SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Six Months Ended June 30, 1997 Commission File Number 0-5537
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INVESTMENT PROPERTIES ASSOCIATES
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(Exact name of registrant as specified in its charter)
NEW YORK 13-2647723
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
60 East 42nd Street, New York, New York 10165
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 880-0389
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NOT APPLICABLE
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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 [ ]
Total Number of Pages 10
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
I N D E X
Page Number
PART 1: Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6 & 7
Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8
PART 2: Other Information 9
SIGNATURES 10
-2-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
BALANCE SHEETS
AS AT JUNE 30, 1997 AND DECEMBER 31, 1996
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
(Unaudited)
ASSETS
Real estate, at cost ........................... $131,799,176 $138,214,361
Less: Accumulated depreciation and
amortization .......................... 90,029,619 95,710,079
------------ ------------
41,769,557 42,504,282
Cash and cash equivalents ...................... 3,327,523 5,187,591
Due from managing agent (Helmsley-Spear, Inc.)
including tenants' security deposits of
$1,814,665 (1997) and $1,587,384 (1996) ...... 2,116,980 2,081,585
Receivables, principally from rentals .......... 1,522,755 1,443,576
Other deferred charges including deferred
leasing commissions .......................... 3,954,588 4,304,324
------------ ------------
$ 52,691,404 $ 55,521,358
============ ============
LIABILITIES AND PARTNERS' CAPITAL/DEFICIENCY
Accounts payable ............................... $ 2,968,193 $ 2,755,221
Accrued real estate taxes ...................... 4,761,969 4,630,585
Accrued Interest ............................... 396,895 396,153
Distributions payable to General Partners,
Special Limited Partners and Limited Partner . 16,386,813 20,889,097
Sundry liabilities and other accrued expenses .. 2,881,168 3,439,050
Note payable to related parties ................ 18,000,000 18,000,000
Mortgages payable (Note 5) ..................... 38,301,643 40,314,558
Deposits and rents received in advance ......... 1,888,724 1,946,639
------------ ------------
85,585,405 92,371,303
------------ ------------
Partners' Capital (Deficiency):
General Partners ............................. (9,030,423) (8,388,913)
Special Limited Partners ..................... (41,834,676) (44,098,397)
Limited Partner (represented by the equivalent
of 820,000 Participation Interests) ........ 17,971,098 15,637,365
------------ ------------
(32,984,001) (36,849,945)
------------ ------------
$ 52,691,404 $ 55,521,358
============ ============
Note: The balance sheets at December 31, 1996 has been derived from the audited
financial statements at that date.
See notes to financial statements
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<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
----------------------------- -----------------------------
JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Gross revenues from real estate ..................... $23,847,921 $26,079,530 $12,071,869 $13,133,045
Interest ............................................ 64,491 39,569 12,807 8,493
----------- ----------- ----------- -----------
23,912,412 26,119,099 12,084,676 13,141,538
----------- ----------- ----------- -----------
Expenses:
Leasehold rentals ................................... 295,363 631,535 145,995 316,809
Real estate taxes ................................... 4,773,301 5,410,844 2,374,353 2,705,423
Interest on mortgages ............................... 2,385,209 2,504,792 1,193,019 1,276,499
Other Expenses ...................................... 10,020,781 11,808,591 4,685,139 5,850,974
Co-owners share of income ........................... 22,548 33,566 19,403 17,711
Depreciation and amortization of real estate ........ 1,544,687 1,671,691 758,709 835,845
Amortization of mortgage refinancing costs .......... 25,437 98,274 22,186 49,136
----------- ----------- ----------- -----------
19,067,328 22,159,293 9,198,854 11,052,397
----------- ----------- ----------- -----------
Income before items shown below ..................... 4,845,084 3,959,806 2,885,812 2,089,141
Loss on Lease Assignment (Note 7).................... (711,522) (711,522)
----------- ----------- ----------- -----------
4,133,562 3,959,806 2,174,290 2,089,141
Payments required under the Limited
Partnership Agreement:
To the Limited Partner ............................ 7,500 7,500 3,750 3,750
To the General and Special Limited Partners ....... 170,118 181,429 65,596 91,024
----------- ----------- ----------- -----------
177,618 188,929 89,348 94,774
