<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, 1996
------------------
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*
-------
RCPI TRUST*
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-7087445
- ----------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Tishman Speyer Properties, L.P.
45 Rockefeller Plaza, New York, N.Y. 10111
------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 698-1440
------------------------------------------------------
(Registrant's telephone number, including area code)
c/o Tishman Speyer Properties, L.P.
1230 Avenue of the Americas, New York, N.Y. 10020
-------------------------------------------------
(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 19, 1996
- --------------------------------- --------------------------------
Trust Ownership Interests 2
- ---------------------------------------------
* As successor in interest to Rockefeller Center Properties, Inc. (Commission
File No. 1-8971)
<PAGE>
RCPI TRUST
INDEX
PAGE
PART I--FINANCIAL INFORMATION
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 only of normal recurring items
except as described in Note 1) necessary for a fair presentation have been
included, except as otherwise disclosed in Note 2.
RCPI Trust, Balance Sheet as of September 30, 1996 (unaudited) 3
RCPI Trust, Statement of Operations for the period from
July 10, 1996 to September 30, 1996 (unaudited) 4
RCPI Trust, Statement of Cash Flows for the period from
July 10, 1996 to September 30, 1996 (unaudited) 5
Rockefeller Center Properties, Inc., Balance Sheet as of
December 31, 1995 6
Rockefeller Center Properties, Inc., Statements of Operations
for the period ended July 10, 1996 and the nine months ended
September 30, 1995 (unaudited) 7
Rockefeller Center Properties, Inc., Statements of Cash
Flows for the period ended July 10, 1996 and the nine months
ended September 30, 1995 (unaudited) 8
Notes to Financial Statements (unaudited) 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 17
PART II--OTHER INFORMATION 24
SIGNATURES 27
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RCPI TRUST
BALANCE SHEET
($ in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1996
------------------
<S> <C>
ASSETS
Land $145,494
Building and improvements, net of accumulated depreciation of $3,107 580,268
Deferred tenant alterations, net of accumulated depreciation of $17 4,123
Furniture & fixtures, net of accumulated depreciation of $60 610
Cash and cash equivalents 38,797
Cash - tenant security deposits 6,544
Deferred leasing costs, net of accumulated amortization of $38 2,529
Organization costs, net of accumulated amortization of $106 2,487
Accounts receivable 13,488
Deferred rent 792
Prepaid expenses 9,752
--------
Total Assets $804,884
--------
--------
LIABILITIES AND OWNER'S EQUITY
Liabilities:
Zero coupon convertible debentures due 2000, net of unamortized
discount of $234,768 (Note 4) $351,417
Floating rate notes due 2000 (Note 4) 10,000
14% debentures due 2007, net of unamortized discount of $4,014 (Note 4) 70,986
Accrued interest and interest rate swap payable (Note 4) 9,735
Accounts payable and accrued expenses 22,125
Leasing commissions payable 1,415
Tenant security deposits payable 6,544
--------
Total Liabilities 472,222
Owner's Equity: 332,662
--------
Total Liabilities and Owner's Equity $804,884
--------
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 3 -
<PAGE>
RCPI TRUST
STATEMENT OF OPERATIONS
($ in thousands)
(UNAUDITED)
Period from July 10 to
September 30, 1996
------------------
REVENUES:
Rent and other tenant charges $ 36,917
Interest income 1,573
--------
Total revenues 38,490
EXPENSES:
Payroll 3,681
Severance and placement costs 627
Cleaning 2,483
Utilities 2,735
Office Expense 253
Repairs and maintenance 1,730
Insurance 691
Professional fees 6,493
General and administrative 321
Tenant buyout 1,779
Real estate taxes 7,009
Management and accounting fees 802
Interest 16,444
Prepayment penalty 1,594
Depreciation and amortization 3,294
--------
Total expenses 49,936
--------
Net (loss) $(11,446)
--------
--------
SEE NOTES TO FINANCIAL STATEMENTS.
- 4 -
<PAGE>
RCPI TRUST
STATEMENT OF CASH FLOWS
($ in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from July 10 to
September 30, 1996
------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $( 11,446)
Adjustment to reconcile net loss to net cash
(used in) operating activities:
Amortization of original issue discount 9,246
Other depreciation and amortization 3,294
Changes in operating assets and liabilities:
Increase in deferred rent (792)
Decrease in prepaid expenses 6,990
Increase in accounts receivable (2,254)
Decrease in accounts payable, accrued expenses and other liabilities (14,818)
-------
Net cash (used in) operating activities (9,780)
--------
INVESTING ACTIVITIES:
Costs incurred to acquire property (12,528)
Additions to building improvements (2,401)
Additions to tenant improvements (4,140)
Additions to furniture, fixtures and equipment (254)
Additions to leasing costs (2,567)
Proceeds from payment of mortgage loan 440,000
Cash received upon transfer of property 15,499
Additions to organization costs (2,593)
--------
Net cash provided by investing activities 431,016
--------
FINANCING ACTIVITIES:
Extinguishment of debt (382,495)
--------
Net cash (used in) financing activities (382,495)
--------
Increase in cash and cash equivalents 38,741
Cash and cash equivalents, beginning of period 56
--------
Cash and cash equivalents, end of period $ 38,797
--------
--------
</TABLE>
NON-CASH TRANSACTION:
Pursuant to the Second Amended Joint Plan of Reorganization confirmed on May 29,
1996 in the Bankruptcy cases of Rockefeller Center Properties and RCP Associates
, on July 17, 1996, the Company received land, buildings and other assets and
liabilities of the Borrower valued at $746,839,000. The related mortgage note
receivable was canceled.
SEE NOTES TO FINANCIAL STATEMENTS.
- 5 -
<PAGE>
Predecessor Company
ROCKEFELLER CENTER PROPERTIES, INC.
BALANCE SHEET
($ in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
ASSETS
Mortgage loan and interest receivable, net of valuation reserve
of $74,000 and unamortized discount of $34,906 (Note 3) $1,176,220
Deferred debt issuance costs, net 12,421
Cash and cash equivalents 1,298
Other assets 837
----------
Total Assets $1,190,776
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Current coupon convertible debentures due 2000 (Note 4) $ 213,170
Zero coupon convertible debentures due 2000, net of
unamortized discount of $225,902 (Note 4) 360,283
Floating rate notes due 2000 (Note 4) 116,296
14% debentures due 2007, net of unamortized
discount of $4,282 (Note 4) 70,718
GSMC facility (Note 4) 10,200
Accrued interest payable 61,914
Stock appreciation rights (Note 4) 13,406
Accounts payable and accrued expenses 3,027
Accrued transaction costs and expenses 25,163
----------
Total Liabilities 874,177
----------
Contingencies
Stockholders' Equity:
Common stock, $.01 par value:
150,000,000 shares authorized,
38,260,704 shares issued and outstanding 383
Additional paid-in capital 707,545
Distributions to stockholders in excess of net income (391,329)
----------
Total Stockholders' Equity 316,599
----------
Total Liabilities and Stockholders' Equity $1,190,776
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 6 -
<PAGE>
Predecessor Company
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF OPERATIONS
($ in thousands, except for share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from Period from Nine months
July 1 to Quarter ended January 1 ended
to July 9, September 30, to July 9, September 30,
1996 1995 1996 1995
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
Loan interest income (Note 3) - - - $20,339
Short term investment and portfolio income 2 556 38 1,003
-------- --------- -------- ---------
2 556 38 21,342
-------- --------- -------- ---------
Expenses:
Interest Expense:
Current coupon convertible debentures 619 5,871 11,642 17,107
Zero coupon convertible debentures 1,015 8,558 18,985 24,862
14% Debentures 301 2,751 5,790 8,252
Floating rate notes 371 4,457 8,013 13,984
GSMC facility 175 - 2,554 -
Commercial paper and other interest - 70 - 70
-------- --------- -------- ---------
2,481 21,707 46,984 64,275
General and administrative 125 2,902 4,774 6,112
Amortization of deferred debt issuance costs 10,656 6,384 12,421 8,116
Stock appreciation rights liability 111 11,478 2,041 10,050
Effects of execution and delivery of merger
agreement (Note 1) (1,610) 99,163 (8,232) 99,163
Expenses related to the March 25, 1996
special meeting of stockholders 23 - 422 -
-------- --------- -------- ---------
11,786 141,634 58,410 187,716
-------- --------- -------- ---------
Net (loss) $(11,784) $(141,078) $(58,372) $(166,374)
-------- --------- -------- ---------
-------- --------- -------- ---------
Net (loss) per share ($0.31) ($3.69) ($1.53) ($4.35)
-------- --------- -------- ---------
-------- --------- -------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 7 -
<PAGE>
Predecessor Company
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
($ in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Period from Nine Months
January 1 to Ended
July 9, September 30,
1996 1995
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Loan interest received $ - $20,339
Short term investment, portfolio and other interest income received 38 998
Interest paid on floating rate notes (7,626) (13,410)
Interest paid on 14% debentures (5,308) (4,521)
Interest paid on current coupon convertible debentures (27,712) -
Payments for accounts payable, accrued expenses and other assets (13,463) (5,793)
-------- -------
Net cash used in operating activities (54,071) (2,387)
-------- -------
Cash flows from investing activities:
Draw downs on letter of credit support - 50,000
-------- -------
Net cash provided by investing activities - 50,000
-------- -------
Cash flows from financing activities:
Net proceeds from GSMC facility 52,829 -
Dividends paid - (5,739)
Floating rate note principal repayment - (33,704)
Net proceeds from working capital loan - 8,025
Letter of intent fee and other financing fees - (2,675)
-------- -------
Net cash provided by (used in) financing activities 52,829 (34,093)
-------- -------
Net (decrease) increase in cash (1,242) 13,520
Cash and cash equivalents at the beginning of the period 1,298 2,897
-------- -------
Cash and cash equivalents at the end of the period $56 $16,417
-------- -------
-------- -------
Reconciliation of net loss to net cash (used in) operating activities:
Net (loss) ($58,372) ($166,374)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Effects of execution and delivery of merger agreement - 99,163
Amortization of discount:
Zero coupon convertible debentures 18,985 24,862
14% debentures 188 268
Increase in interest receivable and amortization of loan
receivable discount, net - (5)
Decrease in deferred debt issuance costs and
other assets, net 12,280 7,823
(Decrease) increase in accrued interest payable and
amortized unpaid discount on commercial paper (12,836) 21,233
Increase in stock appreciation rights liability 2,041 10,050
(Decrease) increase in accounts payable and accrued expenses (16,357) 593
-------- -------
Net cash (used in) operating activities $(54,071) $(2,387)
-------- -------
-------- -------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 8 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PURPOSE
RCPI Trust, a Delaware business trust (the "Company"), is the successor in
interest to Rockefeller Center Properties, Inc. (the "Predecessor" or
"RCPI"), which was formed to permit public investment in two convertible,
participating mortgages on the 12 original landmarked buildings in
Rockefeller Center (the "Property"). From the proceeds of its offering of
Common Stock (the "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 Predecessor made a
$1.3 billion convertible, participating mortgage loan to two partnerships,
Rockefeller Center Properties and RCP Associates (collectively, the
"Borrower"). The partners of the Borrower were Rockefeller Group, Inc.
