<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.
[ ] 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
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(Exact name of registrant as specified in its charter)
<TABLE>
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DELAWARE 13-7087445
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<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
C/O TISHMAN SPEYER PROPERTIES, L.P.
45 ROCKEFELLER PLAZA, NEW YORK, N.Y. 10111
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(Address of principal executive offices) (Zip Code)
(212) 332-6500
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(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
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Name of each exchange
Title of each class on which registered
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<S> <C>
None None
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant is $0.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2 Trust Ownership Interests as
of March 30, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Rockefeller Center Properties, Inc.'s Proxy Statement for its 1996 Special
Meeting of Stockholders, dated February 14, 1996, is incorporated by reference
as a supplemental response to the information required by Items 11, 12 and 13
of Part III of this Annual Report on Form 10-K.
* As successor in interest to Rockefeller Center Properties, Inc. (Commission
File No. 1-8971).
<PAGE> 2
RCPI TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
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<S> <C> <C>
ITEM 1. Business..................................................................................................... 1
ITEM 2. Property..................................................................................................... 4
ITEM 3. Legal Proceedings.............................................................................................7
ITEM 4. Submission of Matters to a Vote of
Security Holders.............................................................................................10
<CAPTION>
PART II
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<S> <C> <C>
ITEM 5. Market for the Registrant's Common Equity
and Related Stockholder Matters..............................................................................11
ITEM 6. Selected Financial Data......................................................................................12
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................................14
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk...................................................18
ITEM 8. Financial Statements and Supplementary Data..................................................................19
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.......................................................................38
<CAPTION>
PART III
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<S> <C> <C>
ITEM 10. Directors and Executive Officers
of the Registrant............................................................................................39
ITEM 11. Executive Compensation.......................................................................................40
ITEM 12. Security Ownership of Certain
Beneficial Owners and Management.............................................................................41
ITEM 13. Certain Relationships and Related
Transactions.................................................................................................41
<CAPTION>
PART IV
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<S> <C> <C>
ITEM 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K......................................................................................44
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
Organization and Purpose
Rockefeller Center Properties, Inc. (referred to as "Inc." or the
"Predecessor") was incorporated in Delaware on July 17, 1985. Inc.
was formed to permit public investment in two convertible
participating mortgages totaling $1.3 billion (collectively, the
"Mortgage Loan"). On September 19, 1985, Inc. issued 37,510,000
shares of common stock (the "Common Stock") in an initial public
offering registered under the Securities Act of 1933, as amended
(the "Act"). Simultaneously with the offering of the Common Stock,
Inc. issued Current Coupon Convertible Debentures due 2000 and Zero
Coupon Convertible Debentures due 2000 (collectively, the
"Convertible Debentures"). In December 1993, 750,704 warrants issued
in connection with the settlement of litigation were exercised and a
like number of shares of Common Stock were issued. In December 1994,
Inc. issued $150 million of Floating Rate Notes (the "Floating Rate
Notes") due December 31, 2000 to Goldman Sachs Mortgage Company
("GSMC"), and $75 million of 14% Debentures (the "14% Debentures")
due December 31, 2007 to Whitehall Street Real Estate Limited
Partnership V ("Whitehall"). In conjunction with the issuance of the
14% Debentures, Inc. also issued 4,155,927 Warrants ("Warrants") to
acquire newly issued common stock exercisable at $5 per share and
5,394,541 Stock Appreciation Rights ("SARS") convertible into 14%
Debentures or, under certain circumstances, Warrants.
The net proceeds of the initial Common Stock offering and the
offerings of Convertible Debentures were used by Inc. to make 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 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%.
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 Inc., 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 own, manage and operate the landmarked buildings
and public space known as Rockefeller Center (the "Property"), and
to be successor in interest to Inc.
On July 10, 1996, pursuant to the Merger Agreement (as described
below), Holdings purchased all the outstanding Common Stock of Inc.
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 Inc. prior to the transfer of all
Inc.'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 in
exchange for a 50% undivided beneficial ownership interest.
Prior to July 10, 1996, the Company's activities were limited to
organizational matters.
The Company operates in only one segment: owning, operating and
managing the Property.
Merger Agreement
Pursuant to an Agreement and Plan of Merger dated November 7, 1995
(as amended, the "Merger Agreement"), entered into between Inc. and
a group of investors (the "Investor Group"), the members
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<PAGE> 4
of which are Exor Group S.A. (and/or various affiliated companies),
Prometheus Investors, L.L.C., Rockprop, L.L.C., Coreopsis
Corporation, Troutlet Investments Corporation, Gribble Investments
(Tortola) BVI, Inc., Weevil Investments (Tortola) BVI, Inc. and WHRC
II Real Estate Limited Partnership, 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 did not withdraw
such demand an 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 Inc. was held by Holdings and
the Warrants and SARS, previously held by Whitehall were contributed
through Holdings to Inc. and canceled. Thereafter, on the Effective
Date, Inc. transferred substantially all of its assets (including
the Mortgage Loan) and liabilities to the Company and the Company
became the successor to Inc. under the Indenture governing the
Convertible Debentures.
In addition, under the Merger Agreement, GSMC, an affiliate of
Whitehall, which was a party to the Merger Agreement for this
purpose, agreed to make a line of credit available to the
Predecessor (the "GSMC Loan") during the period between November 7,
1995 and the earlier of (1) the consummation of the merger
contemplated by the Merger Agreement or (2) any termination of the
Merger Agreement. The Predecessor had borrowed $63.7 million under
the GSMC Loan. The principal balance and accrued interest were
repaid in full on July 17, 1996 by the Company.
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 Inc. 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 ("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, the proceeds of $440 million from the NBC
Sale were paid directly to the Company reducing the outstanding
Mortgage Loan. GSMC 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.
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<PAGE> 5
Merger with Holdings
On June 30, 1997, the Predecessor merged with and into Holdings,
with Holdings being the surviving corporation. Pursuant to the
merger, Holdings succeeded to the Predecessor's beneficial interest
in the Company and Holdings was renamed Rockefeller Center
Properties, Inc.
Repurchases and Repayments of Debt
Between 1987 and 1992, the Predecessor repurchased and retired 36.4%
of the original principal amount of the Current Coupon Convertible
Debentures and 38.4% of the face amount of the Zero Coupon
Convertible Debentures ("the Zero Coupons"). These repurchases were
financed with unsecured short-term nonconvertible borrowings.
Subsequently, these borrowings were replaced with Floating Rate
Notes and 14% Debentures in December 1994. The remaining Current
Coupon Convertible Debentures were redeemed on August 28, 1996, and
the principal amount of $213,170,000 plus accrued interest was paid
on that date. The remaining Zero Coupon Convertible Debentures
accrete to a face value of $586,185,000. A total of $106,296,000 of
the outstanding principal plus accrued interest of the Floating Rate
Notes was prepaid on July 17, 1996. As of December 31, 1996, an
aggregate principal amount of $10 million remained outstanding,
which was repaid on May 16, 1997. See also Note 5 to the Financial
Statements provided in response to Item 8.
Competitive Market
The information and the statements made in this section and
elsewhere in this Annual Report are based upon data supplied by the
1999 year end reports from the five largest commercial real estate
firms in New York City (the "City") and other publicly available
sources.
The City is the largest office real estate market in the country
with over 352.7 million square feet of office space. The Property is
located in the heart of Manhattan's Midtown office market. The
Midtown market is comprised of 183.9 million square feet, making it
the largest segment of commercial office space in Manhattan. The
Midtown market is home to several major national and international
companies in finance, communications, and advertising. The Midtown
market is also home to several national law firms and governmental
agencies. More Fortune 500 firms are headquartered in Midtown
Manhattan than in Dallas, Boston, San Francisco and Los Angeles
combined.
By the end of the fourth quarter of 1999, the Manhattan office
market was experiencing its highest levels of occupancy in more than
a decade, with a vacancy rate of 6.1%. The strength of the market
was driven by the 12% increase in total leasing with over 250,000
square feet of net absorption since January 1, 1999. The high demand
for space was reflected in the 4% increase in the average asking
rent in the month of January 2000 to $48.87 per square foot, which
is a 6% increase over the previous 12 months.
The Midtown market is further segmented into six core business
districts, including the Sixth Avenue / Rockefeller Center
submarket. The Property represents an important division of the
Sixth Avenue / Rockefeller Center submarket, which consists of over
40.5 million square feet of office space in 42 buildings. The Sixth
Avenue / Rockefeller Center submarket is bordered on the westside of
Fifth Avenue, to the westside of Sixth Avenue and from 57th Street
to its southernmost point on the northside of 42nd Street. The
availability rate in this submarket fell from 6.8% in December 1998
to 5.7% in December 1999. By the end of 1999, Rockefeller Center's
average rent reached $58.25 per square foot, with a 9% vacancy rate.
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<PAGE> 6
Financial Information About Segments
See the Financial Statements provided in response to Item 8 for
financial information about the Company's sole segment.
ITEM 2. PROPERTY
Rockefeller Center is among the best-known commercial real estate
complexes in the world, offering an architecturally renowned
combination of office, retail and public space. Occupying most of
the three blocks (approximately 12 acres) between 48th and 51st
Streets and Fifth Avenue and Avenue of the Americas in Midtown
Manhattan, the Property includes 12 buildings, all but one of which
were completed between 1932 and 1940, having approximately 7.4
million square feet of rentable office, retail, storage and studio
space as measured in accordance with the measurement standards
promulgated by the Real Estate Board of New York in 1987 (including
the NBC Space). The Company owns the fee interest in the entire
Property, except the NBC Space, and the land underlying a portion of
the building at 600 Fifth Avenue, which is owned by an unrelated
party and leased to the Company through the year 2000 at an annual
rent of $650,000. Thereafter, this ground lease provides for three
renewal periods of 21 years each at annual rents of 6%, 7% and 8%,
respectively, of the value of the land (exclusive of improvements
and unencumbered by the ground lease) appraised for its highest and
best use, determined at the beginning of each such renewal term.
Also included in the Property is Radio City Music Hall (the "Music
Hall"), which is leased to Radio City Productions, LLC ("RCP")
through February 28, 2023, with an option to extend for an
additional 10 years, at $13 million annually. RCP was a wholly-owned
subsidiary of an affiliate of the Previous Owners. RCP is obligated
under the lease to pay for the expenses of maintaining the interior
of the Music Hall. The Company is responsible for the expenses of
exterior maintenance.
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<PAGE> 7
The following table provides summary information regarding the
buildings included in the Property.
<TABLE>
<CAPTION>
At December 31, 1999
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Number of Rentable area Occupancy
Building Year opened stories (sq.ft.)(1) percentage
-------- ----------- ------- ------------- ----------
<S> <C> <C> <C> <C>
GE (2) 1933 69 2,265,415 93%
NBC Studio (2) 1933 10 384,592 100%
GE West (2) 1933 16 188,814 100%
1270 Avenue of the Americas (3) 1932 31 478,532 93%
Associated Press 1938 15 469,299 84%
International 1935 39 1,256,730 95%
British Empire 1933 7 128,929 96%
La Maison Francaise 1933 7 132,631 91%
One Rockefeller Plaza 1937 34 569,570 97%
Ten Rockefeller Plaza (5) 1939 16 333,717 96%
Simon & Schuster 1940
and addition 730,610 99%
600 Fifth Avenue 1955 21 431,314 99%
Additional Property (4) 1952 27 35,385 89%
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Subtotal ---- ---- 7,405,538
Less: NBC Space 1,514,431
Total ---------
5,891,107 94%
========= =====
</TABLE>
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(1) Measured in accordance with the standards for measurement
promulgated by the New York Real Estate Board in 1987.
