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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
-------------------
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 0-50268
The Newkirk Master Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 11-3636084
- ----------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 Bulfinch Place, Suite 500, Boston, MA 02114-9507
- ----------------------------------------- ----------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 570-4600
-----------------
Indicate by check mark whether 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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date. 6,319,391 Limited Partnership
Units Outstanding as of September 30, 2003.
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Table of Contents
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet at September 30, 2003 and
Audited Consolidated Balance Sheet at December 31, 2002 ................................ 3
Unaudited Consolidated Statements of Operations for the Three Months and Nine
Months Ended September 30, 2003 and September 30, 2002.................................. 4
Unaudited Consolidated Statement of Partners' Equity for the Nine
Months Ended September 30, 2003......................................................... 5
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2003 and September 30, 2002............................................... 6
Notes to Consolidated Unaudited Financial Statements.................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................................... 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................. 28
Item 4. Controls and Procedures................................................................. 29
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 30
Item 6. Exhibits and Reports on Form 8-K........................................................ 31
Signatures........................................................................................ 32
Exhibit Index..................................................................................... 33
2 of 32
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
(UNAUDITED)
ASSETS
Real estate investments:
Land $ 39,407 $ 37,904
Land estates 45,490 54,524
Buildings and improvements 1,594,150 1,624,140
------------ ------------
Total real estate investments 1,679,047 1,716,568
Less accumulated depreciation and amortization (536,919) (512,678)
------------ ------------
Real estate investments, net 1,142,128 1,203,890
Real estate held for sale, net of accumulated depreciation of $12,258 and $61,027 47,330 105,331
Cash and cash equivalents, of which $8,201 and $8,109 is restricted 44,014 33,452
Receivables and deferred rental income 66,953 77,855
Equity investments in limited partnerships 10,218 --
Deferred costs, net of accumulated amortization of $31,816 and $26,656 19,907 24,418
Other assets 27,806 29,387
Other assets of discontinued operations 1,644 2,290
------------ ------------
Total Assets $ 1,360,000 $ 1,476,623
============ ============
LIABILITIES, MINORITY INTERESTS AND PARTNERS' EQUITY
Liabilities:
Mortgage notes and accrued interest payable $ 602,583 $ 717,968
Note payable 199,517 221,650
Contract right mortgage notes and accrued interest payable 417,217 425,441
Accounts payable and accrued expenses 9,522 10,467
Liabilities of discontinued operations 26,603 105,500
------------ ------------
Total Liabilities 1,255,442 1,481,026
Contingencies
Minority interests (28,901) (29,096)
Partners' equity (6,319,391 and 6,116,578 limited partnership units outstanding) 133,459 24,693
------------ ------------
Total Liabilities, Minority Interests and Partners' Equity $ 1,360,000 $ 1,476,623
============ ============
See notes to consolidated financial statements.
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THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(In thousands, except unit and per unit data)
(Unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenue:
Rental income $ 68,447 $ 66,745 $ 204,486 $ 201,106
Interest income 558 867 2,212 2,566
Management fees 134 199 441 597
----------- ----------- ----------- -----------
Total revenue 69,139 67,811 207,139 204,269
----------- ----------- ----------- -----------
Expenses:
Interest 25,899 27,389 78,789 87,298
Depreciation 8,580 6,780 22,632 21,038
General and administrative 1,995 1,283 5,988 5,945
Amortization 958 1,063 3,057 3,070
Ground rent 778 792 2,394 2,376
State income taxes 175 101 645 435
----------- ----------- ----------- -----------
Total expenses 38,385 37,408 113,505 120,162
----------- ----------- ----------- -----------
Income from continuing operations before equity in income
from investments in limited partnerships and minority interest 30,754 30,403 93,634 84,107
Equity in income from investments in limited partnerships 844 -- 2,521 --
Minority interest (3,674) (2,485) (10,848) (7,264)
----------- ----------- ----------- -----------
Income from continuing operations 27,924 27,918 85,307 76,843
----------- ----------- ----------- -----------
Discontinued operations:
Income from discontinued operations 936 4,687 15,062 13,474
(Loss) gain from disposal of real estate (1,996) -- 30,329 --
----------- ----------- ----------- -----------
Net (loss) income from discontinued operations (1,060) 4,687 45,391 13,474
----------- ----------- ----------- -----------
Net income $ 26,864 $ 32,605 $ 130,698 $ 90,317
=========== =========== =========== ===========
Income from continuing operations per
limited partnership unit $ 4.42 $ 4.56 $ 13.47 $ 12.55
(Loss) income from discontinued operations per
limited partnership unit (0.17) 0.77 7.17 2.20
----------- ----------- ----------- -----------
Net income per limited partnership unit $ 4.25 $ 5.33 $ 20.64 $ 14.75
=========== =========== =========== ===========
Distributions per limited partnership unit $ 0.85 $ 0.65 $ 4.62 $ 31.46
=========== =========== =========== ===========
Weighted average limited partnership units 6,319,391 6,119,158 6,332,495 6,121,060
=========== =========== =========== ===========
See notes to consolidated financial statements.
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THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(In thousands, except unit data)
(Unaudited)
LIMITED
PARTNERSHIP PARTNERS'
UNITS EQUITY
------------- -----------
Balance at December 31, 2002 6,116,578 $ 24,693
Equity contributions 317,813 11,049
Distributions -- (29,044)
Limited partner buyouts (115,000) (3,937)
Net income -- 130,698
------------- -----------
Balance at September 30, 2003 6,319,391 $ 133,459
============= ===========
See notes to consolidated financial statements.
5 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(In thousands)
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2003 2002
------------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 130,698 $ 90,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred costs and land estates 7,747 7,177
Depreciation expense 24,447 25,656
Net gain from early extinguishment of debt (8,778) (926)
Gain from disposal of real estate (30,329) --
Minority interest expense 10,848 7,264
Equity in income from investments in limited partnerships (2,521) --
Changes in operating assets and liabilities:
Receivables and deferred rental income 16,655 16,383
Other assets 1,016 (120)
Accounts payable and accrued expenses (2,524) (19,297)
Accrued interest-mortgages and contract rights (17,643) (16,899)
----------- -----------
Net cash provided by operating activities 129,616 109,555
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposal of real estate or other assets 59,492 --
Land additions (2,494) (640)
Cash related to formation of partnership -- 10,776
Cash related to previously unconsolidated limited partnerships 284 --
Investments in limited partnership interests (1,236) --
----------- -----------
Net cash provided by investing activities 56,046 10,136
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Satisfaction of mortgage notes payable (40,129) (26,789)
Satisfaction of contract right mortgage notes payable (2,554) --
Principal payments of mortgage notes payable (95,041) (92,431)
Principal payments of note payable (22,133) (1,688)
Principal payments of contract right mortgage notes payable (422) (2,205)
Proceeds from new debt 25,365 240,040
Mortgage prepayment penalties (400) (30)
Distributions to partners (29,044) (192,603)
Limited partner buyouts (3,937) (83)
Distributions to minority interests (6,159) (1,693)
Distributions from limited partner interests 492 --
Deferred costs (1,138) (9,120)
----------- -----------
Net cash used in financing activities (175,100) (86,602)
----------- -----------
Net increase in cash and cash equivalents 10,562 33,089
Cash and Cash Equivalents at Beginning of Period 33,452 --
----------- -----------
Cash and Cash Equivalents at End of Period $ 44,014 $ 33,089
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for state income taxes $ 909 $ 442
=========== ===========
Cash paid for interest $ 97,946 $ 108,752
=========== ===========
See notes to consolidated financial statements.
