<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(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
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 [ ]
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]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant.
There is no active public market for the units of limited partnership
interests issued by the Registrant.
Not Applicable.
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<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K into which the document is incorporated: (1) Any annual
report to security holders; (2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of
1933. The listed documents should be clearly described for identification
purposes.
None.
<PAGE> 3
PART I.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-K Report, the words "believes", "expects",
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially. In particular, among the
factors that could cause actual results to differ materially are continued
qualification as a real estate partnership, general business and economic
conditions, competition, increases in real estate construction costs, interest
rates, accessibility of debt and equity capital markets and other risks inherent
in the real estate business including tenant defaults, potential liability
relating to environmental matters and illiquidity of real estate investments.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof.
ITEM 1. BUSINESS
Net 1 L.P. (the "Partnership"), is a limited partnership formed on August
25, 1987 under the Uniform Limited Partnership Act of the State of Delaware for
the purpose of investing primarily in existing commercial properties which are
triple net leased to corporations or other entities. The Partnership Agreement
was amended and restated on September 30, 1994, which enables the Partnership to
make additional real estate investments.
The General Partner of the Partnership is Lepercq Net 1 L.P., a Delaware
limited partnership (the "General Partner"). Lepercq Net 1 Inc. is the general
partner of the General Partner. The directors and executive officers of Lepercq
Net 1 Inc. are discussed in PART III, Item 10 (Directors and Executive Officers
of the Registrant). Leased Properties Management, Inc., an affiliate of Lepercq
Net 1 Inc., performs certain property management services in connection with the
operation of the Partnership's business.
The Partnership commenced an offering to the public of 50,000 units at
$1,000 per unit of limited partnership interests (the "Units") on November 20,
1987 pursuant to a Prospectus. The Prospectus was filed with the Securities and
Exchange Commission as part of the Partnership's Registration Statement on Form
S-11 (No. 33-16973). On January 17, 1989, the Partnership held the final
admission of Limited Partners, and the offering was terminated after a total of
31,001 Units had been sold, equaling $31.001 million in capital contributions.
On September 30, 1990, the Partnership repurchased 229 limited partnership Units
for an aggregate purchase price of $169,930. No Units have been repurchased
since 1990.
The Partnership invests in net leased real properties (or interests
therein) located throughout the United States, which offer the potential for (i)
preservation and protection of the capital of the limited partners of the
Partnership, (ii) providing increasing cash available for distributions, (iii)
providing tax benefits so that a portion of the cash distributions is sheltered
from current income taxation, and (iv) appreciation in value of the
Partnership's investments.
Investments are made in various types of commercial real properties and
interests therein. Such investments may include, but are not limited to: fitness
centers, warehouses, distribution centers, office buildings, retail stores,
hotels, motels, nursing homes and congregate care facilities. Investments are
not restricted as to specific geographical areas, however, all of the
Partnership's investments are made within the United States.
1
<PAGE> 4
Each of the following properties (as hereinafter defined) accounted for 10%
or more of consolidated rental revenues for the years ended December 31, follow:
<TABLE>
<CAPTION>
PROPERTY 1999 1998 1997
- -------- ---- ---- ----
<S> <C> <C> <C>
Phoenix, AZ................................................. 22% 24% 25%
Sumter, SC.................................................. 16% 16% 17%
Brownsville, TX............................................. 12% 12% --
Autozone(*)................................................. 12% 24% 26%
Greyhound(**)............................................... 11% 11% 12%
Gainesville, GA............................................. 10% 10% 11%
</TABLE>
- ---------------
(*) These properties consist of 16 retail stores located as follows: two in
Alabama, two in Florida, one in Georgia, five in New Mexico, and six in
Texas and were sold on June 30, 1999.
(**) These properties consist of three bus terminals located in California, two
of which were sold in December of 1999.
The Partnership attempts to maintain a working capital cash reserve in an
amount equal to 3% of the gross proceeds of the offering, which is anticipated
to be sufficient to satisfy liquidity requirements. Liquidity of the Partnership
could be adversely affected by unanticipated costs, particularly costs relating
to the vacancy of properties, tenants experiencing financial difficulties, and
greater than anticipated operating expenses. To the extent that such working
capital reserves are insufficient to satisfy the cash requirements of the
Partnership, additional funds may be obtained either through short-term or
permanent loans or by reducing distributions to limited partners.
The Partnership operates in one industry segment, investment in net leased
real property.
The General Partner has granted Lexington Corporate Properties Trust
("Lexington"), whose chairman and Co-Chief Executive Officer, is an officer and
a shareholder of the General Partner, an option exercisable at any time, to
acquire the general partnership interest. Under the terms of the option,
Lexington, subject to review of any such transaction by the independent members
of its Board of Trustees, may acquire the general partnership interest at its
fair market value based upon a formula relating to partnership cash flows, with
Lexington retaining the option of paying such fair market value in securities of
Lexington, limited partnership Units in controlled subsidiaries, cash or a
combination thereof. Lexington provides the Partnership with various
administrative services.
Competition
The real estate business is highly competitive and the Partnership competes
with numerous established companies having significantly greater resources and
experience. Competition may also come from other partnerships which have been or
may be formed by the General Partner or its affiliates.
