UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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: 0-5537
INVESTMENT PROPERTIES ASSOCIATES
------------------------------------------------------
(Exact Name of registrant as specified in its charter)
A New York Limited Partnership 13-2647723
- ------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60 East 42nd Street, New York, New York
----------------------------------------
(Address of principal executive offices)
10165
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(Zip Code)
Registrant's telephone number, including area code: (212) 687-6400
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
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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820,000 Participations in Limited Partnership Interest
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
I N D E X
Page Number
Item 1. Financial Statements.
Balance Sheets 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of
Operations. 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk. 9
Signatures 10
-2-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
Item 1. Financial Statements.
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(Unaudited) (Note)
ASSETS
- ------
<S> <C> <C>
Real estate, at cost $ 65,818,538 $ 71,323,688
Less: Accumulated depreciation and amortization 41,628,197 44,261,629
------------ ------------
24,190,341 27,062,059
Less: Allowance for loss on impairment of real estate 447,893 2,733,895
------------ ------------
23,742,448 24,328,164
Cash and cash equivalents 13,986,507 13,831,031
Due from managing agent (Helmsley-Spear, Inc.)
including tenants' security deposits of
$1,651,883 (1999) and $1,614,898 (1998) 2,901,928 2,375,753
Receivables, principally from rentals 442,000 471,968
Deferred rent receivable 1,852,875 1,045,707
Other deferred charges including deferred leasing
commissions 7,196,120 7,709,611
------------ ------------
$ 50,121,878 $ 49,762,234
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
- ----------------------------------------------
Accounts payable 903,769 $ 1,155,069
Accrued real estate taxes 1,571,171 3,067,023
Accrued interest 139,338 155,025
Distributions payable to General Partners,
Special Limited Partners and Limited Partner 81,671 10,884,318
Sundry liabilities and other accrued expenses 884,341 2,072,198
Mortgages payable 21,347,488 23,847,488
Deposits and rents received in advance 1,782,047 1,859,300
------------ ------------
26,709,825 43,040,421
------------ ------------
Partners' Capital (Deficiency):
General Partners (2,672,713) (2,768,948)
Special Limited Partners (12,673,263) (21,325,648)
Limited Partner (represented by the equivalent
of 820,000 Participation Interests) 38,758,029 30,816,409
------------ ------------
23,412,053 6,721,813
------------ ------------
$ 50,121,878 $ 49,762,234
============ ============
</TABLE>
Note: The Balance Sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
See Notes to Financial Statements.
-3-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
------------------------------- --------------------------------
SEPT. 30, 1999 SEPT. 30, 1998 SEPT. 30, 1999 SEPT. 30, 1998
-------------- -------------- -------------- --------------
Revenues:
- ---------
<S> <C> <C> <C> <C>
Gross revenues from real estate $ 24,063,487 $ 34,295,336 $ 8,319,977 $ 11,012,200
Interest 415,780 145,681 142,596 52,867
------------ ------------ ------------ ------------
24,479,267 34,441,017 8,462,573 11,065,067
------------ ------------ ------------ ------------
Expenses:
Leasehold rentals -- 409,095 -- 131,267
Real Estate taxes 3,570,645 5,941,671 1,195,053 1,325,662
Interest on mortgages 1,302,097 3,362,814 425,016 1,101,704
Other Expenses 7,331,350 15,080,547 2,452,943 5,323,555
Co-owners share of income -- 24,703 -- 2,090
Depreciation and amortization of real estate 1,374,248 2,108,316 455,559 697,605
Amortization of mortgage refinancing costs 1,593 4,779 -- 4,779
------------ ------------ ------------ ------------
13,579,933 26,931,925 4,528,571 8,586,662
------------ ------------ ------------ ------------
Income before items shown below 10,899,334 7,509,092 3,934,002 2,478,405
Gain on Sale of Real Estate 5,995,855 101,295,597 373,899 100,683,897
------------ ------------ ------------ ------------
$ 16,895,189 $108,804,689 $ 4,307,901 $103,162,302
------------ ------------ ------------ ------------
