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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8971
Rockefeller Center Properties, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3280472
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1270 Avenue of the Americas, New York, N.Y. 10020
(Address of principal executive offices) (Zip Code)
(212) 698-1440
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 13, 1996
Common Stock, $.01 par value 38,260,704
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
INDEX PAGE
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying unaudited, interim financial statements have been
prepared in accordance with the instructions to Form 10-Q. In the
opinion of management, all adjustments (consisting only of normal
recurring items except as described in Note 1) necessary for a fair
presentation have been included.
Balance Sheets as of March 31, 1996 (unaudited) and
December 31, 1995 3
Statements of Operations for the quarters ended
March 31, 1996 and 1995 (unaudited) 4
Statements of Cash Flows for the quarters ended
March 31, 1996 and 1995 (unaudited) 5
Notes to Financial Statements (unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Supplemental information provided by the Debtors 27
PART II--OTHER INFORMATION 29
SIGNATURES 33
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
ROCKEFELLER CENTER PROPERTIES, INC.
BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
Loan receivable and interest receivable,
net of valuation reserve of $74,000 and
unamortized discount of $34,906 $1,176,221 $1,176,220
Deferred debt issuance costs, net 11,485 12,421
Cash and cash equivalents 1,423 1,298
Other assets 1,039 837
--------------------- ---------------------
$1,190,168 $1,190,776
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current coupon convertible debentures due 2000 $213,170 $213,170
Zero coupon convertible debentures due 2000, net of
unamortized discount of $216,916 and $225,902 369,269 360,283
Floating rate notes due 2000 116,296 116,296
14% debentures due 2007, net of
unamortized discount of $4,193 and $4,282 70,807 70,718
GSMC facility 45,000 10,200
Accrued interest payable 43,341 61,914
Stock appreciation rights 15,313 13,406
Accounts payable and accrued expenses 3,798 3,027
Accrued transaction costs and expenses 25,163 25,163
--------------------- ---------------------
902,157 874,177
--------------------- ---------------------
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 (419,917) (391,329)
--------------------- ---------------------
Total stockholders' equity 288,011 316,599
--------------------- ---------------------
$1,190,168 $1,190,776
===================== =====================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31,
1996 1995
------------------- -------------------
<S> <C> <C>
Revenues:
Other income $14 $107
Loan interest income (1) 20,339
-------------- ---------------
14 20,446
-------------- ---------------
Expenses:
Interest expense:
Current coupon convertible debentures 5,511 5,618
Zero coupon convertible debentures 8,986 8,152
14% debentures 2,750 2,750
Floating rate notes 3,834 4,845
GSMC facility 1,056
------------- ---------------
22,137 21,365
General and administrative 3,172 1,276
Amortization of deferred debt issuance costs 936 849
Increase in liability for stock appreciation rights 1,907 4,434
Expenses related to the March 25, 1996
special meeting of stockholders 450
------------- ---------------
28,602 27,924
------------- ---------------
Net loss ($28,588) ($7,478)
============= ===============
Net loss per share ($0.75) ($0.20)
============= ===============
</TABLE>
(1) Loan interest income is presented on the cash basis of accounting, see
Note 1.
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
($ in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS
ENDED MARCH 31,
1996 1995
------------------ ------------------
<S> <C> <C>
Cash flow from operating activities:
Other interest income received $13 $102
Loan interest received 20,339
Interest paid on floating rate notes (3,924) (3,881)
Interest paid on current coupon convertible debentures (27,712)
Payments for accounts payable, accrued expenses and other assets (3,052) (1,939)
------------------ ------------------
Net cash (used in) provided by operating activities (34,675) 14,621
------------------ ------------------
Cash flows from financing activities:
Net proceeds from GSMC facility 34,800
------------------ ------------------
Net cash provided by financing activities 34,800 0
------------------ ------------------
Net increase in cash 125 14,621
Cash and cash equivalents at the beginning of the period 1,298 2,897
----------------- -----------------
Cash and cash equivalents at the end of the period $1,423 $17,518
================= =================
Reconciliation of Net Loss to Net Cash (Used in) Provided by Operating Activities:
Net loss ($28,588) ($7,478)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of discount:
Zero coupon convertible debentures 8,986 8,152
14% Debentures 89 89
Increase in interest receivable and amortization of loan receivable
discount, net (1) (6)
Decrease in deferred debt issuance costs and other assets, net 734 664
(Decrease) increase in accrued interest payable (18,573) 9,244
Increase in stock appreciation rights liability 1,907 4,434
Increase (decrease) in accounts payable and accrued expenses 771 (478)
------------------ ------------------
Net cash (used in) provided by operating activities ($34,675) $14,621
================== ==================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PURPOSE
Rockefeller Center Properties, Inc. (the "Company") 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%. The Borrower owns 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, the proceeds from which were used to retire all of its commercial paper
borrowings and certain of its interest rate swap agreements.
