsidiary of RGI. At December 31, 1994, 1993, and 1992, the balances due
to RGI affiliates include $269,475,000, $125,388,000, and $79,141,000,
respectively, of interest-free overdrafts in the cash management system.
Salaried employees of the Partnerships participate in the defined benefit
pension plan maintained by RGI. Accordingly, the Partnerships were charged
their proportionate share of RGI's pension cost which aggregated $574,000,
$489,000, and $423,000 in 1994, 1993, and 1992, respectively. The hourly
F-10
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
employees of the Partnerships are covered by multi-employer sponsored
defined contribution plans. The contributions to these plans in 1994, 1993,
and 1992 aggregated $1,332,000, $1,370,000, and $1,326,000, respectively.
The Partnerships provide certain health care and life insurance benefits for
current and retired salaried employees through plans maintained by RGI.
Accordingly, the Partnerships were charged their proportionate share of
RGI's health care and life insurance costs which aggregated $1,150,000,
$1,725,000, and $1,524,000 in 1994, 1993, and 1992, respectively.
7. LOANS PAYABLE TO RGI
The Loan with RCPI (see Note 3) provides that, if the cumulative cost of
capital improvements made by the Partnerships is in excess of specified
amounts contained in the agreement for any calendar year, the excess amount
is deemed a renewable one-year loan from RGI to the Partnerships for the
next calendar year. The cumulative amount of excess capital improvements
totaled $126,681,000, $122,934,000, and $107,477,000 at December 31, 1994,
1993, and 1992, respectively.
These excess capital improvement loans accrue interest at 80% of the prime
rate, compounded quarterly. Loans for the cumulative excess capital
improvements existing at the end of the preceding year do not begin to earn
interest until the beginning of the following year. Unpaid interest is
added to the principal balance and also earns interest at 80% of the prime
rate, compounded quarterly. The cumulative amount of unpaid interest
totaled $34,034,000, $26,720,000, and $20,467,000 at December 31, 1994,
1993, and 1992, respectively.
The loan principal and accumulated interest are due and payable following
the Equity Conversion Date, December 31, 2000. If RCPI exercises its
conversion option to acquire a 71.5% equity interest in the partnership then
owning the Property, the loans payable to RGI become the obligation of the
partnership having RCPI as a 71.5% partner and cease to be the sole
obligation of the prior partner group.
8. COMMITMENTS AND CONTINGENCIES
As of December 31, 1994, the Partnerships had approximately $54.4 million of
outstanding commitments to reimburse certain tenants for improvements to
leased premises. It is expected that these improvements will be completed
during 1995. Additional commitments are expected to arise as new leases
are signed.
As required by the Loan Agreement, the Partnerships are committed to make
certain capital improvements totaling $197.6 million prior to December 31,
2000. Qualifying capital expenditures through December 31, 1994
approximated $215.7 million, of which $168.4 million satisfy the $197.6
million requirement.
F-11
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
9. TENANT LEASING ARRANGEMENTS
Other than the NBC lease (see Note 5), the Partnerships lease to tenants
office, retail, and storage space in the Property through non-cancelable
operating leases expiring principally over the next 21 years. The leases
require fixed minimum monthly payments over their terms and provide for
adjustments to rent for the tenants' proportionate share of changes in
certain costs and expenses of the Property. Certain retail leases also
provide for additional rent which is based upon a percentage of sales of the
lessee.
The following is a schedule of minimum future rentals on non-cancelable
operating leases as of December 31, 1994:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1995 $ 164,557,000
1996 149,005,000
1997 148,079,000
1998 157,655,000
1999 153,138,000
Later years 1,781,050,000
--------------
Total minimum future rentals $2,553,484,000
--------------
--------------
</TABLE>
As a result of lease incentives, the actual cash flow may vary
significantly from the amounts presented above.
10. CASH FLOWS FROM CHANGES IN CERTAIN ASSETS AND LIABILITIES
The cash flows from changes in certain assets and liabilities of the
Company as of December 31, 1994, 1993, and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Decrease in accounts receivable $316,000 $856,000 $4,104,000
(Increase) decrease in other current
and non-current assets (509,000) 669,000 (207,000)
(Decrease) increase in accounts
payable and accrued expenses (3,338,000) 8,146,000 (5,948,000)
---------- ---------- ----------
($3,531,000) $9,671,000 ($2,051,000)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-12
