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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) June 6, 1997
Net 2 L.P.
(Exact name of registrant as specified in its charter)
Delaware 33-25984 13-3497738
(State or other jurisdiction of (Commission File Number) (IRS Employer
Identification No.)
c/o Lexington Corporate Properties, Inc.
355 Lexington Avenue
New York, New York 10017
(Address of principal Executive offices) (zip code)
Registrant's telephone number, including area code (212) 692-7200
--------------
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 6, 1997, Net 2 L.P. ( the "Partnership") a limited partnership formed
under the Uniform Limited Partnership Act of the State of Delaware acquired a
property located in the City of Westland, County of Wayne, Michigan (the
"Michigan Property") for $7,050,000 from Nankin Associates, which is unrelated
to the Partnership. The Michigan Property consists of a 102,826 square foot of
retail department store building leased to Wal-Mart Stores, Inc. pursuant to a
triple net lease.
The lease has a remaining term of 11 years and 8 months expiring on January 31,
2009. The lease provides for annual rental payments of $752,776 or $7.32 per
square feet. In addition to net rent, Wal-Mart is required to pay percentage
rent equal to 1% of gross sales in excess of $40,879,000 during the fiscal year
May 1 to April 30 payable on July 1. The lease does not provide for any renewal
options. Wal-Mart Stores, Inc. has the option to purchase the property on
January 31, 2007 at a price equal to the greater of $6,404,611 or the fair
market value.
The purchase price of $7,050,000 was satisfied by a cash payment and by an
assumption of an existing note with a principal balance of $4,712,263. The note
which is being held by Metropolitan Life Insurance Company bears interest at a
rate of 10.5% per annum, with a monthly debt service payment of principal and
interest in the amount of $56,908. The note matures on September 1, 2009.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of acquisition described in ITEM 2
Rule 3-14 Financial Statements
On June 6, 1997, the Partnership acquired the Property located in Westland City,
Wayne, Michigan which is subject to a net lease with Wal-Mart Stores, Inc. which
expires on January 31, 2009.
The following table sets forth selected historical operating data for the year
ended December 31, 1996. The selected operating data include the revenue for the
Property. Interest, depreciation and other costs are not reflected in the
operating data and therefore the operating data is not intended to represent the
complete financial position or results of operations of the Property.
<TABLE>
<CAPTION>
Michigan Property
Selected Operating Data
Year ended December 31, 1996
----------------------------
<S> <C>
Rental revenue from property $ 752,776
=======
</TABLE>
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(b) Pro Forma Financial Information
The following unaudited pro forma financial statements of Net 2 LP for the year
ended December 31, 1996 and, as of and for the three months ended March 31,
1997, have been prepared from the historical financial statements of the
Partnership for the year ended December 31, 1996 and, as of and for the three
months ended, as adjusted to give effect to pro forma adjustment for the
acquisition of the Michigan Property. The accompanying pro forma statements of
income for the year ended December 31, 1996 and the three months ended March 31,
1997 have been prepared as if these events had been consummated as of January 1,
1996 and January 1, 1997, respectively. The accompanying pro forma balance sheet
has been prepared as if the events had been consummated on March 31, 1997. The
unaudited pro forma financial statements do not purport to be indicative of what
the results of operations of the Partnership would have been, had the
transaction been completed on the date assumed, nor is such financial data
necessarily indicative of the results of operations of the Partnership that may
exist in the future. The unaudited pro forma financial statements must be read
in conjunction with the notes thereto and with the historical financial
statements of the Partnership.
UNAUDITED PRO FORMA STATEMENT OF INCOME
(FOR THE YEAR ENDED AND AS OF DECEMBER 31, 1996)
<TABLE>
<CAPTION>
Historical Total
(audited) Adjustments (1) Pro Forma
--------- --------------- ---------
<S> <C> <C> <C>
Revenue:
Rental (2) $5,442,166 $ 752,776 $6,194,942
Interest and other 471,041 -- 471,041
---------- ---------- ----------
Total Revenue 5,913,207 752,776 6,665,983
---------- ---------- ----------
Expenses:
Interest expense (3) 1,568,072 485,466 2,053,538
Depreciation (4) 993,808 128,191 1,121,999
Amortization of deferred expenses 143,258 -- 143,258
General and administrative 899,887 7,528 907,415
---------- ---------- ----------
Total expenses 3,605,025 621,185 4,226,210
---------- ---------- ----------
Net Income $2,308,182 $ 131,591 $2,439,773
========== ========== ==========
Net income per Unit of
limited partnership interest (*) $4.02 to $5.23 $0.23 to $0.30 $4.25 to $5.53
============== ============== ==============
</TABLE>
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(FOR THE YEAR ENDED AND AS OF DECEMBER 31, 1996)
1) These amounts reflect the pro forma results of operations for the newly
acquired Michigan Property.
