FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[] 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 Co-Tenancy [Formerly 13-6082674
[formerly a partnership] as partnership]
(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)
Registrant's telephone number, including area code: (212) 687-8700
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
$3,190,000 of Participations in Co-Tenant Interests
(Title of Class)
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 [ ]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant: Not applicable, but see Items 5 and
10 of this report.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
An Exhibit Index is located on pages 30 through 32 of this Report.
Number of pages (including exhibits) in this filing: 45
PART I
Item 1. Business.
(a) General
Registrant was organized as a partnership on March 21,
1958. Registrant owned the tenant's interest in the long-term
ground lease (the "Lease") of the buildings located at 500 and 512
Seventh Avenue and 228 West 38th Street, New York, New York (the
"Property") until Registrant sold the Lease on December 23, 1999
on the economic terms described in the accompanying financial
statements. Registrant ceased to be a partnership on December 23,
1999 when the interests of its partner Agents were redeemed by
conveyance to them of direct pro rata interests in the Property.
The partnership's final tax return was filed for the period ending
December 23, 1999. After December 23, 1999, such former partners
(the "Agents") continued the ownership of the Lease as co-tenants
for the benefit of the Participants, and the co-tenancy has
conducted its business under the name "Navarre-500 Building
Associates, a co-tenancy", all for the benefit of the Participants
on all the same pre-existing economic and investment terms through
the date of such sale and thereafter. Accordingly, reference
herein to Registrant is a reference to Navarre-500 Building
Associates, a co-tenancy. Registrant's partner Agents were Peter
L. Malkin and Thomas N. Keltner, Jr., who are now the co-tenant
Agents. The land underlying the buildings was owned by an
unaffiliated third party and was leased to Registrant under the
Lease. The current term of the Lease as extended was to expire on
May 1, 2024. The Lease provided for one additional 21-year
renewal option. The annual rent payable by Registrant under the
Lease was $487,500 during the current and each renewal term.
Registrant did not operate the Property, but subleased
the Property to 500-512 Seventh Avenue Associates (the
"Sublessee") pursuant to a net operating sublease (the
"Sublease"). The current renewal term, as extended, of the
Sublease was to expire on April 30, 2024. The Sublease provided
for one renewal option for a term co-extensive with the period
contained in the Lease. Peter L. Malkin, an Agent in Registrant,
has also been a partner and now a co-tenant in Sublessee. The
Agents in Registrant are also members of Wien & Malkin LLP, which
provides supervisory and other services to Registrant and to
Sublessee (the "Supervisor"). See Items 10, 11, 12 and 13 hereof
for a description of the services rendered by, and compensation
paid to, Supervisor and for a discussion of certain relationships
which may pose actual or potential conflicts of interest among
Registrant, Sublessee and certain of their respective affiliates.
Registrant did not maintain a full-time staff. See Item 2 hereof
for additional information concerning the Property, which has been
sold by Registrant.
-2-
(b) The Sublease
Under the Sublease, Sublessee paid (i) annual basic rent
of $1,167,500 during the current renewal term and each additional
renewal term (the "Basic Rent") and (ii) additional rent to
Registrant during the current term and each 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, 1999 by Sublessee.
Additional Rent income was recognized when earned from
the Sublessee, at the close of the lease year ending June 30.
Such income was not determinable until the Sublessee, pursuant to
the Sublease, rendered to Registrant a certified report on the
Sublessee's operation of the Property. The Sublease required that
this report be delivered to Registrant annually within 60 days
after the end of each such lease year. Accordingly, all
Additional Rent income and certain supervisory service expense
could only be determined after the receipt of such report. The
Lease does not provide for the Lessee to render interim reports to
Registrant, so no Additional Rent income was reflected for the
period between the end of the lease year and the end of
Registrant's fiscal year. See Note 3 of the Notes to the
Financial Statements filed under Item 8 hereof (the "Notes")
regarding Additional Rent payments by Sublessee for the fiscal
years ended December 31, 1999, 1998 and 1997.
(c) Competition
Pursuant to tenant space leases at the Property, the
annual base rentals payable to Sublessee averaged $14.85 per
square foot (exclusive of electricity charges and escalation) when
the Property was sold. Registrant no longer has any direct or
indirect interest in the operation of the Property, so local real
estate competition is no longer relevant to Registrant's operation
or financial results.
(d) Tenant Leases
Prior to the sale of the Property, Sublessee operated
the Property free from any federal, state or local government
restrictions involving rent control or other similar rent
regulations which may be imposed upon residential real estate in
Manhattan. Any increase or decrease in the amount of rent payable
by a tenant was governed by the provisions of the tenant's lease.
-3-
Item 2. Property.
Prior to the sale of the Property as stated in Item 1
hereof, Registrant owned the leasehold of the buildings located at
500 and 512 Seventh Avenue, New York, New York. The building at
500 Seventh Avenue contains 17 stories; the building at 512
Seventh Avenue contains 44 stories. The buildings together occupy
the entire block front on the west side of Seventh Avenue between
37th and 38th Streets in New York City's Garment District.
Pursuant to the Lease, Registrant also held a leasehold interest
in an adjacent 5-story building located at 228 West 38th Street.
The two principal buildings, erected in 1921 and 1931,
respectively, contain showroom, office and loft space.
Item 3. Legal Proceedings.
The Registrant and/or its assets are 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, which did include the Registrant's Sublessee prior to
the 1999 sale of the Property.
Item 4. Submission of Matters to a Vote of Participants.
-4-
On July 15, 1999, the Agents 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 in the form of 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.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Security Holder Matters.
Registrant was a partnership and is now a co-tenancy.
Registrant did not issue any common stock. The
securities registered by it under the Securities Exchange Act of
1934, as amended, consisted of participations in the interests of
the Agents in Registrant (the "Participations") and are not shares
of common stock nor their equivalent. The Participations
represent each Participant's fractional share in an Agent's
undivided interest in Registrant, and are divided approximately
equally among the Agents. A full unit of the Participations was
offered originally at a purchase price of $5,000; fractional units
were also offered at proportionate purchase prices. Registrant
has not repurchased Participations in the past and it is not
likely to change its policy in the future.
(a) The Participations neither were traded on an
established securities market nor were readily tradable on a
secondary market or the substantial equivalent thereof. Based on
Registrant's transfer records, Participations are sold from time
to time in privately negotiated transactions and, in many
instances, Registrant is not aware of the prices at which such
transactions occur. Registrant was advised of 24 transfers of
Participations for the year ended December 31, 1999. In all
cases, no consideration was indicated.
(b) As of December 31, 1999, there were 608
Participants of record.
