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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
Commission File
For the year ended December 31, 1996 Number 0-13500
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
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(exact name of Registrant as specified in its charter)
Massachusetts 04-2808184
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(State of organization) (IRS Employer Identification No.)
One International Place, Boston, Massachusetts 02110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 330-8600
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(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
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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. [ ]
(Cover Page Continued on next page)
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Cover Page 2 of 2
No market exists for the limited partnership interests of the registrant, and,
therefore, no aggregate market value can be computed.
Exhibit Index is located on Page ___
DOCUMENTS INCORPORATED BY REFERENCE
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PART I
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Item 1. Business.
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Organization
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1626 New York Associates Limited Partnership (the "Partnership") was
organized as a Massachusetts limited partnership under the Massachusetts
Uniform Limited Partnership Act on December 6, 1983, for the purpose of owning
a general partnership interest in, and serving as a general partner of,
Nineteen New York Properties Limited Partnership (the "Operating Partnership"),
a Massachusetts limited partnership. The Operating Partnership was organized
on December 6, 1983 for the purpose of acquiring a diversified portfolio of
nineteen commercial properties (the "Properties") located in New York City,
from the John D. and Catherine T. MacArthur Foundation.
The general partners of the Partnership (collectively, the "General
Partners") are Two Winthrop Properties, Inc., a Massachusetts corporation ("Two
Winthrop"), Winthrop Interim Partners I, A Limited Partnership, a Maryland
limited partnership ("WIPI") and Linnaeus-Lexington Associates Limited
Partnership, a Massachusetts limited partnership ("Linnaeus-Lexington"). Two
Winthrop is a wholly-owned subsidiary of First Winthrop Corporation ("First
Winthrop"), a Delaware corporation which in turn is wholly-owned by Winthrop
Financial Associates, A Limited Partnership ("WFA"), a Maryland limited
partnership. The general partners of WIPI are Two Winthrop and
Linnaeus-Phoenix Associates Limited Partnership, a Massachusetts limited
partnership ("Linnaeus-Phoenix"). See "Change in Control".
The Partnership was initially capitalized with contributions totaling
$2,500,019 from the General Partners. On October 13, 1984, the Partnership
completed a private placement of 1,344 units of limited partnership interest
(the "Units") at an aggregate purchase price of $336,000,000 pursuant to
Regulation D under the Securities Act of 1933.
Description of Business
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The business of the Partnership is investing as a general partner in the
Operating Partnership. The other general partner of the Operating Partnership
is First Winthrop. The limited partners of the Operating Partnership are WFA
and WFC Realty Co.,
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Inc. ("WFC"), a Massachusetts corporation which is a wholly-owned subsidiary of
First Winthrop.
The Properties
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In January 1984, the Operating Partnership acquired the Properties
consisting of: (1) seventeen commercial office buildings and the land
underlying such buildings located at 757 Third Avenue (the land was acquired in
May 1984), 410 Park Avenue, 535 Fifth Avenue, 545 Fifth Avenue, 61 Broadway,
1372 Broadway, 366 Madison Avenue, 1697 Broadway, 509 Fifth Avenue, 300 Park
Avenue South, 227 East 45th Street, 134 West 29th Street, 218-220 Fifth Avenue,
31-33-39 West 34th Street, 271 Church Street, 136-20 Roosevelt Avenue and 345
Adams Street; (2) the 15 Columbus Circle building and a leasehold interest in
the ground underlying such building; and (3) the ground underlying another
office building located at 450 Park Avenue.
The Operating Partnership financed the acquisition of the Properties
primarily through (a) the $336,000,000 raised from Limited Partners of the
Partnership, (b) the assumption of existing mortgage loans, and (c) the
placement of the $330,000,000 loan from General Electric Pension Trust
("GEPT"), which has been refinanced.
As of December 31, 1996, the remaining Properties in which the Operating
Partnership owned an interest consisted of six commercial buildings and the
land underlying them, including 757 Third Avenue, 535 Fifth Avenue, 545 Fifth
Avenue, 1372 Broadway, 509 Fifth Avenue and 300 Park Avenue South. From 1984
through 1992, the Operating Partnership sold seven of its properties and
exchanged two other properties for the land underlying The 15 Columbus Circle
Building, which land and building were subsequently transferred to GEPT
pursuant to a consensual bankruptcy plan in full satisfaction of the loan
encumbering the property. The Operating Partnership sold one additional
property in 1993 and conveyed its 227 East 45th Street property to a designee
of the lender by a deed in lieu of foreclosure in the first quarter of 1996.