Includes office, retail and storage space. (Includes NBC
Space of 1,514,431 square feet.)
(2) Includes NBC Space in the GE, NBC Studio, and GE West
buildings of 941,025, 384,592 and 188,814 square feet,
respectively.
(3) The Music Hall is included as part of this building but
excluded from the rentable area and occupancy percentage
data.
(4) Includes the underground concourse and lower plaza and
includes the Chez Louis and Citarella restaurant buildings.
(5) Includes the Garage and the Christie's, Inc. Auction
House as part of the building but excluded from rentable area
and occupancy percentage data.
Rockefeller Center is one of the world's largest privately-owned
business and entertainment complexes which employs 639 people. In
addition to the buildings described above, the Property contains a
wide range of amenities including the Channel Gardens landscaped
promenade, the lower plaza used as an ice skating rink during colder
weather and otherwise for outdoor dining, a new 300,000 square foot
auction facility operated by Christie's, Inc., a 3 story 320-car
parking garage and extensive off-street truck delivery areas, an
underground retail and pedestrian concourse connecting all buildings
and providing access to an on-site subway station, roof gardens and
the Music Hall. As of December 31, 1999, retail space within the
Property includes approximately 79 shops and 33 restaurants.
In January 1999, the Company commenced a retail redevelopment
project which includes, among other things, the restoration of the
Channel Gardens, repaving of Rockefeller Plaza, refurbishment of the
common area in the concourse under 30 Rockefeller Plaza and the
completion of numerous new retail stores. Such work is scheduled to
be finished in 2000.
The murals and statuary which are an integral part of the Property
include over one hundred major works by more than thirty artists,
including the renowned sculpture "Prometheus". A private street,
Rockefeller Plaza, parallels Fifth Avenue and the Avenue of the
Americas and bisects the Property.
Under the existing zoning regulations, there is allocable to the
Property the right to develop up to approximately 2.0 million square
feet of floor area in excess of the floor area presently constructed
thereon. These excess development rights may be transferred to
other properties or, with the approval
5
<PAGE> 8
of the New York City Landmarks Preservation Commission (the
"Landmarks Commission"), used to construct additional floor area
within the Property. The Company has reserved the right to transfer
these rights. See also Note 9 to the Financial Statements provided
in response to Item 8.
In April 1985, the Landmarks Commission granted landmark status to
the exterior of all of the buildings in the Property. The Landmarks
Commission has also designated as landmarks portions of the
interiors of the GE and International Buildings and the interior of
the Music Hall. As a result of these designations, alteration,
demolition and reconstruction of the Property will under most
circumstances be subject to approval of the Landmarks Commission.
Appraisal Value
The Property was appraised as of December 31, 1994 by Douglas
Elliman Appraisal and Consulting Division ("Douglas Elliman"), an
independent appraisal firm. In a report dated January 11, 1995,
Douglas Elliman concluded that, as of December 31, 1994, the fair
market value of the Property was $1.25 billion, an increase of $100
million from the value assigned in an appraisal conducted by that
same firm as of December 31, 1993. The Weitzman Group, Inc. ("The
Weitzman Group"), an independent real estate consulting firm,
reviewed the Douglas Elliman appraisal and issued a review and
concurrence report dated February 15, 1995 stating that, based upon
the review described in such report, The Weitzman Group concurred
with the Douglas Elliman appraisal and that, in the opinion of The
Weitzman Group, the market value estimated by Douglas Elliman did
not vary by more than 5 percent from the market value The Weitzman
Group would have estimated in a full and complete appraisal of the
same interests. Copies of the 1994 appraisal and concurrence report
were filed as exhibits to the Predecessor's Current Report on Form
8-K filed on February 22, 1995, and a copy of the 1993 appraisal was
filed as an exhibit to the Predecessor's Current Report on Form 8-K
filed on February 22, 1994. Based on the price of $8.00 per share
paid for the Predecessor's common stock, the fair market value of
the Property on the Effective Date, prior to the sale of the NBC
Space, was $1.21 billion.
Property Management
On July 10, 1996, the Company entered into a management agreement
(the "Management Agreement") with Tishman Speyer Properties (the
"Agent"), an affiliate of Rockprop, L.L.C., a member of the Investor
Group, which expires on July 17, 2000. The Management Agreement will
automatically renew for additional one year terms unless either
party gives notice of election not to renew. The Agent earns a
management fee based on 1.5% of Gross Revenues, as defined. See
also Item 13 "Certain Relationships and Related Transactions" and
Note 8 to the Financial Statements provided in response to Item 8.
Real Estate Taxes
The targeted and actual assessed valuation of the Property and the
real estate taxes payable by the Property are set forth in the
following schedule for the fiscal year periods encompassing the years
ended December 31, 1997, 1998, 1999 and 2000 and the period ended
June 30, 2001. Increases in actual assessed values are required to be
phased-in over a five-year period commencing with the fiscal year for
which it is first increased.
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($ in millions)
<TABLE>
<CAPTION>
ACTUAL ASSESSED REAL ESTATE
FISCAL YEAR VALUATION TAXES PAYABLE
JULY 1-JUNE 30 (1) (2) (1) (2)
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<S> <C> <C>
1996/97 $326.1 $33.4
1997/98 $332.4 $34.2
1998/99 $359.8 $34.9
1999/00 $366.1 $34.9
2000/01 $426.4 $37.6 (3)
</TABLE>
--------------
(1) Excludes amounts applicable to the Music Hall. Real estate
taxes assessed against the Music Hall portions of the Property
are not charged to the Property.
(2) Excludes amounts applicable to the NBC space.
(3) Based on the tax rate for the 1999/2000 fiscal year.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment
utilizing microprocessors to recognize and properly process data
fields containing a 2 digit year is commonly referred to as the
Year 2000 Compliance issue. The concern is that such systems
may be unable to accurately process certain date-based
information.
The Company began preparations for the Year 2000 in 1996 and has
identified all significant applications that require
modification to ensure compliance. Internal and external
resources have been and continue to be used to make the required
modifications and test Year 2000 Compliance. The modification
process of all significant applications is complete and the
Company has not experienced any significant Year 2000 issues.
In addition, the Company has communicated with others with whom
it does significant business to determine their Year 2000
Compliance readiness and the extent to which the Company is
vulnerable to any third party Year 2000 issues. However, there
can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a
failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a
material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance
activities has not been material to its financial position or
results of operations in any given year.
ITEM 3. LEGAL PROCEEDINGS
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
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<PAGE> 10
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 Owners would file for bankruptcy
protection. The cases have been consolidated. On July 28, 1995, the
Predecessor and Dr. Linneman filed answers to the complaints denying
plaintiffs' substantive allegations and asserting numerous
affirmative defenses. On September 22, 1995, plaintiffs served an
Amended Class Action Complaint adding the Predecessor's remaining
directors and its president as defendants. In addition to the
foregoing claims, the Amended Complaint also asserts a cause of
action for breach by the Predecessor's directors and its president
of their fiduciary duties by approving the Agreement and Plan of
Combination dated as of September 11, 1995, between the 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 Exchange Act of
1934 (the "Act") and Rule 10b-5 promulgated thereunder, and Section
14 of the Act and Rule 14a-9 promulgated thereunder by allegedly
failing to provide adequate disclosure of the alleged possibility of
a sale or 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, rescission 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"). In March
1997, plaintiffs filed an amended complaint alleging certain other
disclosure violations, including alleged inadequate disclosure of
Rockefeller Center's transferable development rights. On December
10, 1997, the District Court entered an order dismissing all of the
claims except the claims involving the transferable development
rights. On March 4, 1998, defendants moved for summary judgment on
the remaining claim involving the alleged non-disclosure of the
transferable development rights. On July 10, 1998, the Court issued
a Memorandum Opinion and Order that, inter alia, denied plaintiffs'
motion for reargument of the Court's December 10, 1997 Order
Granting Defendants' Motion to Dismiss in Part and granted
defendants' motion for summary judgment on plaintiffs' claim
involving the alleged non-disclosure of the transferable development
rights. On July 22, 1998, pursuant to the Court's Memorandum Opinion
and Order dated July 19, 1998, the Clerk of the Court entered
Judgment in favor of all defendants against all plaintiffs as to all
claims in the amended complaint. On July 17, 1998, plaintiffs filed
notices of appeal to the United States Court of Appeals for the
Third Circuit from the District Court's dismissal of the case. On
July 19, 1999, the Third Circuit entered an opinion and order (i)
affirming the District Court's grant of summary judgment on the
transferable development rights claims and (ii) vacating and
remanding the dismissal of the claims involving the disclosures
relating to the transaction with NBC and GE. On August 30, 1999,
plaintiffs filed a motion in the District Court for leave to file a
second amended complaint. On October 29, 1999, defendants renewed
their motion in the District Court to dismiss the claims that the
Third Circuit remanded (involving the disclosures relating to the
transaction with NBC and GE) and opposed plaintiffs' motion for
leave to file a second amended complaint. The motions are pending.
8
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On September 13 and 14, 1995, five class action complaints,
captioned Faegheh Moezinia v. Peter D. Linneman, Benjamin D.
Holloway, Peter G. Peterson, William F. Murdoch, Jr. and Rockefeller
Center Properties, Inc.; Martin Zacharias v. B.D. Holloway, P.G.
Peterson, W.F. Murdoch, P.D. Linneman and Rockefeller Center
Properties, Inc.; James Cosentino v. Peter D. Linneman, Benjamin D.
Holloway, Peter G. Peterson, William F. Murdoch, Jr. and Rockefeller
Center Properties, Inc.; Mary Millstein v. Peter D. Linneman, Peter
G. Peterson, Benjamin D. Holloway, William F. Murdoch, Jr. and
Rockefeller Center Properties, Inc.; and Robert Markewich v. Peter
D. Linneman and Daniel M. Neidich, et al. were filed in the Delaware
Court of Chancery. On October 11, 1995, an additional complaint
captioned Hunter Hogan v. Rockefeller Center Properties, Inc., et
al. was filed in the Delaware Court of Chancery. Each of the
complaints purports to be brought on behalf of a class of plaintiffs
comprised of stockholders of the Predecessor who have been or will
be adversely affected by the combination agreement. All of the
complaints allege that the Predecessor's directors breached their
fiduciary duties by approving the combination agreement. The
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.
In June 1998, Samuel and Laurel Beizer and several of the named
plaintiffs in In re RCPI filed another purported class action
complaint and shortly thereafter an amended complaint in the Court
of Chancery of the State of Delaware in and for New Castle County
(the "Chancery Court action"), making largely the same allegations
as in In re RCPI, but asserting them as state law claims, rather
than federal securities law claims. The action is entitled Beizer
et al. v. Linneman et al., C.A. No. 16413. As in In re RCPI, the
defendants in Chancery Court action include several former officers
and directors of the Predecessor as to one or more of whom the
Company may have indemnity obligations. Also, as in In re RCPI,
plaintiffs seek unspecified damages, rescission of the Merger,
and/or disgorgement. By agreement of Counsel, this matter has been
stayed indefinitely.
During 1998 and 1999, the Company resolved certain legal claims with
no material adverse impact on the 1998 and 1999 results of
operations. The Company is also a defendant in other litigation and
in some instances the amounts sought include substantial claims.
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 is 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.
9
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no established public trading market for the Company's
Trust Ownership Interests. There are two (2) record holders of such
interests as of March 30, 2000.
