FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF l934
For the transition period from _____________ to _________________
Commission file number 0-768
GARMENT CAPITOL ASSOCIATES
(Exact name of registrant as specified in its charter)
New York 13-6083208
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)
Registrant's telephone number, including area code (212) 687-8700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered pursuant to section 12(g) of the Act:
$10,470,000 of Participations in Partnership Interests
(Title of class)
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
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
An Exhibit Index is located on pages 35 and 36 of this Report.
Number of Pages (including exhibits) in this filing: 49
<PAGE>
PART I
Item 1. Business.
(a) General
Registrant, a partnership, was organized on January 10,
1957. On May 1, 1957, Registrant acquired fee title to the
Garment Capitol Building (the "Building") and the land thereunder,
located at 498 Seventh Avenue, New York, New York (the
"Property"). Registrant's partners are Stanley Katzman, John L.
Loehr and Peter L. Malkin (individually, a "Partner" and,
collectively, the "Partners"), each of whom also acts as agent for
holders of participations in their respective partnership
interests in Registrant (each holder of a participation,
individually, a "Participant" and, collectively, the
"Participants"). Stanley Katzman and John L. Loehr acquired their
Partnership interests from Donald A. Bettex and Martin D. Newman
effective January 2, 1996.
Registrant does not operate the Property. Registrant
leased the Property to 498 Seventh Avenue Associates (the
"Original Lessee") under a net operating lease (the "Lease") which
commenced as of May 1, 1957 and currently expires on April 30,
2007. The Lease provides for one 25-year renewal option which has
not been exercised and which, if exercised, will extend the Lease
to April 30, 2032.
In 1994 and 1995 the Original Lessee made capital calls
on its partners in the aggregate amount of $1,300,000 to defray
certain operating expenses and improvement costs at the Property.
Despite these new capital infusions, however, the Original Lessee
concluded that to return the Property to profitability would
require a very large additional capital investment, estimated by
the Original Lessee to be as high as $16,000,000. Therefore, on
December 29, 1995, in accordance with the terms of the Operating
Lease, the Original Lessee assigned the Operating Lease to 4987
Corporation (the "New Lessee"), thereby effectively terminating
the liability of the Original Lessee and its partners under the
Lease. The shares in the New Lessee are owned by the partners in
the Original Lessee.
The New Lessee has paid basic rent under the Lease due
January 1, 1996, February 1, 1996, March 1, 1996 and April 1, 1996.
Registrant applied or reserved these rents to cover (1) its monthly
mortgage payments to the Apple Bank for Savings ("Apple Bank") on
Registrants' fee mortgage on the Property (the "Mortgage Loan"),
(2) its monthly fee for supervisory services and (3) its
distributions to the Participants in Registrant. The New Lessee
did not pay the New York City real estate taxes and Business
Improvement District ("BID") assessments in the amounts of
<PAGE>
$936,180.00 and $29,695.14, respectively, which were due on
January 1, 1996. As a result, although payment of the January 1,
1996 real estate taxes and BID assessments has been made as
described below, the New Lessee is in default of the Operating
Lease as of that date.
The New Lessee has requested that Registrant forbear
from exercising its rights and remedies under the Lease, including
termination of the Lease, by reason of the failure to pay the
January 1, 1996 real estate taxes and BID assessments, while
Registrant solicits the consent of the Participants to a sale of
the Property (see item 4 below). If Registrant does forbear, the
New Lessee has agreed to cooperate fully with Registrant in
connection with the sale of the Property and to continue to
perform its other obligations under the Lease, including payment
of basic rent, to enable Registrant to continue its monthly
distributions to the Participants, pay its supervisory fee and pay
its monthly mortgage obligation. The continuation of the Lease
will also serve to insulate Registrant from third party
liabilities attendant on property operations. Because the consent
solicitation program to be made by the Partners for approval of a
sale of the property includes the continuation of the Lease with
the New Lessee, Registrant has not yet sent a notice of default
under the Lease based on the failure of the New Lessee to pay the
January 1, 1996 real estate taxes and BID assessments but the
Agents have been advised that Registrant's right to send such a
notice has not been affected by this delay or by the acceptance of
rent since the default.
Although the failure to pay the January 1, 1996 real
estate taxes and BID assessments also constitutes a breach of
Registrant's obligations under the Mortgage Loan, Apple Bank has
agreed to forbear from exercising its rights and remedies during
the period of the solicitation of consents through a sale of the
Property based on arrangements made between the shareholders of
the New Lessee (or designees on their behalf) and Apple Bank to
fund the January 1, 1996 real estate taxes and BID assessments and
certain future real estate taxes and BID assessments on the
Property (together with the January 1, 1996 real estate taxes, the
"Real Estate Taxes") through protective advances under the
Mortgage Loan. The shareholders of the New Lessee (or designees
on their behalf) have borrowed from Apple Bank the sum of
$1,012,545.49, equal to the January 1, 1996 real estate taxes and
BID assessments, interest thereon to the date of the borrowing,
and certain other minor city charges and interest aggregating less
than $1,500. This sum was used to fund a protective advance by
the Apple Bank to pay the January 1, 1996 real estate taxes and
BID assessments, interest thereon and such minor charges, through
the purchase of a subordinate participating interest in the
Mortgage Loan in such amount. Interest on the protective advance
will be paid by the New Lessee so long as the Lease continues in
effect.
-2-<PAGE>
As to future Real Estate Taxes, Apple Bank has agreed to
make additional loans to such individual shareholders (or their
designees) to fund further protective advances to cover the Real
Estate Taxes due July 1, 1996 (covering the period to December 31,
1996) and January 1, 1997 (covering the period to June 30, 1997).
Those individual borrowers intend to borrow the funds from Apple
Bank and fund the protective advances as required to pay the
July 1, 1996 and January 1, 1997 Real Estate Taxes if the
Participants approve a program to sell the Property and so long as
the Lease continues in effect.
The Original Lessee was a partnership in which Peter L.
Malkin was among the partners. The stockholders in the New Lessee
are the partners in the Original Lessee. The Partners in
Registrant are also members of the law firm of Wien, Malkin &
Bettex, 60 East 42nd Street, New York, New York, counsel to
Registrant and to Original Lessee (the "Counsel"). See Items 10,
11 12 and 13 hereof for a description of the ongoing services
rendered by, and compensation paid to, Counsel and for a
discussion of certain relationships which may pose actual or
potential conflicts of interest among Registrant, Original Lessee,
New Lessee and certain of their respective affiliates.
As of December 31, 1995, the occupancy rate at the
Building was approximately 62%. The Building has approximately
104 tenants who principally engage in the sale of ladies' apparel.
Registrant does not maintain a full-time staff. See Item 2 hereof
for additional information concerning the Property.
(b) The Lease
Under the Lease, the New Lessee must pay (i) annual
basic rent of $1,090,000 (the "Basic Rent") to Registrant and (ii)
additional rent equal to 50% of New Lessee's net operating profit
in excess of $200,000 for each Lease year (the "Additional Rent").
See Note 4 of Notes to Financial Statements filed under Item 8
hereof (the "Notes"). The New Lessee is in default of the Lease
as of January 1, 1996 (see item 1(a)).
Additional Rent income is recognized when earned from
the New Lessee, at the close of the lease year ending April 30.
Such income, if any, is not determinable until the New Lessee,
pursuant to the Lease, renders to Registrant a certified report on
the operation of the Property. The Lease requires that this
report be delivered to Registrant annually within 60 days after
the end of each such Lease year. All Additional Rent income and
certain supervisory service expense can only be determined after
the receipt of such report. The Lease does not provide for the
New Lessee to render interim reports to Registrant, so no
Additional Rent income is reflected for the period between the end
-3-
<PAGE>
of the Lease year and the end of Registrant's fiscal year. See
Note 4 of Notes regarding Additional Rent payments by Original
Lessee for the fiscal years ended December 31, 1995, 1994 and
1993.
The current term of the Lease expires on April 30, 2007,
and the Lease is subject to the renewal option described above.
Pursuant to the Lease, the lessee thereunder has the option of
surrendering its leasehold interest, at any time, upon 60 days'
prior written notice without further liability after the date of
surrender. In addition, the New Lessee has the right to assign
the Lease, without Registrant's consent, so long as the assignee
assumes, in writing, all of the obligations of the Lease.