("RGI") and Radio City Music Hall Productions, Inc. ("RCMHP"), a wholly
owned subsidiary of RGI. Mitsubishi Estate Company, Ltd. controlled an 80%
equity interest in RGI, and Rockefeller Family interests held the remaining
20%. The Borrower owned the Property through July 17, 1996. In December
1994 the Predecessor issued floating rate notes ("Floating Rate Notes") due
December 31, 2000 and 14% debentures ("14% Debentures") due December 31,
2007 and warrants ("Warrants") and stock appreciation rights ("SARs")
expiring December 31, 2007. On July 10, 1996, pursuant to the Merger
Agreement (defined below) RCPI Merger Inc. ("RCPI Merger") was merged with
and into the Predecessor and the Company acquired all of the assets and
assumed the liabilities of the Predecessor. On July 17, 1996, the
Company acquired the Property from the Borrower pursuant to the Second
Amended Joint Plan of Reorganization of the Borrower and the NBC Sale was
consummated (see below).
STATUS OF THE BORROWER
On May 11, 1995, the two partnerships comprising the Borrower filed for
protection under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York. The
Predecessor's only significant source of income was interest received on
the mortgage loan from the Borrower. As a result of these filings, neither
the Predecessor nor the Company received any interest payments from the
Borrower since the date of bankruptcy. The Borrower and RGI filed a
Chapter 11 reorganization plan (the "Chapter 11 Plan") for the Borrower
that contemplated that ownership of the Property would be turned over to
the Predecessor or its designee upon consummation of the Chapter 11 Plan.
Pursuant to the order of the Bankruptcy Court the Chapter 11 Plan was
confirmed on May 29, 1996 and became effective on July 17, 1996 upon the
transfer of the Property by the Borrower to the Company.
MERGER AGREEMENT
Pursuant to an Agreement and Plan of Merger, dated as of November 7, 1995,
entered into between the Predecessor and a group of investors (the
"Investor Group") the members of which are Exor Group S. A., Prometheus
Investors, L.L.C., Rockprop, L.L.C., Troutlet Investments Corporation,
Gribble Investments (Tortola) BVI, Inc., Weevil Investments (Tortola) BVI,
Inc. and Whitehall Street Real Estate Limited Partnership V ("Whitehall"),
as amended by Amendment No. 1 thereto dated as of February 12, 1996,
Amendment No, 2 thereto dated as of April 25, 1996, Amendment No. 3 thereto
dated as of May 29, 1996 and Amendment No. 4 thereto dated as of June 30,
1996, (as so amended, the "Merger Agreement"), RCPI Merger Inc. was merged
(the "Merger") with and into the Predecessor and the Predecessor became a
subsidiary of RCPI Holdings Inc., a Delaware corporation controlled by the
Investor Group ("RCPI Holdings").
The Merger Agreement was approved by the stockholders of the Predecessor on
March 25, 1996 and became effective on July 10, 1996 (the "Effective
Date"). As a result of the consummation of the Merger on the Effective
Date, each share of the Predecessor's common stock outstanding as of the
Effective Date (other than (i) shares of Common Stock held by the
Predecessor or any of its subsidiaries, (ii) shares of Common Stock held by
RCPI Holdings or any of its subsidiaries (including RCPI Merger) and (iii)
any shares of common stock held
- 9 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
by a stockholder who was entitled to demand, and who properly demanded and
has not withdrawn such demand, appraisal for such shares in accordance with
Section 262 of the Delaware General Corporation Law) was converted into the
right to receive $8.00 net in cash, without interest thereon. As a result
of the consummation of the Merger, all of the Common Stock of the
Predecessor is now held of record by RCPI Holdings and all of the Warrants
and SARs have been canceled. Also on July 10, 1996 the Predecessor
transferred all of its assets and liabilities to the Company and the
Company became the successor to the Predecessor under the Indenture
governing the Convertible Debentures.
In addition, under the Merger Agreement, Goldman Sachs Mortgage Company
("GSMC"), which is a party to the Merger Agreement for this purpose, agreed
to make a line of credit available to the Predecessor (the "GSMC Facility")
during the period between November 7, 1995 and the earlier of (1) the
consummation of the merger contemplated by the Merger Agreement or (2) any
termination of the Merger Agreement. Such credit was secured on the same
basis as the Floating Rate Notes and the 14% Debentures, but accrued
interest at the rate of 10% per annum (compounded quarterly) and was
prepayable at any time without penalty. If borrowings under the GSMC
Facility had not been repaid by the earlier of July 19, 1996, or any
termination of the Merger Agreement in specified circumstances, such
borrowings would have become subject to the same terms and conditions as
those applicable to the Floating Rate Notes. The Predecessor had borrowed
a total of $63.7 million under the GSMC Facility. The principal balance
and accrued interest was repaid in full on July 17, 1996 by the Company.
During the quarter ended September 30, 1995, the Predecessor recorded
certain transaction costs and expenses aggregating $25.3 million, which
reflected the breakup fee related to the termination of a Combination
Agreement (See Note 6), professional fees, and certain liquidation expenses
and other liabilities specifically provided for in the Merger Agreement.
For the quarter ended June 30, 1996, this liability was adjusted by $6.6
million to more accurately reflect the amounts actually paid upon
consummation of the Merger and amounts remaining unpaid. For the period
from July 1 to July 9, 1996, the liability was further adjusted by $1.6
million to reflect the actual amount paid in final settlement of the
termination of the Combination Agreement (See Note 6). As a result, a
credit of $8.2 million is reflected in total expenses of the Predecessor
for the period from January 1 to July 9, 1996.
NBC SALE
On July 17, 1996, the effective date of the Chapter 11 Plan, the Company,
as the Predecessor's designee, acquired the Property from the Borrower
pursuant to the Second Amended Joint Plan of Reorganization confirmed on
May 29, 1996 in the Bankruptcy cases of the Borrower. Concurrent
therewith, the Borrower delivered to General Electric Company, a New York
corporation ("GE"), National Broadcasting Company, Inc., a Delaware
corporation ("NBC"), and NBC Trust No. 1996A, a Delaware business trust,
for $440 million, interests in certain buildings in the property
previously leased by GE or its affiliates, including NBC, pursuant to the
agreement, dated as of April 23, 1996, among Whitehall, Rockprop L.L.C.,
Prometheus Investors, L.L.C., Troutlet Investments Corporation, Gribble
Investments (Tortola) BVI, Inc., Weevil Investments (Tortola) BVI, Inc.,
Exor Group S.A., GE and NBC (the "NBC Sale"). Pursuant to the Chapter
11 Plan, the proceeds from the NBC Sale were paid to the Company reducing
the outstanding mortgage loan.
2. BASIS OF PREPARATION
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles and reflect the results of
operations and cash flows of the Predecessor for the year ended
December 31, 1995 and for the period from January 1, 1996 through the
Effective Date. The results of operations and cash flows of the Company,
successor in interest to the Predecessor, are presented for the period from
the Effective Date through September 30, 1996. The Predecessor's balance
sheet at December 31, 1995 and the Company's balance sheet at
September 30, 1996 are presented. Pro forma results of operations, as if
the acquisition of the Property and the NBC Sale had occurred as of
January 1, 1996, are presented in Note 7 to the financial statements.
- 10 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
Pursuant to Accounting Principles Bulletin No. 16, Business Combinations
("APB 16"), the Merger will be accounted for by the purchase method of
accounting, pursuant to which the purchase price will be allocated among
the assets and liabilities of the Company based on the fair market value of
the assets and liabilities on the Effective Date. As of September 30, 1996
these allocations had not been finalized. Statement of Financial
Accounting Standards No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises, allows the acquiring company up to one year to
adjust the fair market value of the assets and liabilities acquired.
3. MORTGAGE LOAN AND INTEREST INCOME
The mortgage loan, which was in the face amount of $1.3 billion, was made
pursuant to a Loan Agreement between the Predecessor and the Borrower on
September 19, 1985 (as amended, the "Loan Agreement"), and was evidenced by
two notes (collectively, as amended, the "Note"). Following the Borrower's
failure to make the interest payment due on May 31, 1995, the Predecessor
drew down the full amount available under the $50 million of letters of
credit which supported, among other things, payment of Base Interest, (as
defined) on the mortgage loan. Due to the significant uncertainties caused
by the Borrower's Chapter 11 filings and solely for accounting purposes,
this $50 million was applied to reduce the carrying value of the
mortgage loan to $1.25 billion. Subsequent to December 31, 1994 and prior
to the execution and delivery of the Merger Agreement, the Predecessor had
based the value assigned to the Property and hence to the mortgage loan on
an independent appraisal as of December 31, 1994, which was supported by a
concurring review. However, the terms of the Merger Agreement indicated
that the market value of the Property was now less than its carrying value.
