[LETTERHEAD OF WIEN & MALKIN LLP]
March 12, 2003
To Members and Participants in 250 West 57th St. Associates L.L.C.
Federal Identification Number 13-6083380
We enclose the annual report of 250 West 57th St. Associates L.L.C., for
the year ended December 31, 2002. The limited liability company owns the Fisk
Building at 250 West 57th Street, New York City.
The reported income for 2002 was $1,496,438. This was less than distri-
butions of $1,860,452 representing the current monthly distributions totaling
$720,000 per annum and the additional distribution of $1,140,452, which was
paid to participants on November 29, 2002. The difference results primarily
from depreciation of building improvements and amortization of mortgage refin-
ancing costs.
Since the inception of this investment, a portion of the distributions
has constituted a return of capital, and has not been reportable as income.
As a result, the book value on December 31, 2002 of an original cash investment
of $10,000 was a deficit balance of $3,296.
Additional rent for the lease year ended September 30, 2002 was
$1,920,029 (including $15,396 of interest earned and retained on funds borrowed
for the improvement program loan funds) or an excess of $1,168,029 over
advances of $752,000 by the lessee against additional rent ($720,000 to
participants, $32,000 to Wien & Malkin LLP). As approved by the participants,
Wien & Malkin LLP received $126,717 of the additional rent and $1,140,452 was
distributed to the participants on November 29, 2002. The additional distri-
bution of $1,140,452, including dividend income from prior years, represented
an annual return of about 31.7% on the original cash investment of $3,600,000.
Regular monthly distributions are at the rate of 20% per annum on the cash
investment so that total distributions for the year ended December 31, 2002
were about 51.7% on the original cash investment.
The enclosed Schedule K-1 form(s) (Form 1065), containing 2002 tax
information, must be reviewed in detail by your accountant.
If you have any question about the enclosed material, please communi-
cate with our office.
Please retain this letter and the enclosed Schedule K-1 form(s) for
the preparation of your income tax returns for the year 2002.
Cordially yours,
WIEN & MALKIN LLP
By: Stanley Katzman
SK:dm
Encs.
[LETTERHEAD OF ROFOGG & COMPANY, P.C.
CERTIFIED PUBLIC ACCONTANTS]
Independent Auditor's Report
To the Participants in
250 West 57th St. Associates L.L.C.
We have audited the accompanying balance sheet of 250 West 57th
St. Associates L.L.C. as of December 31, 2002 and the related statements
of income, of members' deficit and of cash flows for the year then
ended. These financial statements are the responsibility of management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of 250 West
57th St. Associates L.L.C. at December 31, 2002 and the results of its
operations and its cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States of
America.
New York, New York
February 7, 2003
250 West 57th St. Associates L.L.C.
Balance Sheet
December 31, 2002
Assets
Cash and Cash Equivalents:
Fleet Bank $ 64,279
Emigrant Savings Bank 100,000
Distribution account held by
Wien & Malkin LLP 60,000
Emigrant Savings Bank (Money Market Fund) 1,982,538
2,206,817
Rent receivable 5,669
Fisk Building, 250 West 57th Street,
New York City:
Land 2,117,435
Building 4,940,682
Less: Accumulated depreciation 4,940,682 -
Building improvements 8,313,123
Less: Accumulated depreciation 898,184 7,414,939
Improvements in progress 138,227 9,670,601
Mortgage refinancing costs 517,770
Less: Accumulated amortization 217,795 299,975
Other investments (Note 3) -
Total Assets $12,183,062
Liabilities and Members' Capital (Deficit)
Liabilities:
First mortgage - Emigrant Savings Bank $12,000,000
Accrued interest on first mortgage 55,777
Due to Fisk Building Associates 1,313,983
Total liabilities 13,369,760
Members' (deficit), December 31, 2002 (1,186,698)
Total Liabilities and Members' (Deficit) $12,183,062
The Accompanying Notes are an Integral Part of these Financial
Statements.
