FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 2006
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 0-2670
60 EAST 42ND ST. ASSOCIATES L.L.C.
(Exact name of registrant as specified in its charter)
A New York Limited Liability Company 13-6077181
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 East 42nd Street, New York, New York 10165
(Address of principal executive offices)
(Zip Code)
(212) 687-8700
(Registrant's telephone number, including area code)
N/A
(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 [ ].
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes [ ] No [ X ] .
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Statements of Operations
(Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30,
2006 2005 2006 2005
Revenues: | ||||
Basic rent, from a related party (Note C) | $ 830,527 | $707,736 | $2,428,819 | $2,048,112 |
Advance of additional rent, from a related party (Note C) | 263,450 | 263,450 | 790,350 | 790,350 |
Further additional rent from a related party (Note C) | 9,102,338 | 7,010,371 | 9,102,338 | 7,010,371 |
Total | 10,196,315 | 7,981,557 | 12,321,507 | 9,848,833 |
Dividend and interest income | 13,186 | 9,152 | 102,319 | 98,138 |
Total revenues | $10,209,501 | $7,990,709 | $12,423,826 | $9,946,971 |
Expenses: | ||||
Interest on mortgages (Note D ) | $ 837,713 | $710,888 | $2,513,138 | $2,128,250 |
Supervisory services, to a related party (Note E) | 7,845 | 7,845 | 23,535 | 23,535 |
Additional payment to supervisor, a related party (Note E) | 910,164 | 700,967 | 910,164 | 700,967 |
Depreciation of building improvements and equipment | 339,332 | 222,039 | 994,524 | 569,187 |
Amortization of leasing commissions | 72,428 | 46,782 | 200,964 | 113,838 |
Amortization of mortgage refinancing costs | 52,777 | 52,777 | 158,332 | 155,754 |
Fees | 0 | 0 | 0 | 3,890 |
Miscellaneous | 0 | 0 | 700 | 733 |
Total expenses | $2,220,259 | $1,741,298 | $4,801,357 | $3,696,154 |
Net Income | $7,989,242 | $6,249,411 | $ 7,622,469 | $6,250,817 |
Earnings per $10,000 participation unit, based on 700 participation units outstanding during each period |
$ 11,413.20 |
$ 8,927.73 |
$ 10,889.24 |
$ 8,929.74 |
Distributions per $10,000 participation unit consisted of the following: Income Return of capital Total distributions |
$ 373.72 0 $ 373.72 |
$ 373.72 0 $ 373.72 |
$ 1,121.16 0 $ 1,121.16 |
$ 1,121.16 0 $ 1,121.16 |
At September 30, 2006 and 2005, there were $7,000,000 of participation units outstanding.
See notes to the condensed financial statements.
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Balance Sheets
(Unaudited)
September30, 2006 | December31, 2005 | |||
Real estate: | ||||
Land | $ 7,240,000 | $ 7,240,000 | ||
Buildings | $16,960,000 | $16,960,000 | ||
Less, accumulated depreciation | 16,960,000 | - | 16,960,000 | - |
Building improvements and equipment | 56,003,958 | 47,818,612 | ||
Less, accumulated depreciation | 5,201,446 | 50,802,512 | 4,206,922 | 43,611,690 |
Total real estate | 58,042,512 | 50,851,690 | ||
Cash in banks and money market fund | 104,391 | 235,893 | ||
Receivable from participants re: NYS estimated tax | 137,762 | - | ||
Cash segregated for payment of building improvement costs | 998,139 | 3,040,307 | ||
Further additional rent due from lessee, a related party (Note B) | 9,102,338 | |||
Leasing commissions | 2,115,406 | 1,602,951 | ||
Less, accumulated amortization | 391,656 | 1,723,750 | 190,692 | 1,412,259 |
Mortgage refinancing costs | 2,111,087 | 2,111,087 | ||
Less, accumulated amortization | 386,568 | 1,724,519 | 228,237 | 1,882,850 |
Total assets | $71,833,411 | $57,422,999 | ||
Liabilities and Members' Deficiency: | ||||
Liabilities: | ||||
First mortgage payable | $62,750,000 | $58,250,000 | ||
Due to lessee, a related party | 6,469,411 | 6,408,534 | ||
Accrued additional payment to supervisor, a related party | 910,164 | - | ||
Building improvement costs payable | 3,474,730 | 1,392,898 | ||
Accrued mortgage interest and other expenses | 279,237 | 259,352 | ||
Total liabilities | 73,883,542 | 66,310,784 | ||
Members' deficiency | (2,050,131) | (8,887,785) | ||
Total liabilities and members' deficiency | $71,833,411 | $57,422,999 |
See notes to the condensed financial statements.
