-----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, J4VgXVN7WEac1D/Yedo8QiD2skGy0VgfcBl0elV452GyDMDy/G2b4c4E+vMbTmfb NQ7cu7f01lAJzdwCWMPIYQ== 0000950123-98-009905.txt : 19981116 0000950123-98-009905.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950123-98-009905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 98747950 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 September 30, 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 September 30, 1998 (unaudited) and December 31, 1997 1 RCPI Trust, Statements of Operations for the quarters ended September 30, 1998 and 1997 (unaudited) and for the nine months ended September 30, 1998 and 1997 (unaudited) 2 RCPI Trust, Statements of Cash Flows for the nine months ended September 30, 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 ($ in thousands)
As of As of Sept. 30, 1998 December 31, (Unaudited) 1997 ----------- ---- ASSETS: Real Estate: Land $ 158,149 $ 158,149 Buildings and improvements 626,930 611,711 Tenant improvements 46,957 36,170 Furniture, fixtures and equipment 4,564 4,192 --------- --------- 836,600 810,222 Less: Accumulated depreciation and amortization (38,964) (24,393) --------- --------- 797,636 785,829 Cash and cash equivalents 35,585 27,517 Restricted cash 9,656 9,369 Accounts receivable 5,815 11,946 Prepaid expenses 9,576 495 Deferred costs, net of accumulated amortization of $4,735 and $2,192, respectively 36,524 22,521 Accrued rent 58,829 29,969 --------- --------- Total Assets $ 953,621 $ 887,646 ========= ========= LIABILITIES AND OWNERS' EQUITY Liabilities: Zero coupon convertible debentures, net of unamortized discount of $139,095 and $177,696, respectively $ 447,090 $ 408,489 14% debentures (includes premium of $23,540 and $24,710, respectively) 98,540 99,710 NationsBank loans 85,000 55,000 Accrued interest payable 2,037 7,152 Accounts payable and accrued expenses 16,365 21,227 Tenant security deposits payable 9,731 8,940 --------- --------- Total Liabilities 658,763 600,518 Commitments and Contingencies Owners' Equity 294,858 287,128 --------- --------- Total Liabilities and Owners' Equity $ 953,621 $ 887,646 ========= =========
SEE NOTES TO THE FINANCIAL STATEMENTS 1 4 RCPI TRUST (A Delaware business trust) STATEMENTS OF OPERATIONS ($ in thousands) (UNAUDITED)
For the Quarters Ended For the Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ---- ---- ---- ---- Revenues: Base rental $ 48,243 $ 42,321 $143,052 $125,783 Operating escalations and percentage rents 1,815 1,995 5,159 5,376 Interest and other income 2,105 1,865 5,382 7,077 -------- -------- -------- -------- Total revenues 52,163 46,181 153,593 138,236 -------- -------- -------- -------- Expenses: Interest 17,173 15,494 49,265 43,578 Real estate taxes 8,657 8,562 25,486 25,030 Payroll and benefits 4,972 4,240 15,052 13,302 Repairs, maintenance and supplies 3,543 3,068 10,448 8,460 Utilities 4,211 4,753 10,248 12,593 Cleaning 3,267 3,435 10,134 10,291 Professional fees 196 641 1,003 4,883 Insurance 235 315 812 914 Management and accounting fees 888 812 2,646 2,516 General and administration 1,094 1,212 3,251 2,101 Depreciation and amortization 6,194 5,124 17,518 14,330 -------- -------- -------- -------- Total expenses 50,430 47,656 145,863 137,998 -------- -------- -------- -------- Net income (loss) $ 1,733 ($ 1,475) $ 7,730 $ 238 ======== ======== ======== ========
SEE NOTES TO THE FINANCIAL STATEMENTS 2 5 RCPI TRUST (A Delaware business trust) STATEMENTS OF CASH FLOWS ($ in thousands) (UNAUDITED)
For the Nine Months Ended September 30, 1998 1997 ---- ---- Cash Flows from Operating Activities: Net income $ 7,730 $ 238 Adjustment to reconcile net income to net cash provided by operating activities: Amortization of original issue discount and premium 37,431 33,154 Depreciation and amortization 17,518 14,330 (Increase) decrease in restricted cash (287) 924 Decrease in accounts receivable 6,131 9,778 Increase in prepaid expenses (9,081) (8,908) Increase in accrued rent (28,860) (12,157) Decrease in accounts payable and accrued expenses and tenant security deposits payable (1,209) (5,031) Decrease in accrued interest payable (5,114) (1,667) -------- -------- Net cash provided by operating activities 24,259 30,661 -------- -------- Cash Flows from Investing Activities: Additions to building and improvements (15,416) (9,398) Additions to tenant improvements (15,274) (10,443) Additions to furniture, fixtures and equipment (372) (86) Additions to deferred costs (15,129) (12,868) -------- -------- Net cash used in investing activities (46,191) (32,795) -------- -------- Cash Flows from Financing Activities: Additions to NationsBank loans 30,000 55,000 Capital contributions -- 10 Distributions to owners -- (44,128) Payment of floating rate notes -- (10,000) -------- -------- Net cash provided by financing activities 30,000 882 -------- -------- Increase (decrease) in cash and cash equivalents 8,068 (1,252) Cash and cash equivalents at beginning of period 27,517 28,765 -------- -------- Cash and cash equivalents at end of period $ 35,585 $ 27,513 ======== ========
SEE NOTES TO THE FINANCIAL STATEMENTS 3 6 RCPI TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. FINANCIAL STATEMENTS The balance sheet as of September 30, 1998, the statements of operations for the quarters ended and the nine months ended September 30, 1998 and 1997 and the statements of cash flows for the nine months ended September 30, 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 for the year ended 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. On June 29, 1998, the Company entered into a third NationsBank loan in the principal amount of $10 million. As of September 30, 1998 the total loans due to NationsBank were $85 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 September 30, 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 89.6% occupied. Occupancy rates for the Property at various dates are presented in the following table:
