SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
-----------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
------------------------------
Date of Report (date of earliest event reported):
March 5, 1996 (February 28, 1996)
Rockefeller Center Properties, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-8971 13-3280472
-------- ------ ----------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
1270 Avenue of the Americas, New York, New York 10020
- ------------------------------------------------------ ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 698-1440
<PAGE>
2
ITEM 5 OTHER EVENTS
On February 29, 1996, Rockefeller Center Properties, Inc. ("RCPI")
received the combined financial statements of Rockefeller Center Properties
and RCP Associates (collectively, the "Borrower") for the year ended December
31, 1995. A copy of the financial statements, together with the report thereon
of Ernst & Young LLP, independent auditors, is filed herewith as Exhibit 20.1
and is incorporated herein by reference.
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 RCPI. 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 RCPI breached the Investment Agreement, dated August 18, 1995,
between and among RCPI and ZML (the "Investment Agreement") by failing to sell
to ZML 1,788,908 common shares of RCPI and by failing to appoint a person
designated by ZML to RCPI's Board of Directors. ZML seeks specific
performance of the Investment Agreement. A copy of the complaint is filed
herewith as Exhibit 99.1. ZML's motion for a preliminary injunction seeks to
enjoin the March 25, 1996 Special Meeting of RCPI's stockholders pending
resolution of ZML's claim for specific performance. RCPI intends to vigorously
contest both the motion for a preliminary injunction and the underlying
action and RCPI does not believe that ZML is entitled to the relief requested.
A hearing on the motion for a preliminary injunction is scheduled for
March 19, 1996.
<PAGE>
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following are being filed as exhibits to this Report:
(20.1) Combined Financial Statements of Rockefeller Center
Properties and RCP Associates for the year ended
December 31, 1995, together with the report thereon of
Ernst & Young LLP, independent auditors.
(99.1) Complaint No. 96 Civ. 1445 in the action encaptioned
Zell/Merrill Lynch Real Estate Opportunity Partners Limited
Partnership III v. Rockefeller Center Properties, Inc. dated
February 28, 1996.
<PAGE>
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed by the
undersigned thereunto duly authorized.
ROCKEFELLER CENTER PROPERTIES, INC.
(Registrant)
By: /s/ RICHARD M. SCARLATA
-----------------------
Name: Richard M. Scarlata
Title: President and Chief Executive Officer (Principal
Financial Officer and Principal Accounting Officer)
Dated: March 5, 1996
<PAGE>
5
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
20.1 Combined Financial Statements of Rockefeller Center Properties and
RCP Associates for the year ended December 31, 1995, together with
the report thereon of Ernst & Young LLP, independent auditors.
99.1 Complaint No. 96 Civ. 1445 in the action encaptioned
Zell/Merrill Lynch Real Estate Opportunity Partners Limited
Partnership III v. Rockefeller Center Properties, Inc. dated
February 28, 1996.
Exhibit 20.1
ERNST & YOUNG LETTERHEAD
Report of Independent Auditors
The Partners of
Rockefeller Center Properties and RCP Associates
We have audited the accompanying combined balance sheets of Rockefeller
Center Properties and RCP Associates (Debtors-in-Possession) (collectively,
the Partnerships) as of December 31, 1995 and 1994, and the related combined
statements of operations and partners' capital deficiency and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnerships' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
Rockefeller Center Properties and RCP Associates at December 31, 1995 and 1994,
and the combined results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
The accompanying combined financial statements have been prepared on a going
concern basis and accordingly, reflect the Partnerships' combined historical
cost basis in the assets and liabilities presented therein. As more fully
described in Note 1 to the combined financial statements, on May 11, 1995 the
Partnerships filed petitions for reorganization under Chapter 11 of the
Bankruptcy Code. In early February, 1996, the Partnerships and Rockefeller
Group, Inc. ("RGI" -- currently the ultimate owner of the Partnerships) filed a
Second Amended Joint Plan of Reorganization (the "Plan") before the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). Among other things, the Plan calls for an orderly transfer of the
Property (which constitutes substantially all of the combined assets of the
Partnerships) to RCPI in exchange for the release of the Partnerships from any
continuing obligation under the Loan to RCPI. The transfer of the Property to
RCPI is subject to approval by the Bankruptcy Court. The transfer of the
Property, and the release of the Partnerships from any continuing obligation
under the Loan, combined with any cancellation of the Partnerships'
indebtedness to RGI and its affiliates, if consummated, will result in
substantial non-cash gains to the Partnerships. Further, upon consummation of
these transactions, the Partnerships will either cease their business
activities or control of the Partnerships will vest with parties other than
RGI. These conditions raise substantial doubt as to the ability of the
Partnerships to continue as going concerns. The accompanying financial
statements do not reflect the adjustments which would be required to reflect
the transfer of the Property to RCPI, the release or cancellation of
indebtedness, the wind-down of the affairs of the Partnerships, or any change
in control which may occur with respect to the Partnerships. In the event that
the transfer of the Property is not approved and, the Property is foreclosed
upon, other adjustments would be required. All such adjustments could be
material.