250 West 57th St. Associates L.L.C.
Statement of Income
For the Year Ended December 31, 2002
Income:
Basic rent $ 629,656
Additional rent 1,904,633
Dividend income 2,523
Interest income 10,746
Total income 2,547,558
Expenses:
Interest on first mortgage $601,655
Supervisory services 186,717
Professional fees 1,568
Total expenses 789,940
Net income before depreciation and amortization 1,757,618
Depreciation of building improvements 158,462
Amortization of mortgage refinancing costs 102,718
Total depreciation and amortization 261,180
Net income $1,496,438
The Accompanying Notes are an Integral part of these Financial
Statements.
250 West 57th St. Associates L.L.C.
Statement of Members' Deficit
December 31, 2002
Members' deficit, January 1, 2002 $( 822,684)
Add: Net income for the year ended December 31, 2002 1,496,438
673,754
Less: Monthly distributions to members
January 1, 2002 through
December 31, 2002 $ 720,000
Distribution on November 29, 2002 of
balance of additional rent for the
lease year ended September 30, 2002 1,140,452 1,860,452
Members' deficit, December 31, 2002 $(1,186,698)
The Accompanying Notes are an Integral part of these Financial
Statements.
250 West 57th St. Associates L.L.C.
Statement of Cash Flows
For the Year Ended December 31, 2002
Cash flows from operating activities:
Net income $1,496,438
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of building improvements 158,462
Amortization of mortgage refinancing costs 102,718
Mortgage refinancing costs (1,152)
Rent receivable (5,669)
Due to Fisk Building Associates (856,919)
Accrued expenses (1,362)
Net cash provided by operating activities 892,516
Cash flows from investing activities:
Additions to building improvements (2,791,929)
Cash flows from financing activities:
Increase in first mortgage 5,000,000
Monthly distributions to members (720,000)
Distribution on November 29, 2002
of additional rent for the lease year
ended September 30, 2002 (1,140,452)
Net cash provided by financing activities 3,139,548
Net change in cash and cash equivalents 1,240,135
Cash and cash equivalents at beginning of year 966,682
Cash and cash equivalents at end of year $2,206,817
Supplemental Cash Flow Disclosures
Year Ended December 31, 2002
Cash paid during the year for interest $ 589,692
The Accompanying Notes are an Integral part of these Financial
Statements.
250 West 57th St. Associates L.L.C.
Notes to Financial Statements
December 31, 2002
1. Business Activity
250 West 57th St. Associates L.L.C. ("Associates") is a limited liability
company which owns an office building located in New York City. The building
is net leased to Fisk Building Associates.
Effective November 30, 2001, 250 West 57th St. Associates converted from a
joint venture to a limited liability company. Ownership percentages were
unchanged by the conversion, and the partnership's income tax basis in its
assets and liabilities carried over to the limited liability company.
2. Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared on the accrual basis of accounting.
Depreciation
Depreciation of the cost of the building was computed by the straight-line
method over estimated useful life of 30 years through September 30, 1983.
The cost of the building improvements was depreciated by the straight-line
method over various periods from date of completion of improvement through
September 30, 1983. The costs of building improvements completed in 2001
and 2002 are being depreciated over an estimated useful life of 39 years.
Amortization
Capitalized mortgages refinancing costs of $517,770 are being charged to
expense ratably during the period of the mortgage through December 1, 2005.
Cash Equivalents
For purposes of the statement of cash flows, money market funds are considered
to be cash equivalents.
Use of Estimates
Preparing financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
3. First Mortgage - Emigrant Savings Bank
(a) Effective November 17, 2000, a new first mortgage was placed on the
property with Emigrant Savings Bank in the amount of $15,500,000. The
Mortgage matures on December 1, 2005. At the closing, the amount of
$7,000,000 was advanced to pay off the existing first and second mortgages
held by Apple Bank for Savings and to pay for closing and related costs and
the costs of improvements made to the property. The balance of the first
mortgage loan will be advanced in stages through May 31, 2003 to
250 West 57th St. Associates L.L.C.
Notes to Financial Statements
December 31, 2002
3.First Mortgage - Emigrant Savings Bank - continued
pay for additional improvements to the property. Additional mortgage advances
of $2,000,000 and $3,000,000 were received on January 23, 2002 and December 16,
2002.