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 is interest received on the mortgage loan
from the Borrower. As a result of these filings and until such time as these
Chapter 11 cases (the "Chapter 11 Cases") have been brought to a conclusion,
the Company does not expect to receive interest payments from the Borrower and
the Company's ability to enforce its rights under the mortgage loan has been
and will be stayed unless and until the Court issues an order permitting the
Company to take steps to enforce such rights. The Borrower and RGI filed a
Chapter 11 reorganization plan (the "Chapter 11 Plan") for the Borrower that
contemplates that ownership of the Property will be turned over to the Company
or its designee upon consummation of the Chapter 11 Plan. Pursuant to the
order of the Bankruptcy Court having jurisdiction over the Borrower's Chapter
11 Cases, a disclosure statement in respect of the Chapter 11 Plan has been
approved and May 20, 1996 has been set as the date for the hearing to consider
confirmation of the Chapter 11 Plan. The Company currently anticipates that,
if the Chapter 11 Plan is confirmed on or shortly after May 20, 1996 the
transactions contemplated by the Merger Agreement (as defined below) could be
consummated prior to May 31, 1996 as required by the Merger Agreement. There
is no assurance that the conditions to confirmation and/or consummation of the
Chapter 11 Plan will be met, that the conditions to the Merger Agreement will
be met, or that the transactions contemplated by the Chapter 11 Plan and the
Merger Agreement will occur or will take place within the periods described
above.
Due to the significant uncertainties created by the Borrower's Chapter 11
filings, (i) the Company has limited recognition of income on the mortgage
loan for the year ended December 31, 1995 and the quarter ended March 31, 1996
to the cash actually received from the Borrower during this period and (ii)
the Company intends, solely for accounting purposes, to apply future cash
receipts, if any, from the Borrower to reduce the carrying value of the
mortgage loan. When the Company drew down the $50 million of additional
collateral under letters of credit posted by the Borrower's parent in the
second quarter of 1995, these cash receipts were applied to reduce the
carrying value of the mortgage loan to $1.25 billion.
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 and Whitehall Street Real Estate Limited Partnership V
("Whitehall") have entered into an Agreement and Plan of Merger dated as of
November 7, 1995, as amended by Amendment No. 1 thereto dated as of February
12, 1996, and Amendment No. 2 thereto dated as of April 25, 1996, (as so
amended, the "Merger Agreement") pursuant to which, subject to satisfaction
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
of the conditions specified in the Merger Agreement, a corporation formed by
members of the Investor Group or their designated affiliates will merge into
the Company (the Surviving Company being hereinafter the "Surviving Company").
The Surviving Company will be wholly owned by members of the Investor Group or
their designated affiliates, and the stockholders of the Company will receive
$8.00 in cash for each of their shares of the Company's Common Stock other
than Excluded Shares (as defined in the Merger Agreement). The Merger
Agreement was approved at a special meeting of the Company's stockholders on
March 25, 1996. If the merger contemplated by the Merger Agreement is
consummated, members of the Investor Group or their designated affiliates will
own 100% of the Surviving Company's Common Stock.
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 available to the Company up to $49.2 million of credit (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 would be 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 have not
been repaid by the earlier of May 31, 1996, or any termination of the Merger
Agreement in specified circumstances, such borrowings will become subject to
the same terms and conditions as those applicable to the Floating Rate Notes.
The Company had borrowed a total of $45 million under the GSMC Facility as of
March 31, 1996 and a total of $47.5 million as of April 1, 1996. The Company
borrowed the remaining $1.7 million available under the GSMC Facility on May
1, 1996. The GSMC Facility is expected to provide sufficient liquidity for the
Company until the earlier of the consummation of the merger contemplated by
the Merger Agreement or May 31, 1996.
Consummation of the transactions contemplated by the Merger Agreement would
resolve many of the significant uncertainties created by the Borrower's
Chapter 11 filings. 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. In addition, the Company at
that time recorded certain transaction costs and expenses aggregating $25.2
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.
Management and the Board of Directors believe that, if the transactions
contemplated by the Merger Agreement are not consummated, the Company would be
subject to substantial uncertainties. In particular, if the transactions
contemplated by the Merger Agreement have not been consummated by May 31,
1996, unless GSMC agrees to finance the Company's cash requirements in June of
1996, including interest payments aggregating $8.1 million on the Floating
Rate Notes and the 14% Debentures which will be due on June 3, 1996, the
Company, in light of the fact that its cash will be substantially exhausted by
May 31, 1996, will be unable to meet its obligations in June of 1996. In
addition, unless the Company and the Investor Group agree otherwise, either
the Company or the
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
Investor Group will have the right to terminate the Merger Agreement if the
merger has not been consummated by May 31, 1996, and, in the event of such a
termination, the Company will be obligated to reimburse the Investor Group,
promptly after any such termination, for up to $2.5 million of its expenses in
connection with the Merger Agreement.
Due to the factors described above, Management believes that there is
substantial doubt about the Company's ability to continue as a going concern
if the transactions contemplated by the Merger Agreement are not consummated.
The financial statements do not include any adjustment to reflect the possible
future effects on the recoverability of assets or the amounts of liabilities
that may result from the outcome of these uncertainties.
2. LOAN RECEIVABLE AND INTEREST INCOME
The mortgage loan, which is in the face amount of $1.3 billion, was made
pursuant to a Loan Agreement between the Company and the Borrower on September
19, 1985 (as amended, the "Loan Agreement"), and is evidenced by two notes
(collectively, as amended, the "Note"). 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 has been applied
to reduce the carrying value of the mortgage loan to $1.25 billion. The
Company has further reduced the carrying value of the mortgage loan by $74
million to reflect the economics of the transactions contemplated by the
Merger Agreement.
