<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) March 23, 1999
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NET 2 L. P.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 33-25984 13-3497738
- ------------------------------- ------------------------ ------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) 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) 692-7200
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</TABLE>
N/A
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 23, 1999, NET 2 L. P. (the "Partnership") acquired a property in
Bristol, Pennsylvania (the "Bristol Property"), for approximately $8.8 million.
The purchase price was satisfied by the proceeds of a first mortgage note of
approximately $6.6 million and approximately $2.2 million in cash. The note
bears interest at a rate of 7.25% per annum and requires monthly payments of
principal and interest of $47,575 based on a 25-year amortization schedule
beginning May 1, 1999. The note matures on April 30, 2009.
The Bristol Property consists of an approximately 96,000 square foot office
building net leased to Jones Apparel Group, Inc. (the "Tenant"), commenced on
August 1, 1998 through July 31, 2013. There are no renewal terms on the lease.
The annual fixed rents are payable as follows:
<TABLE>
<CAPTION>
Period of Monthly Total Annual
Lease Term Installment Fixed Rent
---------- ----------- ----------
<S> <C> <C>
Year 1 $ 64,000 $ 768,000
Year 2 $ 65,920 $ 791,040
Year 3 $ 67,920 $ 815,040
Year 4 $ 69,920 $ 839,040
Year 5 $ 72,000 $ 864,000
Year 6 $ 74,160 $ 889,920
Year 7 $ 76,400 $ 916,800
Year 8 $ 78,720 $ 944,640
Year 9 $ 81,120 $ 973,440
Year 10 $ 83,520 $ 1,002,240
Year 11 $ 86,000 $ 1,032,000
Year 12 $ 88,560 $ 1,062,720
Year 13 $ 91,200 $ 1,094,400
Year 14 $ 93,920 $ 1,127,040
Year 15 $ 96,720 $ 1,160,640
</TABLE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements
The Tenant of the Bristol Property is a publicly held company and is
listed on the New York Stock Exchange. As of December 31, 1998, the
Tenant reported total consolidated assets, liabilities and
stockholders' equity of approximately $1,189 million, $595 million and
$594 million, respectively. For the year ended December 31, 1998, the
Tenant reported total consolidated revenues and net income of
approximately $1,669 million and $155 million, respectively.
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(b) Pro Forma Financial Information
Estimated Taxable Operating Results and Cash Available from Operations
of the Bristol Property
Notes to Estimated Taxable Operating Results and Cash Available from
Operations of the Bristol Property
Pro Forma Balance Sheet at December 31, 1998
Pro Forma Statement of Income for the Year Ended December 31, 1998
Notes to Pro Forma Financial Statements
(c) Exhibits:
None.
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NET 2 L. P.
Estimated Taxable Operating Results and
Cash Available from Operations
of the Bristol Property
(Unaudited and in thousands)
The following statement represents estimates of taxable operating results and
cash available from operations of the Bristol 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 Bristol 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>
<S> <C>
Estimated Taxable Operating Results:
Cash rent under net lease $ 778
Less:
Interest expense 477
Depreciation 191
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Estimated taxable operating results $ 110
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Estimated Cash Available from Operations:
Estimated taxable operating results $ 110
Add:
Depreciation 191
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Estimated cash available from operations $ 301
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</TABLE>
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NET 2 L.P.
NOTES TO ESTIMATED OPERATING RESULTS AND
CASH AVAILABLE FROM OPERATIONS
OF THE BRISTOL PROPERTY
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 mortgage debt.
The purchase price was allocated to land (12%) and to buildings (88%),
based on an appraisal. Depreciation is computed on a straight-line basis
over 40 years.
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NET 2 L.P.
PRO FORMA BALANCE SHEET AND STATEMENT OF INCOME
The accompanying Pro Forma Balance Sheet of NET 2 L.P. as of December 31, 1998,
gives effect to all 1999 acquisitions and dispositions as if such occurred on
December 31, 1998.