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Statement of Members' Deficiency
(Unaudited)
(CONTINUED)
For the Nine | For the Year | |
Months Ended | Ended | |
September 30, 2006 | December 31, 2005 | |
Members' deficiency: | ||
Members'deficiency, January 1, | $(8,887,785) | $(7,686,429) |
Add net income: | ||
January 1, 2006 through September 30, 2006 | 7,622,469 | - |
January 1, 2005 through December 31, 2005 | - | 6,153,768 |
(1,265,316) | (1,532,661) | |
Less distributions: | ||
Monthly distributions: | ||
January 1, 2006 through September 30, 2006 | 784,815 | - |
January 1, 2005 through December 31, 2005 | - | 1,046,420 |
Additional distribution on November 30, 2005 | - | 6,308,704 |
Total distributions | 784,815 | 7,355,124 |
Members' deficiency: | ||
September 30, 2006 | $(2,050,131) | |
December 31, 2005 | $(8,887,785) |
See notes to the condensed financial statements.
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Statements of Cash Flows
(Unaudited)
January 1, 2006 January 1, 2005
through through
September 30, 2006September 30, 2005
Cash flows from operating activities: | ||
Net income | $7,622,469 | $ 6,250,817 |
Adjustments to reconcile net income to net cash provided by ) operating activities: | ||
Depreciation of building improvements and equipment | 994,524 | 569,187 |
Amortization of leasing commissions | 200,964 | 113,838 |
Amortization of mortgage refinancing costs | 158,332 | 155,754 |
Changes in operating assets and liabilities: | ||
Change in further additional rent due from lessee | (9,102,338) | (7,010,371) |
Change in leasing commissions | (512,455) | (719,868) |
Change in accrued additional payment to supervisor | 910,164 | 700,967 |
Change in accrued mortgage interest and other expenses | 19,885 | (6,303) |
Net cash provided by operating activities | 291,545 | 54,021 |
Cash flows from investing activities: | ||
Purchase of building improvements and equipment | (6,549,487) | (13,840,972) |
Change in receivable from participants | (137,762) | (139,100) |
Change in cash segregated for payment of building improvement costs | 2,042,168 | 9,417,168 |
Net cash used in investing activities | (4,645,081) | (4,562,904) |
Cash flows from financing activities: | ||
Proceeds from refinancing | 4,500,000 | 4,250,000 |
Payments for refinancing costs | - | (55,742) |
Advances from lessee and others for building improvements | 506,849 | 1,143,766 |
Cash distributions | (784,815) | (784,815) |
Net cash provided by financing activities | 4,222,034 | 4,553,209 |
Net increase (decrease) in cash and cash equivalents | (131,502) | 44,326 |
Cash and cash equivalents, beginning of period | 235,893 | 325,148 |
Cash and cash equivalents, end of period | $ 104,391 | $ 369,474 |
Cash paid for: | ||
Interest | $2,493,253 | $2,109,337 |
See notes to the condensed financial statements.
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Statements of Cash Flows
(Unaudited)
For the Nine Months
Ended September 30,
2006 | 2005 | |
Supplemental disclosure of noncash investing and financing activities: | ||
Building improvements purchased through financing agreement with lessee and others | $1,635,859 | $ - |
See notes to the condensed financial statements.