Monthly payments under the mortgage are interest only. Amounts advanced at the
closing bear interest at the rate of 7.511% throughout the term of the
mortgage. Amounts advanced after the closing will bear interest at a floating
rate equal to 1.65 percentage points above 30, 60, 90, 180 or 360 day LIBOR or
the yield on 30-day U.S. Treasury Securities, as selected by Company.
On June 1, 2003 the interest rate on all amounts advanced following the closing
will be converted to a fixed rate equal to 1.65 percentage points above the
then-current yield on U.S. Treasury Securities having the closest maturity to
December 1, 2005.
(b) The mortgage may be prepaid at any time, in whole only, upon payment of a
prepayment of penalty based on a yield maintenance formula. There will be no
prepayment penalty if the mortgage is paid in full during the last 90 days of
the term thereof.
4. Lease
(a) Effective May 1, 1975, the lease between 250 West 57th St. Associates
L.L.C., as lessor, and Fisk Building Associates, as lessee, provides for basic
rent equal to mortgage principal and interest payments plus $28,000 payable to
Wien & Malkin LLP for supervisory services.
(b) The lease modification dated November 17, 2000 provides that the basic rent
will be equal to the sum of $28,000, plus the installment payments for interest
and amortization (not including any balloon principal payment due at maturity)
required annually under the new $15,500,000 first mortgage loan (the "First
Mortgage") from Emigrant Savings Bank. Basic rent is payable in monthly
installments on the first day of each calendar month in an amount equal to
$2,333.33 plus the projected debt service due on the First Mortgage on the
first day of the ensuing calendar month (with a reconciliation to be made as
soon as practicable thereafter). Basic rent shall be adjusted on a dollar-
for-dollar basis by changes in the annual debt service on the First Mortgage.
(c) In accordance with a lease modification, effective October 1, 1984,
primary additional rent is equal to the lesser of $752,000 per annum or the net
operating profit of the property, as defined, after deduction of basic rent.
If the full primary additional rent of $752,000 is paid, it will equal 20% of
the original $3,600,000 cash investment plus $32,000 payable to Wien & Malkin
LLP for supervisory services. Advances against primary additional rent are
paid by the lessee based on the net operating profit of the property for the
prior year to a maximum amount of $752,000. Primary additional rent for the
lease year ended September 30, 2002 was $752,000. Advances against primary
additional rent of $752,000 per annum for the lease year ending September 30,
2003 are being paid. No other additional rent is accrued by Company for the
period between the end of the lessee's lease year ending September 30th and
the end of Company's fiscal year ending December 31st.
250 West 57th St. Associates L.L.C.
Notes to Financial Statements
December 31, 2002
4. Lease - continued
Secondary additional rent is equal to 50% of the net operating profit of the
property after payment of basic rent and primary additional rent for lease years
ending September 30. Secondary additional rent for the lease year ended
September 30, 2002 was $1,152,633.
(d) The lessee has exercised its option to renew the lease for a period of 25
years, from October 1, 1978 through September 30, 2003. The lease
modification, effective October 1, 1984, provides for an additional renewal
term of 25 years from October 1, 2003 through September 30, 2028; the holders
of more than 80% of the participations in 250 West 57th St. Associates have
consented to the granting of options to the lessee to extend the lease for
three additional 25-year renewal terms. There is no change in the terms of
the lease during the renewal periods.
5. Related Party Transactions
a) Rent Income:
Rent income is received from a related party since some members or
participants in Associates are also members in the Lessee.
b) Supervisory and Other Services:
Supervisory and other services are provided to Associates by its
supervisor, Wien & Malkin LLP, a related party in which Peter L. Malkin, a
member in Associates, has an interest. Beneficial interests in Associates
are held by one or more persons at Wien & Malkin, their family members,
and/or trusts, limited liability companies, or similar entities owned for
their family members.