The mortgage loan is secured by leasehold mortgages on the entire Property in
the aggregate amount of $1.3 billion. The mortgage loan is further secured by
a recorded assignment of rents pursuant to which the Borrower has assigned to
the Company, as security for repayment of the mortgage loan, the Borrower's
rights to collect certain rents with respect to the Property.
See Note 1 for discussion of the status of the Borrower.
Loan interest income of the Company for the three months ended March 31, 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.
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 March 31, 1996 the interest rate
in effect is 9.27%. The average interest rate for the three months ended March
31, 1996 was 9.78%. 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).
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
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 March 31, 1996. The SARs are exchangeable for 14% Debentures or under
certain circumstances for Warrants on a one-for-one basis. Each SAR is
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 ($7.86 at March 31,
1996) minus the exercise price per share of the Warrants into which the SARs
are exchangeable ($5 per Warrant) times the number of Warrants into which the
SARs are exchangeable (5,349,541).
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. The Company is 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 is carried by the Company. The SARs would be
automatically exchanged for Warrants on a one-for-one basis following adoption
and filing of an amendment to the Company's Certificate of Incorporation which
would permit the holders of the SARs to own in excess of 9.8% of the
outstanding shares of the Company's Common Stock and adoption of any necessary
Board resolutions. Upon any such exchange, the SARs liability would be
reclassified to paid-in capital, and no further adjustments to future earnings
would be required for any SARs liability.
GSMC Facility
The Merger Agreement provides that GSMC will make available to the Company up
to $49.2 million of credit 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 would be
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 have not been repaid by the earlier of May 31, 1996 or any
termination of the Merger Agreement in specified circumstances, such
borrowings will become subject to the same terms and conditions as those
applicable to the Floating Rate Notes. The Company had borrowed a total of $45
million under the GSMC Facility as of March 31, 1996 and a total of $47.5
million as of April 1, 1996. The Company borrowed the remaining $1.7 million
available under the GSMC Facility on May 1, 1996. The GSMC Facility is
expected to provide sufficient liquidity for the Company until the earlier of
the consummation of the merger contemplated by the Merger Agreement or May 31,
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
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ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
December 1994, the Company retired certain of its interest rate swap
agreements. The amount to be paid or received from interest rate swap
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 March 31, 1996. The
$105,000,000 notional amount of interest rate swap agreements outstanding at
March 31, 1995 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 March 31, 1996 and 1995 are as follows:
1996 1995
------------------ ------------------
Net notional principal $105,000,000 $105,000,000
================== ==================
Weighted average interest rate
of net swaps outstanding 3.97% 3.40%
================== ==================
Annualized net payment $4,168,000 $3,570,000
================== ==================
The current settlement value of all swap agreements outstanding at March 31,
1996, based on information supplied by the counterparties to the swap
contracts, was a liability for the Company of approximately $8.2 million as
compared to $7.7 million at March 31, 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 ended March 31, 1996 and 1995, respectively.
For the quarters ended March 31, 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 is 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 intends to vigorously contest the
plaintiffs' claims.
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 as described in
Note 1.
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<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
On May 24, 1995, Jerry Krim commenced an action encaptioned Krim v.
Rockefeller Center Properties, Inc. and Peter D. Linneman. On June 7, 1995,
Kathy Knight and Moishe Malamud commenced an action encaptioned Knight, et al.
v. Rockefeller Center Properties, Inc. and Peter D. Linneman. Both actions
were filed in the United States District Court for the Southern District of
New York and purport to be brought on behalf of a class of plaintiffs
comprised of all persons who purchased the 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
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ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
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. 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 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 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. In addition,
-12-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
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 Company intends to vigorously defend those actions and does not
believe that ZML or EOH is entitled to the relief requested. 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
Company also seeks monetary damages in an amount to be determined at trial.
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 March 31,
1996 1995
---- ----
Gross Revenue $51,806 $52,647
---------------- --------------
Less:
Operating expenses (41,562) (40,305)
Interest expense, net (31,007)
Reorganization items 242
---------------- --------------
Net income (loss) $10,486 ($18,665)
================ ==============
-13-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources--The Company
The discussion below relates primarily to the Company's financial condition
and results of operations for the first three 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 is secured
by leasehold mortgages on the entire Property ("Property") in the aggregate
amount of $1.3 billion. The mortgage loan is further secured by a recorded
assignment of rents pursuant to which the Borrower has assigned to the
Company, as security for repayment of the mortgage loan, the Borrower's rights
to collect certain rents with respect to the Property.