(c) The First Mortgage Loan
On March 23, 1995, Registrant entered into a
Modification and Extension Agreement (the "Modification"), as of
December 1, 1992, with Apple Bank concerning the Mortgage Loan,
which was originally made on November 30, 1987 in the principal
amount of $3,485,000. The Mortgage Loan is secured by a first
mortgage on the Property.
The principal terms of the Modification are as follows:
Date: As of December 1, 1992.
Amount as of the
effective date of
the Modification: $3,376,340.61.
Term: Five years, maturing on December 1, 1997.
Interest Rates: 10.0% per annum from December 1, 1992
through October 31, 1993;
10.50% per annum from November 1, 1993
through November 30, 1994; and
10.60% per annum from December 1, 1994
through December 1, 1997.
Monthly
Payments: $36,282.33 from January 1, 1993 through
November 1, 1993;
$37,276.35 from December 1, 1993 through
December 1, 1994; and
$37,465.52 from January 1, 1995 through
December 1, 1997.
Prepayment
Privilege: The Mortgage Loan is prepayable at any time in
whole only, without penalty, on 60 days' prior
written notice.
-4-<PAGE>
The following provisions from the Mortgage Loan before
the Modification continue to be applicable:
Liability: No Partner has personal liability for the
obligation under the Mortgage Loan to pay
principal and interest;
Due on Sale: Upon a sale or further encumbrance of the
Property without Apple Bank's consent, the
Mortgage Loan will become immediately due and
payable; and
Lease: No modification or cancellation of the Lease
is permitted without Apple Bank's consent.
At the closing of the Modification, Registrant paid
Apple Bank $247,122.87 for principal and interest due from
December 1, 1992 to March 31, 1995 (including the April 1, 1995
monthly payment); $8,450.00 in payment of Apple Bank's legal fees,
and $5,913.00 in payment of miscellaneous closing charges
(including mortgage insurance, recording fees and searches).
Prior to the Modification, the Mortgage Loan provided
for constant annual payments of $348,500, in equal monthly
installments applicable first to interest and then to principal.
The Mortgage Loan matured on December 1, 1992 and had been the
subject of various extensions at various interest rates.
(d) Competition
Currently, tenant space leases at the Property are
offered at an average annual base rental of approximately $18.00
per square foot (exclusive of electricity charges and escalation).
Space tenants provide their own cleaning. The average asking
rental rate and other financial terms for space leases at the
Property appear to be competitive with the average rental rates
charged by similar buildings currently offering comparable space
in the immediate vicinity.
Based on market information believed to be accurate, the
Partners offer the following information regarding near-by
properties: A neighboring office building located at 485 Seventh
Avenue (at 36th Street), which offers small showrooms and has
upgraded interior features, is offering tenant space at rental
rates between $18.00 and $25.00 per square foot. Two similar
buildings approximately the same age as the Property, which are
located across 39th Street from each other at 530 Seventh Avenue
and 550 Seventh Avenue and have traditionally been the
headquarters for manufacturers of higher price women's apparel,
currently offer tenant space at rental rates between the mid $20's
to high $30's per square foot. At 1407 Broadway and 1411
-5-<PAGE>
Broadway, buildings which offer more modern, upgraded amenities
than the Property, current rental rates are in the high $30's per
square foot.
In the overall rental market for commercial space in
Manhattan, rents range from approximately $45 per square foot for
prime office space to approximately $7 per square foot in less
developed industrial and/or secondary commercial areas. Accord-
ingly, rents at the Building may be considered competitive in the
area, given the relative condition of surrounding buildings and
the nature of services, amenities and office space offered by them
as compared to the Building.
(e) Tenant Leases
The New Lessee operates the Building free from any
federal, state or local government restrictions involving rent
control or other similar rent regulations which may be imposed
upon residential real estate in Manhattan. Any increase or
decrease in the amount of rent payable by a tenant is governed by
the provisions of the tenant's lease.
Item 2. Property.
Registrant owns the Building located at 498 Seventh
Avenue, New York, New York, known as the "Garment Capitol
Building," and the land thereunder. See Item 1 hereof.
Registrant's fee title to the Property is encumbered by the
Mortgage Loan with an unpaid principal balance of $3,045,988 at
December 31, 1995. For a description of the terms of the
Modification of the Mortgage Loan, see Item 1 hereof and Note 3 of
the Notes. The Building, erected in 1921 and containing 24
floors, stands on the southwest corner of Seventh Avenue and 37th
Street in New York City's Garment District. The Building contains
office, showroom and loft space. The Building is equipped with
individual air-conditioning units and has 11 passenger elevators
and 10 freight elevators. The Building is leased to the New
Lessee under the Lease, the initial term of which expired on April
30, 1982 and which contains two 25-year renewal options, the first
of which was exercised on January 7, 1981. See Item 1 hereof for
additional information concerning the Lease.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which
Registrant is a party or to which any of its property is subject.
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Item 4. Submission of Matters to a Vote of Participants.
The Partners are in the process of preparing a
solicitation of consents to authorize a sale of the Property which
includes forebearance in favor of the New Lessee. The details of
the Partners' proposal will be provided in the statement to be
issued by the Partners in connection with the solicitation (see
item 1(a) above).
-7-<PAGE>
PART II
Item 5. Market for Registrant's Common Equity
and Related Security Holder Matters.
Registrant is a partnership organized pursuant to a
partnership agreement dated January 10, 1957.
Registrant has not issued any common stock. The
securities registered by it under the Securities Exchange Act of
1934, as amended, consist of participations in the partnership
interests of the Partners in Registrant (the "Participations") and
are not shares of common stock or their equivalent. The
Participations represent each Participant's fractional share in a
Partner's undivided interest in Registrant and are divided
approximately equally among the Partners. A full unit of the
Participations was originally offered at a purchase price of
$10,000; fractional units were also offered at proportionate
purchase prices. In November 1957, one-half of the original
purchase price was returned to the Participants from the proceeds
of a first mortgage on the Property leaving a remaining unreturned
cash investment of $5,000 (a "$5,000 Participation"). Registrant
has not repurchased Participations in the past and is not likely
to change its policy in the future.
(a) The Participations are not traded on an established
securities market, nor are they readily tradable on a secondary
market or the substantial equivalent thereof. Based on
Registrant's transfer records, Participations are sold by the
holders thereof from time to time in privately negotiated
transactions and, in many instances, Registrant is not aware of
the prices at which such transactions occur. Registrant has been
advised that there were 56 transfers of Participations for the
year ended December 31, 1995. In only three instances was
consideration indicated for the transfer. In one of three
instances, the consideration was 80% of the remaining cash
investment for the Participation, i.e., $4,000 for a $5,000
Participation. In the other two instances, the consideration was
50% of the remaining cash investment for the Participation, i.e.,
$2,500 for a $5,000 Participation.
(b) As of December 31, 1995, there were 908 holders of
Participations of record.
(c) Registrant does not pay dividends. During the year
ended December 31, 1995, Registrant made regular monthly
distributions of $48.58 for each $5,000 Participation. Because no
Additional Rent was paid by the Original Lessee for the lease year
ended April 30, 1995, no additional distribution was made to
Participants in 1995. For each $5,000 Participation during the
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year ended December 31, 1994, Registrant made monthly
distributions of $48.58. There was no Additional Rent earned for
the Lease year ended April 30, 1994. See Item 1 hereof. 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, depends solely on
the New Lessee's ability to make payments of Basic Rent and
Additional Rent to Registrant. See Item 1 hereof and Note 9 of
the Notes. Registrant expects to make distributions so long as it
receives the payments provided for under the Lease. See Item 7
hereof.
-9-<PAGE>
Item 6.
GARMENT CAPITOL ASSOCIATES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Basic rent income................ $1,090,000 $1,090,000 $1,090,000 $1,090,000 $1,090,000
Additional rent income........... - - 1,010,196 1,986,498 3,026,069
Dividend income.................. 3,027 7,994 1,683 - -
Total revenue................. $1,093,027 $1,097,994 $2,101,879 $3,076,498 $4,116,069
Net income....................... $ 693,538 $ 691,708 $1,634,085 $2,480,001 $3,414,459
Earnings per $5,000 participation
unit, based on 1,050 participa-
tion units outstanding during the
year............................ $ 661 $ 659 $ 1,556 $ 2,362 $ 3,252
Total assets..................... $2,642,224 $2,865,967 $2,786,398 $2,619,338 $2,608,657
Long-term obligations............ $2,912,936 $ - $ - $ - $ -
Distributions per $5,000 par-
ticipation unit, based on 1,050
participation units outstanding
during the year:
Income........................ $ 583 $ 583 $ 1,342 $ 2,360 $ 3,251
Return of capital............. - - - - -
Total distributions........... $ 583 $ 583 $ 1,342 $ 2,360 $ 3,251
</TABLE>
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Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation.
