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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 1-8971*
RCPI Trust*
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-7087445
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Tishman Speyer Properties, L.P.
45 Rockefeller Plaza, New York, N.Y. 10011
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 332-6500
---------------------------------------------------
(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
----- ------
- ----------------------------
* As successor in interest to Rockefeller Center Properties, Inc. (Commission
File No. 1-8971)
<PAGE>
RCPI TRUST
INDEX
PAGE
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited, interim financial statements
have been prepared in accordance with the instructions to
Form 10-Q. In the opinion of management, all adjustments
necessary for a fair presentation have been included.
RCPI Trust, Balance Sheets as of March
31, 1997 (unaudited) and December 31,
1996 1
RCPI Trust, Statement of Operations for
the three months ended March 31, 1997
(unaudited) 2
RCPI Trust, Statement of Cash Flows for
the three months ended March 31, 1997
(unaudited) 3
Rockefeller Center Properties, Inc.
(Predecessor), Statement of Operations
for the three months ended March 31, 1996
(unaudited) 4
Rockefeller Center Properties, Inc.
(Predecessor), Statement of Cash Flows
for the three months ended March 31, 1996
(unaudited) 5
Notes to Financial Statements
(unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
PART II--OTHER INFORMATION 18
ITEM 1. LEGAL PROCEEDINGS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(i)
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
RCPI TRUST
BALANCE SHEETS
($ in thousands)
As of As of
March 31, 1997 December 31, 1996
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Real Estate:
Land $158,149 $158,149
Buildings and improvements 598,660 596,880
Tenant improvements 17,287 14,405
Furniture and fixtures 3,939 3,911
----------- -----------
778,035 773,345
Less: Accumulated depreciation 10,924 6,718
----------- -----------
767,111 766,627
Cash and cash equivalents 28,524 28,765
Restricted cash 7,673 10,027
Accounts receivable 12,959 19,859
Prepaid expenses 8,889 478
Deferred costs, net of accumulated
amortization of $611 and $329 11,187 5,486
Accrued rent 12,881 8,430
------------ -----------
Total Assets $849,224 $839,672
============ ===========
LIABILITIES AND OWNERS' EQUITY
Liabilities:
Zero coupon convertible debentures,
net of unamortized discount of
$212,964 and $224,030 $373,221 $362,155
14% debentures (includes premium of
$25,811 and $26,155) 100,811 101,155
Floating rate notes 10,000 10,000
Accrued interest payable 8,884 7,234
Accounts payable and accrued expenses 14,210 19,383
Tenant security deposits payable 6,966 7,279
----------- -----------
Total Liabilities 514,092 507,206
Contingencies
Owners' Equity 335,132 332,466
------------ -----------
Total Liabilities and Owners' Equity $849,224 $839,672
============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
1
<PAGE>
RCPI TRUST
STATEMENT OF OPERATIONS
($ in thousands)
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
MARCH 31, 1997
--------------
Revenues:
Base rental $43,066
Escalations and percentage rents 2,774
Interest and other income 1,810
---------
Total revenues 47,650
Expenses:
Interest 13,606
Real estate taxes 8,234
Payroll and benefits 4,346
Repairs, maintenance, and supplies 1,934
Utilities 4,600
Cleaning 3,589
Professional fees 2,707
Insurance 285
Management and accounting fees 847
General and administrative 313
Depreciation and amortization 4,523
-------
Total expenses 44,984
-------
Net Income $2,666
=======
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
RCPI TRUST
STATEMENT OF CASH FLOWS
($ in thousands)
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
MARCH 31, 1997
--------------
Cash Flows from Operating Activities:
Net income $2,666
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization of original issue discount and premium 10,722
Depreciation and amortization 4,523
Decrease in restricted cash 2,354
Decrease in accounts receivable 6,900
Increase in prepaid expenses (8,411)
Increase in accrued rent (4,451)
Decrease in accounts payable and accrued expenses (5,486)
Increase in accrued interest payable 1,650
--------
Net cash provided by operating activities 10,467
-------
Cash Flows from Investing Activities:
Additions to buildings and improvements (1,780)
Additions to tenant improvements (2,882)
Additions to furniture, fixtures and equipment (28)
Additions to deferred costs (6,018)
-------
Net cash (used in) investing activities (10,708)
-------
Decrease in cash and cash equivalents (241)
Cash and cash equivalents at beginning of period 28,765
------
Cash and cash equivalents at end of period 28,524
======
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
(Predecessor)
STATEMENT OF OPERATIONS
($ in thousands, except per share data)
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
MARCH 31, 1996
--------------
Revenues:
Other income $ 14
---------
14
Expenses:
Interest expense:
Current coupon convertible debentures 5,511
Zero coupon convertible debentures 8,986
14% debentures 2,750
Floating rate notes 3,834
GSMC facility 1,056
---------
22,137
General and administrative 3,172
Amortization of deferred debt issuance costs 936
Increase in liability for stock appreciation rights 1,907
Expenses related to the March 25, 1996
special meeting of stockholders 450
---------
28,602
---------
Net Loss ($28,588)
=========
Net loss per share ($ 0.75)
=========
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
ROCKEFELLER CENTER PROPERTIES, INC.
(Predecessor)
STATEMENT OF CASH FLOWS
($ in thousands)
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
MARCH 31, 1996
--------------
Cash flow from operating activities:
Other interest income received $ 13
Interest paid on floating rate notes ( 3,924)
Interest paid on current coupon convertible debentures (27,712)
Payments for accounts payable, accrued expenses
and other assets ( 3,052)
--------
Net cash (used in) operating activities (34,675)
--------
Cash flows from financing activities:
Net proceeds from GSMC facility 34,800
--------
Net cash provided by financing activities 34,800
Net increase in cash and cash equivalents 125
Cash and cash equivalents at the beginning of the period 1,298
----------
Cash and cash equivalents at the end of the period $ 1,423
==========
Reconciliation of net loss to net cash (used in)
operating activities:
Net loss ($28,588)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Amortization of discount:
Zero coupon convertible debentures 8,986
14% Debentures 89
Increase in interest receivable and amortization
of loan receivable discount, net (1)
Decrease in deferred debt issuance costs and other
assets, net 734
(Decrease) in accrued interest payable (18,573)
Increase in stock appreciation rights liability 1,907
Increase in accounts payable and accrued expenses 771
--------
Net cash (used in) operating activities ($34,675)
========
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PURPOSE
RCPI Trust, (the "Company"), was established in the State of Delaware on
March 26, 1996 as a Delaware business trust. The Company was organized
pursuant to the Trust Agreement dated July 10, 1996 (the "Trust Agreement")
between Rockefeller Center Properties, Inc. (the "Predecessor"), a
wholly-owned subsidiary of RCPI Holdings, Inc. ("Holdings") and RCPI
Investors L.L.C. ("LLC"), each owning a 50% undivided beneficial interest.
