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 March 31, 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>
2.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Navarre-500 Building Associates
Condensed Statement of Income
(Unaudited)
For the Three Months
Ended March 31,
1998 1997
Income:
Rent income, from a related
party (Note B) $ 291,875 $ 291,875
---------- ---------
Expenses:
Leasehold rent (Note B) 121,875 121,875
Supervisory services, to a
related party (Note C) 10,000 10,000
Amortization of leasehold 1,632 1,632
---------- ---------
Total expenses 133,507 133,507
---------- ---------
Net income $ 158,368 $ 158,368
========== =========
Earnings per $5,000 partici-
pation unit, based on 640
participation units out-
standing during the year $ 247.45 $ 247.45
========== =========
Distributions per $5,000
participation:
Distributions per $5,000
participation consisted
of the following:
Income $ 247.45 $ 247.45
Return of capital 2.55 2.55
---------- ---------
Total distributions $ 250.00 $ 250.00
========== =========
At March 31, 1998 and 1997, there were $3,200,000 of participations
outstanding.<PAGE>
Navarre-500 Building Associates 3.
Condensed Balance Sheet
(Unaudited)
Assets March 31, 1998 December 31, 1997
Current assets
Cash $ 135,625 $ 53,334
---------- ----------
Total current assets 135,625 53,334
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 3,029,817 3,028,186
--------- ----------
170,183 171,814
--------- ----------
Total assets $ 305,808 $ 225,148
========== ==========
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, 225,148 231,672
Add, Net income:
January 1, 1998 through March 31, 1998 158,368 -0-
January 1, 1997 through December 31, 1997 -0- 1,465,930
---------- ----------
383,516 1,697,602
Less, Distributions:
Monthly distributions,
January 1, 1998 through
March 31, 1998 160,000 -0-
January 1, 1997 through
December 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 160,000 1,472,454
--------- ----------
Capital:
March 31, 1998 223,516 -0-
December 31, 1997 -0- 225,148
--------- ----------
Total liabilities and capital:
March 31, 1998 $ 305,808
December 31, 1997 ========= $ 225,148
==========<PAGE>
4.
Navarre-500 Building Associates
Condensed Statement of Cash Flows
(Unaudited)
January 1, 1998 January 1, 1997
through through
March 31, 1998 March 31, 1997
Cash flows from operating activities:
Net income $ 158,368 $ 158,368
Adjustments to reconcile net income
to cash provided by operating
activities:
Amortization of leasehold 1,632 1,632
Change in deferred credit 82,292 82,292
----------- -----------
Net cash provided by operating
activities 242,292 242,292
----------- -----------
Cash flows from financing activities:
Cash distributions (160,000) (160,000)
----------- -----------
Net cash used in financing
activities (160,000) (160,000)
----------- -----------
Change in cash during period 82,292 82,292
Cash, beginning of quarter 53,333 53,333
----------- -----------
Cash, end of quarter $ 135,625 $ 135,625
=========== ===========<PAGE>
Navarre-500 Building Associates 5.
March 31, 1998
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 state-
ments 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"). <PAGE>
Navarre-500 Building Associates 6.
March 31, 1998
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) ad-
ditional 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
paid Additional Rent of $914,282. After additional payment
for supervisory services of $81,828 to Counsel, the $832,454
balance was 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 cash investment in Registrant
(the "Additional Payment"). At March 31, 1998, such remain-
ing original cash investment was $3,200,000, representing the
original cash investment of the Participants in Registrant.
No remuneration was paid during the three month
period ended March 31, 1998 by Registrant to either of the
Partners as such. Pursuant to the fee arrangements described
herein, Registrant paid Counsel $10,000 of the Basic Payment
for supervisory services for the three month period ended
March 31, 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 Building, 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 ad-
ditional 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.<PAGE>
Navarre-500 Building Associates 7.
March 31, 1998
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 April 15, 1998, the Partners owned of record
and beneficially $33,125 participations in Registrant,
representing 1.035% of the currently outstanding participa-
tions therein.
In addition, as of April 15, 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<PAGE>
Navarre-500 Building Associates 8.
March 31, 1998
maintain substantial reserves or otherwise maintain liquid
assets to defray any operating expenses of the Property.
Registrant does not pay dividends. During the
three month period ended March 31, 1998, Registrant made
regular monthly distributions of $83.33 for each $5,000
participation ($1,000 per annum for each $5,000 participa-
tion). 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 remained the same for the three month
period ended March 31, 1998 as compared with the three month
period ended March 31, 1997.
Total expenses remained the same for the three
month period ended March 31, 1998 as compared with the three
month period ended March 31, 1997.
Liquidity and Capital Resources
There has been no significant change in
Registrant's liquidity for the three month period ended March
31, 1998 as compared with the three month period ended March
31, 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.<PAGE>
Navarre-500 Building Associates 9.
March 31, 1998
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 termina-
tion 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>
Navarre-500 Building Associates 10.
March 31, 1998
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 there-
unto 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: June 1, 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: June 1, 1998
______________________
* Mr. Katzman supervises accounting functions for
Registrant.<PAGE>
Navarre-500 Building Associates 11.
March 31, 1998
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.
______________________
* 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 March 31, 1998 and the Statement Of Income
for the year ended March 31, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 135,625
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135,625
<PP&E> 3,200,000
<DEPRECIATION> 3,029,817
<TOTAL-ASSETS> 305,808
<CURRENT-LIABILITIES> 82,292<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 223,516
<TOTAL-LIABILITY-AND-EQUITY> 305,808
<SALES> 291,875<F2>
<TOTAL-REVENUES> 291,875
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 133,507<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 158,368
<INCOME-TAX> 0
<INCOME-CONTINUING> 158,368
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,368
<EPS-PRIMARY> 247.45<F4>
<EPS-DILUTED> 247.45<F4>
<FN>
<F1>Deferred credit
<F2>Rental income and additional rent
<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>
