<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 0-13500
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1626 New York Associates Limited Partnership
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2808184
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One International Place, Boston, MA 02110
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 330-8600
--------------
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
----- -----
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<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data) September 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Assets
Real estate, at cost:
Land $ 24,437 $ 26,477
Buildings and improvements, net of accumulated
depreciation of $129,392 and $129,020 as of
September 30, 1996 and December 31, 1995, respectively 110,016 119,260
----------- -----------
134,453 145,737
----------- -----------
Other Assets:
Cash and cash equivalents, at cost, which
approximates market value 334 267
Restricted cash 8,792 11,633
Accounts receivable, net of reserves of $675 and $411 as of
September 30, 1996 and December 31, 1995, respectively 333 756
Deferred rent receivable 8,208 8,233
Deferred costs, net of accumulated amortization of
$22,325 and $21,435 as of September 30, 1996
and December 31, 1995, respectively 3,916 6,260
Prepaid expenses and other assets 2,484 5,827
----------- -----------
Total Assets $ 158,520 $ 178,713
=========== ===========
Liabilities and Partners' Deficit
Liabilities:
Mortgage note payable to affiliates $ 207,000 $ --
Fuji and Sanwa mortgage payable -- 231,409
Dime mortgage notes payable 19,217 19,272
Accounts payable, loans payable, and accrued interest to
general partners and affiliates 10,241 46,222
Accounts payable, security deposits and accrued expenses 7,062 8,617
Accrued interest on mortgage notes payable to affiliates 30,893 --
Accrued interest on other mortgage notes 938 27,930
Deferred purchase price obligation 1,498 1,498
----------- -----------
Total Liabilities 276,849 334,948
----------- -----------
Partners' Equity (Deficit):
Limited partners
Units of limited partnership interest, $250,000
stated value per unit:
1,344 units authorized and issued,
1,340 outstanding (121,276) (121,457)
Less: investor notes (68) (68)
General partners 3,015 (34,710)
----------- -----------
Total partners' deficit (118,329) (156,235)
----------- -----------
Total liabilities and partners' deficit $ 158,520 $ 178,713
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data) For the Nine Months Ended
September 30, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Income:
Rental and escalation income $ 32,715 $ 37,313
Interest and other income 312 613
----------- -----------
33,027 37,926
----------- -----------
Expenses:
Real estate and other taxes 7,208 7,943
Payroll 1,050 1,037
Utilities 3,640 4,040
Repairs and maintenance 3,778 4,602
General and administrative 1,650 1,905
Management fees 726 1,918
Interest 4,747 14,081
Interest on obligations to affiliates 11,242 2,836
Depreciation 8,743 8,451
Amortization 3,186 2,757
----------- -----------
Total expenses 45,970 49,570
----------- -----------
Loss before extraordinary gain (12,943) (11,644)
----------- -----------
Extraordinary gain on transfer of 227 East 45th 13,688 --
----------- -----------
Net income (loss) $ 745 $ (11,644)
=========== ===========
Net income (loss) allocated to general partners $ 564 $ (303)
=========== ===========
Net loss before extraordinary item allocated to
investor limited partners $ (12,557) $ (11,341)
Extraordinary gain allocated to investor limited partners 12,738 --
----------- -----------
Net income (loss) allocated to investor limited partners $ 181 $ (11,341)
=========== ===========
Net loss per unit of investor limited partnership
interest before extraordinary gain $ (9,370.90) $ (8,463.43)
Extraordinary gain per unit of investor limited
partnership interest 9,505.97 --
----------- -----------
Net income (loss) per unit of investor limited
partnership interest $ 135.07 $ (8,463.43)
=========== ===========
Weighted average number of units of limited
partnership interest outstanding 1,340 1,340
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data) For the Three Months Ended
September 30, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Income:
Rental and escalation income $ 10,265 $ 13,140
Interest and other income 143 196
----------- -----------
10,408 13,336
----------- -----------
Expenses:
Real estate and other taxes 2,361 2,615
Payroll 477 310
Utilities 1,483 1,715
Repairs and maintenance 976 1,569