/s/ Ernst & Young LLP
New York, New York
February 7, 1996
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED BALANCE SHEET
At December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 26,171 $ 3
Cash held in escrow for lease obligations 3,299 --
Accounts receivable, less allowance for
doubtful accounts of $2,607 and $2,833 9,307 4,027
Due from RGI affiliates 2,205 1,286
Real estate tax refund receivable 9,735 --
Other current assets 1,132 856
----------- -----------
51,849 6,172
Fixed assets, at cost:
Land 402,419 402,419
Buildings 510,716 499,226
Furniture, fixtures and equipment 26,813 26,422
----------- -----------
939,948 928,067
Less accumulated depreciation (229,021) (214,035)
----------- -----------
710,927 714,032
Deferred renting expenses, less accumulated
amortization of $30,978 and $20,659 148,879 93,735
Lease incentives 72,500 31,327
Deferred financing expenses, less accumulated
amortization of $1,285 in 1994 -- 30,094
Other assets 2,892 2,960
----------- -----------
Total assets $ 987,047 $ 878,320
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
DEFICIENCY
Current liabilities not subject to compromise:
Accounts payable and accrued expenses $ 11,822 $ 26,848
Due to RGI affiliates 2,238 273,778
Mortgage payable, net of unamortized
issue discount of $36,101 in 1994 -- 1,263,899
Loans payable to RGI -- 160,715
Non-current mortgage interest payable -- 36,321
Liabilities subject to compromise 1,841,114 --
Partners' capital deficiency (868,127) (883,241)
----------- -----------
Total liabilities and partners' capital deficiency $ 987,047 $ 878,320
=========== ===========
</TABLE>
See accompanying notes.
1
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED STATEMENTS OF OPERATIONS AND
PARTNERS' CAPITAL DEFICIENCY
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Rental revenue:
Fixed and percentage rents $ 178,208 $ 159,757 $ 152,187
Operating and real estate tax escalations 17,865 42,201 55,643
--------- --------- ---------
Total rental revenue 196,073 201,958 207,830
Sales of services 17,772 18,893 18,767
--------- --------- ---------
Gross revenues 213,845 220,851 226,597
--------- --------- ---------
Real estate taxes 33,867 40,884 44,336
Real estate tax refund (7,535)
Maintenance and engineering 31,708 32,062 33,657
Other operating expenses 26,260 26,025 26,026
Utilities 16,931 16,386 16,553
Cost of service sales 12,033 13,060 13,919
Depreciation and amortization 28,391 25,761 21,821
General and administrative expenses 4,886 4,322 5,871
Management fees 3,911 2,636 2,579
Ground rent 766 754 694
--------- --------- ---------
Cost of revenues 151,218 161,890 165,456
--------- --------- ---------
Yarnings before interest and reorganization items 62,627 58,961 61,141
Interest expense, net 45,038 117,328 114,599
--------- --------- ---------
Earnings (loss) before reorganization items 17,589 (58,367) (53,458)
Reorganization items:
Professional fees and expenses 2,288 -- --
Debtors-in-possession financing fees 826 -- --
Interest income (639) -- --
--------- --------- ---------
Total reorganization items 2,475 -- --
--------- --------- ---------
Net income (loss) $ 15,114 ($ 58,367) ($ 53,458)
Partners' capital deficiency, beginning of period (883,241) (824,874) (771,416)
--------- --------- ---------
Partners' capital deficiency, end of period ($868,127) ($883,241) ($824,874)
========= ========= =========
</TABLE>
See accompanying notes.