Notes to Condensed Financial Statements (Unaudited)
Note A Interim Period Reporting
In the opinion of management, the accompanying unaudited condensed financial statements of 60 East 42nd St. Associates L.L.C. (the "Registrant") reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of September 30, 2006 and its results of operations for the three and nine months ended September 30, 2006 and 2005, and its cash flows for the nine months ended September 30, 2006 and 2005. Information included in the condensed balance sheet as of December 31, 2005 has been derived from the audited balance sheet included in Registrant's Form 10-K for the year ended December 31, 2005 (the "10-K") previously filed with the Securities and Exchange Commission (the "SEC"). Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America hav e been condensed or omitted from these financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto and the other information contained in the 10-K. The results of operations for the three and nine months ended September 30, 2006 are not necessarily indicative of the results to be expected for the full year.
Note B Organization
Registrant was originally organized as a partnership on September 25, 1958. On October 1, 1958, Registrant acquired fee title to the Lincoln Building (the "Building") and the land thereunder, located at 60 East 42nd Street, New York, New York (the "Property"). On November 28, 2001, Registrant converted to a limited liability company under New York law and is now known as 60 East 42nd St. Associates L.L.C. The conversion did not change any aspect of the assets and operations of Registrant other than to protect its participants from liability to a third party. As of October 2, 2005, Registrant's members are Peter L. Malkin, Anthony E. Malkin and Thomas N. Keltner, Jr. (individually, a "Member" and, collectively, the "Members"), each of whom also acts as an agent for holders of participations in the Registrant (individually, a "Participant" and, collectively, "Participants").
Note C Lease
Registrant leases the Property to Lincoln Building Associates L.L.C. ("Lessee") under a long-term net operating lease (the "Lease"), the current term of which expires on September 30, 2008. Lessee is a limited liability company whose members consist of, among others, entities for the benefit of members of Peter L. Malkin's family. The members in Registrant hold senior positions at Wien & Malkin LLC (the "Supervisor"), 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and to Lessee. See Note E below.
The Lease has one additional 25-year term which, if exercised by Lessee, will extend the Lease until September 30, 2033. In 1999, the Participants in Registrant and the members in Lessee consented to a building improvement program (the "Program") estimated to cost approximately $22,800,000.In 2000, the Participants and the Lessee approved an increase in the program from $22,800,000 to approximately $28,000,000 under substantially the same conditions as had previously been approved. To induce the Lessee to approve the Program, Registrant agreed to grant to the Lessee, upon completion of the Program, the right to further extensions of the Lease to 2083. The Program was further increased in 2004 to up to $100,000,000. Such increase would extend the lease beyond 2083, based on the net present benefit to Registrant of the improvements made. As of September 30, 2006, the Registrant had incurred or accrued costs related to the Program of approximately $56,000,000 and estimated that the program will be completed by 2008 and that costs upon completion will be approximately $88,000,000.
The Lease, as modified, provides that Lessee is required to pay Registrant:
(i) annual basic rent (the "Basic Rent") equal to the sum of $24,000 for supervisory services payable to Supervisor plus the constant installment payments of interest and amortization (excluding any balloon principal due at maturity) payable during such year under all mortgages to which the Lease is subordinate, provided that the aggregate principal balance of all mortgages now or hereafter placed on the Property does not exceed $100,000,000 (in accordance with the 2004 Program approved by the Participants), plus refinancing costs.
(ii) annual additional rent (the "Additional Rent") equal to, on an annual basis, the lesser of (x) Lessee's net operating income for the lease year ending September 30 or (y) $1,053,800 and further additional rent ("Further Additional Rent") equal to 50% of any remaining balance of Lessee's net operating income for such lease year. (Lessee has no obligation to make any payment of Additional Rent or Further Additional Rent until after Lessee has recouped any cumulative operating loss accruing from and after September 30, 1977. There is currently no accumulated operating loss against which to offset payment of Additional Rent or Further Additional Rent.)