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THE NEWKIRK MASTER LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(In thousands)
(Unaudited)
Supplemental Information
In January 2003, balances related to the issuance of 317,813 Units in the
Partnership for the various assets contributed to the Partnership were as
follows:
Real estate investments, net $ 18,260
Cash and cash equivalents 14
Receivables 3,228
Deferred costs, net 944
Equity investments in limited partnerships 7,665
Mortgage notes payable (26,374)
Accrued interest payable (985)
Accounts payable and accrued expenses (34)
Minority interests 8,331
-----------
Partners' equity $ 11,049
===========
In connection with the disposal of real estate, the purchaser of a property
assumed $94,818 of the Partnership's debt.
See notes to consolidated financial statements.
7 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
1. GENERAL
The Newkirk Master Limited Partnership (the "Partnership"), commenced
operations on January 1, 2002 following the completion of a transaction
(the "Exchange") involving the merger into wholly-owned subsidiaries of
the Partnership of 90 limited partnerships (the "Newkirk Partnerships"),
each of which owned commercial properties (the "Newkirk properties"), and
the acquisition by the Partnership of various assets, including those
related to the management or capital structure of the Newkirk
Partnerships.
The consolidated financial statements of the Partnership included herein
have been prepared by the Partnership, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted
pursuant to such rules and regulations, although the Partnership believes
that the disclosures contained herein are adequate to make the
information presented not misleading. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Partnership's
Registration Statement on Form 10/A, as filed with the Securities and
Exchange Commission on September 10, 2003.
The consolidated financial statements reflect, in the opinion of the
Partnership, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the consolidated financial position and
results of operations for the respective periods in conformity with
accounting principles generally accepted in the United States of America
consistently applied.
In February 2003, the Partnership acquired from its limited partners
115,000 of its units of limited partnership interest at a purchase price
of $35 per unit, less the per unit distribution payable by the
Partnership to holders of record on and after the offering date.
2. MORTGAGE NOTES AND CONTRACT RIGHT MORTGAGE NOTES PAYABLE
In January 2003, the Partnership acquired a second mortgage loan that
encumbered the Partnership's property in Morris Township, New Jersey. The
outstanding mortgage principal and accrued interest was $28.1 million at
December 31, 2002. It was acquired for $22.1 million, $9.3 million of
which was paid in January 2003 and $12.8 million of which was payable on
or before September 30, 2003. The deferred portion of the purchase price
bore interest at a rate of 6.0% per annum. The Partnership acquired this
mortgage in connection with an extension of the lease on the property and
obtained new first mortgage financing in June 2003 to satisfy the balance
of the purchase price.
The new first mortgage has a principal balance of $21.0 million and bears
interest at LIBOR plus 2.875% per annum (4.105% at September 30, 2003),
and has an initial term of three years, which may be extended for two
additional one-year periods. Interest payments are due monthly beginning
August 1, 2003. Principal payments of $25,000 are due monthly beginning
February 1, 2005. After payment of closing costs, $6.7 million of
proceeds were used to satisfy the existing first mortgage and the balance
of the net proceeds was used to satisfy the deferred portion of the
second mortgage purchase price. In connection with the loan, the
Partnership purchased an interest rate cap on the loan so that the
interest rate is capped at 8.175%. This loan was refinanced in October
2003. (See Note 8 of this Form 10-Q).
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THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
2. MORTGAGE NOTES AND CONTRACT RIGHT MORTGAGE NOTES PAYABLE (CONTINUED)
In August 2003, the Partnership obtained a first mortgage loan
encumbering the Partnership's property in Beaumont, Texas in the amount
of $3.4 million. The new loan bears interest at 6.2% per annum and
matures on November 30, 2007, at which time it is scheduled to be fully
amortized.
In connection with the Partnership's refinancings, real estate sales and
repayments of mortgage debt during the nine months ended September 30,
2003, the Partnership has recognized a net gain from early extinguishment
of debt (net of mortgage prepayment penalties of $0.4 million) of $8.8
million, which is included in discontinued operations.
3. RELATED PARTY TRANSACTIONS
Winthrop Financial Associates, A Limited Partnership ("WFA"), an
affiliate of the general partner, performs asset management services for
the Partnership and received a fee of $1.4 million for the nine months
ended September 30, 2003 and 2002.
The Partnership provides certain asset management, investor and
administrative services to partnerships, whose general partner is
controlled by the Partnership, and which were not merged into the
Partnership ("Other Partnerships"). The Partnership earned $0.4 million
and $0.6 million of management fees for these services for the nine
months ended September 30, 2003 and 2002, respectively. The Partnership
had receivables for management fees of $1.1 million due from Other
Partnerships at September 30, 2003. In addition, the Partnership had a
receivable of $0.6 million at September 30, 2003 for a non-interest
bearing advance made to one of these partnerships.
The Partnership had a loan receivable and accrued interest receivable of
$0.2 million at December 31, 2002 due from Cenland Associates Limited
Partnership, one of the Other Partnerships. In February 2003, the
Partnership received the remaining balance due on this loan.
The Partnership has an ownership interest in the three most junior
tranches of a securitized pool of first mortgages with respect to 31
first mortgage loans encumbering 74 Partnership properties and three
other properties controlled by affiliates of the general partner. The
Partnership had a loan receivable, net of discount, of $9.7 million at
September 30, 2003 and earned interest income of $0.9 million for the
nine months ended September 30, 2003 and 2002 related to this ownership
interest. Mortgage loans receivable and the property's mortgage loan
payable was not eliminated in consolidation because the Partnership does
not have a legal right of offset.
Affiliates of the general partner own $17.3 million of $145.2 million of
interests in a real estate mortgage investment conduit ("REMIC") that
holds debt obligations secured by subordinate mortgages on properties
owned by the Partnership and other partnerships, the general partners of
which are affiliates of the general partner. The affiliates earned $1.9
million of interest income on their REMIC interests during the nine
months ended September 30, 2003 and 2002. Additionally, affiliates of the
general partner own the residual interests in the debt obligations in
which the REMIC holds the current interests. The Partnership has a right
to acquire these residual interests in January 2008 in exchange for
units. The affiliates have the
9 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
3. RELATED PARTY TRANSACTIONS (CONTINUED)
right to require the Partnership to purchase these residual interests in
December 2007 in exchange for units. The acquisition and purchase will be
completed at fair value at the time of any transaction.
In December 2002, an affiliate of the general partner purchased a portion
of the second mortgage indebtedness of a property in which the
Partnership has an interest. The second mortgage payable and accrued
interest owned by the affiliate aggregated $14.4 million at September 30,
2003. The mortgage note bears interest at the rate of 4.86% per annum.
Included in interest expense is $0.5 million related to this second
mortgage payable for the nine months ended September 30, 2003.
Mortgage notes and contract right mortgage notes and accrued interest
payable includes $200.6 million due to related parties at September 30,
2003. Interest expense to related parties totaled $10.8 million and $9.4
million during the nine months ended September 30, 2003 and 2002,
respectively.
As part of the Exchange, affiliates of the general partner of the
Partnership received 4.7 million units for their contribution of certain
assets to the Partnership. See the Partnership's Registration Statement
on Form 10/A for additional information. (Also see Note 5 to this Form
10-Q).