On July 10, 1996, pursuant to the Merger Agreement, Holdings and
RCPI Investors L.L.C. each received a 50% undivided beneficial
interest in the Company for $172 million each. This sale of
securities was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof due to the fact
that there were only two offerees. See also Item 1, "Business".
The Indenture governing the Convertible Debentures limits cash
distributions to the Owners, as defined, to the amount of cumulative
Distributable Cash, as defined. The Indenture defines Distributable
Cash as cash receipts from operations less operating expenses and
interest. The amount of Distributable Cash, net of dividends paid,
at December 31, 1999, 1998 and 1997 was computed as follows ($ in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
Cash flow provided by operations (i) $ 85,624 $ 49,069 $ 43,912
Distributions - - (44,128)
----------- ----------- -----------
Increase (decrease) in cumulative Distributable Cash 85,624 49,069 (216)
Balance, beginning of year 111,643 62,574 62,790
----------- ----------- ----------
Balance, end of year $197,267 $111,643 $ 62,574
=========== =========== ==========
</TABLE>
(i) See statements of cash flows. See Item 8.
The NationsBank credit facilities further restrict equity
distributions during the term of the respective loan agreements.
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
RCPI TRUST
SELECTED FINANCIAL INFORMATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Statement of Operations Data December 31,
(for the years and the period ended): 1999 1998 1997 1996
------------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Total revenues $ 264,901 $ 208,064 $ 189,182 $ 88,488
Operating expenses 113,435 109,327 111,808 62,575
Interest expense 74,333 66,748 58,832 30,508
Depreciation and amortization 31,866 24,361 19,762 7,047
----------------- -------------- -------------- -----------
Net income (loss) $ 45,267 $ 7,628 $ (1,220) $ (11,642)
================= ============== ============== ===========
<CAPTION>
As of December 31,
Balance Sheet Data: 1999 1998 1997 1996
------------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Real estate, net $ 856,380 $ 814,132 $ 785,829 $ 766,627
Total assets 1,087,371 969,750 887,646 839,672
Debt 711,094 638,879 563,199 473,310
Debt due after one year 75,000 613,879 563,199 463,310
Total liabilities 747,348 674,994 600,518 507,206
Owners' equity 340,023 294,756 287,128 332,466
<CAPTION>
For the year ended December 31,
Other Financial Data: 1999 1998 1997 1996
------------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ 85,624 $ 49,069 $ 43,912 $ (6,997)
Net cash (used in) provided by investing activities (84,144) (70,316) (42,225) 419,852
Net cash provided by (used in) financing activities 13,217 25,000 (2,935) (384,090)
Repurchase of Convertible Debentures (3) - - - (213,170)
</TABLE>
(1) Included in net cash provided by investing activities for the period ended
December 31, 1996 is $440,000 of proceeds received from the sale of the
NBC space.
(2) Net cash (used in) financing activities for the period ended December 31,
1996 includes cash expended to retire the Current Coupons, GSMC Loan, and
a significant portion of the Floating Rate Notes.
(3) As of December 31, 1999, the aggregate face value of the Convertible
Debentures repurchased since 1987 was $710,605.
12
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED).
ROCKEFELLER CENTER PROPERTIES, INC.
(PREDECESSOR)
SELECTED FINANCIAL INFORMATION
($ in thousands, except per share data)
<TABLE>
<CAPTION>
January 1
Statements of Operations Data Through July 9, December 31,
- ----------------------------- 1996 1995
(for the year and the period ended): ------------------ ------------------
<S> <C> <C>
Revenues $ 38 $ 21,470
------------------ ------------------
Interest expense 46,984 85,563
General and administrative 4,774 11,267
Amortization of financing costs 12,421 9,258
Stock appreciation rights liability 2,041 10,795
Effects of the execution and delivery
of the Merger Agreement (8,232) 99,163
Expenses related to the March 25, 1996
special meeting of the stockholders 422 553
------------------ ------------------
58,410 216,599
------------------ ------------------
Net loss $ (58,372) $ (195,129)
================== ==================
Weighted average shares outstanding 38,261 38,261
================== ==================
Net loss per share $ (1.53) $ (5.10)
================== ==================
</TABLE>
13
<PAGE> 16
RCPI TRUST
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements made in this Annual Report may constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions,
which will, among other things, affect demand for retail or commercial
space or retail goods, availability of financing; adverse changes in
the real estate market including, among other things, competition with
other companies, properties and technology; risks of real estate
development and acquisition; governmental actions and initiatives; and
environmental/safety requirements.
The discussion below relates to the financial condition and results of
operations of the Company for the years ended December 31, 1999, 1998
and 1997.
LIQUIDITY AND CAPITAL RESOURCES - RCPI TRUST
Land and Buildings
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 the 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 1,514,000 square feet, or
20.5% of the total area of the Property. At December 31, 1999, the
Property, exclusive of the NBC Space, was approximately 94% occupied.
Occupancy rates for the Property at various dates are presented in the
following table.
<TABLE>
<S> <C> <C> <C>
September 30, 1999 93.2% December 31, 1998 93.0%
June 30, 1999 92.5% September 30, 1998 89.6%
March 31, 1999 92.4% June 30, 1998 88.1%
</TABLE>
The following table shows selected lease expirations and vacancy of the
Property as of December 31, 1999. Square feet, 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.
14
<PAGE> 17
RCPI TRUST
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
<TABLE>
<CAPTION>
Square Feet Percent
Year Expiring Expiring
---- -------- --------
<S> <C> <C>
2000 484,366 8.22%
2001 147,938 2.51%
2002 233,134 3.96%
2003 176,677 3.00%
2004 531,954 9.03%
2005 414,302 7.03%
Thereafter 3,902,736 66.25%
---------- -------
Total 5,891,107 100.0%
========== =======
</TABLE>
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 December 31, 1999, the carrying
value of the Debentures, net of unamortized discount, was approximately
$519.7 million.
The Floating Rate Notes were repaid in full on May 16, 1997 and bore
interest at the London Interbank Offered Rate ("LIBOR") plus 4%.
Interest was paid quarterly on March 1, June 1, September 1, and
December 1. On July 17, 1996, outstanding principal in the amount of
$106.3 million plus accrued interest of $1.2 million was prepaid.
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. Interest expense is net of the
amortization of this premium. Interest payments are made semi-annually
on July 31 and January 31. As of December 31, 1999, the carrying value
of the Debentures was $96.4 million.
The Company entered into a credit agreement as of May 16, 1997, with
NationsBank, N.A. ("NationsBank"), pursuant to which the bank agreed to
make term loans to the Company in an aggregate principal amount of up
to $100 million earning interest at LIBOR plus 1.75%. The maximum
amount of the Original NationsBank Loans which may be outstanding at
any time reduces quarterly commencing March 31, 1998 through the May
16, 2000 maturity date. As of December 31, 1998, outstanding balance on
the Original NationsBank Loans was $80 million. On each of March 30,
1999, June 30, 1999, September 30, 1999 and December 31, 1999, the
Company repaid $6.25 million, bringing the outstanding balance of the
Original NationsBank Loans to $55 million as of December 31, 1999.
The Company entered into a second credit agreement as of April 12, 1999
with NationsBank, pursuant to which the bank agreed to make term loans
to the Company in an aggregate principal amount of up to $47 million
earning interest at LIBOR plus 2.5%. The maximum amount of the New
NationsBank Loans which may be
15
<PAGE> 18
RCPI TRUST
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
outstanding at any time reduces quarterly commencing December 31, 1999
through the May 16, 2000 maturity date. As of December 31, 1999 the
outstanding balance on the New NationsBank Loans was $40 million.
Cash Flow
Cash flows from operating activities increased in 1997, 1998 and 1999,
primarily due to an increase in rental revenues caused by higher
occupancy and increased rents, while operating expenses increased at a
slower rate.
During 1997, positive cash flow from operating activities was used to
fund capital needs for new building improvements, tenant improvements
and leasing commissions of approximately $42 million. In addition, $44
million was distributed to the Investors. During 1998, the Company
spent approximately $70 million on similar capital projects which was
funded by cash flows from operating activities and net additional draws
on the NationsBank facility of $25 million.
During 1999, the Company received cash flows of approximately $86
million from operations of the Property. The Company used part of this
cash flow from operations and draws on the New NationsBank Credit
Agreement totaling $40 million to fund tenant improvements, building
improvements and other leasing costs totaling approximately $84
million. The Company also made a $6.25 million amortization payment on
the Original NationsBank Loans on each of March 31, 1999, June 30,
1999, September 30, 1999 and December 31, 1999 from its cash flow from
operations.
On December 31, 2000, all Zero Coupons will either be converted into
the right to receive a cash payment of $368.48 for each $1,000
principal amount of Zero Coupon or exchanged for floating rate notes.
Any holder of Zero Coupons that does not elect either of these two
options will be deemed to have elected to exchange such holder's Zero
Coupons for floating rate notes. After exchange, the floating rate
notes would mature on December 31, 2007. As a result of the foregoing,
no holder of a Zero Coupon will be entitled to receive a cash payment
in respect of the principal of such Zero Coupon on December 31, 2000.
See also Note 5 in the Financial Statements provided in response to
Item 8.
The indenture governing the Zero Coupons limits cash distributions to
the Owners, as defined, to the amount of cumulative Distributable Cash,
as defined. The NationsBank credit facilities further restrict equity
distributions during the term of the respective loan agreements. See
also Item 5, "Market for Registrant's Common Equity and Related
Stockholder Matters".
The Company believes that its current cash balance and future cash
flows from operations will be sufficient to fund its capital and
remaining debt service requirements for the foreseeable future.
Deficiencies, if any, will be covered by additional financing or equity
contributions.
Inflation
Inflation and changing prices during the current period did not
significantly affect the markets in which the Company conducts its
business. In view of the moderate rate of inflation, its impact on the
Company's business has not been significant.
16
<PAGE> 19
RCPI TRUST
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
RESULTS OF OPERATIONS - RCPI TRUST
<TABLE>
<CAPTION>
($ in thousands)
Year ended December 31,
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Total Revenues:
Rent and other tenant charges $263,201 $205,920 $187,630
Interest income 1,700 2,144 1,552
---------- ---------- ----------
264,901 208,064 189,182
Operating Expenses:
Real estate taxes 34,957 34,265 33,591
Utilities 14,201 13,845 14,601
Maintenance, engineering, and other operating expenses 56,155 51,866 51,025
Management and accounting fees 4,226 3,599 3,415
General and administrative 3,896 5,752 9,176
Depreciation and amortization 31,866 24,361 19,762
Interest expense 74,333 66,748 58,832
--------- --------- ---------
219,634 200,436 190,402
Net income (loss) $ 45,267 $ 7,628 ($ 1,220)
======== ========= =========
</TABLE>
Rent and other tenant charges increased by $57.3 million and $18.3 million
for the years ended December 31, 1999 and 1998, respectively, as compared to
the prior year due primarily to increased fixed rent related to new leases.
Additionally, the Company signed several new retail leases which had lease
and rent commencement dates after 1998 and the occupancy level increased to
94% as of December 31, 1999, as compared to 93% and 87% as of December 31,
1998 and 1997, respectively.
Interest income decreased for the year ended December 31, 1999, as compared
to the year ended December 31, 1998, due to a lower average cash balance
during the year ended December 31, 1999 as compared to the year ended
December 31, 1998.
Interest expense has increased by approximately $7.6 million for the year
ended December 31, 1999, as compared to the year ended December 31, 1998,
primarily due to the increase in the outstanding debt balance. Total
outstanding debt as of December 31, 1999 was approximately $711.1 million, as
compared to approximately $638.9 million as of December 31, 1998. The
increase is due primarily to accretion of the Zero Coupons and additional
draws under the NationsBank credit facilities which have increased by $15
million, net of repayments, since December 31, 1998.