-5-
(c) Registrant did not pay dividends. During the years
ended December 31, 1999 and December 31, 1998, Registrant made
regular monthly distributions of $83.33 for each $5,000
Participation. Distributions in 1999 include non-cash
distributions of $306 and cash distributions of $1,000 for each
$5,000 Participation. There were no restrictions on Registrant's
ability to make distributions; however, the amount of such
distributions, particularly distributions of Additional Rent,
depended solely on Sublessee's ability to make payments of Basic
Rent and Additional Rent to Registrant. See Item 1 hereof.
Registrant expected to make distributions so long as it received
the payments provided for under the Sublease. See Item 7 hereof.
-6-
[SELECTED FINANCIAL DATA]
Item 6.
NAVARRE-500 BUILDING ASSOCIATES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Basic rent income... $ 1,139,254 $1,167,500 $1,167,500 $1,167,500 $1,167,500
Additional rent income. - - 914,282 1,071,252 840,704
Total revenue.... $ 1,139,254 $1,167,500 $2,081,782 $2,238,752 $2,008,204
Gain on sale of leasehold
and related income. $49,685,371 $ - $ - $ - $ -
Net income............50,302,553 $ 633,475 $1,465,929 $1,607,202 $1,399,709
Earnings per $5,000 participation
unit, based on 640 participation
units outstanding during the
year:
Income from operations.$ 964 $ 990 $ 2,291 $ 2,511 $ 2,187
Gain on sale of leasehold
and related income... 77,634 - - - -
Net income... $ 78,598 $ 990 $ 2,291 $ 2,511 $ 2,187
Total assets........ $52,619,753 $ 218,618 $ 225,143 $ 231,668 $ 238,193
Long-term obligations.. None None None None None
Distributions per $5,000
participation unit, based on
640 participation units
outstanding during the year:
Income............ $ 1,306 $ 990 $ 2,291 $ 2,511 $ 2,187
Return of capital.. - 10 10 10 10
Total distributions.$ 1,306 $ 1,000 $ 2,301 $ 2,521 $ 2,197
</TABLE>
-7-
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation.
Registrant was organized solely for the purpose of
owning the master leasehold of the Property subject to a net
operating sublease of the Property held by Sublessee. Registrant
was required to pay from Basic Rent the annual rent under the
Lease and amounts for supervisory services. Registrant
distributed the balance of such Basic Rent to the Participants.
Additional Rent was distributed to the Participants after the
Additional Payment to Supervisor. Pursuant to the Sublease,
Sublessee had assumed sole responsibility for the condition,
operation, repair, maintenance and management of the Property.
Registrant did not need to maintain substantial reserves or
otherwise maintain liquid assets to defray any operating expenses
of the Property.
Registrant's results of operations were affected
primarily by the amount of rent payable to it under the Sublease.
The following summarizes the material factors affecting
Registrant's results of operations for the three preceding years:
(a) Total income decreased for the year ended December 31,
1999 as compared with the year ended December 31, 1998.
Such decrease is attributable to the annual rent being
prorated in the year ended December 31, 1999. Total
income decreased for the year ended December 31, 1998 as
compared with the year ended December 31, 1997. Such
decrease is attributable to no Additional Rent having
been received by Registrant for the lease year ended
June 30, 1998. See Note 3 of the Notes.
(b) Total expenses decreased for the year ended December 31,
1999 as compared with the year ended December 31, 1998.
Such decrease resulted from rent expense being prorated
for the year ended December 31, 1999. Total expenses
decreased for the year ended December 31, 1998 as
compared with the year ended December 31, 1997. Such
decrease resulted from no additional payment for
supervisory services being paid as no Additional Rent
was received by Registrant in 1998. See Note 5 of the
Notes.
The amount of Additional Rent payable to Registrant was
affected by the cycles in the New York City economy, the ladies'
garment industry and the real estate rental market. It is
difficult for Registrant to forecast when these markets will
improve or deteriorate.
-8-
Inflation
Inflationary trends in the economy did not directly
impact Registrant's operations, since as noted above, Registrant
did not actively engage in the operation of the Property.
Inflation could impact the operations of Sublessee prior to the
1999 sale of the Property. Sublessee was required to pay Basic
Rent, regardless of the results of its operations. Inflation and
other operating factors affected only the amount of Additional
Rent payable by Sublessee, which was based on Sublessee's net
operating profit.
Item 8. Financial Statements and Supplementary Data.
The financial statements, together with the accompanying
report by, and the consent to the use thereof, of J.H. Cohn LLP
immediately following, are being filed in response to this item.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
-9-
PART III
Item 10.Directors and Executive Officers of the Registrant.
Registrant has no directors or officers or any other
centralization of management. There is no specific term of office
for any Agent. The table below sets forth, as to each Agent as of
December 31, 1999, the following: name, age, nature of any family
relationship with any other Agent, business experience during the
past five years and principal occupation and employment during
such period, including the name and principal business of any
corporation or any organization in which such occupation and
employment was carried on and the date such individual became an
Agent:
Principal Date
Nature of Occupation Individual
Family Business and became
Name Age Relationship Experience Employment Agent
Peter L. Malkin 65 None Real Estate Senior Partner 1988
Supervision and Chairman
and Law Wien & Malkin
LLP
Thomas N. Keltner,
Jr. 53 None Real Estate Partner 1996
Supervision Wien & Malkin
and Law LLP
Mr. Malkin and Mr. Keltner are also members of
Supervisor. See Items 11, 12 and 13 hereof for a description of
the services rendered by, and the compensation paid to, Supervisor
and for a discussion of certain relationships which may pose
actual or potential conflicts of interest among Registrant,
Sublessee and certain of their respective affiliates.
The names of entities which have a class of securities
registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or are subject to the requirements of Section 15(d) of
that Act, and in which the Agents are either a joint venturer or
general partner are as follows:
Peter L. Malkin is a joint venturer in 250 West 57th St.
Associates; and a general partner in Empire State
Building Associates, Garment Capitol Associates and 60
East 42nd St. Associates.
Thomas N. Keltner, Jr. is a general partner in 60 East
42nd St. Associates, Empire State Building Associates
and Garment Capitol Associates.
-10-
Item 11. Executive Compensation.
As stated in Item 10 hereof, Registrant has no directors
or officers or any other centralization of management.
No remuneration was paid during the current fiscal year
ended December 31, 1999 by Registrant to any of the Agents as
such. As accrued through the 1999 sale of the Property,
Registrant paid Supervisor, for supervisory services and
disbursements, fees of $40,000 per annum, plus 10% of all
distributions to Participants in any year in excess of the amount
representing 23% per annum on the Participants' remaining cash
investment in Registrant. The supervisory services provided to
Registrant by Supervisor included real estate supervisory, legal,
administrative and financial services. The services included, but
were not limited to, providing or coordinating with 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 included 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. Supervisor also prepares quarterly, annual and
other periodic filings with the Securities and Exchange Commission
and applicable state authorities.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
(a) Registrant has no voting securities (see Item 5
hereof).