Thus, during the quarter ended September 30, 1995, the Predecessor further
reduced the carrying value of the mortgage loan by $74 million, which is
included on the statement of operations under the caption "effects of the
execution and delivery of the merger agreement", to reflect the economics
of the transactions contemplated by the Merger Agreement.
Due to the significant uncertainties created by the Borrower's Chapter 11
filings, the Predecessor limited recognition of income on the mortgage loan
for the year ended December 31, 1995 and the period ended July 9, 1996 to
the cash , if any, actually received from the Borrower.
4. 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 were 9.23% and 10.23%, through
the Effective Date, for the Current Coupon and Zero Coupon Convertible
Debentures, respectively. Upon consummation of the Merger, the carrying
value of the Zero Coupon Convertible Debentures was adjusted to reflect
the fair market value of such Debentures at such date. Due to this
adjustment such Debentures have been accreting at 12.10% since the
Effective Date rather then at the 10.23% as they had prior to that date.
The Current Coupon Convertible Debentures were redeemed on August 28,
1996 and the principal amount of $213,170,000 plus accrued interest was
paid on that date.
FLOATING RATE NOTES
The interest rate on the Floating Rate Notes is based on the 90-day London
Interbank Offered Rate ("LIBOR") plus 4%. At September 30, 1996 the
interest rate in effect is 9.28%. The average interest rate for the nine
months ended September 30, 1996 was 9.48%. In addition to this interest
based upon LIBOR, interest expense on the Floating Rate Notes includes the
financial effect associated with interest rate swap agreements used for
hedging purposes (see below). A total of $106,296,000 of the outstanding
principal plus accrued interest was prepaid on July 17, 1996. As of
September 30, 1996, an aggregate principal amount of $10 million remains
outstanding.
14% DEBENTURES
Interest expense on the 14% Debentures also includes the straight line
amortization of the original issue discount related to the Warrants and
SARs through the expiration date of December 31, 2007. Under the terms of
the
- 11 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
14% Debentures, to the extent that Net Cash Flow (as defined) is
insufficient to pay interest on an interest payment date (each June and
December 2), the Company will not be obligated to pay interest on the 14%
Debentures on such date and such interest will accrue.
In connection with the issuance of the 14% Debentures in December 1994, the
Predecessor separately issued to Whitehall 5,349,541 SARs which were
exchangeable for 14% Debentures or under certain circumstances for Warrants
on a one-for-one basis. The SARs were exchangeable for a principal amount
of 14% Debentures equal to the product of the average daily market prices
of the Common Stock for the 30 consecutive trading days immediately
preceding the date of exchange ($7.89 at July 10, 1996) minus the exercise
price per share of the Warrants into which the SARs are exchangeable ($5
per Warrant) times the number of Warrants into which the SARs are
exchangeable (5,349,541). All outstanding Warrants and SARs were canceled
in connection with the Merger. See Note 1.
Due to the increase in the market price of the Predecessor's Common Stock
during the period from January 1 to July 9, 1996, the Predecessor was
required to increase its SARs liability and record a current noncash charge
to earnings of $2,041,000 for such period The Predecessor was required to
make adjustments to earnings for the difference between the aggregate
principal amount of 14% Debentures issuable upon exchange of the SARs (SARs
liability) and the value at which the SARs liability was carried.
GSMC FACILITY
The Merger Agreement provided that GSMC would make a line of credit
available to the Predecessor during the period between November 7, 1995 and
the earlier of (1) the consummation of the merger contemplated by the
Merger Agreement or (2) any termination of the Merger Agreement. Such
credit was secured on the same basis as the Floating Rate Notes and the 14%
Debentures, but would have accrued interest at the rate of 10% per annum
(compounded quarterly) and was prepayable at any time without penalty. If
borrowings under the GSMC Facility had not been repaid by the earlier of
July 19, 1996 or any termination of the Merger Agreement in specified
circumstances, such borrowings would have become subject to the same terms
and conditions as those applicable to the Floating Rate Notes. The
Predecessor had borrowed a total of $63.7 million under the GSMC Facility
which amount was repaid in full with accrued interest on July 17, 1996, by
the Company (see Note 1).
INTEREST RATE SWAP AGREEMENTS
In connection with its short term floating rate debt, the Predecessor
entered into interest rate swap agreements with financial institutions that
were intended to fix a portion of the Predecessor's interest rate risk on
floating rate debt. In connection with the issuance of the Floating Rate
Notes and 14% Debentures in December 1994, the Predecessor retired certain
of its interest rate swap agreements. The Company assumed the remaining
agreements on the Effective Date. The Company pays a fixed rate of
interest semi-annually and receives a variable rate of interest semi-
annually based on 180-day LIBOR. The amount to be paid or received from
interest rate swap agreements is accrued as floating interest rates are
reset semi-annually. The $105,000,000 notional amount of interest rate swap
agreements outstanding at September 30, 1996 represents three contracts,
each expiring during 1998.
- 12 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
The net notional principal, weighted average interest rate of net interest rate
swap agreements outstanding and annualized net payment relating to interest rate
swap contracts, as of September 30, 1996 and 1995 are as follows:
1996 1995
------------ ------------
Net notional principal $105,000,000 $105,000,000
------------ ------------
------------ ------------
Weighted average interest rate
of net swaps outstanding 4.026% 3.560%
------------ ------------
------------ ------------
Annualized net payment $ 4,227,300 $ 3,738,000
------------ ------------
------------ ------------
The settlement value of all swap agreements outstanding at September 30,
1996, based on information supplied by the counter parties to the swap
contracts, was a liability for the Company of approximately $6.2 million as
compared to $9.7 million at September 30, 1995.
5. NET LOSS PER SHARE AND DISTRIBUTIONS
Net loss per share for the Predecessor is based upon 38,260,704 average
shares of Common Stock outstanding during the period from July 1, 1996 to
July 9, 1996, the quarter ended September 30, 1995, the period from January
1, 1996 to July 9, 1996 and the nine months ended September 30, 1995,
respectively. For each of these periods, fully diluted net loss per share
is not presented since the effect of the assumed conversion of the
Convertible Debentures, Warrants and SARs would be anti-dilutive.
The Indenture governing the Convertible Debentures limits cash
distributions to equity holders to the amount of cumulative Distributable
Cash. The Indenture defines Distributable Cash as cash receipts from
operations less operating expenses and interest. The amount of
Distributable Cash at September 30, 1996 is approximately $60 million.
This amount includes operating cash flows from the Predecessor, net of
dividends paid, through July 10, 1996 and operating cash flow from the
Company since July 10, 1996. As interest income was not received by the
Predecessor during the period when the Borrower was under Chapter 11
protection, net cash flows from operations of the Property, which accrued
to the benefit of the Company during this period, are also included.
6. LEGAL MATTERS
On January 23, 1995, Bear, Stearns & Co., Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation commenced an action against the Company in
the Supreme Court of New York, County of New York. The plaintiffs allege
that the Company breached a contract relating to the plaintiffs' provision
of investment banking services to the Predecessor in connection with a
proposed 1994 transaction. The plaintiffs seek $5,062,500, plus costs,
attorneys' fees and interest. The Supreme Court of New York denied the
Predecessor's motion to dismiss the complaint on September 21, 1995. On
October 10, 1995, the Predecessor filed an answer to the complaint which
denied the plaintiffs' allegations and asserted numerous affirmative
defenses. The Predecessor has vigorously contested the plaintiffs' claims.
On June 11, 1996, RCPI moved for partial summary judgment on plaintiffs'
claim that they are entitled to a "success fee" of over $4 million even
though the transaction they proposed for RCPI was never consummated, and
on plaintiffs' claim for indemnification of legal fees and expenses in
connection with this lawsuit. On the same day, the plaintiffs moved for
partial summary judgment on their claim for $950,000 in advisory fees and
reimbursement of expenses incurred in connection with the underlying
proposed transaction. These motions are currently pending.
On May 11, 1995 the two partnerships comprising the Borrower filed for
protection under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York. The Chapter
11 Plan was confirmed on May 29, 1996 and became effective on July 17, 1996
(See Note 1).
- 13 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
On May 24, 1995, Jerry Krim commenced an action encaptioned KRIM V.
ROCKEFELLER CENTER PROPERTIES, INC. AND PETER D. LINNEMAN. On June 7,
1995, Kathy Knight and Moishe Malamud commenced an action encaptioned
KNIGHT, ET AL. V. ROCKEFELLER CENTER PROPERTIES, INC. AND PETER D.
LINNEMAN. Both actions were filed in the United States District Court for
the Southern District of New York and purport to be brought on behalf of a
class of plaintiffs comprised of all persons who purchased the
Predecessor's Common Stock between March 20, 1995 and May 10, 1995. The
complaints allege that the Predecessor and Dr. Linneman violated the
federal securities laws by their purported failure to disclose, prior to
May 11, 1995, that the Borrower would file for bankruptcy protection. The
cases have been consolidated. On July 28, 1995, the Predecessor and Dr.
Linneman filed answers to the complaints denying plaintiffs' substantive
allegations and asserting numerous affirmative defenses. On September 22,
1995, plaintiffs served an Amended Class Action Complaint adding the
Predecessor's remaining directors and its president as defendants. In
addition to the foregoing claims, the Amended Complaint also asserts a
cause of action for breach by the Predecessor's directors and its
president of their fiduciary duties by approving the Agreement and Plan of
Combination dated as of September 11, 1995, between the Company and Equity
Office Holdings, L.L.C. ("EOH") (the "Combination Agreement"). The
plaintiffs are seeking damages in such amount as may be proved at trial.
Plaintiffs are also seeking injunctive relief, plus costs, attorneys' fees
and interest. The Company intends to vigorously contest these actions.