----------- ----------- ----------- -----------
Net income transferred to Partners'
Capital Accounts .................................. $ 3,955,944 $ 3,770,877 $ 2,084,942 $ 1,994,367
=========== =========== =========== ===========
Net Income allocable as follows (based on
terms of the Limited Partnership Agreement):
General Partners .................................. $ (641,510) $ 56,564 $ (669,575) $ 29,916
Special Limited Partners .......................... 2,263,721 1,828,875 1,356,225 967,268
Limited Partner (represented by the equivalent
of 820,000 Participation Interests - unchanged
during the periods) ............................. 2,333,733 1,885,438 1,398,232 997,183
----------- ----------- ----------- -----------
$ 3,955,944 $ 3,770,877 $ 2,084,942 $ 1,994,367
=========== =========== =========== ===========
Per Participation Interest:
Net Income .......................................... $ 2.846 $ 2.2993 $ 1.7051 $ 1.2161
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
-4-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
UNAUDITED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................. $ 3,955,944 $ 3,770,877
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of real estate ......... 1,544,687 1,671,691
Amortization of mortgage refinancing costs ........... 25,437 98,274
Loss on lease assignment.............................. 711,522
Amortization of deferred leasing commissions ......... 514,217 552,931
Changes in operating assets and liabilities:
(Increase) Decrease in due from managing agent ..... (35,395) 934,116
(Increase) in receivables........................... (79,180) (211,774)
(Increase) in other deferred charges ............... (189,919) (1,060,080)
Decrease in accounts payable ....................... 212,972 1,390,639
Increase in accrued real estate tax ................ 131,384 78,309
Increase (Decrease) in accrued interest ............ 742 (38,682)
(Decrease) Increase in sundry and other accrued
expenses ......................................... (554,618) 115,012
(Decrease) Increase in deposits and rents received
in advance ....................................... (57,915) 209,284
----------- -----------
Net Cash Provided by Operating Activities ....... 6,179,878 7,510,597
----------- -----------
INVESTING ACTIVITIES:
Property improvements................................... (1,524,747) (1,813,822)
----------- -----------
FINANCING ACTIVITIES:
Distributions of net operating revenues to General
Partners, Special Limited Partners and Limited Partners (4,502,284) (5,174,816)
Principal payments on mortgage payable ................. (2,012,915) (2,023,934)
----------- -----------
Net Cash (Used in)
Financing Activities ........................... (6,515,199) (7,198,750)
----------- -----------
(Decrease) in Cash and Cash Equivalents ......... (1,860,068) (1,501,975)
Cash and Cash Equivalents at Beginning of Year ........... 5,187,591 3,090,409
----------- -----------
Cash and Cash Equivalents at End of Year ................. $ 3,327,523 $ 1,588,434
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ................. $ 2,384,468 $ 2,543,474
=========== ===========
</TABLE>
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<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1
As permitted by the Securities and Exchange Commission, the accompanying
Unaudited Financial Statements and footnotes have been condensed and therefore,
do not contain all disclosures required by generally accepted accounting
principles. Reference should be made to the Company's Annual Report Form 10-K
for the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
NOTE 2
In the opinion of the Company, the accompanying Unaudited Financial
Statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly its financial position as of June 30, 1997
and 1996, and the results of operations for the six months then ended.
NOTE 3
The results of operations for the six months ended June 30, 1997 and 1996
are not necessarily indicative of the results to be expected for the full year.
NOTE 4 - Taxes
The net income for Federal income tax purposes is $4,343,375 (June 30,
1997) and $4,291,644 (June 30, 1996) as compared with net income of $3,955,944
and $3,770,877 respectively, as shown in the statement of operations. The
differences result principally from (a) rents received in advance and recognized
currently for income tax purposes, and (b) differences in depreciation expense
resulting from differences in the basis of real estate for tax and financial
reporting purposes.
NOTE 5 - Mortgage Payable
During the six months ended June 30, 1997, IPA, in addition to a regular
mortgage amortization of $12,915, made a principal payment in the amount of
$2,000,000, reducing the mortgage balance from $40,314,558 as of January 1, 1997
to $38,301,643 as of June 30, 1997. On March 28, 1997 a first notification was
made between IPA and Chase Manhattan Bank. The maturity date was extended
through January 2, 1998.