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 is interest received on the mortgage loan
from the Borrower. As a result of these filings and until such time as these
Chapter 11 cases (the "Chapter 11 Cases") have been brought to a conclusion,
the Company does not expect to receive interest payments from the Borrower and
the Company's ability to enforce its rights under the mortgage loan has been
and will be stayed unless and until the Court issues an order permitting the
Company to take steps to enforce such rights. The Borrower and its managing
general partner, Rockefeller Group, Inc., filed a Chapter 11 reorganization
plan (the "Chapter 11 Plan") for the Borrower that contemplates that ownership
of the Property will be turned over to the Company or its designee upon
consummation of the Chapter 11 Plan. Pursuant to the order of the Bankruptcy
Court having jurisdiction over the Borrower's Chapter 11 Cases, a disclosure
statement in respect of the Chapter 11 Plan has been approved and May 20, 1996
has been set as the date (the "Plan Confirmation Date") for the hearing to
consider confirmation of the Chapter 11 Plan. The Company currently
anticipates that, if the Chapter 11 Plan is confirmed on or shortly after May
20, 1996, the transactions contemplated by the Merger Agreement (as defined
below) could be consummated prior to May 31, 1996, as required by the Merger
Agreement. There is no assurance that the conditions to confirmation and/or
consummation of the Chapter 11 Plan will be met, that the conditions to the
Merger Agreement will be met, or that the transactions contemplated by the
Chapter 11 Plan and the Merger Agreement will occur or will take place within
the periods described above.
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 and Whitehall Street Real Estate Limited Partnership V
("Whitehall") have entered into an Agreement and Plan of Merger dated as of
November 7, 1995, as amended by Amendment No. 1 thereto dated as of February
12, 1996, and Amendment No. 2 thereto dated as of April 25, 1996 (as so
amended, the "Merger Agreement") pursuant to which, subject to satisfaction of
the conditions specified in the Merger Agreement, a corporation formed by
members of the Investor Group or their designated affiliates will merge into
the Company (the Surviving Company being hereinafter the "Surviving Company").
The Surviving Company will be wholly owned by members of the Investor Group or
their designated affiliates, and the stockholders of the Company will receive
$8.00 in cash for each of their shares of the Company's Common Stock other
than Excluded Shares (as defined in the Merger Agreement). The Merger
-14-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
Agreement was approved at a special meeting of the Company's stockholders on
March 25, 1996. If the merger contemplated by the Merger Agreement is
consummated, members of the Investor Group or their designated affiliates will
own 100% of the Surviving Company's Common Stock.
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 available to the Company up to $49.2 million of credit (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 would be 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 have not
been repaid by the earlier of May 31, 1996 or any termination of the Merger
Agreement in specified circumstances, such borrowings will become subject to
the same terms and conditions as those applicable to the Floating Rate Notes.
The Company had borrowed a total of $45 million under the GSMC Facility as of
March 31, 1996 and a total of $47.5 million as of April 1, 1996. The Company
borrowed the remaining $1.7 million available under the GSMC Facility on May
1, 1996. The GSMC Facility is expected to provide sufficient liquidity for the
Company until the earlier of the consummation of the merger contemplated by
the Merger Agreement or May 31, 1996.
Management and the Board of Directors believe that, if the transactions
contemplated by the Merger Agreement are not consummated, the Company would be
subject to substantial uncertainties. In particular, if the transactions
contemplated by the Merger Agreement have not been consummated by May 31,
1996, unless GSMC agrees to finance the Company's cash requirements in June of
1996, including interest payments aggregating $8.1 million on the Floating
Rate Notes and the 14% Debentures which will be due on June 3, 1996, the
Company, in light of the fact that its cash will be substantially exhausted by
May 31, 1996, will be unable to meet its obligations in June of 1996. In
addition, unless the Company and the Investor Group agree otherwise, either
the Company or the Investor Group will have the right to terminate the Merger
Agreement if the merger has not been consummated by May 31, 1996, and, in the
event of such a termination, the Company will be obligated to reimburse the
Investor Group, promptly after any such termination, for up to $2.5 million of
its expenses in connection with the Merger Agreement.
Due to the factors described above, Management believes that there is
substantial doubt about the Company's ability to continue as a going concern
if the transactions contemplated by the Merger Agreement are not consummated.
The financial statements do not include any adjustment to reflect the possible
future effects on the recoverability of assets or the amounts of liabilities
that may result from the outcome of these uncertainties.
Mortgage Loan Interest Income
Due to the significant uncertainties created by the Borrower's Chapter 11
filings, (i) the Company has limited recognition of income on the mortgage
loan for the three months ended March 31, 1996 and 1995, to the cash actually
received from the Borrower during these periods and (ii) the Company intends,
solely for accounting purposes, to apply future cash receipts, if any, from
the Borrower to reduce the carrying value of the mortgage loan. When the
Company drew down the $50 million 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.
-15-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
During the three months ended March 31, 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 is stayed, unless and until the
Court orders otherwise, during the pendency of the Borrower's Chapter 11
cases, provides 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 is 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 provides 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. Based on present conditions
in the Midtown Manhattan rental market, the Company does not currently expect
that it would earn Additional Interest even if the Borrower's reorganization
proceedings were terminated.
Other Interest Income
Other interest income received during the three months ended March 31, 1996
and 1995 was $13,000 and $102,000, respectively. The decrease in other
interest income received of $89,000 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 three 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 three months ended
March 31, 1996 and 1995 the Company paid $2,903,000, and $2,723,000,
respectively, of interest on the Floating Rate Notes and $1,021,000 and
$1,158,000, respectively of interest on its swap agreements for a total of
$3,924,000 and $3,881,000, respectively, paid in floating rate interest.