The Operating Partnership currently is negotiating for the sale of 1372
Broadway. See "Property Matters"
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Property Matters
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A. Sales/Dispositions
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227 East 45th Street - During 1995, the Partnership concluded that the
debt securing the property was substantially greater than the value of the
property. As a result, on January 15, 1996 the Partnership and Sanwa Business
Credit Corporation ("Sanwa"), the lender holding the mortgage on the property,
agreed that in exchange for the delivery by the Partnership of a deed in lieu
of foreclosure to a designee of Sanwa, Sanwa would release the Partnership from
any liabilities or obligations associated with the mortgage loan on 227 East
45th Street and would release its second mortgage on the 509 Fifth Avenue
property for no additional consideration. The Operating Partnership
transferred title to the property to Sanwa on January 24, 1996. As required by
the terms of the January 15 agreement, Sanwa released the Operating
Partnership, as of the closing date, from all claims, demands, liabilities,
obligations, actions and causes of any kind with regard to the Sanwa loan,
other than the second mortgage on 509 Fifth Avenue, which second mortgage was
subsequently released. See "Item 8, Consolidated Financial Statements and
Supplementary Data, Note-5."
B. Loan Restructuring.
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The Fuji Loan - 535 Fifth Avenue, 545 Fifth Avenue, 1372 Broadway and 757
Third Avenue. Over the course of time, it became apparent to the Operating
Partnership and The Fuji Bank, Ltd. ("Fuji"), the holder of the mortgage debt
encumbering 535 and 545 Fifth Avenue, 1372 Broadway and 757 Third Avenue (the
"Fuji Properties"), that the reserves established to fund improvements and
operating deficits under the restructured Fuji loan would be exhausted, and the
Fuji loan would go into default, as early as 1996. Early in 1995, the
Operating Partnership began marketing for sale of 535-545 Fifth Avenue. A sale
at the price established by the General Partners would have accomplished,
among other goals, a reduction in the loan balance, a reduction in the monthly
drain on reserves and delay a default on the remaining loan balance until
1997. In April 1995, Fuji noted in a letter to the Partnership its belief
that the reserves would be depleted in early 1996. Over the following months,
the Operating Partnership continued to market 535-545 Fifth Avenue and also
began pursuing discussions with Fuji aimed at restructuring the debt to
continue to preserve the Partnership's interest in the
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remaining Fuji Properties. By September of 1995, the Operating Partnership had
not received interest at a price sufficient to conclude a sale of the property
and terminated its marketing efforts on 535-545 Fifth Avenue. At this point,
the Operating Partnership also evaluated a bankruptcy strategy; however,
restrictions in the applicable loan documents gave the Operating Partnership's
lenders effective control over substantially all of the Operating Partnership's
cash and cash flow, so that neither the Operating Partnership nor the
Partnership had sufficient reserves to fund a bankruptcy reorganization.
Based on its belief of an impending default on the Fuji loan, Fuji began
formally soliciting third-party offers for the loan in late September 1995.
Fuji's decision to sell the loan effectively put an end to further discussions
with Fuji regarding a restructuring of the loan. At that time, the loan had a
principal balance of approximately $207 million, plus accrued interest of
approximately $40 million. The Fuji loan accrued interest at fixed annual
interest rate of 9.69%, but required payments to be made at a rate of 6.5% per
annum (scheduled to increase to 7.5% on January 1, 1998). The Fuji loan was
scheduled to mature in January 2001.
Among other bidders, a venture comprised of Apollo Real Estate Advisors,
L.P. ("Apollo"), an affiliate of the General Partners, and Emmes Ventures, Inc.
("Emmes") submitted a proposal to purchase the Fuji loan. After a period of
negotiations, the Apollo/Emmes proposal to purchase the Fuji loan was accepted.
Zeus Property LLC ("Zeus"), a newly-organized limited liability company owned
by affiliates of Apollo and Emmes, purchased the loan for $115 million on
February 28, 1996. See "Change in Control" below.
In connection with its purchase of the Fuji loan, Zeus agreed to grant the
Operating Partnership certain concessions. The Operating Partnership obtained
a reduction in the current interest required to be paid under the modified loan
which, based on current projections, would 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. Zeus also arranged to provide the Operating
Partnership with additional financing of up to $19.5 million to be extended on
an unsecured, non-recourse basis to be used for capital improvements and tenant
lease-up costs to the Fuji Properties. The amount to be loaned and the costs
to be funded are each within the discretion of Zeus. At
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December 31, 1996, the Partnership had borrowed approximately $2,900,000 under
this credit line. As part of the restructuring of the Fuji loan, each Fuji
Property was conveyed by the Operating Partnership to separate newly-created
limited liability companies indirectly wholly-owned by the Operating
Partnership and its partners.
