UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 (IRS Employer Identification No.)
Incorporation or organization)
60 East 42nd Street, New York, New York
(Address of principal executive offices)
10165
(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 Participation in Limited Partnership Interest.
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INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
INDEX
Page Number
-----------
Item 1: Financial Statements
------- --------------------
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Unaudited Financial Statements 6
Item 2: Management's Discussion and Analysis
------- Of Financial Condition and
Results of Operations 7
Item 3: Quantitative and Qualitative
------- Disclosures about Market Risk 8
PART II
Item 6: Exhibits and Reports on Form 8-K 9
-------
Signatures 10
----------
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INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
BALANCE SHEETS
AS AT JUNE 30, 2000 AND DECEMBER 31, 1999
June 30, 2000 December 31, 1999
------------- -----------------
ASSETS (Unaudited) (Note)
Real estate, at cost $ 8,481,240 $ 41,215,769
Less: Accumulated depreciation
and amortization 5,759,015 26,391,697
------------- -------------
2,722,225 14,824,072
Less: Allowance for loss on
impairment of real estate 565,809 565,809
------------- -------------
2,156,416 14,258,263
Cash and cash equivalents 11,355,394 79,770,013
Due from managing agent (Helmsley-Spear,
Inc.) including tenants' security
deposits of $1,513,718 (2000) and
$1,963,001 (1999) 2,119,100 2,858,418
Receivables, principally from rentals 105,239 467,233
Other deferred charges including
deferred leasing commissions 3,358,254 5,257,104
------------- -------------
$ 19,094,403 $ 102,611,031
============= =============
LIABILITIES AND PARTNERS' CAPITAL
(DEFICIENCY)
Accounts payable $ 319,721 $ 678,177
Accrued real estate taxes 1,485,161 1,480,861
Accrued interest -- 29,278
Distributions payable to General
Partners, Special Limited
Partners and Limited Partners 2,007,313 77,979,781
Sundry liabilities and other
accrued expenses 507,034 1,142,546
Mortgages payable -- 4,000,000
Deposits and rents received
in advance 1,513,718 1,696,853
------------- -------------
5,832,947 87,007,496
============= =============
Partners' Capital (Deficiency):
General Partners (2,639,696) (2,683,508)
Special Limited Partners (9,704,660) (13,643,808)
Limited Partners (represented by
the equivalent of 820,000
Participation Interests) 25,605,812 31,930,851
------------- -------------
13,261,456 15,603,535
------------- -------------
$ 19,094,403 $ 102,611,031
============= =============
Note: The balance sheets at December 31, 1999 have been derived from the
audited financial statements at that date.
See notes to financial statements
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INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended For the three months ended
------------------------ --------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
---------
Gross revenues from real estate $ 5,854,474 $ 15,743,510 $ 1,797,052 $ 7,849,392
Interest 953,677 273,184 481,061 108,373
------------ ------------ ------------ ------------
6,808,151 16,016,694 2,278,113 7,957,765
------------ ------------ ------------ ------------
Expenses:
---------
Real estate taxes 641,737 2,375,592 210,567 1,165,818
Interest on mortgages 43,584 877,081 -- 431,196
Other expenses 2,309,974 4,878,407 688,336 2,421,479
Depreciation and amortization of real estate 477,149 918,689 163,317 456,643
Amortization of mortgage refinancing costs -- 1,593 -- --
------------ ------------ ------------ ------------
3,472,444 9,051,362 1,062,220 4,475,136
============ ============ ============ ============
Income before items shown below 3,335,707 6,965,332 1,215,893 3,482,629
Gain on sale of real estate 151,381,339 5,621,956 113,892,265 5,621,956
------------ ------------ ------------ ------------
Income before guaranteed payments required under the
Limited Partnership Agreement 154,717,046 12,587,288 115,108,158 9,104,585
------------ ------------ ------------ ------------
Guaranteed Payments required under the Limited
Partnership Agreement:
To the Limited Partner 3,750 7,500 -- 3,750
To the General and Special Limited Partners 55,375 126,972 7,500 63,486
------------ ------------ ------------ ------------
59,125 134,472 7,500 67,236
------------ ------------ ------------ ------------
Net income transferred to Partners' Capital
Account $154,657,921 $ 12,452,816 $115,100,658 $ 9,037,349
============ ============ ============ ============
Net income allocable as follows (based on
terms of the Limited Partnership Agreement):
General Partners $ 907,312 $ 186,792 $ 674,149 $ 135,560
Special Limited Partners 81,575,648 6,039,616 60,612,180 4,383,115
Limited Partner (represented by the equivalent
of 820,000 Participation Interests - unchanged
during the periods) 72,174,961 6,226,408 53,814,329 4,518,674
------------ ------------ ------------ ------------
$154,657,921 $ 12,452,816 $115,100,658 $ 9,037,349
============ ============ ============ ============
Per Participation Interest:
Net income $ 88.0182 $ 7.5932 $ 65.6272 $ 5.5106
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
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INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENT OF CASH FLOWS
(UNAUDITED)
For The Six Months Ended June 30, 2000 And June 30, 1999
2000 1999
---- ----
OPERATING ACTIVITIES:
Net Income $ 154,657,921 $ 12,452,816
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization
of real estate 477,149 918,689
Gain on sale of real estate (151,381,339) (5,621,956)
Amortization of deferred leasing
commissions 183,703 399,546
Changes in operating assets and
liabilities:
Decrease (increase) in due
from managing agent 739,318 (2,159,929)
Decrease (increase) in receivables 361,994 (486,981)
(Increase) in other deferred charges (635,735) (779,374)
(Decrease) in accounts payable (358,456) (94,617)
Increase (decrease) in accrued real
estate tax 4,300 (1,492,449)
(Decrease) in accrued interest (29,278) (14,893)
(Decrease) in sundry and other
accrued expenses (635,512) (1,266,041)
(Decrease) in deposits and rents
received in advance (183,135) (164,716)
------------- -------------
Net cash provided by operating
activities 3,200,930 1,690,095
------------- -------------
INVESTING ACTIVITIES:
Property improvements (595,997) (924,684)
Net proceeds from sale of real
estate 165,952,915 6,140,675
------------- -------------
Net cash provided by investing
activities 165,356,918 5,215,991
------------- -------------
FINANCING ACTIVITIES:
Distributions to General Partners,
Special Limited Partners and
Limited Partners (232,972,467) (10,802,646)
Principal payments on mortgage
payable (4,000,000) (2,000,000)
------------- -------------
Net cash (used in) financing
activities (236,972,467) (12,802,646)
------------- -------------
Decrease in cash and cash
equivalents (68,414,619) (5,896,560)
Cash and cash equivalents at
beginning of period 79,770,013 13,831,031
------------- -------------
Cash and cash equivalents at
end of period $ 11,355,394 $ 7,934,471
============= =============
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest $ 72,862 $ 891,974
============= =============
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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, 1999, 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, 2000
and 1999, and the results of operations for the three and six months then ended.