(iii) An advance against Additional Rent equal to, on an annual basis, the lesser of (x) Lessee's net operating income for the preceding lease year or (y) $1,053,800, which, in the latter amount, will permit basic distributions to Participants at an annual rate of approximately 14.95% per annum on their remaining cash investment in Registrant; provided, however, if such advances exceed Lessee's net operating income for any Lease year, advances otherwise required during the subsequent lease year shall be reduced by an amount equal to such excess until Lessee shall have recovered, through retention of net operating income, the full amount of such excess. After the Participants have received distributions equal to a return of 14% per annum on their original cash investment, $7,380 is paid to Supervisor from the advances against Additional Rent.
Further Additional Rent income is recognized when earned from the Lessee, at the close of the lease year ending September 30. Such income is not determinable until the Lessee, pursuant to the Lease, renders to Registrant a report on the operation of the Property. Further Additional Rent for the lease year ended September 30, 2006 was $9,102,338. After deducting a reserve of $700 for annual New York State limited liability company filing fees and $910,164 as an additional payment to Supervisor, the balance of $8,191,474 was distributed to the Participants on November 30, 2006.
Note D First Mortgage Payable
On November 29, 2004, a new first mortgage was placed on the Property in the amount of $84,000,000 with Prudential Insurance Company of America. At closing, $49,000,000 was drawn to pay off the former first mortgage with Morgan Guaranty Trust Company in the amount of $12,020,814 and the second mortgage in the amount of $27,979,186 with Emigrant Savings Bank. The remaining proceeds of $9,000,000 and all subsequent draws will be used to pay for refinancing costs and capital improvements as needed. The initial draw of $49,000,000 and all subsequent draws require constant equal monthly payments of interest only, at the rate of 5.34% per annum, until July 5, 2007. Commencing August 5, 2007, the Registrant is required to repay the full $84,000,000 in equal monthly payments of $507,838 applied to interest and then principal calculated on a 25-year amortization schedule. An additional $9,250,000 was drawn in 2005 and $4,500,000 was drawn during the nine months ended September 30, 2006. Accordingly , Registrant may draw an additional $21,250,000 after September 30, 2006. The mortgage matures on November 5, 2014.
The mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the mortgage is paid in full during the last 60 days of the term.
The refinancing costs of $2,111,087 were capitalized by Registrant and are being amortized ratably over the term of the mortgage.
Note E Supervisory Services
Registrant pays Supervisor for supervisory services and disbursements. Supervisor receives as compensation an annual fee of $24,000, payable in equal monthly installments ("Basic Payment"). Supervisor also receives 10% of all distributions to Participants in any year in excess of the amount representing a return to them at the rate of 14.95% per annum on their remaining cash investment ("Additional Payment"). For tax purposes, such payment is recognized as a profits interest, and the Supervisor is treated as a partner, all without modifying each Participant's distributive share of reportable income and cash distribution. Supervisor receives $7,380 a year as an advance against the Additional Payment, which Registrant expenses monthly. For the nine months ended September 30, 2006 and 2005, Registrant incurred further charges for the Additional Payment of $910,164 and $700,967, respectively.
The supervisory services provided to Registrant by Supervisor include, but are not limited to, providing or coordinating counsel services to Registrant, maintaining all of its entity and Participant records, performing physical inspections of the Building, reviewing insurance coverage and conducting annual supervisory review meetings, receipt of monthly rent from Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, active review of financial statements submitted to Registrant by Lessee and financial statements audited by and tax information prepared by Registrant's independent registered public accounting firm, and distribution of related materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the Securities and Exchange Commission and applicable state authorities.
Registrant also pays Supervisor for other services at hourly rates. No remuneration was paid by Registrant during the nine-month period ended September 30, 2006 to any of the Members as such.
