-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TAwxbcYCCKkIC4hTFvyuRQpWDfi1yvcc85EVFD7EFcfze+gfSOpMOnWa2dJadlNM 6NV1RPyQfXbiDkiaXqpiXA== 0000950123-98-005100.txt : 19980518 0000950123-98-005100.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950123-98-005100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCPI TRUST /DE/ CENTRAL INDEX KEY: 0000773652 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133280472 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08971 FILM NUMBER: 98622285 BUSINESS ADDRESS: STREET 1: C/O GOLDMAN SACHS & CO STREET 2: 85 BROAD STREET CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2129021085 MAIL ADDRESS: STREET 1: C/O GOLDMAN SACHS & CO STREET 2: 85 BROAD STREET CITY: NW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: ROCKEFELLER CENTER PROPERTIES INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 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 1-8971 RCPI Trust (Exact name of registrant as specified in its charter) Delaware 13-7087445 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) c/o Tishman Speyer Properties, L.P. 45 Rockefeller Plaza, New York, N.Y. 10011 (Address of principal executive offices) (Zip Code) (212) 332-6500 (Registrant's telephone number, including area code) ________________________________________________________________________________ (Former name, former address, and former fiscal year, if changed since last report) 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 _____ 2 RCPI TRUST INDEX PAGE PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The accompanying unaudited, interim financial statements have been prepared in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation have been included. RCPI Trust, Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 1 RCPI Trust, Statements of Operations for the quarters ended March 31, 1998 and 1997 (unaudited) 2 RCPI Trust, Statements of Cash Flows for the quarters ended March 31, 1998 and 1997 (unaudited) 3 Notes to Financial Statements (unaudited) 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9 3 PART I -- FINANCIAL INFORMATION ITEM 1. Financial Statements RCPI TRUST (A Delaware business trust) BALANCE SHEETS AS OF MARCH 31, 1998 AND DECEMBER 31, 1997 ($ in thousands)
March 31, 1998 (Unaudited) December 31, 1997 --------- --------- ASSETS: Real Estate: Land $ 158,149 $ 158,149 Buildings and improvements 615,604 611,711 Tenant improvements 40,187 36,170 Furniture, fixtures and equipment 4,355 4,192 --------- --------- 818,295 810,222 Less: Accumulated depreciation and amortization (29,118) (24,393) --------- --------- 789,177 785,829 Cash and cash equivalents 37,565 27,517 Restricted cash 14,000 9,369 Accounts receivable 5,254 11,946 Prepaid expenses 8,849 495 Deferred costs, net of accumulated amortization of $2,927 and $2,192, respectively 28,595 22,521 Accrued rent 39,393 29,969 --------- --------- Total Assets $ 922,833 $ 887,646 ========= ========= LIABILITIES AND OWNERS' EQUITY Liabilities: Zero coupon convertible debentures, net of unamortized discount of $165,214 and $177,696, respectively $ 420,971 $ 408,489 14% debentures (includes premium of $24,333 and $24,710, respectively) 99,333 99,710 NationsBank Loans 75,000 55,000 Accrued interest payable 2,720 7,152 Accounts payable and accrued expenses 19,684 21,227 Tenant security deposits payable 13,523 8,940 --------- --------- Total Liabilities 631,230 600,518 Commitments and Contingencies Owners' Equity 291,603 287,128 --------- --------- Total Liabilities and Owners' Equity $ 922,833 $ 887,646 ========= =========
SEE NOTES TO THE FINANCIAL STATEMENTS 1 4 RCPI TRUST (A Delaware business trust) STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997 ($ in thousands) (UNAUDITED)
March 31, 1998 March 31, 1997 ------- ------- Revenues: Base rental $47,461 $43,066 Operating escalations and percentage rents 1,915 2,774 Interest and other income 1,465 1,810 ------- ------- Total revenues 50,841 47,650 ------- ------- Expenses: Interest 15,423 13,606 Real estate taxes 8,415 8,234 Payroll and benefits 4,391 4,421 Repairs, maintenance and supplies 2,838 1,865 Utilities 3,872 4,453 Cleaning 3,375 3,640 Professional fees 545 2,725 Insurance 314 289 Management and accounting fees 902 854 General and administration 826 374 Depreciation and amortization 5,465 4,523 ------- ------- Total expenses 46,366 44,984 ------- ------- Net income $ 4,475 $ 2,666 ======= =======
SEE NOTES TO THE FINANCIAL STATEMENTS 2 5 RCPI TRUST (A Delaware business trust) STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997 ($ in thousands) (UNAUDITED)