Transactions in 2002 with Wien & Malkin are as follows:
Basic supervisory fees $ 60,000
Additional supervisory fees* 126,717
Total $186,717
*Wien & Malkin receives 20% of all distributions received by the participants
in excess of 20% per annum on the cash investment of $3,600,000.
Wien & Malkin also serves as supervisor for Associates' lessee and receives
from the Lessee a basic annual fee for such service and a fee based on
distributions to its members. Beneficial interests in the Lessee are held
by one or more persons at Wien & Malkin, their family members, and/or trusts,
limited liability companies, or similar entities owned for their family
members.
Some partners in Fisk Building Associates are also members in Associates.
250 West 57th St. Associates L.L.C.
Notes to Financial Statements
December 31, 2002
6. Income Taxes
Net income is computed without regard to income tax expense, since the
partnership does not pay a tax on its income; instead, any such taxes are
paid by the members in their individual capacities.
7. Concentration of Credit Risk
Company maintains cash balances in a bank and money market funds. The Federal
Deposit Insurance Corp. insures bank balances up to $100,000 each.
Uninsured balances amount to $2,006,817 as at December 31, 2002 as follows:
Cash in Bank $ 24,279
Investment in Emigrant Savings
Bank (Money Market Fund) 1,982,538
$2,006,817
The funds held in the distribution account were paid to the members on January
1, 2003.
8. Litigation
Wien & Malkin and Peter L. Malkin, a member in Associates, have been engaged
in a dispute proceeding with Helmsley-Spear, Inc. commenced in 1997 concerning
the management, leasing and supervision of the property subject to the net
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 additional costs are expected to be incurred. Wien & Malkin and
Mr. Malkin have represented that such costs will be recovered only to the
extent that (a) a competent tribunal authorized payment or (b) an investor
voluntarily agrees that his or her proportionate share be paid. Accordingly,
Associates' allocable share of such costs is as yet undetermined, and Associates
has not provided for the expense and related liability with respect to such
costs in these financial statement.
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) reaffirms the right of the investors in the Lessee to vote to
terminate Helmsley-Spear without cause, (ii) dismisses Helmsley-Spear claims
against Wien & Malkin and Peter Malkin, and (iii) rejects the termination of
Helmsley-Spear for cause. The parts of the decision under appeal were affirmed
by the Appellate Division on December 5, 2002, and were further appealed by
Wien & Malkin and Mr. Malkin on January 13, 2003.
250 West 57th St. Associates L.L.C.
Notes to Financial Statements
December 31, 2002
8. Litigation - continued
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 one or a combination of
designated independent firms (Cushman & Wakefield, Insignia/ ESG, and Newmark
Realty), 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.
Helmsley-Spear filed objections, and on September 10, 2002 the court
confirmed such votes and ruled that Helmsley-Spear has been discharged and
must effect an orderly transition and departure within 60 days. As of November
20, 2002, Helmsley-Spear is no longer the managing and leasing agent and has
been replaced by Cushman & Wakefield, Inc. Helmsley-Spear continues to pursue
its appeal.
In accord with the Lessee's May 20, 2002 vote, 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
$245,251 (including $72,052 plus disbursements of $10,522 to Wien & Malkin)
and are included in other professional fees.
9. Other Investments
In 2000, the Lessee received shares of common stock and warrants from certain
unrelated companies in exchange for permission for those companies to provide
high speed internet access and other telecommunication services to the
building. Associates received an equal amount of shares and warrants. The
Lessee will receive from 5% to 10% of the revenues generated by such services
from advertising and subscriptions with tenants of the building. There are
restrictions as to the transfer of the stock, and neither the warrants nor the
stock have an ascertainable value as of the balance sheet date. Accordingly,
the accompanying financial statements do not reflect any value for these
securities. No income from stock or warrants was received in 2002.