2
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
COMBINED STATEMENT OF CASH FLOWS
Years ended December 31, 1995, 1994, and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings (loss) before reorganization items $ 17,589 ($ 58,367) ($ 53,458)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 28,391 25,761 21,821
Accrued interest expense 21,475 6,016 6,893
Real estate tax refund payable to tenants 13,237 -- --
Amortization of original issue discount and
deferred financing expenses 3,247 5,827 4,176
Real estate tax refund receivable (9,735) -- --
Increase in lease incentives, net (41,173) (17,378) (6,826)
Changes in certain assets and liabilities (2,608) (3,531) 9,671
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES BEFORE REORGANIZATION ITEMS 30,423 (41,672) (17,723)
OPERATING CASH FLOWS FROM REORGANIZATION ITEMS
Professional fees and expenses paid (1,678) -- --
Debtors-in-possession financing fees (733) -- --
Interest income 639 -- --
--------- --------- ---------
NET CASH USED IN REORGANIZATION ITEMS (1,772) -- --
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 28,651 (41,672) (17,723)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred renting expenses paid (47,491) (48,737) (16,358)
Capital expenditures (10,971) (14,423) (27,317)
Increase in cash held in escrow for tenant
lease obligations (3,299) -- --
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (61,761) (63,160) (43,675)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from RGI affiliates 59,278 135,601 45,938
Loans from RGI -- 3,747 15,457
Deferred financing expenses paid -- (34,517) --
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 59,278 104,831 61,395
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 26,168 (1) (3)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3 4 7
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,171 $ 3 $ 4
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 20,339 $ 105,495 $ 103,545
========= ========= =========
</TABLE>
See accompanying notes.
3
<PAGE>
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. PROCEEDINGS UNDER CHAPTER 11, PLAN OF REORGANIZATION
The accompanying financial statements include the combined accounts of two
partnerships, Rockefeller Center Properties ("RCP") and its
affiliate, RCP Associates, (collectively, the "Partnerships"), in which
Rockefeller Group, Inc. ("RGI") and one of its subsidiaries, Radio City
Music Hall Productions, Inc. ("RCMHPI"), are the sole partners (the
"Partners"). The Partnerships together own the real property interests
constituting most of the land and buildings in the landmarked portion of
Rockefeller Center (the "Property"). Transactions between the Partnerships
have been eliminated in the accompanying combined financial statements.
On May 11, 1995 (the "Petition Date"), the Partnerships 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 Partnerships 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 RCP.
Subsequent to the Petition Date, the Partnerships 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 Partnerships 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 Partnerships to
pay certain prepetition liabilities, wages, and other employee obligations and
(ii) approving the use of cash collateral.
On September 12, 1995, the Partnerships reported to the Bankruptcy Court that
they intended to transfer the Property to the mortgage holder, Rockefeller
Center Properties, Inc. ("RCPI"). On February 9, 1996, RGI and the Partnerships
filed a Second Amended Joint Plan of Reorganization, as Modified, dated
February 8, 1996 (the "Plan") calling for the transfer of the Property to RCPI
or an entity designated by RCPI at a date that is not yet certain. Following
the transfer, the Partnerships will be released from all liabilities under the
mortgage payable to RCPI. It also is expected that all prepetition claims of
RGI and its affiliates against the Partnerships will be waived, but that
virtually all other creditors' prepetition claims against the Partnerships
will be paid in full, with interest.
4
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
The Plan provides for an account to be established with $20 million contributed
by or on behalf of RCPI. The balance of funds required to satisfy the
obligations will be paid by RGI. This account will pay for prepetition
obligations which are to be satisfied and a limited number of postpetition
obligations of the Partnerships. Substantially all other postpetition
obligations of the Partnerships have been or will be paid from the postpetition
cash flow of the Property or other sources not affiliated with the Partnerships
or RGI. The Plan is subject to confirmation by the Bankruptcy Court.
Confirmation of the Plan is conditioned, among other things, on approval by
RCPI's shareholders of RCPI's plan of recapitalization and merger.
Liabilities subject to compromise (all or a portion of which may be disputed by
the Partnerships) at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Mortgage payable to RCPI (Note 4) $1,290,902,000
Amounts payable to RGI and affiliates (Note 6) 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
==============
</TABLE>
The mortgage payable to RCPI (the "Loan") 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 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 Partnerships.
Liabilities subject to compromise under reorganization proceedings include the
Partnerships' present estimates of substantially all liabilities as of the
Petition Date. Payment of these liabilities has been stayed while the
Partnerships 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 Partnerships have received claims with aggregate
amounts substantially in excess of those recorded at the Petition Date. The
Partnerships are reconciling these claims to their records
5
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
and do not expect that the resolution of these matters will result in
liabilities materially in excess of those recorded at the Petition Date.