The primary purpose of the Company is to acquire, manage and operate the
landmarked buildings and public space known as Rockefeller Center (the
"Property") and to be successor in interest to the Predecessor.
The Predecessor was incorporated in Delaware on July 17, 1985. The
Predecessor qualifies and has elected to be treated, for Federal income tax
reporting purposes, as a real estate investment trust (a "REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"). The Predecessor was
originally formed to permit public investment in two convertible,
participating mortgages on the Property. From the proceeds of its offering
of common stock (the "Common Stock") and the offerings of its Current Coupon
Convertible Debentures ("Current Coupons") due December 31, 2000 and Zero
Coupon Convertible Debentures ("Zero Coupons") due December 31, 2000
(collectively, the "Convertible Debentures"), the Predecessor made a $1.3
billion convertible, participating mortgage loan (the "Mortgage Loan") to
two partnerships, Rockefeller Center Properties and RCP Associates
(collectively, the "Previous Owners"). The partners of the Previous Owners
were Rockefeller Group, Inc. ("RGI") and Radio City Music Hall Productions,
Inc. ("RCMHP"), a wholly owned subsidiary of RGI. Mitsubishi Estate Company,
Ltd. controlled an 80% equity interest in RGI, and Rockefeller family
interests held the remaining 20%.
On July 10, 1996, pursuant to the Merger Agreement (as described below),
Holdings purchased all the outstanding Common Stock of the Predecessor with
approximately $172 million of its own equity and approximately $172 million
obtained through a note payable to LLC. The note payable was then
transferred to the Predecessor prior to the transfer of all the
Predecessor's assets and liabilities to the Company in exchange for a 50%
undivided beneficial ownership interest. At the same time, LLC contributed
its note receivable of $172 million to the Company which was in exchange for
a 50% undivided beneficial ownership interest.
Prior to July 10, 1996, the Company's activities were limited to
organizational matters.
Merger Agreement
----------------
Pursuant to an Agreement and Plan of Merger dated November 7, 1995, (the
"Merger Agreement"), entered into between the Predecessor and a group of
investors (the "Investor Group") the members of which are Exor Group S.A.,
Prometheus Investors, L.L.C., Rockprop, L.L.C., Troutlet Investments
Corporation, Gribble Investments (Tortola) BVI, Inc., Weevil Investments
(Tortola) BVI, Inc. and Whitehall Street Real Estate Limited Partnership V
("Whitehall"), RCPI Merger Inc., a wholly owned subsidiary of Holdings, was
merged (the "Merger") with and into the Predecessor. Consequently, the
Predecessor became a subsidiary of Holdings, a Delaware corporation
controlled by the Investor Group.
The Merger Agreement was approved by the stockholders of the Predecessor on
March 25, 1996 and became effective on July 10, 1996 (the "Effective Date").
Pursuant to the Merger, each share of the Predecessor's Common Stock
outstanding as of the Effective Date (other than (i) shares of Common Stock
held by the Predecessor or any of its subsidiaries, (ii) shares of Common
Stock held by Holdings or any of its subsidiaries (including RCPI Merger
Inc. ) and (iii) any shares of Common Stock held by a stockholder who was
entitled to demand, and who properly demanded and has not withdrawn such
demand, appraisal for such shares in accordance with Section 262 of the
Delaware General Corporation Law) was converted into the right to receive
$8.00 in cash, without interest thereon. As of the Effective Date, the
Common Stock of the Predecessor was held by Holdings and the Warrants and
Stock Appreciation Rights (see Note 4), previously held by Whitehall were
contributed through Holdings to the Predecessor and canceled. Thereafter, on
the
6
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
Effective Date, the Predecessor transferred substantially all of its assets
(including the Mortgage Loan) and liabilities to the Company and the Company
became the successor to the Predecessor under the Indenture governing the
Convertible Debentures (see Note 4).
Borrower's Chapter 11 Plan
--------------------------
On May 11, 1995, the Previous Owners filed for protection under Chapter 11
of the Federal Bankruptcy Code in the United States Bankruptcy Court in the
Southern District of New York. The Previous Owners and their partners filed
a Chapter 11 reorganization plan (the "Chapter 11 Plan") that contemplated
ownership of the Property being turned over to the Predecessor or its
designee upon consummation of the Chapter 11 Plan. Pursuant to the order of
the Bankruptcy Court, the Chapter 11 Plan was confirmed on May 29, 1996, and
became effective on July 17, 1996, upon the transfer of the Property by the
Previous Owners to the Company in satisfaction of the Mortgage Loan (the
"Transfer").
NBC Sale
--------
Pursuant to the Agreement dated April 23, 1996, among the Investor Group,
General Electric Company ("GE"), National Broadcasting Company, Inc. ("NBC")
and NBC Trust No. 1996A ("NBC Trust"), on July 17, 1996, immediately
preceding the transfer of the Property, the Previous Owners sold to GE, NBC
and NBC Trust (the "NBC Sale"), interests in certain buildings in the
Property (the "NBC Space") previously leased by GE or its affiliates,
including NBC. Pursuant to the Chapter 11 Plan, proceeds of $440 million
from the NBC Sale were paid directly to the Company reducing the outstanding
Mortgage Loan. Goldman Sachs Mortgage Company ("GSMC"), an affiliate of
Whitehall, was paid $4.4 million by the Company in connection with securing
the proceeds of the NBC Sale as a partial repayment of the Mortgage Loan.