On July 6, 1995, Charal Investment Company, Inc. commenced a derivative
action against certain of the Predecessor's present and former directors
in the Court of Chancery of the State of Delaware in and for New Castle
County ("Delaware Court of Chancery"). The Predecessor was named as a
nominal defendant. The plaintiff alleged that the directors breached
their fiduciary duties by: (1) using commercial paper proceeds to
repurchase Convertible Debentures in 1987-1992; (2) entering into interest
rate swaps; and (3) making capital distributions to stockholders during
the years 1990 through 1994. On February 21, 1995, prior to the
commencement of the action, the Predecessor's Board of Directors appointed
a special committee of the Board to review the plaintiff's February 3,
1995 pre-suit demand that the Predecessor's Board of Directors institute
litigation on the Predecessor's behalf with respect to such claims and
recommend a course of action to the full Board. Plaintiff nevertheless
commenced the action, asserting that circumstances did not permit further
delay. On November 7, 1995, the Delaware Court of Chancery dismissed this
action without prejudice due to plaintiff's failure to comply with the
requirements of the Delaware Court of Chancery Rule 23.1.
On November 14, 1995, the plaintiff moved to amend and supplement its
complaint and/or to amend or alter the Delaware Court's judgment so as to
permit the filing of additional derivative allegations, as well as class
allegations that the Predecessor's Board of Directors had approved the
proposed Merger without considering the value to the Predecessor of the
matters set forth in the plaintiff's pre-suit demand. The Delaware Court
of Chancery denied the plaintiff's motion on February 12, 1996.
On November 28, 1995, the special committee of the Board reviewed the
report of its counsel and, after deliberation, determined to recommend to
the Predecessor's Board of Directors that the plaintiff's pre-suit demand
be rejected because it would not be in the best interest of the
Predecessor to pursue the matters set forth in such demand. On December
5, 1995, after considering the recommendation of the special committee
and the report of the special committee's counsel, the Predecessor's
Board of Directors voted to reject the plaintiff's pre-suit demand.
On February 29, 1996, Charal Investment Company, Inc. filed a new action
in the Delaware Court of Chancery purporting to assert both derivative and
class counts. The derivative count alleges claims substantially identical
to those set forth in Charal's July 6, 1995 complaint, which claims were
the subject of the Board's rejection of plaintiff's pre-suit demand. The
class count alleges that the directors failed to consider the value of the
derivative claims in connection with the Board's evaluation of the fairness
of the proposed Merger. The Predecessor is named only as a nominal
defendant in this action. On June 5, 1996, Charal filed an amended and
supplemental complaint which repeated the allegations contained in the
February 29, 1996 complaint and added a new class claim against the
individual defendants alleging that they had breached their fiduciary
duties by not
- 14 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
including certain information in the proxy statement disseminated in
connection with the Merger. To the extent that any relief is sought
against the Company, the Company intends to vigorously contest the action.
On October 18, 1996, the Defendants, including the Company, moved to
dismiss the amended and supplemental complaint. The motion is currently
pending.
On November 15, 1996, Charal Investment Co., Inc. and C.W. Sommer & Co.
filed a purported class action complaint in the United States District
Court for the District of Delaware against certain former directors and
officers of the Predecessor and against certain of the Company's indirect
shareholders. The action is entitled CHARAL INVESTMENT CO. v.
ROCKEFELLER, ET AL. Civil Action No. 96-543 ("CHARAL II"). Plaintiffs
allege that the Defendants violated Section 10(b) of the Securities and
Exchange Act of 1934 (the "Act") and Rule 10b-5 promulgated thereunder,
and Section 14 of the Act and Rule 14a-9 promulgated thereunder by
allegedly failing to provide adequate disclosure of the alleged
possibility of a sale or leasehold financing of a portion of Rockefeller
Center to the National Broadcasting Company and its parent corporation,
General Electric Co., prior to the shareholder vote on the Merger. The
complaint seeks unspecified damages, rescission of the Merger, and/or
disgorgement. Defendents have advised the Company that they intend to
deny the material allegations of the complaint and to contest the action
vigorously. The Company may have indemnity obligations with respect to
one or more of the Defendants.
On July 31, 1995, L.L. Capital Partners, L.P. commenced an action against
the Predecessor in the United States District Court in the Southern
District of New York. The plaintiff alleges that, in a RCPI prospectus
dated November 3, 1993, the Predecessor failed to disclose its purported
belief that the Rockefeller Interests and Mitsubishi Estate would cease to
fund the Borrower's cash flow shortfalls. The plaintiff seeks recovery
under Section 12(2) of the Securities Act of 1933, Section 10(b) of, and
Rule 10b-5 under the Exchange Act and the common law. On April 16, 1996,
the Court granted the Predecessor's motion to dismiss the complaint for
failure to state a claim. On June 3, 1996, Plaintiff filed an Amended
Complaint. On September 24, 1996, the Court granted the Predecessor's
motion to dismiss plaintiff's Amended Complaint for failure to state a
claim. On October 24, 1996, plaintiff filed a Notice of Appeal.
On September 13 and 14, 1995, five class action complaints, captioned
FAEGHEH MOEZINIA V. PETER D. LINNEMAN, BENJAMIN D. HOLLOWAY, PETER G.
PETERSON, WILLIAM F. MURDOCH, JR. AND ROCKEFELLER CENTER PROPERTIES, INC.;
MARTIN ZACHARIAS V. B.D. HOLLOWAY, P.G. PETERSON, W.F. MURDOCH, P.D.
LINNEMAN AND ROCKEFELLER CENTER PROPERTIES, INC.; JAMES COSENTINO V. PETER
D. LINNEMAN, BENJAMIN D. HOLLOWAY, PETER G. PETERSON, WILLIAM F. MURDOCH,
JR. AND ROCKEFELLER CENTER PROPERTIES, INC.; MARY MILLSTEIN V. PETER D.
LINNEMAN, PETER G. PETERSON, BENJAMIN D. HOLLOWAY, WILLIAM F. MURDOCH, JR.
AND ROCKEFELLER CENTER PROPERTIES, INC.; and ROBERT MARKEWICH V. PETER D.
LINNEMAN AND DANIEL M. NEIDICH, ET AL. were filed in the Delaware Court of
Chancery. On October 11, 1995, an additional complaint captioned HUNTER
HOGAN V. ROCKEFELLER CENTER PROPERTIES, INC., ET AL. was filed in the
Delaware Court of Chancery. Each of the complaints purports to be brought
on behalf of a class of plaintiffs comprised of stockholders of the
Predecessor who have been or will be adversely affected by the Combination
Agreement. All of the complaints allege that the Predecessor's Directors
breached their fiduciary duties by approving the Combination Agreement.
The complaints seek damages in such amount as may be proved at trial.
Plaintiffs also seek injunctive relief, plus costs and attorneys fees.
On November 8, 1995, the Delaware Court of Chancery entered an order
consolidating these actions. The Company intends to contest these actions
vigorously.
On July 31, 1996, a Petition for Appraisal, captioned SOLOMON V.
ROCKEFELLER CENTER PROPERTIES, INC., was filed in the Delaware Court of
Chancery. The petitioners allege that the consideration paid to the
Predecessor's stockholders in conjunction with the Merger was inadequate
and they request that the Court determine the fair value of their stock at
the time of the Merger. The Company filed its Response to the Petition
for Appraisal on October 7, 1996, in which it asserts that the fair value
of the Predecessor's common stock at the time of the Merger was not more
than $8.00 per share and asks the Court to so determine.
On November 6, 1996, the parties filed stipulations of dismissal with
prejudice in ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP III ("ZML") V. ROCKEFELLER CENTER PROPERTIES, INC., 96 Civ.
1445, in the United States District Court for the Southern District of New
York, and ROCKEFELLER CENTER PROPERTIES, INC. V. ZELL/MERRILL LYNCH REAL
ESTATE OPPORTUNITY PARTNERS LIMITED PARTNERSHIP III AND EQUITY OFFICE
HOLDINGS, L.L.C. ("EOH"), Index No. 106176/96, in the Supreme Court for the
State of New York, New York County, dismissing all claims, counterclaims
and third-party claims with prejudice. In connection with the dismissal of
the two actions, the Company paid the sum of ten million one hundred
seventy-three thousand eight hundred ninety-six dollars ($10,173,896) to
EOH in settlement of EOH's claim for payment of the break-up fee as set
forth in the Agreement and Plan of Combination dated as of September 11,
1995 between the Predecessor and EOH, and it paid the sum of one hundred
thousand dollars ($100,000) to ZML in settlement of ZML's claim for
$4,300,000 that the Predecessor violated the investment agreement dated
as of August 18, 1995 between the Predecessor and ZML.
The Company does not expect the outcome of the above litigation to have a
material effect on the financial condition of the Company.
- 15 -
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
7. PRO FORMA FINANCIAL INFORMATION
To provide a more meaningful comparison of results of operations, pro forma
statements of income are presented for the nine month period ending
September 30, 1996 as if the Company had acquired the Property on January
1, 1996. These results are compared to the Property's actual results of
operation for the nine month period ended September 30, 1995. The pro
forma statements of income are based upon the Borrower's statement of
income for the six month period ending June 30, 1996, the Borrower's
interim operating statement for the period from July 1 to July 17, 1996,
and the Company's statement of income for the period July 18, 1996 through
September 30, 1996.
Net income for the nine month period ended September 30, 1996 is
adjusted to give effect to (i) gross revenue and operating expenses had
the NBC Sale occurred on January 1, 1996 and (ii) interest expense had
the GSMC Facility and Current Coupon Convertible Debentures been repaid
in full, and $106,296,000 of principal of the Floating Rate Notes prepaid,
on January 1, 1996. Net income for the nine month period ended September
30, 1995 is adjusted to give effect to interest expense had the Borrower
not defaulted on the mortgage loan in May 1995. The pro forma results
are for illustrative purposes only, and do not purport to be indicative
of the actual results which would have occurred, nor are they indicative
of future results of operations.