Registrant was organized solely for the purposes of
acquiring the Property subject to the Lease. Registrant is
required to pay from Basic Rent the mortgage charges and
supervisory services and to distribute the balance of such Basic
Rent to the Participants. Pursuant to the Lease, the holder of
the leasehold interest thereunder, now the New Lessee, has sole
responsibility for the condition, operation, repair, maintenance
and management of the Property. Registrant need not maintain
substantial reserves or otherwise maintain liquid assets to defray
any operating expenses of the Property.
Registrant's results of operations are affected
primarily by the amount of rent payable to it under the Lease.
The following summarizes the material factors affecting
Registrant's results of operations for the three preceding years:
(a) Total income decreased for the year ended December 31,
1995 as compared with the year ended December 31, 1994.
Such decrease is directly attributable to the reduction
in dividend income earned for the year 1995. Total
income decreased for the year ended December 31, 1994 as
compared with the year ended December 31, 1993. Such
decrease is mainly attributable to the fact that no
Additional Rent was received by Registrant in 1994. See
Note 4 of the Notes.
(b) Total expenses decreased for the year ended December 31,
1995 as compared with the year ended December 31, 1994.
Such decrease was the net result of (i) a decrease in
interest expense on the Mortgage Loan and (ii) an
increase in amortization of mortgage refinancing costs.
See Notes 2(c) and 3. Total expenses decreased for the
year ended December 31, 1994 as compared with the year
ended December 31, 1993. Such decrease was the net
result of (x) a decrease in the additional payment for
supervisory services payable in 1994, (y) an increase in
interest expense on the Mortgage Loan and (z) an
increase in the amortization of mortgage refinancing
costs. See Notes 2(c), 3, 4 and 5 of the Notes.
Registrant is aware of the following events. The
Original Lessee operated the Property at a substantial loss during
the years ended December 31, 1995 and December 31, 1994. In 1994
and 1995, the Original Lessee made capital calls on its partners
in the aggregate amount of $1,300,000 to defray certain operating
expenses and improvement costs at the Property.
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The downturn and changes in methods of operations in the
garment industry have had and will continue to have a major impact
on the Property and its operations and profitability. Registrant
has been advised that the loss of tenants at the Property and the
related reduction in rent received are primarily due to
insolvencies affecting tenants in the garment business and reduced
demand for space.
The New Lessee has the right to abandon or assign its
interest in the Lease (see Item 1 above). No assurance can be
provided that the New Lessee will not exercise its right to
terminate the Lease in the future but, if the New Lessee does so,
it will lose its right to share in sales proceeds (assuming a sale
is approved on the terms of the proposed solicitation of consents
(see Item 4 above) and continued forbearance granted to New
Lessee). The Partners believe that, if the Lease is terminated
for any reason, Registrant will be able to sell the Property for
an amount in excess of the Mortgage Loan, including any protective
advances made thereunder, and future Real Estate Taxes.
Liquidity and Capital Resources
There has been no significant change in Registrant's
liquidity for the year ended December 31, 1995 as compared with
the year ended December 31, 1994.
Inflation
Inflationary trends in the economy do not directly
affect Registrant's operations, since as noted above, Registrant
does not actively engage in the operation of the Property.
Inflation may affect the operations of the New Lessee. The New
Lessee is required to pay Basic Rent, regardless of the results of
its operations. Inflation and other operating factors affect only
the amount of Additional Rent payable by the New Lessee, which is
based on the New Lessee's net operating profit.
Inflationary trends in the economy should have no
material impact on the possible sale of the Property.
Item 8. Financial Statements and Supplementary Data.
The financial statements, together with the accompanying
report by, and the consent to the use thereof, of Jacobs Evall &
Blumenfeld LLP immediately following, are being filed in response
to this item.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
-12-<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Registrant has no directors or officers or any other
centralization of management. There is no specific term of office
for any Partner. The table below sets forth as to each individual
who is serving as a Partner the following: name, age, nature of
any family relationship with any other Partner, business
experience during the past five years and principal occupation and
employment during such period, including the name and principal
business of any corporation or any organization in which such
occupation and employment was carried on and the date such
individual became a Partner:
Principal Date
Nature of Occupation Individual
Family Business and became
Name Age Relationship Experience Employment Partner
Stanley Katzman 63 None Attorney-at-Law Senior Partner 1996
Wien, Malkin
& Bettex,
Counsellors-
at-Law
Peter L. Malkin 62 None Attorney-at-Law Senior Partner 1983
Wien, Malkin
& Bettex,
Counsellors-
at-Law
John L. Loehr 59 None Attorney-at-Law Senior Partner 1996
Wien, Malkin
& Bettex,
Counsellors-
at-Law
As stated above, the Partners are also members of
Counsel. See Items 11, 12 and 13 hereof for a description of the
services rendered by, and the compensation paid to, that law firm
and for a discussion of certain relationships which may pose
actual or potential conflicts of interest among Registrant,
Original Lessee, New Lessee and certain of their respective
affiliates.
The names of entities which have a class of securities
registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or are subject to the requirements of Section 15(d) of
that Act, and in which the Partners are either a director, joint
venturer or general partner are as follows:
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Peter L. Malkin is a joint venturer in 250 West 57th St.
Associates; and a general partner in Empire State
Building Associates, 60 East 42nd St. Associates and
Navarre-500 Building Associates; and
Stanley Katzman is a joint venturer in 250 West 57th St.
Associates.
Item 11. Executive Compensation
As stated in Item 10 hereof, Registrant has no directors
or officers or any other centralization of management.
No remuneration was paid during the current fiscal year
ended December 31, 1995 by Registrant to any of the Partners as
such. Registrant's supervisory fee arrangement with Counsel
provides for (i) the basic payment of $42,500 per annum; (ii) an
additional payment of the first $37,500 of Additional Rent paid by
the lessee under the Lease in any lease year; and (iii) the
payment of 10% of all distributions to Participants in any year in
excess of the amount representing a return at the rate of 18% per
annum on their remaining cash investment in any year. At December
31, 1995, such remaining cash investment was $5,250,000. Pursuant
to such fee arrangements described herein, Registrant paid Counsel
$42,500 during the fiscal year ended December 31, 1995. The
supervisory services provided by Counsel include the preparation
of reports and related documentation required by the Securities
and Exchange Commission, the monitoring of all areas of federal
and local security law compliance, the preparation of certain
financial reports, as well as the supervision of accounting and
other documents related to the administration of Registrant's
business. Out of its fees, Counsel paid all disbursements and
costs of regular accounting services. As noted in Items 1 and 10
of this report, the Partners are also members of Counsel.
Item 12. Security Ownership of Certain
Beneficial Owners and Management.
(a) Registrant has no voting securities (see Item 5
hereof). At December 31, 1995, no person owned of record or was
known by Registrant to own beneficially more than 5% of the
outstanding Participations.
(b) The Partners (see Item 10 hereof) beneficially own,
directly or indirectly, the following Participations:
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Name & Address Amount of
of Beneficial Beneficial Percent
Title of Class Owners Ownership of Class
Participations Peter L. Malkin $42,500 .8095%
in Partnership 21 Bobolink Lane
Interests Greenwich, CT 06830
Stanley Katzman $ 2,500 .0476%
75-18 193rd Street
Flushing, NY 11366
John L. Loehr $ 5,000 .0925%
286 Alpine Circle
River Vale, NJ 07675
At December 31, 1995, certain of the Partners (or their
respective spouses) held additional Participations as follows:
Peter L. Malkin owned of record as trustee, but not
beneficially, a $5,000 Participation. Mr. Malkin
disclaims any beneficial ownership in such
Participation.
Isabel Malkin, the wife of Peter Malkin, owned of record
and beneficially, $16,250 of Participations. Mr. Malkin
disclaims any beneficial ownership of such
Participations.
Agency Holdings Associates, an affiliate of Counsel,
owns a $5,000 Participation.
(c) Not applicable.
Item 13. Certain Relationships and Related Transactions.