2
<PAGE> 5
Environmental Matters
Under various federal, state and local environmental laws, statutes,
ordinances, rules and regulations, an owner of real property may be liable for
the costs of removal or redemption of certain hazardous or toxic substances at,
on, in or under such property as well as certain other potential costs relating
to hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). Such laws often impose
liability without regard to whether the owner knew of, or was responsible for,
the presence or disposal of such substances. Although the Partnership's tenants
are responsible for any environmental damage and claims related to the leased
premises, in the event of the bankruptcy or inability of the tenant of such
premises to satisfy any obligations with respect thereto, the Partnership may be
required to satisfy such obligations. In addition, under certain environmental
laws, the Partnership, as the owner of such properties, may be held directly
liable for any such damages or claims irrespective of the provisions of any
lease.
From time to time, in connection with the conduct of the Partnership's
business, and prior to the acquisition of any property from a third party or as
required by the Partnership's financing sources, the Partnership authorizes the
preparation of Phase I environmental reports with respect to its properties.
Based upon such environmental reports and management's ongoing review of its
properties, as of the date of this annual report, management was not aware of
any environmental condition with respect to any of the Partnership's properties
which management believed would be reasonably likely to have a material adverse
effect on the Partnership. There can be no assurance, however, that (i) the
discovery of environmental conditions, the existence or severity of which were
previously unknown, (ii) changes in law, (iii) the conduct of tenants or (iv)
activities relating to properties in the vicinity of the Partnership's
properties will not expose the Partnership to material liability in the future.
Changes in laws increasing the potential liability for environmental conditions
existing on properties or increasing the restrictions on discharges or other
conditions may result in significant unanticipated expenditures or may otherwise
adversely affect the operations of the Partnership's tenants, which would
adversely affect the Partnership's financial condition and results of
operations, including funds from operations.
Employees
The Partnership has no employees. All necessary personnel are provided by
the General Partner or its affiliates or agents. See Part III Item 10,
"Directors and Executive Officers of the Registrant" and Item 13, "Certain
Relationships and Related Transactions".
3
<PAGE> 6
ITEM 2. PROPERTIES
The following is a detailed schedule of the Partnership's real estate and
lease terms at December 31, 1999:
<TABLE>
<CAPTION>
LEASE(S) NET
ACQUISITION ANNUALIZED EXPIRATION RENTABLE
DATE OF COST BASE RENT DATE SQUARE
ACQUISITION TENANT LOCATION ($000'S) ($000'S) (MONTH/YEAR) FEET
- ----------- ------------------------- --------------- ----------- ---------- ------------ --------
<C> <S> <C> <C> <C> <C> <C>
7/18/88 Scandinavian
US Swim & Fitness Phoenix, AZ $ 5,860 $ 755 7/08 36,556
2/28/89 Greyhound Lines, Inc. Stockton, CA 1,294 183 2/09 17,000
8/22/94 Circuit City Stores, Inc. Lynchburg, VA 751 86 11/06 9,300
11/27/95 Wal-Mart Stores, Inc. Sumter, SC 3,850 328 1/08 103,377
12/28/95 Wal-Mart Stores, Inc. Gainesville, GA 2,960 218 1/09 89,199
5/30/97 Wal-Mart Stores, Inc. Brownsville, TX 3,569 321 1/08 85,334
9/27/99 Cymer, Inc. San Diego, CA 8,802 778 12/09 65,755
9/29/99 Bull HN Information
Systems, Inc. Phoenix, AZ 11,625 972 10/05 137,058
------- ------ -------
$38,711 $3,641 543,579
======= ====== =======
</TABLE>
On June 30, 1999, the Partnership sold sixteen properties to Autozone,
Inc., for net proceeds of approximately $8.6 million. The Autozone Properties,
aggregating 104,600 square feet, consisted of retail stores located in Alabama
(2), Florida (2), Georgia (1), New Mexico (5) and Texas (6). The Partnership
realized a gain from the sale of approximately $2.67 million.
On December 21, 1999, the Partnership sold a property located in San
Bernardino, California, the Greyhound Property, to an unrelated party for net
proceeds of approximately $881,000, which resulted in a gain of approximately
$351,000.
On December 23, 1999, the Partnership sold a property located in San Luis
Obispo, California, the Greyhound Property, to an unrelated party for net
proceeds of approximately $817,000, which resulted in a gain of approximately
$350,000.
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership nor its properties are subject to any pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year ended
December 31, 1999 to a vote of Unit holders.
4
<PAGE> 7
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
An established public trading market for the Units does not exist, and it
is not anticipated that such a market will develop in the near future. Further,
the transfer of Units is subject to substantial restrictions. Accordingly,
information as to the market value of a Unit at any given date is not available.
As of December 31, 1999, there were 1,395 investors holding 30,772 limited
partnership units.
The Partnership makes quarterly cash distributions. Cash distributions paid
per Unit of limited partnership interest for each of the years in the three-year
period ended December 31, 1999 was $50.04.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of selected financial data for the
Partnership for the years ended December 31, (in thousands, except per Unit
data):
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Rental revenue....... $ 3,375 $ 3,265 $ 2,992 $ 2,707 $ 1,903
================== ================ ================ ================ ================
Net income........... $ 5,186 $ 1,813 $ 1,855 $ 1,547 $ 1,093
================== ================ ================ ================ ================
Net income per Unit
of limited
partnership
interest(*)........ $157.34 to $169.87 $54.82 to $59.50 $55.85 to $61.00 $46.39 to $51.03 $32.59 to $36.16
================== ================ ================ ================ ================
Total assets......... $ 40,921 $ 25,534 $ 25,663 $ 23,179 $ 23,412
================== ================ ================ ================ ================
Mortgage notes
payable............ $ 16,272 $ 5,344 $ 5,676 $ 3,552 $ 3,687
================== ================ ================ ================ ================
Cash distributions
per Unit of limited
partnership
interest(*)........ $ 50.04 $ 50.04 $ 50.04 $ 50.04 $ 93.40
================== ================ ================ ================ ================
</TABLE>
- ---------------
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
The above financial data should be read in conjunction with the
Consolidated Financial Statements and the related notes appearing elsewhere in
this report.