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 the absence of a substantial improvement in the commercial rental
market and the operation of the Fuji Properties, the Partnership is not
expected be able to meet its financial obligations on the Modified Loan beyond
March 15, 1998. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for information relating to the ability
of the Partnership to make distributions to its partners. The principal
benefit of the Modified Loan to the Operating Partnership is a substantial
reduction in current debt service requirements through February 1998. The only
current debt service payments required to be made under the Modified Loan for
this two-year period are the interest payments on the Secured A Notes.
Interest on all other components of the Modified Loan are payable to the extent
of available cash flow from the Fuji Properties and otherwise accrue until
sufficient cash flow is available for payment. On February 28, 1998, the
Secured A Notes are due and
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payable in full, unless extended at Zeus' option. In addition, a mandatory
prepayment of $25 million against the Secured B Notes is required to be made on
March 15, 1998, and the Fuji Properties will be required to meet a Value to
Loan test of 125% coverage. As a result of the modification, the likelihood of
a monetary default has been deferred from 1996 to 1998. Consequently, the
negative tax consequences associated with a foreclosure or other transfer of
the Fuji Properties is likely to be deferred for two years.
In exchange for this deferral, and for the credit facility of $19.5
million available for capital improvements and tenant leasing costs, the
Operating Partnership has agreed to modify certain of the remedy provisions
which would apply after a default. Essentially, these provisions have the
effect of facilitating and expediting a transfer of the Fuji Properties in the
event of a default. Further, the Modified Loan grants Zeus the right to
require a transfer of one or more of the Fuji Properties at any time after
March 15, 1998 or immediately in the event Zeus delivers to the Operating
Partnership a letter from an acceptable law firm to the effect that such
transfer will not result in any cancellation of indebtedness income to the
Operating Partnership. See "Subsequent Events" below for information with
respect to the possible sale of 1372 Broadway. As described below, the
Operating Partnership also consented to the replacement of Winthrop Management
as the managing and leasing agent for the properties and the appointment of new
third-party management and leasing agents. See "Property Management".
The Receivables Loan - 300 Park Avenue South and 509 Fifth Avenue. In
connection with the Modified Loan, certain affiliates of the General Partners
(collectively, the "Affiliates") entered into an agreement with the Operating
Partnership, the Partnership and an affiliate of Zeus with regard to amounts
owed to the Affiliates by the Operating Partnership and the Partnership (the
"Winthrop Debt Agreement"). Prior to the entering into of this agreement, the
Affiliates were owed in the aggregate approximately $46.6 million by the
Operating Partnership and the Partnership. This amount was comprised of cash
advances made to the Partnership and the Operating Partnership in order to fund
operating deficits and also includes accrued interest on outstanding balances
as well as unpaid deferred fees related to the on-site management of the
properties, asset management and syndication. Under the Winthrop Debt
Agreement, the Affiliates contributed approximately $36.6 million of the $46.6
million to the Operating Partnership. The
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remaining $10 million receivable was evidenced by a promissory note (the
"Receivables Note") issued by the Operating Partnership which is secured by a
pledge of the excess cash flow from 509 Fifth Avenue and 300 Park Avenue South
and is payable only from those properties. See "The Dime Loan" below. The
Receivables Note was then sold to an affiliated of Zeus for a payment of
$6,000,000. 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 Loan.
Interest, to the extent it cannot be paid currently, accrues until the maturity
of the Receivables Note on July 31, 1997.
The Dime Loan - 300 Park Avenue South and 509 Fifth Avenue. With respect
to 509 Fifth Avenue, the loan made by Dime was in the original principal amount
of $8,000,000. This loan bears interest at a rate of 9.375% per annum, is
being amortized over a 25-year period, matures on August 24, 1997 and had an
outstanding principal balance of $7,289,000 at December 31, 1996. In June
1992, the Operating Partnership discontinued making its debt service payments
on the mortgage loan with respect to 300 Park Avenue South. The lender, Dime,
served the Operating Partnership with a notice of default in June 1992 and
accelerated the payments due under the mortgage loan in August 1992. A
$650,000 certificate of deposit was pledged as partial security for the 300
Park Avenue South mortgage. This collateral interest was taken by Dime in
September, 1992 as a result of the Operating Partnership's default. Although
Dime initiated foreclosure proceedings, it continued to engage in discussions
with the Operating Partnership to restructure the Dime Loan as it relates to
300 Park Avenue South and on January 20, 1993 an agreement was reached to
restructure the Dime Loan based on the terms described below. At present, the
Partnership is attempting to refinance or restructure the Dime loan. There can
be no assurance, however, that the Dime loan can be refinanced or restructured
on favorable terms or at all.