The financial statements have been prepared on a going concern basis and
reflect the combined historical cost basis of the Partnerships in their assets
and liabilities. The transfer of the Property to RCPI is subject to the
approval of the Bankruptcy Court. This transfer of the property and the related
release of the Loan and cancellation of the indebtedness to RCPI and RGI and
its affiliates, if consummated, will result in substantial non-cash gains to
the Partnerships. Further, upon consummation of these transactions, the
Partnerships will either cease their business activities or control of the
Partnerships will vest with parties other than RGI. These conditions raise
substantial doubt as to the ability of the Partnerships to continue as going
concerns. The financial statements do not include any adjustments which would
be required to reflect the transfer of the Property to RCPI, the wind-down of
the affairs of the Partnerships, or any change in control which may occur
with respect to the Partnerships. In the event the transfer of the Property is
not approved and the Property is foreclosed upon, other adjustments would be
required. These adjustments could be material.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Reporting by Entities in Reorganization Under the Bankruptcy Code --
For financial reporting purposes, the Partnerships have applied the provisions
of the American Institute of Certified Public Accountants Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). In accordance with SOP 90-7, those liabilities and
obligations whose disposition is dependent upon the outcome of the Chapter 11
Cases have been segregated and classified as "Liabilities Subject to
Compromise" in the combined balance sheet at December 31, 1995. In addition, as
of the Petition Date, the accrual of interest expense ceased and bankruptcy
related expenses were reported separately as "reorganization items" in the
accompanying combined statements of operations and partners' capital
deficiency. Bankruptcy related expenses include professional fees and
debtor-in-possession financing fees, net of interest income earned in
the postpetition period.
Cash and Cash Equivalents -- Cash and cash equivalents include cash in banks and
highly liquid short-term investments that are readily convertible to cash.
Fixed assets -- Fixed assets are recorded at cost and include all major capital
improvements. Ordinary maintenance, minor repairs, and items costing less than
$1,000 each are expensed as incurred.
6
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Depreciation -- Buildings and improvements are depreciated using the
straight-line method over their useful lives, which range from 15 to 50 years.
Other capital expenditures are depreciated using the straight-line method over
their estimated useful lives, which range from 3 to 15 years.
Deferred renting expenses -- Expenditures associated with obtaining new tenants
and preparing the premises for occupancy are categorized as deferred renting
expenses. These costs are amortized on a straight-line basis over the related
lease terms.
Deferred financing expenses -- Mortgage recording taxes paid, net of a mortgage
recording tax credit, have been recorded as deferred financing expenses. Until
the Petition Date these costs were being amortized over the initial term of the
Loan using the interest method. As of the Petition Date, the unamortized amount
was set off against the Loan in liabilities subject to compromise, and
amortization ceased.
Lease incentives -- Lease incentives represent primarily the value of free
rental periods granted to tenants upon initiation or renewal of lease
commitments. Once rental payments begin, the lease incentives are amortized
over the remainder of the lease term.
Cash held in escrow for lease obligations -- Cash held in escrow represents
legally segregated funds to be used for specific lease obligations of the
Partnerships.
Sales of services -- In addition to the rental of real property, RCP provides
maintenance and utility services to tenants.
Interest expense -- Until the Petition Date, interest expense on the Loan had
been recognized based on the average yield of the mortgage notes through
December 31, 2000 (the Equity Conversion Date). The average yield combines the
differing coupon rates of interest (Base Interest) with the amortization (using
the interest method) of the original issue discount. Interest expense accruals
ceased on the Petition Date as a result of the bankruptcy proceedings.
Interest income -- Interest income represents earnings from short-term time
deposits.
Income taxes -- The net income or loss of the Partnerships is included in
determining the net income of their partners which have the responsibility to
pay any related income taxes.
7
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Use of estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make estimates
and assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from these estimates.
3. DEBTOR-IN-POSSESSION REVOLVING CREDIT AGREEMENT
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 Partnerships. 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 RCPI. The Facility matures on the earlier of December
31, 1996 or upon the substantial consummation of a plan of reorganization. The
Partnerships have the option of choosing either a prime rate or a LIBOR-based
interest rate. As of December 31, 1995, no drawdowns against the Facility had
been taken; however, a total of $1 million in letters of credit had been issued
against the Facility.