Interest on the 14% Debentures is payable semi-annually on June 2 and December
2, of each year.
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 March 31, 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 is not
permitted to repurchase any of its Convertible Debentures.
Non-Disturbance Agreements
The Company has executed non-disturbance agreements with tenants that occupy
at least a full floor in any of the buildings comprising a part of the
Property and certain other tenants upon request. Such agreements provide that
in the event of a foreclosure of the mortgage loan, such tenant's possession
of space within the Property will not be disturbed so long as such tenant is
in compliance with the terms of its lease. In addition, certain 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") exceeds $37.5 million,
an agreement with the Borrower (enforcement of which is stayed by the pendency
of the Borrower's Chapter 11 Cases) requires the Borrower to maintain credit
support facilities to provide additional security in an amount equal to at
least 50% of the excess.
-16-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
As of March 31, 1996, the Company had executed seven
rent offset agreements with tenants. The total Rent Offset Amount at such date
was $14.6 million which is 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 three-month period ended
March 31, 1995 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 three-month periods ended March 31, 1996 ($0) and 1995.
Other income for the three months ended March 31, 1996, decreased by $93,000
or 86.9%, 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 three months
ended March 31, 1996 decreased by $107,000 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 three months
ended March 31, 1996 increased by $834,000 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 $1,011,000 or 20.9%,
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
quarters of 1996 and 1995.
GSMC Facility interest expense during the three months ended March 31, 1996
was $1,056,000 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 $22,137,000 and $21,365,000 for
each of the three-month periods ended March 31, 1996 and 1995, respectively.
These amounts accounted for 77.4% and 76.5% of total expenses in each of the
respective periods.
General and administrative expenses for the three months ended March 31, 1996
increased by $1,896,000 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 three months ended March
31, 1996 increased by $87,000 or 10.2% due to the deferred debt issuance costs
relating to the Floating Rate Notes being amortized using the effective
interest method.
-17-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
Increase in liability for stock appreciation rights decreased $2,527,000 or
57% from that of the comparable prior year period, principally due to a
smaller increase in the market price of the Company's Common Stock in the
first quarter of 1996 when compared to the first quarter of 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 March 31, 1996 and 1995. The Company will be required to make future
adjustments to earnings to reflect the aggregate principal amount of 14%
Debentures issuable upon exchange of the SARs based upon the current market
price of the Company's Common Stock unless an amendment to the Company's
Certificate of Incorporation is adopted and filed and any necessary Board
resolutions are adopted which would result in an automatic exchange of SARs
for Warrants (see Note 3 to the Financial Statements). Under the terms of the
Merger Agreement, Whitehall has agreed not to exercise its SARs prior to the
termination of the Merger Agreement unless the Company has taken action and as
a result of such action the failure to exercise the SARs would adversely
affect the rights of the holders of the SARs, the value of the SARs or the
position of the holders of the SARs in the Company.
During the three months ended March 31, 1996 the Company incurred $450,000 of
expenses related to the March 25, 1996 special meeting of stockholders.
Net loss during the three months ended March 31, 1996 and 1995 was $28,588,000
and $7,478,000, respectively, reflecting the matters discussed above.
-18-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
THE PROPERTY
The financial information and analysis included in the following discussions
of the "Financial Condition and Outlook - The Property", "Results of
Operations - The Property", and "Cash Flow - The Property" have been furnished
to the Company by the 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 have been assigned case numbers 95 B 42089 and 95 B 42088 (PBA),
respectively. The separate Chapter 11 Cases of the Debtors have been
consolidated for procedural purposes and are being jointly administered
pursuant to an order of the Bankruptcy Court. A statutory unsecured creditors'
committee has been appointed for the Debtors.
Subsequent to the Petition Date, the Debtors have continued in possession of
their properties and are operating and managing 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 at a date that is not yet certain. Following the
transfer, the Debtors will be released from all liabilities under the mortgage
payable to the Company. It also is expected that all prepetition claims of RGI
and its affiliates against the Debtors will be contributed to the capital of
the Debtors or paid by RGI and, in each case, will no longer be obligations of
the Debtors. Virtually all other creditors' prepetition claims against the
Debtors 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 is subject to
confirmation by the Bankruptcy Court. The hearing to consider confirmation of
the Plan is scheduled to be held on May 20, 1996.
-19-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
Liabilities subject to compromise (all or a portion of which may be disputed
by the Debtors) at March 31, 1996 consisted of the following:
Mortgage loan payable to the Company $1,290,902,000
Amounts payable to RGI and affiliates 496,398,000
Real estate tax refunds payable to
tenants,
other than RGI affiliates 13,237,000
Other items, primarily trade payables 40,577,000
-------------
$1,841,114,000
=============
The mortgage loan payable to the Company includes interest accrued through the
Petition Date and has been recorded net of direct costs including the
unamortized original issue discount and the unamortized mortgage recording tax
related to the mortgage loan. Payables to RGI affiliates consist primarily of
interest-free overdrafts in the cash management system, a loan payable to RGI,
brokerage commissions payable to Rockefeller Center Management Corporation,
and other expenses paid by RGI affiliates on behalf of the Debtors.