5
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
On November 20, 1987, the Partnership commenced the sale of up to 50,000
Units of limited partnership interests at $1,000 per Unit with the option to
offer an additional 50,000 Units. As of January 17, 1989, the Partnership had
raised a total of $31.001 million in capital contributions (31,001 Units) and
the offering was terminated. The net offering proceeds consisting of aggregate
gross offering proceeds of $31.001 million less related offering costs of $3.781
million, along with the proceeds from a closing loan and other mortgage debt,
have been utilized by the Partnership to invest in triple net leased real estate
properties (or interests therein); to pay for related property acquisition
expenses, financing and acquisition fees; and to provide for a working capital
reserve. On September 30, 1990, the Partnership repurchased 229 limited
partnership Units for an aggregate purchase price of $169,930. No Units have
been repurchased since 1990.
Pursuant to the Partnership Agreement, limited partnership Units may be
repurchased at 90% of the net asset value 60 days after the offer to repurchase
has been made.
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 December 31, 1999 totaled $14.546
million ($469.49 to $475.34 per Unit, per close), and was reduced by $384,958
($12.51 per Unit) with the fourth quarter 1999 distribution paid on January 31,
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.
During the year ended December 31, 1999, the Partnership entered into the
following real estate transactions:
<TABLE>
<CAPTION>
LEASE NET
CAPITALIZED ANNUALIZED EXPIRATION RENTABLE
DATE OF COSTS BASE RENT DATE SQUARE
ACQUISITION TENANT LOCATION ($000'S) ($000'S) (MONTH/YEAR) FEET
- ----------- ------------------- ------------- ----------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
September 27 Cymer, Inc. San Diego, CA $ 8,802 $ 778 12/09 65,755
September 29 Bull HN Information
Systems, Inc. Phoenix, AZ 11,625 972 10/05 137,058
------- ------ -------
$20,427 $1,750 202,813
======= ====== =======
</TABLE>
The San Diego Property was purchased through a cash payment of
approximately $4.2 million and the assumption of a $4.6 million mortgage note.
The mortgage note bears interest at a rate of 7.5% per annum, with an annual
debt service payment of principal and interest in the amount of $411,024. The
note matures on January 1, 2011 with a balloon payment of approximately $3.4
million.
6
<PAGE> 9
The Phoenix Property was purchased through a cash payment of approximately
$4.8 million, the issuance of a $1.2 million unsecured note and the assumption
of $5.6 million mortgage note. The mortgage note bears interest at a rate of
8.12% per annum, with an annual debt service payment of principal and interest
in the amount of $621,297. The mortgage note matures on October 10, 2005 with a
balloon payment of approximately $4.2 million. The $1.2 million unsecured note
has a term of 6 years with interest accruing at 8% per annum, due and payable on
September 30, 2005.
Both the San Diego and the Phoenix Properties were purchased from Lexington
Corporate Properties Trust, whose chairman is an officer and a shareholder of
the General Partner.
On June 30, 1999, the Partnership sold sixteen properties to Autozone,
Inc., for net proceeds of approximately $8.6 million. The Autozone Properties
aggregating 104,600 square foot retail stores are located in Alabama (2),
Florida (2), Georgia (1), New Mexico (5) and Texas (6). The Partnership realized
a gain from sale of approximately $2.67 million.
On December 21, 1999, the Partnership sold a property located in San
Bernardino, California, the Greyhound Property, to an unrelated party for net
proceeds of approximately $881,000, which resulted in a gain of approximately
$351,000.
On December 23, 1999, the Partnership sold a property located in San Luis
Obispo, California, the Greyhound Property, to an unrelated party for net
proceeds of approximately $817,000, which resulted in a gain of approximately
$350,000.
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>
INCREASE (DECREASE)
----------------------
1999 1998 1997 1999-1998 1998-1997
------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenues............................. $3,544 $3,347 $3,080 $197 $267
------ ------ ------ ---- ----
Total expenses:
Interest................................. 764 510 469 254 41
Depreciation............................. 510 476 439 34 37
General and administrative............... 455 548 317 (93) 231
------ ------ ------ ---- ----
1,729 1,534 1,225 195 309
------ ------ ------ ---- ----
Income before gain on sale of properties... $1,815 $1,813 $1,855 $ 2 $(42)
====== ====== ====== ==== ====
</TABLE>
The changes in results of operations with respect to revenues, interest and
depreciation for the years ended December 31, 1999, 1998, and 1997 are primarily
attributable to the operations of the real property investments acquired and
sold, and related mortgages assumed as described above.
General and administrative expenses decreased in 1999 due to property
appraisals incurred. General and administrative expenses increased in 1998 due
to transactional expenses incurred in 1998 relating to the proposed partnership
roll-up.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There is no exposure to market risk since all of the Partnership's
long-term indebtedness is fixed rate.
