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 Nine Months Ended September 30, 1997 Commission File Number 0-5537
INVESTMENT PROPERTIES ASSOCIATES
(Exact name of registrant as specified in its charter)
NEW YORK 13-2647723
(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) 880-0389
NOT APPLICABLE
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
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<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
BALANCE SHEETS
AS AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(Unaudited) (Note)
ASSETS
Real estate, at cost ........................... $129,740,300 $138,214,361
Less: Accumulated depreciation and
amortization .......................... 88,586,251 95,710,079
------------ ------------
41,154,049 42,504,282
Cash and cash equivalents ...................... 2,216,566 5,187,591
Due from managing agent (Helmsley-Spear, Inc.)
including tenants' security deposits of
$1,804,738 (1997) and $1,587,384 (1996) ...... 2,202,476 2,081,585
Receivables, principally from rentals .......... 1,503,715 1,443,576
Other deferred charges including deferred
leasing commissions .......................... 5,983,486 4,304,324
------------ ------------
$ 53,060,292 $ 55,521,358
============ ============
LIABILITIES AND PARTNERS' CAPITAL/DEFICIENCY
Accounts payable ............................... $ 2,913,809 $ 2,755,221
Accrued real estate taxes ...................... 3,680,499 4,630,585
Accrued Interest ............................... 375,094 396,153
Distributions payable to General Partners,
Special Limited Partners and Limited Partner . 16,384,184 20,889,097
Sundry liabilities and other accrued expenses .. 3,349,033 3,439,050
Note payable to related parties ................ 18,000,000 18,000,000
Mortgages payable (Note 5) ..................... 37,347,488 40,314,558
Deposits and rents received in advance ......... 1,924,894 1,946,639
------------ ------------
83,975,001 92,371,303
------------ ------------
Partners' Capital (Deficiency):
General Partners ............................. (9,015,424) (8,388,913)
Special Limited Partners ..................... (40,867,486) (44,098,397)
Limited Partner (represented by the equivalent
of 820,000 Participation Interests) ........ 18,968,201 15,637,365
------------ ------------
(30,914,709) (36,849,945)
------------ ------------
$ 53,060,292 $ 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
(Note 1)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Gross revenues from real estate ..................... $35,298,912 $38,183,981 $11,450,991 $12,104,451
Interest ............................................ 85,049 48,565 20,558 8,996
----------- ----------- ----------- -----------
35,383,961 38,232,546 11,471,549 12,113,447
----------- ----------- ----------- -----------
Expenses:
Leasehold rentals ................................... 430,446 780,419 135,083 148,884
Real estate taxes ................................... 7,172,221 7,645,222 2,398,918 2,234,378
Interest on mortgages ............................... 3,538,539 3,701,729 1,153,330 1,196,937
Other Expenses ...................................... 14,969,149 17,457,555 4,948,368 5,658,964
Co-owners share of income ........................... 44,317 38,142 21,769 4,576
Depreciation and amortization of real estate ........ 2,255,659 2,460,668 710,972 788,977
Amortization of mortgage refinancing costs .......... 47,623 147,411 22,186 49,137
----------- ----------- ----------- -----------
28,457,954 32,241,146 9,390,626 10,081,853
----------- ----------- ----------- -----------
Income before items shown below ..................... 6,926,007 5,991,400 2,080,923 2,031,594
Loss on Lease Assignment ............................ (711,522)
Loss on Sale of Real Estate ......................... (14,913) (14,913)
Loss on Ground Lease Termination .................... (752,646) (752,646)
----------- ----------- ----------- -----------
6,199,572 5,238,754 2,066,010 1,278,948
----------- ----------- ----------- -----------
Guaranteed payments required under the
Limited Partnership Agreement:
To the Limited Partner ............................ 11,250 11,250 3,750 3,750
To the General and Special Limited Partners ....... 253,086 267,276 82,968 85,847
----------- ----------- ----------- -----------
264,336 278,526 86,718 89,597
----------- ----------- ----------- -----------
NET INCOME TRANSFERRED TO PARTNERS'
CAPITAL ACCOUNTS .................................. $ 5,935,236 $ 4,960,228 $ 1,979,292 $ 1,189,351
=========== =========== =========== ===========
Net Income (loss) allocable as follows (based on
terms of the Limited Partnership Agreement):
General Partners .................................. $ (626,511) $ (666,953) $ 14,999 $ (723,517)
Special Limited Partners .......................... 3,230,911 2,770,744 967,190 941,869
Limited Partner (represented by the equivalent
of 820,000 Participation Interests - unchanged
during the periods) ............................. 3,330,836 2,856,437 997,103 970,999
----------- ----------- ----------- -----------
$ 5,935,236 $ 4,960,228 $ 1,979,292 $ 1,189,351
=========== =========== =========== ===========
Per Participation Interest:
Net Income .......................................... $ 4.0620 $ 3.4835 $ 1.2160 $ 1.1842
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
-4-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
UNAUDITED
