<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 31, 2000
Net 1 L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 33-16973 13-3421566
(State or other jurisdiction of) (Commission File Number) (IRS Employer Identification No.)
c/o Lexington Corporate Properties Trust
355 Lexington Avenue
New York, New York 10017
(Address of principal Executive offices) (Zip code)
Registrant's telephone number, including area code (212) 672-7200
</TABLE>
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 31, 2000, a wholly owned subsidiary of Net 1 L.P. (the "Partnership")
acquired a property located in Henderson, North Carolina (the "Henderson
Property") for approximately $7.8 million. The Henderson Property is leased to
Corporate Express Office Products, Inc. (the "Tenant"), under the terms of a net
lease. The lease is guaranteed by the Tenant's parent company, Corporate
Express, Inc. The Henderson Property was constructed and completed in December
1998 and was occupied by the Tenant in January 1999. The Henderson Property
consists of an office-warehouse facility situated on 19.09 acres of land.
The current annual rent payable is $712,000 and the average annual rent is
$799,000. The lease expires on January 31, 2014. The lease provides for three
renewal options of five years each at the then fair market values.
The purchase price was satisfied by an assumption of a $4.7 million mortgage
note and an issuance of a $3.1 million demand note. The mortgage note, which
matures May 1, 2009, bears interest at a rate of 7.39% per annum, requires
annual debt service payments of $417,000 and a balloon payment of $3.85 million.
The demand note bears interest at 10% per annum, with interest only payments.
The demand note was fully paid in July 2000.
The Henderson Property was purchased from Lexington Corporate Properties Trust,
whose chairman and Co-Chief Executive Officer is an officer and a shareholder of
the general partner of the Partnership.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Corporate Express Office Products, Inc. is a subsidiary of Corporate
Express, Inc. ("Corporate Express"). Corporate Express is a wholly
owned subsidiary of Buhrmann N.V., a publicly held company listed on
the Amsterdam and Frankfurt Exchanges. The stock is being traded in
London (SEAQ International) and in the United States in the form of
American Depository Receipts (ADR's). Individual financial statements
for the Tenant are not available. As of December 31, 1999, Buhrmann
reported total consolidated assets, liabilities and stockholders'
equity of (in Euro) 5,508 million, 4,022 million and 1,486 million,
respectively. For the year ended December 31, 1999, Buhrmann reported
total consolidated revenues and net income of (in Euro) 5,834 million
and 83 million, respectively.
Independent Auditors' Report.
Historical Summary of Revenue and Certain Operating Expenses for the
Three Months Ended March 31, 2000 (unaudited) and the Year Ended
December 31, 1999 of the Henderson Property.
Notes to Historical Summary of Revenue and Certain Operating Expense.
<PAGE> 3
(b) Pro Forma Financial Information
Estimated Taxable Operating Results and Cash Available from Operations.
Notes to Estimated Taxable Operating Results and Cash Available from
Operations.
Pro Forma Balance Sheet at March 31, 2000.
Pro Forma Statements of Income for the year ended December 31, 1999 and
for the three months ended March 31, 2000.
Notes to Pro Forma Financial Statements.
(c) Exhibits:
None.
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Partners
Net 1 L.P.:
We have audited the accompanying Historical Summary of Revenue and Certain
Operating Expenses of the Henderson Property, as defined in the accompanying
Note 1, for the year ended December 31, 1999. This historical summary is the
responsibility of the management of Net 1 L.P. Our responsibility is to express
an opinion on the historical summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the historical summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the historical summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the historical summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary of Revenue and Certain Operating Expenses of
the Henderson Property has been prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission as described in
Note 2, and is not intended to be a complete presentation of the revenue and
expenses of the Henderson Property.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the revenue and certain operating expenses, as described in
Note 2, of the Henderson Property for the year ended December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
August 15, 2000
<PAGE> 5
NET 1 L.P. AND CONSOLIDATED PARTNERSHIP
Historical Summary of Revenue and Certain Operating Expenses
of the Henderson Property
For the Three Months Ended March 31, 2000 (unaudited) and
For the Year Ended December 31, 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31,
(unaudited) 1999
----------- ----
<S> <C> <C>
Rental revenue $ 178 $ 652
Certain operating expenses:
Interest expense 88 208
--------- ------
Excess of revenue over certain
operating expenses $ 90 $ 444
========= ======
</TABLE>
The accompanying notes are an integral part of this historical summary.