General and administrative 684 672
Management fees 136 653
Interest 757 4,984
Interest on obligations to affiliates 4,757 929
Depreciation 2,745 2,838
Amortization 890 925
----------- -----------
Total expenses 15,266 17,210
----------- -----------
Net loss $ (4,858) $ (3,874)
=========== ===========
Net loss allocated to general partners $ (183) $ (99)
=========== ===========
Net loss allocated to investor limited partners $ (4,675) $ (3,775)
=========== ===========
Net loss per unit of investor limited
partnership interest $ (3,488.81) $ (2,817.16)
=========== ===========
Weighted average number of units of limited
partnership interest outstanding 1,340 1,340
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statement of Partners' Deficit (Unaudited)
(In Thousands, Except Unit Data)
Units of General Investor
limited partners' limited Total
partnership (deficit) partners' partners'
interest equity deficit deficit
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance - December 31, 1995 1,340 $ (34,710) $ (121,525) $ (156,235)
Net income -- 564 181 745
Contributions -- 37,161 -- 37,161
---------- ---------- ---------- ----------
Balance, September 30, 1996 1340 3,015 (121,344) (118,329)
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
5 of 15
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands) For the Nine Months Ended
September 30, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 745 $ (11,644)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,929 11,208
Deferred rent receivable, net 25 (1,044)
Gain on transfer of 227 East 45th St (13,688) --
----------- -----------
(989) (1,480)
Decrease in accounts receivable 423 (84)
(Increase) Decrease in prepaids and other assets 3,343 2,706
Decrease in accounts payable, security deposits
and accrued expenses (1,555) (5,915)
Accrued interest 3,901 2,626
----------- -----------
Net cash provided by (used in) operating activities 5,123 (2,147)
----------- -----------
Cash Flows from Investing Activities:
Additions to buildings and improvements (6,230) (4,052)
Increase in deferred costs (490) (1,127)
----------- -----------
Cash (used in) investing activities (6,720) (5,179)
----------- -----------
Cash Flows from Financing Activities:
Accounts and loans payable to general partners
and affiliates (1,095) 3,409
Restricted cash decrease 2,841 3,964
Principal payments on mortgage note and other loans (82) (74)
----------- -----------
Net cash provided by financing activities 1,664 7,299
----------- -----------
Net increase (decrease) in cash and cash equivalents 67 (27)
Cash and cash equivalents, beginning of period 267 108
----------- -----------
Cash and cash equivalents, end of period $ 334 $ 81
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 11,376 $ 11,168
=========== ===========
</TABLE>
Non-Cash Investing and Financing Activities:
A. Deed in lieu of foreclosure - see Note 5
B. Related party debt forgiveness and modification- see Notes 3 and 4
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements, related footnotes and discussions contained in the
Partnership's annual report for the year ended December 31, 1995.
The financial information contained herein is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature except as discussed in Notes 3, 4 and 5. Certain amounts
have been reclassified to conform to the September 30, 1996 presentation.
The balance sheet at December 31, 1995 was derived from audited financial
statements at such date.
The results of operations for the nine and three months ended September
30, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
2. Accounting Change
On January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ", which
requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows are not sufficient to recover the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the asset to
its carrying amount. The adoption of the SFAS has no effect on the
Partnership's financial statements.
3. Related Parties
The Partnership incurred approximately $337,000 of property and asset
management fees and approximately $134,000 of leasing and construction
fees through February 28, 1996, payable to an affiliate of the general
partner. As part of the sale of Fuji Loan, (described in Note 4), the
Partnership agreed to retain new management and leasing agents for all of
its properties. Effective March 1, 1996, the Partnership's properties are
managed by Axiom Real Estate Management, Inc. and leasing activity is
performed by the Galbreath Company, Newmark & Co. and Koll Company. These
firms are not affiliates of the general partner.