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................. $ 5,935,236 $ 4,960,228
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of real estate ......... 2,255,659 2,460,668
Amortization of mortgage refinancing costs ........... 47,623 147,411
Loss on Lease Assignment.............................. 711,522
Loss on Sale of Real Estate .......................... 14,913
Loss on ground lease termination ..................... 752,646
Amortization of deferred leasing commissions ......... 818,379 831,376
Changes in operating assets and liabilities:
(Increase) Decrease in due from managing agent ..... (120,891) 897,124
(Increase) in receivables........................... (60,139) (51,738)
(Increase) in other deferred charges ............... (2,132,923) (3,322,043)
Increase in accounts payable ....................... 158,588 1,387,515
(Decrease) in accrued real estate tax .............. (950,086) (886,080)
(Decrease) in accrued interest .................... (21,060) (49,363)
(Decrease) Increase in sundry and other accrued
expenses ......................................... (92,646) 319,975
(Decrease) Increase in deposits and rents received
in advance ....................................... (21,745) 184,146
----------- -----------
Net Cash Provided by Operating Activities ....... 6,542,430 7,631,865
----------- -----------
INVESTING ACTIVITIES:
Property improvements................................... (2,044,101) (2,649,623)
----------- -----------
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 ................. (2,967,070) (2,536,193)
----------- -----------
Net Cash (Used in)
Financing Activities ........................... (7,469,354) (7,711,009)
----------- -----------
(Decrease) in Cash and Cash Equivalents ......... (2,971,025) (2,728,767)
Cash and Cash Equivalents at Beginning of Year ........... 5,187,591 3,090,409
----------- -----------
Cash and Cash Equivalents at End of Year ................. $ 2,216,566 $ 361,642
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest ................. $ 3,559,599 $ 3,751,092
=========== ===========
</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 September 30,
1997 and 1996, and the results of operations for the nine months then ended.
NOTE 3
The results of operations for the nine months ended September 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 $6,538,067 (September 30,
1997) and $4,912,470 (September 30, 1996) as compared with net income of
$5,935,236 and $4,960,228 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 nine months ended September 30, 1997, Investment Properties
Associates made amortization payments of $2,967,070. These included $25,816 of
regular quarterly scheduled mortgage reductions, $2,500,000 in reduction of the
Chase mortgage, and $441,254 to First Union National Bank.
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 the deficits would increase
in the coming months. The capital loss arising from this transaction is $65,573
for federal income tax purposes as compared with $14,913 for financial statement
purposes.
-6-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS (Continued)
Note 6 - Lease Assignment
On June 1, 1997 IPA assigned to an unrelated party its position as ground
tenant under its lease with the City of Newark, New Jersey on the property
located at 1180 Raymond Blvd. in Newark. As a consequence of the transaction,
IPA is 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 of the
ground lease, IPA was incurring operating losses of approximately $65,000 per
month with respect to 1180 Raymond Blvd. For federal income tax purposes, the
capital loss arising from this transaction is $739,889 as compared with $711,52
for financial statement purposes.
-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 7.56% as
compared to 1996. The decrease was due primarily to a ground lease termination
at 744 Broad Street, 1180 Raymond Blvd. Building sale of 24 Commerce Building
and all tenants vacating the 570 Broad Street building in Newark, New Jersey.
The decrease in other expenses in 1997 as compared to 1996 is principally
attributable to the reduction of number of buildings in operation as described
above, 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, ground lease
termination at 744 Broad Street building, 1180 Raymond Blvd. Building and sale
of 24 Commerce building offset by the increase in Chicago properties.
The decrease in leasehold rentals was due to the ground lease termination
at 744 Broad Street building and 1180 Raymond Blvd. 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,
1180 Raymond Blvd. building and 24 Commerce 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
None
-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)
December 12, 1997
/s/ Irving Schneider
------------------------------------
(Signature)
IRVING SCHNEIDER
General and Special Limited Partner
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 2,733,895
<SECURITIES> 0
<RECEIVABLES> 5,983,486
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 129,740,300
<DEPRECIATION> 88,586,251
<TOTAL-ASSETS> 53,060,292
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 53,060,292
<SALES> 0
<TOTAL-REVENUES> 35,383,961
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 28,457,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,538,539
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 711,522
<CHANGES> 0
<NET-INCOME> 5,935,236
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