March 31, 1998 March 31, 1997 -------- -------- Cash Flows from Operating Activities: Net income $ 4,475 $ 2,666 Adjustment to reconcile net income to net cash provided by operating activities Amortization of original issue discount and premium 12,105 10,722 Depreciation and amortization 5,465 4,523 (Increase) decrease in restricted cash (4,631) 2,354 Decrease in accounts receivable 6,692 6,900 Increase in prepaid expenses (8,354) (8,411) Increase in accrued rent (9,424) (4,451) Increase (decrease) in accounts payable and accrued expenses 1,824 (5,486) Decrease (increase) in accrued interest payable (4,432) 1,650 -------- -------- Net cash provided by operating activities 3,720 10,467 -------- -------- Cash Flows from Investing Activities: Additions to building and improvements (3,857) (1,780) Additions to tenant improvements (5,827) (2,882) Additions to furniture, fixtures and equipment (163) (28) Additions to deferred costs (3,825) (6,018) -------- -------- Net cash used in investing activities (13,672) (10,708) -------- -------- Cash Flows from Financing Activities: Additions to NationsBank loans 20,000 -- -------- -------- Net cash provided by financing activities 20,000 -- -------- -------- Increase (decrease) in cash and cash equivalents 10,048 (241) Cash and cash equivalents at beginning of period 27,517 28,765 -------- -------- Cash and cash equivalents at end of period $ 37,565 $ 28,524 ======== ========
SEE NOTES TO THE FINANCIAL STATEMENTS 3 6 RCPI TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. FINANCIAL STATEMENTS The balance sheet as of March 31, 1998 and the statements of operations and cash flows for the three months ended March 31, 1998 and 1997 are unaudited, but in the opinion of the Company's management reflect all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial condition and results of operations at those dates and for those periods. The results of operations for the interim periods are not necessarily indicative of results for a full year. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company's latest Form 10-K dated December 31, 1997. 2. DEBT NationsBank Credit Facility The Company entered into a Credit Agreement (the "NationsBank Credit Agreement") dated as of May 16, 1997, with NationsBank of Texas, N.A. ("NationsBank"), pursuant to which NationsBank agreed to make term loans (the "NationsBank Loans") to the Company in an aggregate principal amount of up to $100 million. As of December 31, 1997, the Company had a term loan outstanding in the principal amount of $55 million. On January 16, 1998, the Company entered into a second NationsBank loan in the principal amount of $20 million bringing the aggregate loans due to NationsBank to $75 million. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Prior Year Reclassifications Certain prior year balances have been reclassified to conform with the current year financial statement presentation. 4 7 RCPI TRUST ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES - RCPI TRUST Land and Building At March 31, 1998, the Property, exclusive of 1.5 million square feet owned directly by the National Broadcasting Company, Inc. and NBC Trust No. 1996A, was approximately 88.1% occupied. Occupancy rates for the Property at various dates are presented in the following table: December 31, 1997 86.7% March 31, 1997 83.3% September 30, 1997 86.3% December 31, 1996 83.6% June 30, 1997 86.4% September 30, 1996 82.8% The following table shows selected lease expirations and vacancy of the Property as of March 31, 1998. Area, as presented below and discussed above, is measured based on standards promulgated by the New York Real Estate Board in 1987. Lease turnover could offer an opportunity to increase the revenue of the Property or might have a negative impact on the Property's revenue. Actual renewal and rental income will be affected significantly by market conditions at the time and by the terms at which the Company can then lease space.
Square Feet Percent Year Expiring Expiring ---- -------- -------- Vacant 706,376 11.9% 1998 317,324 5.4% 1999 192,310 3.3% 2000 471,219 7.9% 2001 122,638 2.1% 2002 210,091 3.6% Thereafter 3,879,739 65.8% --------- ----- Total 5,899,697 100.0% ========= ======
Debt The Zero Coupons due December 31, 2000 accrete to a face value of approximately $586.2 million at an effective annual interest rate of 12.10%. At March 31, 1998 and December 31, 1997, the carrying value of the Debentures, net of unamortized discount, was approximately $420.9 million and $408.5 million, respectively. The Floating Rate Notes matured on May 31, 1997 and bore interest at the London Interbank Offered Rate ("LIBOR") plus 4%. Interest is paid quarterly on March 1, June 1, September 1, and December 1. At March 31, 1997 interest was accruing at 9.50%. On July 17, 1996, outstanding principal in the amount of $106.3 million plus accrued interest of $1.2 million was prepaid. On May 16, 1997 the remaining principal balance of $10 million was repaid. The 14% Debentures have a principal balance of $75 million and mature on December 31, 2007. At the time the Property was acquired by the Company, the carrying value of the 14% Debentures was adjusted to reflect their estimated fair value at that date, resulting in a premium. The effective interest rate, which is net of the 5 8 RCPI TRUST ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS amortization of this premium, is approximately 9.03%. Interest payments are made semi-annually on July 31 and January 31. As of March 31, 1998 and December 31, 1997, the carrying value of the 14% Debentures was