Reference is made to Note C above for a description of the terms of the Lease between Registrant and Lessee. As of September 30, 2006, Peter L. Malkin owned a member interest in Lessee. The respective interests, if any, of the Members in Registrant and Lessee arise solely from ownership of their respective Participations in Registrant and, in the case of Peter L. Malkin, his individual ownership of a Member interest in Lessee and Registrant. The Members as such receive no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or members in Lessee. However, each Member who holds a position at Supervisor (which supervises Registrant and Lessee) may, by reason of his position at Supervisor, receive income attributable to supervisory services or other payments made to Supervisor by Registrant and Lessee.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Forward Looking Statements
Readers of this discussion are advised that the discussion should be read in conjunction with the financial statements of Registrant (including related notes thereto) appearing elsewhere in this Form 10-Q. Certain statements in this discussion may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Registrant's current expectations regarding future results of operations, economic performance, financial condition andachievements of Registrant, and do not relate strictly to historical or current facts. Registrant has tried, wherever possible, to identify these forward-looking statements by using words such as "believe", "expect", "anticipate", "intend", "plan", "estimate" or words of similar meaning.
Although Registrant believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, which may cause the actual results to differ materially from those projected. Such factors include, but are not limited to, the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents and the availability of financing; adverse changes in Registrant's real estate market, including, among other things, competition with other real estate owners, risks of real estate development and acquisitions; governmental actions and initiatives; and environmental/safety requirements.
Financial Condition and Results of Operations
Registrant was organized for the purpose of acquiring the Property subject to a net operating lease held by Lessee. Registrant is required to pay, from Basic Rent under the Lease, mortgage charges and amounts for supervisory services. Registrant is required to pay from Additional Rent and Further Additional Rent additional amounts to Supervisor and then to distribute the balance of such Additional Rent and Further Additional Rent to the Participants. See Note C to the condensed financial statements herein. Under the Lease, Lessee has assumed sole responsibility for the condition, operation, repair, maintenance and management of the Property. Registrant is not required to maintain substantial reserves or otherwise maintain liquid assets to defray any operating expenses of the Property.
Registrant does not pay dividends. During the nine month period ended September 30, 2006, Registrant made regular monthly distributions of $124.57 for each $10,000 participation ($1,494.89 per annum for each $10,000 participation). There are no restrictions on Registrant's present or future ability to make distributions; however, the amount of such distributions, particularly distributions of Additional Rent and Further Additional Rent, depends on the ability of Lessee to make payments of Basic Rent, Additional Rent and Further Additional Rent to Registrant. Registrant expects to make distributions so long as it receives the payments provided for under the Lease.
On November 30, 2006, Registrant made an additional distribution of $11,702.11 for each $10,000 Participation. Such distribution represented Further Additional Rent paid by the Lessee in accordance with the terms of the Lease after the Additional Payment to Supervisor and annual New York State Limited Liability Company filing fees. See Notes C and E to the condensed financial statements herein.
Registrant's results of operations are affected primarily by the amount of rent payable to it under the Lease. The amount of Additional Rent and Further Additional Rent payable to Registrant are affected by the New York City economy and real estate rental market, which is difficult for management to forecast. The following summarizes, with respect to the current period and the corresponding period of the previous year, the material factors regarding Registrant's results of operations for such periods:
Total revenues increased for the nine-month period ended September 30, 2006, as compared with the nine-month period ended September 30, 2005. Such increase is the result of an increase in Basic Rent income to cover an increase in debt service, an increase in interest and dividend income and an increase in Further Additional Rent for the period ended September 30, 2006, as compared with the period ended September 30, 2005.
Total expenses increased for the nine-month period ended September 30, 2006, as compared with the nine-month period ended September 30, 2005. Such increase is the net result primarily of an increase in interest on the mortgage paid by Registrant, an increase in the additional payment to supervisor, depreciation of building improvements and equipment as a result of the improvement program and amortization of leasing commissions for the period ended September 30, 2006, as compared with the period ended September 30, 2005.
Liquidity and Capital Resources
Registrant's liquidity has decreased at September 30, 2006as compared with September 30, 2005 as the result of payments made under the improvement program. However, Registrant has the ability to draw as of September 30, 2006 an additional $21,250,000 on its first mortgage for payment of improvements. Costs relating to the improvement program were funded from proceeds of the first mortgage of $84,000,000 of which $62,750,000 has been drawn at September 30, 2006. Registrant may from time to time set cash aside for contingent liabilities. As of September 30, 2006, the Registrant had incurred or accrued costs related to the Program of approximately $56,000,000 and estimated that costs upon completion will be approximately $88,000,000.