Liabilities subject to compromise under reorganization proceedings include the
Debtors' present estimates of substantially all liabilities as of the Petition
Date. Payment of all liabilities has been stayed while the Debtors continue to
operate their business as debtors-in-possession. Pursuant to a court order,
priority prepetition claims for wages, salaries, and benefits were paid.
Additional bankruptcy claims and prepetition liabilities may arise by
termination of contractual obligations, Bankruptcy Court determination of
allowed claims, and as certain contingent and/or potentially disputed
prepetition claims are settled for amounts which may differ from those shown
in the combined balance sheet. The Court set September 13, 1995 as the last
day for filing proofs of claim for prepetition claims. With certain
exceptions, creditors have been barred from filing prepetition claims
subsequent to that date. The Debtors have received claims with aggregate
amounts substantially in excess of those recorded at the Petition Date. The
Debtors are reconciling these claims to their records and do not expect that
the resolution of these matters will result in liabilities materially in
excess of those recorded at the Petition Date.
On October 30, 1995, the Bankruptcy Court approved an $80 million
Debtor-In-Possession Revolving Credit Agreement (the "Facility") which may be
used to fund tenant improvements, leasing commissions, required capital
expenditures, and other permitted working capital needs of the Debtors. A
total of $40 million of the Facility may be used in the form of letters of
credit. The Facility is secured by a first mortgage on the Property which is
senior to the existing mortgage held by the Company. The Facility matures on
the earlier of December 31, 1996 or upon the substantial consummation of a
plan of reorganization. The Debtors have the option of choosing either a prime
rate or a LIBOR-based interest rate. As of March 31, 1996, no drawdowns
against the Facility had been taken; however, a total of $10 million in
letters of credit had been issued against the Facility.
The financial statements of the Debtors, from which this information is
derived, have been prepared on a going concern basis and reflect the combined
historical cost basis of the Debtors in their assets and liabilities. The
transfer of the Property to the Company is subject to the approval of the
Bankruptcy Court. This transfer of the Property and the related release of the
mortgage loan and cancellation of the indebtedness to the Company and RGI and
its affiliates, if consummated, will result in substantial non-cash gains to
the Debtors. Further, upon consummation of these transactions, the Debtors
will either cease their business activities or control of the Debtors will
vest with parties other than RGI. These conditions raise substantial doubt as
to the ability of the Debtors to continue as going concerns. The financial
statements of the Debtors do not include any adjustments which would
-20-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
be required to reflect the transfer of the Property to the Company, the
wind-down of the affairs of the Debtors, or any change in control which may
occur with respect to the Debtors. In the event the transfer of the Property
is not approved and the Property is foreclosed upon, other adjustments would
be required. These adjustments could be material.
-21-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
RESULTS OF OPERATIONS - THE PROPERTY
The operating results of the Property during the quarter ended March 31, 1996
and 1995 are presented in summary form in the table below:
<TABLE>
<CAPTION>
($ In Thousands)
(Unaudited)
Three months ended
March 31,
(In thousands) 1996 1995
--------------- --------------
<S> <C> <C>
Gross revenue:
Fixed and percentage rents $43,086 $44,102
Operating and real estate tax escalation 4,382 4,301
Consideration revenues 73 540
Sales and service revenues 4,265 3,704
------------- ------------
51,806 52,647
------------- ------------
Operating expenses:
Real estate taxes 8,392 9,822
Utilities 5,842 4,769
Maintenance and engineering 7,137 7,829
Other operating expenses 9,454 9,332
Depreciation and amortization 7,837 6,710
Management fee 1,875 678
General and administrative 1,025 1,165
------------- ------------
41,562 40,305
------------- ------------
Earnings before interest and reorganization items 10,244 12,342
Interest expense, net - 31,007
Earnings (loss) before reorganization items 10,244 (18,665)
Reorganization items:
Professional fees and expenses 99 -
Debtors-in-possession financing fees 57 -
Interest income (398) -
------------- ------------
Total reorganization items (242) -
------------- ------------
Net income (loss) $10,486 ($18,665)
=========== =============
</TABLE>
-22-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
The gross revenue of the Property for the quarter ended March 31, 1996
decreased by $.8 million or 2% 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 9.9% to 12.8%. 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.
The following table shows the occupancy rates for the Property at specified
dates:
June 30, 1994 - 96.1% June 30, 1995 - 88.3%
October 1, 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%
The March 31, 1996 occupancy rate reflected a total of 793,000 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 183,000 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 three months ended March 31, 1996, 39 leases covering approximately
153,000 square feet of office, retail, and storage space were concluded and
took effect at net effective annual fixed rents averaging $35.85 per square
foot. The net effective annual rental rates for office space, which accounted
for approximately 106,000 square feet of the total area leased, averaged
$31.11 per square foot. This amount compared to a net effective rental rate of
$31.64 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 three months ended
March 31, 1996 averaged $42.95 per square foot (compared with $36.48 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 106,000 square feet of office space leased during the three
months ended March 31, 1996, approximately 19,000 square feet represented
renewals of existing tenants at an average gross rental rate of $39.53 per
square foot. The combined fixed rent and escalation payments prior to lease
renewal for these renewing tenants had averaged $39.06 per square foot.
