FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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 0-2673
NAVARRE-500 BUILDING ASSOCIATES
(Exact name of registrant as specified in its charter)
A New York Partnership 13-6082674
(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)
(212) 687-8700
(Registrant's telephone number, including area code)
N/A
(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 [ ].
An Exhibit Index is located on Page 12 of this Report.
Number of pages (including exhibits) in this filing: 12<PAGE>
2.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Navarre-500 Building Associates
Condensed Statement of Income
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
Income:
Rent income, from a related
party (Note B) $ 291,875 $ 291,875 $ 583,750 $ 583,750
Additional rent, from
a related party (Note B) 914,281 1,071,252 914,281 1,071,252
---------- --------- ---------- ----------
Total income 1,206,156 1,363,127 1,498,031 1,655,002
---------- --------- ---------- ----------
Expenses:
Leasehold rent (Note B) 121,875 121,875 243,750 243,750
Supervisory services, to a
related party (Note C) 91,828 107,525 101,828 117,525
Amortization of leasehold 1,631 1,631 3,262 3,262
---------- --------- ---------- ----------
Total expenses 215,334 231,031 348,840 364,537
---------- --------- ---------- ----------
Net income 990,822 $1,132,096 1,149,191 $1,290,465
========== ========= ========== ==========
Earnings per $5,000 partici-
pation unit, based on 640
participation units out-
standing during the year $ 1,548.16 $1,768.90 $1,795.61 $ 2,016.35
========== ========= ========== ==========
Distributions per $5,000
participation consisted
of the following:
Income $ 250.00 $ 250.00 $ 500.00 $ 500.00
========== ========= ========== ==========
At June 30, 1997 and 1996, there were $3,200,000 of participations
outstanding.<PAGE>
Navarre-500 Building Associates
Condensed Statement of Income
(Unaudited) 3.
Assets June 30, 1997 December 31, 1996
Current assets
Cash $ 135,625 $ 53,333
Additional rent due from
Sublessee, a related party (Note B) 864,281 -0-
---------- ----------
Total current assets 999,906 53,333
Real Estate
Leasehold on property situated
at 500 and 512 Seventh Avenue
New York, New York 3,200,000 3,200,000
Less, allowance for
amortization 3,024,927 3,021,665
---------- ----------
175,073 178,335
---------- ----------
Total assets 1,174,979 $ 231,668
========== ==========
Liabilities and Capital
Current liabilities
Accrued expense (Note B) $ 31,828 $ -0-
Deferred credit:
Portion of rent income
collected in advance for the
month of December, 1997 82,292 -0-
---------- ----------
Total current liabilities 114,120 -0-
---------- ----------
Capital
Capital January 1, 231,668 238,193
Add, Net income:
January 1, 1997 through June 30, 1997 1,149,191 -0-
January 1, 1996 through December 31, 1996 -0- 1,607,202
---------- ----------
1,380,859 1,845,395
Less, Distributions:
Monthly distributions,
January 1, 1997 through June 30, 1997 320,000 -0-
January 1, 1996 through December 31, 1996 -0- 640,000
Distribution on August 31, 1996
of Additional Rent for the
lease year ended June 30, 1996 -0- 973,727
---------- ----------
Total distributions 320,000 1,613,727
---------- ----------
Capital:
June 30, 1997 1,060,859 -0-
December 31, 1996 -0- 231,668
---------- ----------
Total liabilities and capital:
June 30, 1997 1,174,979
December 31, 1996 ========== $ 231,668
==========<PAGE>
4.
Navarre-500 Building Associates
Condensed Statement of Cash Flows
(Unaudited)
January 1, 1997 January 1, 1996
through through
June 30, 1997 June 30, 1996
Cash flows from operating activities:
Net income 1,149,191 $1,290,465
Adjustments to reconcile net income
to cash provided by operating
activities:
Amortization of leasehold 3,262 3,262
Change in Additional
Rent due from Sublessee (864,281) (1,021,252)
Change in deferred credit 82,292 82,292
Change in accrued
supervisory services 31,828 47,525
----------- -----------
Net cash provided by operating
activities 402,292 402,292
----------- -----------
Cash flows from financing activities:
Cash distributions (320,000) (320,000)
----------- -----------
Net cash used in financing
activities (320,000) (320,000)
----------- -----------
Change in cash during quarter 82,292 82,292
Cash, beginning of period 53,333 53,333
----------- -----------
Cash, end of period $ 135,625 $ 135,625
=========== ===========<PAGE>
Navarre-500 Building Associates 5.