June 30, 1998 88.1% September 30, 1997 86.3% March 31, 1998 88.1% June 30, 1997 86.4% December 31, 1997 86.7% March 31, 1997 83.3%
The following table shows selected lease expirations and vacancy of the Property as of September 30, 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 611,864 10.4% 1998 175,022 3.0% 1999 207,662 3.5% 2000 467,798 7.9% 2001 132,037 2.2% 2002 218,162 3.7% Thereafter 4,087,152 69.3% --------- ----- Total 5,899,697 100.0% ========= ======
Debt The Zero Coupon Debentures due December 31, 2000 accrete to a face value of approximately $586.2 million at an effective annual interest rate of 12.10%. At September 30, 1998 and December 31, 1997, the carrying value of the Zero Coupon Debentures, net of unamortized discount, was approximately $447.1 million and $408.5 million, respectively. On July 17, 1996, outstanding principal on the Floating Rate Notes 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. 5 8 RCPI TRUST ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 amortization of this premium, is approximately 9.03%. Interest payments are made semi-annually on July 31 and January 31. As of September 30, 1998 and December 31, 1997, the carrying value of the 14% Debentures was approximately $98.5 million and $99.7 million, respectively. As of September 30, 1998, the NationsBank credit facility has an aggregate principal balance of $85 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 nine months ended September 30, 1998, the Company received cash flows of approximately $24 million from operations of the Property. The Company used part of this cash flow from operations and an additional draw on the NationsBank credit facility of $30 million to fund building improvements, tenant improvements, leasing commissions and other deferred costs totaling approximately $46 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 the current NationsBank Facility balance as of September 30, 1998 of $85 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 and the nine months ended September 30, 1998 increased approximately $5.9 million and $17.3 million, respectively, from the quarter and the nine months ended September 30, 1997, due mainly to higher rental rates on new leases than existed in the prior year. Additionally, the occupancy level increased to 89.6% as of September 30, 1998, as compared to 86.3% as of September 30, 1997. Interest expense has increased by approximately $1.7 million and $5.7 million for the quarter and the nine months ended September 30, 1998, respectively, as compared to the quarter and the nine months ended September 30, 1997, primarily due to the increase in the outstanding debt balance. Total outstanding debt as of September 30, 1997 was approximately $551 million, as compared to $631 million as of September 30, 1998. The increase is due primarily to accretion of the Zero Coupon Debentures and additional draws under the NationsBank credit facility which has increased by $30 million since September 30, 1997. 6 9 RCPI TRUST ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The increase in payroll and benefits of approximately $732,000 and $1.8 million during the quarter and the nine months ended September 30, 1998, respectively, as compared to the quarter and the nine months ended September 30, 1997, is a result of additional salaries related to retail leasing and redevelopment. The increase in repairs, maintenance and supplies of approximately $475,000 and $2.0 million during the quarter and the nine months ended September 30, 1998, respectively, as compared to the quarter and the nine months ended September 30, 1997, is primarily due to additional asbestos costs incurred related to office and retail tenant construction and base building upgrades and construction which increased in 1998. Utilities expense for the quarter and the nine months ended September 30, 1998 decreased by approximately $542,000 and $2.3 million, respectively, as compared to the quarter and nine months ended September 30, 1997, primarily due to a warm winter in the New York area, as well as operating efficiencies achieved through preventive maintenance. The decrease in professional fees in 1998 is due primarily to legal and settlement costs incurred during the first quarter of 1997 associated with the Bear Stearns & Co., Inc. and Donaldson, Lufkin & Jenrette Securities Corporation lawsuit, totaling approximately $2.6 million. General and administrative costs have increased during the quarter and the nine months ended September 30, 1998, as compared to the quarter and the nine months ended September 30, 1997, by approximately $118,000 and $1.2 million, respectively. The increase is primarily due to a retroactive payment of city franchise and license fees based on a renegotiated contract and an increase in administrative costs related to the retail leasing and redevelopment. The increase in depreciation and amortization expense of approximately $1.1 million and $3.2 million for the quarter and the nine months ended September 30, 1998, respectively, as compared to the quarter and the nine months ended September 30, 1997, was primarily due to additional capital projects at the property being placed into service since September 30, 1997 and due to additional tenant improvements and leasing commissions expended as a result of increased office and retail 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 and Form 10-Q filed as of June 30, 1998. 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 September 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: November 13, 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 SEPTEMBER 30, 1998 AND RCPI TRUST'S STATEMENT OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JUL-01-1998 SEP-30-1998 35,585 0 5,815 0 0 114,585 836,600 (38,964) 953,621 28,133 630,630 0 0 0 294,858 953,621 0 52,163 0 0 33,257 0 17,173 1,733 0 1,733 0 0 0 1,733 0 0
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