Upon satisfaction of the Mortgage Loan, this fee was expensed by the
Company during the third quarter of 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Basis of preparation
--------------------
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles ("GAAP"). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The accompanying financial statements present the Company's balance sheet,
as successor to the Predecessor, as of March 31, 1997 and December 31, 1996
and the results of operations and cash flows for the quarter ended March 31,
1997. The accompanying financial statements also present the Predecessor's
results of operations and cash flows for the quarter ended March 31, 1996.
These financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
There have been no significant changes in accounting principals or the
estimates used in the preparation of the financial statements since the end
of the most recently completed fiscal year.
7
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
3. MORTGAGE LOAN AND INTEREST INCOME
Due to the significant uncertainties caused by the filing of the Chapter 11
Plan, the Predecessor limited recognition of income on the Mortgage Loan for
the quarter ended March 31, 1996 to the cash actually received from the
Previous Owners. No cash was received during this period.
4. DEBT
Convertible Debentures
----------------------
The Convertible Debentures were issued pursuant to an Indenture, dated as of
September 15, 1985 (as amended, the "Indenture"), between the Predecessor
and Manufacturers Hanover Trust Company (now the United States Trust
Company) as Trustee. The Convertible Debentures were convertible into shares
of Common Stock of the Predecessor on the maturity date, December 31, 2000,
and upon certain other events. On July 10, 1996, pursuant to the terms of
the Indenture, the Indenture was amended in connection with the Merger to
provide that the holder of a Convertible Debenture shall, after the
Effective Date and only at such times as may be provided by the terms and
conditions of the Indenture and such Convertible Debenture, have the right
to convert such Convertible Debenture only into cash in an amount equal to
eight dollars ($8.00) in respect of each share of Common Stock of the
Predecessor into which such Convertible Debenture could otherwise have been
converted at the time of conversion pursuant to the terms and conditions of
the Indenture and such Convertible Debenture. At such time, the Company
became the successor to the Predecessor under the amended Indenture.
Upon maturity, the Convertible Debentures are also exchangeable into
nonconvertible floating rate notes, at the holder's option. In the event a
holder of a Convertible Debenture fails to timely surrender such Convertible
Debenture for conversion or exchange, such holder shall be deemed to have
elected to exchange such Convertible Debenture, unless the holders of 90% of
the aggregate principal amount of such series of Convertible Debentures have
elected to convert their Convertible Debentures, in which case such holder
shall be deemed to have elected to convert such Convertible Debenture. After
exchange, the floating rate notes would mature on December 31, 2007 and,
would be prepayable anytime at the Company's option, at par. The notes will
bear interest at the three-month London Interbank Offering Rate ("LIBOR")
plus 1/4% or such greater spread (not in excess of 1%) as would, in the
opinion of a major international investment bank selected by the Company,
cause such notes to trade at par.
Prior to 1994, the Predecessor had repurchased and retired 36.4% of original
principal amount of the Current Coupons and 38.4% of the face amount of the
Zero Coupons. The Predecessor's repurchase of its Convertible Debentures was
initially funded through floating rate short-term unsecured bank loans which
were later fully repaid when the Predecessor initiated a commercial paper
program. The commercial paper borrowings were fully repaid in 1994 with
proceeds from sales of the Predecessor's portfolio securities, operating
cash flow and the issuance of 14% Debentures and Floating Rate Notes (see
below).
Interest expense recognized by the Predecessor on the Convertible Debentures
was based on the average yields to the maturity date. The average yields
were computed (using the interest method with semiannual compounding) by (1)
combining the differing coupon rates on the Current Coupons and (2)
amortizing the original issue discount related to the Zero Coupons. The
resulting effective annual interest rates were 9.23% and 10.23% through the
Effective Date for the Current Coupons and Zero Coupons, respectively. Upon
consummation of the Merger, the carrying value of the Zero Coupons was
adjusted by the Company to reflect the fair market value using an imputed
interest rate of 12.10%. The face amount of the Zero Coupons is
approximately $586.2 million.
The Current Coupons bore interest from the date of issuance until December
31, 1994 at the rate of 8% per annum, and therefore at the rate of 13% per
annum payable annually on December 31 of each year. On August 28, 1996, the
Current Coupons were redeemed at the principal amount of $213,170,000 plus
accrued interest.
8
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
GSMC Facility
-------------
Pursuant to a Loan Agreement dated December 18, 1994, between the
Predecessor and GSMC (as Agent and as Lender), the Predecessor issued
Floating Rate Notes totaling $150 million. The Predecessor made mandatory
principal payments on the Floating Rate Notes of approximately $33.7
million, which reduced the principal balance to approximately $116.3 million
prior to the Effective Date. On July 17, 1996, a total of approximately
$106.3 million of the outstanding principal, $1.2 million of accrued
interest and a prepayment penalty of approximately $1.6 million was prepaid
by the Company.
Pursuant to the Amended and Restated Loan Agreement (the "GSMC Facility")
dated July 17, 1996, the Company was named as successor in interest to the
Predecessor. The GSMC Facility, among other things, was amended to change
the maturity date of the Floating Rate Notes to January 31, 1997, and
provides for an Additional Advance, as defined, up to a maximum outstanding
balance of $60 million. Subsequent amendments to the Amended and Restated
Loan Agreement have extended the maturity date to May 31, 1997. As of March
31, 1997, no amounts have been drawn on the Additional Advance and the
balance remains at $10 million.
The Floating Rate Notes bear interest based on 90-day LIBOR plus 4% which is
reset two business days prior to each interest payment date. At March 31,
1997 and December 31, 1996 the interest rate in effect was 9.50%. The
weighted average interest rate was 9.50% for the quarter ended March 31,
1997 for the Company, and 9.875% for the quarter ended March 31, 1996 for
the Predecessor. Interest is payable quarterly on March 1, June 1, September
1, and December 1 of each year. Since July 17, 1996, the GSMC Facility has
been guaranteed by the Investor Group.
The Merger Agreement provided that GSMC would make a line of credit (the
"GSMC Loan") available to the Predecessor during the period between November
7, 1995 and the earlier of (1) the consummation of the Merger as
contemplated by the Merger Agreement or (2) any termination of the Merger
Agreement. The GSMC Loan accrued interest at the rate of 10% per annum
(compounded quarterly) and was prepayable at any time without penalty. The
Predecessor borrowed a total of approximately $63.7 million under the GSMC
Loan which was repaid, along with accrued interest, on July 17, 1996 by the
Company.