The increase in depreciation and amortization expense of approximately $7.5
million for the year ended December 31, 1999, as compared to the year ended
December 31, 1998, was primarily due to additional capital projects at the
Property being placed into service since December 31, 1998 and due to
additional tenant improvements and leasing commissions expended as a result
of increased leasing activity. Additionally, the increase in amortization
expense was due to the adoption of the provisions of SOP 98-5 "Reporting on
the Costs of Start-Up Activities" effective January 1, 1999. This required
the write-off of the Company's remaining organizational costs of
approximately $1.34 million.
17
<PAGE> 20
The increase in interest income of $592,000 from 1997 to 1998 was due
primarily to a larger average cash balance on hand during 1998 as compared
to 1997.
The decrease in general and administrative expenses from 1997 to 1998 is
primarily due to the fact that during 1997, the Company recorded
non-recurring charges for abandoned projects and a legal settlement. The
overall decrease was partially offset by increased general and
administrative expenses related to the implementation of a new retail
redevelopment plan in 1998.
The increase in depreciation and amortization of approximately $4.6
million from 1997 to 1998 is primarily due to increased capital
expenditures at the Property and increased tenant improvements because of
office and retail leasing activity.
Interest expense increased from 1997 to 1998 due to higher debt balances
due to additional draws on the NationsBank loans.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company has no material exposure to market risk sensitive instruments
other than the NationsBank Loans. The market risk associated with this
floating rate loan is minimized by an interest rate protection agreement
which caps out the floating rate on the Original NationsBank loans at
7.69% during the first two years of the initial term and 8.69% thereafter,
including the extension period, and on the New NationsBank loans at 7.85%
through the extension period. The Company enters into derivative
instruments only to hedge its exposure to changes in interest rates on
some of its outstanding indebtedness, not for speculative or trading
purposes, and does not enter into leveraged derivatives. See Note 5 to the
Financial Statements provided in response to Item 8 for information about
the Company's interest rate protection agreement.
18
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
I. Financial Statements and Report of Independent Public Accountants
<TABLE>
<S> <C> <C>
PAGE NO.
1. Report of Independent Public Accountants --------
a. Arthur Andersen LLP........................................................................................20
2. RCPI Trust
a. Balance Sheets as of December 31, 1999 and 1998............................................................21
b. Statements of Operations for the years ended December 31, 1999,
1998 and 1997..............................................................................................22
c. Statements of Changes in Owners' Equity for the years ended
December 31, 1999, 1998 and 1997...........................................................................23
d. Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997..............................................................................................24
3. Notes to Financial Statements...................................................................................25
</TABLE>
II. Financial Statement Schedule
<TABLE>
<S> <C>
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1999 ............................................36
</TABLE>
All other schedules in the applicable accounting regulation of the
Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.
19
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees of RCPI Trust:
We have audited the accompanying balance sheets of RCPI Trust (a Delaware
business trust) as of December 31, 1999 and 1998 and the related statements
of operations, changes in owners' equity and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements, and
the schedule referred to below, are the responsibility of RCPI Trust's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RCPI Trust as of December
31, 1999 and 1998, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
February 1, 2000
20
<PAGE> 23
RCPI TRUST
(a Delaware business trust)
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
($ in thousands)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ---------------- ----------------
<S> <C> <C>
Real estate:
Land $ 158,149 $ 158,149
Buildings and improvements 651,154 626,764
Buildings and improvements - construction in progress 25,212 8,826
Tenant improvements 69,388 51,126
Tenant improvements - construction in progress 11,802 6,960
Furniture, fixtures and equipment 8,187 6,618
---------------- ----------------
923,892 858,443
Less: Accumulated depreciation and amortization (67,512) (44,311)
---------------- ----------------
856,380 814,132
Cash and cash equivalents 45,967 31,270
Restricted cash 10,803 10,120
Accounts receivable 7,454 6,680
Prepaid expenses 1,392 973
Deferred costs, net of accumulated
amortization of $10,726 and $5,918, respectively 50,524 40,724
Accrued rent 114,851 65,851
---------------- ----------------
Total Assets $ 1,087,371 $ 969,750
================ ================
LIABILITIES AND OWNERS' EQUITY
- ------------------------------
Liabilities:
Zero coupon convertible debentures, net of unamortized
discount of $66,484 and $125,433, respectively $ 519,701 $ 460,752
14% debentures, includes premium of $21,393 and $23,127,
respectively 96,393 98,127
NationsBank Loans 95,000 80,000
Accrued interest payable 4,708 4,738
Accounts payable and accrued expenses 21,312 21,392
Tenant security deposits payable 10,234 9,985
---------------- -----------------
Total Liabilities 747,348 674,994
Commitments and Contingencies (Note 9)
Owners' Equity 340,023 294,756
---------------- -----------------
Total Liabilities and Owners' Equity $ 1,087,371 $ 969,750
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 24
RCPI TRUST
(a Delaware business trust)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Revenues:
Base rental $ 252,037 $ 193,311 $ 171,968
Escalations and percentage rents 7,251 7,035 7,926
Interest and other income 5,613 7,718 9,288
-------------- --------------- --------------
Total Revenues 264,901 208,064 189,182
-------------- --------------- --------------
Expenses:
Interest 74,333 66,748 58,832
Real estate taxes 34,957 34,265 33,591
Payroll and benefits 22,464 21,077 18,826
Repairs, maintenance and supplies 15,871 15,394 14,066
Utilities 14,201 13,845 14,601
Cleaning 14,738 13,288 14,157
Professional fees 1,671 1,219 2,739
Insurance 1,131 888 1,237
Management and accounting fees 4,226 3,599 3,415
General and administration 3,896 5,752 3,847
Litigation settlement - - 2,612
Write off of abandoned projects - - 2,187
Tenant buyout costs 280 - 530
Depreciation and amortization 31,866 24,361 19,762
-------------- --------------- --------------
Total Expenses 219,634 200,436 190,402
-------------- --------------- --------------
Net Income (Loss) $ 45,267 $ 7,628 $ (1,220)
============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 25
RCPI TRUST
(a Delaware business trust)
STATEMENTS OF CHANGES IN OWNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands)
<TABLE>
<CAPTION>
Balance
Percentage December 31, 1997
Interest 1996 Activity
------------------ ------------------ ------------------
<S> <C> <C> <C>
Rockefeller Center Properties, Inc.:
Capital contributions 50% $ 172,054 $ -
Distributions - (22,064)
Net income (loss) (5,821) (610)
------------------- ------------------
Total 166,233 (22,674)
------------------- ------------------
RCPI Investors L.L.C.:
Capital contributions 50% 172,054 10
Distributions - (22,064)
Net income (loss) (5,821) (610)
------------------- ------------------
Total 166,233 (22,664)
------------------- ------------------
Total Owners' Equity $ 332,466 $ (45,338)
=================== ==================
</TABLE>
<TABLE>
<CAPTION>
Balance Balance
December 31, 1998 December 31,
1997 Activity 1998
------------------ ------------------ ------------------
<S> <C> <C> <C>
Rockefeller Center Properties, Inc.:
Capital contributions $ 172,054 $ - $ 172,054
Distributions (22,064) - (22,064)
Net income (loss) (6,431) 3,814 (2,617)
------------------ ------------------ ------------------
Total 143,559 3,814 147,373
------------------ ------------------ ------------------
RCPI Investors L.L.C.:
Capital contributions 172,064 - 172,064
Distributions (22,064) - (22,064)
Net income (loss) (6,431) 3,814 (2,617)
------------------ ------------------ ------------------
Total 143,569 3,814 147,383
------------------ ------------------ ------------------
Total Owners' Equity $ 287,128 $ 7,628 $ 294,756
================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
Balance
1999 December 31,
Activity 1999
----------------- ------------------
<S> <C> <C>
Rockefeller Center Properties, Inc.:
Capital contributions $ - $ 172,054
Distributions - (22,064)
Net income (loss) 22,633 20,016
----------------- ------------------
Total 22,633 170,006
----------------- ------------------
RCPI Investors L.L.C.:
Capital contributions - 172,064
Distributions - (22,064)
Net income (loss) 22,634 20,017
----------------- ------------------
Total 22,634 170,017
----------------- ------------------
Total Owners' Equity $ 45,267 $ 340,023
================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 26
RCPI TRUST
(a Delaware business trust)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 45,267 $ 7,628 $ (1,220)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Amortization of original issue discount and premium 57,215 50,680 44,889
Depreciation and amortization 31,866 24,361 19,762
(Increase) decrease in restricted cash (683) (751) 658
(Increase) decrease in accounts receivable (774) 5,266 7,913
Increase in prepaid expenses (419) (478) (17)
Increase in accrued rent (49,000) (35,882) (21,539)
Increase (decrease) in accounts payable and accrued expenses
and tenant security deposits payable 2,182 659 (6,452)
Decrease in accrued interest payable (30) (2,414) (82)
-------------- ---------------- ---------------
Net cash provided by operating activities 85,624 49,069 43,912
-------------- ---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to buildings and improvements (41,712) (23,879) (14,141)
Additions to tenant improvements (26,590) (22,605) (16,952)
Additions to furniture, fixtures and equipment (1,571) (1,445) (281)
Additions to deferred costs (14,271) (22,387) (10,851)
-------------- ---------------- ---------------
Net cash used in investing activities (84,144) (70,316) (42,225)
-------------- ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of NationsBank Loans (25,000) (5,000) -
Proceeds from NationsBank Loans 40,000 30,000 55,000
Payment of floating rate notes - - (10,000)
Distributions to Owners - - (44,128)
Capital contributions - - 10
Payment of deferred financing fees (1,783) - (3,817)
-------------- ---------------- ---------------
Net cash provided by (used in) financing activities 13,217 25,000 (2,935)
-------------- ---------------- ---------------
Increase (decrease) in cash and cash equivalents 14,697 3,753 (1,248)
Cash and cash equivalents, beginning of year 31,270 27,517 28,765
-------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 45,967 $ 31,270 $ 27,517
============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 27
RCPI TRUST
(a Delaware business trust)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1997
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 (the "Trust Agreement") dated July 10,
1996 (the "Effective Date") between Rockefeller Center Properties, Inc.
("RCPI") and RCPI Investors L.L.C. ("LLC"), each owning a 50% undivided
beneficial interest. RCPI and LLC are controlled by a group of investors
(the "Investor Group"), the members of which are Exor Group S.A. (and/or
various affiliated companies), Prometheus Investors, L.L.C., Rockprop,
L.L.C., Coreopsis Corporation, Troutlet Investments Corporation, Gribble
Investments (Tortola) BVI, Inc., Weevil Investments (Tortola) BVI, Inc.
and WHRC II Real Estate Limited Partnership.
The primary purpose of the Company is to own, manage and operate the
landmarked buildings and public space known as Rockefeller Center (the
"Property").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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.
Real Estate
Buildings and improvements are carried at cost and depreciated using the
straight-line method over their estimated useful lives of forty years.
Significant renovations or improvements which extend the economic useful
life of the assets are capitalized. Expenditures for maintenance and
repairs are expensed as incurred.
Tenant improvements are carried at cost and are amortized using the
straight-line method over the terms of the respective leases. Furniture,
fixtures and equipment are carried at cost and are depreciated using the
straight-line method over their expected useful lives of three to ten
years.