4. CONTINGENCIES
Legal
In July 2002, an action was commenced in the Connecticut Superior Court
against, among others, the Partnership's general partner and various
affiliates of the Partnership's general partner. Plaintiffs are six
limited partners of five of the Newkirk Partnerships. The action alleges,
among other things, that the price paid to non-accredited investors in
connection with the Exchange was unfair and did not fairly compensate
them for the value of their partnership interests. The complaint also
alleges that the exchange values assigned in the Exchange to certain
assets contributed by affiliates of the Partnership's general partner
were too high in comparison to the exchange values assigned to the
Newkirk partnerships, that the option arrangement relating to the
Partnership's potential acquisition in the future of the T-2 Certificate,
which represents an interest in a grantor trust, the mortgage assets of
which consist of subordinate mortgage notes secured by the Partnership's
real properties as well as other properties owned by other partnerships
that are controlled by affiliates of the Partnership's general partner,
was unfair to limited partners and that the disclosure document used in
connection with the Exchange contained various misrepresentations and/or
omissions of material facts. The complaint seeks to have the action
classified as a class action as well as compensatory and punitive damages
in an unspecified amount. In order to avoid the expenses, distraction,
and uncertainties of litigation, and without conceding their view that
the allegations of the complaint are without merit, the defendants have
executed an agreement in principal to settle the litigation, subject to
confirmatory discovery and finalization of a formal settlement agreement,
based on the following material terms (only unitholders who are not
affiliates of the general partner of the Partnership will receive the
consideration): (i) the Newkirk Group shall convey to unitholders units
in the Partnership equal to 1% of the Partnership; (ii) shall convey to
an escrow agent $1.5 million for the benefit of unitholders; (iii) the
Partnership shall convey $1.7 million to an escrow agent for the benefit
of the unitholders of the Newkirk Partnerships who received cash in the
Exchange; and (iv) theMLP and NK-CR Holdings LLC shall enter into an
agreement, subject to certain terms and conditions, relating to the
10 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
4. CONTINGENCIES (CONTINUED)
Legal (Continued)
exercise of the discounted payoff options under the second mortgage loans
which will enable the Partnership to derive the benefit of the discount
payoff amounts. As part of the agreement, defendants have also agreed not
to object to payment of reasonable attorneys fees, expenses, and
incentive awards to be paid from the foregoing consideration.
Confirmatory discovery is currently proceeding, and a final settlement
agreement will be subject to review and approval by the Court after
notice to persons other than affiliates of defendants who were limited
partners at the time of the Exchange in the Newkirk Partnerships.
On December 31, 2002, a derivative action was commenced in the Dallas
County Texas District Court by a limited partner of Eastgar Associates,
L.P. ("Eastgar") against, among others, the general partners of Eastgar
and affiliates of the Newkirk Partnerships. The Partnership owns a 60.5%
limited partnership interest in Eastgar and also controls the general
partner of that partnership. The complaint alleges that the defendants
have charged Eastgar excessive management fees and have unfairly
prevented Eastgar from prepaying and refinancing its mortgage
indebtedness. The complaint seeks compensatory and punitive damages in an
unspecified amount, attorneys' fees and expenses, an accounting, and a
declaration of the parties' future rights and obligations regarding
management fees and the refinancing of mortgage indebtedness. In order to
avoid the expenses, distraction, and uncertainties of litigation, the
defendants have executed an agreement in principal to settle the
litigation for a payment by the defendants other than Eastgar of $137,500
to Eastgar for distribution to Eastgar's limited partners other than the
Partnership or its affiliates, after payment from said amount of
plaintiffs' attorneys' fees and expenses. The settlement also sets the
management fees to be charged to Eastgar, subject to any changes that
Eastgar may approve in the future consistent with its fiduciary duty. The
settlement is subject to the approval of the court after notice to the
limited partners of Eastgar.
Property Matters
In January 2002, Kmart Corporation ("Kmart"), a tenant at twelve of the
Partnership's properties, filed for protection under Chapter 11 of the
United States Bankruptcy Code. Kmart had the right to either accept or
reject the leases. Kmart elected to reject the leases, which caused an
immediate termination of such leases. The Partnership re-leased nine of
the properties to Furr's Restaurant Group ("Furr's") for 10-year lease
terms, one of the properties to Lithia Motors for a 10-year lease term
and another property for use as a Chinese food restaurant for a five-year
lease term. The remaining property was vacant. The Partnership is
pursuing a claim against Kmart in the Bankruptcy Court. In January 2003,
Furr's filed for protection under Chapter 11 of the Bankruptcy Code and
subsequently rejected the lease on three sites. The remaining sites
continue to be leased to Furr's through 2012 and the Partnership is
pursuing a claim against Furr's in the Bankruptcy Court for the three
rejected sites. Furr's also has the right to reject the lease that now
covers the remaining sites. In addition, the Chinese food restaurant has
recently defaulted on its lease and that property has been vacated. The
aggregate rent for the seven sites that are presently leased is
significantly less than the amount that was scheduled to be received from
Kmart during its renewal term which would have begun in February 2003.
The Partnership is responsible for the payment of insurance, real estate
taxes and mortgage debt on the vacant properties. The Partnership has
purchased the land underlying all twelve properties for $0.25 million. In
September 2003, two of the vacant properties were sold. The Partnership
is attempting to either sell or re-let the three remaining vacant
properties.
11 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
5. ACQUISITIONS
On January 1, 2003, the Partnership acquired from an affiliate of the
general partner, limited partnership interests in nine limited
partnerships that own net-leased commercial properties. The limited
partnership interests acquired by the Partnership ranged between 4.9% and
57.75% of each partnership and were acquired in exchange for 317,813
limited partnership units of the Partnership valued at $22.7 million. In
addition, the Partnership has an option to purchase additional limited
partnership interests for approximately 21,000 partnership units subject
to adjustment based upon the assets of the Partnerships at the time of
exercise. The values of the net-leased real estate partnerships and the
Partnership units were determined without arms-length negotiations.
Independent appraisals were obtained on the value of the properties owned
by the limited partnerships. The Partnership has accounted for the
acquisition on a historical cost basis. Three of the limited partnerships
have been consolidated into the Partnership's financial statements and
six of the limited partnerships are being accounted for under the equity
method of accounting. In August 2003, the Partnership acquired
approximately an additional 9.9% interest in one of these limited
partnerships for a cash purchase price of $525,000, increasing the
partnership interest to 23.4% from 13.5%. These interests were aquired
from unaffiliated limited partners.
In January 2003, the Partnership acquired the land underlying the
property owned by one of the net-leased partnerships referred to
immediately above. The land was acquired from a company affiliated with
the general partner for $1.0 million, $50,000 of which was paid in cash
and the balance in the form of a $950,000 note due September 8, 2008. The
note bore interest at the rate of 6.0% per annum, compounded annually,
and was payable interest-only until maturity, at which time the full
balance of the note was to be due. In September 2003, the note was
satisfied by the Partnership from cash reserves. The purchase price for
the land sale was determined without arms-length negotiations. An
independent appraisal was obtained on the value of the land that was
acquired.
In April and June 2003, the Partnership acquired 30.6% and 46.1%,
respectively, of the outstanding limited partnership interests in two
Other Partnerships. The partnership interests were acquired for an
aggregate cash purchase price of $711,250. The Partnership previously
owned 1.5% and 3.8%, respectively, of the outstanding limited partnership
interests in these two partnerships. The Partnership controls the general
partners of each of these partnerships. The Partnership has consolidated
these partnerships in accordance with the guidance provided by Statement
of Position 78-9 "Accounting for Investments in Real Estate Ventures."
In May and June 2003, the Partnership purchased the remainder interest in
the land underlying 25 properties for an aggregate purchase price of $1.2
million and, as a result, now owns a fee interest in the underlying land.
The improvements on 23 of the properties are owned by the Partnership and
the improvements on the two other properties are owned by one of the
Other Partnerships in which the Partnership owns limited partnership
interests and controls the general partner.
12 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
6. DISCONTINUED OPERATIONS AND SALES OF REAL ESTATE
During the nine months ended September 30, 2003, the Partnership sold
twelve properties for a combined net sales price of $154.3 million. The
Partnership recognized a net gain on sale of these properties of $30.3
million. The sale and operations of these properties for all periods
presented have been recorded as discontinued operations in accordance
with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." In addition, the Partnership has classified three
properties as real estate held for sale in the accompanying consolidated
balance sheet and has classified the operations of the properties and the
sold properties as discontinued operations in the accompanying
consolidated statement of operations.