June 30, 1997
Notes to Condensed Financial Statements (unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include all
information and footnotes necessary for a fair presentation
of financial position, results of operations and statement of
cash flows in conformity with generally accepted accounting
principles. The accompanying unaudited condensed financial
statements include all adjustments (consisting only of normal
recurring accruals) which are, in the opinion of the partners
in Registrant, necessary for a fair statement of the results
for such interim periods. The partners in Registrant believe
that the accompanying unaudited condensed financial
statements and the notes thereto fairly disclose the
financial condition and results of Registrant's operations
for the periods indicated and are adequate to make the
information presented therein not misleading.
Note B - Interim Period Reporting
The results for interim periods are not
necessarily indicative of the results to be expected for a
full year.
Registrant was organized on March 21, 1958.
Registrant owns the tenant's interest in the master operating
leasehold (the "Master Lease") of the buildings located at
500 and 512 Seventh Avenue and 228 West 38th Street, New
York, New York (the "Property"). Registrant's partners are
Peter L. Malkin and Stanley Katzman (the "Partners"). The
land underlying the buildings is owned by an unaffiliated
third party and is leased to Registrant under a long-term
ground lease (the "Lease"). The current term of the Lease
expires on May 1, 2024. The Lease provides for one 21-year
renewal option. If this option is exercised, the Lease will
expire on May 1, 2045. The annual rent payable by Registrant
under the Lease is $487,500 during the current and the
renewal term.
Registrant does not operate the Property, but
subleases the Property to 500-512 Seventh Avenue Associates
(the "Sublessee") pursuant to a net operating sublease (the
"Sublease"), the current renewal term of which will expire on
April 30, 2024. The Sublease provides for one renewal option
co-extensive with the lease. Peter L. Malkin, a partner in
Registrant, is also a partner in Sublessee. The Partners in
Registrant are also members of the law firm of Wien & Malkin
LLP, counsel to Registrant and to Sublessee (the "Counsel").
See Note C of this Item 1 ("Note C"). <PAGE>
Navarre-500 Building Associates 6.
June 30, 1997
Under the Sublease, Sublessee must pay (i) annual
basic rent of $1,167,500 during the current renewal term and
the additional renewal term (the "Basic Rent") and (ii)
additional rent to Registrant during the current term and the
renewal term equal to 50% of Sublessee's net operating profit
in excess of $620,000 for each lease year ending June 30 (the
"Additional Rent").
For the lease year ended June 30, 1997, Sublessee
will pay Additional Rent of $914,281. After additional
payment for supervisory services of $81,828 to Counsel, the
balance of $832,453 will be distributed to the Participants
on August 29, 1997. Additional Rent income is recognized
when earned from the Sublessee, at the close of the lease
year ending June 30. No Additional Rent is accrued by
Registrant for the period between Sublessee's lease year and
Registrant's fiscal year.
Note C - Supervisory Services
Registrant pays Counsel, for supervisory services
and disbursements, $40,000 per annum (the "Basic Payment")
plus 10% of all distributions to Participants in any year in
excess of the amount representing a return at the rate of 23%
per annum on their remaining original cash investment in
Registrant (the "Additional Payment"). At June 30, 1997,
such remaining cash investment was $3,200,000, representing
the original cash investment of the Participants in
Registrant.
No remuneration was paid during the three and six
month periods ended June 30, 1997 by Registrant to either of
the Partners as such. Pursuant to the fee arrangements
described herein, Registrant paid Counsel $10,000 and
$20,000, respectively, of the Basic Payment for supervisory
services for the three and six month periods ended June 30,
1997. In the three month periods ended June 30, 1997 and
June 30, 1996, an Additional Payment of $50,000 was made.
The supervisory services provided to Registrant by
Counsel include legal, administrative nd financial services.
The legal and administrative services include acting as
general counsel to Registrant, maintaining all of its
partnership records, performing physical inspections of the
Building, reviewing insurance coverage and conducting annual
partnership meetings. Financial services include monthly
receipt of rent from the Sublessee, payment of monthly rent
to the fee owner, payment of monthly and additional
distributions to the Participants, payment of all other
disbursements, confirmation of the payment of real estate
taxes, review of financial statements submitted to Registrant<PAGE>
Navarre-500 Building Associates 7.
June 30, 1997
by the Sublessee, review of financial statements audited by
and tax information prepared by Registrant's independent
certified public accountant, and distribution of such
materials to the Participants. Counsel also prepares
quarterly, annual and other periodic filings with the
Securities and Exchange Commission and applicable state
authorities.