4. RCPI MORTGAGE LOAN
Rockefeller Center Properties, Inc., a real estate investment trust, used the
net proceeds of its initial public offerings to make a $1.3 billion
participating mortgage loan (the "Loan") to the Partnerships. The net proceeds
of the offerings, which totaled $1,233,752,000, were loaned to the Partnerships
on September 19, 1985, thus creating original issue discount of approximately
$66,248,000 with respect to the Loan.
As of the Petition Date, interest payments were discontinued. The Loan, net of
the unamortized original issue discount, has been reclassified within
liabilities subject to compromise on the balance sheet, and interest expense
accruals have ceased. If interest accruals had continued, an additional $72.1
million of Loan interest would have been recorded.
The Loan is secured by recorded fee and leasehold mortgages in the aggregate
amount of $1.3 billion. A total of $1,255.2 million of the mortgages was not
recorded until September 1994, at which time mortgage recording taxes totaling
$34.5 million were paid at the Partnerships' expense. The Loan is further
secured by a recorded Assignment of Rents pursuant to which the Partnerships
have assigned to RCPI, as security for repayment of the Loan, the Partnerships'
rights to collect certain rents with respect to the Property.
8
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
The Loan Agreement required the Partnerships to maintain a standby, irrevocable
letter of credit or to deposit with a trustee either cash or specified types of
collateral with an equivalent fair market value. During June 1995, RCPI drew on
the letters of credit and received full payment of $50 million. The $50
million, which was ultimately paid by RGI, has not been reflected in the
accounts of the Partnerships.
The Loan provides for specified quarterly Base Interest payments during its
remaining term with annualized coupon rates increasing from 7.97% in 1993 to
8.43% in 2000. The combination of the varying rates of Base Interest with the
amortization of the original issue discount resulted in an effective annual
interest rate approximating 8.51% over the term of the Loan.
Certain leases grant tenants the right to reduce or offset rent payable if the
Partnerships breach certain obligations under the leases, including the funding
of tenant improvements and other items. An amendment to the Loan agreement
dated February 22, 1994 required the Partnerships to provide additional
collateral security in connection with these leases. The minimum security
amount, which at any time is equal to 50% of the excess of the tenants' right
to offset rent over $37.5 million, is required to be placed in an escrow
account. At December 31, 1995, these obligations totaled $14.8 million which
did not require the Partnerships to provide additional collateral security. At
December 31, 1994, tenant improvement obligations aggregated $39.3 million,
which necessitated an escrow amount of $900,000.
As a result of the significant uncertainties caused by the bankruptcy
proceedings, it is not practicable at this time for the Partnerships to
estimate the fair value of the Loan.
5. NBC TRANSACTION
National Broadcasting Company, Inc. ("NBC") leases approximately 1.3 million
square feet of space in four Rockefeller Center buildings (the GE Building, the
Studio Building, the GE West Building, and 10 Rockefeller Plaza).
Under agreements signed in 1988, the primary NBC lease, which is for premises
leased in the three buildings known as 30 Rockefeller Plaza, has been extended
to the year 2022. Through 1997, NBC will continue to pay rent on the basis of
its prior lease. The agreements, however, provide that, prior to 1997, NBC will
have the right to directly pay a portion of the operating expenses and real
estate taxes on its leased space and reduce its lease payments accordingly.
9
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
From 1997 to 2022, NBC will pay rent at fixed rates varying according to the
types of space involved (such as office or studio) and location within the
three buildings. This rent, which will increase by 15% in each of 2007 and
2017, has been determined on a "net" basis, that is, without including amounts
normally payable with regard to real estate taxes and certain operating
expenses. Further, NBC has options for one 10-year renewal period and one
9-year and five month renewal period, at net rents determined according to the
then fair market rental value.
The transaction was structured to accommodate arrangements between New York
City and NBC for certain financial assistance in connection with the project.
The three affected buildings were subjected to a condominium regime, and the
NBC-occupied areas were conveyed to the City's Industrial Development Agency
("IDA") for nominal consideration. These areas were then leased back to the
Partnerships at nominal rents, with NBC becoming a subtenant of the
Partnerships. Upon the expiration of the period of City benefits, ownership
will revert to the owner of the Property. IDA ownership is a technical
structure required to effectuate the transaction and will have no economic
effect upon the ownership of the Property.
6. RELATED PARTY TRANSACTIONS
RGI and affiliates occupy approximately 2% of the total rentable space within
the Property. The terms of the leases with RGI provide for an annual base rent
of approximately $5,257,000.