If the Property continues to generate an annual net profit in future years comparable to that in past years, and if current real estate trends continue in the geographic area in which the Property is located, Registrant anticipates that the value of the Property would be sufficient to cover the Mortgage balance at maturity.
Registrant anticipates that funds for working capital for the Property will be provided from rental payments received from the Lessee and, to the extent necessary, from additional capital investment by the Members in Lessee and/or external financing. However, as noted above, Registrant has no requirement to maintain substantial reserves to defray any operating expenses of the Property.
Inflation
Registrant believes that there has been no material change in the impact of inflation on its operations since the filing of its report on Form 10-K for the year ended December 31, 2005.
Security Ownership
As of September 30, 2006, the Members in Registrant owned of record and beneficially an aggregate $28,333 of Participations in Registrant, representing 0.40% of the currently outstanding Participations therein.
In addition, as of September 30, 2006, certain of the Members in Registrant held additional Participations in Registrant as follows:
Peter L. Malkin owned of record as trustee or co-trustee an aggregate of $169,048 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations.
Entities for the benefit of members of Peter L. Malkin's family owned of record and beneficially $107,500 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations, except that related family trusts or entities are required to complete scheduled payments to him.
Anthony E. Malkin owned of record as co-trustee an aggregate of $25,000 of Participations. Anthony E. Malkin disclaims any beneficial ownership of such Participations.
Item 4. Controls and Procedures.
- Evaluation of disclosure controls and procedures. The person who functions in the capacity of Registrant's chief executive officer and Registrant's chief financial officer, after evaluating the effectiveness of Registrant's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of September 30, 2006, the end of the period covered by this report, has concluded that Registrant's disclosure controls and procedures were effective and designed to ensure that material information relating to Registrant would be made known to him by others within those entities on a timely basis.
- Changes in internal controls over financial reporting. There were no changes in Registrant's internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to affect, the Registrant's internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The property of Registrant was the subject of the following material litigation:
Wien & Malkin LLC and Peter L. Malkin, a member in Registrant, have been engaged in a proceeding with Helmsley-Spear, Inc. commenced in 1997 concerning the management, leasing and supervision of the property subject to the Lease, in which Wien & Malkin and Mr. Malkin have sought an order removing Helmsley-Spear. In this connection, certain costs for legal and professional fees and other expenses have been paid and incurred by Wien & Malkin and Mr. Malkin, and certain costs for filings to terminate such proceeding may be incurred in the future. Wien & Malkin and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) a competent tribunal authorizes payment or (b) an investor voluntarily agrees that his or her proportionate share be paid. Accordingly, Registrant's allocable share of such costs is as yet undetermined, and Registrant has not provided for the expense and related liability with respect to such costs in these financial statements .
The original action was commenced in June 1997 and was referred to arbitration. The March 30, 2001 decision of the Arbitrators, which was confirmed by the court, (i) reaffirmed the right of the investors in the Lessee to vote to terminate Helmsley-Spear, Inc. without cause, (ii) dismissed Helmsley-Spear's claims against Wien & Malkin and Peter L. Malkin, and (iii) rejected the termination of Helmsley-Spear, Inc. for cause. The parts of the decision under appeal were initially affirmed by the Appellate Division, and the New York Court of Appeals declined to review such ruling. On October 6, 2003, the United States Supreme Court granted Wien & Malkin's petition, vacated the judgment of the Appellate Division and remanded the case to the New York court.
On October 14, 2004, the Appellate Division issued a unanimous decision reversing the Arbitrators and deciding (i) that there was a covert assignment without Lessee's knowledge or consent and (ii) that the corporation controlled by Irving Schneider and now named "Helmsley-Spear," which has represented itself to be Lessee's managing agent since September 1997, in fact never received a valid assignment to become Lessee's managing agent. Lessee's previously authorized managing agent, the original corporation named "Helmsley-Spear," was owned by Harry B. Helmsley and is no longer active. On February 21, 2006 the Court of Appeals reversed the decision of the Appellate Division and reinstated the decision of the Arbitrators, including items (i), (ii), and (iii) of the preceding paragraph. On July 21, 2006, Wien & Malkin filed a certiorari petition seeking review by the U.S. Supreme Court, which it later withdrew as part of an August 29, 2006 settlement agreement terminati ng claims broadly by exchange of general releases between Helmsley-Spear, Irving Schneider, and their related parties, on one hand, and Leona M. Helmsley, Peter L. Malkin, Wien & Malkin, various property owners supervised by Wien & Malkin, and their related parties, on the other.