(a) As stated in Item 1 hereof, Peter L. Malkin,
Stanley Katzman and John L. Loehr are the three Partners in
Registrant and also act as agents for the Participants in their
respective partnership interests. Mr. and Mrs. Malkin are also
among the partners in the Original Lessee and shareholders in the
New Lessee. Because one of the three Partners and his wife are
partners in the Original Lessee and shareholders in the New Lessee
and all three Partners are members of Counsel (which represents
Registrant and Original Lessee), certain actual or potential
conflicts of interest may arise with respect to the management and
administration of the business of Registrant. Donald A. Bettex
and Martin Newman, Partners at December 31, 1995 (see Item 1),
were also partners in Counsel at December 31, 1995. Conflicts may
also exist in connection with the possible sale of the Property
but these will be discussed more fully in the solicitation of
-15-<PAGE>
consents for the proposed sale (see Item 4 above). Under the
respective participating agreements pursuant to which the Partners
act as agents for the Participants, certain transactions require
the prior consent of a specified number of the Participants in
order for the agents to act on their behalf. Such transactions
include modifications and extensions of the Lease or the Mortgage
Loan, or a sale or other disposition of the Property or
substantially all of Registrant's other assets.
Reference is made to Items 1 and 2 hereof for a
description of the terms of the Lease between Registrant and the
New Lessee. The respective interests of Messrs. Katzman, Loehr
and Malkin, if any, in Registrant arise solely from the ownership
of their respective participations in Registrant. The respective
interests of Mr. and Mrs. Malkin in Original Lessee and New Lessee
arise solely from the ownership of their respective partnership
interests in Original Lessee and shares in New Lessee. The
Partners (and Mrs. Malkin) receive no extra or special benefit not
shared on a pro rata basis with all other Participants in
Registrant or partners in Original Lessee and shareholders in New
Lessee. However, each of the Partners, by reason of his
respective interest in Counsel, is entitled to receive his share
of any legal fees or other remuneration paid to Counsel for
professional services rendered to Registrant and Original Lessee.
Reference is also made to Items 1 and 10 hereof for a
description of the relationship between Registrant and Counsel, of
which the Partners are among the members. The respective
interests of the Partners in any remuneration paid or given by
Registrant to Counsel arise solely from the ownership of their
respective partnership interests in Counsel. See Item 11 hereof
for a description of the remuneration arrangements between
Registrant and Counsel.
(b) Reference is made to Paragraph (a) above.
(c) Not applicable.
(d) Not applicable.
-16-<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K.
(a)(1) Financial Statements:
Consent of Jacobs Evall & Blumenfeld LLP, Certified
Public Accountants, dated April 15, 1996.
Accountant's Report of Jacobs Evall & Blumenfeld LLP,
Certified Public Accountants, dated April 10, 1996.
Balance Sheets at December 31, 1995 and at December 31,
1994 (Exhibit A).
Statements of Income for the fiscal years ended December
31, 1995, 1994 and 1993 (Exhibit B).
Statement of Partners' Capital Deficit for the fiscal
year ended December 31, 1995 (Exhibit C-1).
Statement of Partners' Capital Deficit for the fiscal
year ended December 31, 1994 (Exhibit C-2).
Statement of Partners' Capital Deficit for the fiscal
year ended December 31, 1993 (Exhibit C-3).
Statements of Cash Flows for the fiscal years ended
December 31, 1995, 1994 and 1993 (Exhibit D).
Notes to Financial Statements for the fiscal years ended
December 31, 1995, 1994 and 1993.
(2) Financial Statement Schedules:
List of Omitted Schedules.
Real Estate and Accumulated Depreciation - December 31,
1995 (Schedule III).
(3) Exhibits: See Exhibit Index.
(b) Form 8-K was filed by Registrant on February 14,
1996 reporting the Assignment of the Leasehold by
498 Seventh Avenue Associates to 4987 Corporation
under the Indenture of Lease between Registrant and
498 Seventh Avenue Associates.
-17-
<PAGE>
April 15, 1996
Garment Capitol Associates
New York, N.Y.
We consent to the use of our independent accountants' report dated April 10,
1996, covering our audit of the accompanying financial statements of Garment
Capitol Associates in connection with and as part of your December 31, 1995
annual report (Form 10-K) to the Securities and Exchange Commission.
Jacobs Evall & Blumenfeld LLP
Certified Public Accountants
-18-
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the participants in Garment Capitol Associates
(a Partnership)
New York, N. Y.
We have audited the accompanying balance sheets of Garment Capitol Associates
(the "Company") as of December 31, 1995 and 1994, and the related statements of
income, partners' capital deficit and cash flows for each of the three years in
the period ended December 31, 1995, and the supporting financial statement
schedule as contained in Item 14(a)(2) of this Form 10-K. These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide 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 Garment Capitol Associates as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles, and the related
financial statement schedule, when considered in relation to the basic
financial statements, presents fairly, in all material respects, the
information set forth therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company owns commercial property
situated in New York City. As discussed more fully in Note 11 to these
financial statements, the original lessee of this property had sustained
substantial operating losses during 1995 and 1994, and on December 29, 1995
assigned the operating lease to a new lessee, thereby effectively terminating
the liability under the operating lease of the original lessee and its
remaining partners. The new lessee has failed to pay the property's real
estate taxes that fell due on January 1, 1996, which constitutes a default of
-19-
<PAGE>
- 2 -
the operating lease as of that date, as well as a breach of the Company's
obligations under the fee mortgage. These events raise substantial doubt
about the Company's ability to continue as a going concern.
Management's actions subsequent to these events, and its plans in regard to
these matters, including the proposed solicitation of consents from the
participants in the Company to sell the property, are also described in Note
11. The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
Jacobs Evall & Blumenfeld LLP
Certified Public Accountants
New York, N. Y.
April 10, 1996
-20-
<PAGE>
EXHIBIT A
GARMENT CAPITOL ASSOCIATES
BALANCE SHEETS
A S S E T S
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents (Note 10):
Morgan Guaranty Trust Company of New York $ 37,547 $ 37,467
Distribution account held by
Wien, Malkin & Bettex................... 49,826 51,009
Fidelity U.S. Treasury Income
Portfolio............................... 826 232,847
TOTAL CURRENT ASSETS............... 88,199 321,323
Real Estate (Notes 2b, 3 and 11):
Land....................................... 2,500,000 2,500,000
Building................................... $8,000,000 $8,000,000
Less: Accumulated depreciation.......... 8,000,000 - 8,000,000 -
Other Assets:
Mortgage refinancing costs, less
accumulated amortization of $53,025
in 1995 and $24,838 in 1994 (Note 2c)..... 54,025 44,644
TOTAL ASSETS....................... $2,642,224 $2,865,967
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL DEFICIT
<TABLE>
<S> <C> <C> <C> <C>
Current Liabilities:
Principal payments of first
mortgage payable within one
year (Notes 3 and 11)..................... $ 133,052 $3,312,692
Accrued interest payable................... 26,906 65,371
TOTAL CURRENT LIABILITIES.......... 159,958 3,378,063
Long-term Liabilities:
Bonds, mortgages and similar debt:
First mortgage payable (Notes 3 and 11).. $3,045,988 -
Less: Current installments shown above.. 133,052 2,912,936 - -
TOTAL LIABILITIES.................. 3,072,894 3,378,063
Partners' capital deficit (Exhibit C)........ (430,670)
(512,096)
TOTAL LIABILITIES AND PARTNERS'
CAPITAL DEFICIT................... $2,642,224 $2,865,967
</TABLE>
See accompanying notes to financial statements.
-21-
<PAGE>
EXHIBIT B
GARMENT CAPITOL ASSOCIATES
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Rent income, from a related
party (Notes 4 and 11)................... $1,090,000 $1,090,000 $2,100,196
Dividend income........................... 3,027 7,994 1,683
1,093,027 1,097,994 2,101,879
Expenses:
Interest on mortgage (Note 3)............. 328,802 348,479 324,445
Supervisory services, to a
related party (Note 5)................... 42,500 42,500 135,601
Amortization of mortgage
refinancing costs (Note 2c).............. 28,187 15,307 7,748
399,489 406,286 467,794
NET INCOME, CARRIED TO PARTNERS'
CAPITAL DEFICIT (NOTE 8)......... $ 693,538 $ 691,708 $1,634,085
Earnings per $5,000 participation
unit, based on 1,050 participation
units outstanding during each year......... $ 661 $ 659 $ 1,556
</TABLE>
See accompanying notes to financial statements.