On November 13, 1995, Registrant and First Fidelity Bank ("Fidelity")
entered into a modification of the mortgage note held by Fidelity on
Registrant's Federal Trust building in Newark, New Jersey. Effective January 1,
1996, the maturity date of the note was extended to June 30, 1997. Interest on
the amended note is based on the weekly average yield on U.S. Treasury
Securities plus 2% and the modification calls for the monthly payment of
principal and interest. The principal balance of the Fidelity loan at June 30,
1997 was $454,155.
-6-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)
Note 6 - Subsequent Event
On July 14, 1997, as part of a workout with First Union National Bank, the
holder of the first mortgage on the property located at 24 Commerce Street,
Newark, N.J., IPA transferred title to the property to an unrelated entity. IPA
was relieved of liability for the outstanding balance of the mortgage loan
($441,254) and received a full release from any future liability with respect to
the mortgage loan. As of the date of the transfer, IPA was incurring losses of
approximately $30,000 per month and anticipated that deficits would increase in
the coming months. The estimated capital loss arising from this transaction is
$60,000 for federal income tax purposes as compared with $10,000 for financial
statement purposes.
Note 7 - Lease Assignment
On June 1, 1997 IPA assigned to an unrelated party its ground lease with
the City of Newark, New Jersey on the property located at 1180 Raymond Blvd.
having a net book value of $711,522. As a consequence of the transaction, IPA
was relieved of liability for ground lease rent and real estate taxes on the
property from and after June 1, 1997. As of the date of the assignment, IPA was
incurring operating losses of approximately $65,000 per month. For the period
ending June 30, 1997, IPA recognized a loss of $711,522 from this transaction.
-7-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross revenue from rentals for 1997 decreased approximately 8.56% as
compared to 1996. The decrease was due primarily to a ground lease termination
at 744 Broad Street building and all tenants vacating the 570 Broad Street
building in Neward, New Jersey.
The decrease in other expenses in 1997 as compared to 1996 is principally
attributable to the decrease in security labor, heating cost, building repairs,
cleaning and electric.
The decrease in real estate taxes was attributable primarily to decreases
in real estate assessments for properties located in New York City, and ground
lease termination at 744 Broad Street building.
The decrease in leasehold rentals was due to the ground lease termination
at 744 Broad Street building.
The decrease in interest expense was due to the reduction in mortgage
principal balance. The decrease in depreciation and amortization of real estate
was primarily due to the ground lease termination at 744 Broad Street building.
Liquidity and Capital Resources - IPA's cash generated from operations plus
its ability to refinance certain mortgage obligations provide it with the
resources needed to meet its anticipated obligations including operating
expenses, mortgage amortization and required distributions to partners.
-8-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
PART 2 - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 6, 1997, the holders of limited partner participation interests
("PPIs") approved an amendment to the Agreement of Limited Partnership of
Registrant (the "Amendment"). The Amendment provided for the continuation of
Registrant notwithstanding the death of its General Partner, Harry B. Helmsley,
on July 4, 1997. The Amendment was effective May 22, 1997. The holders of
508,970 PPIs, constituting approximately 61% of the amount outstanding, voted
"For" the Amendment; the holders of 7,128 PPIs voted against the Amendment; and
the holders of 75,000 PPIs (approximately 9.1%), abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Amendment, dated May 22, 1997, to Agreement of Limited Partnership of
Investment Properties Associates (incorporated by reference to Registrant's
Consent Statement, dated April 17, 1997).
(b) Form 8-K, dated June 24, 1997 relating to agreement in principle for
sale of properties.
-9-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
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.
INVESTMENT PROPERTIES ASSOCIATES
(Registrant)
DATE 9/16/96
-----------
/s/ Irving Schneider
--------------------------------
(Signature)
IRVING SCHNEIDER
General and Special Limited Partner
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 3,327,523
<SECURITIES> 0
<RECEIVABLES> 3,639,735
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 131,799,176
<DEPRECIATION> 90,029,619
<TOTAL-ASSETS> 52,691,404
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 52,691,404
<SALES> 0
<TOTAL-REVENUES> 23,912,412
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,067,328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,385,209
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 711,522
<CHANGES> 0
<NET-INCOME> 3,955,944
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