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 193,699 248,086 66,727 80,620
------------ ------------ ------------ ------------
204,949 259,336 70,477 84,370
------------ ------------ ------------ ------------
$ 16,690,240 $108,545,353 $ 4,237,424 $103,077,932
============ ============ ============ ============
Net Income transferred to Partners' Capital Accounts
Net Income allocable as follows (based on terms of
the Limited Partnership Agreement):
General Partners $ 96,235 $ 671,539 $ 23,306 $ 641,468
Special Limited Partners 8,652,385 60,377,495 2,095,406 57,673,855
Limited Partner (represented by the equivalent
of 820,000 Participation Interests -
unchanged during the periods) 7,941,620 47,496,319 2,118,712 44,762,609
------------ ------------ ------------ ------------
$ 16,690,240 $108,545,353 $ 4,237,424 $103,077,932
------------ ------------ ------------ ------------
Per Participation Interest:
Net Income $ 9.6849 $ 57.9223 $ 2.5838 $ 54.5885
============ ============ ============ ============
See Notes to Financial Statements
</TABLE>
-4-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
UNAUDITED
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30 , 1999 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
1999 1998
OPERATING ACTIVITIES: -------------- ------------
Net income
<S> <C> <C>
$ 16,690,240 $ 108,545,353
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of real estate 1,374,248 2,108,316
Amortization of Mortgage refinancing costs 1,593 4,779
Gain on Sale of Real Estate (5,995,855) (101,295,597)
Amortization of deferred leasing commissions 615,816 894,041
Changes in operating assets and liabilities:
Decrease (Increase) in due from managing agent (526,175) 858,249
Decrease (Increase) in receivables (777,200) 311,353
Decrease (Increase) in other deferred charges (112,663) (3,705,490)
(Decrease) in accounts payable (251,300) (505,608)
(Decrease) in accrued real estate tax (1,495,852) (1,823,755)
(Decrease) in accrued interest (15,687) (44,289)
(Decrease) Increase in sundry and other
Accrued expenses (1,189,447) 2,862,871
(Decrease) in deposits and rents
Received in advance (77,253) (318,846)
------------- -------------
Net Cash Provided by Operating Activities 8,240,465 7,891,377
------------- -------------
INVESTING ACTIVITIES:
Property improvements (1,179,000) (3,488,842)
Net Proceeds from Sale of Real Estate 6,396,658 119,910,064
------------- -------------
Net Cash Provided by Investing Activities 5,217,658 116,421,222
------------- -------------
FINANCING ACTIVITIES:
Distributions of net operating revenues to General
Partners, Special Limited Partners and Limited Partner (10,802,647) (37,897,755)
Principal payments on mortgage payable (2,500,000) (12,500,000)
------------- -------------
Net Cash Used in Financing Activities (13,302,647) (50,397,755)
------------- -------------
Increase in Cash and
Cash Equivalents 155,476 73,914,844
Cash and Cash Equivalents at Beginning of Year 13,831,031 2,240,190
------------- -------------
Cash and Cash Equivalents at September 30 $ 13,986,507 $ 76,155,034
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,317,784 $ 3,407,102
============= =============
-5-
</TABLE>
<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, 1998, 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, 1999 and 1998, and
the results of operations for the nine months then ended.
NOTE 3
The results of operations for the nine months ended September 30, 1999 and 1998
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 $15,036,837 (September 30,
1999) and $107,868,410 (September 30, 1998) as compared with net income of
$16,690,240 and $108,545,353, 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 - Mortgages Payable
During the nine months ended September 30, 1999, the Company made principal
payments in the aggregate amount of $2,500,000, reducing the mortgage balance
from $23,847,488 as of January 1, 1999 to $21,347,488 as of September 30, 1999.
The payment was applied to the properties at 261 Fifth Avenue, 245 Fifth Avenue
and 1440 Broadway, New York, New York.
The $8,000,000 first mortgage loan on 1328 Broadway Building, New York, New York
(in which the Company has a 50% tenancy in common interest) which became due
initially on November 24, 1997 was extended to April 30, 1999, at the interest
rate of 8.5% per annum. The mortgage was further extended to May 31, 1999 at the
same interest rate. Discussions are currently being held regarding new terms.