(b) At December 31, 1999, the Agents in Registrant (see
Item 10 hereof) beneficially owned, directly or indirectly, the
following Participations:
Name and
Address of Amount of
Beneficial Beneficial Percent
Title of Class Owners Ownership of Class
Participations in Peter L. Malkin $ 8,125 .254%
Agent Interests 60 East 42nd Street
New York, NY 10165
-11-
At such date, certain of the Agents (or their respective
spouses) held additional Participations as follows:
Peter L. Malkin, Trustee of Mattie Saunders 1983 Trust,
owned $7,500 of Participations. Mr. Malkin disclaims
any beneficial ownership of such Participations.
Entities for the benefit of members of Peter L. Malkin's
family own of record and beneficially $35,000 of
Participations. Mr. Malkin disclaims any beneficial
ownership of such Participations, except that the
related Trusts are required to complete scheduled
payments to Mr. Malkin.
(c) Not applicable.
Item 13. Certain Relationships and Related Transactions.
(a) As stated in Items 1 and 10 hereof, Messrs. Peter
L. Malkin and Thomas N. Keltner, Jr. are the Agents in Registrant
acting for the Participants. Mr. Malkin's family have also owned
equity interests in Sublessee. As a consequence of Mr. Malkin's
family having an interest in Sublessee and both Mr. Malkin and Mr.
Keltner being members of Supervisor, certain actual or potential
conflicts of interest may arise with respect to the management and
administration of the business of Registrant. However, under the
respective participating agreements pursuant to which Mr. Malkin
and Mr. Keltner act as agents for the Participants, certain
transactions require the prior consent from Participants owning a
specified interest under the Agreements in order for them to act
on their behalf. Such transactions included modifications and
extensions of the Lease and the Sublease or the sale of the
Property or substantially all of Registrant's other assets.
See Item 1 for a description of the terms of the
Sublease. The interest of Mr. Malkin in the Sublease arose solely
from the ownership of his family's interest in Sublessee, and he
received no extra or special benefit not shared on a pro rata
basis with all other equity owners in Sublessee, except that Mr.
Malkin and Mr. Keltner, by reason of their respective interests in
Supervisor, were entitled to receive their pro rata share of any
supervisory, service, legal or other remuneration paid to
Supervisor for services rendered to Registrant and Sublessee. See
Item 11 hereof for a description of the remuneration arrangements
between Registrant and Supervisor relating to supervisory services
provided by Supervisor.
-12-
See Items 1 and 10 hereof for a description of the
relationship between Registrant and Supervisor, of which the
Agents in Registrant are among its members. The interest of each
of Mr. Malkin and Mr. Keltner in any remuneration paid or given by
Registrant to Supervisor arose solely from such person's ownership
of an interest in Supervisor. See Item 11 hereof for a
description of the remuneration arrangements between Registrant
and Supervisor relating to supervisory services provided by
Supervisor.
(b) Reference is made to paragraph (a) above.
(c) Not applicable.
(d) Not applicable.
-13-
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
(a)(1) Financial Statements:
Consent of J.H. Cohn LLP, Certified Public Accountants,
dated March 22, 2000.
Accountant's Report of J.H. Cohn LLP, Certified Public
Accountants, dated March 20, 2000.
Balance Sheets at December 31, 1999 and at December 31,
1998 (Exhibit A).
Statements of Income for the fiscal years ended December
31, 1999, 1998 and 1997 (Exhibit B).
Statement of Partners' Capital for the fiscal year ended
December 31, 1999 (Exhibit C-1).
Statement of Partners' Capital for the fiscal year ended
December 31, 1998 (Exhibit C-2).
Statement of Partners' Capital for the fiscal year ended
December 31, 1997 (Exhibit C-3).
Statements of Cash Flows for the fiscal years ended
December 31, 1999, 1998 and 1997 (Exhibit D).
Notes to Financial Statements for the fiscal years ended
December 31, 1999, 1998 and 1997.
(2) Financial Statement Schedules:
List of Omitted Schedules.
(3) Exhibits: See Exhibit Index.
(b) No report on Form 8-K was filed by Registrant
during the last quarter of the period covered by
this report.
-14-
[LETTERHEAD OF J.H. COHN LLP
ACCOUNTANTS & CONSULTANTS]
March 22, 2000
Navarre-500 Building Associates (A Co-Tenancy)
New York, N.Y.
We consent to the use of our independent accountants' report dated March
20, 2000 covering our audits of the accompanying financial statements of
Navarre-500 Building Associates in connection with and as part of your
December 31, 1999 annual report (Form 10-K) to the Securities and
Exchange Commission.
J. H. Cohn LLP
New York, N.Y.
-15-
INDEPENDENT ACCOUNTANTS' REPORT
To the participants in Navarre-500 Building Associates
(a general partnership converted in 1999 to a co-tenancy)
New York, N. Y.
We have audited the accompanying balance sheets of Navarre-500 Building
Associates (the "Company") as of December 31, 1999 and 1998, and the
related statements of income, partners' capital and cash flows for each
of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
As more fully described in Note 1 to the financial statements the
Company ceased to be a general partnership on December 23, 1999, when it
was dissolved coincidental with an in-kind liquidating distribution to
its partners of all of the Company's assets, and converted to a co-
tenancy. On that date, the co-tenants, operating as Navarre-500
Building Associates, the co-tenancy, sold their individual interests in
the leasehold property and received in exchange a purchase money note
due on January 4, 2000. After December 23, 1999, the co-tenancy
conducted its business as Navarre-500 Building Associates for the
benefit of each of the co-tenants, on the same respective economic and
investment terms as had existed before the partnership's legal
dissolution. As a result of the foregoing and in order to reflect the
substance of the conveyance of the property, the co-tenancy's
transactions for the period subsequent to the dissolution of the general
partnership have been combined in the accompanying financial statements
with those of the general partnership.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Navarre-500
Building Associates as of December 31, 1999 and 1998, and the results of
its operations and its cash flows for each of the three years in the
period ended December 31, 1999 in conformity with generally accepted
accounting principles.
J.H. Cohn LLP
New York, N. Y.