-23-
<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 selected lease expiration information for the
Property as of March 31, 1996 and has been furnished to the Company by the
Debtors. Lease turnover during the remaining term of the mortgage loan could
offer an opportunity to increase the revenue of the Property or might have a
negative impact on the Property's revenue. Actual renewal rents and rental
income will be affected significantly by market conditions at the time and by
the terms at which the Debtors can then lease space.
<TABLE>
<CAPTION>
Number of Percentage of
Year leases expiring Area (sq.ft.) total rentable area
- ---- --------------- ------------- -------------------
<S> <C> <C> <C>
1996 (April 1 to December 31) 71 182,744 2.95%
1997 59 127,839 2.07%
1998 69 223,264 3.61%
1999 62 167,690 2.71%
2000 61 398,938 6.45%
2001 20 43,305 0.70%
2002 22 136,725 2.21%
2003 24 94,431 1.53%
2004 70 393,135 6.36%
2005 29 301,606 4.88%
2006 24 203,985 3.30%
2007 10 101,770 1.65%
2008 10 165,608 2.68%
2009 46 481,408 7.78%
2010 7 95,852 1.55%
2012 3 256,725 4.15%
2013 2 51,598 0.83%
2014 3 292,583 4.72%
2015 1 14,015 0.23%
2016 3 7,485 0.12%
2017 1 43,575 0.70%
2019 1 2,266 0.04%
2020 2 94,595 1.53%
2022 4 1,295,608 20.95%
Space under temporary occupancy N/A 128,386 2.08%
Vacant space N/A 792,602 12.80%
Space occupied by the Debtors N/A 87,760 1.42%
--- --------- -------
604 6,185,498 100.0%
=== ========= =======
</TABLE>
During the quarter ended March 31, 1996, the operating expenses of the
Property increased by $1.3 million or 3% from the comparable prior-year
period. This increase was primarily the result of increased management fees
($1.2 million), higher depreciation and amortization (increase of $1.1
million), and increased utility costs ($1.1 million). These increases were
offset partially by lower real estate taxes ($1.4 million) and decreased
maintenance and engineering expenses ($.7 million).
-24-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
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 real estate taxes resulted primarily from a decrease in the
assessed valuation of the Property. On June 29, 1995 the Bankruptcy Court
approved a settlement between the Debtors and New York City that incorporated
a reduction in the assessed valuation of the Property. The agreement covered
the period from July 1, 1989 through June 30, 1995. The statement of
operations as of March 31, 1996 reflects this reduction in assessed valuation.
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.
As a result of the foregoing, earnings before interest and reorganization
items for the quarter ended March 31, 1996 decreased $2.1 million or 17%.
Interest expense, net during the quarter ended March 31, 1996, decreased $31
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 quarter ended March
31, 1996, the Property experienced an operating cash surplus before
reorganization items of $4.7 million. During the quarter ended March 31, 1995,
the property experienced an operating cash deficit amounting to $18.9 million
after interest payments of $20.3 million to the Company. This increase of
$23.6 million in the operating cash flow surplus primarily reflected a
decrease in interest paid to the Company ($20.3 million) and a net decrease in
lease incentives associated with new and renewal tenants ($5.9 million). These
factors were offset partially by decreased earnings before interest ($2.1
million) and lower levels of net working capital ($.5 million).
The Debtors also expended funds for capital improvements to the Property,
tenant improvements, and leasing commissions as follows:
(In thousands) Quarters ended March 31,
------------------------------
1996 1995
----------- ------------
Tenant improvements $5,093 $26,804
Capital improvements 4,625 2,792
Leasing commissions (including legal fees) 1,392 2,147
Cash held in escrow for lease obligations (2,981) -
--------- ---------
$8,129 $31,743
========= =========
The funds expended for tenant improvements for the quarter ended March 31,
1995 resulted in large measure from the significant turnover of leases which
expired on September 30, 1995.
-25-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd)
The mortgage loan agreement provides for the establishment of loans for the
cumulative portion of capital improvements made by the Debtors in excess of
amounts specified in the Loan Agreement. The cumulative amounts of excess
capital improvements totaled $126.7 million at March 31, 1996 and 1995,
respectively. These excess capital improvement loans are deemed to be made to
the Debtors by its partners and bear interest at 80% of the prime rate (as
defined), compounded quarterly. Interest charges on excess capital improvement
loans are added to the loan principal at the end of each year. At March 31,
1996 and 1995 the amount of excess capital improvement loans (including
accrued interest) totaled $164.6 million and $160.7 million, respectively. As
a result of the bankruptcy proceedings, interest has not been accrued since
the Petition Date.
The results of operations of the Property as of March 31, 1995 reflects
non-cash interest charges of $2.7 million, relating to interest on these
excess capital improvement loans.
The Debtors are committed to expend significant funds for tenant improvements
and leasing commissions in connection with certain leases. In order to renew
and/or re-lease the available space during 1996, significant expenditures also
could be required. Additionally, the Debtors have committed and may be
required to commit to rent abatements in connection with the renewal and/or
re-leasing of space.
-26-
<PAGE>
Supplemental information provided by the Debtors.