2) Rental revenue in this pro forma statement of income (both historical and pro
forma) is generated from leases that are "net leases", under which the tenant is
responsible for substantially all costs or real estate taxes, insurance and
ordinary maintenance. Pro forma rental income represents straight-line rent as
provided by Generally Accepted Accounting Principles, calculated as the
difference between the cash rent paid under the lease and the average rent due
over the non-cancelable term of the lease.
3) Applicable pro forma interest expense is calculated based on the annual
interest rate of 10.5% on the existing mortgage note as if the acquisition
occurred on January 1, 1996.
4) Based on the purchase price of the property, including costs incurred on the
closing date, the depreciation expense in this pro forma income statement is
computed based on a 40 year, straight-line recovery period for building and
improvements.
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(FOR THE THREE MONTHS ENDED AND AS OF MARCH 31, 1997)
<TABLE>
<CAPTION>
Total
Historical Adjustments (1) Pro Forma
---------- --------------- ---------
INCOME STATEMENT:
Revenue:
<S> <C> <C> <C>
Rental (2) $ 1,361,562 $ 188,194 $ 1,549,756
Interest and other 49,273 -- 49,273
----------- ----------- -----------
Total Revenue 1,410,835 188,194 1,599,029
----------- ----------- -----------
Expenses:
Interest expense (3) 395,779 123,284 519,063
Depreciation (4) 248,452 32,048 280,500
Amortization of deferred expenses 34,003 -- 34,003
General and administrative 141,749 1,882 143,631
----------- ----------- -----------
Total expenses 819,983 157,214 977,197
----------- ----------- -----------
Net Income $ 590,852 $ 30,980 $ 621,832
=========== =========== ===========
Net income per Unit
of limited partnership interest $ 1.21 $ 0.06 $ 1.27
=========== =========== ===========
BALANCE SHEET (AT END OF PERIOD):
Real estate at cost $49,609,958 $ 7,127,650 $56,737,608
Less: accumulated depreciation 6,440,496 -- 6,440,496
----------- ----------- -----------
Real estate, net 43,169,462 7,127,650 50,297,112
Other assets 6,847,854 (2,415,387) 4,432,467
----------- ----------- -----------
Total assets $50,017,316 $ 4,712,263 $54,729,579
=========== =========== ===========
Mortgage notes payable including
accrued interest) $17,178,829 $ 4,712,263 $21,891,092
Other liabilities 338,535 -- 338,535
Partners' capital 32,499,952 -- 32,499,952
----------- ----------- -----------
Total liabilities and capital $50,017,316 $ 4,712,263 $54,729,579
=========== =========== ===========
</TABLE>
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NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(FOR THE THREE MONTHS ENDED AND AS OF MARCH 31, 1997)
1) The amounts in the pro forma financial statements reflect the pro forma
results of operation of the newly acquired Michigan Property.
2) Rental revenue in this pro forma statement of income (both historical and pro
forma) is generated from leases that are "net leases", under which the tenant is
responsible for substantially all costs or real estate taxes, insurance and
ordinary maintenance. Pro forma rental income represents straight-line rent as
provided by Generally Accepted Accounting Principles, calculated as the
difference between the cash rent paid under the lease and the average rent due
over the non-cancelable term of the lease.
3) Applicable pro forma interest expense is calculated based on the annual
interest rate of 10.5% on the existing mortgage note as if the acquisition
occurred on January 1, 1997.
4) Based on the purchase price of the property, including costs incurred on the
closing date, the depreciation expense in this pro forma income statement is
computed based on a 40 year, straight-line recovery period for building and
improvements.
(c) Exhibits:
To be filed.
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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 2 L.P.
By: Lepercq Net 2 L.P.
its general partner
By: Lepercq Net 2 Inc.
its general partner
Date: June 23, 1997 By: /s/E. Robert Roskind
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E. Robert Roskind
President