<PAGE> 6
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Notes to Historical Summary of Revenue and Certain Operating Expenses
of the Henderson Property
1. Property
On May 31, 2000, a wholly owned subsidiary of Net 1 L.P. (the
"Partnership") acquired a property located in Henderson, North Carolina
(the "Henderson Property") for approximately $7.8 million. The
Henderson Property is leased to Corporate Express Office Products, Inc.
(the "Tenant"), under the terms of a net lease. The lease is guaranteed
by the Tenant's parent company, Corporate Express, Inc. The Henderson
Property was constructed and completed in December 1998 and was
occupied by the Tenant in January 1999. The Henderson Property consists
of an office-warehouse facility situated on 19.09 acres of land.
The current annual rent payable is $712,000 and the average annual rent
is $799,000. The lease expires on January 31, 2014. The lease provides
for three renewal options of five years each at the then fair market
values.
The purchase price was satisfied by an assumption of a $4.7 million
mortgage note and an issuance of a $3.1 million demand note. The
mortgage note, which matures May 1, 2009, bears interest at a rate of
7.39% per annum, requires annual debt service payments of $417,000 and
a balloon payment of $3.85 million. The demand note bears interest at
10% per annum, with interest only payments. The demand note was fully
paid in July 2000.
2. Basis of Presentation
The Historical Summary has been prepared on the accrual method of
accounting. In accordance with the regulations of the Securities and
Exchange Commission, depreciation and general and administrative
expenses have been excluded from certain operating expenses, as such
costs are dependent upon a particular owner, purchase price or other
financial agreement.
3. Revenue Recognition
Minimum revenues from rental property are recognized on a straight-line
basis over the term of the related lease.
The minimum future rental payments receivable under the terms of the
non-cancelable operating lease are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ------
<S> <C>
2000 $ 712
2001 712
2002 751
2003 754
2004 754
Thereafter 7,536
-------
$11,219
=======
</TABLE>
<PAGE> 7
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Notes to Historical Summary of Revenue and Certain Operating Expenses
of the Henderson Property
4. Mortgage and Note Payable
The principal payments for the next five years ending December 31, are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ------
<S> <C>
2000 $65
2001 71
2002 77
2003 83
2004 88
</TABLE>
5. Related Party Transaction
The Henderson Property was purchased from Lexington Corporate
Properties Trust, whose chairman and Co-Chief Executive Officer is an
officer and a shareholder of the general partner of the Partnership.
<PAGE> 8
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Estimated Taxable Operating Results and Cash Available from Operations
(Unaudited and in thousands)
The following statement represents estimates of taxable operating results and
cash available from operations of the Henderson Property, based upon rents to be
received in the first year of the lease. These estimated results do not purport
to represent results of operations of the Henderson Property in the future and
were prepared on the basis described in the accompanying notes which should be
read in conjunction herewith. The General Partner is not aware of any material
supportable facts that would cause these estimates to be misleading.
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Estimated Taxable Operating Results:
Cash rent under net lease $ 712
Less:
Interest expense 346
Depreciation 190
-----
Estimated taxable operating loss $ 176
=====
Estimated Cash Available from Operations:
Estimated taxable operating loss $ 176
Add:
Depreciation 190
-----
Estimated cash available from operations $ 366
=====
</TABLE>
<PAGE> 9
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Notes to Estimated Operating Results and Cash Available from Operations
Basis of Presentation
Cash rent under the net lease represents the rental payments expected to be
received during the first year of the lease.
Interest expense represents tax deductible interest that is expected to be
incurred on the related assumed mortgage debt. No interest is included
related to the demand note as it was repaid in July 2000.
The acquisition cost for the Henderson Property was allocated 4% to land
and 96% to buildings based on appraisals. Depreciation is computed on a
straight-line basis over 40 years.
<PAGE> 10
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Pro Forma Consolidated Balance Sheet and Statements of Income
The accompanying Pro Forma Consolidated Balance Sheet of Net 1 L.P. as of March
31, 2000 gives effect to the purchase of the Henderson Property, as if such
occurred on March 31, 2000.
The accompanying Pro Forma Consolidated Statements of Income for the year ended
December 31, 1999 and the three months ended March 31, 2000, give effect to all
acquisitions and dispositions, as if such occurred as of January 1, 1999.