14% Debentures
--------------
The 14% Debentures were issued pursuant to a Debenture Purchase Agreement
dated as of December 18, 1994 between the Predecessor and Whitehall and
amended effective July 10, 1996 to, among other things, name the Company as
the successor in interest to the Predecessor. The unsecured 14% Debentures
mature on December 31, 2007 and bear interest at a rate of 14% per annum,
payable semi-annually on June 2 and December 2.
The Company's interest expense for the 14% Debentures includes the
amortization of a premium adjustment to reflect the carrying amount of the
14% Debentures at their estimated fair value as of the Effective Date. The
premium on the 14% Debentures is being amortized on the effective interest
method until maturity. The Predecessor's interest expense on the 14%
Debentures includes the straight line amortization of the original issue
discount related to the Warrants and SARs (see below) through the maturity
date, 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. If an Event
of Default, as defined, were to occur and be continuing, the 14% Debentures
would bear interest at 18% per annum. Upon the occurrence of an Event of
Default, the holders of the 14% Debentures may declare the unpaid principal
thereof and accrued interest thereon due and payable. The 14% Debentures are
redeemable in whole or in part at any time after December 30, 2000 provided
the Floating Rate Notes have been paid in full. The Debenture Purchase
Agreement provides for decreasing penalties for early redemption of the 14%
Debentures before December 31, 2003.
9
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
In connection with the issuance of the 14% Debentures in December 1994, the
Predecessor issued to Whitehall 4,155,927 Warrants, to acquire shares of
newly issued Common Stock of the Predecessor and 5,349,541 Stock
Appreciation Rights ("SARs"),which were exchangeable for 14% Debentures or,
under certain circumstances, for Warrants on a one-for-one basis. The
Predecessor was required to make adjustments to earnings for the difference
between the aggregate principal amount of 14% Debentures issuable upon
exchange of the SARs (SARs liability) and the value at which the SARs
liability was carried. In connection with the Merger (see Note 1), all
outstanding Warrants and SARs were contributed by Whitehall through Holdings
to the Predecessor at a value of $4.00 per Warrant and SAR and were then
canceled.
Interest rate swap agreements
-----------------------------
In connection with its short term floating rate debt, the Predecessor
entered into interest rate swap agreements with financial institutions that
were intended to fix a portion of the Predecessor's interest rate risk on
floating rate debt. The Predecessor paid a fixed rate of interest
semi-annually and received a variable rate of interest semi-annually based
on 180-day LIBOR. In connection with the issuance of the Floating Rate Notes
and 14% Debentures in December 1994, the Predecessor retired all but three
of its interest rate swap agreements. The remaining three contracts have an
aggregate notional amount of $105 million and each expires during 1998.
The amount to be paid or received from interest rate swap agreements is
accrued as floating interest rates are reset semi-annually.
On the Effective Date, the Company assumed the three remaining interest rate
swap agreements and adjusted the carrying value of the swap liabilities to
reflect their estimated fair value of approximately $5.3 million. For each
swap, the Company and the Predecessor paid a net weighted average rate of
interest of 3.94% and 3.78% for the quarters ended March 31, 1997 and 1996,
respectively. As of March 31, 1997 and December 31, 1996, the net weighted
average interest rate of swaps outstanding for the Company was 3.97% and
3.93%, respectively.
The interest rate swaps were used by the Predecessor for hedging purposes,
therefore the fair value of these swaps are not reflected in the
Predecessor's balance sheet and the incremental revenue or expense is
recognized in the Predecessor's statements of operations.
The interest rate swaps are reported in the Company's financial statements
on a mark to market basis. As of March 31, 1997 and December 31, 1996, the
carrying amount of all interest rate swap agreements was reported as a
liability by the Company of approximately $4.1 million and $5.2 million
respectively, based on information supplied by the swap counterparties to
the swap contracts. During the quarter ended March 31, 1997, the Company
recorded an adjustment of approximately $1.1 million to properly mark to
market the swaps as of March 31, 1997 and reflected the adjustment as
reduction of interest expense in the Company's statement of operations.
5. CONTRIBUTIONS, DISTRIBUTION AND NET LOSS PER SHARE
Pursuant to the Stock Subscription and Stockholders Agreement dated July 9,
1996 that organized Holdings and the Limited Liability Company Agreement
dated July 9, 1996 that organized LLC (hereinafter Holdings, and LLC will be
collectively referred to as the "Owners"), the Owners are required to
provide additional contributions up to the Maximum Additional Mandatory
Contribution, as defined, totaling $60 million. The Maximum Additional
Mandatory Contribution shall be used to repay amounts outstanding under the
GSMC Facility and to fund unforeseen capital expenditures and similar
contingencies reasonably necessary to protect and maintain the value of the
Property. No additional contributions have been made to the Company by the
Owners since their initial capital contributions on July 10, 1996.
The Indenture governing the Convertible Debentures limits cash distributions
to the Owners of the Company to the amount of cumulative Distributable Cash.
The Indenture defines Distributable Cash as cash receipts from operations
less operating expenses and interest. The amount of Distributable Cash, net
of dividends
10
<PAGE>
RCPI TRUST
NOTES TO FINANCIAL STATEMENTS (cont'd)
(UNAUDITED)
paid, at March 31, 1997 and December 31, 1996 was approximately $73 million
and $63 million respectively. This amount includes cash flows from operating
activities and certain investing activities, net of dividends paid, from the
Predecessor's inception through July 9, 1996 of approximately $70 million.
As interest income was not received by the Predecessor during the period
when the Previous Owners were under Chapter 11 protection, net cash flows
from operations of the Property, which accrued to the benefit of the Company
during this period, are also included.
Net loss per share for the Predecessor is based upon 38,260,704 average
shares of Common Stock outstanding during the quarter ended March 31, 1996.
For this period, 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.