After the September 24, 1997 purported assignment of Lessee's management, the Schneider corporation representing itself as "Helmsley-Spear" received $3,009,861 of overrides from Lessee. After the October 14, 2004 Appellate Division decision determined such assignment was invalid, Wien & Malkin as supervisor made written demand that the Schneider corporation return those overrides for the benefit of Lessee investors. Following the February 21, 2006 ruling of the Court of Appeals reversing the Appellate Division, treatment of these overrides awaited final decision after any appeal. Any claim for such refund was suspended pending appeal and then was permanently released as part of an exchange of mutual general releases between Helmsley-Spear and Lessee under the August 29, 2006 settlement agreement.
In January 1998, Irving Schneider, who is one of the controlling principals of Helmsley-Spear and has no record or beneficial interest in Registrant or the Lessee, brought litigation against Lessee's supervisor, Wien & Malkin and Peter L. Malkin (or his affiliate), claiming misconduct and seeking damages and disqualification from performing services for the Lessee. In March 2002, the court dismissed Mr. Schneider's claims. Although Mr. Schneider thereafter appealed the dismissal, the claim was withdrawn prior to 2006 and is no longer pending.
At the Lessee's May 20, 2002 special meeting, a vote of the investors was conducted on proposals for the removal without cause of Helmsley-Spear as managing and leasing agent and its replacement by a designated independent firm, including payment by the Lessee of the expenses for the preparation of the solicitation statement, the solicitation of votes, and the implementation of the new program. On May 21, 2002, the proponents of the proposals, Peter L. Malkin and Wien & Malkin, filed a court application to determine and confirm all investors' votes for removal without cause and replacement and to set the final date for Helmsley-Spear's termination. The court confirmed such votes and ruled that Helmsley-Spear had been discharged and since November 20, 2002, Helmsley-Spear has not been the managing and leasing agent and has been replaced by the firm now known as Newmark Knight Frank. Under the August 29, 2006 settlement agreement, Helmsley-Spear withdrew any challenge to its replacement as Lessee's managing and leasing agent.
In accord with the Lessee's approval, the expenses for the preparation of the solicitation statement, the solicitation of votes, and the implementation of the new program are being paid by the Lessee. Such payments have totaled $285,780 through September 30, 2006 (including fees of $75,000 plus disbursements of $7,212 to Wien & Malkin LLC).
Item 6. Exhibits
The exhibits hereto are being incorporated by reference.
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.
The individual signing this report on behalf of Registrant is Attorney-in-Fact for Registrant and each of the Members in Registrant, pursuant to Powers of Attorney, dated October 9, 2003, October 22, 2003 and October 23, 2003 (collectively, the "Power").
60 EAST 42ND ST. ASSOCIATES L.L.C.
(Registrant)
By: /s/ Mark Labell
Mark Labell, Attorney-in-Fact*
Dated: January 26, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned as Attorney-in-Fact for each of the Members in Registrant, pursuant to the Power, on behalf of Registrant on the date indicated.
By: /s/ Mark Labell
Mark Labell, Attorney-in-Fact*
Dated: January 26, 2007
- Mr. Labell supervises accounting functions for Registrant.