7
<PAGE> 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
INDEX
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Independent Auditors' Report................................ 9
Consolidated Balance Sheets at December 31, 1999 and 1998... 10
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997.......................... 11
Consolidated Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31, 1999, 1998 and
1997...................................................... 12
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... 13
Notes to Consolidated Financial Statements.................. 14 - 20
Consolidated Financial Statement Schedule
Real Estate and Accumulated Depreciation Schedule III....... 21
</TABLE>
8
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
The Partners
Net 1 L.P.:
We have audited the consolidated financial statements of Net 1 L.P. and
consolidated partnerships as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the consolidated financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the consolidated financial
statement schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the consolidated financial statement 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Net 1 L.P.
and consolidated partnerships as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ KPMG LLP
New York, New York
March 9, 2000
9
<PAGE> 12
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT UNITS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
ASSETS
Real estate, at cost:
Buildings................................................. $31,952 $18,914
Land...................................................... 6,759 7,526
------- -------
38,711 26,440
Less: accumulated depreciation............................ 2,483 3,211
------- -------
36,228 23,229
Cash and cash equivalents................................... 1,951 1,688
Restricted cash............................................. 1,710 --
Rent receivable............................................. 504 455
Other assets................................................ 528 162
------- -------
$40,921 $25,534
======= =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Long term debt.............................................. $16,272 $ 5,344
Accrued interest payable.................................... 88 28
Accounts payable and other liabilities...................... 912 128
------- -------
17,272 5,500
------- -------
Partners' capital (deficit):
General Partner........................................... (96) (169)
Limited Partners ($1,000 per Unit, 50,000 Units
authorized, 30,772 Units issued and outstanding)....... 23,745 20,203
------- -------
23,649 20,034
------- -------
$40,921 $25,534
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
10
<PAGE> 13
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998 1997
------------------ ---------------- ----------------
<S> <C> <C> <C>
Revenues:
Rental.............................. $3,375 $3,265 $2,992
Interest and other.................. 169 782 88
------------------ ---------------- ----------------
3,544 3,347 3,080
------------------ ---------------- ----------------
Expenses:
Interest............................ 764 510 469
Depreciation........................ 510 476 439
General and administrative.......... 455 548 317
------------------ ---------------- ----------------
1,729 1,534 1,225
------------------ ---------------- ----------------
Income before gain on sale of
properties.......................... 1,815 1,813 1,855
Gain on sale of properties, net..... 3,371 -- --
------------------ ---------------- ----------------
Net income.......................... $5,186 $1,813 $1,855
================== ================ ================
Net income per Unit of limited
partnership interest(*)............. $157.34 to $169.87 $54.82 to $59.50 $55.85 to $61.00
================== ================ ================
</TABLE>
- ---------------
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
See accompanying notes to consolidated financial statements.
11
<PAGE> 14
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
GENERAL LIMITED
TOTAL PARTNER PARTNERS
------- ------- --------
<S> <C> <C> <C>
Partners' capital (deficit) at December 31, 1996............ $19,508 $(180) $19,688
Net income.................................................. 1,855 37 1,818
Cash distributions.......................................... (1,571) (31) (1,540)
------- ----- -------
Partners' capital (deficit) at December 31, 1997............ 19,792 (174) 19,966
Net income.................................................. 1,813 36 1,777
Cash distributions.......................................... (1,571) (31) (1,540)
------- ----- -------
Partners' capital (deficit) at December 31, 1998............ 20,034 (169) 20,203
Net income.................................................. 5,186 104 5,082
Cash distributions.......................................... (1,571) (31) (1,540)
------- ----- -------
Partners' capital (deficit) at December 31, 1999............ $23,649 $ (96) $23,745
======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 15
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 5,186 $ 1,813 $ 1,855
------- ------- -------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 510 476 439
Gain on sale of properties............................. (3,371) -- --
Increase in rent receivable............................ (49) (55) (85)
(Increase) decrease in other assets.................... (518) 84 (79)
Increase (decrease) in accrued interest payable........ 60 (2) (2)
Increase (decrease) in accounts payable and other
liabilities.......................................... 784 (37) 78
------- ------- -------
Total adjustments...................................... (2,584) 466 351
------- ------- -------
Net cash provided by operating activities................. 2,602 2,279 2,206
------- ------- -------
Cash flows from investing activities:
Proceeds from sale of properties, net..................... 10,288 -- --
Increase in restricted cash............................... (1,710) -- --
Repayment of note receivable.............................. 152 -- --
Acquisition of real estate................................ (9,066) -- (1,205)
------- ------- -------
Net cash used in investing activities..................... (336) -- (1,205)
------- ------- -------
Cash flows from financing activities:
Principal payments on mortgage notes...................... (432) (332) (241)
Cash distributions to partners............................ (1,571) (1,571) (1,571)
------- ------- -------
Net cash used in financing activities..................... (2,003) (1,903) (1,812)
------- ------- -------
Change in cash and cash equivalents......................... 263 376 (811)
Cash and cash equivalents at beginning of year.............. 1,688 1,312 2,123
------- ------- -------
Cash and cash equivalents at end of year.................... $ 1,951 $ 1,688 $ 1,312
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for interest...................... $ 704 $ 512 $ 471
======= ======= =======
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
On September 27, 1999, the Partnership assumed approximately $4.6 million
of mortgage financing in connection with the acquisition of a property in San
Diego, California.
On September 29, 1999, the Partnership assumed approximately $5.6 million
of mortgage financing and issued a $1.2 million unsecured note in connection
with the acquisition of a property in Phoenix, Arizona.
On May 30, 1997, the Partnership assumed approximately $2.4 million of
first mortgage financing in connection with the acquisition of a property in
Brownsville, Texas.
See accompanying notes to consolidated financial statements.
13
<PAGE> 16
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
1. THE PARTNERSHIP
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. The Partnership terminates on
December 31, 2027, unless sooner terminated by law.