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
ASSETS March 31,1996 December 31, 1995
------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $23,101 $26,171
Cash held in escrow for lease obligations 318 3,299
Accounts receivable, less allowance for
doubtful accounts of $2,538 and $2,607 14,529 9,307
Due from RGI affiliates 3,776 2,205
Prepaid real estate taxes 9,040 -
Real estate tax refund receivable - 9,735
Other current assets 875 1,132
------- -------
51,639 51,849
Fixed assets, at cost:
Land 402,419 402,419
Buildings 513,329 510,716
Furniture, fixtures and equipment 26,960 26,813
------ ------
942,708 939,948
Less accumulated depreciation (233,212) (229,021)
------- -------
709,496 710,927
Deferred renting expenses, less accumulated
amortization of $28,971 and $30,978 150,741 148,879
Lease incentives 78,354 72,500
Other assets 2,801 2,892
-------- --------
Total assets $993,031 $987,047
======== ========
LIABILITIES AND PARTNERS' CAPITAL
DEFICIENCY
Current liabilities not subject to compromise:
Accounts payable and accrued expenses $7,348 $11,822
Due to RGI affiliates 2,210 2,238
Liabilities subject to compromise 1,841,114 1,841,114
Partners' capital deficiency (857,641) (868,127)
--------- ---------
Total liabilities and partners' capital deficiency $993,031 $987,047
========= =========
</TABLE>
-27-
<PAGE>
Supplemental information provided by the Debtors.
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED STATEMENT OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarters ended March 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings (loss) before reorganization items $10,244 ($18,665)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 7,837 6,710
Real estate tax refund receivable 9,735 -
Decrease in other assets 348 127
Decrease (increase) in accounts payable and accrued expenses (1,782) 3,423
Increase in interest payable - 10,661
Increase in lease incentives, net (5,854) (11,714)
Increase (decrease) in accounts receivable (6,793) 1,205
Increase in prepaid real estate taxes (9,040) (10,694)
----- ------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES BEFORE REORGANIZATION ITEMS 4,695 (18,947)
OPERATING CASH FLOWS FROM REORGANIZATION ITEMS
Professional fees and expenses paid (34) -
Interest income 398 -
--- ----------
NET CASH PROVIDED BY REORGANIZATION ITEMS 364 -
--- ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 5,059 (18,947)
----- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,625) (2,792)
Deferred renting expenses paid (6,485) (28,951)
Decrease in cash held in escrow for tenant lease obligations 2,981 -
----- ------
NET CASH USED IN INVESTING ACTIVITIES (8,129) (31,743)
----- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from RGI affiliates - 50,690
----- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 50,690
----- ------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (3,070) -
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 26,171 3
------ -
CASH AND CASH EQUIVALENTS, END OF PERIOD $23,101 $3
====== =
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ - $20,339
====== ======
</TABLE>
-28-
<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
plaintiff's 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 intends to
vigorously contest the plaintiffs' claims.
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
as described in Note 1.
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
-29-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
PART II - OTHER INFORMATION (cont'd)
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. 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 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
-30-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
PART II - OTHER INFORMATION (cont'd)
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 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. 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 Company intends to vigorously defend those actions and
does not believe that ZML or EOH is entitled to the relief requested.
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 Company also seeks monetary damages in an amount to be
determined at trial.
The Company does not expect the outcome of the above litigation to
have a material effect on the financial condition of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Company held a special meeting of stockholders on March 25, 1996
(the "Special Meeting").
-31-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
PART II - OTHER INFORMATION (cont'd)
(c) At the Special Meeting, stockholders were asked to approve and adopt a
Merger Agreement between the Company and the Investor Group. Under the
terms of the Merger Agreement, the Company's stockholders will receive
$8.00 in cash for each of their shares of the Company's Common Stock
other than Excluded Shares (as defined in the Merger Agreement)
following the consummation of the transactions contemplated by the
Merger Agreement. This proposal was approved. The following table sets
forth the number of votes cast for and against, as well as the number
of abstentions and broker non-votes on this item:
For Against Abstentions Broker Non-Votes
22,772,770 1,825,358 573,788 0
ITEM 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
A report on Form 8-K was filed on February 22, 1996, reporting events
under Item 5 and Item 7 of Form 8-K.
A report on Form 8-K was filed on March 5, 1996, reporting events under
Item 5 and Item 7 of Form 8-K.
-32-
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKEFELLER CENTER PROPERTIES, INC.
Date: May 15, 1996 By: /s/ Richard M. Scarlata
----------------------------
Richard M. Scarlata
President and Chief Executive Officer
(Principal Financial Officer and
Principal Accounting Officer)
-33-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,423
<SECURITIES> 0
<RECEIVABLES> 1,176,221
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,190,168
<CURRENT-LIABILITIES> 0
<BONDS> 814,542
<COMMON> 383
0
0
<OTHER-SE> 287,628
<TOTAL-LIABILITY-AND-EQUITY> 1,190,168
<SALES> 0
<TOTAL-REVENUES> 14
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,529
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,073
<INCOME-PRETAX> (28,588)
<INCOME-TAX> 0
<INCOME-CONTINUING> (28,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,588)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> 0<F1><F2>
<FN>
<F1>15, Classified Balance Sheet is not presented.
<F2>19, Classified Balance Sheet is not presented.
</FN>
</TABLE>