-22-
<PAGE>
EXHIBIT C-1
GARMENT CAPITOL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL DEFICIT
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Partners' Partners'
capital deficit Share of capital deficit
January 1, 1995 net income Distributions December 31, 1995
<S> <C> <C> <C> <C>
Donald A. Bettex Group........ $(170,699) $231,179 $ 204,037 $(143,557)
Peter L. Malkin Group......... (170,699) 231,179 204,037 (143,557)
Martin D. Newman Group
(formerly Alvin
Silverman Group)............ (170,698) 231,180 204,038 (143,556)
$(512,096) $693,538 $ 612,112 $(430,670)
</TABLE>
See accompanying notes to financial statements.
-23-
<PAGE>
EXHIBIT C-2
GARMENT CAPITOL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL DEFICIT
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Partners' Partners'
capital deficit Share of capital deficit
January 1, 1994 net income Distributions December 31, 1994
<S> <C> <C> <C> <C>
Donald A. Bettex Group...... $(197,231) $ 230,570 $ 204,038 $(170,699)
Peter L. Malkin Group....... (197,231) 230,569 204,037 (170,699)
Alvin Silverman Group....... (197,230) 230,569 204,037 (170,698)
$(591,692) $ 691,708 $ 612,112 $(512,096)
</TABLE>
See accompanying notes to financial statements.
-24-
<PAGE>
EXHIBIT C-3
GARMENT CAPITOL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL DEFICIT
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Partners' Partners'
capital deficit Share of capital deficit
January 1, 1993 net income Distributions December 31, 1993
<S> <C> <C> <C> <C>
Donald A. Bettex Group........ $(272,190) $ 544,695 $ 469,736 $(197,231)
Peter L. Malkin Group......... (272,190) 544,695 469,736 (197,231)
Alvin Silverman Group......... (272,190) 544,695 469,735 (197,230)
$(816,570) $1,634,085 $1,409,207 $(591,692)
</TABLE>
See accompanying notes to financial statements.
-25-
<PAGE>
EXHIBIT D
GARMENT CAPITOL ASSOCIATES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 693,538 $ 691,708 $1,634,085
Adjustments to reconcile net income to
cash provided by operating activities:
Amortization of mortgage refinancing
costs (Note 2c)............................. 28,187 15,307 7,748
Changes in operating liabilities:
Accrued interest payable................... (38,465) 32,091 5,163
Rent received in advance................... - - (33,763)
Mortgage refinancing costs paid............ (37,568) (25,493) (10,226)
Net cash provided by
operating activities................ 645,692 713,613 1,603,007
Cash flows from financing activities:
Cash distributions.............................. (612,112) (612,112) (1,409,207)
Principal payments on first mortgage payable.... (266,704) (32,118) (29,218)
Net cash used in financing
activities.......................... (878,816) (644,230) (1,438,425)
Net increase (decrease) in cash
and cash equivalents................ (233,124) 69,383 164,582
Cash and cash equivalents, beginning of year...... 321,323 251,940 87,358
CASH AND CASH EQUIVALENTS,
END OF YEAR......................... $ 88,199 $ 321,323 $ 251,940
Supplemental disclosures of cash flow information:
1995 1994 1993
Cash paid for:
Interest...................................... $ 367,267 $ 316,388 $ 319,282
</TABLE>
See accompanying notes to financial statements.
-26-
<PAGE>
GARMENT CAPITOL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. Business Activity
Garment Capitol Associates ("Associates") is a general partnership which
owns commercial property situated at 498 Seventh Avenue, New York, New
York. Through December 28, 1995 the property was net leased to 498
Seventh Avenue Associates (the "Original Lessee"). Effective December 29,
1995 the operating lease was assigned to 4987 Corporation (the "New
Lessee"). See Notes 4 and 11.
2. Summary of Significant Accounting Policies
a. Cash and Cash Equivalents:
Cash and cash equivalents include investments in money market funds
and all highly liquid debt instruments purchased with a maturity of
three months or less.
b. Real Estate and Depreciation of Building:
Real estate, consisting of land and building (the "Property"), is
stated at cost. The building is fully depreciated. Depreciation of
the building had been provided on the straight-line method based on a
thirty-year life (3-1/3% per annum).
c. Mortgage Refinancing Costs and Amortization:
Mortgage refinancing costs totaling $107,050 have been incurred in
connection with the December 1, 1992 refinancing of the first
mortgage payable (see Note 3), and are being charged to income
ratably over the five year term of the first mortgage. Such costs
include payments of $49,564 to the firm of Wien, Malkin & Bettex, a
related party (see Note 5).
d. Use of Estimates:
In preparing financial statements in conformity with generally
accepted accounting principles, management often makes 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 revenues and expenses during the reporting period. Actual results
could differ from those estimates.
3. First Mortgage Payable
On November 30, 1987, a first mortgage was placed on the Property with
Apple Bank for Savings in the amount of $3,485,000. Annual mortgage
charges were $348,500, payable in equal monthly installments, applied
first to interest at the rate of 9-1/2% per annum and the balance to
principal. The mortgage was scheduled to mature on December 1, 1992 with
a balance of $3,376,341 but was extended until June 16, 1993, when the
bank issued a commitment to extend and modify the mortgage for a five year
-27-
<PAGE>
GARMENT CAPITOL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(continued)
3. First Mortgage Payable (continued)
period from December 1, 1992 through December 1, 1997. The closing, which
had been delayed, occurred on March 23, 1995. The terms of the extended
mortgage provide for constant monthly payments totalling $435,388 per
annum, including interest at the rate of 10% per annum from December 1,
1992 through October 31, 1993; constant monthly payments totalling
$447,316 per annum, including interest at the rate of 10 1/2% per annum
from November 1, 1993 through November 30, 1994; and constant payments
totalling $449,586 per annum, including interest at the rate of 10.6% per
annum from December 1, 1994 through maturity. The constant payments are
based on a fifteen year amortization schedule. Payments of principal and
interest made subsequent to the original maturity date (December 1, 1992)
were reapplied according to these new repayment terms and, at the closing,
a retroactive payment of $218,081 was made to bring the payments current
with the new mortgage schedule. The balance of the mortgage at maturity
will be $2,778,001.
Principal payments required to be made on long-term debt are as follows:
Year ending December 31,
1996................................................ $ 133,052
Through December 1, 1997............................ 2,912,936
$3,045,988
The Property is pledged as collateral for the first mortgage. See Note
11.
4. Related Party Transactions - Rent Income
Rent income for the years ended December 31, 1995, 1994 and 1993
represents twelve equal monthly installments of an annual net rent of
$1,090,000 (the "Basic Rent") under a net operating lease dated May 1,
1957 (the "Operating Lease") with the Original Lessee, plus, where
applicable, payments of additional rent as provided under certain
conditions with respect to the lessee's defined net income from operations
for lease years ending April 30th.
For the years ended December 31, 1995 and 1994, no additional rent was
earned from the Original Lessee for its lease years ended April 30, 1995
and 1994. For the year ended December 31, 1993 additional rent of
$1,010,196 was earned from the Original Lessee for its lease year ended
April 30, 1993.
No additional rent is accrued by Associates for the period between the end
of the lessee's lease year and the end of Associates' fiscal year.
-28-
<PAGE>
GARMENT CAPITOL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(continued)
4. Related Party Transactions - Rent Income (continued)
The current term of the Operating Lease expires on April 30, 2007. The
Operating Lease includes a renewal option to extend the term to April 30,
2032. Pursuant to the Operating Lease, the lessee has the right to
surrender its leasehold interest at any time, upon 60 days' prior written
notice, without further liability after the date of surrender. The lessee
also has the right to assign the Operating Lease, without Associates'
consent, so long as the assignee assumes, in writing, all of the
obligations of the Operating Lease. The Original Lessee exercised such
assignment right on December 29, 1995, and the New Lessee assumed all
lessee obligations under the Operating Lease as of that date; such
assignment effectively terminated the liability of the Original Lessee and
its remaining partners under the Operating Lease. The shares in the New
Lessee are owned by the partners in the Original Lessee. See Note 11.
A partner in Associates is also a partner in the Original Lessee.
5. Related Party Transactions - Supervisory Services
Supervisory services (including disbursements and cost of regular
accounting services) for the years ended December 31, 1995, 1994 and 1993,
totaling $42,500, $42,500 and $135,601, respectively, were paid to the
firm of Wien, Malkin & Bettex. Some partners in that firm are also
partners in Associates. Fees for supervisory services are paid pursuant
to an agreement, which amount is based on a rate of return of investment
achieved by the participants in Associates each year.
6. Number of Participants
There were approximately 900 participants in the participating groups at
December 31, 1995, 1994 and 1993.