The Property includes Radio City Music Hall and the land on which it is
situated. Radio City Music Hall is operated by an RGI affiliate which pays
rent consisting primarily of responsibility for all costs (including real
estate taxes) related to the operation of the facility.
The Property includes a six-story parking garage. The garage is leased to
Rockefeller Center Management Corporation ("RCMC") for an annual base rent of
approximately $2,300,000.
Rental revenue in the accompanying combined statements of operations and
partners' capital deficiency included $9,100,000, $8,223,000, and $7,778,000
earned during 1995, 1994, and 1993, respectively, under the terms of these
leases including their proportionate share of increases in certain costs and
expenses of the Property.
10
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Under the terms of a management agreement, RCMC provides management and ad-
ministrative services for the Property. During 1995, 1994, and 1993, RCMC
charged the Partnerships $3,911,000, $2,636,000, and $2,579,000, respectively,
in management fees under the terms of this agreement.
For all leases executed before October 1, 1995, this management agreement also
allowed RCMC to receive commissions with respect to leases negotiated within
the Property, including overrides when another broker is the procuring broker.
During 1995, 1994, and 1993, RCMC earned $4,924,000, $22,389,000, and
$2,888,000, respectively, in leasing commissions from the Partnerships.
Cushman & Wakefield, Inc., an RGI subsidiary, was paid $1,102,000, $1,673,000,
and $571,000 in leasing commissions by the Partnerships during 1995, 1994,
and 1993, respectively.
Under the terms of a franchise agreement with RCMC (as agent for the
Partnerships), Rockefeller Group Telecommunications Services, Inc., a
subsidiary of RGI, is permitted to provide shared telecommunication services
to tenants within the Property. No fees are paid to the Partnerships for the
right to provide these services. The Partnerships have committed to pay for
certain of the capital additions associated with telecommunication
services up to an aggregate of $13,000,000. During 1995, 1994, and 1993, the
cost of capital additions borne by the Partnerships approximated $947,000,
$1,153,000, and $658,000, respectively. Total expenditures through December 31,
1995 approximated $10,535,000.
As a result of the bankruptcy proceedings, any or all of these related party
agreements described above may be subject to renegotiation or cancellation.
Prior to the Petition Date the Partnerships participated in a cash management
system under which their funds, together with the funds of other related
companies, were managed by a subsidiary of RGI. At December 31, 1994, and 1993,
the balances due to RGI affiliates include, $269,475,000, and $125,388,000,
respectively, representing interest-free overdrafts in the cash management
system. This system was suspended as of April 18, 1995; however, residual
balances due to RGI at December 31, 1995 aggregated $313,695,000.
Salaried employees of the Partnerships participate in the defined benefit
pension plan maintained by RGI. Accordingly, the Partnerships were charged
their proportionate share of RGI's pension cost which aggregated $667,000,
$574,000 and $489,000 in 1995, 1994, and 1993, respectively. The hourly
employees of the Partnerships are covered by defined contribution plans. The
contribution to the multi-employer sponsored plans in 1995, 1994, and 1993
aggregated $1,416,000, $1,332,000, and $1,370,000, respectively.
11
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
The Partnerships provide certain health care and life insurance benefits for
current and retired salaried employees through plans maintained by RGI.
Accordingly, the Partnerships were charged their proportionate share of RGI's
health care and life insurance costs which aggregated $1,219,000, $1,150,000,
and $1,725,000 in 1995, 1994, and 1993, respectively.
The Loan with RCPI (see Note 4) provides that, if the cumulative cost of
capital improvements made by the Partnerships is in excess of specified
amounts contained in the agreement for any calendar year, the excess amount is
deemed a renewable one-year loan from RGI to the Partnerships for the next
calendar year. The cumulative amount of excess capital improvements totaled
$126,681,000, $126,681,000, and $122,934,000 at December 31, 1995, 1994, and
1993, respectively. As of the December 31, 1995, the loans payable to RGI have
been classified as liabilities subject to compromise on the balance sheet, and
the accrual of interest ceased as of the Petition Date. If interest accruals
had continued, $7.3 million of additional interest would have been recorded.
These excess capital improvement loans had accrued interest at 80% of the prime
rate, compounded quarterly. Loans for the cumulative excess capital
improvements existing at the end of the preceding year did not begin to earn
interest until the beginning of the following year. Unpaid interest was added
to the principal balance and also earned interest at 80% of the prime rate,
compounded quarterly. The cumulative amount of unpaid interest totaled
$37,980,000, $34,034,000, and $26,720,000 at December 31, 1995, 1994, and 1993,
respectively.
