<PAGE>
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 September 30, 1998
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 11 of this Report.
Number of pages (including exhibits) in this filing: 11<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Navarre-500 Building Associates
Condensed Statement of Income
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
Income:
Rent income, from a
related party (Note B) $ 291,875 $ 291,875 $ 875,625 $ 875,625
Additional rent, from
a related party (Note B) -0- -0- -0- $ 914,282
--------- --------- --------- ----------
Total income 291,875 291,875 875,625 1,789,907
--------- --------- --------- ----------
Expenses:
Leasehold rent (Note B) 121,875 121,875 365,625 365,625
Supervisory services, to a
related party (Note C) 10,000 10,000 30,000 111,828
Amortization of leasehold 1,631 1,631 4,893 4,893
--------- --------- --------- ----------
Total expenses 133,506 133,506 400,518 482,346
--------- --------- --------- ----------
Net income $ 158,369 $ 158,369 $ 475,107 $1,307,561
========= ========= ========= ==========
Earnings per $5,000
participation unit,
based on 640 participation
units outstanding
during the year $ 247.45 $ 247.45 $ 742.35 $ 2,043.06
========= ========= ========= ==========
Distributions per $5,000
participation consisted
of the following:
Income $ 247.45 $ 247.45 $ 742.35 $ 2,043.06
Return of capital 2.55 1,303.26 7.65 7.65
--------- --------- --------- ----------
Total distributions $ 250.00 $1,550.71 $ 750.00 $ 2,050.71
========= ========= ========= ==========
At September 30, 1998 and 1997, there were $3,200,000 of participations
outstanding.<PAGE>
Navarre-500 Building Associates
Condensed Statement of Income
(Unaudited)
Assets September 30, 1998 December 31, 1997
Current assets
Cash $ 135,625 $ 53,333
---------- ----------
Total current assets 135,625 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 3,033,083 3,028,190
---------- ----------
166,917 171,810
---------- ----------
Total assets $ 302,542 225,143
========== ==========
Liabilities and Capital
Current liabilities
Deferred credit:
Portion of rent income collected
in advance for the month
of December, 1998 $ 82,292 $ -0-
---------- ----------
Total current liabilities 82,292 $ -0-
---------- ----------
Capital
Capital January 1, 225,143 231,668
Add, Net income:
January 1, 1998 through Sept. 30, 1998 475,107 -0-
January.1, 1997 through Dec. 31, 1997 -0- 1,465,929
---------- ----------
700,250 1,697,597
Less, Distributions:
Monthly distributions,
Jan. 1, 1998 through Sept. 30, 1998 480,000 -0-
Jan. 1, 1997 through Dec. 31, 1997 -0- 640,000
Distribution on August 29, 1997
of Additional Rent for the
lease year ended June 30, 1997 -0- 832,454
---------- ----------
Total distributions 480,000 1,472,454
---------- ----------
Capital:
September 30, 1998 220,250 -0-
December 31, 1997 -0- 225,143
---------- ----------
Total liabilities and capital:
September 30, 1998 $302,542
December 31, 1997 ========== $ 225,143
==========<PAGE>
Navarre-500 Building Associates
Condensed Statement of Cash Flows
(Unaudited)
January 1, 1998 January 1, 1997
through through
September 30, 1998 September 30, 1997
Cash flows from operating activities:
Net income $ 475,107 $1,307,561
Adjustments to reconcile net income
to cash provided by operating
activities:
Amortization of leasehold 4,893 4,893
Change in deferred credit 82,292 82,292
------------ ------------
Net cash provided by operating
activities 562,292 1,394,746
------------ ------------
Cash flows from financing activities:
Cash distributions (480,000) (1,312,454)
------------ ------------
Net cash used in financing
activities (480,000) (1,312,454)
------------ ------------
Change in cash 82,292 82,292
Cash, beginning of period 53,333 53,333
------------ ------------
Cash, end of period $ 135,625 $ 135,625
============ ============
<PAGE>
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 the interim period 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 Thomas N. Keltner, Jr. (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").
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").
There was no Additional Rent paid for the lease year ended June
30, 1998 by Sublessee. 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 cash investment in
Registrant (the "Additional Payment"). At September 30, 1998, such remaining
original cash investment was $3,200,000, representing the original cash
investment of the Participants in Registrant.
No remuneration was paid during the nine month period ended
September 30, 1998 by Registrant to either of the Partners as such. Pursuant
to the fee arrangements described herein, Registrant paid Counsel $30,000 of
the Basic Payment for supervisory services for the nine month period ended
September 30, 1998.
The supervisory services provided to Registrant by Counsel
include legal, administrative and financial services. The legal and
administrative services include acting as general counsel to Registrant,
maintaining all of its partnership and Participant records, performing physical
inspections of the Property, reviewing insurance coverage and conducting annual
partnership meetings. Financial services include monthly receipt of rent from
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 by 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 of Item 1 (Note "B") for a
description of the terms of the Sublease between Registrant and Sublessee. The
respective interests, if any, of the Partners in 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 pro rata share of
any legal fees or other remuneration paid to such law firm for legal and
supervisory services rendered to Registrant and Sublessee.
