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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) January 7, 1999
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NET 2 L. P.
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(Exact name of registrant as specified in its charter)
Delaware 33-25984 13-3497738
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(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
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(Address of principal Executive offices) (zip code)
Registrant's telephone number, including area code (212) 692-7200
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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 January 7, 1999, NET 2 L. P. (the "Partnership") acquired a property in
Ocala, Florida (the "Ocala Property"), for approximately $19.5 million. The
purchase price was satisfied by the proceeds of a first mortgage note of
approximately $14.625 million and $4.875 million additional line of credit. The
note bears interest at a rate of 7.25% per annum and requires monthly payments
of principal and interest of $110,988 beginning March 1, 1999. The note matures
on February 1, 2021. The additional line of credit bears interest at 315 points
over the London Interbank Offered Rate, in effect on the first business day of
each month and is due on May 1, 2000. The rate on the line of credit is
currently at 8.77%.
The Ocala Property consists of approximately 696,597 square foot warehouse and
distribution building net leased to Associated Grocers of Florida, Inc. through
December 31, 2018. The fixed annual net rent payable for the base term is
approximately $1.9 million through 2003, $2.1 million from 2004 through 2008,
$2.3 million from 2009 through 2013 and $2.5 million from 2014 through 2018. The
lease provides for fixed rent during the four renewal options of four years
each.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements
No historical financial statements are presented herein since the
Ocala Property was previously owned and occupied by Associated Grocers
of Florida, Inc.
(b) Pro Forma Financial Information
Estimated Taxable Operating Results and Cash Available from Operations
of the Ocala Property
Notes to Estimated Taxable Operating Results and Cash Available from
Operations of the Ocala Property
Pro Forma Balance Sheet as of September 30, 1998
Pro Forma Statements of Income for the Year Ended December 31, 1997
and the Nine Months Ended September 30, 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 Ocala Property
(Unaudited and in thousands)
The following statement represents estimates of taxable operating results and
cash available from operations of the Ocala 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 Ocala 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 $1,872
Less:
Interest expense 1,060
Depreciation 429
------
Estimated taxable operating results $ 383
======
Estimated Cash Available from Operations:
Estimated taxable operating results $ 383
Add:
Depreciation 429
------
Estimated cash available from operations $ 812
======
</TABLE>
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NET 2 L.P.
NOTES TO ESTIMATED OPERATING RESULTS AND
CASH AVAILABLE FROM OPERATIONS
OF THE OCALA 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 STATEMENTS OF INCOME
The accompanying Pro Forma Balance Sheet of NET 2 L. P. as of September 30,
1998, gives effect to the purchase of the Ocala Property, as if such occurred on
September 30, 1998.
The accompanying Pro Forma Statements of Income for the year ended December 31,
1997 and nine months ended September 30, 1998, give effect to all 1998 and 1997
sale and acquisitions, as if such occurred as of January 1, 1997.
The Pro Forma Balance Sheet and Statements 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 Statements of Income
should be read in conjunction with the Partnership's audited financial
statements as of December 31, 1997 and for the year then ended (which are
contained in the Partnership's Form 10-K for the year ended December 31, 1997),
and the unaudited financial statements as of September 30, 1998, and for the
nine months then ended (which are contained in the Partnership's Form 10-Q for
the period ended September 30, 1998) and the accompanying notes thereto.
<PAGE> 6
NET 2 L.P.
PRO FORMA BALANCE SHEET
September 30, 1998
(Unaudited and in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Real estate, net $ 65,993 $ 19,500 $ 85,493
Cash and cash equivalents 312 (159) 153
Deferred expenses (net of accumulated amortization
of $582 and $480 in 1998 and 1997, respectively) 275 159 434
Rent receivable 2,114 -- 2,114
Other assets 241 -- 241
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Total assets $ 68,935 $ 19,500 $ 88,435
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage and notes payable $ 30,822 $ 19,500 $ 50,322
Accrued interest payable 128 -- 128
Accounts payable and other liabilities 723 -- 723
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31,673 19,500 51,173
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Partners' capital (deficit):
General Partner (268) -- (268)
Limited Partners ($100 per Unit, 500,000 Units
authorized, 477,167 Units issued
and outstanding) 37,530 -- 37,530
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37,262 -- 37,262
-------- -------- --------
Total liabilities and partners' capital $ 68,935 $ 19,500 $ 88,435
======== ======== ========
</TABLE>
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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 Ocala
Property.
The adjustment to mortgage and notes payable reflects the financing of the
acquisition.
The adjustment to deferred expenses reflects costs incurred in obtaining
financing of the acquisition.
<PAGE> 8
NET 2 L. P.
PRO FORMA STATEMENT OF INCOME
Nine months ended September 30, 1998
(Unaudited and in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
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<S> <C> <C> <C>
Revenue:
Rental $ 4,989 $ 2,314 $ 7,303
Interest and other 75 - 75
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5,064 2,314 7,378
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Expenses:
Interest expense 1,520 1,554 3,074
Depreciation 881 500 1,381
Amortization of deferred expenses 102 12 114
General and administrative 436 - 436
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2,939 2,066 5,005
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Net Income $ 2,125 $ 248 $ 2,373
============ =========== ============
Net income per Unit
of limited partnership interest (*) $3.82 to $4.74 $4.27 to $5.29
============== ==============
</TABLE>
(*) Amounts allocated to unit holders vary depending on the dates they became
unit holders.
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NET 2 L. P.
PRO FORMA STATEMENT OF INCOME
Year ended December 31, 1997
(Unaudited and in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue:
Rental $ 5,934 $ 3,677 $ 9,611
Interest and other 149 - 149
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6,083 3,677 9,760
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Expenses:
Interest expense 1,875 2,417 4,292
Depreciation 1,074 782 1,856
Amortization of deferred expenses 136 16 152
General and administrative 634 - 634
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3,719 3,215 6,934
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Net Income $ 2,364 $ 462 $ 2,826
========== ============= ============
Net income per Unit of
limited partnership interest (*) $4.20 to $5.30 $5.02 to $6.34
============== ==============
</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 STATEMENTS 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: 1/22/99 By: E. Robert Roskind
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E. Robert Roskind
President