Reference is made to Note B for a description of
the terms of the Sublease between Registrant and Sublessee.
The respective interests, if any, of the Partners in the
Registrant and Sublessee arise solely from their respective
ownership of participations, if any, in Registrant and, in
the case of Mr. Malkin, his ownership of a partnership
interest in Sublessee. The Partners receive no extra or
special benefit not shared on a pro rata basis with all other
Participants in Registrant or partners in Sublessee.
However, each of the Partners, by reason of his respective
partnership interest in Counsel, is entitled to receive his
share of any legal fees or other remuneration paid to such
law firm for legal services rendered to Registrant and
Sublessee.
As of June 30, 1997, the Partners owned of record
and beneficially $33,125 of participations in Registrant,
representing less than 2% of the currently outstanding
participations therein.
In addition, as of June 30, 1997, certain of the
Partners in Registrant (or their respective spouses) held
additional Participations as follows:
Peter L. Malkin, Trustee of Mattee Saunders 1983
Trust, owned $7,500 of Participations. Mr. Malkin
disclaims any beneficial ownership of such
Participations.
Isabel W. Malkin, the wife of Peter L. Malkin,
owned of record and beneficially $5,000 of
Participations. Mr. Malkin disclaims any
beneficial ownership of such Participations.
Stanley Katzman owned of record as a trustee, but
not beneficially, $5,000 of Participations. Mr.
Katzman disclaims any beneficial ownership of such
Participations.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
As stated in Note B, Registrant was organized for
the purpose of acquiring the Master Lease subject to a net<PAGE>
Navarre-500 Building Associates 8.
June 30, 1997
operating sublease held by Sublessee. Basic Rent received
under the Sublease is used to pay annual rent due under the
Master Lease and the Basic Payment to Counsel for supervisory
services. The balance of the Basic Rent is distributed to
the Participants. Additional Rent is distributed to the
Participants after the Additional Payment to Counsel. See
Note C of Item 1 above. Pursuant to the Sublease, Sublessee
has assumed sole responsibility for the condition, operation,
repair, maintenance and management of the Property.
Registrant has no requirement to maintain substantial
reserves or otherwise maintain liquid assets to defray any
operating expenses of the Property.
Registrant does not pay dividends. During the
three and six month periods ended June 30, 1997, Registrant
made regular monthly distributions of $83.33 for each $5,000
participation ($1,000 per annum for each $5,000
participation). There are no restrictions on Registrant's
present or future ability to make distributions; however, the
amount of such distributions depends solely on the ability of
Sublessee to make payments of Basic Rent and Additional Rent
to Registrant in accordance with the terms of the Sublease.
Registrant expects to make distributions so long as it
receives the payments provided for under the Sublease. See
Note B of Item 1 above.
Registrant's results of operations are affected
primarily by the amount of rent payable to it under the
Sublease. The amount of Additional Rent payable to
Registrant is affected by the cycles in the New York City
economy and real estate rental market. It is difficult for
management to forecast the New York City real estate market
over the next few years.
The following summarizes, with respect to the
current period and the corresponding period of the previous
year, the material factors affecting Registrant's results of
operations for such periods.
Total income decreased for the three and six month
periods ended June 30, 1997 as compared with the three and
six month periods ended June 30, 1996. Such decrease
resulted from a decrease in Additional Rent payable by
Sublessee for the lease year ended June 30, 1997. See Note
B.
Total expenses decreased for the three and six
month periods ended June 30, 1997 as compared with the three
and six month periods ended June 30, 1996. Such decrease
resulted from a decrease in the Additional Payment to be made
to Counsel based on the Additional Rent for the lease year
ended June 30, 1997. See Note B. <PAGE>
Navarre-500 Building Associates 9.
June 30, 1997
Liquidity and Capital Resources
There has been no significant change in
Registrant's liquidity for the three and six month periods
ended June 30, 1997 as compared with the three and six month
periods ended June 30, 1996.
Registrant anticipates that funds for working
capital for the Property will be generated by operation of
the Building by the Sublessee, which entity in turn is
required to make payments of Basic Rent and Additional Rent
under the Sublease and, to the extent necessary, from
additional capital investment by the partners in Sublessee
and/or external financing. Registrant foresees no need to
make material commitments for capital expenditures while the
Sublease is in effect.