Discontinued operations for the nine months ended September 30, 2003 and
2002 are summarized as follows:
2003 2002
-------- --------
Revenue $ 12,826 $ 32,337
Expenses (6,570) (19,401)
Net gain from early extinguishment of debt 8,806 538
Gain from disposal of real estate 30,329 -
-------- --------
Net income from discontinued operations $ 45,391 $ 13,474
======== ========
Other assets of discontinued operations at September 30, 2003 and December 31,
2002 are summarized as follows:
2003 2002
------- -------
Receivables $ 319 $ 2,164
Other assets 1,325 126
------- -------
$ 1,644 $ 2,290
======= =======
Liabilities of discontinued operations at September 30, 2003 and December 31,
2002 are summarized as follows:
2003 2002
---------- --------
Mortgage notes and accrued interest payable $ 26,170 $ 44,999
Contract right mortgage notes and accrued
interest payable 430 59,707
Accounts payable and accrued expenses 3 794
--------- --------
$ 26,603 $105,500
========= ========
13 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q SEPTEMBER 30, 2003
7. CONTRACT TO SELL PROPERTY
In June 2003, the Partnership entered into a contract with a potential
purchaser for one of its properties. The sale is contingent upon the
purchaser completing its due diligence and if consummated, is expected to
occur in the fourth quarter of 2003. This property has been classified as
real estate held for sale in the accompanying consolidated balance sheet
at September 30, 2003 and is included as part of discontinued operations
in the accompanying consolidated statements of operations for September
30, 2003 and 2002.
8. SUBSEQUENT EVENTS
The Partnership has received a commitment from its lender to provide
financing that will enable the Partnership to reduce the interest rate on
its existing note payable from an effective rate of 8.5% to LIBOR plus
4.5% per annum (5.7% at September 30, 2003). The loan is expected to
close during the fourth quarter.
In October 2003, the Partnership refinanced its first mortgage loan on
its property in Morris Township, New Jersey. The new first mortgage loan
has a principal balance of $28.5 million, bears interest at 5.55%, and
has a term of ten years. After payment of closing costs, $21.1 million of
proceeds were used to satisfy the existing first mortgage and accrued
interest. The Partnership has also entered into a contract with a
potential purchaser to sell this property. The sale is contingent upon
the purchaser completing its due diligence and, if consummated, is
expected to occur in the first quarter of 2004. This property has been
classified as real estate held for sale in the accompanying consolidated
balance sheet at September 30, 2003 and is included as part of
discontinued operations in the accompanying consolidated statements of
operations for September 30, 2003 and 2002.
14 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained herein constitute forward-looking
statements. Forward-looking statements include information relating to
the Partnership's intent, belief or current expectations.
We identify forward-looking statements in this Form 10-Q by using words
or phrases such as "anticipate," "believe," "estimate," "expect,"
"intend," "may be," "objective," "plan," "predict," "project" and "will
be" and similar words or phrases (or the negative thereof).
The forward-looking information involves important risks and
uncertainties that could cause our actual results, performance or
achievements to differ materially from our anticipated results,
performance or achievements expressed or implied by such forward-looking
statements. These risks and uncertainties include, but are not limited
to, those set forth in our Registration Statement on Form 10/A filed on
September 10, 2003 under "Forward-Looking Statements."
Although we believe the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, we cannot assure you
that such expectations will be attained or that any deviations will not
be material. We disclaim any obligation or undertaking to disseminate to
you any updates or revisions to any forward-looking statement contained
in this Form 10-Q to reflect any change in our expectations or any
changes in events, conditions or circumstances on which any statement is
based.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2003 the Partnership owned an interest in 227 Newkirk
properties, almost all of which are leased to one or more tenants
pursuant to net leases with original lease terms, subject to extensions,
ranging between approximately twenty and twenty-five years.
Approximately 90% of the original lease terms expire between 2005 and
2009. There are five properties which are vacant and not leased which
represent approximately 117,000 square feet of the Partnership's
properties. The Partnership also holds subordinated interests in a
securitized pool of notes evidencing first mortgage indebtedness secured
by certain of the Partnership's properties as well as other properties,
limited partnership interests in various partnerships that own
commercial net-leased properties, an interest in a management company
that provides services for the Partnership as well as other real estate
partnerships, ground leases, remainder interests or the right to acquire
remainder interests in various properties and miscellaneous other
assets. In addition, the Partnership, or an affiliate of the general
partner, controls the general partner of the real estate limited
partnerships in which the Partnership owns limited partnership
interests, and the Partnership has an option to acquire in 2008 second
mortgage debt secured by a substantial number of the Partnership's
properties as well as the properties owned by eight other partnerships.
The Partnership receives rental income from its properties which is its
primary source of liquidity. Pursuant to the terms of the net leases,
the tenants are responsible for substantially all of the operating
expenses with respect to the properties, including maintenance, capital
improvements, insurance and taxes. If a tenant fails to exercise its
renewal option or exercises its option to terminate its lease early, the
Partnership will be required to either sell the property or procure a
new tenant. If the Partnership attempts to procure a new tenant, it will
be competing for new tenants in the then current rental markets, which
may not be able to support terms as favorable as those contained in the
original lease options.
15 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The level of liquidity based on cash and cash equivalents experienced a
$10,562,000 increase at September 30, 2003 as compared to December 31,
2002. The increase was due to net cash provided by operating activities
of $129,616,000 and net cash provided by investing activities of
$56,046,000, which were substantially offset by net cash used in
financing activities of $175,100,000. Cash provided by investing
activities included $284,000 of cash related to previously
unconsolidated limited partnerships and $59,492,000 of net proceeds from
disposal of real estate, which were partially offset by land
acquisitions of $2,494,000 and investments in limited partnership
interests of $1,236,000. Cash used in financing activities consisted
primarily of mortgage note and contract right mortgage note payoffs of
$42,683,000, principal payments on mortgage, contract right and notes
payable of $117,596,000 and partner distributions of $29,044,000, which
were partially offset by loan proceeds of $25,365,000. At September 30,
2003, the Partnership had cash and cash equivalents totaling
$44,014,000, of which $8,201,000 is restricted, in cash reserves which
were invested primarily in money market mutual funds.
Other Matters
On January 1, 2003, the Partnership acquired limited partnership
interests from an affiliate of the general partner in nine limited
partnerships that own net-leased commercial properties. The limited
partnership interests acquired by the Partnership ranged between 4.9%
and 57.75% of each partnership and were acquired in exchange for 317,813
limited partnership units of the Partnership. In addition, the
Partnership has an option to purchase additional limited partnership
interests for approximately 21,000 partnership units subject to
adjustment based upon the assets of the partnerships at the time of
exercise. The values of the net leased real estate partnerships and the
Partnership units were determined without arms length negotiations.
Independent appraisals were obtained to determine the value of the
properties owned by the limited partnerships. In August 2003, the
Partnership acquired an additional 9.9% interest in one of these limited
partnerships for a cash purchase price of $525,000.
In January 2003, the Partnership acquired the land underlying the
property owned by one of the net leased partnerships referred to
immediately above. The land was acquired from a company affiliated with
the general partner for $1,000,000, $50,000 of which was paid in cash
and the balance in the form of a $950,000 note due September 8, 2008.
The note bore interest at the rate of 6.0% per annum, compounded
annually, and was payable interest-only until maturity, at which time
the full balance of the note was to be due. In September 2003, the note
was satisfied by the Partnership from cash reserves. The purchase price
for the land sale was determined without arms-length negotiations. An
independent appraisal was obtained on the value of the land that was
acquired.
In January 2003, the Partnership acquired a second mortgage loan that
encumbered the Partnership's property in Morris Township, New Jersey.
