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, 1995
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
(Exact name of registrant as specified in its charter)
A New York Partnership 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 [ ].
An Exhibit Index is located on Page 12 of this Report.
Number of pages (including exhibits) in this filing: 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
60 East 42nd St. Associates
Condensed Statement of Income
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
Income:
Basic rent from a related
party (Note B) $ 271,961 $ 278,331 $ 815,881 $ 844,368
Additional rent from a related
party (Note B) 263,450 263,450 790,350 790,350
Further additional rent
income from a related
party (Note B) 1,565,928 2,202,847 1,565,928 2,202,847
---------- ---------- ---------- ----------
Total rent income 2,101,339 2,744,628 3,172,159 3,837,565
---------- ---------- ---------- ----------
Expenses:
Interest on mortgage (Note B) 265,961 263,057 797,881 790,067
Supervisory services, to a
related party (Note C) 164,438 203,178 180,128 218,868
Amortization of mortgage
refinancing costs 6,194 11,036 18,582 33,104
---------- ---------- ---------- ----------
Total expenses 436,593 477,271 996,591 1,042,039
---------- ---------- ---------- ----------
Net income $1,664,746 $2,267,357 $2,175,568 $2,795,526
========== ========== ========== ==========
Earnings per $10,000 participa-
tion unit, based on 700 parti-
cipation units outstanding
during the year $2,378.21 $3,239.08 $3,107.95 $3,993.61
========= ========= ========= =========
Distributions per $10,000 parti-
cipation consisted of the
following:
Income $2,378.21 $3,239.08 $3,107.95 $3,993.61
Decrease in capital deficit (2,004.49) (2,865.36) (1,986.79)
(2,872.45)
--------- --------- --------- ----------
Total distributions $ 373.72 $ 373.72 $1,121.16 $1,121.16
========= ========= ========= ==========
At September 30, 1995 and 1994, there were $7,000,000 of participations
outstanding.
60 East 42nd St. Associates 3.
September 30, 1995
60 East 42nd St. Associates
Condensed Balance Sheet
(Unaudited)
September 30, 1995 December 31, 1994
Assets
Current assets:
Cash $ 87,879 $ 176,532
Further additional rent
due from a related
party (Note B) 1,440,928 -0-
----------- -----------
Total current assets 1,528,807 176,532
Real estate
Land 7,240,000 7,240,000
Buildings and Building Improvements 18,534,135 18,534,135
Less, allowance for depreciation 18,534,135 18,534,135
----------- -----------
-0- -0-
Mortgage refinancing costs 249,522 249,522
Less, allowance for amortization 24,487 5,905
------------ ---------
225,035 243,617
----------- -----------
Total assets $ 8,993,842 $ 7,660,149
=========== ===========
Liabilities and Capital
Current liabilities
Accrued interest payable $ -0- $ 88,653
Accrued expense, to a related party (Note C) 31,593 -0-
----------- -----------
Total current liabilities 31,593 88,653
Long-term debt 12,020,814 12,020,814
Capital
Capital deficit, January 1, (4,449,318) (4,696,133)
Add, Net income:
January 1, 1995 through September 30, 1995 2,175,568 -0-
January 1, 1994 through December 31, 1994 -0- 3,051,227
----------- -----------
(2,273,750) (1,644,906)
----------- -----------
Less, Distributions:
Monthly distributions,
January 1, 1995 through September 30, 1995 784,815 -0-
January 1, 1994 through December 31, 1994 -0- 1,046,420
Distribution on November 30, 1994 of
Additional Rent for the lease year
ended September 30, 1994 -0- 1,757,992
----------- -----------
Total distributions 784,815 2,804,412
----------- -----------
Capital (deficit)
September 30, 1995 (3,058,565) -0-
December 31, 1994 -0- (4,449,318)
----------- -----------
Total liabilities and capital:
September 30, 1995 $ 8,993,842 -0-
December 31, 1994 -0- $ 7,660,149
=========== ===========
60 East 42nd St. Associates 4.
September 30, 1995
60 East 42nd St. Associates
Condensed Statements of Cash Flows
(Unaudited)
January 1, 1995 January 1, 1994
through through
September 30, 1995 September 30, 1994
Cash flows from operating activities:
Net income $2,175,568 $2,795,526
Adjustments to reconcile net income
to cash provided by operating
activities:
Amortization of mortgage refinancing
costs 18,582 33,104
Change in accrued interest payable (88,653) (296)
Change in accrued expenses 31,593 45,333
Change in additional rent due (1,440,928) (1,812,347)
Change in due to lessee -0- 4,688
---------- ----------
Net cash provided by operating
activities 696,162 1,066,008
---------- ----------
Cash flows from financing activities:
Cash distributions (784,815) (784,815)
Deposit with mortgagee -0- (240,500)
Principal payments on long-term debt -0- (40,693)
---------- ----------
Net cash used in financing
activities (784,815) (1,066,008)
---------- ----------
Net increase (decrease) in cash (88,653) -0-
Cash, beginning of period 176,532 180,217
---------- ----------
Cash, end of period $ 87,879 $ 180,217
========== ==========
January 1, 1995 January 1, 1994
through through
September 30, 1995 September 30, 1994
Cash paid for:
Interest $ 886,534 $ 790,363
========== ==========
60 East 42nd St. Associates 5.
September 30, 1995
Notes to Condensed Financial Statements (Unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial position,
results of operations and statement of cash flows in conformity
with generally accepted accounting principles. The accompanying
unaudited condensed financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the
opinion of the partners in Registrant, necessary for a fair
statement of the results for such interim periods. The partners
in Registrant believe that the accompanying unaudited condensed
financial statements and the notes thereto fairly disclose the
financial condition and results of Registrant's operations for the
periods indicated and are adequate to make the information
presented therein not misleading.
Note B - Interim Period Reporting
The results for interim periods are not necessarily
indicative of the results to be expected for a full year.
Registrant is a New York partnership which was organized
on September 25, 1958 and which owns fee title to the Lincoln
Building and the land thereunder, located at 60 East 42nd Street,
New York, New York 10165 (the "Property"). Registrant's partners
are Donald A. Bettex, Ralph W. Felsten, Stanley Katzman, Peter L.
Malkin, Martin D. Newman, Melvyn H. Halper and C. Michael Spero,
(collectively the "Partners"), each of whom also acts as an agent
for holders of participations (the "Participants") in their
respective partnership interests in Registrant.
Registrant leases the Property to Lincoln Building
Associates ("Lessee") under a long-term net operating lease (the
"Lease"), the current term of which expires on September 30, 2008.
(There is one additional 25-year term which, if exercised, will
extend the Lease until September 30, 2033.) Lessee is a
partnership whose partners consist of, among others, Mr. Malkin.
The Partners are also members of the law firm of Wien, Malkin &
Bettex, 60 East 42nd Street, New York, New York, counsel to
Registrant and Lessee ("Counsel"). See Note C of this Item 1
("Note C").
The Lease, as modified, provides that Lessee is required
to pay Registrant:
(i) an annual basic rent of $1,087,842 (the "Basic
Rent"), which is equal to the sum of $1,063,842, the constant
annual charges on the first mortgage calculated in accordance with
the terms of the Lease plus $24,000 for supervisory services
payable to Counsel.
60 East 42nd St. Associates 6.
September 30, 1995
(ii) (A) additional rent (the "Additional Rent") equal
to the lesser of (x) Lessee's net operating income for the
preceding lease year or (y) $1,053,800 and (B) further additional
rent (the "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.)
(iii) as an advance against Additional Rent, an amount
which will permit basic distributions to Participants at the
annual rate of 10% 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.
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 certified report on the
operation of the Property. Further Additional Rent for the lease
year ended September 30, 1995 was $1,565,928. After payment of
$156,593 to Counsel as an additional payment for supervisory
services, the balance of $1,409,335 will be distributed to the
Participants on November 30, 1995.
