<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 June 30, 1996
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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*
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RCPI Trust*
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(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.
1230 Avenue of the Americas, New York, N.Y. 10020
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(Address of principal executive offices) (Zip Code)
(212) 332-6535
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(Registrant's telephone number, including area code)
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(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 August 14, 1996
- ------------------------- ------------------------------
Trust Ownership Interests 2
* As successor in interest to Rockefeller Center Properties, Inc.
(Commission File No. 1-8971)
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
INDEX
PART I--FINANCIAL INFORMATION PAGE
----
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited, interim financial statements have been prepared in
accordance with the instructions to Form 10-Q. In the opinion of management,
all adjustments (consisting only of normal recurring items except as described
in Note 1) necessary for a fair presentation have been included.
Balance Sheets as of June 30, 1996 (unaudited) and
December 31, 1995 3
Statements of Operations for the quarters and six months
ended June 30, 1996 and 1995 (unaudited) 4
Statements of Cash Flows for the quarters and six months
ended June 30, 1996 and 1995 (unaudited) 5
Notes to Financial Statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 14
Supplemental information provided by the Debtors 23
PART II--OTHER INFORMATION 26
SIGNATURES 30
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
ROCKEFELLER CENTER PROPERTIES, INC.
BALANCE SHEETS
($ in thousands)
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(Unaudited)
ASSETS
- ------
Loan receivable and interest
receivable, net of valuation
reserve of $74,000 and unamortized
discount of $34,906 $1,176,220 $1,176,220
Deferred debt issuance costs, net 10,656 12,421
Cash and cash equivalents 996 1,298
Other assets 1,179 837
---------- ----------
Total Assets $1,189,051 $1,190,776
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
Liabilities:
Current coupon convertible
debentures due 2000 $ 213,170 $ 213,170
Zero coupon convertible
debentures due 2000, net of
unamortized discount of $207,931
and $225,902 378,254 360,283
Floating rate notes due 2000 116,296 116,296
14% debentures due 2007, net of
unamortized discount of $4,103
and $4,282 70,897 70,718
GSMC facility 57,900 10,200
Accrued interest payable 47,621 61,914
Stock appreciation rights 15,335 13,406
Accounts payable and accrued
expenses 1,027 3,027
Accrued transaction costs and
expenses 18,540 25,163
---------- ----------
Total Liabilities $ 919,040 $ 874,177
---------- ----------
Contingencies
Stockholders' Equity:
Common stock, $.01 par value:
150,000,000 shares authorized,
38,260,704 shares issued and
outstanding $ 383 $ 383
Additional paid-in capital 707,545 707,545
Distributions to stockholders in
excess of net income (437,917) (391,329)
---------- ----------
Total Stockholders' Equity 270,011 316,599
---------- ----------
Total Liabilities and Stockholders'
Equity $1,189,051 $1,190,776
---------- ----------
---------- ----------
SEE NOTES TO FINANCIAL STATEMENTS.
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ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF OPERATIONS
($ in thousands, except for share data)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Loan interest income (1) - - - $20,339
Short term investment and portfolio
income 22 339 36 446
-------- -------- -------- --------
22 339 36 20,785
-------- -------- -------- --------
Expenses:
Interest Expense:
Current coupon convertible debentures 5,511 5,618 11,022 11,236
Zero coupon convertible debentures 8,985 8,152 17,971 16,304
14% Debentures 2,739 2,751 5,489 5,501
Floating rate notes 3,808 4,682 7,642 9,527
GSMC facility 1,323 - 2,379 -
-------- -------- -------- --------
22,366 21,203 44,503 42,568
General and administrative 1,479 1,933 4,652 3,209
Amortization of deferred debt
issuance costs 829 883 1,765 1,732
Increase (reduction) in stock appreciation
rights liability 22 (5,862) 1,929 (1,428)
Effects of execution and delivery of merger
agreement (6,623) - (6,623) -
Expenses related to the March 25, 1996
special meeting of stockholders (51) - 398 -
-------- -------- -------- --------
18,022 18,157 46,624 46,081
-------- -------- -------- --------
Net (loss) ($18,000) ($17,818) ($46,588) ($25,296)
-------- -------- -------- --------
-------- -------- -------- --------
Net (loss) per share ($0.47) ($0.46) ($1.22) ($0.66)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) Loan interest income for the quarter and six months ended June 30, 1996 and
1995 is presented on a cash basis, see Note 1.
SEE NOTES TO FINANCIAL STATEMENTS.
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ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
($ in thousands)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
1996 1995
----------- ------------
Cash flows from operating activities:
Loan interest received $ - $ 20,339
Short term investment, portfolio and
other interest income received 36 249
Interest paid on current coupon
convertible debentures (27,712) -
Interest paid on floating rate notes (7,626) (8,762)
Interest paid on 14% debentures (5,308) (4,521)
Payments for accounts payable, accrued
expenses and other assets (7,392) (3,890)
-------- --------
Net cash (used in) provided by operating
activities (48,002) 3,415
-------- --------
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:
Dividends paid - (5,739)
Net proceeds from GSMC facility 47,700 -
-------- --------
Net cash provided by (used in) financing
activities 47,700 (5,739)
-------- --------
Net (decrease) increase in cash (302) 47,676
Cash and cash equivalents at the beginning
of the period 1,298 2,897
-------- --------
Cash and cash equivalents at the end
of the period $ 996 $ 50,573
-------- --------
-------- --------
Reconciliation of Net Loss to Net Cash
Provided by Operating Activities:
Net loss ($46,588) ($25,296)
Adjustments to reconcile net loss to
net cash (used in) provided by operating
activities:
Amortization of discount:
Zero coupon convertible debentures 17,971 16,304
14% Debentures 179 179
Increase in interest receivable and
amortization of loan receivable
discount, net - (199)
Decrease in deferred debt issuance costs
and other assets, net 1,423 1,442
(Decrease) Increase in accrued interest
payable and amortized unpaid discount
on commercial paper (14,293) 12,803
Increase (decrease) in stock appreciation
rights liability 1,929 (1,428)
(Decrease) in accounts payable, accrued
expenses and accrued transaction costs
and expenses (8,623) (390)
-------- --------
Net cash (used in) provided by operating
activities ($48,002) $ 3,415
-------- --------
-------- --------
SEE NOTES TO FINANCIAL STATEMENTS.
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PURPOSE
RCPI Trust, a Delaware business trust ("RCPI Trust"), is the successor in
interest to Rockefeller Center Properties, Inc. (the "Company"), 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 Company 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 are Rockefeller Group, Inc.
("RGI") and Radio City Music Hall Productions, Inc. ("RCMHP"), a wholly
owned subsidiary of RGI. Mitsubishi Estate Company, Ltd. controls an 80%
equity interest in RGI, and Rockefeller Family interests hold the remaining
20%. As of June 30, 1996 the Borrower owned the Property. In December
1994 the Company 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. was merged with and into the
Company and RCPI Trust acquired all of the assets and liabilities of the
Company. On July 17, 1996, RCPI Trust acquired the Property from the
Borrower pursuant to the Second Amended Joint Plan of Reorganization of the
Borrower. See Note 7.
