FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
___________
Commission file number 0-768
GARMENT CAPITOL ASSOCIATES
(Exact name of registrant as specified in its
charter)
A New York Partnership 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)
(212) 687-8700
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ]. No [ ].
An Exhibit Index is located on Page 13 of this Report.
Number of pages (including exhibits) in this filing: 13<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Garment Capitol Associates
Condensed Statement of Income
(Unaudited)
For the Three Months Ended
March 31,
1996 1995
Income:
Basic rent, from a related
party (Note B) $ 272,500 $ 272,500
Dividend Income 11 2,846
--------- ---------
Total income 272,511 275,346
--------- ---------
Expenses:
Interest on mortgage 80,156 83,385
Supervisory services, to a
related party (Note C) 10,625 10,625
Amortization of mortgage
refinancing costs 7,042 7,042
--------- --------
Total expenses 97,823 101,052
--------- ----------
Net income $ 174,688 $ 174,294
========= ==========
Earnings per $5,000 participation
unit, based on 1,050 participation
units outstanding during the year $ 166.37 $ 165.99
======== ==========
Distributions per $5,000
participation consisted of
the following:
Income $ 142.36 $ 145.74
========= ==========
At March 31, 1996 and 1995, there were $5,250,000 of participations
outstanding.<PAGE>
<PAGE>
Garment Capitol Associates
Condensed Balance Sheet
(Unaudited)
March 31, 1996 December 31, 1995
Assets
Current assets:
Cash $ 88,210 $ 88,199
Due from lessee 1,011,053 -0-
----------- -----------
Total current assets 1,099,263 88,199
----------- -----------
Real estate
Land 2,500,000 2,500,000
Building 8,000,000 8,000,000
Less, allowance for depreciation ( 8,000,000) ( 8,000,000)
----------- -----------
2,500,000 2,500,000
----------- -----------
Intangible assets
Mortgage refinancing costs 107,050 107,050
Less, allowance for amortization 60,067 53,025
----------- -----------
46,983 54,025
----------- -----------
Total assets $ 3,646,246 $ 2,642,224
=========== ===========
Liabilities and Capital
Current liabilities
Accrued interest on mortgage $ 26,624 $ 26,906
Real estate taxes and interest payable 1,011,053 -0-
Principal payments of first mortgage
payable within one year 3,014,029 133,052
----------- -----------
Total current liabilities 4,051,706 159,958
----------- -----------
Long-term debt -0- 2,912,936
----------- -----------
Capital
Capital deficit, January 1, ( 430,670) ( 512,096)
Add, Net income:
January 1, 1996 through March 31, 1996 174,688
January 1, 1995 through December 31, 1995 693,538
----------- -----------
( 255,982) 181,442
Less, Distributions:
Monthly distributions,
January 1, 1996 through March 31, 1996 149,478
January 1, 1995 through December 31, 1995 612,112
----------- -----------
Total distributions 149,478 612,112
----------- -----------
Capital (deficit)
March 31, 1996 ( 405,460)
December 31, 1995 ( 430,670)
----------- -----------
Total liabilities and capital:
March 31, 1996 $ 3,646,246
December 31, 1995 $ 2,642,224
=========== ===========
<PAGE>
<PAGE>
Garment Capitol Associates
Condensed Statement of Cash Flows
(Unaudited)
January 1, 1996 January 1, 1995
through through
March 31, 1996 March 31, 1995
Cash flows from operating activities:
Net income $ 174,688 $ 174,294
Adjustments to reconcile net income
to cash provided by operating
activities:
Amortization of mortgage refinancing
costs 7,042 7,042
Change in accrued interest payable ( 282) ( 65,371)
Change in real estate taxes payable 1,011,053 -0-
Change in due from lessee ( 1,011,053) -0-
Change in accrued expense -0- 22,957
----------- -----------
Net cash provided by operating
activities 181,448 138,922
----------- -----------
Cash flows from financing activities:
Cash distributions ( 149,478) ( 153,028)
Principal payments on first mortgage ( 31,959) ( 185,491)
Mortgage refinancing costs -0- ( 37,516)
----------- -----------
Net cash used in financing activities ( 181,437) ( 376,035)
----------- -----------
Net increase (decrease) in cash 11 ( 237,113)
Cash, beginning of period 88,199 321,323
----------- -----------
Cash, end of period $ 88,210 $ 84,210
=========== ===========
January 1, 1996 January 1, 1995
through through
March 31, 1996 March 31, 1995
Cash paid for:
Interest $ 80,438 $ 148,756
=========== ===========
<PAGE>
March 31, 1996
Notes to Condensed Financial Statements (Unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial position,
results of operations and statement of cash flows in conformity
with generally accepted accounting principles. The accompanying
unaudited condensed financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the
opinion of the partners in Registrant, necessary for a fair
statement of the results for such interim periods. The partners
in Registrant believe that the accompanying unaudited condensed
financial statements and the notes thereto fairly disclose the
financial condition and results of Registrant's operations for the
periods indicated and are adequate to make the information pre-
sented therein not misleading.