The outstanding mortgage principal and accrued interest was $28,100,000
at December 31, 2002. It was acquired for $22,100,000, $9,300,000 of
which was paid in January 2003 and $12,800,000 of which was payable on
or before September 30, 2003. The deferred portion of the purchase price
bore interest at a rate of 6.0% per annum. The Partnership acquired this
mortgage in connection with an extension of the lease on the property
and obtained new first mortgage financing in June 2003 to satisfy the
balance of the purchase price.
16 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The new first mortgage has a principal balance of $21,000,000 and bears
interest at LIBOR plus 2.875% per annum (4.105% at September 30, 2003),
and has an initial term of three years, which may be extended for two
additional one-year periods. Interest payments are due monthly beginning
August 1, 2003. Principal payments of $25,000 are due monthly beginning
February 1, 2005. After payment of closing costs, $6,700,000 of proceeds
were used to satisfy the existing first mortgage and the balance of the
net proceeds was used to satisfy the deferred portion of the second
mortgage purchase price. In connection with the loan, the Partnership
purchased an interest rate cap on the loan so that the interest rate is
capped at 8.175%.
In October 2003, the Partnership refinanced its first mortgage loan on
its property in Morris Township, New Jersey. The new first mortgage loan
has a principal balance of $28,500,000 and bears interest at 5.55%, and
has a term of ten years. After payment of closing costs, $21,100,000 of
proceeds were used to satisfy the existing first mortgage and accrued
interest. The Partnership has also entered into a contract with a
potential purchaser to sell this property. The sale is contingent upon
the purchaser completing its due diligence and if consummated, is
expected to occur in the first quarter of 2004.
In February 2003, the Partnership acquired from its limited partners
115,000 of its units of limited partnership interest at a purchase price
of $35 per unit, less the per unit distribution payable by the
Partnership to holders of record on and after the offering date.
In February 2003, the Partnership received a notice from Albertson's,
Inc., the tenant at the Partnership's Sioux Falls, South Dakota
property, exercising the economic discontinuance provisions of the
lease. Under the terms of the notice, Albertson's had proposed to
terminate the lease effective November 5, 2003 and had made a rejectable
offer as required by the lease to purchase the property for $1,551,000.
The Partnership had until October 2003 to accept or reject this offer.
The Partnership elected to reject the offer and sold the property in
September 2003 for $2,700,000.
The Partnership has also received notice from Albertson's indicating
that it intended to exercise its right to terminate the lease for a
supermarket property located in Stuart, Florida. In accordance with the
economic discontinuance provision of its lease, Albertson's made a
rejectable offer to purchase the property for an amount stipulated in
the lease of approximately $631,000. The Partnership elected to reject
the offer. As a result of the rejection, the Partnership was required to
payoff the first mortgage encumbering the property, which had a balance
of approximately $531,000. The Partnership satisfied the first mortgage
using its cash reserves. The Partnership has entered into a contract to
sell the property, for a price in excess of the rejectable offer price.
The sale, which is contingent upon the purchaser completing its due
diligence is expected to occur, if at all, in the fourth quarter of
2003.
The Partnership has also received notice from Albertsons that they are
exercising a purchase option in accordance with their lease on ten of
the Partnership's properties. The Partnership has a right to reject this
offer. If the Partnership accepts such offer, the sale would be
effective July 1, 2004. If the Partnership rejects this offer, the
tenant can elect to terminate the lease on July 1, 2004 or extend for
eighteen months which will expire on December 31, 2005. Rent during the
eighteen month period would be at the renewal rates. If Albertsons
elects to renew for the eighteen month period they still have a series
of five year renewal options. On six of the properties Albertsons has
elected to renew the lease for eighteen months assuming the purchase
offer is rejected. For four of the properties, Albertsons has not yet
elected to renew. They have until April 17, 2004 to exercise their
renewal option. The Partnership is currently reviewing all of the
purchase offers in order to determine a course of action.
17 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In April and June 2003 the Partnership acquired 30.6% and 46.1%,
respectively, of the outstanding limited partnership interests in two
partnerships that own commercial net-leased properties. The partnership
interests were acquired for an aggregate cash purchase price of
$711,250. The partnership previously owned 1.5% and 3.8%, respectively,
of the outstanding limited partnership interests in these two
partnerships. The Partnership controls the general partners of each of
these partnerships. The Partnership has consolidated these partnerships
in accordance with the guidance provided by Statement of Position 78-9
"Accounting for Investments in Real Estate Ventures."
The Partnership has received a commitment from its lender to provide
financing that will enable the Partnership to reduce the interest rate
on its existing note payable form an effective rate of 8.5% to LIBOR
plus 4.5% per annum (5.7% at Septemebr 30, 2003). The loan is expected
to close during the fourth quarter.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2003 TO THE NINE
MONTHS ENDED SEPTEMBER 30, 2002.
Income from Continuing Operations
Income from continuing operations increased by $8,464,000 to $85,307,000
for the nine months ended September 30, 2003 from $76,843,000 for the
nine months ended September 30, 2002. As more fully described below, this
increase is attributable to an increase in total revenue of $2,870,000, a
decrease in total expenses of $6,657,000, and an increase in equity in
income from investments in limited partnerships of $2,521,000, which was
partially offset by an increase in minority interest expense of
$3,584,000.
Rental Income
Rental income increased by $3,380,000 or approximately 2% to $204,486,000
for the nine months ended September 30, 2003 from $201,106,000 for the
nine months ended September 30, 2002. The increase was primarily due to
five newly acquired consolidated partnerships which contributed
approximately $6,600,000 in rental income. This increase was partially
offset by lower rental income received from properties previously leased
by Kmart of $1,400,000 and lower rental income on lease renewals or
renegotiations of $1,800,000.
Interest Income
Interest income decreased by $354,000 or approximately 14% to $2,212,000
for the nine months ended September 30, 2003 from $2,566,000 for the nine
months ended September 30, 2002. The decrease was due to the payoff of a
loan receivable and overall lower interest rates on invested cash
balances.
18 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Management Fees
Management fees decreased by $156,000 or approximately 26% to $441,000
for the nine months ended September 30, 2003 from $597,000 for the nine
months ended September 30, 2002. The decrease is attributable to fewer
properties under management.
Interest Expense
Interest expense decreased by $8,509,000 or approximately 10% to
$78,789,000 for the nine months ended September 30, 2003 compared to
$87,298,000 for the nine months ended September 30, 2002. The decrease
was primarily due to $42,683,000 of loan payoffs during the period and
normal scheduled principal payments.
Depreciation
Depreciation expense increased by $1,594,000 or approximately 8% to
$22,632,000 for the nine months ended September 30, 2003 compared to
$21,038,000 for the nine months ended September 30, 2002. The increase
is primarily attributable to additional depreciation expense from five
newly acquired consolidated partnerships.
General and Administrative
General and administrative expenses increased by $43,000 or
approximately 1% to $5,988,000 for the nine months ended September 30,
2003 compared to $5,945,000 for the nine months ended September 30,
2002. The increase is primarily the result of higher professional fees
incurred related to legal proceedings and filings with the Securities
and Exchange Commissions and additional administrative expenses
associated with the five newly acquired consolidated partnerships. This
increase was substantially offset by one-time organizational expenses
relating to the formation of the Partnership in 2002.
Amortization Expense
Amortization expense remained relatively constant for the nine months
ended September 30, 2003 compared to the nine months ended September 30,
2002.
Ground Rent
Ground rent expense remained relatively constant for the nine months
ended September 30, 2003 compared to the nine months ended September 30,
2002.
19 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
State Income Taxes
State income tax expense increased by $210,000 or approximately 48% to
$645,000 for the nine months ended September 30, 2003 compared to
$435,000 for the nine months ended September 30, 2002. The increase is
the result of several states commencing partnership income tax
requirements.