On November 20, 1987, the Partnership commenced the sale of up to 50,000
Units of limited partnership interests at $1,000 per Unit with the option to
offer an additional 50,000 Units. As of the last admission of Limited Partners,
which occurred on January 17, 1989, the Partnership had raised a total of
$31.001 million (31,001 Units) from 1,638 investors and the offering was
terminated. On September 30, 1990, the Partnership repurchased 229 limited
partnership Units for an aggregate purchase price of $169,930. No Units have
been repurchased since 1990.
Pursuant to the Partnership Agreement, limited partnership Units may be
repurchased at 90% of the net asset value 60 days after the offer to repurchase
has been made.
As of December 31, 1999, there were a total of 1,395 investors holding
30,772 limited partnership units.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership's financial statements are prepared on the accrual basis.
The financial statements reflect the accounts of the Partnership, Net 1
Sumter L.P. and Net 1 Gainesville L.P., on a consolidated basis. The Partnership
owns a 99% limited partnership interest in each of Net 1 Sumter L.P. and Net 1
Gainesville L.P. The minority interest is not significant and is included in
other liabilities and general and administrative expenses in the accompanying
consolidated financial statements.
Real estate assets are stated at cost, less accumulated depreciation. If
there is an event or change in circumstance that indicates an impairment in the
value of a property has occurred, the Partnership's policy is to assess any
impairment in value by making a comparison of the current and projected
operating cash flows of each such property over its remaining useful life, on an
undiscounted basis, to the carrying amount of the property. If such carrying
amounts are in excess of the estimated projected operating cash flows of the
property, the Partnership would recognize an impairment loss equivalent to an
amount required to adjust the carrying amount to its estimated fair market
value. No such impairment loss has occurred.
All direct costs associated with the acquisition of real estate are
capitalized.
Depreciation is determined by the straight-line method over the remaining
estimated economic useful lives of the properties. The Partnership generally
depreciates buildings over a 40-year period.
14
<PAGE> 17
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 December 31, 1999 and 1998,
rent receivable consists of the excess of rental revenues recognized on a
straight-line basis over the rents collectible under the leases.
Percentage rent is recognized on a cash basis. The percentage rent received
for each of the years in the three-year period ended December 31, 1999 was
$447,000, $446,000 and $319,000, respectively.
The Partnership considers all highly liquid instruments with maturities of
three months or less from the date of purchase to be cash equivalents.
As of December 31, 1999, the restricted cash represents proceeds from sale
of properties restricted for investment in future acquisitions.
No provision for income taxes has been made as the liability for such taxes
is that of the individual partners rather than the Partnership.
Income per Unit amounts were calculated by using the weighted average
number of Units outstanding for each year and allocating the income attributable
for that year to the Limited Partners. The weighted average Units outstanding
for each of the years in the three-year ended December 31, 1999 was 30,772.
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of Financial
Instruments, defines fair value of a financial instrument as the amount at which
the instrument could be exchanged at a current transaction between willing
parties. The Partnership's cash, long term debt, accounts payable and accrued
liabilities are considered to be financial instruments and except for certain
mortgage notes payable, as described in note 5, are carried at cost, which
approximates fair value.
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 consolidated financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
15
<PAGE> 18
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. THE PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, the General Partner is
liable for all general obligations of the Partnership to the extent not paid by
the Partnership. The Limited Partners are not and will not be liable for the
debts of the Partnership beyond their contributed capital.
Distributable cash from operations, as defined in the Partnership
Agreement, is generally to be distributed 98% to the Limited Partners and 2% to
the General Partner until each Limited Partner has received total distributions
from operations equal to an 11% cumulative non-compounded preferred return.
Thereafter, such distributions are to be made 90% to the Limited Partners and
10% to the General Partner.
Distributable cash from capital transactions, as defined, is generally to
be distributed 99% to the Limited Partners and 1% to the General Partner until
each Limited Partner has received total distributions from capital transactions
equal to an 11% cumulative non-compounded preferred return plus a return of
capital contributions. Thereafter, such distributions are to be made 85% to the
Limited Partners and 15% to the General Partner. As of December 31, 1999, the
Partnership has not made any distributions of proceeds from capital
transactions.
For financial statement reporting purposes, all items of income are
allocated in the same proportion as cumulative distribution 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 December 31, 1999 totaled $14.546 million ($469.49 to
$475.34 per Unit, per close). On January 31, 2000, the unpaid cumulative
preferred return at December 31, 1999 was reduced by a cash distribution to the
Limited Partners for the quarter ended December 31, 1999 totaling $384,958
($12.51 per unit). The General Partner received a cash distribution of $7,856 on
January 31, 2000.
Cash distributions paid per Unit of limited partnership interest for each
of the years in the three-year period ended December 31, 1999 was $50.04.
Taxable income as defined, before depreciation, generally is allocated in
the same proportion as cumulative distributions of distributable cash or
cumulative distributable cash from capital transactions (other than the portion
of such proceeds constituting a return of capital). Depreciation and
amortization expense, to the extent that it does not exceed income before
depreciation for such year, shall be allocated in the same ratio as taxable
income. Any excess of such depreciation deductions shall be allocated 98% to the
Limited Partners and 2% to the General Partner. For financial statement
reporting purposes all items of income are allocated in the same proportion as
distributions of distributable cash or distributable cash from capital
transactions.