In connection with the sale of the Fuji Loan, Winthrop Financial
Associates ("Winthrop") and certain of its affiliates entered into an
agreement with the Investor Partnership, the Operating Partnership and an
affiliate of Zeus Property LLC ("Zeus") with regard to amounts owed to
Winthrop and its affiliates by the Investor Partnership and the Operating
Partnership (the "Winthrop Debt Agreement"). Prior to this agreement,
Winthrop and its affiliates were owed, in the aggregate, $47,161,000 by
the Investor Partnership and the Operating Partnership. This amount is
comprised of cash advances made by Winthrop to the Operating Partnership,
as well as unpaid deferred fees related to the on-site management of the
properties, asset management and syndication. This amount also includes
accrued interest on these outstanding balances.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Related Parties (Continued)
Under the Winthrop Debt Agreement, Winthrop and its affiliates
contributed approximately $37,161,000 of the $47,161,000 to the Operating
Partnership. The remaining $10,000,000 receivable has been evidenced by a
promissory note issued by the Operating Partnership (the "Receivables
Note") which is secured by a pledge of excess cash flow from 509 Fifth
Avenue and 300 Park Avenue South and is payable only from those
properties. Upon receiving consent of The Dime Savings Bank, the holder
of the first mortgage, the Receivables Note is to be secured by second
mortgages on 509 Fifth Avenue and 300 Park Avenue South. Winthrop then
sold the Receivables Note to an affiliate of Zeus for a payment of $6
million in cash. The Receivables Note has an annual base interest rate of
6% and an additional annual contingent interest rate of 9%. Interest is
payable only from available cash flow after payment of debt service on
The Dime Savings Bank first mortgage. Interest, to the extent that it
cannot be paid currently, accrues until the maturity of this Note on July
31, 1997.
On October 17, 1996 the Partnership borrowed approximately $1,755,000
against the $19,550,000 credit line provided by Zeus.
4. Debt Modification
On February 28, 1996, Zeus purchased the existing debt held by the Fuji
Bank Ltd. for $115 million. In connection with its purchase of the Fuji
loan, Zeus agreed to grant the Operating Partnership certain concession
(see "Item 2. Management Discussion and Analysis of Financial
Condition").
5. Deed in Lieu of Foreclosure
A deed in lieu of foreclosure agreement was reached between the Operating
Partnership and Sanwa Business Credit Corporation ("Sanwa") on January
15, 1996. Pursuant to the deed in lieu of foreclosure agreement, the
Operating Partnership transferred title to the property located at 227
East 45th St. to Sanwa on January 24, 1996. In exchange, Sanwa released,
as of the closing date, the Operating Partnership from all claims,
demands, liabilities, obligations, actions and causes of any kind with
regard to Sanwa, other than the second mortgage lien on 509 Fifth Avenue.
The 509 Fifth Avenue second mortgage lien was subsequently released.
As of year end, the balance related to the mortgage was approximately
$16,628,000 which was secured by both 227 East 45th St. and 509 Fifth
Avenue. In addition, the Sanwa note payable, which had an approximate
$7,782,000 balance, was secured by both 227 East 45th St. and 509 Fifth
Avenue. As a result of the above described transactions, the Operating
Partnership has recognized an extraordinary gain of approximately
$13,688,000. The property was stated at its fair value at December 31,
1995 as a result of a recorded write-down.
8 of 15
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Item should be read in conjunction with the Consolidated
Financial Statements and other Items contained elsewhere in this
Report.
Liquidity and Capital Resources
The Partnership serves as the general partner of Nineteen New York
Properties Limited Partnership (the "Operating Partnership"). All of
the Operating Partnership's six remaining properties (the
"Properties") are office buildings located in New York City. The
Partnership's sole source of revenue is from distributions from the
Operating Partnership and interest income on cash reserves. The
Partnership is responsible for its operating expenses. The Operating
Partnership receives rental revenue from tenants and is responsible
for operating expenses, administrative expenses, capital
improvements and debt service payments.
