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 June 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
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(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 |_|
820,000 Participations in Limited Partnership Interest
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
I N D E X
Page Number
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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 8
Of Financial Condition and Results of
Operations.
Item 3. Quantitative and Qualitative Disclosures about 9
Market Risk.
Signatures 10
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<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
Item 1. Financial Statements.
BALANCE SHEET
AS AT JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
(Unaudited) (Note)
------------- -----------------
<S> <C> <C>
ASSETS
Real estate, at cost $ 70,798,757 $ 71,323,688
Less: Accumulated depreciation and amortization 44,239,085 44,261,629
------------ ------------
26,559,672 27,062,059
Less: Allowance for loss on impairment of real estate 2,733,895 2,733,895
------------ ------------
23,825,777 24,328,164
Cash and cash equivalents 7,934,471 13,831,031
Due from managing agent (Helmsley-Spear, Inc.)
including tenants' security deposits of
$1,651,883 (1999) and $1,614,898 (1998) 4,535,682 2,375,753
Receivables, principally from rentals 420,837 471,968
Deferred rent receivable 1,583,819 1,045,707
Other deferred charges including deferred leasing
commissions 8,079,102 7,709,611
------------ ------------
$ 46,379,688 $ 49,762,234
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Accounts payable $ 1,060,452 $ 1,155,069
Accrued real estate taxes 1,574,574 3,067,023
Accrued interest 140,132 155,025
Distributions payable to General Partners,
Special Limited Partners and Limited Partner 81,672 10,884,318
Sundry liabilities and other accrued expenses 806,157 2,072,198
Mortgages payable 21,847,488 23,847,488
Deposits and rents received in advance 1,694,584 1,859,300
------------ ------------
27,205,059 43,040,421
------------ ------------
Partners' Capital (Deficiency):
General Partners (2,582,156) (2,768,948)
Special Limited Partners (15,286,032) (21,325,648)
Limited Partner (represented by the equivalent
of 820,000 Participation Interests) 37,042,817 30,816,409
------------ ------------
19,174,629 6,721,813
------------ ------------
$ 46,379,688 $ 49,762,234
============ ============
</TABLE>
Note: The Balance Sheet as at December 31, 1998 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, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Gross revenues from real estate $15,743,510 $23,283,136 $ 7,849,392 $11,676,858
Interest 273,184 92,814 108,373 29,207
----------- ----------- ----------- -----------
16,016,694 23,375,950 7,957,765 11,706,065
----------- ----------- ----------- -----------
Expenses:
Leasehold rentals -- 277,828 -- 130,917
Real estate taxes 2,375,592 4,616,009 1,165,818 2,292,874
Interest on mortgages 877,081 2,261,110 431,196 1,103,614
Other Expenses 4,878,407 9,756,992 2,421,479 5,013,309
Co-owners share of income -- 22,613 -- 13,630
Depreciation and amortization of real estate 918,689 1,410,711 456,643 697,608
Amortization of mortgage refinancing costs 1,593 -- -- --
----------- ----------- ----------- -----------
9,051,362 18,345,263 4,475,136 9,251,952
----------- ----------- ----------- -----------
Income before items shown below 6,965,332 5,030,687 3,482,629 2,454,113
Gain on Sale of Ground Lease -- 611,700 -- --
Gain on Sale of Real Estate 5,621,956 -- 5,621,956 --
----------- ----------- ----------- -----------
$12,587,288 $ 5,642,387 $ 9,104,585 $ 2,454,113
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 126,972 167,466 63,486 83,733
----------- ----------- ----------- -----------
134,472 174,966 67,236 87,483
----------- ----------- ----------- -----------
Net Income transferred to Partners' Capital
Accounts $ 2,452,816 $ 5,467,421 $ 9,037,349 $ 2,366,630
=========== =========== =========== ===========
Net Income allocable as follows
(based on terms of the Limited
Partnership Agreement):
General Partners $ 186,792 $ 82,011 $ 135,560 $ 35,499
Special Limited Partners 6,039,616 2,651,700 4,383,115 1,147,816
Limited Partner (represented by the
equivalent of 820,000 Participation
Interests - unchanged during the periods) 6,226,408 2,733,710 4,518,674 1,183,315
----------- ----------- ----------- -----------
$12,452,816 $ 5,467,421 $ 9,037,349 $ 2,366,630
----------- ----------- ----------- -----------
Per Participation Interest:
Net Income $ 7.5932 $ 3.3338 $ 5.5106 $ 1.4431
=========== =========== =========== ===========
</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, 1999 AND JUNE 30, 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 12,452,816 $ 5,467,422