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
Company's only significant source of income prior to its acquisition of the
Property on July 17, 1996 was interest received on the mortgage loan from
the Borrower. As a result of these filings, the Company did not receive
any interest payments from the Borrower during the quarter ended June 30,
1996. 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 Company 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 RCPI Trust.
MERGER AGREEMENT
Pursuant to an Agreement and Plan of Merger, dated as of November 7, 1995,
entered into between the Company and a group of investors (the "Investor
Group") the members of which are Exor Group S.A., David Rockefeller,
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 Company and the Company became a
subsidiary of RCPI Holdings Inc., a Delaware corporation controlled by the
Investor Group. See Note 7.
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 Company (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 would accrue
interest at the rate of 10% per annum (compounded quarterly) and be
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
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<PAGE>
Rate Notes.
The Company had borrowed a total of $57.9 million under the GSMC Facility
as of June 30, 1996 and a total of $63.7 million as of July 15, 1996. The
total amount borrowed including accrued interest was repaid on July 17,
1996.
Subsequent to December 31, 1994 and prior to the execution and delivery of
the Merger Agreement, the Company 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. The
appraisal, at that time, gave the clearest indication as to the value of
the Property. However, the terms of the Merger Agreement could be
considered to indicate that the market value of the Property now may be
less than the carrying value of the mortgage loan as reported in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Accordingly, as reported in the Company's quarterly report for the quarter
ended September 30, 1995, the Company reflected a valuation reserve,
totaling $74 million, to reduce the carrying value of the mortgage loan to
reflect the economics of the transactions contemplated by the Merger
Agreement. During the quarter ended September 30, 1995, the Company
recorded certain transaction costs and expenses aggregating $25.3 million,
which reflected the breakup fee related to the termination of a Combination
Agreement, professional fees, and certain liquidation expenses and other
liabilities specifically provided for in the Merger Agreement. During the
quarter ended June 30, 1996, this liability was adjusted to more accurately
reflect the amounts actually paid upon consummation of the Merger and
amounts remaining unpaid. As a result, a credit of $6.6 million is
reflected in total expenses for the quarter ended June 30, 1996.
2. LOAN RECEIVABLE 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 Company 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 Company 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. The Company further reduced the carrying value of the
mortgage loan by $74 million 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 Company limited
recognition of income on the mortgage loan for the year ended December 31,
1995 and the six months ended June 30, 1996 to the cash actually received
from the Borrower during this period.
The mortgage loan was secured by leasehold mortgages on the entire 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
has assigned to the Company, as security for repayment of the mortgage
loan, the Borrower's rights to collect certain rents with respect to the
Property.
See Note 1 for discussion of the status of the Borrower.
Loan interest income of the Company for the six months ended June 30, 1996
and 1995 is presented on the cash basis of accounting.
3. DEBT
CONVERTIBLE DEBENTURES
Interest expense recognized on the Convertible Debentures is based on the
average yields to the maturity date, December 31, 2000. The average yields
are computed (using the interest method with semiannual compounding) by (1)
combining the differing coupon rates on the Current Coupon Convertible
Debentures and (2) amortizing the original issue discount related to the
Zero Coupon Convertible Debentures. The resulting effective annual
interest rates are 9.23% and 10.23% for the Current Coupon and Zero Coupon
Convertible Debentures, respectively. The Current Coupon Convertible
Debentures have been called for redemption on August 28, 1996. See Note 7.
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 June 30, 1996 the interest
rate in effect was 9.50%. The average interest rate for
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ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
the six months ended June 30, 1996 was 9.61%. 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 $106,296,312
of outstanding principal and accrued interest at June 30, 1996 was prepaid
on July 17, 1996. The remaining outstanding principal on July 17, 1996
was $10 million.
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 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
Company separately issued to Whitehall 5,349,541 SARs which remain
outstanding as of June 30, 1996. The SARs 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 ($7.87 at June 30, 1996) minus the exercise price per share of the
Warrants into which the SARs were exchangeable ($5 per Warrant) times the
number of Warrants into which the SARs are exchangeable (5,349,541). All
outstanding Warrants and SARS were cancelled in connection with the Merger.
See Note 7.
Due to the increase in the market price of the Company's Common Stock
during the quarter ended March 31, 1996, the Company was required to
increase its SARs liability and record a current noncash charge to earnings
of $1,907,000 in the first quarter of 1996. An additional $22,000 was
recorded during the quarter ended June 30, 1996. The Company 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 by the
Company.
GSMC FACILITY
The Merger Agreement provided that GSMC would make a line of credit
available to the Company 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 accrue interest at the rate of 10% per annum
(compounded quarterly) and be 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 Company
had borrowed a total of $57.9 million under the GSMC Facility as of June
30, 1996 and a total of $63.7 million as of July 15, 1996. The total
amount borrowed including accrued interest was repaid on July 17, 1996.
INTEREST RATE SWAP AGREEMENTS
In connection with its short term floating rate debt, the Company entered
into interest rate swap agreements with financial institutions that were
intended to fix a portion of the Company's interest rate risk on floating
rate debt. The Company pays a fixed rate of interest semi-annually and
receives a variable rate of interest semi-annually based on 180-day LIBOR.
In connection with the issuance of the Floating Rate Notes and 14%
Debentures in December 1994, the Company retired certain of its interest
rate swap agreements. The amount to be paid or received from interest rate
swap
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ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
agreements is accrued as floating interest rates are reset semi-annually.
The Company presents the financial effect of interest rate swap agreements
as a component of interest expense on Floating Rate Notes. Approximately
90% of the Company's exposure to interest rate fluctuations on its Floating
Rate Notes was hedged by interest rate swap agreements at June 30, 1996.
The $105,000,000 notional amount of interest rate swap agreements
outstanding at June 30, 1996 represents three contracts, each expiring
during 1998.
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 June 30, 1996 and 1995 are as follows:
1996 1995
----------- ------------
Net notional principal $105,000,00 $105,000,000
----------- ------------
----------- ------------
Weighted average interest rate
of net swaps outstanding 4.151% 3.133%
----------- ------------
----------- ------------
Annualized net payment $ 4,358,000 $ 3,290,000
----------- ------------
----------- ------------
The settlement value of all swap agreements outstanding at June 30, 1996,
based on information supplied by the counter parties to the swap contracts,
was a liability for the Company of approximately $6.7 million as compared
to $10.4 million at June 30, 1995.
4. NET LOSS PER SHARE AND DISTRIBUTIONS
Net loss per share is based upon 38,260,704 average shares of Common Stock
outstanding during the quarters and six months ended June 30, 1996 and
1995, respectively. For the quarters and six months ended June 30, 1996
and 1995, 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. Under the terms of the Merger Agreement,
the Company was prohibited from paying dividends unless required to do so
to maintain real estate investment trust ("REIT") status.
5. 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 Company 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 Company's
motion to dismiss the complaint on September 21, 1995. On October 10,
1995, the Company filed an answer to the complaint which denied the
plaintiffs' allegations and asserted numerous affirmative defenses. The
Company 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.