The Partnership and the Operating Partnership had $334,000 of cash
and cash equivalents and $8,792,000 of restricted cash at September
30, 1996, as compared to $267,000 and $11,633,000, respectively, at
December 31, 1995. Restricted cash includes amounts held in mortgage
collateral accounts, restricted operating accounts, tenant security
and utility deposits, and real estate tax escrows. The $67,000
increase in cash and cash equivalents at September 30, 1996, as
compared to December 31, 1995, was due to $5,123,000 of cash
provided by operating activities and $1,664,000 of cash provided by
financing activities, which was substantially offset by $6,720,000
of cash used in investing activities. Cash used in investing
activities consisted primarily of $6,230,000 of improvements to real
estate, the majority of which were building improvements. Cash
provided by financing activities consisted of a $2,841,000 decrease
in restricted cash, $1,095,000 repaid to general partners and
affiliates and $82,000 of mortgage principal payments.
The Operating Partnership's only other source of liquidity is a
$19,550,000 unsecured credit line provided by Zeus Property LLC
("Zeus"). This credit line can be used by the Operating Partnership
to fund capital improvements and tenant lease-up costs at the Fuji
Properties. However, any borrowings under this credit line are
subject to Zeus' discretion. Accordingly, it is possible that the
Operating Partnership may not be able to borrow against this credit
line each time it deems it necessary. On October 17, 1996 the
Partnership borrowed approximately $1,755,000 against the Zeus
credit line to pay for tenant improvements.
On February 28, 1996 Zeus purchased the existing debt held by The
Fuji Bank Ltd. for $115 million. The Operating Partnership obtained
a reduction in the current interest required to be paid under the
modified loan which, based on current projections, will greatly
reduce the likelihood of monetary default under the loan prior to
February 28, 1998, the new maturity date for a portion of the loan.
As part of the restructuring of the Fuji loan, each of the Operating
Partnership's 535 and 545 Fifth Avenue, 1372 Broadway and 757 Third
Avenue properties (the "Fuji Properties") were conveyed by the
Operating Partnership to newly-created limited liability companies
which are wholly-owned, indirectly, by the Operating Partnership and
its partners.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (Continued)
The modified Fuji loan (the "Modified Loan") is comprised of several
component non-recourse loans, all held by Zeus and its affiliates.
The most senior loan component consists of a series of secured notes
in the aggregate principal amount of $104,550,000, each having an
annual interest rate of 295 basis points over 30-day LIBOR, maturing
on February 28, 1998 unless extended at Zeus' option (the "Secured A
Notes").
A junior component consists of secured notes in the aggregate
principal amount of $102,450,000, each having a fixed annual
interest rate of 14% for the next three years and then 16.75%
thereafter, maturing on February 28, 2016 (the "Secured B Notes").
The Secured A Notes and Secured B Notes are collectively secured by
first mortgages on the Fuji Properties. A third component is the
unsecured $19,550,000 note (the "Unsecured Note") representing the
additional financing expected to be drawn upon by the Operating
Partnership to fund capital improvements and tenant lease-up costs
with respect to the Fuji Properties. The Unsecured Note bears
interest at a fixed annual rate of 14% for the next three years and
then 16.75% thereafter and matures on February 28, 1998, unless
extended at Zeus' option.
In connection with the Modified Loan, loans in the form of cash
advances and deferred fees that were made to the Partnership and the
Operating Partnership by Affiliates of the General Partner were
restructured. See Item 1, Note 4.
After giving effect to the loan restructuring, the Operating
Partnership's properties were encumbered by approximately
$236,254,000 of principal amount of mortgage loans. The Partnership
believes that current cash flow will be sufficient to fund the
current debt service requirements on these loans until their
maturity (December 31, 1997 with respect to the loans encumbering
300 Park Avenue South and 509 Fifth Avenue and February 28, 1998
with respect to the Fuji Properties). However, in the absence of a
substantial improvement in the commercial rental market and the
operations of the Properties, the Partnership will not be able to
make the balloon payments due on these loans at maturity.
Accordingly, if the Properties cannot be sold at prices sufficient
to satisfy the debt, or the existing loans refinanced or modified,
prior to their maturity, there is a substantial likelihood that some
or all of the Properties will be lost through foreclosure. At
present, it appears that the Partnership's original objective of
capital appreciation will not be achieved and the Partnership's
partners will not receive a return of a substantial amount of their
original investment.