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of real estate 918,689 1,410,711
Gain on Sale of Ground Lease -- (611,700)
Gain on Sale of Real Estate (5,621,956) --
Amortization of deferred leasing commissions 399,546 563,204
Changes in operating assets and liabilities:
(Increase) in due from managing agent (2,159,929) (432,868)
(Increase) Decrease in receivables (486,981) 383,414
Decrease (Increase) in other deferred charges (779,374) 859,078
(Decrease) in accounts payable (94,617) (555,683)
(Decrease) in accrued real estate tax (1,492,449) (412,653)
(Decrease) in accrued interest (14,893) (33,847)
(Decrease) Increase in sundry and other
Accrued expenses (1,266,041) 339,351
(Decrease) in deposits and rents
Received in advance (164,716) (20,597)
------------ ------------
Net Cash Provided by Operating Activities 1,690,095 6,955,832
------------ ------------
INVESTING ACTIVITIES:
Property improvements (924,684) (1,068,136)
Net Proceeds from Sale of Real Estate 6,140,675 1,298,000
------------ ------------
Net Cash Provided by Investing Activities 5,215,991 229,864
------------ ------------
FINANCING ACTIVITIES:
Distributions of net operating revenues to General
Partners, Special Limited Partners and Limited Partner (10,802,646) (4,895,255)
Principal payments on mortgage payable (2,000,000) (2,000,000)
------------ ------------
Net Cash (Used in) Financing Activities (12,802,646) (6,895,255)
------------ ------------
(Decrease) Increase in Cash and
Cash Equivalents (5,896,560) 290,441
Cash and Cash Equivalents at Beginning of Year 13,831,031 2,240,190
------------ ------------
Cash and Cash Equivalents at June 30 $ 7,934,471 $ 2,530,631
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 891,974 $ 2,294,956
============ ============
</TABLE>
-5-
<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 June 30, 1999 and 1998, and the
results of operations for the six months then ended.
NOTE 3
The results of operations for the six months ended June 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 $12,026,369 (June 30, 1999)
and $5,920,763 (June 30, 1998) as compared with net income of $12,452,816 and
$5,467,421 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 six months ended June 30, 1999, the Company made principal payments
in the aggregate amount of $2,000,000, reducing the mortgage balance from
$23,847,488 as of January 1, 1999 to $21,847,488 as of June 30, 1999. The
payments were applied to the properties at 261 Fifth Avenue and 245 Fifth
Avenue, 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.
Although the mortgage matured on April 30, 1999, the mortgagee has continued to
bill the property for interest only at the rate of 8.5% per annum. The Company
has paid interest through August 31, 1999.
-6-
<PAGE>
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(Continued)
NOTE 6 - Sale of Mojud Building
On April 14, 1999, the Company sold the Mojud Building in Long Island City, New
York for $6,500,000. The sales proceeds are to be used to 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 $5,622,000.
NOTE 7 - Subsequent Events
The Company sold the Midland Savings Building, Midland, Texas on August 30, 1999
for $300,000. The sales proceeds have been reserved to pay the Company's
mortgage debt, closing costs, other commitments and future distributions to the
partners.
-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 32.38% 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, New York
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 Certificates of
Deposit and 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 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)
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company is exposed to interest rate risk on its variable rate
mortgages. On June 30, 1999, the Company had total mortgage debt of
approximately $21,847,488 of which approximately $17,847,000 (or approximately
82%) 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 $116,000 for the six months ended June 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: October 15, 1999
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,934,471
<SECURITIES> 0
<RECEIVABLES> 2,004,656
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,474,809
<PP&E> 68,064,862
<DEPRECIATION> 44,239,085
<TOTAL-ASSETS> 46,379,688
<CURRENT-LIABILITIES> 2,856,830
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,379,688
<SALES> 0
<TOTAL-REVENUES> 7,957,765
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,111,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 431,196
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 3,415,393
<EXTRAORDINARY> 5,621,956
<CHANGES> 0
<NET-INCOME> 9,037,349
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