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ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (Cont's)
(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 Company's
Common Stock between March 20, 1995 and May 10, 1995. The complaints
allege that the Company 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 Company 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 Company'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
Company'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 Company'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 Company 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 Company's Board of Directors appointed a special committee of
the Board to review the plaintiff's February 3, 1995 pre-suit demand that
the Company's Board of Directors institute litigation on the Company'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 Company's Board of Directors had approved the proposed
Merger without considering the value to the Company 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 Company's Board of Directors that the plaintiff's pre-suit demand be
rejected because it would not be in the best interest of the Company 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 Company'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 Company 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
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (Cont's)
(UNAUDITED)
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 July 31, 1995, L.L. Capital Partners, L.P. commenced an action against
the Company in the United States District Court in the Southern District of
New York. The plaintiff alleges that, in a Company prospectus dated
November 3, 1993, the Company 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. In September 1995,
counsel for the Company filed a motion to dismiss this action for failure
to state a claim. On April 16, 1996, the Court granted the Company's
motion and dismissed the complaint. On May 3, 1996, plaintiff moved to
vacate the Court's dismissal and for leave to file an Amended Complaint.
On June 19, 1996, the Company moved to dismiss the Amended Complaint for
failure to state a claim.
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 Company
who have been or will be adversely affected by the Combination Agreement.
All of the complaints allege that the Company'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 February 28, 1996, Zell/Merrill Lynch Real Estate Opportunity Partners
Limited Partnership III ("ZML") filed a complaint and a motion for a
preliminary injunction against the Company. The action is captioned
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED PARTNERSHIP III
V. ROCKEFELLER CENTER PROPERTIES, INC., 96 Civ. 1445, and is pending in the
United States Federal District Court for the Southern District of New York
(the "SDNY action"). The complaint alleges that the Company breached the
investment agreement dated as of August 18, 1995, between the Company and
ZML (the "ZML Investment Agreement") by failing to sell to ZML 1,788,908
shares of Common Stock and by failing to appoint a person designated by ZML
to the Company's Board of Directors. ZML seeks specific performance of the
ZML Investment Agreement. On March 21, 1996, the Court denied ZML's motion
for injunctive relief. The Company intends to vigorously contest the
action and the Company does not believe that ZML is entitled to the relief
requested. On April 3, 1996, ZML informed the Company that ZML would move
to dismiss the action on the basis of a purported lack of federal subject
matter jurisdiction. On April 3, 1996, ZML also filed an action in the
Circuit Court of Cook County, Illinois, captioned ZELL/MERRILL LYNCH REAL
ESTATE OPPORTUNITY PARTNERS LIMITED PARTNERSHIP III V. ROCKEFELLER CENTER
PROPERTIES, INC., ET AL. Case No. 96 CH 03341, alleging claims that are
virtually identical to those alleged in ZML's February 28, 1996, complaint
(the "ZML Illinois action"). In addition, on April 3, 1996, EOH filed a
separate action in the Circuit Court of Cook County, Illinois, captioned
EQUITY OFFICE HOLDINGS, L.L.C. V. ROCKEFELLER CENTER PROPERTIES, INC., Case
No. 96 CH 03342, for declaratory judgment that the Company is obligated to
pay EOH a break-up fee and reimburse certain expenses in accordance with
the terms of the Combination Agreement (the "EOH Illinois action"). On
April 4, 1996, the Company filed an action in the Supreme Court in the
State of New York, New York County, captioned ROCKEFELLER CENTER
PROPERTIES, INC., V. ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS
LIMITED PARTNERSHIP III AND EQUITY OFFICE HOLDINGS L.L.C., Index No.
106176/96, seeking a declaratory judgment
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (Cont's)
(UNAUDITED)
that the Company has not breached the ZML Investment Agreement and that the
Company is not obligated to pay EOH or any of its affiliates a break-up fee
or reimburse certain expenses under the terms of the Combination Agreement
(the "New York State action"). The Company also seeks monetary damages in
an amount to be determined at trial.
On May 3, 1996, the Company removed the ZML Illinois action to the United
States District Court for the Northern District of Illinois. On June 17,
1996, the Circuit Court of Cook County entered an order dismissing the EOH
Illinois action for lack of personal jurisdiction over the Company. On
July 18, 1996, the parties entered a stipulation of dismissal without
prejudice of the ZML Illinois action. ZML's motion to dismiss the SDNY
action for lack of federal subject matter jurisdiction, which was filed on
April 3, 1996, is still pending. In the New York State action, the parties
entered a stipulation extending the time for ZML and EOH to answer or
otherwise respond to the Complaint to 14 days after the earlier of (1)
enter of an order dismissing the SDNY action, or (2) August 30, 1996.
The Company does not expect the outcome of the above litigation to have a
material effect on the financial condition of the Company.
6. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information concerning the results of operations of
the Property provided by the Borrower is presented below:
($ In Thousands)
Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------- -------- --------- ---------
Gross Revenue: $51,496 $51,453 $103,302 $104,100
Less:
Operating expenses (39,573) (37,175) (81,135) (77,480)
Interest expense, net - (14,031) - (45,038)
Reorganization items (1,507) (263) (1,265) (263)
------- -------- --------- ---------
Net Income (Loss) $10,416 ($16) $20,902 ($18,681)
------- -------- --------- ---------
------- -------- --------- ---------
7. SUBSEQUENT EVENTS
Pursuant to the Merger Agreement, which was approved by the stockholders of
the Company on March 25, 1996, on July 10, 1996 (the "Effective Date"),
RCPI Merger Inc., a Delaware corporation formed by members of the Investor
Group ("RCPI Merger"), was merged with and into the Company pursuant to the
Merger Agreement (the "Merger"), and the Company was the surviving
corporation in such Merger. As a result of the consummation of the Merger
on the Effective Date, each share of the Company'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 Company or any of its
subsidiaries, (ii) shares of Common Stock held by RCPI Holdings, a Delaware
corporation and holder of 100% of the outstanding capital stock of RCPI
Merger, 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 Company is now held of record by RCPI
Holdings and all of the Warrants and SARs have been cancelled. Also on
July 10, 1996 the Company
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(UNAUDITED)
transferred all of its assets and liabilities to RCPI Trust and RCPI Trust
became the successor to the Company under the Indenture governing the
Convertible Debentures.
On July 17, 1996, the effective date of the Chapter 11 Plan, RCPI Trust, as
the Company'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, RCPI Trust
sold 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 Rockefeller Center 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.
Also on July 17, 1996, RCPI Trust repaid in full the outstanding balance of
$63,668,036 under the GSMC Facility, and RCPI Trust prepaid $106,296,312 of
principal and interest to reduce the amount of Floating Rate Notes
outstanding.
On July 29, 1996, RCPI Trust called the Current Coupon Convertible
Debentures due 2000 for redemption on August 28, 1996. As of August 28,
1996, the $213,170,000 principal amount outstanding of Current Coupon
Convertible Debentures will become due and payable and interest thereon
shall cease to accrue. A total of $18,320,777 of interest will be paid to
holders of the Current Coupon Convertible Debentures due 2000 who properly
surrender their Debentures for redemption.