EXHIBIT INDEX
Number | Document | Page* |
3 (a) | Attached hereto as Exhibit 3 (c) is Registrant's Consent and Operating Agreement dated as of November 28, 2001 as a Limited Liability Company, which incorporates by reference the Registrant's prior Partnership Agreement, dated September 25, 1958, which was filed by letter dated March 31, 1981 (Commission File No. 0-2670) filed as Exhibit No. 1 to Registrant's Registraion Statement on Form S-1 as amended (the "Registration Statement"), and is itself incorporated by reference as an exhibit hereto. | |
3 (b) | Amended Business Certificate of Registrant filed with the Clerk of New York County on November 28, 1997, reflecting a change in the Partners of Registrant, was filed as Exhibit 3(b) to Registrant's 10-Q for the quarter ended March 31, 1998, and is incorporated by reference as an exhibit hereto. | |
3 (c) | Registrant's Consent and Operating Agreement dated as of November 28, 2001 | |
3 (d) | Certificate of Conversion of Registrant to a limited liability company dated November 28, 2001 filed with the New York Secretary of State on December 3, 2001. | |
13 (a) | Letter to Participants dated May 15, 2006 and supplementary financial reports for the fiscal year ended December 31, 2005. The foregoing material shall not be deemed "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934.
EXHIBIT INDEX | |
Number | Document | Page* |
24 | Powers of Attorney dated October 9, 2003, October 22, 2003 and October 23, 2003 between Partners of Registrant and Mark Labell which is filed as Exhibit 24 to Registrant's 10-Q for the quarter ended September 30, 2003 and is incorporated by reference as an exhibit hereto. | |
31.1 | Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* Page references are based on sequential numbering system.
Exhibit 31.1
CERTIFICATIONS
I, Mark Labell, certify that:
- I have reviewed this report on Form 10-Q of 60 East 42nd St. Associates L.L.C.;
- Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
- Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
- The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
- designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
- evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
- disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
- The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
- all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
- any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: January 26, 2007
By /s/ Mark Labell
Name: Mark Labell
Title: Senior Vice President, Finance of Wien & Malkin LLC, Supervisor of 60 East 42nd St. Associates L.L.C.
Exhibit 31.2
CERTIFICATIONS
I, Mark Labell, certify that:
- I have reviewed this quarterly report on Form 10-Q of 60 East 42nd St. Associates L.L.C.;
- Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
- Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
- The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
- Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
- Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
- Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
- The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
- all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
- any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: January 26, 2007
By /s/ Mark Labell
Name: Mark Labell
Title:Senior Member of Financial/Accounting Staff of Wien & Malkin LLC, Supervisor of 60 East 42nd St. Associates L.L.C.
Exhibit 32.1
Certification Pursuant to 18 U.S.C., Section 1350 as adopted
Pursuant to Section 906
of Sarbanes - Oxley Act of 2002
The undersigned, Mark Labell, is signing this Chief Executive Officer certification as Senior Vice President, Finance of Wien & Malkin LLC, the supervisor* of 60 East 42nd St. Associates L.L.C. ("Registrant") to certify that:
- the Quarterly Report on Form 10-Q of Registrant for the period ended September 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
- the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.
Dated: January 26, 2007
By /s/ Mark Labell
Mark Labell
Wien & Malkin LLC, Supervisor
*Registrant's organizational documents do not provide for a Chief Executive Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company which is supervised by Wien & Malkin LLC. Accordingly, this Chief Executive Officer certification is being signed by a Senior Vice President, Finance of Registrant's supervisor.
Exhibit 32.2
Certification Pursuant to 18 U.S.C., Section 1350 as adopted
Pursuant to Section 906
of Sarbanes - Oxley Act of 2002
The undersigned, Mark Labell, is signing this Chief Financial Officer certification as a senior member of the financial/accounting staff of Wien & Malkin LLC, the supervisor* of 60 East 42nd St. Associates L.L.C. ("Registrant"), to certify that:
- the Quarterly Report on Form 10-Q of Registrant for the period ended September 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
- the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.
Dated: January 26, 2007
By /s/ Mark Labell
Mark Labell
Wien & Malkin LLC, Supervisor
*Registrant's organizational documents do not provide for a Chief Financial Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company which is supervised by Wien & Malkin LLC. Accordingly, this Chief Financial Officer certification is being signed by a senior member of the financial/accounting staff of Registrant's supervisor.