6. LEGAL MATTERS
On January 23, 1995, Bear, Stearns & Co., Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation commenced an action against the Predecessor
in the Supreme Court of New York, County of New York. The plaintiffs alleged
that the Predecessor breached a contract relating to the plaintiffs'
provision of investment banking services to the Predecessor in connection
with a proposed 1994 transaction. The plaintiffs sought $5.1 million, plus
costs, attorneys' fees and interest. On October 19, 1995, the Predecessor
filed an answer to the complaint which denied the plaintiffs' allegations
and asserted numerous affirmative defenses. On June 11, 1996, the plaintiffs
moved for partial summary judgment on their claim for $950,000 in advisory
fees and reimbursement of expenses incurred in connection with the
underlying proposed transaction. On December 19, 1996, the court granted
plaintiffs' motion, and on February 5, 1997, the court entered judgment on
that claim in the total amount, including pre-judgment interest, of
$1,115,612.33. The Company satisfied that judgment prior to trial. The trial
regarding the plaintiffs' claims for its "success fees" and indemnification
of legal fees and expenses commenced on February 24, 1997. On March 3, 1997,
during the course of the trial, the parties agreed to a settlement. Pursuant
to the settlement agreement, the Company paid plaintiffs $2 million, and
plaintiffs dismissed the lawsuit with prejudice. Plaintiffs and the Company
executed mutual releases of all claims arising out of the engagement of
plaintiffs in connection with the proposed 1994 transaction.
On May 24, 1995, Jerry Krim commenced an action encaptioned Krim v.
Rockefeller Center Properties, Inc. and Peter D. Linneman. On June 7, 1995,
Kathy Knight and Moishe Malamud commenced an action encaptioned Knight, et
al. v. Rockefeller Center Properties, Inc. and Peter D. Linneman. Both
actions were filed in the United States District Court for the Southern
District of New York and purport to be brought on behalf of a class of
plaintiffs comprised of all persons who purchased the Predecessor's Common
Stock between March 20, 1995 and May 10, 1995. The complaints allege that
the Predecessor and Dr. Linneman violated the federal securities laws by
their purported failure to disclose, prior to May 11, 1995, that the
Previous Owner would file for bankruptcy protection. The cases have been
consolidated. On July 28, 1995, Predecessor and Dr. Linneman filed answers
to the complaints denying plaintiffs' substantive allegations and asserting
numerous affirmative defenses. On September 22, 1995, plaintiffs served an
Amended Class Action Complaint adding the Predecessor's remaining directors
and its president as defendants. In addition to the foregoing claims, the
Amended Complaint also asserts a cause of action for breach by the
Predecessor's directors and its president of their fiduciary duties by
approving the Agreement and Plan of Combination dated as of September 11,
1995, between the Predecessor 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 November 15, 1996, Charal Investment Co., Inc. and C.W. Sommer & Co.
filed a purported class action complaint in the United States District Court
for the District of Delaware against certain former directors and officers
of the Predecessor and against certain of the Company's indirect
shareholders. Plaintiffs alleged that the defendants violated Section 10(b)
of the Securities and Exchange Act of 1934 (the "Act") and Rule 10b-5
11
<PAGE>
promulgated thereunder, and Section 14 of the Act and Rule 14a-9 promulgated
thereunder by allegedly failing to provide adequate disclosure of the
alleged possibility of a sale or lease financing of a portion of the
Property to NBC and its parent corporation, GE, prior to the shareholder
vote on the Merger. The complaint sought unspecified damages, recission of
the Merger and/or disgorgement. The Company may have indemnity obligations
with respect to one or more of the defendants. On December 11, 1996 and
December 18, 1996, identical complaints were filed in the federal court in
Delaware by additional plaintiffs. On January 13, 1997, all these actions
were consolidated under the caption In re Rockefeller Center Properties,
Inc. Securities Litigation, Cons. C.A. No 96-543 (RRM) ("In re RCPI"). On
January 31, 1997, all defendants moved to dismiss the complaint for failure
to state a claim. On March 3, 1997, the plaintiffs in In re RCPI responded
to the motion to dismiss by filing an amended complaint. The two federal
securities law claims remain the same, but the plaintiffs added new
allegations that defendants failed adequately to disclose (i) the existence
of certain transferable development rights, or air rights, that were
obtained by the Company in connection with the Merger, and (ii) alleged
negotiations with Christie's Auction House and the Walt Disney Company to
become new tenants at Rockefeller Center. On April 30, 1997, defendants
supplemented their initial motion to dismiss by moving to dismiss the
amended complaint for failure to state a claim. On May 9, 1997, the court
signed a supplemental order of consolidation admitting four new plaintiffs.
On January 21, 1997, an action entitled Flashman v. Goldman, Sachs & Co., 97
Civ. 0403 (MGC) (S.D.N.Y.), was filed in New York Federal court containing
allegations substantially similar to those in the original complaint in In
re RCPI. Subsequently, the plaintiff in Flashman joined as a plaintiff in
the amended complaint filed in In re RCPI and the New York action was
dismissed without prejudice.
On February 25, 1997, an action entitled Debora v. Rockefeller, et. al., 97
Civ. 01312 (LLS) ("Debora"), was filed in the United States District Court
for the Southern District of New York. The complaint in Debora was
substantially similar to the original complaint in In re RCPI. On April 25,
1997, the plaintiff voluntarily dismissed the action without prejudice.
On July 31, 1995, L.L. Capital Partners, L.P. commenced an action against
the Predecessor in the United States District Court in the Southern District
of New York. The plaintiff alleged that, the Predecessor's prospectus dated
November 3, 1993, failed to disclose its purported belief that the
Rockefeller Interests and Mitsubishi Estate would cease to fund the Previous
Owner's cash flow shortfalls. On January 3, 1997, the parties entered into a
settlement agreement and executed and filed stipulations of dismissals and
releases dismissing all claims, counterclaims and third party claims with
prejudice. In connection with the dismissal, the Company paid L.L. Capital
Partners, L.P. the sum of $50,000.
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 Rockefeller Center Properties, Inc.; James Cosentino v. Peter D.
Linneman, Benjamin D. Holloway, Peter G. Peterson, William F. Murdoch, Jr.
and Rockefeller Center Properties, Inc.; Mary Millstein v. Peter D.