Inflation
Registrant believes that there has been no material
change in the impact of inflation on its operations since the
filing of its annual report on Form 10-K for the year ended
December 31, 1996, which report and all exhibits thereto are
incorporated herein by reference and made a part hereof.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Property of Registrant is the subject of the
following pending litigation:
Wien & Malkin LLP, et. al. v. Helmsley-Spear, Inc.,
et. al. On June 19, 1997 Wien & Malkin LLP and Peter L.
Malkin filed an action in the Supreme Court of the State of
New York, on behalf of themselves and various partnerships,
including Registrant, against Helmsley-Spear, Inc. and Leona
Helmsley. The filing of the action was accompanied by a
motion for a Temporary Restraining Order and a Preliminary
Injunction by which the plaintiffs sought the return of over
$5,000,000 in Empire State Building Company funds which were
being wrongfully held by Helmsley-Spear, Inc., an order
preventing Leona Helmsley from further violations of the
partnership agreements of the partnerships, and expedited
discovery of Helmsley-Spear, Inc. and Leona Helmsley
regarding the financial status of Helmsley-Spear, Inc. In
their complaint, plaintiffs seek the same relief requested in
the motion for a Temporary Restraining Order and Preliminary
Injunction, as well as the removal of Helmsley-Spear, Inc. as
managing and leasing agent for all of the buildings owned by<PAGE>
Navarre-500 Building Associates 10.
June 30, 1997
the partnerships on whose behalf the action was brought.
Plaintiffs also seek an order precluding Leona Helmsley from
exercising any partner management powers in the partnerships.
Justice Ira Gammerman ordered that argument on plaintiff's
motion be heard June 24, and on the date ordered further
argument on July 14, 1997. Defendants filed opposition
papers to the motion for a Temporary Restraining Order and
Preliminary Injunction on June 26 and cross-moved for
arbitration on July 10. Plaintiffs filed reply papers on
July 14, and defendants filed reply papers on their
cross-motion for arbitration on July 26, 1997. Both motions
are currently before the court. In addition, plaintiffs have
served document requests on both defendants and notices of
deposition on the officers of Helmsley-Spear, Inc. and Leona
Helmsley.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits hereto are being incorporated by
reference.
(b) Registrant filed a Form 8-K on July 1, 1997
reporting the commencement of an action against Helmsley-
Spear, Inc. and Leona M. Helmsley. See Item 1.<PAGE>
Navarre-500 Building Associates 11.
June 30, 1997
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.
The individual signing this report on behalf of
Registrant is Attorney-in-Fact for Registrant and each of the
Partners in Registrant, pursuant to a Power of Attorney,
dated August 6, 1996 (the "Power").
NAVARRE-500 BUILDING ASSOCIATES
(Registrant)
By: /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: August 15, 1997
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed by the
undersigned as Attorney-in-Fact for each of the Partners in
Registrant, pursuant to the Power, on behalf of Registrant
and as a Partner in Registrant on the date indicated.
By: /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: August 15, 1997
______________________
* Mr. Katzman supervises accounting functions for
Registrant.<PAGE>
Navarre-500 Building Associates 12.
June 30, 1997
EXHIBIT INDEX
Number Document Page*
25 Power of Attorney dated August
6, 1996, between Peter L. Malkin
and Stanley Katzman as Partners
in Registrant and Richard A.
Shapiro and Stanley Katzman was
filed as Exhibit 24 to Registrants'
10-Q dated September 30, 1996 and is
incorporated herein by reference.
______________________
*Page references are based on sequential numbering system.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Balance Sheet as of June 30, 1997 and the Statement Of Income
for the period ended June 30, 1997, and is qualified in its entirety by
reference to such financial statements.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 135,625
<SECURITIES> 0
<RECEIVABLES> 864,281
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 999,906
<PP&E> 3,200,000
<DEPRECIATION> 3,024,927
<TOTAL-ASSETS> 1,174,979
<CURRENT-LIABILITIES> 114,120<F1>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,060,859
<TOTAL-LIABILITY-AND-EQUITY> 1,174,979
<SALES> 1,206,156<F2>
<TOTAL-REVENUES> 1,206,156
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 215,334<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 990,822
<INCOME-TAX> 0
<INCOME-CONTINUING> 990,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 990,822
<EPS-PRIMARY> 1,548.16<F4>
<EPS-DILUTED> 1,548.16<F4>
<FN>
<F1>Deferred credit
<F2>Rental income and additional rent
<F3>Leasehold rent expense, supervisory services and
amortization of leasehold
<F4>Earnings per $5,000 participation unit, based on 640 participation units
outstanding during the period
</FN>
</TABLE>