Note B - Interim Period Reporting
The results for the interim period are not necessarily
indicative of the results to be expected for a full year.
Registrant 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
(collectively the "Partners"), each of whom also acts as an agent
for holders of participations in their respective partnership
interests in Registrant (the "Participants").
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. Lessee has 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<PAGE>
Garment Capitol Associates Page 6.
March 31, 1996
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 through
May 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 $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. The Partners have submitted a draft of a
solicitation of consents to authorize a sale of the Property,
which includes forbearance in favor of the New Lessee, to the
Securities and Exchange Commission for their review. The details
of the Partners' proposal will be provided in the statement to be
issued by the Partners in connection with the solicitation. 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<PAGE>
Garment Capitol Associates Page 7.
March 31, 1996
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
$1,012,274.18, 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 on April 2, 1996 to fund a
protective advance by 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.
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 amoung 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").
Under the Lease, 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").
Additional Rent income is recognized when earned from
the New Lessee, at the close of the lease years 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 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
of the lease year and the end of Registrant's fiscal year. <PAGE>
Garment Capitol Associates Page 8.
March 31, 1996
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 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.
On March 23, 1995, Registrant entered into a
Modification and Extension Agreement (the "Modification"), as of
December 1, 1992, with Apple Bank 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.
Lessee reported net loss of $2,222,031 for the lease
year ended April 30, 1995; therefore, there was no additional rent
payable for such lease year. Consequently, no additional payments
for supervisory services were payable to Counsel for the lease
year ended April 30, 1995.
Note C - Supervisory Services
Registrant pays Counsel for supervisory services and
disbursements (i) the basic payment of $42,500 per annum ("Basic
Payment"); (ii) an additional annual basic payment of the first
$37,500 of Additional Rent paid by Lessee in any lease year
("Additional Basic Payment"); and (iii) an additional 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 (the "Additional
Payment"). The Additional Basic Payment will be payable in each
year only from Additional Rent received by Registrant from New
Lessee. If Additional Rent in any year is inadequate to cover the
Additional Basic Payment, such deficiency shall be payable in the
following year in which Additional Rent is sufficient.
No remuneration was paid during the three month period
ended March 31, 1996 by Registrant to any of the Partners as such.
Pursuant to the fee arrangements described herein, Registrant paid
Counsel $42,500 during the fiscal year ended December 31, 1995.
Registrant also paid Counsel $10,625 of the Basic Payment for
supervisory services for the three month period ended March 31,
1996.
The supervisory services provided to Registrant by
Counsel include legal, administrative services and financial
services. The legal and administrative services include acting as
general counsel to Registrant, maintaining all of its partnership
records, performing physical inspections of the Building,<PAGE>
Garment Capitol Associates Page 9.
March 31, 1996
reviewing insurance coverage and conducting annual partnership
meetings. Financial services include monthly receipt of rent from
the New Lessee, payment of monthly and additional distributions to
the Participants, payment of all other disbursements, confirmation
of the payment of real estate taxes, and active review of
financial statements submitted to Registrant by the Lessee and
financial statements audited by and tax information prepared by
Registrants' independent certified public accountant, and
distribution of such materials to the Participants. Counsel also
prepares quarterly, annual and other periodic filings with the
Securities and Exchange Commission and applicable state
authorities.
Reference is made to Note B for a description of the
terms of the Lease between Registrant and New Lessee. As of March
31, 1996, Mr. and Mrs. Peter L. Malkin own shares in the New
Lessee. Mr. Malkin disclaims any beneficial ownership of Mrs.
Malkin's interests in 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 and Mr. Malkin's
interests in the New Lessee. The Partners receive no extra or
special benefit not shared on a pro rata basis with all other
Participants in Registrant or partners in the New Lessee.
However, each of the Partners, by reason of his respective
interest in Counsel, is entitled to receive his pro rata share of
any legal fees or other remuneration paid to Counsel for legal
services rendered to Registrant and the New Lessee.
As of March 31, 1996, the Partners owned of record and
beneficially an aggregate $50,000 of Participations, representing
less than 1% of the currently outstanding Participations in
Registrant.
In addition, as of March 31, 1996, certain of the
Partners in Registrant (or their respective spouses) held
additional Participations in Registrant as follows:
Peter L. Malkin owned of record as trustee, but not
beneficially, $5,000 of Participations. Mr. Malkin
disclaims any beneficial ownership of such
Participations.
Isabel Malkin, the wife of Peter L. Malkin, owned of
record and beneficially, $21,250 of Participations.
Mr. Malkin disclaims any beneficial ownership of such
Participations. <PAGE>
Garment Capitol Associates Page 10.