March 20, 2000
-16-
EXHIBIT A
NAVARRE-500 BUILDING ASSOCIATES
BALANCE SHEETS
A S S E T S
<TABLE>
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Current Assets:
Cash in bank.................................... $ 25,935 $ -
Cash in distribution account held by
Wien & Malkin LLP (Note 9).................... 36,881 53,333
62,816 53,333
Purchase money note receivable (Note 1)......... 52,500,000 -
Accrued interest receivable (Note 1)............ 56,937 -
TOTAL CURRENT ASSETS.................... 52,619,753 53,333
Real Estate (Note 2):
Leasehold on property situated at
500 and 512 Seventh Avenue, New York, NY....... - 3,200,000
Less: Accumulated amortization................ - 3,034,715
- 165,285
TOTAL ASSETS............................ $52,619,753 $ 218,618
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities (Note 1):
Accrued expenses of sale of leasehold.......... $ 212,647 $ -
Advances from partner, a related party......... 2,525,935 -
TOTAL CURRENT LIABILITIES................. 2,738,582 -
Partners' Capital (Exhibit C)................... 49,881,171 218,618
TOTAL LIABILITIES AND PARTNERS' CAPITAL.... $52,619,753 $ 218,618
</TABLE>
See accompanying notes to financial statements.
-17-
EXHIBIT B
NAVARRE-500 BUILDING ASSOCIATES
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Revenues:
Rent income, from a related party
(Note 3).......................... $ 1,139,254 $1,167,500 $2,081,782
Expenses:
Leasehold rent (Note 4).............. 475,706 487,500 487,500
Supervisory services, to a related
party (Note 5)..................... 40,000 40,000 121,828
Amortization of leasehold (Note 2)... 6,366 6,525 6,525
522,072 534,025 615,853
INCOME FROM OPERATIONS....... 617,182 633,475 1,465,929
Gain on sale of leasehold (Note 1)..... 49,628,434 - -
Interest income on purchase money
note receivable..................... 56,937 - -
49,685,371 - -
NET INCOME, CARRIED TO
PARTNERS' CAPITAL (NOTE 8)....... $50,302,553 $ 633,475 $1,465,929
Earnings per $5,000 participation
unit, based on 640 participation
units outstanding during each year:
Income from operations.............. $ 964 $ 990 $ 2,291
Gain on sale of leasehold and
interest income.................. 77,634 - -
NET INCOME................... $ 78,598 $ 990 $ 2,291
</TABLE>
See accompanying notes to financial statements.
-18-
EXHIBIT C-1
NAVARRE-500 BUILDING ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Peter L. Thomas N.
Malkin Keltner,
Total Group Jr. Group
<S> <C> <C> <C>
Partners' capital, January 1, 1999.... $ 218,618 $ 109,309 $ 109,309
Share of net income of partnership..... 617,182 308,591 308,591
Share of net income of co-tenancy..... 49,685,371 24,842,686 24,842,685
50,521,171 25,260,586 25,260,585
Distributions of partnership:
Cash distributions.................. (640,000) (320,000) (320,000)
In-kind liquidating distribution to partners of
their undivided interests of partnership
assets on December 23, 1999, at cost.. (195,800) (97,900) (97,900)
TOTAL DISTRIBUTIONS........... (835,800) (417,900) (417,900)
Contribution, on December 23, 1999 to capital of
co-tenancy of cost basis of co-tenants'
undivided interests in assets received on
dissolution of partnership......... 195,800 97,900 97,900
CO-TENANT PARTNERS' CAPITAL,
DECEMBER 31, 1999........ $49,881,171 $24,940,586 $24,940,585
</TABLE>
See accompanying notes to financial statements.
-19-
EXHIBIT C-3
NAVARRE-500 BUILDING ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Peter L. Stanley
Malkin Katzman
Total Group Group
<S> <C> <C> <C>
Partners' capital, January 1, 1997.... $ 231,668 $ 115,834 $ 115,834
Share of net income.................. 1,465,929 732,965 732,964
1,697,597 848,799 848,798
Distributions....................... 1,472,454 736,227 736,227
PARTNERS' CAPITAL, DECEMBER 31, 1997..$ 225,143 $ 112,572 $ 112,571
</TABLE>
See accompanying notes to financial statements.
-20-
EXHIBIT C-2
NAVARRE-500 BUILDING ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Thomas N.
Keltner,
Jr. Group
(formerly
Peter L. Stanley
Malkin Katzman
Total Group Group)
<S> <C> <C> <C>
Partners' capital, January 1, 1998........ $225,143 $112,572 $112,571
Share of net income....................... 633,475 316,737 316,738
858,618 429,309 429,309
Distributions........................... 640,000 320,000 320,000
PARTNERS' CAPITAL, DECEMBER 31, 1998.... $218,618 $109,309 $109,309
</TABLE>
See accompanying notes to financial statements.
-21-
EXHIBIT D
NAVARRE-500 BUILDING ASSOCIATES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 50,302,553 $ 633,475 $ 1,465,929
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of leasehold......... 6,366 6,525 6,525
Gain on sale of leasehold........... (49,628,434) - -
Accrued interest on purchase
money note receivable.............. (56,937) - -
Net cash provided by operating
activities.................... 623,548 640,000 1,472,454
Cash flows from investing activities:
Payments of expenses of sale of
leasehold........................... (2,500,000) - -
Net cash used in investing
activities.................... (2,500,000) - -
Cash flows from financing activities:
Cash distributions..................... (640,000) (640,000) (1,472,454)
Short-term advances from partner....... 2,525,935 - -
Net cash provided by (used in)
financing activities.......... 1,885,935 (640,000) (1,472,454)
Net change in cash............. 9,483 - -
Cash, beginning of year.................. 53,333 53,333 53,333
Cash, end of year..............$ 62,816 $ 53,333 $ 53,333
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
On December 23, 1999, in connection with the dissolution of the partnership and
its conversion to a co-tenancy, the partnership made an in-kind distribution of
all its assets to the partners, which had a cost basis of $195,800. On that
same date, the co-tenancy sold its leasehold in exchange for a purchase money
note receivable in the amount of $52,500,000.
See accompanying notes to financial statements.
-22-
NAVARRE-500 BUILDING ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. Business Activity, Sale of Leasehold and Basis of Presentation
Until its dissolution on December 23, 1999 Navarre-500 Building Associates
("Associates") conducted its business as a general partnership which held the
tenant's position in the master leasehold of property situated at 500 and 512
Seventh Avenue, New York, New York.
On December 23, 1999, the general partnership was dissolved coincidental with
an in-kind liquidating distribution to its partners of all of Associates'
assets, and was converted to a co-tenancy. Also, on that date, the co-
tenants, operating as Navarre-500 Building Associates, the co-tenancy, sold
their individual interests in the leasehold property for $52,500,000 and
received in exchange a 5% purchase money note due on January 4, 2000. After
December 23, 1999, the co-tenancy conducted its business as Navarre-500 Building
Associates for the benefit of each of the co-tenants, on the same respective
economic and investment terms as had existed before the partnership's legal
dissolution. As a result of the foregoing and in order to reflect the substance
of the conveyance of the property, the co-tenancy's transactions for the period
subsequent to the dissolution of the general partnership have been combined in
the accompanying financial statements with those of the general partnership.