As of September 30, 1998, the Partners owned of record and
beneficially $38,125 participations in Registrant, representing 1.191% of the
currently outstanding participations therein.
In addition, as of September 30, 1998, certain of the Partners
in Registrant (or their respective spouses) held additional Participations as
follows:
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.
Peter L. Malkin, Trustee of Mattee Saunders 1983 Trust, owned
$7,500 of Participations. Mr. Malkin 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 the Sublease. 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 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 nine month period
ended September 30, 1998, 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 legal or contractual 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 nine month period ended September
30, 1998 as compared with the nine month period ended September 30, 1997. Such
decrease is the result of no Additional Rent being received by the Registrant
for the current lease year.
Total expenses decreased for the nine month period ended
September 30, 1998 as compared with the nine month period ended September 30,
1997. Such decrease is attributable to no additional payment for supervisory
services being paid by Registrant based on Additional Rent.
Liquidity and Capital Resources
There has been no significant change in Registrant's liquidity
for the nine month period ended September 30, 1998 as compared with the nine
month period ended September 30, 1997.
Registrant anticipates that funds for working capital will
continue to be provided by Sublessee through rental payments made in
accordance with the terms of the Sublease. Registrant is not required to
maintain substantial reserves to defray any operating expenses of the
Property. 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, 1997, 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, against Helmsley-Spear, Inc. and Leona
Helmsley concerning various partnerships which own, lease or operate buildings
managed by Helmsley-Spear, Inc., including Registrant's property. In their
complaint, plaintiffs sought the removal of Helmsley-Spear, Inc. as managing
and leasing agent for all of the buildings. Plaintiffs also sought an order
precluding Leona Helmsley from exercising any partner management powers in the
partnerships. In August, 1997, the Supreme Court directed that the foregoing
claims proceed to arbitration. As a result, Mr. Malkin and Wien & Malkin LLP
filed an arbitration complaint against Helmsley-Spear, Inc. and Mrs. Helmsley
before the American Arbitration Association. Helmsley-Spear, Inc. and Mrs.
Helmsley served answers denying liability and asserting various affirmative
defenses and counterclaims; and Mr. Malkin and Wien & Malkin LLP filed a reply
denying the counterclaims. By agreement dated December 16, 1997, Mr. Malkin
and Wien & Malkin LLP (each for their own account and not in any
representative capacity) reached a settlement with Mrs. Helmsley of the claims
and counterclaims in the arbitration and litigation between them. Mr. Malkin
and Wien & Malkin LLP are continuing their prosecution of claims in the
arbitration for relief against Helmsley-Spear, Inc., including its termination
as the leasing and managing agent for various entities and properties,
including the Registrant's Lessee.
Item 6. Exhibits and Report on Form 8-K
(a) None.
(b) Registrant has not filed any report on Form 8-K during
the quarter for which this report is being filed.<PAGE>
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 Powers of Attorney, dated August 6, 1996 and May 14, 1998
(collectively, the "Power").
NAVARRE-500 BUILDING ASSOCIATES
(Registrant)
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: November , 1998
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 on the date indicated.
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: November , 1998
__________________________
* Mr. Katzman supervises accounting functions for Registrant.<PAGE>
EXHIBIT INDEX
Number Document Page*
3(a) Partnership Agreement, dated March 21, 1958, which
was filed as Exhibit 1 to Registrant's S-1, as
amended, by letter dated April 3, 1958 and
assigned File No. 2-14019, is incorporated herein
by reference.
3(b) Amended Business Certificate of Registrant which
was filed as Exhibit 3(b) to Registrant's Annual
Report on 10-K for the fiscal year ended December
31, 1996 and is incorporated herein by reference.
4 Form of Participation Agreement, which was filed
as Exhibit 4 to Registrant's S-1 by letter dated
April 3, 1958 and assigned File No. 2-14019, is
incorporated herein by reference.
24 Powers of Attorney dated August 6, 1996 and May
14, 1998 between Peter L. Malkin and Thomas N.
Keltner, Jr., as Partners in Registrant and
Stanley Katzman and Richard Shapiro, which was
filed as Exhibit 24 to Registrant's 10-Q for the
quarter ended March 31, 1998 and is incorporated
herein by reference.
__________________________
* Page references are based on sequential numbering system.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Balance Sheet as of September 30, 1998 and the Statement Of Income
for the year ended September 30, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 135,625
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135,625
<PP&E> 3,200,000
<DEPRECIATION> 3,033,083
<TOTAL-ASSETS> 302,542
<CURRENT-LIABILITIES> 82,292<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 220,250
<TOTAL-LIABILITY-AND-EQUITY> 302,542
<SALES> 875,625<F2>
<TOTAL-REVENUES> 875,625
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 400,518<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 475,107
<INCOME-TAX> 0
<INCOME-CONTINUING> 475,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 475,107
<EPS-PRIMARY> 742.35<F4>
<EPS-DILUTED> 742.35<F4>
<FN>
<F1>Deferred credit
<F2>Rental income
<F3>Leasehold rent expense, supevisory servises and amortization of leasehold
<F4>Earnings per $5,000 participation unit, based on 640 participation units
outstanding during the year.
</FN>
</TABLE>