Nine months Ended
September 30,
1996 1995
------ ------
Gross Revenue: $140,155 $157,801
Less:
Operating expenses (118,469) (110,680)
Interest expense (43,921) (82,973)
--------- ---------
Net Loss $( 22,235) $( 35,852)
--------- ---------
--------- ---------
- 16 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The discussion below relates primarily to the results of operations of
Rockefeller Center Properties, Inc. (the "Predecessor") for the period ended
July 9, 1996 and the financial condition and results of operation of RCPI
Trust (the "Company") for the period from July 10, 1996 through September 30,
1996. In addition, pro forma operating statements are presented to provide a
meaningful comparison of the results of operation of the Property for the
nine month periods ended September 30, 1996 and 1995 as if the acquisition of
the Property and the NBC Sale (see below) had occurred on January 1, 1996.
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, 1995 contained in the
Predecessor's Annual Report on Form 10-K for the year ended December 31, 1995
for a more complete understanding of the Predecessor's financial condition
and results of operations.
The primary source of liquidity for the Predecessor prior to the Chapter 11
filings referred to below was interest income received on its mortgage loan to
two partnerships (collectively, the "Borrower"). The mortgage loan was secured
by leasehold mortgages on the entire Property ("Property") in the aggregate
amount of $1.3 billion. The mortgage loan was further secured by a recorded
assignment of rents pursuant to which the Borrower had assigned to the
Predecessor, as security for repayment of the mortgage loan, the Borrower's
rights to collect certain rents with respect to the Property. As discussed
below, pursuant to a Merger Agreement, the Predecessor's assets and liabilities
were transferred to the Company on July 10, 1996. On July 17, 1996, pursuant to
the Chapter 11 Plan, the Borrower transferred the Property to the Company.
STATUS OF THE BORROWER
On May 11, 1995, the two partnerships comprising the Borrower filed for
protection under Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York. The Predecessor's only
significant source of income was interest received on the mortgage loan from the
Borrower. As a result of these filings, neither the Predecessor nor the Company
received any interest payments from the Borrower since the date of bankruptcy.
The Borrower and RGI filed a Chapter 11 reorganization plan (the "Chapter 11
Plan") for the Borrower that contemplated that ownership of the Property would
be turned over to the Predecessor or its designee upon consummation of the
Chapter 11 Plan. Pursuant to the order of the Bankruptcy Court the Chapter 11
Plan was confirmed on May 29, 1996 and became effective on July 17, 1996 upon
the transfer of the Property by the Borrower to the Company.
MERGER AGREEMENT
Pursuant to an Agreement and Plan of Merger, dated as of November 7, 1995,
entered into between the Predecessor and a group of investors (the "Investor
Group") the members of which are Exor Group S. A., Prometheus Investors, L.L.C.,
Rockprop, L.L.C., Troutlet Investments Corporation, Gribble Investments
(Tortola) BVI, Inc., Weevil Investments (Tortola) BVI, Inc. and Whitehall Street
Real Estate Limited Partnership V ("Whitehall"), as amended by Amendment No. 1
thereto dated as of February 12, 1996, Amendment No, 2 thereto dated as of April
25, 1996, Amendment No. 3 thereto dated as of May 29, 1996 and Amendment No. 4
thereto dated as of June 30, 1996, (as so amended, the "Merger Agreement"), RCPI
Merger Inc. was merged (the "Merger") with and into the Predecessor and the
Predecessor became a subsidiary of RCPI Holdings Inc., a Delaware corporation
controlled by the Investor Group ("RCPI Holdings").
The Merger Agreement was approved by the stockholders of the Predecessor on
March 25, 1996 and became effective on July 10, 1996 (the "Effective Date"). As
a result of the consummation of the Merger on the Effective Date, each share of
the Predecessor's common stock outstanding as of the Effective Date (other than
(i) shares of Common Stock held by the Predecessor or any of its subsidiaries,
(ii) shares of Common Stock held by RCPI Holdings or any of its subsidiaries
(including RCPI Merger) and (iii) any shares of Common Stock held by a
stockholder who was entitled to demand, and who properly demanded and has not
withdrawn such demand, appraisal for such shares in accordance with Section 262
of the Delaware General Corporation Law) was converted into the right to receive
$8.00 net in cash, without interest thereon. As a result of the consummation of
the Merger,
- 17 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
all of the Common Stock of the Predecessor is now held of record by RCPI
Holdings and all of the Warrants and SARs have been canceled. Also on July 10,
1996 the Predecessor transferred all of its assets and liabilities to the
Company and the Company became the successor to the Predecessor under the
Indenture governing the Convertible Debentures.
In addition, under the Merger Agreement, Goldman Sachs Mortgage Company
("GSMC"), which is a party to the Merger Agreement for this purpose, agreed to
make a line of credit available to the Predecessor (the "GSMC Facility") during
the period between November 7, 1995 and the earlier of (1) the consummation of
the merger contemplated by the Merger Agreement or (2) any termination of the
Merger Agreement. Such credit was secured on the same basis as the Floating
Rate Notes and the 14% Debentures, but accrued interest at the rate of 10% per
annum (compounded quarterly) and was prepayable at any time without penalty. If
borrowings under the GSMC Facility had not been repaid by the earlier of July
19, 1996, or any termination of the Merger Agreement in specified circumstances,
such borrowings would have become subject to the same terms and conditions as
those applicable to the Floating Rate Notes. The Predecessor had borrowed a
total of $63.7 million under the GSMC Facility. The principal balance and
accrued interest was repaid in full on July 17, 1996 by the Company.
NBC SALE
On July 17, 1996, the effective date of the Chapter 11 Plan, the Company, as
the Predecessor's designee, acquired the Property from the Borrower pursuant
to the Second Amended Joint Plan of Reorganization confirmed on May 29, 1996
in the Bankruptcy cases of the Borrower. Concurrent therewith, the Borrower
delivered to General Electric Company, a New York corporation ("GE"),
National Broadcasting Company, Inc., a Delaware corporation ("NBC"), and NBC
Trust No. 1996A, a Delaware business trust, for $440 million, interests in
certain buildings in the preperty previously leased by GE or its
affiliates, including NBC, pursuant to the agreement, dated as of April 23,
1996, among Whitehall, Rockprop L.L.C., Prometheus Investors, L.L.C.,
Troutlet Investments Corporation, Gribble Investments (Tortola) BVI, Inc.,
Weevil Investments (Tortola) BVI, Inc., Exor Group S.A., GE and NBC (the "NBC
Sale"). Pursuant to the Chapter 11 Plan, the proceeds from the NBC Sale were
paid to the Company reducing the outstanding mortgage loan.
RESULTS OF OPERATIONS - ROCKEFELLER CENTER PROPERTIES, INC.
The Predecessor's principle source of revenue for the period ended July 9,
1996 and September 30, 1995 was interest income received on the mortgage
loan. For the periods ended July 9, 1996 and September 30, 1995, the
Predecessor limited recognition of income on the mortgage loan to the cash
actually received. During the nine month period ended September 30, 1995, the
Predecessor recognized $20,339,000 of revenue, prior to the Borrower filing
for Chapter 11 protection on May 11, 1995. Since that date and through the
Effective Date, the Predecessor did not receive any interest payments and
accordingly no income was recognized.
Due principally to decreased cash available for investment, other income for the
period ended July 9, 1996 was $2,000 as compared to $1,003,000 for the period
ended September 30, 1995.
The amortization of deferred debt issuance costs of $12,421,000 for the period
ended July 9, 1996 includes the write-off of the unamortized balance of
$10,565,000 relating to the debt which was transferred to the Company on the
Effective Date. The amortization for the period ended September 30, 1995
includes the write off of debt issuance costs and letter of intent fees totaling
$4,431,000 relating to the termination of the working capital loan and the
Agreement and Plan of Combination, dated as of September 11, 1995 (the
"Combination Agreement"), between the Predecessor and Equity Office Holdings,
L.L.C. After consideration of these items, amortization for the period ended
July 9, 1996 is approximately $1,829,000 less than the amortization for the
nine months ended September 30, 1996 due to the shorter fiscal period in 1996.
The Predecessor was required to adjust the SAR liability to reflect the
aggregate principal amount of 14% Debentures that would have been issuable upon
exchange for the SARs on July 9, 1996 and September 30, 1995, respectively. The
increase in expense of $8,009,000 between the period ended July 9, 1996 and
September 30, 1995 is directly related to the greater increase in the
Predecessor's stock price during 1995 as compared to 1996. Concurrent with the
Merger, the Predecessor's SARs and Warrants were canceled.
- 18 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
During the nine months ended September 30, 1996 the Predecessor recorded certain
transaction costs and expenses aggregating $25,163,000, which reflected
the breakup fee related to the termination of the Combination Agreement,
professional fees, and certain liquidation expenses and other liabilities
specifically provided for in the Merger Agreement. Also during this period, the
Predecessor reduced the carrying value of the mortgage loan by $74,000,000 to
reflect the economics of the Merger Agreement. This total of $99,163,000
recognized during the nine months ended September 30, 1995, was adjusted by
$6,622,000 during the quarter ended June 30, 1996 to more accurately reflect the
amounts actually paid upon consummation of the Merger and amounts remaining
unpaid. During the period from July 1 to July 9, 1996, the liability was
further reduced by $1,610,000 to reflect the actual amount paid in final
settlement of the termination of the Combination Agreement (See Note 6). As a
result, a credit of $8,232,000 is reflected in total expenses for the period
from January 1 to July 9, 1996.
During the period ended July 9, 1996, the Predecessor recognized $422,000 of
expenses related to the March 25, 1996 special meeting of stockholders. The
stockholders approved the Merger Agreement on that date.