16
<PAGE> 19
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVESTMENTS IN REAL ESTATE
Following is a detailed schedule of the Partnership's real estate and lease
terms at December 31, 1999:
<TABLE>
<CAPTION>
LEASE(S) NET
ACQUISITION ANNUALIZED EXPIRATION RENTABLE
DATE OF COST BASE RENT DATE SQUARE
ACQUISITION TENANT LOCATION ($000'S) ($000'S) (MONTH/YEAR) FEET
- ----------- ------------------------- ---------------- ----------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
7/18/88 Scandinavian US
Swim & Fitness Phoenix, AZ $ 5,860 $ 755 7/08 36,556
2/28/89 Greyhound Lines, Inc. Stockton, CA 1,294 183 2/09 17,000
8/22/94 Circuit City Stores, Inc. Lynchburg, VA 751 86 11/06 9,300
11/27/95 Wal-Mart Stores, Inc. Sumter, SC 3,850 328 1/08 103,377
12/28/95 Wal-Mart Stores, Inc. Gainesville, GA 2,960 218 1/09 89,199
5/30/97 Wal-Mart Stores, Inc. Brownsville, TX 3,569 321 1/08 85,334
9/27/99 Cymer, Inc. San Diego, CA 8,802 778 12/09 65,755
9/29/99 Bull HN Information
Systems, Inc. Phoenix, AZ 11,625 972 10/05 137,058
------- ------ -------
$38,711 $3,641 543,579
======= ====== =======
</TABLE>
On June 30, 1999, the Partnership sold sixteen properties to Autozone,
Inc., for net proceeds of approximately $8.6 million. The Autozone Properties,
aggregating 104,600 square feet, consisted of retail stores located in Alabama
(2), Florida (2), Georgia (1), New Mexico (5) and Texas (6). The Partnership
realized a gain from the sale of approximately $2.67 million.
On December 21, 1999, the Partnership sold a property located in San
Bernardino, California, the Greyhound Property, to an unrelated party for net
proceeds of approximately $881,000, which resulted in a gain of approximately
$351,000.
On December 23, 1999, the Partnership sold a property located in San Luis
Obispo, California, the Greyhound Property, to an unrelated party for net
proceeds of approximately $817,000, which resulted in a gain of approximately
$350,000.
The following unaudited pro forma operating information for the years ended
December 31, 1999 and 1998, were prepared as if all acquisitions and
dispositions were consummated as of January 1, 1998. The information provided do
not purport to be indicative of what the operating results of the Partnership
would have been had the acquisitions and dispositions been consummated on the
date assumed. The pro forma amounts (dollars in thousand, except per Unit
amounts) follow:
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998
---------------- ---------------
<S> <C> <C>
Revenues................................... $4,415 $4,313
Net Income................................. $1,727 $1,563
Income per Unit of limited partnership
interest................................. $52.40 to $56.57 $47.26 to 51.29
================ ===============
</TABLE>
17
<PAGE> 20
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG TERM DEBT
Following is a detailed schedule of the Partnership's long term debt as of
December 31, 1999 and 1998 ($000's):
<TABLE>
<CAPTION>
LONG TERM DEBT
AS OF DECEMBER 31, SCHEDULED
LOAN OR ------------------- INTEREST BALLOON DEBT SERVICE
PROPERTY LOCATION 1999 1998 RATE MATURITY PAYMENT IN 2000
- ----------------- -------- ------- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loan:
Sumter, SC...................... $ 1,670 $1,795 10.38% 1/08 $ -- $ 306
Gainesville, GA (first)......... 688 809 13.00% 1/04 -- 218
Gainesville, GA (second)........ 669 621 7.50% 1/09 -- --
Brownsville, TX................. 1,949 2,119 7.35% 1/08 -- 321
San Diego, CA................... 4,569 -- 7.50% 1/11 3,420 411
Phoenix, AZ..................... 5,527 -- 8.12% 10/05 4,268 621
Unsecured loan due from
affiliate..................... 1,200 -- 8.00% 9/05 1,936 --
------- ------ ------ ------
$16,272 $5,344 $9,624 $1,877
======= ====== ====== ======
</TABLE>
The San Diego Property and the Phoenix Property were purchased from, and
the $1.2 million unsecured note was issued to, Lexington Corporate Properties
Trust, whose chairman is an officer and a shareholder of the General Partner.
Required principal payments of the long term debt for each of the
succeeding five years are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------ ------
<S> <C>
2000...................................................... $709
2001...................................................... 778
2002...................................................... 853
2003...................................................... 936
2004...................................................... 959
</TABLE>
The estimated fair value of the long term debt at December 31, 1999 and
1998 are $16.53 million and $5.671 million, respectively, and are based on a
valuation of these debts using market rates of interest (approximately 7.5%) as
of December 31, 1999 and 1998.
18
<PAGE> 21
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LEASES
Minimum future rental payments receivable under noncancelable operating
leases for the properties as of December 31, 1999 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNTS
- ------------ -------
<S> <C>
2000..................................................... $ 3,657
2001..................................................... 3,722
2002..................................................... 3,779
2003..................................................... 3,862
2004..................................................... 3,959
Thereafter............................................... 12,362
-------
$31,341
=======
</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.
Each of the following properties accounted for 10% or more of rental
revenues shown for the years ended December 31:
<TABLE>
<CAPTION>
PROPERTY 1999 1998 1997
- -------- ---- ---- ----
<S> <C> <C> <C>
Phoenix, AZ................................................. 22% 24% 25%
Sumter, SC.................................................. 16% 16% 17%
Brownsville, TX............................................. 12% 12% --
Autozone(*)................................................. 12% 24% 26%
California(**).............................................. 11% 11% 12%
Gainesville, GA............................................. 10% 10% 11%
</TABLE>
- ---------------
(*) These properties consist of 16 retail stores located as follows: two in
Alabama, two in Florida, one in Georgia, five in New Mexico, and six in
Texas, and were sold on June 30, 1999.