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES--THE COMPANY
The discussion below relates primarily to the Company's financial condition and
results of operations for the first six months of 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 Company's Annual Report on Form 10-K for the
year ended December 31, 1995 for a more complete understanding of the Company's
financial condition and results of operations.
The primary source of liquidity for the Company 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 has assigned to the Company, as security
for repayment of the mortgage loan, the Borrower's rights to collect certain
rents with respect to the Property.
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 Company's only
significant source of income prior to its acquisition of the Property on July
17, 1996 was interest received on the mortgage loan from the Borrower. As a
result of these filings the Company did not receive interest payments from the
Borrower for the quarter ended June 30, 1996. 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 Company
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 RCPI Trust.
Pursuant to an Agreement and Plan of Merger, dated as of November 7, 1995,
entered into between the Company and a group of investors (the "Investor Group")
the members of which are Exor Group S.A., David Rockefeller, 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 Company and the Company became a
subsidiary of RCPI Holdings Inc., a Delaware corporation controlled by the
Investor Group.
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 Company (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 would accrue interest at the rate of 10% per annum
(compounded quarterly) and be prepayable at any time without penalty. If
borrowings under the GSMC Facility had not been repaid by the earlier of May 31,
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 Company had borrowed a total
of $57.9 million under the GSMC Facility as of June 30, 1996 and a total of
$63.7 million as of July 15, 1996. The total amount borrowed including accrued
interest was repaid on July 17, 1996.
MORTGAGE LOAN INTEREST INCOME
Due to the significant uncertainties created by the Borrower's Chapter 11
filings, the Company limited recognition of income on the mortgage loan for the
six months ended June 30, 1996 and 1995, to the cash actually received from the
Borrower during these periods. When the Company drew down the $50 million
-14-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
under letters of credit posted by the Borrower's parents in the second quarter
of 1995, these cash receipts were applied to reduce the carrying value of the
mortgage loan to $1.25 billion.
During the six months ended June 30, 1996 and 1995, cash generated from interest
income on the mortgage loan was $0 and $20,339,000 respectively. The mortgage
loan agreement, enforcement of which was stayed during the pendency of the
Borrower's Chapter 11 cases, provided for base interest to be paid by the
Borrower in accordance with a schedule requiring the Borrower to pay on November
30 of each year that portion of the base interest payment due for the whole year
equal to the interest that was payable during such year with respect to the
Current Coupon Convertible Debentures of the Company due 2000 and the remainder
quarterly on February 28, May 31, August 31 and November 30 of each such year.
The mortgage loan also provided for Additional Interest (as defined therein) to
be earned by the Company under certain circumstances. No Additional Interest
has been earned by the Company to date.
OTHER INTEREST INCOME
Other interest income received during the six months ended June 30, 1996 and
1995 was $36,000 and $249,000, respectively. The decrease in other interest
income received of $213,000 was due to lower interest earnings on invested funds
due to decreased cash available for investment. The Company's short term
investments are highly liquid and have the highest credit rating with a maturity
of less than six months.
DEBT
Interest payments on the Floating Rate Notes are made quarterly on March 1, June
1, September 1 and December 1 of each year. For the six months ended June 30,
1996 and 1995 the Company paid $5,718,000 and $6,653,000, respectively, of
interest on the Floating Rate Notes and $1,908,000 and $2,109,000, respectively,
of interest on its swap agreements for a total of $7,626,000 and $8,762,000,
respectively, paid in floating rate interest. Interest on the 14% Debentures is
payable semi-annually on June 2 and December 2, of each year. The Company paid
$5,308,000 and $4,521,000 of interest on the 14% Debentures during the six
months ended June 30, 1996 and 1995, respectively. On July 15, 1996, the
Company paid $639,394.67 to reduce its outstanding swap obligations and on July
17, RCPI Trust prepaid $106,296,312 of principal and accrued interest to reduce
the outstanding amount of Floating Rate Notes. See Note 7 to Financial
Statements
Coupon payments on outstanding Current Coupon Convertible Debentures are made
annually on December 31. However, under the terms of the Indenture, if December
31 is not a business day, interest will be paid on the next business day which
was the case for the December 31, 1995 payment. Cash interest of $27,712,000 on
the Current Coupon Convertible Debentures was paid on January 2, 1996. The
interest rate payable on the $213,170,000 Current Coupon Convertible Debentures
outstanding as of June 30, 1996 is 13% per annum. Prior to January 1, 1995 this
interest rate was 8% per annum. The Company has not repurchased any of its
Convertible Debentures since 1992 and, under the terms of the 14% Debentures and
Floating Rate Notes, the Company was not permitted to repurchase any of its
Convertible Debentures. On July 29, 1996, RCPI Trust called the Current Coupon
Convertible Debentures due 2000 for redemption on August 28, 1996. As of August
28, 1996, the $213,170,000 principal amount outstanding of Current Coupon
Convertible Debentures will become due and payable and interest thereon shall
cease to accrue. A total of $18,320,777 of interest will be paid to holders of
the Current Coupon Convertible Debentures due 2000 who properly surrender their
Debentures for redemption. See Note 7 to Financial Statements.
NON-DISTURBANCE AGREEMENTS
The Company executed non-disturbance agreements with tenants that occupy at
least a full floor in any of the buildings comprising a part of the Property and
certain other tenants upon request. Such agreements provided that in the event
of a foreclosure of the mortgage loan, such tenant's possession of space within
the Property will not be disturbed so long as such tenant is in compliance with
the terms of its lease. In addition, certain tenants, under their leases, may
offset fixed rent otherwise payable to the Borrower (up to specified maximum
amounts) in the event that the Borrower fails to pay for alterations provided
for in their leases. In the event the aggregate amount that such tenants may
offset (the "Rent Offset Amount") exceeded $37.5 million, an agreement with the
Borrower (enforcement of which was stayed by the pendency of the Borrower's
Chapter
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
11 Cases) required the Borrower to maintain credit support facilities to provide
additional security in an amount equal to at least 50% of the excess. As of
June 30, 1996, the total Rent Offset Amount was below the $37.5 million
threshold and, accordingly, the Borrower is not required to maintain credit
support facilities for this Rent Offset Amount.
RESULTS OF OPERATIONS--THE COMPANY
The Company's principal source of revenue during the six-month period ended June
30, 1996 was loan interest income recognized on the mortgage loan. As discussed
in Note 1 of the Notes to Financial Statements, loan interest income was
recognized only to the extent of loan interest actually received during the
six-month periods ended June 30, 1996 ($0) and 1995 ($29,339,000).
Other income for the six months ended March 31, 1996, decreased by $210,000 or
91.9%, from that of the comparable prior year period as a result of decreased
cash available for investment.
Interest expense on Current Coupon Convertible Debentures for the six months
ended June 30, 1996 decreased by $214,000 or 1.9%, over that of the comparable
prior year period, principally as a result of the recognition of interest
expense according to the effective interest method by which interest is
calculated on the basis of the average interest expense on the Current Coupon
Convertible Debentures through the maturity date, December 31, 2000.