On January 24, 1996, the Operating Partnership transferred the title
to the property located at 227 East 45th St. to Sanwa Business
Credit Corporation ("Sanwa") pursuant to a deed in lieu of
foreclosure. In exchange, Sanwa released, as of the closing date,
the Operating Partnership from all claims, demands, liabilities,
obligations, actions and causes of any kind with regards to Sanwa,
other than the second mortgage lien on 509 Fifth Avenue. The 509
Fifth Avenue second mortgage lien was released subsequent to the
transfer of 227 East 45th St. to Sanwa.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (Continued)
As part of the debt restructuring process, the Operating Partnership
reviewed the Properties to determined whether they have suffered an
impairment in value which is deemed to be other than temporary. The
Partnership determined that, based upon current economic conditions
and projected operational cash flows, the recovery of the carrying
value of the Partnership's Properties was not likely. As a result,
the Partnership wrote down its investment in the Properties by
$22,500,000 in 1995 to their estimated fair value.
There have been, and it is possible there may be other Federal,
state and local legislation and regulations enacted relating to the
protection of the environment and individual rights (such as the
American with Disabilities Act). The Partnership is unable to
predict the extent, if any, to which such new legislation or
regulation might occur and the degree to which such existing or new
legislation or regulations might adversely affect the Partnership's
liquidity and capital resources.
Real Estate Market
The income and expenses of operating the Properties owned by the
Operating Partnership are subject to factor's outside its control,
such as the over-supply of similar properties, increases in
unemployment, population shifts, or changes in patterns or needs of
users. Expenses, such as local real estate taxes and miscellaneous
expenses, are subject to change and cannot always be reflected in
rental rate increases due to market conditions. In addition, there
are risks inherent in owning and operating office buildings because
such properties are labor intensive and are susceptible to the
impact of economic and other conditions outside the control of the
Partnership.
These market conditions have and will continue to have a significant
impact on the Partnership. In general, while the General Partners
believe that the loan restructurings represent an accomplishment of
the immediate goals set by the Operating Partnership, there will be
little or no direct positive benefits for the Partnership unless
there is a significant recovery in market conditions.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Results of Operations
Nine Months ended September 30, 1996 vs. September 30, 1995
The Partnership generated a net loss before extraordinary gain of
approximately $12.9 million for the nine months ended September 30,
1996, as compared to a net loss of approximately $11.6 million for
the nine months ended September 30, 1995. The increase in net loss
was due to a decrease in revenues which exceeded a decrease in
expenses.
Rental income decreased to approximately $32.7 million for the nine
months ended September 30, 1996 as compared to approximately $37.3
million for the nine months ended September 30, 1995. Rental income
was negatively impacted by the loss of the 227 East 45th property by
approximately $2,340,000 coupled with a decrease in rental revenues
at 757 Third Avenue and and 1372 Broadway of approximately
$1,838,000 and $887,000, respectively, for the nine months ended
September 30, 1996, as compared to 1995. These decreases were
partially offset by an increase in rental income at 535 Fifth Avenue
of approximately $576,000. The lower rental revenues were primarily
the result of lower effective rental rates and decreased occupancy.
All other properties remained relatively constant.
Expenses for the nine months ended September 30, 1996, as compared
to 1995, declined by approximately $3,600,000 partially as a result
of the loss of the 227 East 45th property. The decreases in overall
operating expenses (i.e., real estate taxes, payroll, utilities,
repairs and maintenance) of $1,946,000, interest expense of
approximately $928,000, management fees of $1,192,000 and general
and administrative expenses of $255,000 were partially offset by
increases in amortization expense of $429,000 and depreciation
expense of approximately $292,000.