(**) These properties consist of three bus terminals located in California, two
of which were sold in December of 1999.
19
<PAGE> 22
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED PARTIES
The General Partner has granted Lexington Corporate Properties Trust
("Lexington"), whose chairman and Co-Chief Executive Officer is an officer and a
shareholder of the General Partner, an option exercisable at any time, to
acquire the general partnership interest. Under the terms of the option,
Lexington, subject to review of any such transaction by the independent members
of its Board of Trustees, may acquire the general partnership interest at its
fair market value based upon a formula relating to partnership cash flows, with
Lexington retaining the option of paying such fair market value in securities of
Lexington, limited partnership Units in controlled subsidiaries, cash or a
combination thereof.
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 years ended December 31, 1999, 1998 and 1997, management
fees which are included in general and administrative expenses totaled $33,000,
$32,000 and $29,000, respectively.
Affiliates of the General Partner received acquisition fees totaling
$87,500 and $35,000 for the years ended December 31, 1999 and 1997,
respectively.
Lexington is reimbursed by the Partnership for various administrative
services performed. For the years ended December 31, 1999, 1998 and 1997, such
reimbursements totaled $198,000, $153,000 and $109,000, respectively.
20
<PAGE> 23
SCHEDULE III
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999, 1998 AND 1997
INITIAL COST TO PARTNERSHIP AND GROSS AMOUNT AT WHICH CARRIED AT END OF
PERIOD(A)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED DATE OF
DESCRIPTION ENCUMBRANCES(B) LAND BUILDINGS TOTAL(C) DEPRECIATION(D) ACQUIRED CONSTRUCTION
- ----------- --------------- ------ --------- -------- --------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Health and tennis
club facility,
Phoenix, AZ........ $ -- $1,117 $ 4,743 $ 5,860 $1,359 July 18, 1988 1988
Bus terminal,
Stockton,
California......... -- 540 754 1,294 214 February 28, 1989 1967
Retail, Lynchburg,
Virginia........... -- 300 451 751 61 August 22, 1994 1986
Retail, Sumter, South
Carolina........... 1,670 850 3,000 3,850 309 November 27, 1995 1983
Retail, Gainesville,
Georgia............ 1,357 802 2,158 2,960 218 December 28, 1995 1984
Retail, Brownsville,
Texas.............. 1,949 380 3,189 3,569 209 May 30, 1997 1985
Office, San Diego,
California......... 4,569 905 7,897 8,802 51 September 27, 1999 1986
Office, Phoenix,
Arizona............ 5,527 1,865 9,760 11,625 62 September 29, 1999 1982
------- ------ ------- ------- ------
$15,072 $6,759 $31,952 $38,711 $2,483
======= ====== ======= ======= ======
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN LATEST
INCOME STATEMENTS
DESCRIPTION IS COMPUTED
- ----------- ----------------------
<S> <C>
Health and tennis
club facility,
Phoenix, AZ........ 40 years
Bus terminal,
Stockton,
California......... 40 years
Retail, Lynchburg,
Virginia........... 40 years
Retail, Sumter, South
Carolina........... 40 years
Retail, Gainesville,
Georgia............ 40 years
Retail, Brownsville,
Texas.............. 40 years
Office, San Diego,
California......... 40 years
Office, Phoenix,
Arizona............ 40 years
</TABLE>
- ---------------
(A) The initial cost includes the purchase price paid by the Partnership and
acquisition fees and expenses. The total cost basis of the Partnership's
properties at December 31, 1999 for Federal income tax purposes was
approximately $27.28 million.
(B) See note 5 of Notes to Consolidated Financial Statements -- Long Term Debt.
(C) Reconciliation of real estate owned:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year.................. $26,440 $26,440 $22,871
Additions during the year..................... 20,427 -- 3,569
Sale of properties............................ (8,156) -- --
------- ------- -------
Balance at end of year........................ $38,711 $26,440 $26,440
======= ======= =======
</TABLE>
(D) Reconciliation of accumulated depreciation:
<TABLE>
<S> <C> <C> <C>
Balance at beginning of year.................. $ 3,211 $ 2,735 2,296
Sale of properties............................ (1,238) -- --
Depreciation expense.......................... 510 476 439
------- ------- -------
Balance at end of year........................ $ 2,483 3,211 2,735
======= ======= =======
</TABLE>
21
<PAGE> 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
22
<PAGE> 25
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership and has no directors or officers.
The General Partner of the Partnership is Lepercq Net 1 L.P., a Delaware
limited partnership. Lepercq Net 1 Inc., a Delaware corporation, is the general
partner of the General Partner. The directors and executive officers of Lepercq
Net 1 Inc. are discussed below. The directors and executive officers of Lepercq
Net 1 Inc. are responsible for the management of the Partnership's business
including, but not limited to, the acquisition of, sale of, financing or
refinancing of, making certain major capital improvements to, or leasing of,
Partnership properties.
The General Partner has granted Lexington Corporate Properties Trust
("Lexington"), whose chairman and Co-Chief Executive Officer is an officer and a
shareholder of the General Partner, an option exercisable at any time, to
acquire the general partnership interest. Under the terms of the option,
Lexington subject to review of any such transaction by the independent members
of its Board of Trustees, may acquire the general partnership interest at its
fair market value based upon a formula relating to partnership cash flows, with
Lexington retaining the option of paying such fair market value in securities of
Lexington, limited partnership Units in controlled subsidiaries, cash or a
combination thereof. Lexington provides the Partnership with various
administrative services.