Linneman, Peter G. Peterson, Benjamin D. Holloway, William F. Murdoch, Jr.
and Rockefeller Center Properties, Inc.; and Robert Markewich v. Peter D.
Linneman and Daniel M. Neidich, et al. were filed in the Delaware Court of
Chancery. On October 11, 1995, an additional complaint captioned Hunter
Hogan v. Rockefeller Center Properties, Inc., et al. was filed in the
Delaware Court of Chancery. Each of the complaints purports to be brought on
behalf of a class of plaintiffs comprised of stockholders of the Predecessor
who have been or will be adversely affected by the Combination Agreement.
All of the complaints allege that the Predecessor's directors breached their
fiduciary duties by approving the Combination Agreement. The plaintiffs 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
under the caption In re Rockefeller Center Properties, Inc. Shareholders
Litigation, Consol. C.A. No. 14612. In a status report filed with the court
on February 28, 1997, plaintiffs counsel represented to the court that the
actions "had been mooted" and that an application for counsel fees was being
prepared. The Company intends to contest any such application vigorously.
12
<PAGE>
On July 31, 1996, a Petition for Appraisal, captioned Solomon v. Rockefeller
Center Properties, Inc., C.A. No. 15155, was filed in the Delaware Court of
Chancery. The petitioners allege that the consideration paid to RCPI's
stockholders in conjunction with the Merger was inadequate and they request
that the Court determine the fair value of their stock at the time of the
Merger. Predecessor filed its Response to the Petition for Appraisal on
October 7, 1996, in which it asserts that the fair value of Predecessor
common stock at the time of the Merger was not more than $8.00 per share
and asks the Court to so determine.
Although the outcome of claims, litigation and disputes cannot be predicted
with certainty, in the opinion of management based on facts known at this
time, the resolution of such matters are not anticipated to have a material
adverse effect on the financial position or results of operations of the
Company. As these matters continue to proceed through the process to
ultimate resolution, it is reasonably possible that the Company's estimation
of the effect of such matters could change within the next year.
13
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The discussion below relates primarily to the results of operations of the
Predecessor for the quarter ended March 31, 1996 and the financial condition
and results of operation of the Company at and for the quarter ended March
31, 1997. In addition, pro forma operating statements are presented to
provide a meaningful comparison of the results of operation of the Property
for the quarters ended March 31, 1997 and 1996 as if the acquisition of the
Property and the NBC Sale (see below) had occurred on January 1, 1996.
RESULTS OF OPERATIONS - ROCKEFELLER CENTER PROPERTIES, INC.
RCPI's principle source of revenue was interest income received on the
Mortgage Loan. For the quarter ended March 31, 1996 the Predecessor limited
recognition of income on the Mortgage Loan to the cash actually received.
Since the Previous Owner filed for Chapter 11 protection on May 11, 1995,
and through the Effective Date, the Predecessor did not receive any interest
payments, no income was recognized.
Other income for the quarter ended March 31, 1996 was approximately $14,000,
and relates to interest earned on cash deposits.
Amortization of deferred debt issuance costs for the quarter ended March 31,
1996 was approximately $936,000. The total relates to normal amortization of
deferred debt issuance costs related to the Current Coupons, Zero Coupons,
14% Debentures, and Floating Rate Notes.
The Predecessor was required to adjust the SAR liability to reflect the
aggregate principal amount of 14% Debentures that would have been issuable
upon exchange of the SARs on March 31, 1996. This adjustment, which is
directly related to the increase in the Predecessor's stock price, resulted
in an expense of approximately $1.9 million for the quarter ended March 31,
1996. Concurrent with the Merger, the Predecessor's SARs and Warrants were
canceled.
During the quarter ended March 31, 1996 the Predecessor recognized
approximately $450,000 in expenses related to the March 25, 1996 special
meeting of stockholders. The stockholders approved the Merger Agreement on
that date.
All debt of the Predecessor was transferred to the Company on the Effective
Date. To provide a more meaningful analysis, interest expense recognized by
the Company for the quarter ended March 31, 1997 is compared to interest
expense recognized by the Predecessor for the quarter ended March 31, 1996.
The following table illustrates comparative interest expense for the
quarters ended March 31, 1997 and 1996.
For the quarters ended March 31
1997 1996
Current coupon convertible debentures $ - $ 5,511
Zero coupon convertible debentures 11,066 8,986
14% debentures 2,281 2,750
Floating rate notes 237 2,842
GSMC Loan - 1,056
Interest rate swaps and other 22 992
------ ------
Total $13,606 $22,137
======= =======
The Predecessor recognized approximately $5.5 million of interest expense on
the Current Coupons for the quarter ended March 31, 1996. As the Current
Coupons were redeemed on August 28, 1996, the Company did not recognize any
interest expense for the quarter ended March 31, 1997.
Interest expense on the Zero Coupons increased partially as a result of the
accretion of the principal amount, which increases the carrying value of the
Zero Coupons each year. In addition, the accretion had compounded at an
effective interest rate of 10.23% prior to the Merger. As of the Effective
Date, the fair
14
<PAGE>
RCPI TRUST
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (cont'd)
market value of the Zero Coupons was adjusted, and the carrying amount of
the Zero Coupons has been accreting at 12.10% since that date.
Interest expense on the 14% Debentures accrued at the pay rate of 14%, plus
amortization of the discount related to the warrants and SARs, prior to the
Effective Date. As of the Effective Date, the fair market value of these
Debentures was adjusted resulting in a premium. As a result of premium
amortization related to this adjustment, the effective interest rate on the
14% Debentures has been approximately 9.03% since the Effective Date.
Accordingly, interest expense is lower for the quarter ended March 31, 1997.
On September 1, 1995, the Predecessor repaid $33.7 million of the $150
million of Floating Rate Notes originally issued in December 1994. On July
17, 1996, the Company prepaid an additional $106.3 million of outstanding
principal plus accrued interest. As of March 31, 1997, $10 million remained
outstanding. Interest expense related to the Floating Rate Notes is lower
for the quarter ended March 31, 1997 due to the smaller principal balance
outstanding during that period. Interest expense on the swap agreement,
which the Predecessor had accounted for as a component of interest expense
related to the Floating Rate Notes, has been reclassified for this analysis.