7. Determination of Distributions to Participants
Distributions to participants represent mainly the excess of rent income
received over the mortgage requirements, as anticipated, and expenses
paid.
8. Distributions and Amount of Income per $5,000 Participation Unit
Distributions per $5,000 participation unit during the years 1995, 1994
and 1993, based on 1,050 participation units outstanding during each year,
totaled $583, $583 and $1,342, respectively. All such distributions
consisted of income only.
-29-
<PAGE>
GARMENT CAPITOL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(continued)
8. Distributions and Amount of Income per $5,000 Participation Unit
(continued)
Net income is computed without regard to income tax expense since
Associates does not pay a tax on its income; instead, any such taxes are
paid by the participants in their individual capacities.
Generally, financial and income tax reporting have been the same.
However, for income tax purposes in 1992, the rent received in advance
from the lessee in 1992 in excess of the overage rent earned (Note 4),
amounting to $33,763, was treated as taxable income in 1992 and reduced
taxable income in 1993.
9. Economic Dependency on Operations of Building
Associates' building is located in the heart of New York City's "Garment
District", and its tenants are almost exclusively in the garment business.
The property, as well as other buildings in the district, has suffered
significant vacancies in recent years. As a result, the Original Lessee
has experienced continuous decreases in
its revenue stream, causing its net income from operations, as defined in
the Operating Lease, in 1994 and 1995 to fall below the amount necessary
to require payment of any additional rent for such years. For the lease
year ended April 30, 1995 the Original Lessee reported a net loss
(unaudited) of $2,222,031. See Note 11.
10. Concentration of Credit Risk
Associates maintains cash balances in a bank, money market fund (Fidelity
U.S. Treasury Income Portfolio), and a distribution account held by Wien,
Malkin & Bettex. The bank balance is insured by the Federal Deposit
Insurance Corporation up to $100,000, and at December 31, 1995 was
completely insured. The cash in the money market fund and the
distribution account held by Wien, Malkin & Bettex is not insured. The
funds held in the distribution account were paid to the participants on
January 1, 1996.
11. Subsequent Events Regarding Default by New Lessee of the Operating Lease,
Breach of Associates' Obligations Under the Fee Mortgage, and Proposed
Solicitation of Consents from the Participants to a Sale of the Property
The New Lessee has paid Basic Rent under the Operating Lease due January
1, 1996, February 1, 1996, March 1, 1996 and April 1, 1996. Associates in
turn has continued to pay (1) the monthly mortgage payments to the Apple
Bank for Savings (the "Fee Mortgagee") on Associates' fee mortgage on the
Property (the "Fee Mortgage") through April 1, 1996; (2) its monthly fee
for supervisory services through April, 1996; and (3) its monthly
distributions to the participants in Associates. Associates holds the
April 1, 1996 rent to cover the May 1996 mortgage payment and a May 1996
distribution to participants. The New Lessee failed to pay the New York
City real estate and Business Improvement District ("BID") assessments in
the amounts of $936,180 and $29,695, respectively, which were due on
-30-
<PAGE>
GARMENT CAPITOL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(continued)
11. Subsequent Events Regarding Default by New Lessee of the Operating Lease,
Breach of Associates' Obligations Under the Fee Mortgage, and Proposed
Solicitation of Consents from the Participants to a Sale of the Property
(continued)
January 1, 1996 (collectively, the "1/1/96 Real Estate Taxes"). As a
result, the New Lessee is in default of the Operating Lease as of that
date.
The New Lessee has requested that Associates forbear from exercising its
rights and remedies under the Operating Lease, including termination of
the Operating Lease, by reason of the failure to pay the 1/1/96 Real
Estate Taxes, while management of Associates solicits the consent of its
participants to a sale of the Property (the "Solicitation"). If
Associates does forbear, the New Lessee has agreed to cooperate fully with
Associates in connection with the sale of the Property and to continue to
perform its other obligations under the Operating Lease, including payment
of the Basic Rent, to enable Associates to continue its monthly
distributions to the participants, pay its supervisory fee and pay its
monthly mortgage obligation.
The failure to pay the 1/1/96 Real Estate Taxes also constituted a breach
of Associates obligations under the Fee Mortgage. The shareholders of the
New Lessee (or designees on their behalf) have borrowed from the Fee
Mortgagee a sum equal to the 1/1/96 Real Estate Taxes and interest thereon
to the date of the borrowing. This sum was used to fund a protective
advance by the Fee Mortgagee to pay the 1/1/96 Real Estate Taxes and
interest thereon through the purchase of a subordinate participating
interest in the Fee Mortgage in such amount. As a result, the Fee
Mortgagee has agreed to forbear from exercising rights and remedies under
the Fee Mortgage based on Associates' failure to pay (or cause to be paid
by the New Lessee) the 1/1/96 Real Estate Taxes. Interest on the
protective advance will be paid by the New Lessee so long as the Operating
Lease continues in effect.
As to future real estate taxes and BID assessments on the Property
(together with the 1/1/96 Real Estate Taxes, the "Real Estate Taxes"), the
Fee Mortgagee has agreed to make additional loans to such individual
shareholders (or their designees) to fund further protective advances to
cover the Real Estate Taxes due July 1, 1996 (covering the period to
December 31, 1996) and January 1, 1997 (covering the period to June 30,
1997). Those individual borrowers intend to borrow the funds from the Fee
Mortgagee and fund the protective advances as required to pay the July 1,
1996 and January 1, 1997 Real Estate Taxes if the participants in
Associates authorize a sale of the Property and so long as the Operating
Lease continues in effect.
Management advises that the Solicitation, which is scheduled to be
completed no later than August 30, 1996, will express its belief that the
Property cannot be operated on a profitable basis without significant
capital improvements; it will also opine that the program to sell the
Property will permit Associates to liquidate its investment in an orderly
fashion and avoid the necessity of raising additional capital from the
participants and others to support and renovate the Property while
avoiding litigation costs and the risk of loss of the Property through a
Fee Mortgage foreclosure.
-31-
<PAGE>
GARMENT CAPITOL ASSOCIATES
OMITTED SCHEDULES
The following schedules have been omitted as not applicable in the present
instance:
SCHEDULE I - Condensed financial information of registrant.
SCHEDULE II - Valuation and qualifying accounts.
SCHEDULE IV - Mortgage loans on real estate.
-32-
<PAGE>
SCHEDULE III
GARMENT CAPITOL ASSOCIATES
Real Estate and Accumulated Depreciation
December 31, 1995
<TABLE>
<S> <C> <C>
Column
A Description Office building and land located at
498 Seventh Avenue, New York, N. Y.
B Encumbrances - Apple Bank for Savings
Balance at December 31, 1995................................. $ 3,045,988
C Initial cost to company
Land......................................................... $ 2,500,000
Building..................................................... $ 8,000,000
D Cost capitalized subsequent to acquisition..................... None
E Gross amount at which carried at
close of period
Land........................................................ $ 2,500,000
Building.................................................... 8,000,000
Total....................................................... $10,500,000(a)
F Accumulated depreciation....................................... $ 8,000,000(b)
G Date of construction 1921
H Date acquired May 1, 1957
I Life on which depreciation in latest
income statements is computed Not applicable
</TABLE>
(a) There have been no changes in the carrying values of real estate for
the years ended December 31, 1995, December 31, 1994 and December 31,
1993. The costs for federal income tax purposes are the same as for
financial statement purposes.
(b) Accumulated depreciation
Balance at January 1, 1993 $8,000,000
Depreciation:
F/Y/E 12/31/93 None
12/31/94 None
12/31/95 None None
Balance at December 31, 1995 $8,000,000
-33-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, 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
April 10, 1996 (the "Power").
GARMENT CAPITOL ASSOCIATES (Registrant)
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: April 15, 1996
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: April 15, 1996
______________________
* Mr. Katzman supervises accounting functions for Registrant.
-34-<PAGE>
Exhibit Index
Number Document Page*
3 (a) Registrant's Partnership Agree-
ment, dated January 10, 1957, which
was filed as Exhibit No. 1 to
Registrant's Registration Statement
on Form S-1 as amended (the
"Registration Statement") effective
February 13, 1957 and assigned File
No. 2-13034, is incorporated by
reference as an exhibit hereto.
3 (b) Amended Business Certificate of
Registrant effective as of January
2, 1996, reflecting a change in the
partners of Registrant.