The results of operations for the three and six months ended June 30, 2000 are
not necessarily indicative of the results to be expected for the full year.
NOTE 3 - Taxes
--------------
The net income for Federal income tax purposes is $147,352,691 (June 30,
2000) and $12,026,369 (June 30, 1999) as compared with net income of
$154,657,921 and $12,452,816 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 and gain on sales of properties resulting from differences
in the basis of real estate for tax and financial reporting purposes.
NOTE 4 - Sale of Properties
---------------------------
On February 18, 2000, IPA sold its 50% undivided interest in the 1328
Broadway property for a sales price of $43,500,000. In connection with this
transaction, IPA recognized a gain of approximately $36,930,406. The sales
proceeds were used to repay IAP's $4,000,000 share of the outstanding principal
balance of the Apple loan, sales commissions of $1,646,168 paid to an affiliate
of one of the general partners and other closing costs of approximately
$1,418,043. On January 18, 2000, IPA also declared a distribution of $37,000,000
to its partners using the proceeds from the sale of 1328 Broadway and the
remaining proceeds from previous asset sales. An amount of $18,500,000 was paid
to the General Partners and Special Limited Partners in January, 2000 and
$18,500,000 was paid to the holders of Participation Interests in February,
2000.
On May 8, 2000, IPA sold the 261 Fifth Avenue and 245 Fifth Avenue
properties for $135,000,000. The sales proceeds were used to pay sales
commissions of $5,107,832 paid to an affiliate of one of the General Partners,
closing costs of $4,375,042 and distributions of $120,000,000 to the General
Partners, Special Limited Partners and Limited Partners. In connection with this
transaction, IPA recognized a gain of approximately $114,450,933.
As a result of these sales, IPA's remaining properties consist of
unimproved land at Edgewood Shopping Center and Bellway Shopping Center, both in
Houston, Texas, and an office building located at 570 Broad Street, Newark, New
Jersey, which is currently vacant.
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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 2000 decreased approximately 62.81% as compared
to 1999. The decrease was primarily due to the sale of the five New York
properties.
The increase in interest income was due to the proceeds received from the sale
of properties invested in Commercial Paper.
The decrease in Real Estate Taxes and other expenses in 2000 as compared to 1999
is principally attributable to the sale of the five New York properties.
The decrease in interest expense was due to the repayment of mortgage principal
balance.
The decrease in depreciation and amortization of real estate was due to the sale
of the five New York Properties and Midland Building.
Liquidity and Capital Resources -- IPA's cash generated from operations and from
the sale of properties provide it with the resources needed to meet its
anticipated obligations including operating expenses and required distributions
to partners.
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INVESTMENT PROPERTIES ASSOCIATES
--------------------------------
(A New York Limited Partnership)
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Upon the repayment in January, 2000 of its sole remaining interest bearing
indebtedness (related to its obligation for one-half of the $8 million mortgage
payable to Apple Bank which bore interest at a fixed rate of 8 1/2 percent),
Registrant had significantly reduced its exposure to interest rate risk. Should
Registrant elect to refinance any of its remaining properties, Registrant 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. Registrant
believes that it can refinance its properties at commercially reasonable rates,
although there can be no assurances in this regard.
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Exhibits and Reports on Form 8-K
(i) On May 10, 2000, Registrant filed a Current Report on Form
8-K relating to the completion of the sale of 245 Fifth Avenue and 261 Fifth
Avenue, New York, N.Y. for $135,000,000
(ii) On April 25, 2000, Registrant filed a Current Report on Form 8-K
relating to the contract to sell 245 Fifth Avenue and 261 Fifth Avenue, New
York, New York for $135,000,000.
(iii) On April 13, 2000, Registrant filed a Current Report on Form 8-K
relating to its intention to sell 245 Fifth Avenue and 261 Fifth Avenue, New
York, New York.
(iv) On February 15, 2000 Registrant filed a Current Report on Form 8-K
relating to the sale of 1440 Broadway, New York, New York, for $152,000,000
(v) On January 21, 2000, Registrant filed a Current Report on Form 8-K
relating to the sale of 1328 Broadway, New York, New York for $43,500,000.
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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 13, 2000
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