Interest expense on Zero Coupon Convertible Debentures for the six months ended
June 30, 1996 increased by $1,667,000 or 10.2%, over that of the comparable
prior year period, principally as a result of accruals of interest on the
increasing accretion of the principal amount of the Zero Coupon Convertible
Debentures. Such accruals of interest grow at the annual rate of 10.2%.
Interest expense on the Floating Rate Notes decreased by $1,885,000 or 19.8%,
from that of the comparable prior year period principally due to the decrease in
interest rates and a lower principal balance outstanding between the first six
months of 1996 and 1995.
GSMC Facility interest expense during the six months ended June 30, 1996 was
$2,379,000 which represents interest accrued on amounts outstanding under the
GSMC Facility. (See Note 3 of the Notes to Financial Statements.)
Combined interest expense on all debt totaled $44,503,000 and $42,568,000 for
each of the six-month periods ended June 30, 1996 and 1995, respectively. These
amounts accounted for 95.5% and 92.4% of total expenses in each of the
respective periods.
General and administrative expenses for the six months ended June 30, 1996
increased by $1,443,000 over that of the comparable prior year period,
principally due to increased legal fees, investor relations related expenses and
financial advisory fees, in turn principally due to actions taken as a result of
the Borrower's Chapter 11 filings.
Amortization of deferred debt issuance costs for the six months ended June 30,
1996 increased by $33,000 or 1.9% due to the deferred debt issuance costs
relating to the Floating Rate Notes being amortized using the effective interest
method.
The stock appreciation rights liability increased by $1,929,000 during the six
months ended June 30, 1996, as compared to a decrease of $1,428,000 during the
same period in 1995. The Company is required to adjust the SARs liability to
reflect the aggregate principal amount of 14% Debentures that would have been
issuable upon exchange of the SARs on June 30, 1996 and 1995. The large
variance is the result of the varying stock prices at June 30, 1996 and 1995,
which were $7.87 and $5.22, respectively. All outstanding SARs and Warrants
were cancelled on July 10, 1996, in connection with the Merger. See Note 7 to
Financial Statements.
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
During the six months ended June 30, 1996 the Company incurred $398,000 of
expenses related to the March 25, 1996 special meeting of stockholders.
During the quarter ended September 30, 1995, the Company recorded certain
transaction costs and expenses aggregating $25.3 million, which reflected the
breakup fee related to the termination of a Combination Agreement, professional
fees, and certain liquidation expenses and other liabilities specifically
provided for in the Merger Agreement. During the quarter ended June 30, 1996,
this liability was adjusted to more accurately reflect the amounts actually paid
upon consummation of the Merger and amounts remaining unpaid. As a result, a
credit of $6.6 million is reflected in total expenses for the quarter ended June
30, 1996.
Net loss during the six months ended June 30, 1996 and 1995 was $46,588,000 and
$25,296,000, respectively, reflecting the matters discussed above.
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 Company
pursuant to the Merger Agreement (the "Merger"), and the Company was the
surviving corporation in such Merger. As a result of the consummation of the
Merger on the Effective Date, each share of the Company 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 Company or any of its subsidiaries,
(ii) shares of Common Stock held by RCPI Holdings, a Delaware corporation and
holder of 100% of the outstanding capital stock of RCPI Merger, 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 Company is now held
of record by RCPI Holdings and all of the Warrants and SARs have been cancelled.
Also on July 10, 1996 the Company transferred all of its assets and liabilities
to RCPI Trust and RCPI Trust became the successor to the Company under the
Indenture governing the Convertible Debentures.
On July 17, 1996, the effective date of the Chapter 11 Plan, RCPI Trust, as the
Company'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, RCPI Trust sold 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
Rockefeller Center 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 PROPERTY
The financial information and analysis included in the following discussions of
the "Financial Condition and Outlook - The Property", "Results of Operations -
The Property", and "Cash Flow - The Property" have been furnished to the Company
by the Debtors.
PROCEEDINGS UNDER CHAPTER 11, PLAN OF REORGANIZATION
On May 11, 1995 (the "Petition Date"), Rockefeller Center Properties ("RCP") and
its affiliate, RCP Associates (collectively, the "Debtors", previously referred
to as the Borrower) filed voluntary petitions for reorganization under Chapter
11 (the "Chapter 11 Cases"), title 11 of the United States Code, as amended (the
"Bankruptcy Code") in the United States Bankruptcy Court of the Southern
District of New York (the "Bankruptcy Court"). The Chapter 11 Cases were
assigned case numbers 95 B 42089 and 95 B 42088 (PBA), respectively. The
separate Chapter 11 Cases of the Debtors were consolidated for procedural
purposes and were jointly administered pursuant to an order of the Bankruptcy
Court. A statutory unsecured creditors' committee was appointed for the
Debtors.
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
Subsequent to the Petition Date, the Debtors continued in possession of their
properties and operated and managed their businesses as debtors-in-possession
pursuant to Sections 1107 and 1108 of the Bankruptcy Code. The Debtors have
sought and obtained orders from the Bankruptcy Court intended to stabilize new
business and minimize the disruption caused by the Chapter 11 proceedings,
including orders: (i) authorizing the Debtors to pay certain prepetition
liabilities, wages, and other employee obligations and (ii) approving the use of
cash collateral.
On September 12, 1995, the Debtors reported to the Bankruptcy Court that they
intended to transfer the Property to the Company. On February 9, 1996,
Rockefeller Group, Inc. ("RGI") and the Debtors filed a Second Amended Joint
Plan of Reorganization, as Modified, dated February 8, 1996 (the "Plan") calling
for the transfer of the Property to the Company or an entity designated by the
Company. Following the transfer, the Debtors were released from all
liabilities under the mortgage payable to the Company. Most prepetition claims
of RGI and its affiliates against the Debtors were contributed to the capital of
the Debtors or have been or will be paid by RGI. Virtually all other creditors'
prepetition claims against the Debtors have been or will be paid in full,
with interest.
The Plan provides for an account to be established with $20 million contributed
by or on behalf of the Company. The balance of funds required to satisfy the
obligations will be paid by RGI. This account will pay for unpaid prepetition
obligations and a limited number of postpetition obligations of the Debtors.
Substantially all other postpetition obligations of the Debtors have been or
will be paid from the postpetition cash flow of the Property or other sources
not affiliated with the Debtors or RGI. The Plan was confirmed by the
Bankruptcy Court on May 29, 1996 and became effective on July 17, 1996 upon
transfer of the Property by the Borrower to RCPI Trust.
On October 30, 1995, the Bankruptcy Court approved an $80 million Debtor-In-
Possession Revolving Credit Agreement (the "Facility") to fund tenant
improvements, leasing commissions, required capital expenditures, and other
permitted working capital needs of the Debtors. A total of $40 million of the
Facility could be used in the form of letters of credit. The Facility was
secured by a first mortgage on the Property senior to the existing mortgage
held by the Company. The Facility matured on the earlier of December 31, 1996
or upon the substantial consummation of a plan of reorganization. As of
June 30, 1996, no drawdowns against the Facility had been taken; however, a
total of approximately $11 million in letters of credit had been issued
against the Facility. On July 17, 1996, the Debtors became the obligors under
$600,000 of such letters of credit and RCPI Trust became the obligor under
the remaining approximately $10.4 million in letters of credit.