All debt of the Predecessor was transferred to the Company on the Effective
date, thus interest expense from July 10, 1996 through September 30, 1996 was
recognized by the Company. To provide a more meaningful comparison to the
period ended September 30, 1995, interest expense recognized by the
Predecessor for the period from January 1 through July 9, 1996 and interest
expense recognized by the Company for the period July 10, 1996 through
September 30, 1996 have been combined. The following table illustrates
comparative interest expenses for the nine month periods ended September 30,
1996 and 1995.
For the nine month period ended
September 30
1996 1995
---- ----
Current coupon convertible debentures 15,337 17,107
Zero coupon convertible debentures 28,152 24,862
14% debentures 8,262 8,252
Floating rate notes 6,278 10,397
GSMC facility 2,664 -
Other interest 2,736 3,657
------ ------
Total 63,429 64,275
------ ------
------ ------
The Current Coupon Convertible Debentures were redeemed on August 28, 1996. Due
primarily to the shorter period such Debentures were outstanding during 1996,
interest expense related to these Debentures decreased by $1,770,000.
Upon consummation of the Merger, the carrying value of the Zero Coupon
Convertible Debentures was adjusted to reflect the fair market value of such
Debentures at that date. Due to this adjustment, such debentures have been
accreting at 12.10% since the Effective Date, rather than at the 10.23% as they
had prior to that date. As a result, interest expense increased by $3,290,000.
Interest expense on the 14% Debentures accrues at the pay rate. The $10,000
increase in expense for the nine month period ended September 30, 1996 as
compared to the same period during 1995 is a result of additional amortization
of the original issue discount.
On July 17, 1996, the Company prepaid $106,296,000 of the outstanding principal
plus accrued interest on the Floating Rate Notes. As of September 30, 1996,
$10,000,000 remained outstanding. Interest expense related to the Floating Rate
Notes decreased by $4,119,000 due to the smaller principal balance outstanding
during the nine month period ended September 30, 1996. Interest expense on the
swap agreements, which the Predecessor had accounted for as a component of
interest expense related to the Floating Rate Notes, has been reclassified to
"other interest" for this analysis.
- 19 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
Interest expense related to the GSMC Facility, which was obtained in November
1995, totaled $2,664,000 during the period ended September 30, 1996.
The decrease in other interest of $921,000 is due primarily to more favorable
interest rates related to the interest rate swap agreements during the nine
month period ended September 30, 1996 as compared to the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES - RCPI TRUST
LAND AND BUILDING
As discussed above, on July 17, 1996, the Property was transferred to the
Company and the related mortgage notes were canceled. Concurrently, the
Borrower delivered certain interests in certain buildings in the Property
("NBC Space") to GE, NBC, and their affiliates for $440,000,000. The NBC
Space, measured in accordance with the standards promulgated by the New York
Real Estate Board in 1987, accounted for approximately 1,520,000 square feet,
or 20.5% of the total area of the Property.
Leasing activity which had been adversely affected by the Borrower's Chapter 11
filing, has increased since acquisition of the Property by the Company. At
September 30, 1996 the Property, excluding the NBC Space, was approximately
82.8% occupied as compared to 81.7% on July 17, 1996. Since acquisition of the
Property, the Company has executed 21 new leases for a total of 103,000 square
feet. Net absorption since acquisition has been 65,000 square feet. Occupancy
rates for the Property at the following dates, prior to acquisition, have been
adjusted to account for the sale of the NBC space:
June 30, 1996 82.2% September 30, 1995 86.2%
March 31, 1996 83.8% June 30, 1995 85.2%
December 31, 1995 82.7% March 31, 1995 87.5%
The following table shows selected lease expirations and vacancy of the
Property, excluding the NBC Space, as of September 30, 1996. Area, as
presented below and discussed above, is measured based on standards
promulgated by the New York Real Estate Board in 1987. Lease turnover could
offer an opportunity to increase the revenue of the Property or might have a
negative impact on the Property's revenue. Actual renewal and rental income
will be affected significantly by market conditions at the time and by the
terms at which the Company can then lease space. Because the former leases
for the NBC Space would not have expired until 2022, the percentage of leases
expiring in the next five years for the Property, excluding the NBC space,
is higher than it was prior to the NBC Sale.
Square Feet Percent
YEAR Expiring Expiring
- ---- -------- --------
Vacant 1,014,017 17.2%
1996 192,792 3.3%
1997 241,407 4.1%
1998 301,693 5.1%
1999 218,878 3.7%
2000 451,279 7.6%
Thereafter 3,479,464 59.0%
--------- ------
Total 5,899,530 100.0%
--------- ------
--------- ------
DEBT
The Current Coupon Convertible Debentures transferred from the Predecessor to
the Company on the Effective Date were redeemed on August 28, 1996. Principal
in the amount of $213,170,000 plus accrued interest of
- 20 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
$18,321,000 was paid on that date. Interest accrued at the pay rate of 13% from
the effective date through the redemption date. Prior to transfer of such
Debentures from the Predecessor, interest accrued at an effective annual
interest rate of 9.23%.
The GSMC Facility transferred from the Predecessor to the Company on the
Effective Date was repaid in full on July 17, 1996. The total payment of
$66,484,000 included accrued interest of $2,817,000. Interest accrued at 10%
for the period from July 10, 1996 to July 17, 1996.
The Zero Coupon Convertible Debentures due December 31, 2000 accrete to a face
value of $586,185,000 at an effective annual interest rate of 12.10%.
Concurrent with the Merger, the carrying value of such Debentures was adjusted
to reflect the fair market value as of the Effective Date. As a result, the
effective annual interest rate changed from 10.23% to 12.10%. At September 30,
1996, the carrying value of such Debentures, net of unamortized discount, was
$351,417,000.
The Floating Rate Notes mature on December 31, 2000 and bear interest at the
London Interbank Offered Rate ("LIBOR") plus 4%. Interest is paid quarterly on
March 1, June 1, September 1, and December 1. At September 30, 1996, interest
was accruing at 9.28%. On July 17, 1996, outstanding principal in the amount of
$106,296,000 plus accrued interest of $1,234,000 was prepaid. As of September
30, 1996, $10,000,000 of principal remained outstanding.
The 14% debentures have a principal balance of $75,000,000 and mature on
December 31, 2007. Interest expense includes the amortization of the original
issue discount. Interest payments are made semi-annually on June 2 and December
2. As of September 30, 1996, the carrying value of such debentures was
$70,986,000, and has not yet been adjusted to reflect the fair market value
as of the Effective Date, in accordance with APB 16. Management expects this
adjustment to be finalized by December 31, 1996.
CASH FLOW
The Company received $15,499,000 from the Borrower in connection with the
Company's acquisition of the Property, representing the balance in the
collateral trust account. The proceeds from the sale of the NBC Space were used
primarily to retire the Current Coupon Convertible Debentures, the GSMC
Facility, and a significant portion of the Floating Rate Notes.
The Company expended approximately $12,528,000 of legal and consulting fees to
acquire the Property. Since acquisition of the Property, the Company has
expended $4,140,000 and $2,567,000 in tenant improvements and leasing
commissions, respectively.
RESULTS OF OPERATIONS - RCPI TRUST
As the Company's statement of operations only reflects activity from the
Effective Date through September 30, 1996, pro forma operating statements for
the nine months ended September 30, 1996 and 1995 have been prepared as if the
Property had been acquired on January 1, 1996. The discussion below highlights
certain items included on the Company's operating statement for the period from
July 10, 1996 through September 30, 1996. For a discussion of comparative
results of operations, refer to the caption "Pro Forma Results of Operations -
The Property."
A significant portion of the proceeds received from the NBC Sale remained on
hand through the redemption of the Current Coupon Convertible Debentures on
August 28, 1996. As a result, $1,573,000 of interest income was earned.
Due to downsizing of personnel employed by the Company, $627,000 in severance
costs and placement fees were incurred.
The Company expended $1,779,000 to buy out the lease of a tenant who had filed
for bankruptcy in order to gain control of the underlying space.
- 21 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
In connection with the retirement of the Floating Rate Notes, the Company
incurred a prepayment penalty of $1,594,000.
For a comparison of interest expense of the Company and the Predecssor for
the nine month periods ended September 30, 1996 and 1995, see "Results of
Operations - Rockefeller Center Properties, Inc."
PRO FORMA RESULTS OF OPERATIONS - THE PROPERTY
To provide a more meaningful comparison of results of operations, pro forma
statements of income are presented for the nine month period ending September
30, 1996 as if the Company had acquired the Property on January 1, 1996. These
results are compared to the Property's actual results of operation for the nine
month period ended September 30, 1995. The pro forma statements of income are
based upon the Borrower's statement of income for the six month period ending
June 30, 1996, the Borrower's interim operating statement for the period from
July 1 to July 17, 1996, and the Company's statement of income for the period
July 18, 1996 through September 30, 1996.
Net income for the nine month period ended September 30, 1996 is adjusted to
give effect to (i) gross revenue and operating expenses had the NBC Sale
occurred on January 1, 1996 and (ii) interest expense had the GSMC Facility
and Current Coupon Convertible Debentures been repaid in full, and
$106,296,000 of principal of the Floating Rate Note prepaid, on January 1,
1996. Net income for the nine month period ended September 30, 1995 is
adjusted to give effect to interest expense had the Borrower not defaulted on
the mortgage loan in May 1995. The pro forma results are for illustrative
purposes only, and do not purport to be indicative of the actual results
which would have occurred, nor are they indicative of future results of
operations.