4 Registrant's form of Participation
Agreement, which was filed as
Exhibit No. 5 to the Registration
Statement effective February 13,
1957 and assigned File No. 2-13034,
is incorporated by reference as an
exhibit hereto.
10 (a) Contract between Lawrence A. Wien
("Wien") and Garment Center Capitol
Inc. for the purchase of the
property 498 Seventh Avenue and
certain other property, dated
January 7, 1957, which was filed as
Exhibit No. 2 to the Registration
Statement effective February 13,
1957 and assigned File No. 2-1304,
is hereby incorporated by reference
as an exhibit hereto.
10 (b) Assignment by Wien to Registrant of
his rights under the contract
assignment, dated January 11, 1957,
insofar as they pertain to 498
Seventh Avenue and agreement of
assignment, dated January 11, 1957,
______________________
* Page references are based on a sequential numbering system.
-35-<PAGE>
Number Document Page*
which was filed as Exhibit No. 3 to
the Registration Statement effective
February 13, 1957 and assigned File
No. 2-13034, is hereby incorporated
by reference as an exhibit hereto.
10 (c) Modification and Extension
Agreement, dated as of December 1,
1992, between Apple Savings Bank and
Garment Capitol Associates, which
was filed as Exhibit 10(c) to
Registrant's Annual Report on Form
10K for the year ended 1994, is
incorporated herein by reference.
13 (a) Letter to Participants dated July
21, 1995 and accompanying financial
reports for the lease years ended
April 30, 1995 and April 30, 1994.
The foregoing material shall not be
deemed to be "filed" with the
Commission or otherwise subject to
the liabilities of Section 18 of the
Securities Exchange Act of 1934.
24 Power of Attorney dated April 10,
1996, between Stanley Katzman, Peter
L. Malkin, and John L. Loehr as
Partners of Registrant and Stanley
Katzman and Richard A. Shapiro.
27 Financial Data Schedule of Registrant
for fiscal year ended December 31,
1995.
29 (a) Assignment of Leasehold under
Indenture of Lease between
Registrant and 498 Seventh Avenue
Associates by 498 Seventh Avenue
Associates to 4987 Corporation as of
December 29, 1995.
______________________
* Page references are based on a sequential numbering system.
-36-<PAGE>
Number Document Page*
29 (b) Acceptance of Assignment of 498
Seventh Avenue Associates Leasehold
by 4987 Corporation of Leasehold
under Indenture of Lease between
Registrant and 498 Seventh Avenue
Associates as of December 29, 1995.
______________________
* Page references are based on a sequential numbering system.
-37-<PAGE>
Exhibit 3(b)
AMENDED BUSINESS CERTIFICATE
The undersigned hereby certify that a certificate of business
under the assumed name
GARMENT CAPITOL ASSOCIATES
for the conduct of business at 60 East 42nd Street, New York, New
York, was filed in the office of the County Clerk New York County,
State of New York, on the 11th day of January, 1957, under index
number 442/57; that the last amended certificate was filed on the
21st day of February, 1996 in the office of said County Clerk
under index number 442/57.
It is hereby further certified that this amended certificate
is made for the purposes of more accurately setting forth the
facts recited in the original certificate or the last amended
certificate and to set forth the following changes in such facts.
MARTIN D. NEWMAN, residing at 535 Park Avenue, New York, New York
10021, has been succeeded as a member of Garment Capitol
Associates by STANLEY KATZMAN, residing at 75-18 193rd Street,
Flushing, New York 11366.
DONALD A. BETTEX, residing at 700 Park Avenue, New York, New York
10021, has been succeeded as a member of Garment Capitol
Associates by JOHN L. LOEHR, residing at 286 Alpine Circle, River
Vale, New Jersey 07675.
The members of GARMENT CAPITOL ASSOCIATES now consist of:
Peter L. Malkin, Stanley Katzman and John L. Loehr.
IN WITNESS WHEREOF, the undersigned have as of this 2nd day
of January, 1996 made and signed this certificate.
/s/ Peter L. Malkin /s/ Donald A. Bettex
PETER L. MALKIN DONALD A. BETTEX
/s/ Martin D. Newman /s/ Stanley Katzman
MARTIN D. NEWMAN STANLEY KATZMAN
/s/ John L. Loehr
JOHN L. LOEHR
State of New York, County of New York ss.:
On this 24th day of January, 1996, before me personally
appeared MARTIN D. NEWMAN, DONALD A. BETTEX, STANLEY KATZMAN, JOHN
L. LOEHR and PETER L. MALKIN, to me known and known to me to be
the individual described in and who executed the foregoing
certificate, and they thereupon duly acknowledged to me that they
executed the same.
/s/ Marilyn Pfeiffer
Notary Public
State of New York
No. 24-4711035
Qualified in Kings County
Expires July 31, 1996
-38-
July 21, 1995
TO PARTICIPANTS IN GARMENT CAPITOL ASSOCIATES:
We enclose the comparative operating report of the lessee,
498 Seventh Avenue Associates, for the lease years ended April
30, 1995 and April 30, 1994. Additional rent is payable to
Garment Capitol Associates equal to 50% of net profit in excess
of $200,000 per annum. The lessee incurred a loss of $2,222,031
for the lease year ended April 30, 1995; therefore, there was no
additional rent.
On April 27, 1995, we advised participants that we had
concluded the refinancing and extension of the first mortgage on
March 31, 1995. Our letter reported that the building was expe-
riencing serious difficulties in a depressed garment district
market and that occupancy in the building was approximately 55%.
Neither occupancy in the building nor general market conditions
have improved. The lessee has prepaid real estate taxes through
December 31, 1995. However, a very substantial cash infusion is
required to improve the competitive position of the building.
We expect that the lessee will soon be submitting a program that
will seek cooperation from Garment Capitol Associates. Until
then, we expect that regular monthly distributions will continue
at the current rate of about 11.7% per annum on the cash invest-
ment of $5,250,000.
If you have any question on the above, please communicate
with us at our New York office or, if it is more convenient, at
our branch office in Palm Beach, Florida.
Cordially yours,
WIEN, MALKIN & BETTEX
BY: Stanley Katzman
SK:mg
Encs.
<PAGE>
498 Seventh Avenue Associates
60 East 42nd Street
New York, New York 10165
Gentlemen:
In accordance with our engagement, we have reviewed the
special-purpose comparative statement of income and expense, as
defined, of 498 Seventh Avenue Associates for the lease years
ended April 30, 1995 and 1994.
Our engagement included the examination of statements of
receipts and disbursements, together with supporting records,
submitted by Helsmley-Spear, Inc., the managing agent for the
property, but did not include the verification by direct
communication of the income from tenants or liabilities and
disbursements to vendors.
In our opinion, subject to the above, the accompanying
special-purpose comparative statement of income and expense
presents fairly the net operating profit (loss), as defined, of
498 Seventh Avenue Associates for the lease years ended April 30,
1995 and 1994.
Respectfully submitted,
Kaufman Goldstein
New York, New York
May 25, 1995
<PAGE>
498 Seventh Avenue Associates
Comparative Statement of Income and Expense
(Unaudited)
May l, 1994 May l, 1993
through through Increase
April 30, 1995 April 30, 1994 (Decrease)
Income:
Rent $6,395,782 $8,097,433 ($1,701,651)
Electricity - net ( 32,770) ( 22,674) ( 10,096)
Real estate tax refund 470,454 - 470,454
Miscellaneous 105,293 121,529 ( 16,236)
Total Income 6,938,759 8,196,288 ( 1,257,529)
Expenses:
Rent paid 1,090,000 1,090,000 -
Labor costs 1,348,879 1,322,827 26,052
Real estate taxes 2,455,608 3,000,860 ( 545,252)
Repairs, supplies and improvements 2,684,061 1,578,697 1,105,364
Management and leasing 588,076 232,090 355,986
Steam 196,903 221,664 ( 24,761)
Water - net ( 28,315) 86,659 ( 114,974)
Professional fees 280,256 122,036 158,220
Insurance 190,016 172,721 17,295
Amortization of elevator improvements 201,183 201,183 -
Interest on notes payable -
re elevator improvements 2,937 16,606 ( 13,669)
Fire alarm service 30,356 24,934 5,422
Cartage 50,240 61,993 ( 11,753)
Miscellaneous 70,590 59,061 11,529
Total Expenses 9,160,790 8,191,331 969,459
Net income (loss) for the lease year ( 2,222,031) 4,957 ( 2,226,988)
Less, exclusion under lease - ( 4,957) ( 4,957)
Net income subject to additional rent $ - $ - $ -
Additional rent, at 50% $ - $ - $ -
The accompanying letter of transmittal is an integral part of this statement.