The financial statements of the Debtors, from which this information is derived,
have been prepared on a going concern basis and reflect the combined historical
cost basis of the Debtors in their assets and liabilities. The transfer of the
Property and the related release of the mortgage loan and cancellation of the
indebtedness to the Company and RGI and its affiliates will result in
substantial non-cash gains to the Debtors. Further, upon consummation of these
transactions, the Debtors will either cease their business activities or control
of the Debtors will vest with parties other than RGI. These conditions raised
substantial doubt as to the ability of the Debtors to continue as going
concerns. The financial statements of the Debtors do not include any
adjustments which would be required to reflect the transfer of the Property to
the Company, the wind-down of the affairs of the Debtors, or any change in
control which may occur with respect to the Debtors.
-18-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
RESULTS OF OPERATIONS - THE PROPERTY
The operating results of the Property during the quarter and six months ended
June 30, 1996 and 1995 are presented in summary form in the table below:
<TABLE>
<CAPTION>
($ In Thousands)
(Unaudited)
Quarters Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Gross Revenue:
Fixed and percentage rents $43,888 $43,719 $86,974 $87,821
Operating and real estate tax escalation 3,172 3,165 7,554 7,466
Consideration revenues 131 373 204 913
Sales and service revenues 4,305 4,196 8,570 7,900
------- ------- ------- -------
51,496 51,453 103,302 104,100
------- ------- ------- -------
Operating Expenses:
Real estate taxes 8,575 7,101 16,967 16,923
Utilities 3,977 3,633 9,819 8,402
Maintenance and engineering 7,370 7,844 14,507 15,673
Other operating expenses 8,994 9,822 18,448 19,154
Depreciation and amortization 7,838 6,706 15,675 13,416
Management fee 1,875 679 3,750 1,357
General and administrative 944 1,390 1,969 2,555
------- ------- ------- -------
39,573 37,175 81,135 77,480
------- ------- ------- -------
Earnings before interest and reorganization
items 11,923 14,278 22,167 26,620
Interest expense, net - 14,031 - 45,038
------- ------- ------- -------
Earnings before organization items 11,923 247 22,167 (18,418)
Reorganization items:
Professional fees and expenses 1,764 301 1,863 301
Debtors-in-possession financing fees 116 173
Interest income (373) (38) (771) (38)
------- ------- ------- -------
Total reorganization items 1,507 263 1,265 263
------- ------- ------- -------
Net Income (Loss) $10,416 ($16) $20,902 ($18,681)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The gross revenue of the Property for the six months ended June 30, 1996
decreased by $798,000 or 0.8% from the comparable prior-year period. This
decrease in gross revenue was a result of lower fixed rent and decreased
consideration revenue. This decrease was offset partially by increased sales
and service revenue. The decrease in fixed rent reflects the increase in the
vacancy rate from 11.7% to 14.3%. Consideration revenue consists principally of
one-time payments negotiated by tenants for the right to cancel their leases
prior to scheduled termination dates. Sales and service revenue increased
primarily as a result of greater overtime air-conditioning sales.
-19-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
The following table shows the occupancy rates for the Property at specified
dates:
September 30, 1994 - 90.4% September 30, 1995 - 89.1%
December 31, 1994 - 90.2% December 31, 1995 - 86.3%
March 31, 1995 - 90.1% March 31, 1996 - 87.2%
June 30, 1995 - 88.3% June 30, 1996 - 85.9%
The June 30, 1996 occupancy rate reflected a total of 1,064,000 square feet of
vacant space resulting in large measure from the significant turnover of leases
which expired on September 30, 1994. Leasing activity at the Property was also
adversely affected by the Debtors' filing of the Chapter 11 Cases. In addition,
a total of 184,000 square feet will become available during the remainder of
1996. Releasing the space will represent a significant challenge which may
involve ongoing high levels of expenditures for tenant work and concessions.
During the six months ended June 30, 1996, 74 leases covering approximately
248,000 square feet of office, retail, and storage space were concluded and took
effect at net effective annual fixed rents averaging $31.02 per square foot.
The net effective annual rental rates for office space, which accounted for
approximately 196,000 square feet of the total area leased, averaged $26.95 per
square foot. This amount compared to a net effective rental rate of $26.40 per
square foot for office space leases signed during all of 1995. Net effective
annual rental rates reflect the present value of base rental payments less the
current and future expenditures for tenant improvements, concessions, and
brokerage commissions. The gross rental rates for the office space leases that
were concluded and took effect during the six months ended June 30, 1996
averaged $35.34 per square foot (compared with $30.44 per square foot for office
space leases signed during all of 1995). The actual rate at which each lease
was executed depended upon its location within the Property, type of space
leased, length of lease term, and other factors. Of the approximately 196,000
square feet of office space leased during the six months ended June 30, 1996,
approximately 39,000 square feet represented renewals of existing tenants at an
average gross rental rate of $32.30 per square foot.
The following table shows selected lease expiration information for the Property
as of June 30, 1996. Area, as presented in the following table and as 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 rents and rental income will be affected significantly
by market conditions at the time and by the terms at which the Debtors can then
lease space.
NUMBER OF PERCENTAGE OF
YEAR LEASES EXPIRING AREA (SQ.FT.) TOTAL RENTABLE AREA
---- --------------- ------------- -------------------
1996 66 183,768 2.5%
1997 59 165,973 2.2%
1998 69 266,668 3.6%
1999 62 208,214 2.8%
2000 68 480,391 6.5%
2001 34 94,165 1.3%
2002 23 168,784 2.3%
2003 27 111,772 1.5%
2004 77 475,568 6.4%
2005 30 352,368 4.8%
2006 25 242,165 3.3%
2007 8 86,463 1.2%
2008 9 197,084 2.7%
2009 49 595,133 8.0%
2010 7 122,586 1.7%
2011 5 113,454 1.5%
-20-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
2012 4 310,927 4.2%
2013 2 67,412 0.9%
2014 3 386,564 5.2%
2015 3 16,280 0.2%
2016 3 7,485 0.1%
2017 1 51,088 0.7%
2019 1 2,266 0.0%
2020 3 50,544 0.7%
2022 4 1,516,733 20.5%
Vacant space N/A 1,064,176 14.4%
Space occupied by the Debtors N/A 75,456 1.0%
--- ---------
642 7,413,487 100.0%
------ --------- -------
------ --------- -------
During the six months ended June 30, 1996, the operating expenses of the
Property increased by $ 3.7 million or 4.7% from the comparable prior-year
period. This increase was primarily the result of increased management fees
($2.4 million), higher depreciation and amortization (increase of $2.3 million),
and increased utility costs ($1.4 million). These increases were offset
partially by lower general, administrative and other operating expenses ($1.3
million) and decreased maintenance and engineering expenses ($1.2 million).