A new first mortgage loan on the Property in the
original principal amount of $12,020,814 was closed on October 6,
1994 (the "Mortgage"). Annual Mortgage charges are $1,063,842,
payable in equal monthly installments of $88,654, representing
interest only at the rate of 8.85% per annum. The Mortgage will
mature on October 31, 2004 and is prepayable in whole after
October 6, 1995 with a penalty providing interest protection to
the mortgagee. The Mortgage is prepayable in whole without
penalty during the 90-day period prior to its maturity date.
The refinancing costs were capitalized by Registrant and
are being expensed ratably during the period of the mortgage
extension from October 6, 1994 to October 31, 2004.
If the Mortgage is modified, upon the first refinancing
which would result in an increase in the amount of the outstanding
principal balance of the mortgage, the basic rent shall be equal
to the Wien, Malkin & Bettex annual supervisory fee of $24,000
plus an amount equal to the product of the new debt service
percentage rate under the refinanced mortgage multiplied by the
principal balance of the mortgage immediately prior to such
refinancing. If there are subsequent refinancings which result in
an increase in the amount of the outstanding principal balance of
the mortgage, the principal balance referred to above shall be
reduced by the amount of the mortgage amortization payable from
basic rent subsequent to the first refinancing.
60 East 42nd St. Associates 7.
September 30, 1995
Note C - Supervisory Services
Registrant pays Counsel for supervisory services and
disbursements $24,000 per annum (the "Basic Payment"), plus an
additional payment of 10% of all distributions to Participants in
Registrant in any year in excess of the amount representing a
return at the rate of 14% per annum on their remaining cash
investment (the "Additional Payment"). At September 30, 1995,
such remaining cash investment was $7,000,000 representing the
original cash investment of Participants in Registrant.
No remuneration was paid during the three and nine month
periods ended September 30, 1995 by Registrant to any of the
Partners as such. Pursuant to the fee arrangements described
herein, Registrant paid Counsel $6,000 and $18,000, respectively,
of the Basic Payment and $1,845 and $5,535 respectively, on
account of the Additional Payment, for supervisory services for
the three and nine month periods ended September 30, 1995. In
addition, Registrant paid Counsel $125,000 in the three month
period ended September 30, 1995 on account of additional payment
for supervisory services of $156,593 with respect to Further
Additional Rent. See Note B of this Item 1. The supervisory
services provided to Registrant by Counsel include legal,
administrative services and financial services. The legal and
administrative services include acting as general counsel to
Registrant, maintaining all of its partnership records, performing
physical inspections of the Building, reviewing insurance coverage
and conducting annual partnership meetings. Financial services
include monthly receipt of rent from the Lessee, payment of
monthly and additional distributions to the Participants, payment
of all other disbursements, confirmation of the payment of real
estate taxes, and active review of financial statements submitted
to Registrant by the Lessee and financial statements audited by
and tax information prepared by Registrants' independent certified
public accountant, and distribution of such materials to the
Participants. Counsel also prepares quarterly, annual and other
periodic filings with the Securities and Exchange Commission and
applicable state authorities.
Reference is made to Note B for a description of the
terms of the Lease between Registrant and Lessee. As of
September 30, 1995, Mr. Malkin owned a partnership interest in
Lessee. The respective interests, if any, of the Partners in
Registrant and Lessee arise solely from ownership of their
respective participations in Registrant and, in the case of Mr.
Malkin, his individual ownership of a partnership interest in
Lessee. The Partners receive no extra or special benefit not
shared on a pro rata basis with all other Participants in
Registrant or partners in Lessee. However, the Partners, by
reason of their respective interests in Counsel, are entitled to
receive their pro rata share of any legal fees or other
remuneration paid to Counsel for legal services rendered to
Registrant and Lessee.
As of September 30, 1995, the Partners owned of record
and beneficially an aggregate $49,583.34 of participations in
60 East 42nd St. Associates 8.
September 30, 1995
Registrant, representing less than 1% of the currently outstanding
participations therein.
In addition, as of September 30, 1995, certain of the
Partners in Registrant (or their respective spouses) held
additional Participations in Registrant as follows:
C. Michael Spero owned of record as trustee or
co-trustee, but not beneficially, $50,714.29 of
Participations. Mr. Spero disclaims any beneficial
ownership of such Participations.