The Company reviews the carrying value of the Property for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If such review indicates that
the asset is impaired, given that the carrying amount of an asset exceeds
the sum of its expected future cash flows, on an undiscounted basis, the
asset's carrying amount should be written down to fair value. As of
December 31, 1999, there was no impairment in the value of the Property.
25
<PAGE> 28
Restricted Cash
The Company maintains tenant security deposits in a restricted cash
account. At December 31, 1999 and 1998, the carrying amount in the
restricted cash account for tenant security deposits was approximately
$10.1 million and $10.0 million, respectively.
Deferred Costs
Deferred costs include costs incurred in the successful negotiation of
leases, including brokerage and legal, and are being amortized on a
straightline basis over the terms of the respective leases. Deferred
costs also include financing costs related to the NationsBank Loans which
are amortized on a straightline basis over the terms of the loans (see
Note 5).
The Company adopted the provisions of SOP 98-5 "Reporting on the Costs of
Startup Activities" effective January 1, 1999. The effect of adopting this
statement was a charge of $1.34 million related to the writeoff of the
January 1, 1999 unamortized balance of organizational costs and has been
included as a component of depreciation and amortization in the
accompanying 1999 statement of operations. Prior to adopting SOP 98-5,
costs incurred in connection with the formation of the Company were
deferred and amortized over a period of five years.
Revenue Recognition
Base rental revenue is recognized on a straightline basis over the terms
of the respective leases. Differences between base rental revenue and
contractual amounts are recorded in the accompanying balance sheets as
accrued rent. The impact of the straightline adjustment increased base
rental revenues by approximately $49.0 million, $35.9 million and $21.5
million for the years ended December 31, 1999, 1998 and 1997,
respectively. Escalations and percentage rents, which are provided for in
the leases, are recognized as income when earned and their amounts can be
reasonably estimated.
Statements of Cash Flows
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Interest paid
by the Company on its debt obligations was approximately $17.1 million,
$18.5 million and $13.8 million for the years ended December 31, 1999,
1998 and 1997, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform with current
period presentation.
New Accounting Pronouncement
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which provides that all derivative
instruments should be recognized as either assets or liabilities depending
on the rights and obligations under the contract and that all derivative
instruments be measured at fair value. This pronouncement is required to
be adopted by January 1, 2001. Management has not yet quantified the
impact that adoption of this pronouncement will have on the Company's
financial statements.
26
<PAGE> 29
3. THE PROPERTY
Rockefeller Center
The Property consists of twelve landmarked buildings and public space
located in midtown Manhattan, New York City. The Company owns the fee
interest in the entire Property, except for the NBC Space, as hereinafter
defined, and the land underlying a portion of the building located at 600
Fifth Avenue, which is subject to a ground lease. This ground lease
provides for an annual rent of $650,000 through the year 2000.
Thereafter, this lease provides for three renewal periods of 21 years each
at annual rents of 6%, 7% and 8%, respectively, of the value of the land
(exclusive of improvements and unencumbered by the ground lease) appraised
for its highest and best use, determined at the beginning of each such
renewal term. The ground rent expense is included in general and
administration costs in the accompanying statements of operations.
At December 31, 1999 and 1998, approximately 5.6 million and 5.5 million
square feet, respectively, representing approximately 94% and 93% of
total rentable square feet were leased to tenants under operating leases.
Of the total rentable square feet, as of December 31, 1999, approximately
31% or 1.8 million square feet is under lease to seven tenants in the
financial services, legal or publishing industry. These leases are
scheduled to expire in years 2000 through 2014.
Future Minimum Rentals
Future minimum rentals to be received under noncancelable tenant leases at
December 31, 1999 are as follows ($ in thousands):
2000 $ 229,294
2001 223,792
2002 220,606
2003 217,801
2004 209,044
Thereafter 1,538,576
Future minimum rentals do not include amounts which may be received for
overage rents, which are based on tenant sales, or other reimbursements
for certain operating costs.
The Rockefeller Center Tower Condominium
On July 17, 1996, the National Broadcasting Company, Inc. ("NBC")
purchased 53.75% of the office condominium units (the "NBC Space") within
30 Rockefeller Plaza, 1250 Avenue of the Americas and the Studio Building
(collectively known as the "Condominium Buildings"). The Company amended
and restated the Declaration of The Rockefeller Center Tower Condominium
(the "Condominium") to establish the ownership rights of the office
condominium units between NBC and the Company. The purpose of the
Condominium is to operate and maintain the Common Elements, as defined in
the Operation, Maintenance and Reciprocal Easement Agreement ("REA") and
the Unit Owners Agreement ("UOA"). On behalf of the Condominium, the
Company is responsible for determining and collecting all costs pursuant
to the REA and UOA (collectively the "Shared Costs"). These Shared Costs
are calculated based on the specific terms of the REA and UOA and
therefore are not necessarily in direct proportion to the respective
ownership percentages of the Company and NBC.
27
<PAGE> 30
For financial reporting purposes, the Company's portion of Shared Costs is
allocated to the respective expense accounts in the accompanying
statements of operations based on the REA and UOA. The following
represents the summary of Shared Costs for the years ended December 31,
1999, 1998 and 1997:
The Rockefeller Center Tower Condominium
Summary of Shared Costs
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Payroll and benefits $ 8,314 $ 8,066 $ 7,243
Repairs, maintenance and supplies 5,966 5,485 5,838
Utilities 6,605 5,929 6,519
Cleaning 4,477 3,974 4,427
General and administration 2,499 3,551 4,980
Management and accounting fees 1,858 1,729 1,599
--------- -------- --------
Shared Costs, as defined $29,719 $28,734 $30,606
========= ======== ========
Shared Costs, NBC $11,682 $11,112 $11,176
Shared Costs, the Company 18,037 17,622 19,430
--------- -------- --------
$29,719 $28,734 $30,606
========= ======== ========
</TABLE>
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
In assessing the fair value of financial instruments at December 31, 1999
and 1998, the Company has used a variety of methods and assumptions which
are based on estimates of market conditions and risks existing at that
time. In cases where quoted market prices are not available, fair values
are based on estimates using present value and other techniques. Such
techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. Derived fair value
estimates cannot be substantiated by comparison to independent markets and
may not reflect the values that could be realized in any immediate
settlement of the instrument or otherwise. The aggregate fair value
amounts may not necessarily represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for financial instruments:
Cash and Cash Equivalents
The carrying amounts of cash and cash equivalents approximate their fair
value.
Debt
The fair values of all debt instruments are estimated using discounted
cash flow analysis, based on incremental borrowing rates currently
available to the Company for debt with similar terms and maturity.
28
<PAGE> 31
As of December 31, 1999 and 1998, the estimated fair values of the Zero
Coupon Convertible Debentures were approximately $531.8 million and $482.5
million, respectively, as compared to its carrying amount of approximately
$519.7 million and $460.8 million, respectively.
As of December 31, 1999 and 1998, the carrying values of all other
financial instruments approximated their estimated fair values.
5. DEBT
Zero Coupon Convertible Debentures
The Zero Coupon Convertible Debentures ("the Zero Coupons") were issued
under an Indenture, dated as of September 15, 1985 (as amended, the
"Indenture"), between RCPI and Manufacturers Hanover Trust Company (now
the United States Trust Company) as Trustee. As of July 10, 1996, the
Company became the successor to RCPI under the amended Indenture. The
Zero Coupons were originally convertible into shares of common stock of
RCPI on the maturity date (December 31, 2000) and upon the occurrence of
certain other events specified in the Indenture. Holders of the Zero
Coupons also originally had the right to exchange their Zero Coupons upon
maturity for nonconvertible floating rate notes of the Company (the
"Floating Rate Notes") in an equal aggregate principal amount.
On July 10, 1996, the Indenture was amended to provide that instead of
being convertible into RCPI common stock as described above, each Zero
Coupon is convertible, on the maturity date and upon the other events
specified in the Indenture, only into cash in an amount equal to eight
dollars ($8.00) for each share of common stock of RCPI into which the Zero
Coupon was originally convertible. Under this formula, on the maturity
date, each $1,000 principal amount of Zero Coupons is convertible into
$368.48 (the "Conversion Amount"). The amendment of the Indenture did not
change the right of holders of Zero Coupons to exchange the Zero Coupons
upon maturity for Floating Rate Notes as described above.
If a holder of a Zero Coupon fails to timely surrender the Zero Coupon for
conversion or exchange, the holder will be deemed to have elected to
exchange the Zero Coupon for Floating Rate Notes on the maturity date,
unless the holders of 90% of the aggregate principal amount of the Zero
Coupons have elected to convert their Zero Coupons into the Conversion
Amount on the maturity date, in which case that holder will be deemed to
have elected to convert the Zero Coupon into the Conversion Amount.
After the exchange of Zero Coupons for Floating Rate Notes, the Floating
Rate Notes will mature on December 31, 2007. The Company will have the
right to prepay the Floating Rate Notes at any time, at par. The Floating
Rate Notes will bear interest at the three-month London Interbank Offering
Rate ("LIBOR") plus either 1/4% or a spread greater than 1% and not
greater than 1% that would, in the opinion of a major international
investment bank selected by the Company, cause the Floating Rate Notes to
trade at par.
On July 10, 1996, the carrying value of the Zero Coupons was adjusted by
the Company to reflect their then fair market value using an imputed
interest rate of 12.10%. The face amount of the Zero Coupons is $586.2
million.
Interest expense recorded by the Company for the Zero Coupons was
approximately $58.9 million, $52.3 million and $46.3 million,
respectively, for the years ended December 31, 1999, 1998 and 1997.
29
<PAGE> 32
14% Debentures
The 14% Debentures were issued pursuant to a Debenture Purchase
Agreement dated as of December 18, 1994 between RCPI and Whitehall
Street Real Estate Limited Partnership V ("Whitehall") and amended
effective July 10, 1996 to, among other things, name the Company as the
successor in interest to RCPI. The unsecured 14% Debentures mature on
December 31, 2007 and bear interest at a rate of 14% per annum. On May
16, 1997, the agreement was further amended to change the semi-annual
interest payments from each June 2 and December 2 to each July 31 and
January 31, respectively.
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 Company's net interest expense and premium
amortization was as follows:
<TABLE>
<CAPTION>
Year Ended Net Interest Expense Premium Amortization
----------- -------------------- --------------------
<S> <C> <C>
December 31, 1999 $8.9 million $1.7 million
December 31, 1998 $9.1 million $1.6 million
December 31, 1997 $9.2 million $1.4 million
</TABLE>
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, 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. The Debenture Purchase Agreement provides for
decreasing penalties for early redemption of the 14% Debentures before
December 31, 2003.
Original NationsBank Credit Facility
On May 16, 1997, the Company entered into a Credit Agreement (the
Original NationsBank Credit Agreement") with NationsBank, N.A.
("NationsBank"), pursuant to which NationsBank agreed to make term
loans (the "Original NationsBank Loans") to the Company in an aggregate
principal amount of up to $100 million. The maximum amount of the
Original NationsBank Loans which may be outstanding at any time reduces
quarterly commencing March 31, 1998 through the May 16, 2000 maturity
date. As of December 31, 1998, the outstanding balance on the Original
NationsBank Loans was $80 million. On each of March 30, 1999, June 30,
1999, September 30, 1999 and December 31, 1999, the Company repaid
$6.25 million, bringing the outstanding balance of the Original
NationsBank Loans down to $55 million as of December 31, 1999.