($ In Thousands)
(Unaudited)
Nine months Ended
September 30,
1996 1995
Gross Revenue:
Rent and other tenant charges $137,724 $157,527
Interest income 2,431 274
-------- --------
140,155 157,801
Operating Expenses:
Real estate taxes 25,527 25,703
Real estate tax refund - (7,388)
Utilities 12,229 13,207
Maintenance and engineering 20,376 23,096
Other operating expenses 30,683 29,759
Depreciation and amortization 20,402 20,559
Management fee 4,895 2,036
General and administrative 4,357 3,708
118,469 110,680
-------- --------
Earnings before interest 21,686 47,121
Interest expense 43,921 82,973
-------- --------
Net (loss) $(22,235) $(35,852)
-------- --------
-------- --------
Gross revenue decreased by $19,803,000 for the nine month period ended September
30, 1996 as compared to the same period in 1995. The decrease is primarily a
result of the NBC Sale because, concurrent therewith, all leases governing the
- 22 -
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
NBC Space were canceled. The Company would have received base rent and
operating escalations of $1,236,000 and $927,000 per month, respectively
from NBC for the nine months ended September 30, 1996 had the sale not
occurred. As a result, gross revenue is $19,467,000 less during the nine
months ended September 30, 1996. The remaining decrease can be attributed
to the lower occupancy percentage during the nine month period ended
September 30, 1996 as compared to nine month period ended September 30, 1995.
As discussed above, the increase in interest income of $2,157,000 was due in
part to the large cash balance carried prior to redemption of the Current Coupon
Convertible Debentures. The remaining increase can be attributed to the
Borrower's failure to make interest payments from the bankruptcy date through
the date the Property was acquired by the Company. As a result, the cash
balance and resulting interest income was higher during the nine month period
ended September 30, 1996 as compared to the same period in the prior year.
On June 29, 1995, the bankruptcy court approved a settlement between the
Borrower and New York City that incorporated a reduction in the assessed
valuation of the Property. As a result, the Borrower received a real estate tax
refund of $7,388,000 relating to the period from July 1, 1989 to September 30,
1995. The refund was recognized during the nine month period ended September
30, 1995.
For the nine month period ended September 30, 1996 compared with the same period
in 1995, utilities decreased by $978,000 and maintenance and engineering
decreased by $2,720,000 due primarily to the reimbursement of operating costs by
NBC. The Company and NBC have executed two agreements governing the shared
responsibility to pay operating costs of the Property. Pursuant to these
agreements, NBC reimbursed the Property for a portion of the utilities and
maintenance and engineering costs that the Company had incurred.
For the nine month period ended September 30, 1996 compared with the same
period in 1995, other operating expenses increased by $924,000. Included in
this amount for the nine month period ended September 30, 1996 are the tenant
buy out costs and a debt prepayment penalty of $1,779,000 and $1,594,000,
respectively. Excluding the effects of these items, other operating expenses
decreased by $2,449,000 due primarily to the reimbursement of costs from NBC.
The increase in management fees of $2,859,000 is due in part to an
increased fee schedule negotiated with the Borrower in 1996 prior to the
Company's acquisition of the Property and to a new management agreement,
signed concurrent with the acquisition of the Property.
General and administrative expenses increased by $649,000, due to increased
costs incurred in connection with the acquisition of the Property.
Based on pro forma calculations, interest expense decreased by $39,052,000
during the period ended September 30, 1996 as compared to the same period in
the prior year. During the nine month period ended September 30, 1995, the
Property was financed by the $1.3 billion mortgage note. The effective
annual interest rate, which incorporates the differing coupon rates of base
interest and the amortization of the original issue discount, was 8.51%,
resulting in interest expense of $82,973,000 assuming the Borrower had not
defaulted on the mortgage loan in May 1995. Had the Property been acquired
and had the NBC Sale occurred on January 1, 1996, the Current Coupon
Convertible Debentures and GSMC Facility would have been repaid in full, and
$106,296,000 of principal of the Floating Rate Notes would have been prepaid,
on that date. Based on the principal amount of debt thus considered
outstanding during the nine month period ended September 30, 1996 and the
interest rates in effect during that period, interest expense would have been
$43,921,000.
- 23 -
<PAGE>
RCPI TRUST
PART II.--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 23, 1995, Bear, Stearns & Co., Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation commenced an action against the
Predecessor in the Supreme Court of New York, County of New York. The
plaintiffs allege that the Predecessor breached a contract relating to
the plaintiffs' provision of investment banking services to the
Predecessor in connection with a proposed 1994 transaction. The
plaintiffs seek $5,062,500, plus costs, attorneys' fees and interest.
The Supreme Court of New York denied the Predecessor's motion to
dismiss the complaint on September 21, 1995. On October 10, 1995, the
Predecessor filed an answer to the complaint which denied the
plaintiffs' allegations and asserted numerous affirmative defenses. The
Predecessor has vigorously contested the plaintiffs' claims. On
June 11, 1996, RCPI moved for partial summary judgment on plaintiffs'
claim that they are entitled to a "success fee" of over $4 million even
though the transaction they proposed for RCPI was never consummated, and
on plaintiffs' claim for indemnification of legal fees and expenses in
connection with this lawsuit. On the same day, the plaintiffs moved for
partial summary judgment on their claim for $950,000 in advisory fees
and reimbursement of expenses incurred in connection with the underlying
proposed transaction. These motions are currently pending.
On May 11, 1995 the two partnerships comprising the Borrower filed for
protection under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York. The
Chapter 11 Plan was confirmed on May 29, 1996 and became effective on
July 17, 1996. See Note 1 to the Financial Statements.
On May 24, 1995, Jerry Krim commenced an action encaptioned KRIM V.
ROCKEFELLER CENTER PROPERTIES, INC. AND PETER D. LINNEMAN. On June 7,
1995, Kathy Knight and Moishe Malamud commenced an action encaptioned
KNIGHT, ET AL. V. ROCKEFELLER CENTER PROPERTIES, INC. AND PETER D.
LINNEMAN. Both actions were filed in the United States District Court
for the Southern District of New York and purport to be brought on
behalf of a class of plaintiffs comprised of all persons who purchased
the Predecessor's Common Stock between March 20, 1995 and May 10, 1995.
The complaints allege that the Predecessor and Dr. Linneman violated the
federal securities laws by their purported failure to disclose, prior to
May 11, 1995, that the Borrower would file for bankruptcy protection.
The cases have been consolidated. On July 28, 1995, the Predecessor and
Dr. Linneman filed answers to the complaints denying plaintiffs'
substantive allegations and asserting numerous affirmative defenses. On
September 22, 1995, plaintiffs served an Amended Class Action Complaint
adding the Predecessor's remaining directors and its president as
defendants. In addition to the foregoing claims, the Amended Complaint
also asserts a cause of action for breach by the Predecessor's directors
and its president of their fiduciary duties by approving the Agreement
and Plan of Combination dated as of September 11, 1995, between the RCPI
and Equity Office Holdings, L.L.C. ("EOH") (the "Combination
Agreement"). The plaintiffs are seeking damages in such amount as may be
proved at trial. Plaintiffs are also seeking injunctive relief, plus
costs, attorneys' fees and interest. The Company intends to vigorously
contest these actions.
On July 6, 1995, Charal Investment Company, Inc. commenced a derivative
action against certain of the Predecessor's present and former directors
in the Court of Chancery of the State of Delaware in and for New Castle
County ("Delaware Court of Chancery"). The Predecessor was named as a
nominal defendant. The plaintiff alleged that the directors breached
their fiduciary duties by: (1) using commercial paper proceeds to
repurchase Convertible Debentures in 1987-1992; (2) entering into
interest rate swaps; and (3) making capital distributions to
stockholders during the years 1990 through 1994. On February 21, 1995,
prior to the commencement of the action, the Predecessor's Board of
Directors appointed a special committee of the Board to review the
plaintiff's February 3, 1995 pre-suit demand that the Predecessor's
Board of Directors institute litigation on the Predecessor's behalf
with respect to such claims and recommend a course of action to the
full Board. Plaintiff nevertheless commenced the action, asserting that
circumstances did not permit further delay. On November 7, 1995, the
Delaware Court of Chancery dismissed this action without prejudice due
to plaintiff's failure to comply with the requirements of the Delaware
Court of Chancery Rule 23.1.
- 24 -
<PAGE>
RCPI TRUST
PART II.--OTHER INFORMATION (Cont'd)
On November 14, 1995, the plaintiff moved to amend and supplement its
complaint and/or to amend or alter the Delaware Court's judgment so as
to permit the filing of additional derivative allegations, as well as
class allegations that the Predecessor's Board of Directors had
approved the proposed Merger without considering the value to the
Predecessor of the matters set forth in the plaintiff's pre-suit demand.
The Delaware Court of Chancery denied the plaintiff's motion on
February 12, 1996.
On November 28, 1995, the special committee of the Board reviewed the
report of its counsel and, after deliberation, determined to recommend
to the Predecessor's Board of Directors that the plaintiff's pre-suit
demand be rejected because it would not be in the best interest of the
Predecessor to pursue the matters set forth in such demand. On
December 5, 1995, after considering the recommendation of the special
committee and the report of the special committee's counsel, the
Predecessor's Board of Directors voted to reject the plaintiff's
pre-suit demand.
On February 29, 1996, Charal Investment Company, Inc. filed a new action
in the Delaware Court of Chancery purporting to assert both derivative
and class counts. The derivative count alleges claims substantially
identical to those set forth in Charal's July 6, 1995 complaint, which
claims were the subject of the Board's rejection of plaintiff's pre-suit
demand. The class count alleges that the directors failed to consider
the value of the derivative claims in connection with the Board's
evaluation of the fairness of the proposed Merger. The Predecessor is
named only as a nominal defendant in this action. On June 5, 1996,
Charal filed an amended and supplemental complaint which repeated the
allegations contained in the February 29, 1996 complaint and added a new
class claim against the individual defendants alleging that they had
breached their fiduciary duties by not including certain information in
the proxy statement disseminated in connection with the Merger. To the
extent that any relief is sought against the Company, the Company
intends to vigorously contest the action. On October 18, 1996, the
Defendants, including the Company, moved to dismiss the amended and
supplemental complaint. The motion is currently pending.