approximately $99.3 million and $99.7 million, respectively. As of March 31, 1998, the NationsBank credit facility has an aggregate principal balance of $75 million and matures on May 16, 2000. The Company may elect interest periods based on one, two, three or six month LIBOR rates. Interest accrues at LIBOR plus 1.75% and is payable monthly in arrears. Cash Flow During the quarter ended March 31, 1998, the Company received cash flows of approximately $3.7 million from operations of the Property. The Company used this cash flow from operations to fund in part tenant improvements and other leasing costs. The remaining tenant improvement costs, which totaled $5.8 million, deferred costs, which totaled $3.8 million, and building and improvements of $3.9 million were funded through an additional draw on the NationsBank credit facility of $20 million. The Company believes that its current cash balance and future cash flows from operations, together with its expected borrowings in an amount currently believed not to exceed $100 million, will be sufficient to fund its requirements for the foreseeable future. Inflation Inflation and changing prices during the current period did not significantly affect the markets in which the Company conducts its business. In view of the moderate rate of inflation, its impact on the Company's business has not been significant. RESULTS OF OPERATIONS - RCPI TRUST Base rent for the quarter ended March 31, 1998 increased approximately $4.4 million from the quarter ended March 31, 1997 partially due to higher rental rates on new leases than existed in the prior year. Additionally, the occupancy level increased to 88.1% as of March 31, 1998 as compared to 83.3% as of March 31, 1997. Operating escalations have decreased due to a general reduction in overall operating expenses from 1996 to 1997. The effect of this reduction was not recognized until the second quarter of 1997. As such, operating escalations during the first quarter of 1997 are higher than the same period in 1998. Interest expense has increased by approximately $1.8 million for the quarter ended March 31, 1998 as compared to the quarter ended March 31, 1997 primarily due to the increase in the outstanding debt balance. Total outstanding debt as of March 31, 1997 was approximately $484 million as compared to $595 million as of March 31, 1998. The increase is due primarily to accretion of the Zero Coupon Debentures and the new 6 9 RCPI TRUST ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NationsBank credit facility which was not established until May 1997 and has increased to $75 million outstanding as of March 31, 1998. The increase in repairs and maintenance of approximately $1 million in the quarter ended March 31, 1998, as compared to the quarter ended March 31, 1997, is primarily due to the accelerated timing of certain repairs and maintenance projects in 1998. Utilities expense has decreased by approximately $582,000 in the first quarter of 1998, as compared to the first quarter of 1997, primarily due to the unseasonable warm weather in the New York area. The decrease in professional fees in 1998 is due primarily to legal and professional fees expended during the quarter ended March 31, 1997 in the amount of approximately $2 million related to the settlement of the Bear Stearns & Co., Inc. and Donaldson, Lufkin & Jenrette Securities Corporation lawsuit. General and administrative costs have increased in the first quarter of 1998, as compared to the first quarter of 1997, by approximately $454,000. The increase is primarily due to the write off of bad debts in 1998. Additionally, there was an increase in certain advertising costs in 1998 to promote leasing activity. The increase in depreciation and amortization expense of approximately $941,000 from the first quarter of 1997 to the first quarter of 1998 is primarily due to additional capital expenditures at the property between the first quarter of 1997 and the first quarter of 1998. Additionally, depreciation has increased due to additional tenant improvements expenditures caused by leasing activity. 7 10 RCPI TRUST PART II - OTHER INFORMATION Item 1. Legal Proceedings Except as disclosed below, there has been no material change to the status of existing litigation as reported in the Company's Form 10-K filed as of December 31, 1997. On January 21, 1997, an action entitled Flashman v. Goldman, Sachs & Co., 97 Civ. 0403 (MGC) (S.D.N.Y.), was filed in New York Federal court containing allegations substantially similar to those in the original complaint in In re RCPI. Subsequently, the plaintiff in Flashman joined as a plaintiff in the amended complaint filed in In re RCPI, and voluntarily dismissed the action in Federal Court in New York. On February 25, 1997, an action entitled Debora v. Rockefeller, et. al., 97 Civ. 01312 (LLS) ("Debora"), was filed in the United States District Court for the Southern District of New York. The complaint in Debora was substantially similar to the original complaint in In re RCPI. The defendants are the same in both actions. The Debora complaint alleged common