Equity in Income from Investments in Limited Partnerships
Equity in income from investments in limited partnerships is the result
of the January 2003 purchase of equity positions in six new
partnerships.
Minority Interest Expense
Minority interest expense increased by $3,584,000 or approximately 49%
to $10,848,000 for the nine months ended September 30, 2003 compared to
$7,264,000 for the nine months ended September 30, 2002. The increase
was the result of minority interests in the amount of $2,087,000 related
to the five newly acquired consolidated partnerships. The remaining
increase of $1,497,000 related to increased profitability at the
previous partially owned partnerships.
Discontinued Operations
During the nine months ended September 30, 2003, the Partnership sold
twelve properties for a combined net sales price of $154,310,000. The
Partnership recognized a net gain on disposal of these properties of
$30,329,000. The sale and operations of these properties for all periods
presented have been recorded as discontinued operations in compliance
with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long
Lived Assets."
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2003 TO THE THREE
MONTHS ENDED SEPTEMBER 30, 2002.
Income from Continuing Operations
Income from continuing operations increased by $6,000 to $27,924,000 for
the three months ended September 30, 2003 from $27,918,000 for the three
months ended September 30, 2002. As more fully described below, this
increase is attributable to an increase in total revenue of $1,328,000
and an increase in equity in income from investments in limited
partnerships of $844,000, which were substantially offset by an increase
in total expenses of $977,000 and an increase in minority interest of
$1,189,000.
Rental Income
Rental income increased by $1,702,000 or approximately 3% to $68,447,000
for the three months ended September 30, 2003 from $66,745,000 for the
three months ended September 30, 2002. The increase was due to the five
newly acquired consolidated partnerships which was partially offset by
lower income from lease renewals and renegotiations.
20 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Interest Income
Interest income decreased by $309,000 or approximately 36% to $558,000
for the three months ended September 30, 2003 from $867,000 for the
three months ended September 30, 2002. The decrease was due to the
payoff of a loan receivable and overall lower interest rates on invested
cash balances.
Management Fees
Management fees decreased by $65,000 or approximately 33% to $134,000
for the three months ended September 30, 2003 from $199,000 for the
three months ended September 30, 2002. The decrease is attributable to
the sale of properties previously under management.
Interest Expense
Interest expense decreased by $1,490,000 or approximately 5% to
$25,899,000 for the three months ended September 30, 2003 compared to
$27,389,000 for the three months ended September 30, 2002. The decrease
was a result of loan payoffs and normal scheduled principal payments.
Depreciation
Depreciation expense increased by $1,800,000 or approximately 27% to
$8,580,000 for the three months ended September 30, 2003 compared to
$6,780,000 for the three months ended September 30, 2002. The increase
is primarily attributed to depreciation expense on the newly acquired
consolidated partnerships.
General and Administrative
General and administrative expenses increased by $712,000 or
approximately 55% to $1,995,000 for the three months ended September 30,
2003 compared to $1,283,000 for the three months ended September 30,
2002. The increase is primarily the result of higher professional fees
incurred related to legal proceedings and filings with the Securities
and Exchange Commission and additional administrative expenses
associated with the five newly acquired consolidated partnerships.
Amortization Expense
Amortization expense decreased by $105,000 or approximately 10% to
$958,000 for the three months ended September 30, 2003 compared to
$1,063,000 for the three months ended September 30, 2002. The decrease
is the result of savings due to the purchase of land estates during 2002
and 2003.
21 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Ground Rent
Ground rent expense remained relatively constant for the three months
ended September 30, 2003 compared to the three months ended September
30, 2002.
State Income Taxes
State income tax expense increased by $74,000 or approximately 73% to
$175,000 for the three months ended September 30, 2003 compared to
$101,000 for the three months ended September 30, 2002. The increase is
the result of several states commencing partnership income tax
requirements.
Equity in Income from Investments in Limited Partnerships
Equity in income from investments in limited partnerships is the result
of the January 2003 purchase of equity positions in six partnerships.
Minority Interest Expense
Minority interest expense increased by $1,189,000 or approximately 48%
to $3,674,000 for the three months ended September 30, 2003 compared to
$2,485,000 for the three months ended September 30, 2002. The increase
was the result of minority interests in the amount of $709,000 related
to the five newly consolidated partnerships. The remaining increase of
$480,000 related to increased profitability at the previous partially
owned partnerships.
Discontinued Operations
During the three months ended September 30, 2003, the Partnership sold
three properties for a combined net sales price of $3,385,000. The
Partnership recognized a net loss on sale of these properties of
$1,996,000. The sale and operation of these properties for all periods
presented has been recorded as discontinued operations in compliance
with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long
Lived Assets."
22 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying
consolidated financial statements and related notes. In preparing these
consolidated financial statements, management has made its best
estimates and judgments of certain amounts included in the consolidated
financial statements, giving due consideration to materiality. The
Partnership does not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies
described below. However, application of these accounting policies
involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these
estimates.
IMPAIRMENT OF LONG-LIVED ASSETS. At September 30, 2003, the Partnership
had $1,142,128,000 of real estate (net), accounting for approximately
84% of the Partnership's total assets. Buildings and improvements are
carried at cost net of adjustments for depreciation and amortization.
The fair values of the Partnership's buildings and improvements are
dependent on the performance of the properties.
The Partnership evaluates recoverability of the net carrying value of
its real estate and related assets at least annually, and more often if
circumstances dictate. If there is an indication that the carrying value
of a property might not be recoverable, the Partnership prepares an
estimate of the future undiscounted cash flows expected to result from
the use of the property and its eventual disposition, generally over a
five-year holding period. In performing this review, management takes
into account, among other things, the existing occupancy, the expected
leasing prospects of the property and the economic situation in the
region where the property is located.
If the sum of the expected future undiscounted cash flows is less than
the carrying amount of the property, the Partnership recognizes an
impairment loss and reduces the carrying amount of the asset to its
estimated fair value. Fair value is the amount at which the asset could
be bought or sold in a current transaction between willing parties, that
is, other than in a forced or liquidation sale. Management estimates
fair value using discounted cash flows or market comparables, as most
appropriate for each property. Independent certified appraisers are
utilized to assist management when warranted.
Because the cash flows used to evaluate the recoverability of the assets
and their fair values are based upon projections of future economic
events, such as property occupancy rates, rental rates, operating cost
inflation and market capitalization rates, which are inherently
subjective, the amounts ultimately realized at disposition may differ
materially from the net carrying values at the balance sheet dates. The
cash flows and market comparables used in this process are based on good
faith estimates and assumptions developed by management.
23 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CRITICAL ACCOUNTING POLICIES (CONTINUED)
Unanticipated events and circumstances may occur, and some assumptions
may not materialize; therefore, actual results may vary from the
estimates, and variances may be material. The Partnership may provide
additional write-downs, which could be material in subsequent years if
real estate markets or local economic conditions change.
USEFUL LIVES OF LONG-LIVED ASSETS. Building and improvements and certain
other long-lived assets are depreciated or amortized over their useful
lives. Depreciation and amortization are computed using the
straight-line method over the estimated useful life of the building and
improvements. The cost of properties represents the initial cost of the
properties to the Partnership plus acquisition and closing costs less
impairment adjustments.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") SFAS No. 142
"Goodwill and Other Intangible Assets." SFAS No. 142 addresses
accounting and reporting for intangible assets acquired, except for
those acquired in a business combination. SFAS No. 142 presumes that
goodwill and certain intangible assets have indefinite useful lives.