The sale of the leasehold on December 23, 1999 resulted in a gain, computed as
follows:
Sales proceeds allocated to co-tenants $52,500,000
Less costs of sale:
Unamortized cost of leasehold $ 158,919
Expenses of sale 2,712,647 2,871,566
Gain on sale of leasehold $49,628,434
In 1999 the co-tenancy borrowed $2,525,935 from a partner, Peter L. Malkin. All
all of these funds were used to pay the above expenses of sale. See Note 10.
2. Summary of Significant Accounting Policies
Real Estate and Amortization of Leasehold:
Real estate, consisting of leasehold, is stated at cost. In 1978,
Associates exercised its first renewal option on the lease. Amortization of
the leasehold was being computed by the straight-line method over the
estimated useful life of 25 years, 4 months, from January 1, 1978 to May 1,
2003. The second renewal option, for a period of 21 years through May 1,
2024, was exercised in October 1995 (see Note 4) and the estimated life of
the leasehold was revised as of January 1, 1995 to 29 years and 4 months
until May 1, 2024.
Use of Estimates:
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
-23-
NAVARRE-500 BUILDING ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(continued)
3. Related Party Transactions - Rent Income
Rent income for the period January 1, 1999 to December 23, 1999 and the years
ended December 31, 1998 and 1997 represents the annual basic rent of
$1,167,500, under an operating sublease, as modified, with 500-512 Seventh
Avenue Associates (the "Sublessee"), plus, for 1997, payments of additional
rent. Additional rent is payable in an amount equal to 50% of the Sublessee's
defined net income from operations for lease years ending June 30th. For 1999
the rent income of $1,139,254 is the annual basic rent, prorated through
December 23, 1999.
For the years ended December 31, 1999 and 1998 no additional rent was earned
for the lease years ended June 30th of those years.
For the year ended December 31, 1997, additional rent of $914,282 was earned
for the lease year ended June 30, 1997.
No additional rent is accrued by Associates for the period between the end of
the Sublessee's lease year ending June 30th and the end of Associates' fiscal
year ending December 31st.
In 1995, the Sublessee exercised its renewal option for the second renewal
term commencing May 1, 2003 and ending April 30, 2024.
A partner in Associates is also a partner in the Sublessee.
4. Leasehold Rent
Leasehold rent paid during the years ended December 31, 1999, 1998 and 1997
consists of the annual net rent of $487,500 under an operating leasehold, as
modified, with GSL Enterprises, Inc. For 1999 the annual net rent expense of
$475,706 was prorated through December 23, 1999. In 1995, Associates
exercised its option to renew the lease for the second renewal period from May
2, 2003 to May 1, 2024.
5. Related Party Transactions - Supervisory Services
Supervisory services (including disbursements and cost of regular accounting
services) during the years ended December 31, 1999, 1998 and 1997, totaling
$40,000, $40,000 and $121,828, respectively, were paid to the firm of Wien &
Malkin LLP. Some members in that firm are partners in Associates. Fees for
supervisory services are paid pursuant to an agreement, which amount is based
on a rate of return of investment achieved by the participants of Associates
each year.
-24-
NAVARRE-500 BUILDING ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(continued)
6. Number of Participants
There were approximately 600 participants in the two participating groups at
December 31st of each period presented.
7. Determination of Distributions to Participants
Cash distributions to participants during each year represent the excess of
rent income received over the cash expenses.
8. Distributions and Amount of Income per $5,000 Participation Unit
Distributions per $5,000 participation unit during the years 1999, 1998 and
1997, based on 640 participation units outstanding during each year, consisted
of the following:
Year ended December 31,
1999 1998 1997
Income.......................... $1,306 $ 990 $2,291
Return of capital............... - 10 10
TOTAL DISTRIBUTIONS......... $1,306 $1,000 $2,301
Distributions in 1999 include non-cash distributions of $306 and cash
distributions of $1,000. Income in 1999 per $5,000 participation unit
includes $342 from gain on sale of leasehold and related income (Note 1).
Net income is computed without regard to income tax expense since Associates
does not pay a tax on its income; instead, any such taxes are paid by the
participants in their individual capacities.
9. Concentration of Credit Risk
Associates maintains cash balances in a bank, which is insured, and in a
distribution account held by Wien & Malkin LLP, which is not insured.
10. Subsequent Event
On January 4, 2000 the purchase money note receivable and accrued interest was
collected in full. The proceeds were used substantially for distributions to
the co-tenants, after having paid all the co-tenancy's outstanding liabilities
at December 31, 1999.
-25-
NAVARRE-500 BUILDING ASSOCIATES
OMITTED SCHEDULES
The following schedules have been omitted as not applicable in the present
instance:
SCHEDULE I - Condensed financial information of registrant.
SCHEDULE II - Valuation and qualifying accounts.
SCHEDULE III - Real estate and accumulated depreciation.
SCHEDULE IV - Mortgage loans on real estate.
-26-
SCHEDULE III
NAVARRE-500 BUILDING ASSOCIATES
Real Estate and Accumulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
Column
<S> <C> <C>
A Description Leasehold on property situated at
500 and 512 Seventh Avenue,
New York, New York.
B Encumbrances........................................ None
C Initial cost to company
Leasehold...................................... $3,200,000
D Costs capitalized subsequent to acquisition......... None
E Gross amount at which carried at
close of period
Leasehold...................................... $3,200,000(a)
F Accumulated amortization.......................... $3,034,715(b)
G Date of construction 1921
H Date acquired July 1, 1958
I Life on which leasehold amortization in
latest income statements is computed 29 years, 4 months
<?TABLE>
(a) There have been no changes in the carrying values of real estate for the
years ended December 31, 1998, December 31, 1997 and December 31, 1996. The
costs for federal income tax purposes are the same as for financial statement
purposes.
(b) Accumulated amortization
balance at January 1, 1996 $3,015,140
Amortization:
F/Y/E 12/31/96 $6,525
12/31/97 6,525
12/31/98 6,525 19,575
Balance at December 31, 1998 $3,034,715
-27-
SIGNATURE
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.
The individual signing this report on behalf of
Registrant is Attorney-in-Fact for Registrant and each of the
Agents 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: April 14, 2000
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 Agents in
Registrant, pursuant to the Power, on behalf of the Registrant
and as an Agent in Registrant on the date indicated.
By:/s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: April 14, 2000
________________________
* Mr. Katzman supervises accounting functions for Registrant.