On November 15, 1996, Charal Investment Co., Inc. and C.W. Sommer &
Co. filed a purported class action complaint in the United States
District Court for the District of Delaware against certain former
directors and officers of the Predecssor and against certain of the
Company's indirect shareholders. The action is entitled CHARAL
INVESTMENT CO. v. ROCKEFELLER, ET AL. Civil Action No. 96-543
("CHARAL II"). Plaintiffs allege that the Defendants violated
Section 10(b) of the Securities and Exchange Act of 1934 (the "Act")
and Rule 10b-5 promulgated thereunder, and Section 14 of the Act and
Rule 14a-9 promulgated thereunder by allegedly failing to provide
adequate disclosure of the alleged possibility of a sale or leasehold
financing of a portion of Rockefeller Center to the National
Broadcasting Company and its parent corporation, General Electric Co.,
prior to the shareholder vote on the Merger. The complaint seeks
unspecified damages, rescission of the Merger, and/or disgorgement.
Defendents have advised the Company that they intend to deny the
material allegations of the complaint and to contest the action
vigorously. The Company may have indemnity obligations with respect
to one or more of the Defendants.
On July 31, 1995, L.L. Capital Partners, L.P. commenced an action
against the Predecessor in the United States District Court in the
Southern District of New York. The plaintiff alleges that, in a RCPI
prospectus dated November 3, 1993, the Predecessor failed to disclose
its purported belief that the Rockefeller Interests and Mitsubishi
Estate would cease to fund the Borrower's cash flow shortfalls. The
plaintiff seeks recovery under Section 12(2) of the Securities Act of
1933, Section 10(b) of, and Rule 10b-5 under the Exchange Act and the
common law. On April 16, 1996, the Court granted the Predecessor's
motion to dismiss the complaint for failure to state a claim. On
June 3, 1996, Plaintiff filed an Amended Complaint. On September 24,
1996, the Court granted the Predecessor's motion to dismiss
plaintiff's Amended Complaint for failure to state a claim. On
October 24, 1996, plaintiff filed a Notice of Appeal.
On September 13 and 14, 1995, five class action complaints, captioned
FAEGHEH MOEZINIA V. PETER D. LINNEMAN, BENJAMIN D. HOLLOWAY, PETER G.
PETERSON, WILLIAM F. MURDOCH, JR. AND ROCKEFELLER CENTER PROPERTIES,
INC.; MARTIN ZACHARIAS V. B.D. HOLLOWAY, P.G. PETERSON, W.F. MURDOCH,
P.D. LINNEMAN AND ROCKEFELLER CENTER PROPERTIES, INC.; JAMES COSENTINO
V. PETER D. LINNEMAN, BENJAMIN D. HOLLOWAY, PETER G. PETERSON, WILLIAM
F. MURDOCH, JR. AND ROCKEFELLER CENTER PROPERTIES, INC.; MARY MILLSTEIN
V. PETER D. LINNEMAN, PETER G. PETERSON, BENJAMIN D. HOLLOWAY, WILLIAM
F. MURDOCH, JR. AND ROCKEFELLER CENTER PROPERTIES, INC.; AND ROBERT
MARKEWICH V. PETER D. LINNEMAN AND DANIEL M. NEIDICH, ET AL. were filed
in the Delaware Court of Chancery. On October 11, 1995, an additional
complaint captioned HUNTER HOGAN V. ROCKEFELLER CENTER PROPERTIES, INC.,
ET AL. was filed in the Delaware Court of Chancery. Each of the
complaints purports to be brought on behalf of a class of plaintiffs
comprised of stockholders of the Predecessor who have been or will be
adversely affected by the Combination Agreement. All of the complaints
allege that the Predecessor's Directors breached their fiduciary duties
by approving the Combination Agreement. The complaints seek damages in
such amount as may be proved at trial. Plaintiffs also seek injunctive
relief, plus costs and attorneys fees. On November 8, 1995, the
Delaware Court of Chancery entered an order consolidating these actions.
The Company intends to contest these actions vigorously.
On July 31, 1996, a Petition for Appraisal, captioned SOLOMON V.
ROCKEFELLER CENTER PROPERTIES, INC., was filed in the Delaware Court of
Chancery. The petitioners allege that the consideration paid to the
Predecessor's stockholders in conjunction with the Merger was
inadequate and they request that the Court determine the fair value of
their stock at the time of the Merger. The Company filed its Response
to the Petition for Appraisal on October 7, 1996, in which it asserts
that the fair value of the Predecessor's common stock at the time of
the Merger was not more than $8.00 per share and asks the Court to so
determine.
On November 6, 1996, the parties filed stipulations of dismissal with
prejudice in ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP III ("ZML") V. ROCKEFELLER CENTER PROPERTIES, INC., 96 Civ.
1445, in the United States District Court for the Southern District of
New York, and ROCKEFELLER CENTER PROPERTIES, INC. V. ZELL/MERRILL LYNCH
REAL ESTATE OPPORTUNITY PARTNERS LIMITED PARTNERSHIP III AND EQUITY
OFFICE HOLDINGS, L.L.C. ("EOH"), Index No. 106176/96, in the Supreme
Court for the State of New York, New York County, dismissing all claims,
counterclaims and third-party claims with prejudice. In connection
with the dismissal of the two actions, the Company paid the sum of ten
million one hundred seventy-three thousand eight hundred ninety-six
dollars ($10,173,896) to EOH in settlement of EOH's claim for payment
of the break-up fee as set forth in the Agreement and Plan of
Combination dated as of September 11, 1995 between the Predecessor and
EOH, and it paid the sum of one hundred thousand dollars ($100,000) to
ZML in settlement of ZML's claim for $4,300,000 that the Predecessor
violated the investment agreement dated as of August 18, 1995 between
the Predecessor and ZML.
The Company does not expect the outcome of the above litigation to have
a material effect on the financial condition of the Company.
- 25 -
<PAGE>
RCPI TRUST
PART II.--OTHER INFORMATION (Cont'd)
On July 31, 1996, a Petition for Appraisal, captioned SOLOMON V.
ROCKEFELLER CENTER PROPERTIES, INC., was filed in the Delaware Court of
Chancery. The petitioners allege that the consideration paid to the
Company's stockholders in conjunction with the Merger was inadequate and
they request that the Court determine the fair value of their stock at
the time of the Merger. The Company filed its Response to the Petition
for Appraisal on October 7, 1996, in which it asserts that the fair
value of the Company's common stock at the time of the Merger was not
more than $8.00 per share and asks the Court to so determine.
On November 6, 1996, the parties filed stipulations of dismissal with
prejudice in ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP III ("ZML") V. ROCKEFELLER CENTER PROPERTIES, INC., 96 Civ.
1445, in the United States District Court for the Southern District of
New York, and ROCKEFELLER CENTER PROPERTIES, INC. V. ZELL/MERRILL LYNCH
REAL ESTATE OPPORTUNITY PARTNERS LIMITED PARTNERSHIP III AND EQUITY
OFFICE HOLDINGS, L.L.C. ("EOH"), Index No. 106176/96, in the Supreme
Court for the State of New York, New York County, dismissing all claims,
counterclaims and third-party claims with prejudice. In connection with
the dismissal of the two actions, the Company paid the sum of ten
million one hundred seventy-three thousand eight hundred ninety-six
dollars ($10,173,896) to EOH in settlement of EOH's claim for payment of
the break-up fee as set forth in the Agreement and Plan of Combination
dated as of September 11, 1995 between the Company and EOH, and it paid
the sum of one hundred thousand dollars ($100,000) to ZML in settlement
of ZML's claim for $4,300,000 that the Company violated the investment
agreement dated as of August 18, 1995 between the Company and ZML.
The Company does not expect the outcome of the above litigation to have
a material effect on the financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES
(a) On July 10, 1996 (the "Effective Date"), RCPI Merger, a Delaware
corporation formed by members of the Investor Group, was merged with and
into the Predecessor pursuant to the Merger Agreement (the "Merger"),
and the Predecessor was the surviving corporation in such Merger. As a
result of the consummation of the Merger on the Effective Date, each
share of the Predecessor's common stock, par value $.01 per share
("Common Stock"), outstanding as of the Effective Date (other than (i)
shares of Common Stock held by the Predecessor or any of its
subsidiaries, (ii) shares of Common Stock held by RCPI Holdings, Inc. or
any of its subsidiaries (including RCPI Merger) and (iii) any shares of
Common Stock held by a stockholder who was entitled to demand, and who
properly demanded and has not withdrawn such demand, appraisal for such
shares in accordance with Section 262 of the Delaware General
Corporation Law) was converted into the right to receive $8.00 net in
cash, without interest thereon. As a result of the consummation of the
Merger, all of the Common Stock of the Predecessor is now held of record
by RCPI Holdings, Inc. and all of the Warrants and SARs have been
canceled.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
A report on Form 8-K was filed on July 1, 1996, reporting events under
Item 5 and Item 7 of Form 8-K.
A report on Form 8-K was filed on August 1, 1996, reporting events under
Item 2 and Item 7 of Form 8-K and incorporating by reference the
financial statements for the Property for the fiscal years 1993, 1994
and 1995.
- 26 -
<PAGE>
RCPI TRUST
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.
RCPI TRUST
Date: November 19, 1996 By: /s/ DAVID AUGARTEN
---------------------------------
David Augarten
Vice President
(Principal Financial Officer)
- 27 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 45,341
<SECURITIES> 0
<RECEIVABLES> 13,488
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 733,679
<DEPRECIATION> 3,184
<TOTAL-ASSETS> 804,884
<CURRENT-LIABILITIES> 0
<BONDS> 432,403
0
0
<COMMON> 0
<OTHER-SE> 332,662
<TOTAL-LIABILITY-AND-EQUITY> 804,884
<SALES> 0
<TOTAL-REVENUES> 38,470
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 33,492
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,444
<INCOME-PRETAX> (11,446)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,446)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,446)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F1><F2>
<FN>
<F1>15, Classified Balance Sheet is not presented.
<F2>19, Classified Balance Sheet is not presented.
</FN>
</TABLE>