The Company may elect interest periods based on one, two, three, or six
month LIBOR rates. Interest accrues at LIBOR plus 1.75% and is payable
at the end of each interest period. Subject to the satisfaction of
certain conditions precedent, the Company may extend the maturity date
of the Original NationsBank Loans to December 31, 2000 and such loans
will bear interest based on LIBOR plus 2.125% during such extension
period. As of December 31, 1999, interest was accruing at 8.21%.
Interest expense recorded on the Original NationsBank Loans by the
Company was approximately $5.0 million, $5.9 million and $2.6 million,
for the years ended December 31, 1999, 1998 and 1997, respectively.
30
<PAGE> 33
The Original NationsBank Credit Agreement requires, among other
covenants: (i) limitations on indebtedness and hedging obligations,
(ii) restrictions on payments of distributions, and (iii) required
level of minimum and maximum capital expenditures. The Company was in
compliance with all financial covenants as of December 31, 1999.
In connection with the Original NationsBank Loans, the Company
purchased an interest rate protection agreement, with a notional amount
of $55 million, from Goldman Sachs Capital Markets L.P., an affiliate
of Whitehall, capping LIBOR at 7.69% during the first two years of the
initial term and at 8.69% thereafter, including the extension period.
The cost of purchasing this agreement of $230,000 has been capitalized
as part of deferred costs on the accompanying balance sheets.
As a condition to making the Original NationsBank Loans, the holder of
the 14% Debentures and the Company executed an Intercreditor and
Subordination Agreement pursuant to which the holder of the 14%
Debentures agreed (i) to subordinate payment on the 14% Debentures to
the Original NationsBank Loans, (ii) that in certain circumstances
interest would accrue but not be paid on the 14% Debentures, and (iii)
that NationsBank may take certain actions on behalf of the holder of
the 14% Debentures upon the occurrence of certain bankruptcy related
events in respect of the Company.
In addition, certain members of the Investor Group and/or certain of
their affiliates entered into a Limited Recourse Agreement dated as of
May 16, 1997, in, favor of NationsBank.
New NationsBank Credit Facility
The Company entered into a second Credit Agreement (the "New
NationsBank Credit Agreement") as of April 12, 1999, with NationsBank,
pursuant to which NationsBank agreed to make additional term loans (the
"New NationsBank Loans") to the Company in an aggregate principal
amount of up to $47 million. NationsBank made the first term loan to
the Company, under the New NationsBank Credit Agreement, in the
principal amount of $5 million on April 28, 1999. A second term loan
was made to the Company on June 28, 1999 in the principal amount of $25
million, and a third was made on September 27, 1999 in the principal
amount of $10 million. Similar to the Original NationsBank Credit
Agreement, the Company may elect interest periods based on one, two,
three, or six month LIBOR. Interest accrues at LIBOR plus 2.50% and is
payable at the end of each interest period. The maximum amount of the
New NationsBank Loans which may be outstanding at any time reduces
quarterly commencing December 31, 1999 through the May 16, 2000
maturity date. Subject to the satisfaction of certain conditions
precedent, the Company may extend the maturity date of the New
NationsBank Loans to December 31, 2000 and such loans will bear
interest based on LIBOR plus 2.50%.
In connection with the New NationsBank Credit Agreement, the Company
purchased an interest rate protection agreement, with a current
notional amount of $42 million, from Goldman Sachs Capital Markets L.P.,
capping LIBOR at 7.85% through the extension period. The cost of
purchasing this agreement of $10,000 has been capitalized as a part of
deferred costs on the accompanying balance sheets.
As a condition to making the New NationsBank Loans, the holder of the
14% Debentures and the Company amended the Intercreditor and
Subordination Agreement, executed as part of the Original NationsBank
Loans, to include the New NationsBank Loans (the Original NationsBank
Loans and the New NationsBank Loans are hereafter collectively referred
to as the "NationsBank Loans"). The lntercreditor and Subordination
Agreement provides that the holder of the 14% Debentures agrees (i) to
subordinate payment on the 14% Debentures to the NationsBank Loans,
(ii) that in certain circumstances interest would accrue but not be
paid on the 14% Debentures, and (iii) that NationsBank may take certain
31
<PAGE> 34
actions on behalf of the holder of the 14% Debentures upon the
occurrence of certain bankruptcy related events in respect of the
Company.
In addition, certain members of the Investor Group and/or certain of
their affiliates entered into a Limited Recourse Agreement dated as of
April 12, 1999, in favor of NationsBank.
Future Maturity of Debt
The principal balance of the Company's debts outstanding as of December
31, 1999 matures as follows ($ in thousands):
<TABLE>
<S> <C>
2000 $681,185
2001 -
2002 -
2003 -
2004 -
Thereafter 75,000
--------
$756,185
========
</TABLE>
6. CONTRIBUTIONS AND DISTRIBUTIONS
Pursuant to the Stock Subscription and Stockholders Agreement dated
July 9, 1996 that organized RCPI, the Limited Liability Company
Agreement dated July 9, 1996 that organized LLC (hereinafter, RCPI and
LLC will be collectively referred to as the "Owners"), and the
Amendment Agreement dated May 1, 1997 among the Owners, the Owners are
required to provide additional contributions up to the Maximum
Additional Mandatory Contribution, as defined, totaling $82.5 million.
The Maximum Additional Mandatory Contribution shall be used to fund
unforeseen capital expenditures and similar contingencies reasonably
necessary to protect and maintain the value of the Property. As of
December 31, 1999, no such additional contributions have been made.
During the year ended December 31, 1997, the Company made cash
distributions to each of its Owners in an aggregate amount of
$44,127,504. RCPI and LLC have each received 50%. During the year ended
December 31, 1997, LLC contributed an additional $10,000 to the
Company, and LLC receives an 8% cumulative preferred return on the
$10,000 contribution.
The Indenture governing the Convertible Debentures limits cash
distributions to the Owners to the amount of cumulative Distributable
Cash, as defined. The Indenture defines Distributable Cash as cash
receipts from operations less operating expenses and interest. The
amount of Distributable Cash, net of dividends paid, at December 31,
1999, 1998 and 1997 was computed as follows ($ in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------- ---------- ---------
<S> <C> <C> <C>
Cash flow provided by operations (i) $ 85,624 $ 49,069 $ 43,912
Distributions - - (44,128)
--------- ---------- ---------
Increase (decrease) in cumulative Distributable Cash 85,624 49,069 (216)
Balance, beginning of year 111,643 62,574 62,790
--------- ---------- ---------
Balance, end of year $ 197,267 $ 111,643 $ 62,574
========= ========== =========
</TABLE>
(i) See statements of cash flows.
32
<PAGE> 35
7. INCOME TAXES
The Company, formed as a Delaware business trust, is taxed as a
partnership for federal, state and local income tax reporting purposes.
No provision for income taxes is made in the accompanying financial
statements for the Company since such taxes are liabilities of the
Owners and depend on their respective tax positions. Further, the
Owners' equity accounts reflected in the Company's accompanying
financial statements differ from the amounts reported on the Company's
federal income tax return due to differences in accounting policies
adopted for financial and tax reporting purposes.
8. RELATED PARTY TRANSACTIONS
On July 10, 1996, the Company entered into a management agreement (the
"Management Agreement"), with an affiliate (the "Agent") of Rockprop,
L.L.C., which expires on July 17, 2000. The Management Agreement will
automatically renew for additional one year terms unless either party
gives notice of election not to renew. The Agent earns a management fee
based on 1.5% of Gross Revenues, as defined. For the years ended
December 31, 1999, 1998 and 1997, the Agent earned approximately $4.0
million, $3.3 million and $3.2 million, respectively. Of total
management fees earned by the Agent, the Company incurred $3.1 million,
$2.4 million and $2.3 million for the years ended December 31, 1999,
1998 and 1997, respectively, and NBC incurred approximately $943,000,
$916,000 and $922,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
In addition, the Company pays the Agent an accounting fee pursuant to
the Management Agreement. The payment is equal to $1,134,000 for the
first year to be increased each year by 4% of the sum of $254,000 plus
the aggregate amount of the prior year increases. The total accounting
fee for each of the years ended December 31, 1999, 1998 and 1997 was
approximately $1.2 million.
The Agent also earns commissions for leasing services provided to the
Company. For the years ended December 31, 1999, 1998 and 1997, total
leasing commissions paid to the Agent were approximately $4.2 million,
$7.7 million and $3.8 million, respectively. As of December 31, 1999,
1998 and 1997, the Company owed approximately $1.4 million, $1.4
million and $1.3 million, respectively, to the Agent for leasing
commissions.
The Agent also earns fees for cleaning and development services. For
the years ended December 31, 1999, 1998 and 1997, the Agent earned
approximately $196,000, $132,000 and $397,000, respectively, in
cleaning fees. For the years ended December 31, 1999, 1998 and 1997,
the Company incurred development fees of approximately $570,000,
$970,000 and $783,000, respectively, which is included in buildings and
improvements-construction in progress.
The Agent will also earn an incentive fee under certain circumstances.
If the Company disposes of its interest in all of the Property, the
Company and the Agent will calculate (as provided in the Management
Agreement) the internal rate of return received by RCPI and LLC from
the date the Company first acquired its interest in the Property to the
date of such disposition. If such internal rate of return exceeds
fifteen percent, then the Company will pay to the Agent an amount equal
to ten percent of all amounts received by RCPI and LLC which result in
the internal rate of return exceeding fifteen percent (the "Incentive
Fee") unless the Management Agreement is terminated by the Company due
to certain defaults by the Agent.
33
<PAGE> 36
An affiliate of the Company provides cleaning and painting services for
which the Company incurred expenses of approximately $3.6 million, $2.9
million and $1.7 million, during the years ended December 31, 1999,
1998 and 1997, respectively.
The Company paid an investment banking fee to Goldman, Sachs & Co., an
affiliate of Whitehall, of $1 million and $470,000, related to the
closing of the Original NationsBank Loans and the New NationsBank
Loans, respectively (see Note 5). These fees were capitalized as a
component of deferred costs in the accompanying balance sheets.
9. COMMITMENTS AND CONTINGENCIES
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 the State 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 10, 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 10, 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 approximately $1.1 million. 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 $2 million which is
included in litigation settlement in the accompanying 1997 statement of
operations. The plaintiffs dismissed the lawsuit with prejudice and the
parties executed mutual releases of all claims arising out of the
engagement of plaintiffs in connection with the proposed 1994
transaction.
During 1998 and 1999, the Company resolved certain legal claims with no
material adverse impact on the 1998 and 1999 results of operations. The
Company is also a defendant in other litigation and in some instances
the amounts sought include substantial claims. Although the outcome of
claims, litigation and disputes cannot be predicted with certainty, in
the opinion of management based on facts known at this time, the
resolution of such matters are not anticipated to have a material
adverse effect on the financial position or results of operations of
the Company. As these matters continue to proceed through the process
to ultimate resolution, it is reasonably possible that the Company's
estimation of the effect of such matters could change within the next
year.
Other
Under existing zoning regulations, there is allocable to the Property
the right to develop additional floor area in excess of the floor area
presently constructed at the Property. These excess development rights
may be used to construct additional floor area with the Property with
the approval of the New York City Landmarks Preservation Commission,
or, with certain approvals, may be transferred to a limited number of
other properties.