-28-
EXHIBIT INDEX
Number Document Page*
3(a) Partnership Agreement, dated
March 21, 1958, which was filed as
Exhibit No. 1 to Registrant's Form
S-1 Registration Statement, as
amended (the "Registration
Statement") by letter dated April 3,
1958 and assigned File No. 2-14019,
is incorporated by reference as an
exhibit hereto.
3(b) Amended Business Certificate of
Registrant filed with the Clerk of
New York County on August 10, 1998
reflecting a change in Partners
which was filed as Exhibit 3(b) to
Registrant's Report on Form 10-Q-A
for the quarter ended September 30,
1998 and is incorporated herein by
reference.
4 Form of Participating Agreement,
which was filed as Exhibit No. 4 to
Registrant's Registration Statement
by letter dated April 3, 1958 and
assigned File No. 2-14019, is
incorporated by reference as an
exhibit hereto.
10(a) Deed from Garment Center Capitol
Inc. to The Prudential Insurance
Company of America ("Prudential")
dated May 1, 1957, filed by letter
dated March 31, 1981 (Commission
File No. 0-2673) as Exhibit No.
10(a) to Registrant's Form 10-K for
the fiscal year ended December 31,
1980, is incorporated by reference
as an exhibit hereto.
_______________________
* Page references are based on a sequential numbering system
-29-
Number Document Page*
10(b) Purchase Agreement between Navarre-
500 Building Associates and 500-512
Seventh Avenue Associates, dated
March 25, 1958, which was filed as
Exhibit No. 2 to Registrant's
Registration Statement by letter
dated April 3, 1958 and assigned
File No. 2-14019, is incorporated by
reference as an exhibit hereto.
10(c) Net Lease, dated May 1, 1957, between
Prudential and 500-512, Inc., which
was filed as Exhibit No. 3 to
Registrant's Registration Statement
by letter dated April 3, 1958 and
assigned File No. 2-14019, is
incorporated by reference as an
exhibit hereto.
10(d) Assignment of Net Lease from 500-512,
Inc. to 500-512 Seventh Avenue
Associates, dated May 1, 1957, which
was filed as Exhibit No. 3(a) to
Registrant's Registration Statement
by letter dated April 3, 1958 and
assigned File No. 2-14019, is
incorporated by reference as an
exhibit hereto.
13(a) Letter to Participants, dated
February 17, 2000 and accompanying
financial reports for the fiscal
year ended December 31, 1999. The
foregoing material shall not be
deemed to be "filed" with the
Commission or otherwise subject to
the liabilities of Section 18 of the
Securities Exchange Act of 1934.
_______________________
* Page references are based on a sequential numbering system.
-30-
Number Document Page*
13(b) Letter to Participants, dated
August 31, 1999 and accompanying
financial reports for the lease
years ended June 30, 1999 and June
30, 1998. The foregoing material
shall not be deemed to be "filed"
with the Commission or otherwise
subject to the liabilities of
Section 18 of the Securities
Exchange Act of 1934.
24 Powers of Attorney dated August 6, 1996
and May 14, 1998 between Peter L.
Malkin and Thomas N. Keltner, Jr. as
Agents in Registrant and Stanley
Katzman and Richard Shapiro, was
filed as Exhibit 24 to Registrant's
10-Q dated March 31, 1998 and is
incorporated herein by reference.
27 Financial Data Schedule of Registrant
for the fiscal year ended December 31, 1999.
_______________________
* Page references are based on a sequential numbering system
-31-
</TABLE>
Exhibit 13 (a)
[LETTERHEAD OF
WIEN & MALKIN LLP]
February 17, 2000
To Participants in Navarre-500 Building Associates ("Associates")
Federal Identification Number 13-6082674
We enclose the annual report for the year 1999 of the partnership which
owned the leasehold on the premises at 500 and 512 Seventh Avenue, New York
City.
On December 23, 1999, Associates concluded the joint sale of the
leaseholds of 500-512 Seventh Avenue for $113,000,000, of which $52,500,000 was
allocable to Associates. Associates was liquidated on the date of sale and
distributed beneficially to each participant a co-tenancy interest in the
property equal to each participant's proportionate interest in Associates.
At closing, each participant received his or her proportionate share of the
seller's installment obligation due January 4, 2000. No sale proceeds were
received in 1999. After deducting costs of sale and a 5% reserve as provided
in the joint sale agreement, $47,080,000 was distributed to the participants
on January 10, 2000. The sale proceeds were applied as follows:
Gross sale proceeds allocated to Associates $52,500,000
Expenses of sale:
Legal fees paid to Wien & Malkin LLP ($ 106,858)
Legal fees paid to other counsel (139,380)
Transfer taxes - New York State (210,000)
Transfer taxes - New York City (1,378,125)
Brokerage commissions (787,500)
Accounting fees (5,308)
Letter of credit cost (35,475)
Rent adjustment (16,452)
Payment to fee owner (50,000)
Total expenses ($2,729,098)
Net sale proceeds $49,770,902
Net interest income received 82,426
Total available funds from sale $49,853,328
Distribution $47,080,000
Funds held in reserve 2,773,328
Total $49,853,328
-32-
Each participant in Associates who reports on the cash basis will defer
the gain on sale to the year 2000 under the installment sale method of reporting
gains. IRS form number 6252 - Installment Sale Income - should be filed with
your 1999 income tax return. Questions 1 through 26 of Form 6252 should be
completed. On line 5, enter your share of the purchaser's installment
obligation, determined by multiplying the percentage interest reflected on the
attached Schedule K-1 by $52,500,000. Your ending capital account as reflected
on attached Schedule K-1 should be entered on line 10. On line 11, enter your
share of expenses of sale of $2,729,098. Enter zero on line 21, payments
received during the year. A sample partially completed form is annexed and
should be used by your tax adviser as a guide in completing Form 6252.
The reported income for 1999 was $617,182. There was no additional
rent for the lease year ended June 30, 1999 and the lease year from July 1, 1999
to December 23, 1999.
The enclosed Schedule K-1 form(s) (Form 1065) containing 1999 tax
information must be reviewed in detail by your accountant.
Please retain this letter and the enclosed Schedule K-1 form(s) for the
preparation of your income tax returns for the year 1999. If you have any
question about the enclosed material, please communicate with our office.
Cordially yours,
WIEN & MALKIN LLP
By: Stanley Katzman
SKfm
Encs.
O
-33-
[LETTERHEAD OF
WIEN & MALKIN LLP]
February 17, 2000
To Participants in Navarre-500 Building Associates ("Associates")
Federal Identification Number 13-6082674
We enclose the annual report for the year 1999 of the partnership which
owned the leasehold on the premises at 500 and 512 Seventh Avenue, New York
City.