As of December 31, 1995, the following related party payables and accrued
expenses were classified as liabilities subject to compromise:
<TABLE>
<CAPTION>
<S> <C>
Cash management system $313,695,000
Loan payable to RGI, including
accrued interest 164,661,000
Commissions payable 11,436,000
Other 6,606,000
------------
$496,398,000
============
</TABLE>
If the Plan (Note 1) is approved, it is expected that RGI's claim to these
amounts would be waived.
12
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
7. COMMITMENTS AND CONTINGENCIES
As of December 31, 1995, the Partnerships had a total of $36.6 million of
outstanding commitments to tenants for improvements to leased premises. Of this
amount, a total of $19.7 million had been accrued as a prepetition liability
and was classified on the balance sheet within liabilities subject to
compromise. It is expected that the remaining improvements ($16.9 million) will
be completed during 1996. Additional commitments are expected to arise as new
leases are signed.
As required by the Loan Agreement, the Partnerships are committed to make
certain capital improvements totaling $197.6 million prior to December 31,
2000. Qualifying capital expenditures through December 31, 1995 approximated
$223.2 million, of which $170.4 million satisfy the $197.6 million requirement.
8. TENANT LEASING ARRANGEMENTS
The Partnerships lease to tenants office, retail, and storage space in the
Property through non-cancelable operating leases expiring principally over the
next 28 years. The leases require fixed minimum monthly payments over their
terms and generally provide for adjustments to rent for the tenants'
proportionate share of changes in certain costs and expenses of the Property.
Certain leases also provide for additional rent which is based upon a percentage
of sales of the lessee.
The following is a schedule of minimum future rentals on non-cancelable
operating leases as of December 31, 1995:
<TABLE>
<CAPTION>
Year ending December 31,
- ------------------------
<S> <C>
1996 $ 167,374,000
1997 165,585,000
1998 174,484,000
1999 168,975,000
2000 160,251,000
Later years 1,722,891,000
--------------
Total minimum future rentals $2,559,560,000
==============
</TABLE>
As a result of lease incentives, the actual lease payments may vary
significantly from the amounts presented above.
13
ROCKEFELLER CENTER PROPERTIES AND RCP ASSOCIATES
DEBTORS-IN-POSSESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
9. CASH FLOWS FROM CHANGES IN CERTAIN ASSETS AND LIABILITIES
The cash flows from changes in certain assets and liabilities of the Company as
of December 31, 1995, 1994, and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(Increase) decrease in accounts
receivable ($5,280,000) $ 316,000 $ 856,000
(Increase) decrease in other current
and non-current assets (208,000) (509,000) 669,000
Increase (decrease) in accounts
payable and accrued expenses 2,880,000 (3,338,000) 8,146,000
----------- ----------- -----------
($2,608,000) ($3,531,000) $ 9,671,000
=========== =========== ===========
</TABLE>
14
Exhibit 99.1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- ---------------------------------------
ZELL/MERRILL LYNCH REAL ESTATE
OPPORTUNITY PARTNERS LIMITED
PARTNERSHIP III, an Illinois Limited
Partnership,
Plaintiff, 96 Civ.
-against- COMPLAINT
ROCKEFELLER CENTER PROPERTIES,
INC., a Delaware Corporation,
Defendant
- -----------------------------------------
Plaintiff, Zell/Merrill Lynch Real Estate Opportunity Partners Limited
Partnership III ("ZML"), for its complaint against Defendant Rockefeller Center
Properties, Inc. ("RCPI"), states:
1. ZML is an Illinois Limited Partnership with its principal place of
business in Chicago, Illinois.
2. Defendant RCPI is a corporation organized and existing under the
laws of the State of Delaware with its principal place of business in New York,
New York.
JURISDICTION
3. This Court has subject matter jurisdiction of this action pursuant
to 28 U.S.C. Section 1332, as the plaintiff and the defendant are citizens of
different states and the amount in controversy exceeds $50,000, exclusive of
interest and costs.
4. This Court has personal jurisdiction over the defendant, as
defendant is doing and transacting business in this District.
VENUE
5. Venue is proper in this District pursuant to 28 U.S.C. Section
1391, as the defendant resides and does business within this District.
FACTS
6. ZML is a real estate investment fund which owns and operates real
property throughout the United States.
7. RCPI is a publicly traded real estate investment trust which holds
a mortgage on a portion of the property commonly known as Rockefeller Center in
New York, New York.
