<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, 2000
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)
<TABLE>
<S> <C>
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)
</TABLE>
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
(Dollars in thousands, except units and per unit amounts)
March 31, 2000 (unaudited) and December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
-------- --------
<S> <C> <C>
Real estate, at cost $ 38,711 $ 38,711
Less: accumulated depreciation 2,683 2,483
-------- --------
36,028 36,228
Cash and cash equivalents 1,839 1,951
Restricted cash 1,723 1,710
Rent receivable 1,032 504
Other assets 376 528
-------- --------
$ 40,998 $ 40,921
======== ========
Liabilities and Partners' Capital
Long term debt $ 16,114 $ 16,272
Accrued interest payable 111 88
Accounts payable and other liabilities 674 912
-------- --------
16,899 17,272
-------- --------
Partners' capital (deficit):
General Partner (88) (96)
Limited Partners ($1,000 per Unit, 50,000 Units
authorized, 30,772 Units issued and outstanding) 24,187 23,745
-------- --------
Total partners' capital 24,099 23,649
-------- --------
$ 40,998 $ 40,921
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 3
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per Unit amounts)
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Revenues:
Rental $1,440 $1,127
Interest and other 41 20
------ ------
1,481 1,147
------ ------
Expenses:
Interest 334 122
Depreciation 200 118
General, administrative, and other 103 119
------ ------
637 359
------ ------
Net income $ 844 $ 788
====== ======
Net income per Unit of limited
partnership interest $26.87 $25.10
====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 4
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Net cash provided by operating activities: $ 453 $ 391
------- -------
Cash flows from financing activities:
Increase in restricted cash (13) --
------- -------
Cash flows from financing activities:
Principal payments on mortgage notes (158) (89)
Cash distributions to partners (394) (394)
------- -------
Net cash used in financing activities (552) (483)
------- -------
Decrease in cash and cash equivalents (112) (92)
Cash and cash equivalents at beginning of period 1,951 1,688
------- -------
Cash and cash equivalents at end of period $ 1,839 $ 1,596
------- -------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 311 $ 122
======= =======
</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, 2000
(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
net leased real estate properties or interests therein. As of March 31,
2000, the Partnership had owned interests in eight properties.
As of March 31, 2000, the Partnership has a total of 30,772 Units
issued and outstanding held by approximately 1,400 limited partners.
The unaudited financial statements reflect all adjustments that are, in
the opinion of the General Partner, necessary to present a fair
statement of condition and 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, 1999.
2. Summary of Significant Accounting Policies
Net income per Unit amounts were calculated by using the weighted
average number of Units outstanding for each period and allocating 98%
of the income attributable for that period to the Limited Partners. The
weighted average number of Units outstanding was 30,772 for all periods
presented.
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses to prepare these financial statements
in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
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, 2000 totaled $15.007 million
($484.48 to $490.33 per Unit, per close). On April 28, 2000, the unpaid
cumulative preferred return was reduced by a cash distribution to the
Limited Partners totaling $384,958 ($12.51 per Unit). The General
Partner received a cash distribution of $7,856 on April 28, 2000.
<PAGE> 6
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. 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 three months ended
March 31, 2000 and 1999, property management fees of $14,000 and
$11,000 were incurred.
Lexington Corporate Properties Trust, whose chairman and Co-Chief
Executive Officer is an officer and a shareholder of the General
Partner, is reimbursed by the Partnership for various administrative
services performed. For the three months ended March 31, 2000 and 1999
such reimbursements totaled $61,000 and $42,000, respectively.
<PAGE> 7
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 that 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, 2000 totaled $15.007 million
($484.48 to $490.33 per Unit, per close), and was reduced by $384,958 ($12.51
per Unit) with the distribution paid in April 2000.
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.
As of March 31, 2000, the restricted cash represents remaining proceeds from the
sale of properties under the Internal Revenue Code Section 1031, restricted for
investment in future acquisitions.
Impact of Year 2000
To date there have been no situations that the General Partner is aware of,
where the year 2000 issue has caused a computer system that effects the
Partnership or any of its properties to function improperly.
Results of Operations (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
2000 1999 Increase (Decrease)
------ ------ ------
<S> <C> <C> <C>
Total revenues $1,481 $1,147 $ 334
------ ------ ------
Total expenses:
Interest 334 122 212
Depreciation 200 118 82
General and administrative 103 119 (16)
------ ------ ------
637 359 278
------ ------ ------
Net income $ 844 $ 788 $ 56
====== ====== ======
</TABLE>
The change in results of operations with respect to revenues, interest and
depreciation for the three months ended March 31, 2000 are primarily
attributable to the operations of the real property investments acquired in
September 1999.
General and administrative expenses decreased in the three months ended March
31, 2000 due to property appraisals incurred in the first quarter of 1999.
<PAGE> 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There is no exposure to market risk since all of the Partnership's
long-term indebtedness is fixed rate.
<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, 2000.
Form 8-K/A dated September 27, 1999, filed January
14, 2000. Provided certain historical financial
information for a property located in Phoenix,
Arizona.
<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 15, 2000 By: /s/ E. Robert Roskind
--------------------- -----------------------------
E. Robert Roskind
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME AS OF AND FOR
THE THREE MONTHS ENDED MARCH 31, 2000 AS CONTAINED IN THE PARTNERSHIP'S FORM
10-Q FOR SUCH PERIOD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10-Q. DOLLARS ARE IN THOUSANDS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,562
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 38,711
<DEPRECIATION> (2,683)
<TOTAL-ASSETS> 40,998
<CURRENT-LIABILITIES> 0
<BONDS> 16,114
0
0
<COMMON> 0
<OTHER-SE> 24,099
<TOTAL-LIABILITY-AND-EQUITY> 40,998
<SALES> 0
<TOTAL-REVENUES> 1,481
<CGS> 0
<TOTAL-COSTS> 200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 334
<INCOME-PRETAX> 844
<INCOME-TAX> 0
<INCOME-CONTINUING> 844
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 844
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