Interest expense related to the GSMC Loan was approximately $1.1 million for
the quarter ended March 31, 1996. The GSMC Loan was repaid in full on July
17, 1996, thus there is no related expense for the quarter ended March 31,
1997.
Other interest expense is lower for the quarter ended March 31, 1997 due
primarily to the mark to market adjustment of approximately $1.0 million,
which offsets interest expense related to the interest rate swap agreements.
the Predecessor did not account for the interest rate swap agreements on a
mark to market basis, thus there is no corresponding adjustment for the
quarter ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES - RCPI TRUST
Land and Building
As discussed above, on July 17, 1996, the Property was transferred to the
Company and the related Mortgage Loan was canceled. Concurrently, the
Previous Owners sold certain interests in certain buildings in the Property
("NBC Space") to GE, NBC, and their affiliates for $440 million. The NBC
Space, measured in accordance with the standards promulgated by the New York
Real Estate Board in 1987, accounted for approximately 1.5 million square
feet, or 20.5% of the total area of the Property. At March 31, 1997 the
Property, exclusive of the NBC Space, was approximately 83.3% occupied.
Occupancy rates for the Property at various dates are presented in the
following table. Occupancy rates for dates prior to the Effective Date have
been adjusted to account for the sale of the NBC space.
December 31, 1996 83.6% March 31, 1996 83.8%
September 30, 1996 82.8% December 31, 1995 82.7%
June 30, 1996 82.2% September 30, 1995 86.2%
The following table shows selected lease expirations and vacancy of the
Property as of March 31, 1997. Area, as presented below and discussed above,
is measured based on standards promulgated by the New York Real Estate Board
in 1987. Lease turnover could offer an opportunity to increase the revenue
of the Property or might have a negative impact on the Property's revenue.
Actual renewal and rental income will be affected significantly by market
conditions at the time and by the terms at which the Company can then lease
space.
15
<PAGE>
RCPI TRUST
ITEM 2. MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (cont'd)
Square Feet Percent
Year Expiring Expiring
Vacant 987,623 16.7%
1997 289,417 4.9%
1998 319,631 5.4%
1999 223,340 3.8%
2000 495,738 8.4%
2001 109,122 1.9%
Thereafter 3,474,826 58.9%
--------- -----
Total 5,899,697 100.0%
========= ======
Debt
The Zero Coupons due December 31, 2000 accrete to a face value of
approximately $586.2 million at an effective annual interest rate of 12.10%.
Concurrent with the Merger, the carrying value of such Debentures was
adjusted to reflect the fair market value as of the Effective Date. As a
result, the effective annual interest rate was adjusted from 10.23% to
12.10%. At March 31, 1997 and December 31, 1996, the carrying value of the
Debentures, net of unamortized discount, was approximately $373.2 million
and $362.2 million, respectively.
The Current Coupons were redeemed on August 28, 1996. Principal in the
amount of $213.2 million plus accrued interest of $18.3 million was paid on
that date. Interest accrued at the pay rate of 13% from the Effective Date
through the redemption date. Prior to the Effective Date, interest accrued
at an effective annual interest rate of 9.23%.
The GSMC Facility was repaid in full on July 17, 1996. The total payment of
$66.5 million included accrued interest of $2.8 million. Interest accrued at
10% from inception through the payment date.
The Floating Rate Notes mature on May 31, 1997 and bear interest at the
London Interbank Offered Rate ("LIBOR") plus 4%. Interest is paid quarterly
on March 1, June 1, September 1, and December 1. At March 31, 1997 and
December 31, 1996, interest was accruing at 9.50%. On July 17, 1996,
outstanding principal in the amount of $106.3 million plus accrued interest
of $1.2 million was prepaid. As of March 31, 1997, $10 million of principal
remained outstanding.
The 14% Debentures have a principal balance of $75 million and mature on
December 31, 2007. On the Effective Date, the carrying value of the 14%
Debentures was adjusted to reflect their estimated fair value at that date,
resulting in a premium. The effective interest rate, which is net of the
amortization of this premium, is approximately 9.03%. Interest payments are
made semi-annually on June 2 and December 2. As of March 31, 1997 and
December 31, 1996, the carrying value of the 14% Debentures was
approximately $100.8 million and $101.2 million, respectively.
Cash Flow
During the quarter ended March 31, 1997 the Company received cash flows of
approximately $10.5 million from operations of the Property. The Company
used this cash flow from operations to fund tenant improvements of
approximately $2.8 million and other leasing costs of approximately $6.0
million. In addition, the Company expended approximately $1.8 million
for building improvements, furniture, fixtures and equipment.
16
<PAGE>
RCPI TRUST
ITEM 2. MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (cont'd)
The Company believes that its current cash balance and future cash flows
from operations, together with its expected borrowings in an amount
currently believed not to exceed $100 million, will be sufficient to fund
its requirements for the foreseeable future.
Inflation
Inflation and changing prices during the current period did not
significantly affect the markets in which the Company conducts its business.
In view of the moderate rate of inflation, its impact on the Company's
business has not been significant.
RESULTS OF OPERATIONS - RCPI TRUST
As the Company has only been active since July 10, 1996, pro forma operating
statements for the quarters ended March 31, 1997 and 1996 have been prepared
as if the Property had been acquired on January 1, 1996. The discussion
below highlights certain items included on the Company's operating statement
for the quarter ended March 31, 1997, which are not otherwise discussed. For
a discussion of comparative results of operations of the Property, refer to
the caption "Pro Forma Results of Operations - The Property."
During the quarter ended March 31, 1997, the Company expensed $2.0 million,
which is included with professional fees, related to the settlement of the
Bear Stearns & Co., Inc. and Donaldson, Lufkin, & Jenrette Securities
Corporation lawsuit (See Note 6). The payment is for full settlement of
plaintiffs' claim for "success fees" and indemnification of legal fees and
expenses. Plaintiffs' claim for advisory fees had been accrued by the
Predecessor and such expense, including interest thereon, is included in the
Predecessor's statement of operations for the year ended December 31, 1995.
For a comparison of interest expense of the Company and RCPI for the
quarters ended March 31, 1997 and 1996, see "Results of Operations -
Rockefeller Center Properties, Inc."