law fraud and deceit in addition to the two federal securities law violations alleged in In re RCPI. Subsequently, the plaintiff in Debora joined as a plaintiff in In re RCPI and voluntarily dismissed the action in Federal Court in New York. 8 11 ITEM 6. (a) EXHIBITS (3.1) Certificate of Trust of RCPI Trust, dated March 22, 1996 is incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996. (4.1) Amended and Restated Debenture Purchase Agreement dated as of July 17, 1996 between the Company and WHRC Real Estate Limited Partnership is incorporated by reference to exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 10-K"). (4.2) Indenture dated as of September 15, 1985 between the Predecessor and Manufacturers Hanover Trust Company, as Trustee, including the forms of Current Coupon Convertible Debenture, Zero Coupon Convertible Debenture and Floating Rate Note, is incorporated by reference to Exhibit 4 to the Predecessor's Quarterly Report on Form 10-Q for the period ended September 30, 1985. (4.3) First Supplemental Indenture dated as of December 15, 1985 between the Predecessor and the Trustee, is incorporated by reference to the Predecessor's Annual Report on Form 10-K for the year ended December 31, 1985. (4.4) Second Supplemental Indenture dated as of July 10, 1996 between the Company and the United States Trust Company of New York, as Trustee is incorporated by reference to exhibit 4.4 to the 1996 10-K. (4.5) Instrument of Resignation, Appointment and Acceptance dated as of December 1, 1993 among the Predecessor, Chemical Bank, successor by merger to Manufacturers Hanover Trust Company, and United States Trust Company of New York is incorporated by reference to Exhibit 4.21 to the Predecessor's Annual Report on Form 10-K for the year ended December 31, 1993. (10.1) Amended and Restated Loan Agreement dated as of July 17, 1996 among the Company, the lenders parties thereto and GSMC, as agent, is incorporated by reference to Exhibit 10.1 to the 1996 10-K. (10.2) Guarantee dated July 17, 1996 by Whitehall Street Real Estate Limited Partnership V, Exor Group S.A., Tishman Speyer Crown Equities, David Rockefeller, Troutlet Investments Corporation, Gribble Investments (Tortola) BVI, Inc. and Weevil Investments (Tortola) BVI, Inc., as guarantors in favor of GSMC, as agent and lender, is incorporated by reference to Exhibit 10.2 to the 1996 10-K. (10.3) Agreement and Plan of Merger dated as of November 7, 1995 among the Predecessor, RCPI Holdings Inc., RCPI Merger Inc., Whitehall Street Real Estate Limited Partnership V, Rockprop, L.L.C., David Rockefeller, Exor Group S.A. and Troutlet Investments Corporation is incorporated by reference to Exhibit 10.28 to the Predecessor's Current Report on Form 8-K dated November 13, 1995. (10.4) Amendment No. 1 dated as of February 12, 1996 to the Agreement and Plan of Merger dated as of November 7, 1995 among the Predecessor, RCPI Holdings Inc., RCPI Merger Inc., 9 12 ITEM 6. (a) EXHIBITS (Cont'd) Whitehall Street Real Estate Limited Partnership V, Rockprop, L.L.C., David Rockefeller, Exor Group S.A. and Troutlet Investments Corporation is incorporated by reference to Exhibit 10.31 to the Predecessor's Current Report on Form 8-K dated February 22, 1996. (10.5) Amendment No. 2 to the Agreement and Plan of Merger, dated as of April 25, 1996 is incorporated herein by reference to the Predecessor's Current Report on Form 8-K, filed on April 25, 1996. (10.6) Amendment No. 3 to the Agreement and Plan of Merger, dated as of May 29, 1996 is incorporated herein by reference to the Predecessor's Current Report on Form 8-K, filed on May 29, 1996. (10.7) Amendment No. 4 to the Agreement and Plan of Merger, dated as of June 30, 1996 is incorporated herein by reference to the Predecessor's Current Report on Form 8-K, filed on July 1, 1996. (10.8) Credit Agreement, dated as of May 16, 1997, between the Company and NationsBank of Texas, N.A. is incorporated by reference to Exhibit 4.6 to the Company's Quarterly Report on Form 10- Q for the period ended June 30, 1997. (10.9) Intercreditor and Subordination Agreement, dated as of May 16, 1997, between the Company and Whitehall is incorporated by reference to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (10.10) Limited Resource Agreement, dated as of May 16, 1997, is incorporated by reference to Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (27.1) Company's Financial Data Schedule. (b) REPORTS ON FORM 8-K No Current Reports on Form 8-K have been filed during the last fiscal quarter. 10 13 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. RCPI TRUST Date: May 15, 1998 By: /s/ David Augarten ----------------------- David Augarten Vice President (Principal Financial Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RCPI TRUST'S BALANCE SHEET AS OF MARCH 31, 1997 AND RCPI TRUST'S STATEMENT OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-30-1998 37,565 0 5,254 0 0 90,837 818,295 29,118 922,833 35,927 595,304 0 0 0 291,603 922,833 0 50,841 0 0 30,942 0 15,423 4,476 0 4,476 0 0 0 4,476 0 0
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