Accordingly, goodwill and certain intangibles are not be amortized but
rather will be tested at least annually for impairment. SFAS No. 142
also addresses accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. This
statement had no effect on the Partnership's consolidated financial
statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" and the accounting and reporting provisions of Accounting Principles
Board ("APB") Opinion No. 30, "Reporting the Results of Operations
-Reporting the Effects of a Disposal of a Business and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," for the
disposal of a segment of a business. This statement also amends
Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years. The provisions of this
statement generally are to be applied prospectively. As a result of this
statement, the Partnership has classified the sale of properties as
discontinued operations.
24 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
Technical Corrections," which updates, clarifies and simplifies existing
accounting pronouncements. In part, this statement rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt." FASB No. 145
is effective for fiscal years beginning after May 15, 2002. Upon
adoption, enterprises must reclassify prior period items that do not
meet the extraordinary item classification criteria in APB Opinion No.
30. The Partnership adopted this statement in 2002 and has included
$28,000 and $389,000 in early extinguishment of debt gains in interest
expense for the nine months ended September 30, 2003 and 2002,
respectively.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities
when they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard include
lease termination costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, plant closing
or other exit or disposal activity. SFAS No. 146 is effective
prospectively for exit and disposal activities initiated after December
31, 2002, with earlier adoption encouraged. This statement had no effect
on the Partnership's consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantors'
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." The Interpretation
elaborates on the disclosures to be made by a guarantor in its financial
statements about its obligations under certain guarantees that it has
issued. It also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. This Interpretation does
not prescribe a specific approach for subsequently measuring the
guarantor's recognized liability over the term of the related guarantee.
The disclosure provisions of this Interpretation were effective for the
Partnership's December 31, 2002 consolidated financial statements. The
initial recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002. This Interpretation had no
effect on the Partnership's consolidated financial statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities." This Interpretation clarifies the
application of existing accounting pronouncements to certain entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated
financial support from other parties. The provisions of the
Interpretation are immediately effective for all variable interests in
variable interest entities created after January 31, 2003, and the
Partnership needs to apply its provisions to any existing variable
interests in variable interest entities in 2003. This interpretation had
no impact on the Partnership's consolidated financial statements.
25 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation." In
particular, this statement (1) provides alternative methods of
transition for entities that voluntarily change to the fair value based
method of accounting for stock-based employee compensation, (2) amends
the disclosure provision of SFAS No. 123 to require prominent disclosure
about the effects on reported net income of an entity's accounting
decisions with respect to stock-based employee compensation and (3)
amends APB No. 28," Interim Financial Reporting," to require disclosure
about those effects in interim financial information. The transition
provisions of this statement are effective for financial statements for
fiscal years ending after December 15, 2002. The disclosure provisions
of this statement are effective for financial reports containing
condensed financial statements for interim periods beginning after
December 15, 2002. This statement had no effect on the Partnership's
consolidated financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133
on Derivative Instruments and Hedging Activities." This statement amends
and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The changes in this statement improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. In particular, this statement (1) clarifies
under what circumstances a contract with an initial net investment meets
the characteristic of a derivative discussed in SFAS No. 133, (2)
clarifies when a derivative contains a financing component, (3) amends
the definition of an underlying that is related to an asset, liability
or equity security to conform it to language used in FASB Interpretation
No. 45, and (4) amends certain other existing pronouncements. Those
changes will result in more consistent reporting of contracts as either
derivatives or hybrid instruments. This statement is effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The guidance should be
applied prospectively. The provisions of this statement that relate to
SFAS No. 133 implementation issues that have been effective for fiscal
quarters that began prior to June 15, 2003, should continue to be
applied in accordance with their respective effective dates. In
addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist, should
be applied to existing contracts as well as new contracts entered into
after June 30, 2003. This statement had no effect on the Partnership's
consolidated financial statements.
26 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." The statement improves the accounting for certain financial
instruments that under previous guidance, issuers could account for as
equity. The new statement requires that those instruments be classified
as liabilities in statements of financial position. SFAS No. 150 affects
the issuer's accounting for three types of freestanding financial
instruments. One type is mandatorily redeemable shares, which the
issuing company is obligated to buy back in exchange for cash or other
assets. A second type, which includes put options and forward purchase
contracts, involves instruments that do or may require the issuer to buy
back some of its shares in exchange for cash or other assets. The third
type of instruments that are liabilities under this statement is
obligations that can be settled with shares, the monetary value of which
is fixed, tied solely or predominantly to a variable such as a market
index, or varies inversely with the value of the issuers' shares. SFAS
No. 150 does not apply to features embedded in a financial instrument
that is not a derivative in its entirety. In addition to its
requirements for the classification and measurement of financial
instruments in its scope, SFAS No. 150 also requires disclosures about
alternative ways of settling the instruments and the capital structure
of entities, all of whose shares are mandatorily redeemable. Most of the
guidance in SFAS No. 150 is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective
at the beginning of the first interim period beginning after June 15,
2003. In October 2003, the FASB deferred, indefinitely, the application
of paragraphs 9 and 10 of SFAS No. 150 as it relates to mandatorily
redeemable non-controlling interests in consolidated subsidiaries that
would not be recorded as liabilities under SFAS No. 150 by such
subsidiaries. The remainder of this statement had no effect on the
Partnership's consolidated financial statements.
27 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership has both fixed and variable rate debt, as well as two
interest rate caps. All financial instruments were entered into for
other than trading purposes. A change in interest rates on the fixed
rate portion of the debt portfolio or the interest rate caps impacts the
net financial position, but has no impact on interest incurred or cash
flows. A change in interest rates on the variable portion of the debt
portfolio impacts the interest incurred and cash flows, but does not
impact the net financial instrument position.
At December 31, 2002, the Partnership had one loan which had a variable
interest rate. The loan which had an outstanding balance of $199.5
million at September 30, 2003, was obtained in January 2002 and has a
three-year term. Interest on the outstanding balance accrues at a rate
equal to, at the Partnership's option, either (i) 5.5% plus the greater
of 3.0% or the LIBOR rate (as defined) or (ii) 3.5% plus the greater of
5% or bank's prime rate. As a result, the minimum interest rate on the
loan is 8.5%. The Partnership purchased an interest rate cap on the loan
so that the interest rate would be capped at 9.0%, 10.5% and 12.5% in
years one, two and three, respectively.
To date, the Partnership has elected to pay the loan based on the LIBOR
rate. The following table shows the effect of a change in the LIBOR rate
over the next two years based on an 8.5% minimum rate and a maximum
based on the interest rate cap.
Change in LIBOR
(In thousands)
-----------------------------------------------
<1.9% 2.9% 3.9%(1) 5.9%(2)
Additional interest expense -- $ 2,000 $ 4,000 $ 8,000
==== ======= ======= =======
(1) A 3.9% change in LIBOR brings the total interest rate to the 10.5%
interest rate cap in year two.
(2) A 5.9% change in LIBOR brings the total interest rate to the 12.5%
interest rate cap in year three.
As of September 30, 2003, the Partnership has obtained one additional
loan which had a variable interest rate. The loan had an outstanding
balance of $21.0 million at September 30, 2003, was obtained in June 2003
and has a three-year term. Interest on the outstanding balance accrues at
LIBOR plus 2.875%. The Partnership purchased an interest rate cap on the
loan so that the interest rate would be capped at 8.175%. This loan was
refinanced in October 2003 at a fixed rate of interest.
The following table shows the effect of increases in the LIBOR rate.
Change in LIBOR
(In thousands)
------------------------------------------
1% 2% 3% 4% (1)
Additional interest expense $ 200 $ 400 $ 600 $ 800
===== ===== ===== =====
(1) Maximum increase.
28 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 4. CONTROLS AND PROCEDURES
The Partnership's management, with the participation of the
Partnership's Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of the end of
the period covered by this report. Based on such evaluation, the
Partnership's Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, the Partnership's
disclosure controls and procedures are effective.