On December 23, 1999, Associates concluded the joint sale of the
leaseholds of 500-512 Seventh Avenue for $113,000,000, of which $52,500,000 was
allocable to Associates. Associates was liquidated on the date of sale and
distributed beneficially to each participant a co-tenancy interest in the
property equal to each participant's proportionate interest in Associates.
At closing, each participant received his or her proportionate share of the
seller's installment obligation due January 4, 2000. No sale proceeds were
received in 1999. After deducting costs of sale and a 5% reserve as provided
in the joint sale agreement, $47,080,000 was distributed to the participants
on January 10, 2000. The sale proceeds were applied as follows:
Gross sale proceeds allocated to Associates $52,500,000
Expenses of sale:
Legal fees paid to Wien & Malkin LLP ($ 106,858)
Legal fees paid to other counsel (139,380)
Transfer taxes - New York State (210,000)
Transfer taxes - New York City (1,378,125)
Brokerage commissions (787,500)
Accounting fees (5,308)
Letter of credit cost (35,475)
Rent adjustment (16,452)
Payment to fee owner (50,000)
Total expenses ($ 2,729,098)
Net sale proceeds $49,770,902
Net interest income received 82,426
Total available funds from sale $49,853,328
Distribution $47,080,000
Funds held in reserve 2,773,328
Total $49,853,328
-34-
Each participant in Associates who reports on the cash basis will
defer the gain on sale to the year 2000 under the installment sale method
of reporting gains. IRS form number 6252 -Installment Sale Income - should
be filed with your 1999 income tax return. Questions 1 through 26 of
Form 6252 should be completed. On line 5, enter your share of the purchaser's
installment obligation, determined by multiplying the percentage interest
reflected on the attached Schedule K-1 by $52,500,000. On line 11, enter
your share of expenses of sale of $2,729,098. Enter zero on line 21, payments
received during the year. A sample partially completed form is annexed
and should be used by your tax adviser as a guide in completing Form 6252.
The reported income for 1999 was $617,182. There was no additional rent
for the lease year ended June 30, 1999 and the lease year from July 1, 1999 to
December 23, 1999.
The enclosed Schedule K-1 form(s) (Form 1065) containing 1999 tax
information must be reviewed in detail by your accountant.
Please retain this letter and the enclosed Schedule K-1 form(s) for the
preparation of your income tax returns for the year 1999. If you have any
question about the enclosed material, please communicate with our office.
Cordially yours,
WIEN & MALKIN LLP
By: Stanley Katzman
SK/fm
Encs.
N-O
-35-
[LETTERHEAD OF
ORLIN & FEUERSTEIN, CPA, PC]
ACCOUNTANTS' REPORT
To the participants in Navarre-500 Building Associates ( a Partnership):
We have audited the accompanying balance sheet of Navarre-500 Building
Associates ( "Associates" ) as of December 23, 1999 (prior to dissolution of
the partnership) and the related statements of income, partners' capital, and
cash flows for the period January 1, 1999 to December 23, 1999. These financial
statements are the responsibility of Associates' management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Associates as of December 23,
1999 (prior to liquidation of the partnership), and the results of its
operations and its cash flows for the period January 1, 1999 to December 23,
1999 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements the partnership was
liquidated on December 23, 1999, and the assets and liabilities were
distributed to Peter L. Malkin and Thomas N. Keltner, Jr., who each become the
nominal holder on behalf of the participants of a 50% undivided interest in the
master lease.
Orlin & Feuerstein, CPAs, P.C.
60 East 42nd Street
New York, NY 10165
February 14, 2000
-36-
Navarre-500 Building Associates
Balance Sheet
December 23, 1999
(Prior to Liquidation of Partnership)
Assets
Cash:
Chase Manhattan Bank $ 62,816
Leasehold at 500 and 512 Seventh Avenue,
New York City $3,200,000
Less: Accumulated amortization of
cost of leasehold 3,041,078 158,922
Total assets $ 221,738
Liabilities and Partners' Capital
Liabilities:
Loan from participants $ 25,933
Total liabilities 25,933
Partners' capital, December 23, 1999 195,805
Total liabilities and partners' capital $ 221,738
Statement of Income
January 1, 1999 to December 23, 1999
Rent income:
Basic rent $1,139,254
Expenses:
Leasehold rent $ 475,706
Supervisory services 40,000
Total expenses 515,706
Income before amortization of cost of leasehold 623,548
Amortization of cost of leasehold 6,366
Net income $ 617,182
The accompanying notes are an integral part of these financial statements.
-37-
Navarre-500 Building Associates
Balance Sheet
December 23, 1999
(Prior to Liquidation of Partnership)
Cash flows from operating activities:
Net income $ 617,182
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of cost of leasehold $ 6,366
Changes in assets and liabilities:
Loan from participants 25,933 32,299
Net cash provided by operating activities 649,481
Cash flows from financing activities:
Monthly distributions to participants (640,000)
Net change in cash 9,481
Cash at beginning of year 53,335
Cash at end of year $ 62,816
The accompanying notes are an integral part of these financial statements.
-38-
Navarre-500 Building Associates
Balance Sheet
December 23, 1999
(Prior to Liquidation of Partnership)
Partners' capital, January 1, 1999 $ 218,623
Add, Net income for the period January 1, 1999
to December 23, 1999 617,182
835,805
Less: Distributions: January 1, 1999
through December 1, 1999 640,000
Partners' capital, December 23, 1999 $ 195,805
The accompanying notes are an integral part of these financial statements.
-39-
Navarre-500 Building Associates
Balance Sheet
December 23, 1999
(Prior to Liquidation of Partnership)
1. Business Activity:
Navarre-500 Building Associates ("Associates") was a general partnership
which owned and leased the leasehold at 500 and 512 Seventh Avenue, New York
City. The partnership was liquidated on December 23, 1999, and the assets
and liabilities were distributed to Peter Malkin and Thomas N.
Keltner, Jr., who each became a nominal holder of a 50% undivided interest in
the master lease. On December 23, 1999, the joint sale of the leaseholds of
500-512 Seventh Avenue was concluded for $113,000,000, of which $52,500,000
was allocable to the master lease. The nominees received on behalf of each
participant two promissory notes aggregating $52,500,000 payable on January 4,
2000; no cash was received at the closing.