-6-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(Continued)
NOTE 6 - Sales of Properties
On April 14, 1999, the Company sold the Mojud Building in Long Island City, New
York for $6,500,000. The sales proceeds will be used to first pay the Company's
mortgage debt, closing costs, other commitments and future distributions to the
partners. In connection with this transaction, the Company recognized a gain on
sale of approximately $5,605,104 for Federal income tax purposes as compared
with $5,580,101 for financial statement purposes.
On August 30, 1999, the Company sold the Midland Savings Building in Midland,
Texas for $300,000. The sale proceeds will be used to first pay mortgage debt,
closing costs, other commitments and future distributions to the partners. In
connection with this transaction, the Company recognized a loss on the sale of
approximately $771,420 for Federal income tax purposes as compared with a gain
of $415,754 for financial statement purposes.
NOTE 7 - Subsequent Event
On October 5, 1999, the Company announced that it has signed a contract to sell
its commercial property at 1440 Broadway, New York, New York, for $152,000,000.
The sales proceeds will be used to first pay mortgage debt, closing costs and
other commitments, aggregating approximately $40,000,000. After completing a
final accounting and establishing a record date for holders of its
participations of limited partnership interests, the Company will make a special
distribution in accordance with its limited partnership agreement.
-7-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Gross revenue from rentals for 1999 decreased approximately 29.83% as compared
to 1998. The decrease was primarily due to the sale of the five Chicago
properties (the "Chicago Properties") in 1998 and the Mojud Building, Long
Island City, New York (the "Mojud Building") on April 14, 1999 offset in part by
an increase in the rental among the New York properties.
The increase in interest income was due to the proceeds received from the sale
of the Chicago Properties and the Mojud Building invested in Commercial Paper.
The decrease in other expenses in 1999 as compared to 1998 is principally
attributable to the sale of the Chicago Properties and the Mojud Building.
The decrease in real estate taxes was primarily attributable to the sale of the
Chicago Properties and the Mojud Building.
The decrease in leasehold rentals was due to the sale of the ground lease of the
Chicago Properties.
The decrease in interest expense was due to the repayment of notes payable to
the partners and mortgage principal balance.
The decrease in depreciation and amortization of real estate was primarily due
to the sale of the Chicago Properties and the Mojud Building.
Liquidity and Capital Resources - The Company's cash generated from operations
plus its ability to refinance certain mortgage obligations provide it with the
resources necessary 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)
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company is exposed to interest rate risk on its variable rate
mortgages. On September 30, 1999, the Company had total mortgage debt of
approximately $21,347,488 of which approximately $17,347,000 (or approximately
81%) is at a variable rate. The effect of a 1% change in the interest rates on
the Company's mortgage debt would have resulted in a change in interest expense
of approximately $170,000 for the nine months ended September 30, 1999.
All of the Company's mortgage debt is scheduled to mature within the next
12 months. If the Company elects to refinance such mortgage debt upon maturity,
the Company would seek to manage its interest rate risk through the use of fixed
rate debt or interest rate derivatives in conjunction with variable rate debt.
The Company believes that it can refinance such mortgage debt at commercially
reasonable rates, although there can be no assurances in this regard.
-9-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
SIGNATURES
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.
INVESTMENT PROPERTIES ASSOCIATES
By:/s/Irving Schneider
----------------------------
Irving Schneider
General and Special Limited Partner
Dated: December 13, 1999
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,986,507
<SECURITIES> 0
<RECEIVABLES> 5,196,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,330,435
<PP&E> 65,370,645
<DEPRECIATION> 41,628,197
<TOTAL-ASSETS> 50,121,878
<CURRENT-LIABILITIES> 5,362,337
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,412,053
<TOTAL-LIABILITY-AND-EQUITY> 50,121,878
<SALES> 0
<TOTAL-REVENUES> 8,836,472
<CGS> 0
<TOTAL-COSTS> 4,103,555
<OTHER-EXPENSES> 70,477
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 425,016
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,237,424
<EPS-BASIC> 2.58
<EPS-DILUTED> 0
</TABLE>