Peter L. Malkin owned of record as trustee or
co-trustee, an aggregate of $65,714.29 of
Participations. Mr. Malkin disclaims any beneficial
ownership of such Participations.
Isabel Malkin, the wife of Peter L. Malkin, individually
and beneficially, owned $30,000 of Participations.
Mr. Malkin disclaims any beneficial ownership of such
Participations.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
As stated in Note B, Registrant was organized solely for
the purpose of acquiring the Property subject to a net operating
lease held by Lessee. Registrant is required to pay from Basic
Rent the annual mortgage charges due under the Mortgage and the
Basic Payment to Counsel for supervisory services. The balance of
such Basic Rent is distributed to the Participants. Additional
Rent and Further Additional Rent is distributed to the
Participants after the Additional Payment to Counsel. See Note C
of Item 1 above. 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 three and
nine month periods ended September 30, 1995, 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 depends solely on the ability of Lessee to make
payments of Basic Rent, Additional Rent and Further Additional
Rent to Registrant in accordance with the terms of the Lease.
Registrant expects to make distributions so long as it receives
the payments provided for under the Lease.
On November 30, 1995, Registrant will make an additional
distribution of $2,013.34 for each $10,000 participation. Such
distribution represents Further Additional Rent payable by Lessee
in accordance with the terms of the Lease.
60 East 42nd St. Associates 9.
September 30, 1995
Registrant's results of operations are affected
primarily by the amount of rent payable to it under the Lease.
The following summarizes, with respect to the current period and
the corresponding period of the previous year, the material
factors affecting Registrant's results of operations for such
periods:
Total income decreased for the three and nine month
periods ended September 30, 1995, as compared with the
three and nine month periods ended September 30, 1994.
Such decrease resulted from a decrease in the Basic
Rent now payable under the Lease and from a decrease
in income from Further Additional Rent for the lease
year ending September 30, 1995. See Note B. Total
expenses decreased for the three and nine month
periods ended September 30, 1995, as compared with the
three and nine month periods ended September 30, 1994.
Such decrease was the net result of (i) an increase in
mortgage interest expense, (ii) a decrease in the
additional payments for supervisory services with
respect to Further Additional Rent for the lease year
ended September 30, 1995, as compared with the
payments for supervisory services with respect to
Further Additional Rent for the lease year ended
September 30, 1994, and (iii) a decrease in the
amortization of mortgage refinancing costs. See Note
B.
Liquidity and Capital Resources
There has been no significant change in Registrant's
liquidity for the three and nine month periods ended September 30,
1995, as compared with the three and nine month periods ended
September 30, 1994.
No amortization payments are due under the Mortgage to
fully satisfy the outstanding principal balance at maturity, and
furthermore, the Registrant does not maintain any reserve to cover
the payment of such Mortgage indebtedness at maturity. Therefore,
repayment of the Mortgage will depend on Registrant's ability to
arrange a refinancing. Assuming that the Building continues to
generate an annual net profit in future years comparable to that
in past years, and assuming further that 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 in excess of the amount of the Mortgage balance at
maturity. Registrant foresees no need for it to make material
commitments for capital expenditures while the Lease is in effect.
Inflation
Registrant has been advised 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, 1994, which report and all exhibits thereto are incorporated
herein by reference and made a part hereof.
60 East 42nd St. Associates 10.
September 30, 1995
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) Registrant has not filed any report on Form 8-K
during the quarter for which this report is being filed.
60 East 42nd St. Associates 11.
September 30, 1995
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
Partners in Registrant, pursuant to a Power of Attorney, dated
March 30, 1989 (the "Power").
60 EAST 42ND ST. ASSOCIATES
(Registrant)
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: November 9, 1995
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 Partners in Registrant, pursuant
to the Power, on behalf of Registrant and as a Partner in
Registrant on the date indicated.
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: November 9, 1995
______________________
* Mr. Katzman supervises accounting functions for
Registrant.
60 East 42nd St. Associates 12.
September 30, 1995
EXHIBIT INDEX
Registrant is not filing any exhibit as part of this
quarterly report on Form 10-Q.