34
<PAGE> 37
10. INTERIM FINANCIAL INFORMATION (UNAUDITED)
($ in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1999 1Q 2Q 3Q 4Q
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $58,996 $60,080 $61,164 $84,661
Net income $ 6,863 $ 8,793 $ 6,169 $23,442
- -------------------------------------------------------------------------------
1998 1Q 2Q 3Q 4Q
- -------------------------------------------------------------------------------
Total revenues $50,841 $50,589 $52,163 $54,471
Net income (loss) $ 4,475 $ 1,522 $ 1,733 ($102)
- -------------------------------------------------------------------------------
1997 1Q 2Q 3Q 4Q
- -------------------------------------------------------------------------------
Total revenues $47,650 $44,405 $46,181 $50,946
Net income (loss) $ 2,666 ($953) ($1,475) ($1,458)
- -------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
SCHEDULE III
RCPI TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
($ in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C
Initial Cost
Buildings and
Description Encumbrances Land Improvements
- --------------------------------- ----------------------- -------------------- ----------------------
<S> <C> <C> <C>
GE Building $ 46,715 $ 165,626
International Building 29,984 106,308
One Rockefeller Plaza 12,890 45,701
600 Fifth Avenue - 33,442
Ten Rockefeller Plaza 14,835 52,598
Simon & Schuster 10,535 37,351
Associated Press 10,625 37,669
1270 Avenue of the Americas 16,636 58,981
La Maison Francaise 6,449 22,864
British Empire Building 6,909 24,496
Other Property 2,571 9,116
-------------------- ----------------------
$ 158,149 $ 594,152
==================== ======================
<CAPTION>
COLUMN A COLUMN D
Cost Capitalized
Subsequent to Acquisition
Buildings and
Description Land Improvements
- --------------------------------- ------------------ -----------------------
<S> <C> <C>
GE Building $ - $ 53,233
International Building - 35,342
One Rockefeller Plaza - 15,037
600 Fifth Avenue - 8,207
Ten Rockefeller Plaza - 15,822
Simon & Schuster - 5,970
Associated Press - 11,710
1270 Avenue of the Americas - 13,379
La Maison Francaise - 2,855
British Empire Building - 1,480
Other Property - 169
------------------ -----------------------
$ - $ 163,404
================== =======================
<CAPTION>
COLUMN A COLUMN E
Gross Amount at Which
Carried at Close of Year
Buildings and
Description Land Improvements Total
- --------------------------------- ---------------------- -------------------------- --------------------
<S> <C> <C> <C>
GE Building $ 46,715 $ 218,859 $ 265,574
International Building 29,984 141,650 171,614
One Rockefeller Plaza 12,890 60,738 73,628
600 Fifth Avenue - 41,649 41,649
Ten Rockefeller Plaza 14,835 68,420 83,255
Simon & Schuster 10,535 43,321 53,856
Associated Press 10,625 49,379 60,004
1270 Avenue of the Americas 16,636 72,360 88,996
La Maison Francaise 6,449 25,719 32,168
British Empire Building 6,909 25,976 32,885
Other Property 2,571 9,485 12,056
---------------------- -------------------------- --------------------
$ 158,149 $ 757,556 $ 915,705
====================== ========================== ====================
<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H
Accumulated Date of Date
Description Depreciation Construction Acquired
- --------------------------------- ----------------------- -------------------- -----------------
<S> <C> <C> <C>
GE Building $ 15,363 1933 1996
International Building 12,561 1935 1996
One Rockefeller Plaza 6,441 1937 1996
600 Fifth Avenue 3,065 1952 1996
Ten Rockefeller Plaza 5,430 1939 1996
Simon & Schuster 3,884 1940 1996
Associated Press 6,027 1938 1996
1270 Avenue of the Americas 6,774 1932 1996
La Maison Francaise 2,295 1933 1996
British Empire Building 2,198 1933 1996
Other Property 779 Various 1996
-----------------------
$ 64,817
=======================
<CAPTION>
COLUMN A COLUMN I (1) COLUMN I (2)
Life on which
Depreciation Life on which
is Calculated Depreciation
(Buildings and is Calculated
Building (Tenant
Description Improvements) Improvements)
- --------------------------------- ---------------------- ----------------------
<S> <C>
GE Building 40 years Life of lease
International Building 40 years Life of lease
One Rockefeller Plaza 40 years Life of lease
600 Fifth Avenue 40 years Life of lease
Ten Rockefeller Plaza 40 years Life of lease
Simon & Schuster 40 years Life of lease
Associated Press 40 years Life of lease
1270 Avenue of the Americas 40 years Life of lease
La Maison Francaise 40 years Life of lease
British Empire Building 40 years Life of lease
Other Property 40 years Life of lease
</TABLE>
36
<PAGE> 39
RCPI TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 1999, 1998 AND 1997
($ in thousands)
The changes in real estate for the years ended December 31, 1999, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ------------- ----------------
<S> <C> <C> <C>
Real estate balance at beginning
of year $ 693,676 $ 647,881 $ 611,285
Improvements 63,880 45,795 36,596
---------------- ------------- ----------------
Balance at close of year $ 757,556 $ 693,676 $ 647,881
================ ============= ================
</TABLE>
The changes in accumulated depreciation, exclusive of amounts relating to
furniture, fixtures and equipment for the years ended December 31, 1999, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ------------- ----------------
<S> <C> <C> <C>
Balance at beginning of year $ 42,578 $ 23,430 $ 6,439
Depreciation for year 22,239 19,148 16,991
---------------- ------------- ----------------
Balance at end of year $ 64,817 $ 42,578 $ 23,430
================ ============= ================
</TABLE>
37
<PAGE> 40
ITEM 9. CHARGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
38
<PAGE> 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information is furnished with respect to the trustees
and executive officers of the Company (1).
<TABLE>
<CAPTION>
Company Position
Occupation and Business Experience Held Continuously Term
Name Age During the Last Five Years (2) Since Expires (3)
----- --- ---------------------------------- ----------------- --------
<S> <C> <C> <C> <C>
David Rockefeller 84 Chairman of the Board of Trustees; July, 1996 Indefinite
Chairman of the Board of Rockefeller
Group, Inc. since prior to 1994; retired
since October, 1995.
Ralph F. Rosenberg 35 Trustee, Vice President, Treasurer and July, 1996 Indefinite
Assistant Secretary; Partner and Managing
Directors of Goldman, Sachs and Co.,
Since 1998, Vice President of Goldman,
Sachs & Co. since 1994 and an associate of
Goldman, Sachs & Co. since 1990. Also
director of Metropolis REIT and Cadillac
Fairview Corp.
Mark Tercek 43 Trustee; Vice President of Goldman, Sachs July, 1996 Indefinite
& Co. since prior to 1994; Managing
Director of Goldman, Sachs & Co.
since November, 1996
Daniel M. Neidich 50 Trustee; Partner of Goldman, Sachs & Co. July, 1996 Indefinite
since 1990; Managing Director of Goldman,
Sachs & Co. since November, 1996.
Barry S. Volpert 40 Trustee; Vice President of Goldman, Sachs July, 1996 Indefinite
& Co. since prior to 1992; Partner of Goldman,
Sachs & Co. since November, 1994; Managing
Director of Goldman, Sachs & Co. since
November, 1996. Also a director of Elifin S.A.
and IDB Holdings, Inc.
Gianluigi Gabetti 75 Trustee; Vice Chairman of Istituto Finanziario July, 1999 Indefinite
Industriale from 1993 to present and Chief
Executive Officer from 1972 to 1993; Vice
Chairman of FIAT S.p.A. from 1993 to 1999
when appointed Director Emeritus; Vice
Chairman of EXOR Group since prior to
1993. Also a director of FIAT USA, Club
Mediterrance S.A., Deutsche Bank S.p.A. and
Riverwood International Corporation.
Andreas C. Dracopoulos 36 Trustee; financial consultant to Transoceanic July, 1996 Indefinite
Marine, Inc. since prior to 1994.
Richard E. Salomon 57 Trustee; President and Managing Director July, 1996 Indefinite
of Spears, Benzak, Salomon & Farrell (an
investment advisor). Also a director of
Cousins Properties, Inc.
Jerry I. Speyer 59 President and Chief Executive July, 1996 Indefinite
Officer; President and Chief Executive
Officer of Tishman Speyer Properties,
L.P. since prior to 1994.
</TABLE>
39
<PAGE> 42
<TABLE>
<CAPTION>
Company Position
Occupation and Business Experience Held Continuously Term
Name Age During the Last Five Years (2) Since Expires (3)
---- --- ---------------------------------- ---------------- -----------
<S> <C> <C> <C> <C>
David Augarten 44 Vice President, Treasurer and Assistant July, 1996 Indefinite
Secretary; Chief Financial Officer of
Tishman Speyer Properties, L.P.
since prior to 1994.
Geoffrey P. Wharton 57 Vice President, Assistant Treasurer and July, 1996 Indefinite
Assistant Secretary; Senior Managing
Director of Tishman Speyer Properties, L.P.
since prior to 1994.
</TABLE>
- ----------------------------------------------
(1) Wilmington Trust Company also serves as a trustee of the Company pursuant
to the requirement of Title 12, Section 3807 of the Delaware Code but has
no vote and does not have any management responsibilities with respect to
the Company.
(2) The names of companies subject to the periodic reporting requirements of
the Securities Exchange Act of 1934, as amended, on which any of the
trustees serves as a director are also listed.
(3) The Company's existence will terminate, if not earlier terminated, in
2046.
ITEM 11. EXECUTIVE COMPENSATION.
None. (1)
The Predecessor's Proxy Statement for its 1996 Special Meeting of
Stockholders, dated February 14, 1996, is incorporated by reference as
a supplemental response to the information required by this item.
- ----------------------------------------------
(1) Wilmington Trust Company receives an annual administration fee
of $2,500 and certain other immaterial transaction based fees.
40
<PAGE> 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as of March 30,
2000 concerning the beneficial ownership of the outstanding Trust
Ownership Interests by each person known by the Company to own more
than 5% of the outstanding Trust Ownership Interests on March 30,
2000.
<TABLE>
Percent of Trust
Name and Address Amount and Nature of Ownership Interest
of Beneficial Owner Beneficial Ownership (1) Outstanding
------------------- ------------------------ -------------------
<S> <C> <C>
Rockefeller Center Properties, Inc. 1 (2) 50%
c/o Tishman Speyer Properties, L.P.
45 Rockefeller Plaza
New York, NY 10111
RCPI Investors L.L.C. 1 (2) 50%
c/o Tishman Speyer Properties, L.P.
45 Rockefeller Plaza
New York, NY 10111
</TABLE>
- -------------------------------------
(1) This table lists beneficial ownership in accordance with the
definitions contained in Rule 13d-3 adopted by the Securities and
Exchange Commission under the Securities Act of 1934, as amended.
All shares and other equity interests listed are subject to the sole
investment and voting power of the named beneficial owner.
(2) Each of Rockefeller Center Properties, Inc. and RCPI Investors L.L.C.
has sole investment and voting power with respect to its interest in
the Company.
Security Ownership of Management
Except as disclosed in the Predecessor's Proxy Statement for its 1996
Special Meeting of Stockholders, dated February 14, 1996 which is
incorporated by reference as a supplemental response to the
information required by this item as of March 30, 2000, no person who
since July 10, 1996 served as a trustee or executive officer of RCPI
Trust has beneficial ownership of any equity interest in the Company,
the Predecessor, RCPI Investors L.L.C. or other affiliates of the
Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On July 10, 1996, the Company entered into a management agreement (the
"Management Agreement"), with an affiliate (the "Agent") of Rockprop,
L.L.C., which expires on July 17, 2000. The Management Agreement will
automatically renew for additional one year terms unless either party
gives notice of election not to renew. The Agent earns a management
fee based on 1.5% of Gross Revenues, as defined. For the years ended
December 31, 1999, 1998 and 1997, the Agent earned approximately $4.0
million, $3.3 million and $3.2 million, respectively. Of total
management fees earned by the Agent, the Company incurred $3.1
million, $2.4 million and $3.3 million for the years ended December
31, 1999, 1998 and 1997, respectively and NBC incurred approximately
$943,000, $916,000 and $922,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
41
<PAGE> 44
In addition, the Company pays the Agent an accounting fee pursuant to the
Management Agreement. The payment is equal to $1,134,000 for the first
year to be increased each year by 4% of the sum of $254,000 plus the
aggregate amount of the prior year increases. The total accounting fee for
each of the years ended December 31, 1999, 1998 and 1997 was
approximately $1.2 million.
