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, 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 0-2673
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
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,
1999 1998 1999 1998
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) -0- -0- -0- -0-
--------- --------- --------- ---------
Total income 291,875 291,875 $ 583,750 $ 583,750
--------- --------- --------- ---------
Expenses:
Leasehold rent (Note B) 121,875 121,875 243,750 243,750
Supervisory services, to a
related party (Note C) 10,000 10,000 20,000 20,000
Amortization of leasehold 1,631 1,631 3,262 3,262
--------- --------- --------- ---------
Total expenses 133,506 133,506 267,012 267,012
--------- --------- --------- --------
Net income 158,369 158,369 316,738 316,738
========= ========= ========= =========
Earnings per $5,000
participation unit,
based on 640 participation
units outstanding
during the year $ 247.45 $ 247.45 $ 494.90 $ 494.90
========= ========= ========= =========
Distributions per $5,000
participation consisted
of the following:
Income $ 247.45 $ 247.45 $ 494.90 $ 494.90
Return of capital 2.55 2.55 5.10 5.10
--------- --------- --------- ---------
Total Distributions 250.00 250.00 500.00 500.00
========= ========= ========= =========
At June 30, 1999 and 1998, there were $3,200,000 of
participations outstanding.
-1-
Navarre-500 Building Associates
Condensed Balance Sheet
(Unaudited)
Assets June 30, 1999 December 31, 1998
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 3,037,977 3,034,715
---------- ----------
162,023 165,285
---------- ----------
Total assets $ 297,648 218,618
========== ==========
Liabilities and Capital
Current liabilities
Accrued expense (Note B)
Deferred credit:
Portion of rent income collected
in advance for the month
of December, 1999 $ 82,292 $ -0-
---------- ----------
Total current liabilities 82,292 $ -0-
---------- ----------
Capital
Capital January 1, 218,618 225,143
Add, Net income:
January 1, 1999 through June 30, 1999 316,738 -0-
January 1, 1998 through Dec. 31, 1998 -0- 633,475
---------- ----------
535,356 858,618
Less, Distributions:
Monthly distributions,
January 1, 1999 June 30, 1999 320,000 -0-
January 1, 1998 through Dec. 31, 1998 -0- 640,000
---------- ----------
Total distributions 320,000 640,000
---------- ----------
Capital:
June 30, 1999 215,356 -0-
December 31, 1998 -0- 218,618
---------- ----------
Total liabilities and capital:
June 30, 1999 $297,648
December 31, 1998 ========== $ 218,618
==========
-2-
Navarre-500 Building Associates
Condensed Statement of Cash Flows
(Unaudited)
January 1, 1999 January 1, 1998
through through
June 30, 1999 June 30, 1998
Cash flows from operating activities:
Net income $ 316,738 $ 316,738
Adjustments to reconcile net income
to cash provided by operating
activities:
Amortization of leasehold 3,262 3,262
Change in deferred credit 82,292 82,292
----------- ----------
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 quarter $ 135,625 $ 135,625
=========== ==========
-3-
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").
-4-
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 by Sublessee for the
lease year ended June 30, 1999. 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 June 30, 1999, 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 six month period
ended Jue 30, 1999 by Registrant to either of the Partners as
such. Pursuant to the fee arrangements described herein,
Registrant paid Counsel $20,000 of the Basic Payment for
supervisory services for the six month period ended June 30,
1999.
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.
-5-
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 June 30, 1999, the Partners owned of record and
beneficially $8,125 participations in Registrant, representing
.25% of the currently outstanding participations therein.
In addition, as of June 30, 1999, certain of the
Partners in Registrant (or their respective spouses) held
additional Participations as follows:
Trusts for the benefit of members of Peter L. Malkin's
family owned of record and beneficially $35,000 of
Participations. Mr. Malkin disclaims any beneficial
ownership of such Participations, except that such
Trusts are required to complete scheduled payments to
Mr. Malkin.
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.
-6-
Registrant does not pay dividends. During the six
month period ended June 30, 1999, 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 remained the same for the six month period
ended June 30, 1999 as compared with the six month period ended
June 30, 1998.
Total expenses remained the same for the six month period
ended June 30, 1999 as compared with the six month period ended
June 30, 1998.
Liquidity and Capital Resources
There has been no significant change in Registrant's
liquidity for the six month period ended June 30, 1999 as
compared with the six month period ended June 30, 1998.
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, 1998, which report and all exhibits thereto are
incorporated herein by reference and made a part hereof.
-7-
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
Sublessee.
Item 4. Submission of Matters to a Vote of Participants.
On July 15, 1999, the Partners mailed to the
Participants a STATEMENT ISSUED BY THE AGENTS IN CONNECTION WITH
THE SOLICITATION OF CONSENTS OF THE PARTICIPANTS (the
"Statement") requesting their authorization for the sale of
Registrant's Leasehold. The details of the Partners' Proposal
are provided in the Definitive Proxy Statement which was filed
with the Securities and Exchange Commission as Schedule 14-A on
July 15, 1999, and is incorporated by reference. Supplementary
letters consistent with such Statement were subsequently mailed
to the Participants, have been filed with the Securities and
Exchange Commission, and are also incorporated by reference.
-8-
Item 6. Exhibits and Report on Form 8-K
(a) The exhibits hereto are incorporated by reference.
(b) Registrant has not filed any report on Form
8-K during the quarter for which this report is being filed
-9-
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: August 13, 1999
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: August 13, 1999
__________________________
* Mr. Katzman supervises accounting functions for Registrant.
-10-
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.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Balance Sheet as of June 30, 1999 and the Statement Of Income
for the year ended June 30, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 135,625
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 135,625
<PP&E> 3,200,000
<DEPRECIATION> 3,037,977
<TOTAL-ASSETS> 297,648
<CURRENT-LIABILITIES> 82,292<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 215,356
<TOTAL-LIABILITY-AND-EQUITY> 297,648
<SALES> 583,750<F2>
<TOTAL-REVENUES> 583,750
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 267,012<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 316,738
<INCOME-TAX> 0
<INCOME-CONTINUING> 316,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 316,738
<EPS-BASIC> 494.90<F4>
<EPS-DILUTED> 494.90<F4>
<FN>
<F1>Deferred credit
<F2>Rental income
<F3>Leasehold rent expense, supevisory services and amortization of leasehold
<F4>Earnings per $5,000 participation unit, based on 640 participation units
outstanding during the year.
</TABLE>