The directors and executive officers of Lepercq Net 1 Inc. are as follows:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
E. Robert Roskind.................... President and Secretary
Robert Albert........................ Vice President and Treasurer
Denise E. DeBaun..................... Vice President
Dianne R. Smith...................... Vice President and Assistant
Secretary
</TABLE>
Certain biographical information relating to the directors and executive
officers of Lepercq Net 1 Inc. is set forth below:
E. Robert Roskind, age 55, has been associated with LCP since 1973 and has
been Chairman of The LCP Group ("LCP") since September 1976. He also serves as
Chairman of the Board and Co-Chief Executive Officer of Lexington Corporate
Properties Trust, a real estate investment trust traded on the New York Stock
Exchange. Mr. Roskind is a graduate of the University of Pennsylvania and
Columbia Law School, and has been a member of the New York Bar since 1970. Mr.
Roskind is a director of Berkshire Realty Company, Inc., Krupp Government Income
Trust I and Krupp Government Income Trust II.
Robert N. Albert, age 49, has been employed by LCP since 1997. He owned a
retail furniture and antiques business for twenty-five years, prior to joining
the LCP Group. He is a graduate of the University of Louisville, where he
received his bachelor's degree in Business Management.
Denise E. DeBaun, age 49, was associated with LCP from 1981 to 1997. She
was a member of the marketing department from 1986 to 1990. Since 1997, she has
served as an Executive Assistant of Lexington Corporate Properties Trust, a real
estate investment trust traded on the New York Stock Exchange. Ms. DeBaun is a
graduate of Hunter College of the City of New York.
Dianne R. Smith, age 53, has been associated with LCP since 1988 as its
paralegal. Ms. Smith also serves as the Paralegal to Lexington Corporate
Properties Trust, a real estate investment trust traded on the New York Stock
Exchange. Ms. Smith is a graduate of New York University where she received her
Paralegal degree.
23
<PAGE> 26
ITEM 11. EXECUTIVE COMPENSATION
The General Partner is entitled to receive a share of cash distributions
when and as cash distributions are made to the Limited Partners, and a share of
taxable income or loss. Cash distributions of $31,425 were made to the General
Partner in 1999.
The directors and executive officers of Lepercq Net 1 Inc. received no
remuneration from the Partnership.
As described in Item 13 below, the General Partner and its affiliates were
paid certain fees and commissions and reimbursed for certain expenses.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of
more than 5% of the Units.
(b) Directors and executive officers of Lepercq Net 1 Inc. and affiliated
entities own 99 Units as of December 31, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership reimburses the General Partner or its affiliates for
expenses incurred and may pay interest on loans made in connection with
acquisitions.
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 years ended December 31, 1999, 1998, and 1997,
management fees which are included in general and administrative expenses
totaled $33,000, $32,000 and $29,000 in 1999, 1998, and 1997, respectively.
Affiliates of the General Partner received acquisition fees totaling
$87,500 and $35,000 for the years ended December 31, 1999 and 1997,
respectively.
Lexington is reimbursed by the Partnership for various administrative
services performed. For the years ended December 31, 1999, 1998 and 1997, such
reimbursements totaled $198,000, $153,000 and $109,000, respectively.
Additional information with respect to the directors and officers and
compensation of the General Partner and affiliates is contained in Items 8, 10
and 11 above.
24
<PAGE> 27
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see index to Financial Statements filed as
part of Item 8 of this Annual Report).
2. Financial Statement Schedule (see Index to Financial Statements
filed as part of Item 8 of this Annual Report).
3. Exhibits.
(3) Amended and Restated Agreement of Limited Partnership dated as
of November 20, 1987 set forth as Exhibit A to the Prospectus included
in Registration Statement Number 33-16973 is incorporated herein by
reference.
Second Amended and Restated Agreement of Limited Partnership dated
as of September 30, 1994 is incorporated herein by reference.
(21) Subsidiaries of the registrant.
Net 1 Gainesville L.P., a Delaware limited partnership, qualified
to do business in Georgia.
Net 1 Sumter L.P., a Delaware limited partnership, qualified to do
business in South Carolina.
(b) Reports on Form 8-K filed during the fourth quarter of 1999.
None.
(c) Exhibits. See (a)3 above.
Exhibit No. 27 Financial Data Schedule
(d) Financial Statement schedules excluded from the Annual Report to Unit
holders.
None.
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this annual 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
<TABLE>
<S> <C>
By: /s/ E. ROBERT ROSKIND By: /s/ BRENDA LUBRIN
-----------------------------------------------------
- ----------------------------------------------------- Assistant Accounting Officer
President
</TABLE>
Pursuant to the requirements of the Securities Act of 1934, this annual
report has been signed below by the following persons on behalf of the
Partnership and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ E. ROBERT ROSKIND President and Secretary
- -------------------------------------------------
E. Robert Roskind
/s/ ROBERT N. ALBERT Vice President and Treasurer
- -------------------------------------------------
Robert N. Albert
/s/ DENISE E. DEBAUN Vice President
- -------------------------------------------------
Denise E. DeBaun
/s/ DIANNE R. SMITH Vice President and Assistant Secretary
- -------------------------------------------------
Dianne R. Smith
Date: March 30, 2000
</TABLE>
26
<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 year ended December 31, 1999 as contained in the partnership's Form 10-K for
such year and is qualified in its entirety by reference to such Form 10-K.
Dollars are in thousands, except units and per unit amounts.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,661
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
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0
0
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</TABLE>