2. Significant Accounting Policy:
a) Land, buildings and amortization
The leasehold was stated at cost. The unamortized leasehold cost of
$191,388 at December 31, 1994 was being amortized over the period of 29 years
and 4 months from January 1, 1995 to May 1, 2024, the end of the second renewal
period, with amortization at $6,524 per annum. For the period January 1, 1999
to December 23, 1999, amortization was $6,366. Amortization of leasehold from
July 1, 1958 through December 31, 1977 was $134,266 per annum, and from January
1,1978 through December 31,1994 was $22,966 per annum.
b) Use of estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles often requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues, and
expenses. Such estimates may relate to unsettled transactions and events as of
the date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
3. Leasehold at 500 and 512 Seventh Avenue, New York City:
The lease included an initial term which expired April 30,1982, and options
to renew for three additional terms of 21 years each. Associates had exercised
the first renewal option for the period from May 1, 1982 to May 1, 2003, and
the second renewal option for the period from May 1, 2003 to May 1, 2024.
The lease rent was $937,500 per annum during the initial term, and was $437,500
per annum through April 30, 1985. Pursuant to a lease modification effective
May 1, 1985, the lease rent was increased by $50,000 from $437,500 to $487,500
per annum during the present term and all future renewal terms. For the period
January 1, 1999 to December 23, 1999, the annual rent was pro-rated. Rent
expense was $475,706.
-40-
Navarre-500 Building Associates
Balance Sheet
December 23, 1999
(Prior to Liquidation of Partnership)
4. Rent Income and Related Party Transactions:
The sublease included an initial term which expired April 30, 1982 and three
additional terms of 21 years each, provided that the lease remains in effect.
The sublessee had exercised its first and second renewal options for the terms
from May 1, 1982 through April 30, 2003, and from May 1, 2003 through April 30,
2024. Basic rent under the sublease was $1,337,500 during the initial term, and
$1,117,500 through April 30, 1985. Pursuant to the modification of the sublease
effective May 1, 1985, basic rent was increased by $50,000 from $1,117,500 to
$1,167,500 during the present term and all future renewal terms. For the
period January 1, 1999 through December 23, 1999, the annual rent was prorated.
Rent income was $1,139,254.
Additional rent was payable to Navarre-500 Building Associates equivalent to
one-half the net operating profit, as defined, in excess of $400,000, in any
year during the initial term, and $620,000 during renewal terms. For the lease
year ended June 30, 1999 and the lease year from July 1, 1999 to December 23,
1999, the sublessee reported a net operating loss, so that no additional rent
was received.
Some partners in Associates are also partners in the sublessee.
5. Supervisory Services and Related Party Transactions:
Payments for supervisory services, including disbursements and cost of
accounting services, were made to the firm of Wien & Malkin LLP. Some partners
in that firm were also partners in Associates.
6. Income Taxes:
Net income is computed without regard to income tax expense since the
partnership does not pay a tax on its income; instead, any such taxes are paid
by the participants in their individual capacities.
7. Concentration of Credit Risk:
At the time of liquidation, Associates maintained a cash balance in a bank.
The bank balance was insured by the Federal Deposit Insurance Corporation up to
$100,000, and at December 23, 1999, was completely insured.
-41-
Exhibit 13 (b)
[LETTERHEARD OF WIEN & MALKIN LLP]
August 31, 1999
TO PARTICIPANTS IN NAVARRE-500 BUILDING ASSOCIATES
We enclose the operating report of the sublessee, 500-512 Seventh
Avenue Associates, for the fiscal year of the lease ended June 30, 1999.
Under the sublease, 50% of the annual net income of the sublessee in
excess of $620,000 is payable as additional rent. As the sublessee reported
net loss of $840,964 for the year ended June 30, 1999, no additional rent was
received.
The participants have approved an additional payment for supervisory
services to Wien & Malkin LLP equivalent to 10% of distributions in excess of
23% on the cash investment in any year, commencing May 1, 1982. For the year
ended June 30, 1999, no additional distribution will be made to the
participants and no additional payment will be made to Wien & Malkin LLP.
Regular monthly distributions of $640,000 continue at the rate of 20%
on the cash investment of $3,200,000 in Navarre-500 Building Associates.
If you have any question, please communicate with Stanley Katzman,
Alvin Silverman or Mark Labell, partners in Wien & Malkin LLP, by mail or by
phone at (212) 687-8700.
Cordially yours,
WIEN & MALKIN LLP
By: Stanley Katzman
SK/fd
Encs:
-42-
[LETTERHEARD OF REILLY, DEANE & RABOY
CERTIFIED PUBLIC ACCOUNTANTS]
Navarre-500 Building Associates
60 East 42nd Street
New York, New York 10165
We have compiled the Statement of Income and Expense of 500-512 Seventh
Avenue Associates, the sublessee of 500 Seventh Avenue, 512 Seventh Avenue and
228 West 38th Street, New York, New York for the sublease year ended June 30,
1999, pursuant to the 500-512 Seventh Avenue Associates sublease dated June 27,
1958, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying financial statement and, accordingly, do
not express an opinion or any other form of assurance on it.
New York, New York
August 4, 1999
-43-
STATEMENT OF INCOME AND EXPENSE
FOR THE SUBLEASE YEAR ENDED JUNE 30, 1999
Income:
Rent income $11,497,185
Electricity, net 336,612
Air conditioning 32,680
Sprinkler 104,493
Water, net ( 27,046)
Fire insurance claim 383,912
Lease cancellation 51,111
Other 97,171
Total income 12,476,118
Expenses:
Base rent 1,167,500
Labor costs 2,256,185
Real estate taxes 2,966,308
Tenant and other alterations,
repairs and supplies 3,830,635
Management & leasing 1,889,828
Fuel 316,566
Insurance 122,188
Legal and accounting fees 471,064
Sprinkler alarm 40,820
Telephone 17,423
Amortization of leasehold
improvements - elevators 113,376
Miscellaneous 125,189
Total expenses 13,317,082
Net loss for sublease year ( 840,964)
Less: Exclusion*
Net income subject to additional rent $ 0
Additional rent at 50% $ 0
*Overage rent is payable to the landlord at 50% of the net income over $620,000.
-44-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Balance Sheet as of December 31, 1999 and the Statement Of Income
for the year ended December 31, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 62,816
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,619,753
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,619,753
<CURRENT-LIABILITIES> 2,738,582
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 49,881,171
<TOTAL-LIABILITY-AND-EQUITY> 52,619,753
<SALES> 1,139,254<F1>
<TOTAL-REVENUES> 1,139,254
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 522,072<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 617,182
<INCOME-TAX> 0
<INCOME-CONTINUING> 617,182
<DISCONTINUED> 0
<EXTRAORDINARY> 49,685,371<F3>
<CHANGES> 0
<NET-INCOME> 50,302,553
<EPS-BASIC> 78,598<F4>
<EPS-DILUTED> 78,598<F4>
<FN>
<F1>Rental income
<F2>Leasehold rent expense, supevisory servises and amortization of leasehold
<F3>Gain on sale
<F4>Earning per $5,000 participation unit, based on 640 participation units
outstanding during the year.
-45-
</TABLE>