March 31, 1996
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Registrant was organized solely for the purpose of
acquiring the Property subject to the Lease. Registrant is
required to pay from Basic Rent the annual charges due under the
Mortgage Loan and the Basic Payment for supervisory services, and
to distribute the balance to the Participants. Additional Rent is
distributed to the Participants after the Additional Basic Payment
and the Additional Payment is made to Counsel. See Note C.
Pursuant to the Lease, the New Lessee has assumed 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. In fact, if Associates
accumulated cash reserves by withholding or reducing distributions
to the Participants from Basic Rent or Additional Rent, the
Participants would suffer adverse tax consequences because the
amounts held back by Associates would nevertheless be taxable to
the Participants.
Registrant does not pay dividends. During the three
month period ended March 31, 1996, Registrant made regular monthly
distributions of $48.58 for each $5,000 participation ($582.96 per
annum for each $5,000 participation). As a result of no
additional rent being payable to Registrant for the lease year
ended April 30, 1995, there was no additional distribution for
1995. There are no restrictions on Registrant's present or future
ability to make distributions; however, the amount of such distri-
butions, particularly distributions of Additional Rent, depends
solely on the ability of New Lessee to make monthly payments of
Basic Rent and Additional Rent to Registrant in accordance with
the terms of the Lease. Registrant expects to make distributions
so long as it receives the payments provided for under the Lease.
See Note B.
Registrant's results of operations are affected
primarily by the amount of rent payable to it under the Lease.
The following summarizes, with respect to the current period and
the corresponding period of the previous year, the material
factors affecting Registrant's results of operations for such
periods:
Total income decreased for the three-month period
ended March 31, 1996, as compared with the three-
month period ended March 31, 1995. Such decrease
resulted from a decrease in dividend income earned
on funds temporarily invested with Fidelity U.S.
Treasury Income Portfolio. Total expenses
decreased for the three month period ended March
31, 1996, as compared with the three month period
ended March 31, 1995. Such decrease resulted from
a decrease in interest expense on the mortgage.
See Note B. <PAGE>
Garment Capitol Associates Page 11.
March 31, 1996
Liquidity and Capital Resources
There has been no significant change in Registrant's
liquidity for the three month period ended March 31, 1996 as
compared with the three month period ended March 31, 1995. As
stated in Note B, Apple Bank has extended the Mortgage Loan until
December 1, 1997.
Registrant believes that the value of the Property is
currently in excess of the amount of the mortgage balance and
anticipates that the value of the Property will be in excess of
the mortgage balance at maturity. Changes in the short-term or
long-term financial liquidity position of Registrant are dependent
on the payments made by New Lessee under the Lease. Registrant
foresees no need for it to make material commitments for capital
expenditures while the Lease is in effect.
Inflation
Registrant believes that there has been no material
change in the impact of inflation on its operations since the
filing of its report on Form 10-K for the year ended December 31,
1995, which report and all exhibits thereto are incorporated
herein by reference and made a part hereof.<PAGE>
Garment Capitol Associates Page 12.
March 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
The individual signing this report on behalf of
Registrant is Attorney-in-Fact for Registrant and each of the
Partners in Registrant, pursuant to a Power of Attorney, dated
April 10, 1996 (the "Power").
GARMENT CAPITOL ASSOCIATES
(Registrant)
By /s/Stanley Katzman
Stanley Katzman, Attorney-in-fact*
Date: August 21, 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: August 21, 1996
______________________
* Mr. Katzman supervises accounting functions for
Registrant.<PAGE>
Garment Capital Associates Page 13.
March 31, 1996
EXHIBIT INDEX
Registrant is not filing any exhibit as part of this
amended quarterly report on Form 10-Q/A.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Balance Sheet as of March 31, 1996 and the Statement Of Income
for the period ended March 31, 1996, and is qualified in its entirety by
reference to such financial statements
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 88,210
<SECURITIES> 0
<RECEIVABLES> 1,011,053<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 88,210
<PP&E> 10,500,000
<DEPRECIATION> 8,000,000
<TOTAL-ASSETS> 3,646,246<F2>
<CURRENT-LIABILITIES> 4,051,706<F3>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (405,460)
<TOTAL-LIABILITY-AND-EQUITY> 3,646,246
<SALES> 272,500<F4>
<TOTAL-REVENUES> 272,511<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,667<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,156
<INCOME-PRETAX> 174,688
<INCOME-TAX> 0
<INCOME-CONTINUING> 174,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,688
<EPS-PRIMARY> 166.37<F7>
<EPS-DILUTED> 166.67<F7>
<FN>
<F1>Due from lessee
<F2>Includes unamortized mortgage refinancing costs
<F3>Accrued interest and first mortgage principal due
<F4>Rental income
<F5>Includes dividend income
<F6>Supervisory services and amortization of mortgage refinancing costs
<F7>Earnings per $5,000 participation unit, based on 1,050 participation
units outstanding during the period
</FN>
</TABLE>