The accompanying Pro Forma Statement of Income for the year ended December 31,
1998, give effect to all 1999 and 1998 sales and acquisitions, as if such
occurred as of January 1, 1998.
The Pro Forma Balance Sheet and Statement of Income were prepared by the
management of the Partnership. These pro forma 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 Balance Sheet and Statement of Income
should be read in conjunction with the Partnership's audited financial
statements as of December 31, 1998 (which are contained in the Partnership's
Form 10-K), and the accompanying notes thereto.
<PAGE> 7
NET 2 L.P.
PRO FORMA BALANCE SHEET
December 31, 1998
(Unaudited and in thousands, except units and per unit amounts)
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ---------- ----------- ---------
<S> <C> <C> <C>
Real estate, net $ 61,512 $ 28,275 $ 89,787
Properties held for sale 4,650 (4,650) -
Cash and cash equivalents 518 518
Restricted cash 9,861 (1,817) 8,044
Deferred expenses, net 429 174 603
Rent receivable 1,667 - 1,667
Other assets 281 - 281
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Total assets $ 78,918 $ 21,982 $ 100,900
========== ============ ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Mortgage notes payable $ 41,519 $ 21,207 $ 62,726
Accrued interest payable 216 - 216
Accounts payable and other liabilities 179 - 179
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41,914 21,207 63,121
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Partners' capital (deficit):
General Partner (274) 15 (259)
Limited Partners ($100 per Unit, 500,000 Units
authorized, 477,167 Units issued
and outstanding) 37,278 760 38,038
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37,004 775 37,779
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Total liabilities and partners' capital $ 78,918 $ 21,982 $ 100,900
========== ============ =========
</TABLE>
<PAGE> 8
NET 2 L. P.
NOTES TO PRO FORMA BALANCE SHEET
(Unaudited)
1. Pro Forma Adjustments
The adjustment to real estate, net reflects the purchase price of the
acquisitions.
The adjustment to restricted cash represents net change in restricted
cash resulting from the purchase and sale of the properties.
The adjustment to mortgage notes payable reflects the financing of the
acquisitions.
The adjustment to deferred expenses, net reflects costs incurred in
obtaining financing of the acquisitions.
The adjustment to partners' capital (deficit) and properties held for
sale reflect the sale of the properties and the corresponding gain.
<PAGE> 9
NET 2 L. P.
PRO FORMA STATEMENT OF INCOME
Year ended December 31, 1998
(Unaudited and in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Rental $ 6,871 $ 3,218 $ 10,089
Interest and other 92 -- 92
-------- -------- --------
6,963 3,218 10,181
-------- -------- --------
Expenses:
Interest expense 2,277 2,004 4,281
Depreciation 1,238 771 2,009
Amortization of deferred expenses 154 17 171
General and administrative 818 -- 818
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4,487 2,792 7,279
-------- -------- --------
Income before gain on
sale of properties, net 2,476 426 2,902
Gain on sale of properties, net 4,516 (4,516) --
-------- -------- --------
Net Income $ 6,992 $ (4,090) $ 2,902
======== ======== ========
Net income per Unit
of limited partnership interest (*) $12.62 to $15.55 $5.24 to $6.46
================ ==============
</TABLE>
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
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NET 2 L. P.
NOTES TO PRO FORMA STATEMENT OF INCOME
(Unaudited)
1. Pro Forma Adjustments
The adjustment to rental revenues relates to the establishment of a new
measurement date in the straight-lining of rents under the lease term
resulting from the acquisition of the properties.
The adjustment to interest expense relates to the additional debt
incurred in financing the acquisitions.
The adjustment to depreciation relates to an increase in building basis
which is depreciated over an estimated useful life of 40 years, using
the straight-line method.
The adjustment to amortization relates to an increase in deferred costs
which is amortized over the life of the loan of 10 years, using the
straight-line method.
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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 2 L.P.
By: Lepercq Net 2 L.P.
its general partner
By: Lepercq Net 2 Inc.
its general partner
Date: April 7, 1999 By: /s/ E. Robert Roskind
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E. Robert Roskind
President