The Agent also is entitled to reimbursement for the following reasonable
out-of-pocket expenses incurred by the Agent in connection with its
performance of its responsibilities under the Management Agreement,
including: (i) travel and entertainment expenses (including meals and
lodging), (ii) costs of advertising and engaging in promotional
activities (including the preparation of brochure's and other marketing
materials) and (iii) costs of insurance required to be maintained by the
Agent pursuant to the Management Agreement. The Company also reimburses
the Agent for compensation paid to employees of the Agent which are
listed in the Operating Budget (as defined) as payable by the Company and
placement fees and other out-of-pocket expenses incurred in connection
with the hiring of employees whose compensation is payable by the Company
pursuant to the Operating Budget. If, with the Company's consent or at
the Company's direction, the Agent hires any attorneys to negotiate and
prepare leases of space at the Property or to perform other work in
respect of the Property, the compensation of such attorneys will be paid
or reimbursed by the Company.
The Agent also earns commissions for leasing services provided to the
Company. The Agent earns for each office lease the sum of the following,
as appropriate: 5% of the Fixed Rent (as defined) for the 1st year of any
lease term, 4% for the 2nd year, 3 1/2% for the 3rd through 5th years, 2
1/2% for the 6th through 10th year, 2% for the 11th through 20th year,
and 1% for the 21st year and each succeeding year thereafter. This fee is
reduced by 50% for renewals. In addition, if the lease is secured by an
outside broker, the Agent receives 50% of such broker's commission in
lieu of the fee structure set forth above. With respect to retail lease
transactions, except as provided in the Letter Agreement between the
Company and the Agent, the Agent will receive as full compensation for
all commissions and development fees the sum of $2 million, which is paid
pro rata as leases are executed. For the years ended December 31, 1999,
1998 and 1997, total leasing commissions paid to the Agent were
approximately $4.2 million, $7.7 million and $3.8 million, respectively.
As of December 31, 1999, 1998 and 1997, the Company owed approximately
$1.4 million, $1.4 million and $1.3 million, respectively, to the Agent
for leasing commissions.
The Agent also earns fees for cleaning and development services. The
Agent earns 5% of the amount of any wages and other compensation
(including benefit obligations but excluding severance obligations)
payable any year to employees to furnish cleaning services to the
Property, and 4% of the Hard Construction Costs (as defined) of capital
improvements (excluding tenant improvements) for the Agent's supervisory
and coordinating services. For the years ended December 31, 1999, 1998 and
1997, the Agent earned approximately $196,000, $132,000 and $397,000.
respectively, in cleaning fees. For the years ended December 31, 1999,
1998 and 1997, the Company incurred development fees of approximately
$570,000, $970,000 and $783,000, respectively.
The Agent will also earn an incentive fee under certain circumstances. If
the Company disposes of its interest in all of the Property, the Company
and the Agent will calculate (as provided in the Management Agreement)
the internal rate of return received by Rockefeller Center Properties,
Inc. and LLC from the date the Company first acquired its interest in the
Property to the date of such disposition. If such internal rate of return
exceeds fifteen percent then the Company will pay to the Agent an amount
equal to ten percent of all amounts received by RCPI and LLC which result
in the
42
<PAGE> 45
internal rate of return exceeding fifteen percent (the "Incentive Fee")
unless the Management Agreement is terminated by the Company due to
certain defaults by the Agent.
The Agent is also indemnified by the Company for certain claims arising
under the Management Agreement and the Agent's activities pursuant
thereto.
An affiliate of the Company provides cleaning services for which the
Company incurred expenses of approximately $3.6 million, $2.9 million and
$1.7 million, during the years ended December 31, 1999, 1998 and 1997,
respectively.
The Company paid an investment banking fee to Goldman, Sachs & Co., an
affiliate of Whitehall, of $1 million and $470,000, related to the
closing of the Original NationsBank Loans and the New NationsBank Loans,
respectively. These fees were capitalized as a component of deferred
costs in the Company's accompanying balance sheets.
As of December 31, 1999, an aggregate of $96.4 million in principal and
premium of the Company's 14% Debentures was held by Whitehall. Certain
directors and executive officers of the Company are also directors or
executive officers of Goldman, Sachs & Co., an affiliate of Whitehall.
See Item 10 - "Directors and Executive Officers of the Registrant". The
Predecessor's Proxy Statement for its 1996 Special Meeting of
Stockholders, dated February 14, 1996 is incorporated by reference as a
supplemental response to the information required by this item.
43
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of the report
<TABLE>
<CAPTION>
1. Financial Statements and Report of Independent Public Accountants PAGE NO.
--------
<S> <C>
(1) Report of Independent Public Accountants
a. Arthur Andersen LLP ........................................... 20
(2) RCPI Trust
a. Balance Sheets as of December 31, 1999 and 1998 ............... 21
b. Statements of Operations for the years ended December 31, 1999,
1998 and 1997 ................................................. 22
c. Statements of Changes in Owners' Equity for the years
ended December 31, 1999, 1998 and 1997 ........................ 23
d. Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997 ................................................. 24
(3) Notes to Financial Statements ....................................... 25
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1999 ............................................... 36
All other schedules are not required under the
applicable accounting regulation of the Securities and
Exchange Commission or under the related instructions
and therefore have been omitted.
</TABLE>
44
<PAGE> 47
PART IV/(CONT'D)
3. 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 is
incorporated by reference to exhibit 4.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996
10-K").
(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 exhibit 4.4 to the 1996 10-K.
(4.5) Instrument of Resignation, Appointment and Acceptance dated as of
December 1, 1993 among the Predecessor, 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.
(10.1) Amended and Restated Loan Agreement dated as of July 17, 1996 among
the Company, the lenders parties thereto and GSMC, as agent, is
incorporated by reference to Exhibit 10.1 to the 1996 10-K.
(10.2) 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 QSMC, as agent and lender, is incorporated by
reference to Exhibit 10.2 to the 1996 10-K.
(10.3) Agreement and Plan of Merger dated as of November 7, 1995 among the
Predecessor, RCPI Holdings Inc., RCPI Merger Inc., Whitehall Street
Real Estate Limited Partnership V, Rockprop, L.L.C., David
Rockefeller, Exor Group S.A. and Troutlet Investments Corporation is
incorporated by reference to Exhibit 10.28 to the Predecessor's
Current Report on Form 8-K dated November 13, 1995.
(10.4) Amendment No. 1 dated as of February 12, 1996 to the Agreement and
Plan of Merger dated as of November 7, 1995 among the Predecessor,
RCPI Holdings Inc., RCPI Merger Inc., Whitehall Street Real Estate
Limited Partnership V, Rockprop, L.L.C., David Rockefeller, Exor Group
S.A. and Troutlet Investments Corporation is incorporated by reference
to Exhibit 10.31 to the Predecessor's Current Report on Form 8-K dated
February 22, 1996.
45
<PAGE> 48
PART IV (CONT'D)
Exhibits: (Cont'd)
(10.5) Amendment No. 2 to the Agreement and Plan of Merger, dated as of April
25, 1996 is incorporated herein by reference to the Predecessor's
Current Report on Form 8-K, filed on April 25, 1996.
(10.6) Amendment No. 3 to the Agreement and Plan of Merger, dated as of May
29, 1996 is incorporated herein by reference to the Predecessor's
Current Report on Form 8-K, filed on May 29, 1996.
(10.7) Amendment No. 4 to the Agreement and Plan of Merger, dated as of June
30, 1996 is incorporated herein by reference to the Predecessor's
Current Report on Form 8-K, filed on July 1, 1996.
(10.8) Credit Agreement, dated as of May 16, 1997, between the Company and
NationsBank of Texas, N.A. is incorporated by reference to Exhibit 4.6
to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997.
(10.9) Intercreditor and Subordination Agreement, dated as of May 16, 1997,
between the Company and Whitehall is incorporated by reference to
Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.
(10.10) Limited Recourse Agreement, dated as of May 16, 1997, is incorporated
by reference to Exhibit 4.8 to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1997.
(10.11) Amendment to the May 16, 1997 Credit Agreement, dated as of April 12,
1999, between the Company and NationsBank, N.A. is incorporated by
reference to Exhibit 10.11 to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1999.
(10.12) Credit Agreement, dated as of April 12, 1999, between the Company and
NationsBank, N.A. is incorporated by reference to Exhibit 10.12 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1999.
(10.13) Amended and Restated Intercreditor and Subordination Agreement, dated
as of April 12, 1999, between the Company and WHRC Real Estate Limited
Partnership is incorporated by reference to Exhibit 10.13 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1999.
(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.
46
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/JERRY I. SPEYER
------------------
JERRY I. SPEYER
President
Date: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/DAVID ROCKEFELLER
-----------------
DAVID ROCKEFELLER
Chairman of the Board of Trustees
Date: March 30, 2000
By: /s/RALPH F. ROSENBERG
---------------------
RALPH F. ROSENBERG
Trustee and Vice President
Date: March 30, 2000
By: /s/MARK TERCEK
---------------------
MARK TERCEK
Trustee
Date: March 30, 2000
47
<PAGE> 50
SIGNATURES (CONT'D)
By: /s/DANIEL M. NEIDICH
---------------------
DANIEL M. NEIDICH
Trustee
Date: March 30, 2000
By: /s/BARRY S. VOLPERT
-------------------
BARRY S. VOLPERT
Trustee
Date: March 30, 2000
By: /s/GIANLUIGI GABETTI
--------------------
GIANLUIGI GABETTI
Trustee
Date: March 30, 2000
By: /s/ANDREAS C. DRACOPOULOS
-------------------------
ANDREAS C. DRACOPOULOS
Trustee
Date: March 30, 2000
48
<PAGE> 51
SIGNATURES (CONT'D)
By: /s/RICHARD E. SALOMON
---------------------
RICHARD E. SALOMON
Trustee
Date: March 30, 2000
By: /s/JERRY I. SPEYER
------------------
JERRY I. SPEYER
President
(Principal Executive Officer)
Date: March 30, 2000
By: /s/DAVID AUGARTEN
-----------------
DAVID AUGARTEN
Vice President
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 30, 2000
49
<PAGE> 52
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No proxy material has been sent to more than ten (10) of the Company's security
holders and no annual report has been sent to the Company's security holders.
50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from RCPI Trust's
Balance Sheet as of December 31, 1999 and RCPI Trust's Statement of Operations
for the year ended December 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 45,967
<SECURITIES> 0
<RECEIVABLES> 7,454
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,813
<PP&E> 923,892
<DEPRECIATION> 67,512
<TOTAL-ASSETS> 1,087,371
<CURRENT-LIABILITIES> 26,020
<BONDS> 616,094
0
0
<COMMON> 0
<OTHER-SE> 340,023
<TOTAL-LIABILITY-AND-EQUITY> 1,087,371
<SALES> 0
<TOTAL-REVENUES> 264,901
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 145,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,333
<INCOME-PRETAX> 45,267
<INCOME-TAX> 0
<INCOME-CONTINUING> 45,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,267
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
