<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from to
----------------- ----------------
Commission File Number 33-16973
--------
NET 1 L. P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3421566
- ---------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Lexington Corporate Properties Trust
355 Lexington Avenue
New York, NY 10017
- ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 692-7200
------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
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 .
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant.
Not applicable.
There is no active public market for the units of limited partnership interests
issued by the Registrant.
<PAGE> 2
PART 1. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS
($000)
March 31, 1998 (Unaudited) and December 31, 1997
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1998 1997
-------- --------
<S> <C> <C>
Real estate, at cost $ 26,440 $ 26,440
Less: accumulated depreciation 2,853 2,735
-------- --------
23,587 23,705
Cash and cash equivalents 1,381 1,312
Rent receivable 421 400
Other assets 551 246
-------- --------
$ 25,940 $ 25,663
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 5,596 $ 5,676
Accrued interest payable 30 30
Accounts payable and other liabilities 148 165
-------- --------
5,774 5,871
-------- --------
Partners' capital (deficit):
General Partner (167) (174)
Limited Partners ($1,000 per Unit,
50,000 Units authorized, 30,772
Units issued and outstanding) 20,333 19,966
-------- --------
Total partners' capital 20,166 19,792
-------- --------
$ 25,940 $ 25,663
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 3
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF INCOME
($000 except per Unit amounts)
Quarters Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, March 31,
1998 1997
------ ------
<S> <C> <C>
Revenues:
Rental $1,086 $ 900
Interest and other 18 28
------ ------
1,104 928
------ ------
Expenses:
Interest 131 94
Depreciation 118 98
General, administrative, and other 88 99
------ ------
337 291
------ ------
Net income $ 767 $ 637
====== ======
Net income per Unit of limited
partnership interest $24.43 $20.29
====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 4
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000)
Quarters Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, March 31,
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 767 $ 637
------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 118 98
Other, net (343) (231)
------- -------
Total adjustments (225) (133)
------- -------
Net cash provided by operating activities 542 504
------- -------
Cash flows from financing activities:
Principal payments on mortgage notes (80) (36)
Cash distributions to partners (393) (393)
------- -------
Net cash used in financing activities (473) (429)
------- -------
Net increase in cash and cash equivalents 69 75
Cash and cash equivalents at beginning of period 1,312 2,123
------- -------
Cash and cash equivalents at end of period $ 1,381 $ 2,198
======= =======
Cash paid during the period for interest $ 131 $ 95
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 5
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. The Partnership and Basis of Presentation
Net 1 L. P. (the "Partnership") was formed as a limited partnership on
August 25, 1987 under the laws of the State of Delaware to invest in
real estate or interests therein to be net leased to corporations or
other entities.
As of March 31, 1998, the Partnership has a total of 30,772 Units issued
and outstanding held by approximately 1,500 limited partners.
The unaudited financial statements reflect all adjustments that are, in
the opinion of the General Partner, necessary to a fair statement of the
results for the interim period presented. For a more complete
understanding of the Partnership's financial position and accounting
policies, reference is made to the financial statements previously filed
with the Securities and Exchange Commission with the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1997.
2. Summary of Significant Accounting Policies
The leases relating to the properties are operating leases in accordance
with generally accepted accounting principles. Rental revenue is
recognized on a straight-line basis over the minimum lease terms. At March
31, 1998, rent receivable primarily consists of amounts for the excess of
rental revenues recognized on a straight-line basis over the rents
collectible under the leases.
For purposes of the statement of cash flows, the Partnership considers all
highly liquid instruments to be cash equivalents. The balance sheet
caption cash and cash equivalents includes $1.3 million of money market
instruments at March 31, 1998.
Net income per Unit amounts were calculated by using the weighted average
number of Units outstanding for each period and allocating the income
attributable for that period to the Limited Partners. The weighted average
number of Units outstanding was 30,772 for the quarters ended March 31,
1998 and 1997.
Statement of Financial Accounting Standards No. 128 (SFAS 128) " Earnings
per Share" is effective for periods ending December 15, 1997. Application
of SFAS 128 had no effect on the Partnership's net income per unit for the
quarters ended March 31, 1998 and 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income" and SFAS 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS 130 and 131 are effective
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods, provided for comparative
purposes, is required. The adoption of SFAS 130 and 131 on January 1,
1998, had no effect on the financial statements of the Partnership.
<PAGE> 6
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Continued
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Certain amounts included in the prior years' financial statements have
been reclassified to conform with the current years' presentation.
3. The Partnership Agreement
For financial statement reporting purposes all items of income are
allocated in the same proportion as distributions of distributable cash.