-2-<PAGE>
EXHIBIT 24
GARMENT CAPITOL ASSOCIATES
FILE NO. 0-768
POWER OF ATTORNEY
We, the undersigned general partners of Garment Capitol
Associates ("Associates"), hereby severally constitute and appoint
Stanley Katzman and Richard A. Shapiro and each of them,
individually, our true and lawful attorneys with full power to
them and each of them to sign for us, and in our names and in the
capacities indicated below on behalf of Associates, any and all
reports or other statements required to be filed with the
Securities and Exchange Commission under Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Signature Title Date
/s/Peter L. Malkin
Peter L. Malkin General Partner April 10, 1996
/s/John L. Loehr
John L. Loehr General Partner April 10, 1996
/s/Stanley Katzman
Stanley Katzman General Partner April 10, 1996<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 10th day of April, 1996 before me personally came
PETER L. MALKIN, JOHN L. LOEHR and STANLEY KATZMAN to me known to
be the individuals described in and who executed the foregoing
instrument, and acknowledged that they executed the same.
/s/Notary Public
NOTARY PUBLIC<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Balance Sheet as of December 31, 1995 and the Statement Of Income
for the year ended Decemeber 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 88,199
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 88,199
<PP&E> 10,500,000
<DEPRECIATION> 8,000,000
<TOTAL-ASSETS> 2,642,224<F1>
<CURRENT-LIABILITIES> 159,958<F2>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (430,670)<F3>
<TOTAL-LIABILITY-AND-EQUITY> 2,642,224<F4>
<SALES> 1,090,000<F5>
<TOTAL-REVENUES> 1,093,027<F6>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 70,687<F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 328,802
<INCOME-PRETAX> 693,538
<INCOME-TAX> 0
<INCOME-CONTINUING> 693,538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 693,538
<EPS-PRIMARY> 661<F8>
<EPS-DILUTED> 661<F8>
<FN>
<F1>Includes unamortized mortgage refinance costs of $54,025
<F2>Accrued interest on mortgage and first mortgage principal payment due
within one year
<F3>Partnership capital
<F4>Include long-term debt
<F5>Rental income
<F6>Includes dividend income
<F7>Supervisory services and amortization of mortgage refinance costs
<F8>Earnings per $5,000 participation unit, based on 1,050 participation
units outstanding during the period
</FN>
</TABLE>
EXHIBIT 29(a)
ASSIGNMENT OF LEASEHOLD
The Undersigned Partnership, for good and valuable
consideration, receipt whereof is hereby acknowledged, hereby
assigns, conveys and transfers to 4987 Corporation, a New York
Corporation, all of its right, title and interest in and to a
certain Leasehold to the real property more fully described in the
description attached hereto which Leasehold has been created by a
certain INDENTURE OF LEASE dated May 1, 1957 between GARMENT
CAPITOL ASSOCIATES as Landlord and 498 SEVENTH AVENUE ASSOCIATES
as Tenant, a copy of which INDENTURE OF LEASE is attached hereto
as Exhibit A, which Leasehold was extended by notice dated
January 7, 1981 until April 30, 2007 attached hereto as Exhibit B.
This assignment is executed and delivered this 28th day
of December, 1995.
498 Seventh Avenue Associates
By: /s/Peter L. Malkin
Partner<PAGE>
STATE OF FLORIDA)
COUNTY OF LEE, ss.:
CAPTIVA ISLAND )
On the 28th day of December, 1995, before me personally
came Peter L. Malkin to me known and known to be the individual
who executed the foregoing instrument, and who, being duly sworn
by me, did depose and say that he is a partner in the partnership
498 Seventh Avenue Associates and that he had authority to sign
the same, and acknowledged that he executed the same as the act
and deed of said partnership.
/s/Notary Public
Notary Public<PAGE>
ALL those certain plots, pieces or parcels of land,
situate, lying and being in the Borough of Manhattan, City, County
and State of New York, bounded and described as follows:
BEGINNING at the corner formed by the intersection of
the westerly side of Seventh Avenue with the southerly side of
37th Street; running thence WESTERLY along the said southerly side
of 37th Street, 225 feet; thence SOUTHERLY parallel with Seventh
Avenue and part of the distance through a party wall, 60 feet;
thence EASTERLY parallel with 36th Street, 6-1/2 inches to the
center of a party wall; thence SOUTHERLY parallel with Seventh
Avenue and through said party wall, 45 feet 10 inches; thence
EASTERLY parallel with 36th Street, 10 feet 6 inches; thence
SOUTHERLY parallel with Seventh Avenue, 3 feet 5 inches; thence
WESTERLY and nearly parallel with 36th Street, 18 feet 4-4/5
inches to a point distant 88 feet 1 inch northerly on a line
parallel with Seventh Avenue from the northerly side of 36th
Street; thence NORTHERLY and parallel with Seventh Avenue, 2-3/4
inches to a point distant 88 feet 3-3/4 inches northerly from the
northerly side of 36th Street; thence WESTERLY and nearly parallel
with 36th Street, 18 feet 4-4/5 inches to a point distant 87 feet
10 inches northerly on a line parallel with Seventh Avenue from
the northerly side of 36th Street; thence SOUTHERLY along said
line parallel with Seventh Avenue, and part of the distance
through a party wall, 87 feet 10 inches to the said northerly side
of 36th Street; thence EASTERLY along said northerly side of 36th
Street, 170 feet 9 inches to a point distant 80 feet westerly from
the northwesterly corner of Seventh Avenue and 36th Street; thence
NORTHERLY parallel with Seventh Avenue, 98 feet 9 inches; thence
EASTERLY parallel with 36th Street, 80 feet to the westerly side
of Seventh Avenue at a point distant 98 feet 9 inches southerly
from the southwesterly corner of Seventh Avenue and 37th Street,
and thence NORTHERLY along said westerly side of Seventh Avenue,
98 feet 9 inches to the point or place of beginning.
SAID premises being known as and by the street numbers
492-498 Seventh Avenue, 200-216 West 37th Street, and 205-221 West
36th Street, New York, New York.
TOGETHER with all right, title and interest of Landlord
in and to any tunnels, alleys, streets and roads in front of,
adjoining or connecting to said premises;
TOGETHER with all fixtures, chattels and articles of
personal property owned or leased by Landlord and now or hereafter
attached to or used in connection with said premises, and any and
all replacements thereof and additions thereto;<PAGE>
SUBJECT TO:
a. Existing leases and tenancies of space in the
demised premises and rights of occupants thereof;
b. Any state of facts an accurate survey may show;
c. All consents, covenants, restrictions, easements,
reservations, party wall agreements, and all mechanics liens
affecting the demised premises;
d. All past due and current taxes, water charges,
sewer rents, assessments and other public and governmental charges
of any nature whatsoever;
e. All ordinances and laws of any governmental
authority and existing violations thereof, if any;
f. A certain tunnel running beneath the surface of
West 37th Street between 498 Seventh Avenue and 500 Seventh Avenue
used under the provisions of a certain resolution of the Board of
Estimate of the City of New York adopted November 19, 1948, and
approved by the Mayor of the City of New York on December 28,
1948, and the provisions and conditions therein set forth.
-2-<PAGE>
EXHIBIT 29 (b)
ACCEPTANCE OF ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS
The undersigned 4987 Corporation, as Assignee from 498
SEVENTH AVENUE ASSOCIATES, a New York General Partnership, of a
certain Leasehold dated May 1, 1957 and extended on January 7,
1981 to April 30, 2007, between Garment Capitol Associates,
Landlord, and 498 SEVENTH AVENUE ASSOCIATES, Tenant, which
Leasehold is evidenced by the INDENTURE OF LEASE attached hereto
as Exhibit A, hereby accepts such assignment of the Leasehold and
hereby assumes all of the obligations of 498 SEVENTH AVENUE
ASSOCIATES under said Leasehold and Indenture.
This Acceptance and Assumption is executed and delivered
this 29th day of December, 1995.
4987 Corporation
By:/s/Thomas N. Keltner<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 29th day of December, 1995, before me came
Thomas N. Keltner, Jr., to me known, who being by me duly sworn,
did depose and say that he resides at 1111 Park Avenue, New York,
New York 10128; that he is President of 4987 Corporation, the
corporation described in and which executed to foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/Notary Public
Notary Public<PAGE>