There have not been any changes in the Partnership's internal controls
over financial reporting during the fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to
materially affect, the Partnership's internal controls over financial
reporting.
29 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 2002, an action was commenced in the Connecticut Superior Court
against, among others, the Partnership's general partner and various
affiliates of the Partnership's general partner. Plaintiffs are six
limited partners of five of the Newkirk Partnerships. The action
alleges, among other things, that the price paid to non-accredited
investors in connection with the Exchange was unfair and did not fairly
compensate them for the value of their partnership interests. The
complaint also alleges that the exchange values assigned in the Exchange
to certain assets contributed by affiliates of the Partnership's general
partner were too high in comparison to the exchange values assigned to
the Newkirk partnerships, that the option arrangement relating to the
Partnership's potential acquisition in the future of the T-2
Certificate, which represents an interest in a grantor trust, the
mortgage assets of which consist of subordinate mortgage notes secured
by the Partnership's real properties as well as other properties owned
by other partnerships that are controlled by affiliates of the
Partnership's general partner, was unfair to limited partners and that
the disclosure document used in connection with the Exchange contained
various misrepresentations and/or omissions of material facts. The
complaint seeks to have the action classified as a class action as well
as compensatory and punitive damages in an unspecified amount. In order
to avoid the expenses, distraction, and uncertainties of litigation, and
without conceding their view that the allegations of the complaint are
without merit, the defendants have executed an agreement in principal to
settle the litigation, subject to confirmatory discovery and
finalization of a formal settlement agreement, based on the following
material terms (only unitholders who are not affiliates of the general
partner of the Partnership will receive the consideration): (i) the
Newkirk Group shall convey to unitholders units in the Partnership equal
to 1% of the Partnership; (ii) shall convey to an escrow agent $1.5
million for the benefit of unitholders; (iii) the Partnership shall
convey $1.7 million to an escrow agent for the benefit of the
unitholders of the Newkirk Partnerships who received cash in the
Exchange; and (iv) theMLP and NK-CR Holdings LLC shall enter into an
agreement, subject to certain terms and conditions, relating to the
exercise of the discounted payoff options under the second mortgage
loans which will enable the Partnership to derive the benefit of the
discount payoff amounts. As part of the agreement, defendants have also
agreed not to object to payment of reasonable attorneys fees, expenses,
and incentive awards to be paid from the foregoing consideration.
Confirmatory discovery is currently proceeding, and a final settlement
agreement will be subject to review and approval by the Court after
notice to persons other than affiliates of defendants who were limited
partners at the time of the Exchange in the Newkirk Partnerships.
On December 31, 2002, a derivative action was commenced in the Dallas
County Texas District Court by a limited partner of Eastgar Associates,
L.P. ("Eastgar") against, among others, the general partners of Eastgar
and affiliates of the Newkirk Partnerships. The Partnership owns a 60.5%
limited partnership interest in Eastgar and also controls the general
partner of that partnership. The complaint alleges that the defendants
have charged Eastgar excessive management fees and have unfairly
prevented Eastgar from prepaying and refinancing its mortgage
indebtedness. The complaint seeks compensatory and punitive damages in
an unspecified amount, attorneys' fees and expenses, an accounting, and
a declaration of the parties' future rights and obligations regarding
management fees and the refinancing of mortgage indebtedness. In order
to avoid the expenses, distraction, and uncertainties of litigation, the
defendants have executed an agreement in principal to settle the
litigation for a payment by the defendants other than Eastgar of
$137,500 to Eastgar for distribution to Eastgar's limited partners other
than the Partnership or its affiliates, after payment from said amount
of plaintiffs' attorneys' fees and expenses. The settlement also sets
the management fees to be charged to Eastgar, subject to any changes
that Eastgar may approve in the future consistent with its fiduciary
duty. The settlement is subject to the approval of the court after
notice to the limited partners of Eastgar.
30 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibits required by Item 601 of Regulation S-K are filed herewith
or incorporated herein by reference and are listed in the attached
Exhibit Index.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the period ended
September 30, 2003.
31 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE NEWKIRK MASTER LIMITED PARTNERSHIP
BY: MLP GP LLC
General Partner
BY: NEWKIRK MLP CORP
Manager
BY: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
BY: /s/ Thomas C. Staples
Thomas C. Staples
Chief Financial Officer
Dated: November 13, 2003
32 0f 32
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Agreement and Plan of Merger between the Newkirk Master Limited
Partnership and each of the Merger Partnerships set forth on Schedule
A, dated December 6, 2001 (incorporated by reference to exhibit 2.1 of
the Partnership's Form 10 filed April 30, 2003).
2.2 Assignment and Assumption Agreement by and between Newkirk Stock LLC,
The Newkirk Master Limited Partnership, Newkirk NL Holdings LLC and
VNK Corp. dated as of December 26, 2001 (incorporated by reference to
exhibit 2.2 of the Partnership's Form 10 filed April 30, 2003).
2.3 Assignment and Assumption Agreement by and between Newkirk Eastgar
LLC, Newkirk Partner Interest LLC, The Newkirk Master Limited
Partnership and Newkirk MLP Unit LLC dated as of December 26, 2001
(incorporated by reference to exhibit 2.3 of the Partnership's Form 10
filed April 30, 2003).
2.4 Assignment and Assumption Agreement by and between Vornado Realty
L.P., Vornado Newkirk L.L.C., The Newkirk Master Limited Partnership,
and Newkirk MLP Unit LLC, dated as of December 26, 2001 (incorporated
by reference to exhibit 2.4 of the Partnership's Form 10 filed April
30, 2003).
2.5 Assignment and Assumption Agreement between Newkirk RE Associates LLC,
The Newkirk Master Limited Partnership, Newkirk RE Holdings and
Vornado Newkirk LLC dated as of December 26, 2001 (incorporated by
reference to exhibit 2.5 of the Partnership's Form 10 filed April 30,
2003).
2.6 Assignment and Assumption Agreement by and between Newkirk Associates
LLC, The Newkirk Master Limited Partnership, Newkirk NL Holdings LLC
and Vornado Newkirk L.L.C. dated as of December 26, 2001 (incorporated
by reference to exhibit 2.6 of the Partnership's Form 10 filed April
30, 2003).
2.7 Agreement and Plan of Merger by and between The Newkirk Master Limited
Partnership, Lanmar Associates Limited Partnership and Newkirk Lanmar
L.P., dated as of December 6, 2001 (incorporated by reference to
exhibit 2.7 of the Partnership's Form 10 filed April 30, 2003).
3. Certificate of Limited Partnership of the Newkirk Master Limited
Partnership (incorporated by reference to exhibit 3 of the
Partnership's Form 10 filed April 30, 2003).
4.1 Agreement of Limited Partnership of The Newkirk Master Limited
Partnership, by and among MLP GP LLC, Newkirk Manager Corp. and all
other persons who shall, pursuant to the Exchange or otherwise become
limited partners of the Partnership, dated as of October 23, 2001
(incorporated by reference to exhibit 4.1 of the Partnership's Form 10
filed April 30, 2003).
THE NEWKIRK MASTER LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 2003
EXHIBIT INDEX
(CONTINUED)
EXHIBIT DESCRIPTION
- ------- -----------
4.2 Additional provisions incorporated by reference into the Agreement of
Limited Partnership of the Newkirk Master Limited Partnership
(incorporated by reference to exhibit 4.2 of the Partnership's Form 10
filed April 30, 2003).
4.3 Limited Liability Agreement of MLP GP LLC (incorporated by reference
to exhibit 4.3 of the Partnership's Form 10 filed April 30, 2003).
31.1 Chief Executive Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer's Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certificate of Chief Executive Officer and Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.