The management of the Partnership prepared the Pro Forma Consolidated Balance
Sheet and Statements of Income. These pro forma consolidated statements may not
be indicative of the results that would have actually occurred if such had been
in effect on the dates indicated. Also, they may not be indicative of the
results that may be achieved in the future. The Pro Forma Consolidated Balance
Sheet and Statements of Income should be read in conjunction with the
Partnership's audited financial statements as of December 31, 1999, and for the
year then ended (which are contained in the Partnership's Form 10-K for the year
ended December 31, 1999), and the unaudited financial statements as of March 31,
2000, and for the three months then ended (which are contained in the
Partnership's Form 10-Q for the period ended March 31, 2000), and the
accompanying notes thereto.
<PAGE> 11
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Pro Forma Consolidated Balance Sheet
(In thousands, except per Unit amounts)
March 31, 2000
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ---------- ----------- ---------
<S> <C> <C> <C>
Real estate, net $ 36,028 $ 7,750 $ 43,778
Cash and cash equivalent 1,839 -- 1,839
Restricted cash 1,723 -- 1,723
Rent receivable 1,032 -- 1,032
Other Assets 376 -- 376
-------- ------- --------
Total Assets $ 40,998 $ 7,750 $ 48,748
======== ======= ========
LIABILITIES AND PARTNERS' CAPITAL
Long-term debt $ 16,114 $ 4,683 $ 20,797
Note Payable -- 3,067 3,067
Accrued interest payable 111 -- 111
Accounts payable and other liabilities 674 -- 674
-------- ------- --------
16,899 7,750 24,649
-------- ------- --------
Partners' capital (deficit):
General Partner (88) -- (88)
Limited Partners ($1,000 per Unit, 50,000 Units
authorized, 30,772 Units issued) 24,187 -- 24,187
-------- ------- --------
24,099 -- 24,099
-------- ------- --------
Total liabilities and partners' capital $ 40,998 $ 7,750 $ 48,748
======== ======= ========
</TABLE>
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NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Notes to pro forma Consolidated Balance Sheet
1. Pro Forma Adjustments
The adjustment to real estate, net reflects the purchase price of the
Henderson Property.
The adjustment to long-term debt and note payable reflect the
financing of the acquisition.
<PAGE> 13
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Pro Forma Consolidated Statement of Income
(Dollars in thousands, except per Unit amounts)
Three Months Ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue:
Rental $1,440 $ 200 $1,640
Interest and other 41 -- 41
------ ------ ------
1,481 200 1,681
------ ------ ------
Expenses:
Interest expense 334 86 420
Depreciation and amortization 200 48 248
General and administrative 103 -- 103
------ ------ ------
637 134 771
------ ------ ------
Net Income $ 844 $ 66 $ 910
====== ====== ======
Net income per Unit
of limited partnership interest $26.88 $28.98
====== ======
</TABLE>
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NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Pro Forma Consolidated Statement of Income
(Dollars in thousands, except per Unit amounts)
Year ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue:
Rental $3,375 $ 1,670 $5,045
Interest and other 169 -- 169
------ ------- ------
3,544 1,670 5,214
------ ------- ------
Expenses:
Interest expense 764 1,015 1,779
Depreciation and amortization 510 484 994
General and administrative 455 -- 455
------ ------- ------
1,729 1,499 3,228
------ ------- ------
Income before gain on sale of
properties, net 1,815 171 1,986
Gain on sale of properties, net 3,371 (3,371) --
------ ------- ------
Net Income $5,186 $(3,200) $1,986
====== ======= ======
Net income per Unit of
limited partnership interest (*) $157.34 to $169.87 $60.25 to $65.05
================== ================
</TABLE>
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
<PAGE> 15
NET 1 L.P. AND CONSOLIDATED PARTNERSHIPS
Notes to Pro Forma Statements of Income
1. Pro Forma Adjustments
The adjustment to rental revenues relates to the net straight-lining of
rent under the remaining lease terms.
The adjustment to interest expense relates to the financing of the
acquisition. No interest is included related to the demand note on the
Henderson Property as it was repaid in July 2000.
The adjustment to depreciation was based on an estimated useful life of
40 years, using the straight-line method.
<PAGE> 16
SIGNATURE
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: August 28, 2000 By:
---------------- --------------------
E. Robert Roskind
President