PRO FORMA RESULTS OF OPERATIONS - THE PROPERTY
To provide a more meaningful comparison of results of operations, pro forma
statements of operations have been presented for the quarters ended March
31, 1997 and 1996 as if the acquisition of the Property by the Company had
occurred on January 1, 1996. The pro forma statements of operations are
based upon the Company's statement of operations for the quarter ended March
31, 1997 and the Previous Owners' statement of operations for the quarter
ended March 31, 1996.
The pro forma statements of operations for the quarters ended March 31, 1997
and 1996 have been adjusted to show the effect of (i) gross revenues and
operating expenses had the NBC Sale occurred on January 1, 1996; (ii)
interest expense had the GSMC Loan and Current Coupons been repaid in full,
and had $106.3 million of principal on the Floating Rate Notes been paid on
January 1, 1996; (iii) depreciation and amortization expense had the
Property been purchased and had the NBC Sale occurred on January 1, 1996,
and (iv) general and administrative expenses had certain bankruptcy related
costs not been incurred by the Previous Owners and had costs related to the
NBC Sale been incurred during the quarter ended March 31, 1996.
17
<PAGE>
RCPI TRUST
ITEM 2. MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (cont'd)
The pro forma results are for illustrative purposes only, and do not purport
to be indicative of the actual results which would have occurred, nor are
they indicative of future results of operations.
($ In Thousands)
Quarter ended March 31,
1997 1996
-------- -------
Gross Revenue:
Rent and other tenant charges $47,304 $45,317
Interest income 346 398
-------- -------
47,650 45,715
Operating Expenses:
Real estate taxes 8,234 8,392
Utilities 4,600 5,072
Maintenance, engineering, and
other operating expenses 10,154 15,875
Depreciation and amortization 4,523 4,154
Management fee 847 1,662
General and administrative 3,020 7,011
------- -------
31,378 42,166
------- -------
Earnings before interest 16,272 3,549
Interest expense 13,606 12,422
------- -------
Net income (loss) $ 2,666 ($ 8,873)
=========== ===========
Rent and other tenant charges increased by approximately $2.0 million for
the quarter ended March 31, 1997 as compared to the same period in the prior
year. Occupancy, which remained fairly stable, was 83.3% at March 31, 1997
as compared to 83.8% at March 31, 1996. The increase in rent and other
charges is due in part to new leases signed at higher rental rates than were
existing in the prior year and a termination payment received from a tenant
in the amount of $300,000.
The decrease in utilities; maintenance, engineering and other operating
expenses; and management fees in an aggregate amount of $6.9 million is due
to achieving cost reductions during the first quarter of 1997.
The decrease in general and administrative expenses is due primarily to
legal and professional fees related to the NBC Sale of approximately $6.1
million, which based on pro forma results, would have been incurred during
the first quarter of 1996. This decrease is offset by the $2.0 million
expended during the quarter ended March 31, 1997 related to the settlement
of the Bear Sterns & Co., Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation lawsuit.
Based on pro forma calculations, interest expense increased by $1.2 million
for the quarter ended March 31, 1997. This increase is due primarily to
increased interest related to the Zero Coupons. The Zero Coupons compound at
12.10% annually, which resulted in an additional $1.3 million of expense
during 1997.
18
<PAGE>
RCPI TRUST
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The information set forth in Note 6 to the financial statements in incor-
porated herein by reference.
19
<PAGE>
ITEM 6. (a) EXHIBITS
(3.1) Certificate of Trust of RCPI Trust, dated March 22, 1996 is
incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1996.
(4.1) Amended and Restated Debenture Purchase Agreement dated as
of July 17, 1996 between the Company and WHRC Real Estate
Limited Partnership.
(4.2) Indenture dated as of September 15, 1985 between the
Predecessor and Manufacturers Hanover Trust Company, as
Trustee, including the forms of Current Coupon Convertible
Debenture, Zero Coupon Convertible Debenture and Floating
Rate Note, is incorporated by reference to Exhibit 4 to the
Predecessor's Quarterly Report on Form 10-Q for the period
ended September 30, 1985.
(4.3) First Supplemental Indenture dated as of December 15, 1985
between the Predecessor and the Trustee, is incorporated by
reference to the Predecessor's Annual Report on Form 10-K
for the year ended December 31, 1985.
(4.4) Second Supplemental Indenture dated as of July 10, 1996
between the Company and the United States Trust Company of
New York, as Trustee, is incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
(4.5) Instrument of Resignation, Appointment and Acceptance dated
as of December 1, 1993 among the Registrant, Chemical Bank,
successor by merger to Manufacturers Hanover Trust Company,
and United States Trust Company of New York is incorporated
by reference to Exhibit 4.21 to the Predecessor's Annual
Report on Form 10-K for the year ended December 31, 1993.
(4.6) Amended and Restated Loan Agreement dated as of July 17,
1996 among the Company, the lenders parties thereto and
GSMC, as agent.
(4.7) Guarantee dated July 17, 1996 by Whitehall Street Real
Estate Limited Partnership V, Exor Group S.A., Tishman
Speyer Crown Equities, David Rockefeller, Troutlet
Investments Corporation, Gribble Investments (Tortola) BVI,
Inc. and Weevil Investments (Tortola) BVI, Inc., as
guarantors in favor of GSMC, as agent and lender.
(27.1) Company's Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
No Current Reports on Form 8-K have been filed during the last fiscal
quarter.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RCPI TRUST
Date: May 15, 1997 By: ______________________
David Augarten
Vice President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from RCPI Trust's
Balance Sheet as of March 31, 1997 and RCPI Trust's Statement of Operations for
the quarter ended March 31, 1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 36,197
<SECURITIES> 0
<RECEIVABLES> 12,959
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 778,035
<DEPRECIATION> 10,924
<TOTAL-ASSETS> 849,224
<CURRENT-LIABILITIES> 33,094
<BONDS> 474,032
0
0
<COMMON> 0
<OTHER-SE> 335,133
<TOTAL-LIABILITY-AND-EQUITY> 849,224
<SALES> 0
<TOTAL-REVENUES> 47,650
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 31,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,606
<INCOME-PRETAX> 2,666
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,666
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