Operating and interest expenses declined as a result of the 227 East
45th deed in lieu of foreclosure. Management fees declined due to
the elimination of the asset management fee payable to a related
party, the new management agreement (which changed the previous fee
of 2.5% of cash receipts to a fixed fee) and the disposition of the
227 East 45th Street property. General and administrative expenses
declined as a result of the loss of the 227 East 45th property and a
decrease in legal expenses. Depreciation expense increased due to
the depreciation of tenant improvements placed in service in the
prior year. Amortization expense increased due to the increase in
leasing commissions and the amortization of professional fees
associated with the mortgage refinancing.
The extraordinary gain was recognized because the outstanding
mortgage indebtedness encumbering the 227 East 45th Street property
exceeded the Partnership's carrying value of the disposed property.
As of September 30, 1996 and 1995, the current portfolio's occupancy
was 78% and 90%, respectively. During the first nine months of 1996,
the Operating Partnership signed new, renewal, extension, and
expansion leases with sixteen tenants totaling 75,297 square feet at
rental terms comparable to buildings of similar quality in the
market. This leasing activity only slightly offset the decline in
occupancy.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Three Months ended September 30, 1996 vs. September 30, 1995
The Partnership generated a net loss of approximately $4.9 million
for the three months ended September 30, 1996, as compared to a net
loss of approximately $3.9 million for the three months ended
September 30, 1995. The increase in net loss was due to a decrease
in revenues which exceeded a decrease in expenses.
Rental income decreased to approximately $10.3 million for the three
months ended September 30, 1996 as compared to approximately $13.1
million for the three months ended September 30, 1995. Rental income
was negatively impacted by the loss of the 227 East 45th property by
approximately $840,000 coupled with a decrease in rental revenues at
757 Third Avenue, 545 Fifth Avenue and 1372 Broadway for the three
months ended September 30, 1996, as compared to 1995. These
decreases were partially offset by an increase in rental income at
the Partnership's other Properties. The lower rental revenues were
primarily the result of lower effective rental rates and decreased
occupancy.
Total expenses for the three months ended September 30, 1996, as
compared to 1995, declined by $1,944,000 primarily as a result of
the 227 East 45th deed in lieu of foreclosure. The decreases in
overall operating expenses (i.e., real estate taxes, payroll,
utilities, repairs and maintenance) of approximately $912,000,
interest expense of $399,000, management fees of $517,000,
amortization expense of $35,000 and depreciation expense of
approximately $93,000 were slightly offset by an increase in general
and administrative expenses of $12,000.
Operating and interest expenses declined as a result of the loss of
227 East 45th property. Management fees declined as a result of the
elimination of the asset management fee payable to a related party,
the new management agreement (which changed the previous fee of 2.5%
of cash receipts to a fixed fee) and the disposition of the 227 East
45th Street property. General and administrative expenses,
amortization expense and depreciation expense remained relatively
constant.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8K:
On September 23, 1996, a current report on Form 8-K was filed
with respect to the Registrant's change of independent
auditors.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
BY: TWO WINTHROP PROPERTIES, INC.
MANAGING GENERAL PARTNER
BY: /s/ Michael L. Ashner
---------------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Edward V. Williams
---------------------------------
Edward V. Williams
Chief Financial Officer
DATED: November 18, 1996
15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from 1626
New York Associates Limited Partnership and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,126,000<F1>
<SECURITIES> 0
<RECEIVABLES> 1,008,000
<ALLOWANCES> (675,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 263,845,000
<DEPRECIATION> (129,392,000)
<TOTAL-ASSETS> 158,520,000
<CURRENT-LIABILITIES> 0
<BONDS> 268,048,000<F2>
0
0
<COMMON> 0
<OTHER-SE> (118,329,000)
<TOTAL-LIABILITY-AND-EQUITY> 158,520,000
<SALES> 0
<TOTAL-REVENUES> 32,715,000
<CGS> 0
<TOTAL-COSTS> 28,331,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,989,000
<INCOME-PRETAX> (12,943,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,943,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 13,688,000
<CHANGES> 0
<NET-INCOME> 745,000
<EPS-PRIMARY> 135.07
<EPS-DILUTED> 135.07
<FN>
<F1> Cash includes $8,792,000 of restricted cash.
<F2> Includes $247,893,000 to a related party.
</FN>
</TABLE>