8. On or about August 18, 1995, ZML and RCPI entered into an
Investment Agreement, dated August 18, 1995 (the "Agreement"), a copy of which
is attached hereto as Exhibit A.
9. Pursuant to Section 2 of the Agreement generally and Section 2.01
of the Agreement specifically, ZML agreed to make a term loan to RCPI in the
principal amount of $10,000,000 (the "Loan"), subject to the terms and
conditions set forth in the Agreement.
10. On or about August 29, 1995, ZML made the Loan to RCPI pursuant to
the Agreement.
11. Pursuant to Section 8.01 of the Agreement, ZML agreed to purchase
1,788,908 common shares of RCPI, par value $0.01 per share (the "Initial
Shares") for a purchase price of $10,000,000, and 2,325,581 common shares of
RCPI, par value $0.01 per share (the "Subsequent Shares") for a purchase price
of $13,000,000, each upon delivery to ZML of a written notice to purchase (a
"Purchase Notice") in accordance with Section 8.01 of the Agreement.
12. On or about September 27, 1995, pursuant to Section 8.01 of the
Agreement, RCPI delivered a Purchase Notice executed by the President and Chief
Executive Officer of RCPI to ZML requiring ZML to purchase the Initial Shares on
October 2, 1995 for an aggregate purchase price of $10,000,000, a copy of which
is attached hereto as Exhibit B.
13. On October 2, 1995, ZML stood ready, willing and able to perform
its obligations under the Agreement to purchase the Initial Shares and delivered
a written notice thereof to RCPI, a copy of which is attached hereto as Exhibit
C.
14. Pursuant to Section 5.08 of the Agreement, upon purchase of the
Initial Shares, RCPI is obligated to cause the appointment of a designee of ZML
to the Board of Directors of RCPI.
15. RCPI breached the Agreement on October 2, 1995, when it failed to
perform its obligations under the Agreement by failing to sell to ZML the
Initial Shares and to appoint a designee of ZML to the RCPI Board of Directors,
as required by Sections 8.01 and 5.08 of the Agreement, respectively.
16. On or about October 5, 1995, ZML notified RCPI that it was in
default of its obligations under the Agreement and requested that RCPI correct
this default and honor its obligations to consummate the purchase and sale of
the Initial Shares and RCPI did not correct this default.
COUNT 1
SPECIFIC PERFORMANCE
17. ZML repeats and realleges paragraphs 1 through 16, and
incorporates them herein by reference.
18. ZML brings this action against RCPI for Specific Performance of
the Agreement between ZML and RCPI.
19. The Agreement between ZML and RCPI constitutes a legal, valid and
binding contract which is enforceable by this Court.
20. ZML has already substantially performed its duties under the terms
of the Agreement, is willing and able to perform all remaining obligations that
it has under the Agreement, and has so confirmed this to RCPI in writing.
21. RCPI is able to perform its duties under the terms of the
Agreement, as RCPI may still sell the Initial Shares to ZML and appoint a ZML
designee to the RCPI Board of Directors, as required by the Agreement.
22. ZML has no adequate remedy at law for the breach of the Agreement by
RCPI, since the value to ZML of having the voting stock and a representative on
RCPI's Board of Directors cannot be valued for compensatory damages. RCPI's
breach of the Agreement denies ZML the opportunity to participate in the
management of RCPI, which cannot be adequately compensated by monetary damages
because calculating a figure would be impractical and speculative.
WHEREFORE, ZML prays that this Court enter judgment in its favor and
against RCPI for the following relief:
a. An order directing RCPI to sell the Initial Shares to ZML and
appoint a ZML designee to the RCPI Board of Directors in accordance with the
terms of the Agreement;
b. An order directing RCPI to be able to vote the Initial Shares at
any Meeting of Shareholders of RCPI;
c. An order awarding to ZML compensatory damages consistent with the
proof at trial;
d. An order awarding to ZML its costs and fees in connection with
prosecuting this suit, including reasonable attorneys' fees, as allowed by law;
and
e. Such other and further relief as this Court may deem just.
Dated: New York, New York
February 28, 1996
SEYFARTH, SHAW, FAIRWEATHER
& GERALDSON
By: /s/ NATHANIEL H. AKERMAN
____________________________________
Nathaniel H. Akerman (NHA-0241)
Attorneys for Plaintiff
900 Third Avenue
New York, New York 10022-4728
(212) 715-9000