Distributable cash attributed to a particular limited partner's Unit is
calculated from the date of admission to the Partnership. The unpaid
cumulative preferred return at March 31, 1998 totaled $11.317 million
($364.56 to $370.41 per Unit, per close). On April 30, 1998, the unpaid
cumulative preferred return at March 31, 1998 was reduced by a cash
distribution to the Limited Partners for the quarter ended March 31, 1998
totaling $384,958 ($12.51 per Unit). The General Partner received a cash
distribution of $7,856 on April 30, 1998.
4. Mortgage Notes Payable
Principal paydowns of the mortgage notes payable for the succeeding five
years are as follows ($000):
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
--------------- ------
<S> <C>
1998 (9 months) $ 286
1999 416
2000 459
2001 507
2002 560
2003 620
======
</TABLE>
<PAGE> 7
NET 1 L. P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Leases
Minimum total annual future rental payments receivable under the
noncancelable operating leases for the properties as of March 31, 1998,
follow ($000):
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
--------------- ---------
<S> <C>
1998 (9 months) $ 2,073
1999 2,803
2000 2,803
2001 2,804
2002 2,818
2003 2,851
2004-2008 13,160
2009 78
---------
$ 29,390
=========
</TABLE>
The leases are triple net leases requiring the lessees to pay all taxes,
insurance, maintenance, and all other similar charges and expenses
relating to the properties and their use and occupancy.
6. Related Party Transactions
Leased Properties Management, Inc., an affiliate of the General Partner,
is entitled to receive a fee for managing the Partnership's properties in
the amount of 1% of gross annual rental receipts (or a greater amount in
certain circumstances). For the quarters ended March 31, 1998 and 1997,
property management fees of $11,000 and $9,000, respectively had been
incurred.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership attempts to maintain a working capital reserve in an amount
equal to 3% of the gross proceeds of its offering, an amount which is
anticipated to be sufficient to satisfy liquidity requirements. Liquidity of the
Partnership could be adversely affected by unanticipated costs, lessees
experiencing financial difficulties and greater than anticipated operating
expenses. To the extent that such working capital reserves are insufficient to
satisfy the cost requirements of the Partnership, additional funds may be
obtained through short-term or permanent loans or by reducing distributions to
limited partners.
The unpaid cumulative preferred return at March 31, 1998 totaled $11.317 million
($364.56 to $370.41 per Unit, per close), and was reduced by $384,958 ($12.51
per Unit) with the first quarter 1998 distribution paid in April 1998.
Except for the debt service requirements under the mortgages, there are no
material restrictions upon the Partnership's present or future ability to make
distributions in accordance with the provisions of its Partnership Agreement.
Results of Operations ($000)
<TABLE>
<CAPTION>
Quarters ended Increase (Decrease)
March 31, Quarter ended
--------- -------------
1998 1997 March 31, 1998
---- ---- --------------
<S> <C> <C> <C>
Total revenues $1,104 $ 928 $ 176
------ ------ ------
Total expenses:
Interest 131 94 37
Depreciation 118 98 20
General & administrative 88 99 (11)
------ ------ ------
337 291 46
------ ------ ------
Net income $ 767 $ 637 $ 130
====== ====== ======
</TABLE>
The changes in results of operations with respect to revenues, interest and
depreciation for the quarter ended March 31, 1998 are primarily attributable to
the operations of the real property investment acquired in the second quarter of
1997.
General and administrative expenses decreased in the quarter ended March 31,
1998, due to lower property operating expenses.
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings - not applicable.
ITEM 2. Changes in Securities - not applicable.
ITEM 3. Defaults under the Senior Securities - not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders - not
applicable.
ITEM 5. Other Information - not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
27 Financial Data Schedule
(b) Reports on form 8-K filed during the first quarter ended March
31, 1998. None.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NET 1 L. P.
By: Lepercq Net 1 L. P.
its general partner
By: Lepercq Net 1 Inc.
its general partner
Date: May 13, 1998 By:/s/ E. Robert Roskind
--------------------- ----------------------------------
E. Robert Roskind
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTER ENDED MARCH 31, 1998 AND THE
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,381,774
<SECURITIES> 0
<RECEIVABLES> 420,598
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 26,440,197
<DEPRECIATION> (2,853,523)
<TOTAL-ASSETS> 25,940,254
<CURRENT-LIABILITIES> 0
<BONDS> 5,596,285
0
0
<COMMON> 0
<OTHER-SE> 20,166,202
<TOTAL-LIABILITY-AND-EQUITY> 25,940,254
<SALES> 0
<TOTAL-REVENUES> 1,104,000
<CGS> 0
<TOTAL-COSTS> 118,069
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,751
<INCOME-PRETAX> 767,333
<INCOME-TAX> 0
<INCOME-CONTINUING> 767,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 767,333
<EPS-PRIMARY> 24.43
<EPS-DILUTED> 24.43
</TABLE>