Management fees increased as a result of a renegotiated fee schedule.
Depreciation and amortization charges increased as a result of a higher fixed
asset base which included expenditures required by the Loan Agreement, other
capital expenditures, and improvements to tenant spaces necessitated by lease
commitments. The higher utility costs reflected an increase in steam consumption
as a result of the cold winter. The reduction in maintenance and engineering
costs was attributable to decreased building maintenance expenditures and lower
labor costs as a result of a strike by certain union employees. General
administrative and other expenditures decreased due to a general reduction in
expenses.
As a result of the foregoing, earnings before interest and reorganization items
for the six months ended June 30, 1996 decreased $4.5 million or 16.9%.
Interest expense, net during the six months ended June 30, 1996, decreased $45.0
million. Interest expense accruals ceased on May 11, 1995 as a result of the
bankruptcy proceedings.
CASH FLOW-THE PROPERTY
Because of the cessation of interest payments to the Company after May 11, 1995
as a result of the bankruptcy proceedings, for the six months ended June 30,
1996, the Property experienced an operating cash surplus before reorganization
items of $23.3 million. During the six months ended June 30, 1995, the Property
experienced an operating cash deficit amounting to $6.7 million after interest
payments of $20.3 million to the Company. This increase of $30.0 million in the
operating cash flow surplus primarily reflected a decrease in interest paid to
the Company ($20.3 million), a net decrease in lease incentives associated with
new and renewal tenants ($11.0 million), and a real estate tax refund received
($9.7 million). These factors were offset partially by decreased earnings
before interest ($4.5 million) and lower levels of net working capital ($6.2
million).
-21-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont'd)
The Debtors also expended funds for capital improvements to the Property, tenant
improvements, and leasing commissions as follows:
(in thousands) Six Months Ended June 30
------------------------
1996 1995
---- ----
Tenant improvements and Leasing commissions $10,898 $33,946
Capital improvements 7,716 5,091
Cash held in escrow for lease obligations (2,981) 783
------- -------
$15,633 $39,820
The funds expended for tenant improvements for the six months ended June 30,
1995 resulted in large measure from the significant turnover of leases which
expired on September 30, 1994.
-22-
<PAGE>
Supplemental information provided by the Debtors.
ROCKEFELLER CENTER PROPERTIES, INC. AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED BALANCE SHEET
(In Thousands)
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(UNAUDITED)
ASSETS
- ------
Current assets:
Cash and cash equivalents $32,373 $26,171
Cash held in escrow for lease obligations 318 3,299
Accounts receivable, less allowance for
doubtful accounts of $2,577 and $2,607 17,026 9,307
Due from RGI affiliates 2,421 2,205
Real estate tax refund receivable - 9,735
Other current assets 753 1,132
--------- ---------
52,891 51,849
Fixed assets, at cost:
Land 402,419 402,419
Buildings 515,378 510,716
Furniture, fixtures and equipment 27,198 26,813
--------- ---------
944,995 939,948
Less: Accumulated depreciation (237,403) (229,021)
--------- ---------
707,592 710,927
Deferred renting expenses, less accumulated
amortization of $32,618 and $30,978 150,640 148,879
Lease incentives 84,142 72,500
Other assets 2,765 2,892
--------- ---------
Total assets $998,030 $987,047
--------- ---------
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL DEFICIENCY:
- --------------------------------------------
Current liabilities not subject to
compromise:
Accounts payable and accrued
expenses $ 3,142 $11,822
Due to RGI affiliates 464 2,238
Liabilities subject to compromise 1,337,613 1,841,114
Partners' capital deficiency (343,189) (868,127)
--------- ---------
Total liabilities and partners'
capital deficiency $998,030 $987,047
--------- ---------
--------- ---------
-23-
<PAGE>
Supplemental information provided by the Debtors.
ROCKEFELLER CENTER PROPERTIES, INC. AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED STATEMENT OF CASH FLOWS
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) before reorganization items $11,923 $247 $22,167 ($18,418)
Adjustments to reconcile net income (loss) before
reorganization items to net cash provided by
(used in)
operating activities:
Depreciation and amortization 7,838 6,706 15,675 13,416
Increase in accounts receivable (609) (3,163) (7,402) (1,958)
Decrease (Increase) in other assets 158 (1,429) 506 (1,302)
Decrease in prepaid real estate taxes 9,040 10,694 - -
Increase in lease incentives (5,788) (10,932) (11,642) (22,646)
Decrease in real estate tax refund receivable - - 9,735 -
Decrease in accounts payable and accrued expenses (4,001) (3,947) (5,783) (524)
Amortization of original issue discount and
deferred financing expenses - 2,218 - 3,247
------- ------ ------- -------
Non-current portion of interest expense - 11,843 - 21,475
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES BEFORE REORGANIZATION ITEMS 18,561 12,237 23,256 (6,710)
------- ------ ------- -------
OPERATING CASH USED IN REORGANIZATION ITEMS
Professional fees paid (2,158) (301) (2,192) (301)
Interest income 373 38 771 38
------- ------ ------- -------
(1,785) (263) (1,421) (263)
------- ------ ------- -------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 16,776 11,974 21,835 (6,973)
------- ------ ------- -------
CASH FLOWS (USED IN) INVESTING ACTIVITIES:
Capital expenditures (3,091) (2,299) (7,716) (5,091)
Deferred renting expenses paid (4,413) (4,995) (10,898) (33,946)
(Increase) Decrease in cash held in escrow for tenant
lease obligations - (783) 2,981 (783)
Deferred financing expenses paid - (250) - (250)
------- ------ ------- -------
NET CASH (USED IN) INVESTING ACTIVITIES (7,504) (8,327) (15,633) (40,070)
------- ------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from RGI affiliates, principally cash
management system, net - 4,218 - 54,908
------- ------ ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 4,218 - 54,908
------- ------ ------- -------
NET CHANGE IN CASH 9,272 7,865 6,202 7,865
CASH, BEGINNING OF PERIOD 23,101 3 26,171 3
------- ------ ------- -------
CASH, END OF PERIOD $32,373 $7,868 $32,373 $7,868
------- ------ ------- -------
------- ------ ------- -------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense - - - $20,339
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
-24-
<PAGE>
Non-Cash transactions:
During the quarter and six months ended June 30, 1996, the Company adjusted
its retained earnings by $504,036,000 which resulted in a decrease in
liabilities subject to compromise of $503,501,000 a decrease in accrued
expenses of $2,000 and an increase to accounts receivable of $533,000.
-25-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
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
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 Company 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 Company's motion to dismiss the complaint
on September 21, 1995. On October 10, 1995, the Company filed an
answer to the complaint which denied the plaintiffs' allegations and
asserted numerous affirmative defenses. The Company 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 Rockefeller Center Properties, Inc.
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 Company's Common Stock between March 20, 1995 and May 10, 1995.
The complaints allege that the Company 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
Company 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 Company'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
Company'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 Company'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 Company 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
Company's Board of Directors appointed a special committee of the
Board to review the plaintiff's February 3, 1995 pre-suit demand that
the Company's Board of Directors institute litigation on the Company'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.
-26-
<PAGE>
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 Company's Board of Directors had approved
the proposed Merger without considering the value to the Company 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 Company's Board of Directors that the plaintiff's pre-suit
demand be rejected because it would not be in the best interest of the
Company 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 Company'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 Company 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 July 31, 1995, L.L. Capital Partners, L.P. commenced an action
against the Company in the United States District Court in the
Southern District of New York. The plaintiff alleges that, in a
Company prospectus dated November 3, 1993, the Company 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. In September 1995, counsel for the
Company filed a motion to dismiss this action for failure to state a
claim. On April 16, 1996, the Court granted the Company's motion and
dismissed the complaint. On May 3, 1996, plaintiff moved to vacate
the Court's dismissal and for leave to file an Amended Complaint. On
June 19, 1996, the Company moved to dismiss the Amended Complaint for
failure to state a claim.
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 Company who
have been or will be adversely affected by the Combination Agreement.
All of the complaints allege that the Company'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 February 28, 1996, Zell/Merrill Lynch Real Estate Opportunity
Partners Limited Partnership III ("ZML") filed a complaint and a
motion for a preliminary injunction against the Company. The action
is captioned ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS
LIMITED PARTNERSHIP
-27-
<PAGE>
III V. ROCKEFELLER CENTER PROPERTIES, INC., 96 Civ. 1445, and is
pending in the United States Federal District Court for the Southern
District of New York (the "SDNY action"). The complaint alleges that
the Company breached the investment agreement dated as of August 18,
1995, between the Company and ZML (the "ZML Investment Agreement") by
failing to sell to ZML 1,788,908 shares of Common Stock and by failing
to appoint a person designated by ZML to the Company's Board of
Directors. ZML seeks specific performance of the ZML Investment
Agreement. On March 21, 1996, the Court denied ZML's motion for
injunctive relief. The Company intends to vigorously contest the
action and the Company does not believe that ZML is entitled to the
relief requested. On April 3, 1996, ZML informed the Company that ZML
would move to dismiss the action on the basis of a purported lack of
federal subject matter jurisdiction. On April 3, 1996, ZML also filed
an action in the Circuit Court of Cook County, Illinois, captioned
ZELL/MERRILL LYNCH REAL ESTATE OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP III V. ROCKEFELLER CENTER PROPERTIES, INC., ET AL., Case
No. 96 CH 03341, alleging claims that are virtually identical to those
alleged in ZML's February 28, 1996, complaint (the "ZML Illinois
action"). In addition, on April 3, 1996, EOH filed a separate action
in the Circuit Court of Cook County, Illinois, captioned EQUITY OFFICE
HOLDINGS, L.L.C. V. ROCKEFELLER CENTER PROPERTIES, INC., Case No. 96
CH 03342, for declaratory judgment that the Company is obligated to
pay EOH a break-up fee and reimburse certain expenses in accordance
with the terms of the Combination Agreement (the "EOH Illinois
action"). On April 4, 1996, the Company filed an action in the
Supreme Court in the State of New York, New York County, captioned
ROCKEFELLER CENTER PROPERTIES, INC., V. ZELL/MERRILL LYNCH REAL ESTATE
OPPORTUNITY PARTNERS LIMITED PARTNERSHIP III AND EQUITY OFFICE
HOLDINGS L.L.C., Index No. 106176/96, seeking a declaratory judgment
that the Company has not breached the ZML Investment Agreement and
that the Company is not obligated to pay EOH or any of its affiliates
a break-up fee or reimburse certain expenses under the terms of the
Combination Agreement (the "New York State action"). The Company also
seeks monetary damages in an amount to be determined at trial.
On May 3, 1996, the Company removed the ZML Illinois action to the
United States District Court for the Northern District of Illinois.
On June 17, 1996, the Circuit Court of Cook County entered an order
dismissing the EOH Illinois action for lack of personal jurisdiction
over the Company. On July 18, 1996, the parties entered a stipulation
of dismissal without prejudice of the ZML Illinois action. ZML's
motion to dismiss the SDNY action for lack of federal subject matter
jurisdiction, which was filed on April 3, 1996, is still pending. In
the New York State action, the parties entered a stipulation extending
the time for ZML and EOH to answer or otherwise respond to the
Complaint to 14 days after the earlier of (1) enter of an order
dismissing the SDNY action, or (2) August 30, 1996.
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 Company pursuant to the Merger Agreement (the "Merger"),
and the Company was the surviving corporation in such Merger. As a
result of the consummation of the Merger on the Effective Date, each
share of the Company'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 Company 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 Company is now held of
record by RCPI Holdings Inc. and all of the Warrants and SARs have
been cancelled.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
-28-
<PAGE>
3.1 Certificate of Trust of RCPI Trust, dated March 22, 1996.
10.1 Amendment No. 2 to the Agreement and Plan of Merger, dated as of April
25, 1996, is incorporated herein by reference to the Company's report
on Form 8-K, filed on April 25, 1996.
10.2 Amendment No. 3 to the Agreement and Plan of Merger, dated as of May
29, 1996, is incorporated by reference to the Company's report on Form
8-K filed on May 29, 1996.
10.3 Amendment No. 4 to the Agreement and Plan of Merger, dated as of June
30, 1996, is incorporated by reference to the Company's report on Form
8-K filed on July 1, 1996.
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 25, 1996, reporting events under Item 5
and Item 7 of Form 8-K.
A report on Form 8-K was filed on May 29, 1996, reporting events under Item 5
and Item 7 of 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.
-29-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RCPI TRUST
Date: August 14, 1996 By: /S/ DAVID AUGARTEN
-----------------------------------
David Augarten
Vice President (Principal Financial
Officer)
-30-
<PAGE>
EXHIBIT NO. DESCRIPTION PAGE NO.
3.1 Certificate of Trust of RCPI Trust
-31-
<PAGE>
Exhibit 3.1
CERTIFICATE OF TRUST OF RCPI TRUST
THIS Certificate of Trust of RCPI Trust (the "Trust"), dated
March 22, 1996, is being duly executed and filed by Wilmington Trust Company,
a Delaware banking corporation, as trustee, to form a business trust under the
Delaware Business Trust Act (12 DEL. C. Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is RCPI
Trust.
2. DELAWARE TRUSTEE. The name and business address of the
trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
upon filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first-above
written.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 996
<SECURITIES> 0
<RECEIVABLES> 1,176,220
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,189,051
<CURRENT-LIABILITIES> 0
<BONDS> 836,517
0
0
<COMMON> 383
<OTHER-SE> 269,628
<TOTAL-LIABILITY-AND-EQUITY> 1,189,051
<SALES> 0
<TOTAL-REVENUES> 36
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,268
<INCOME-PRETAX> (46,588)
<INCOME-TAX> 0
<INCOME-CONTINUING> (46,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,588)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> 0<F1><F2>
<FN>
<F1>Classified Balance Sheet is not presented.
<F2>Classified Balance Sheet is not presented.
</FN>
</TABLE>