The Dime Loan balance with respect to 300 Park Avenue South (after taking
into account the application of the $650,000 reserve referred to above)
remained at $11,882,140 and the loan maturity date was extended from August 31,
1997 to December 31, 1997, with the Operating Partnership having an option to
extend the term an additional four years. This option may be exercised by the
Operating Partnership if no event of default exists and if one of the following
two conditions are met:
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(i) The Dime Loan balance is no greater than 80% of the appraised value
of 300 Park Avenue South as of December 31, 1997; or
(ii) A guaranty of debt service payments up to a maximum amount of
$1,750,000 from a viable entity (as determined by Dime) or a $1,750,000 letter
of credit is provided to Dime.
The interest rate of 9.5% and pay rate of interest only plus amortization
payments (based on a 30-year amortization) are reduced as follows:
Period Interest Rate Pay Rate
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5/01/92 - 12/31/92 0% 0%
1/01/93 - 12/31/95 8% 6%
1/01/96 - 12/31/97 8% 8%
The percentages shown are based on a percentage of the $11,882,140 loan
balance and the difference between the pay rate and the interest rate will
accrue without interest. If the Dime Loan is extended as discussed above, the
interest rate will equal the four-year U.S. Treasury Note rate plus 2% with
payments adequate to amortize the principal amount over 25 years, with total
unpaid principal and interest due and payable on December 31, 2001.
Reserves of $1,625,000 were established at closing and consisted of (i)
$84,749 net cash flow provided by this Property's operations since the default
on the Dime Loan and (ii) $1,540,251 funded by the Operating Partnership from
the proceeds of a loan made by WFA to the Operating Partnership (collectively,
the "Dime Reserves"). At closing, $163,974 of the Dime Reserves were applied
to pay for closing costs. Subsequent to closing and through December 31, 1995,
the Dime Reserves could have been used to fund capital improvements, tenant
improvements and leasing commissions (the "Dime Property Capital Expenditures")
to the extent net income after debt service is not sufficient. From January
1, 1996 through maturity, the Dime Reserves may be used to pay Dime Property
Capital Expenditures and debt service to the extent that net income is not
sufficient. Dime has a security interest in the Dime Reserves and other
operating accounts of the Operating Partnership with respect to 300 Park Avenue
South. Upon repayment in full of the Dime Loan, any remaining Dime
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Reserves may be retained by the Operating Partnership. As of December 31,
1995, all of the Dime Reserves had been spent.
The Dime Loan plus accrued interest will become due in full at maturity or
upon a refinancing or sale of 300 Park Avenue South. See "Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations" for a
discussion of the Operating Partnership's ability to satisfy the Dime Loan at
maturity. Any remaining proceeds after repayment of the Dime Loan will be
retained by the Operating Partnership. The Operating Partnership may also
retain any monthly net cash flow (defined as revenue less operating expenses,
debt service and capital expenditures), if, among other things, (i) 300 Park
Avenue South has adequate funds to pay the following month's debt service and
operating expenses, and (ii) 300 Park Avenue South is 80% occupied or the Dime
Reserve has adequate funds to pay for leasing commissions and tenant
improvements to reach 80% occupancy. However, it is anticipated that any
excess cash flow will needed to make payments on the Receivables Loan. See
"The Receivables Loan" above. During 1994 the Operating Partnership retained
$346,701 of such cash flow, which was applied to the Winthrop Loan. No cash
flow amounts were applied to the Winthrop Loan in 1995 or 1996.
The Operating Partnership and WFA had provided Dime with a guaranty of the
payment of Dime's debt service from January 1, 1993 through December 31, 1995
to the extent net income is not sufficient, up to a total liability of
$1,250,000. No payments were required under this guaranty.
C. Subsequent Events
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1372 Broadway - In March 1997, Zeus informed the Partnership that it was
exercising its rights under the Modified Loan to cause the Operating
Partnership to sell 1372 Broadway to an unaffiliated third party. The
Partnership has been advised that the letter required to be delivered from an
acceptable law firm that provides that such a sale will not result in any
cancellation of indebtedness income to the Partnership will be forwarded
shortly. The Partnership, Zeus and the purchaser are negotiating a Purchase
and Sale contract for the property. There can be no assurance, however, that
the required letter will be delivered or that a mutually acceptable Purchase
and Sale Agreement will be negotiated. In the event the property is sold,
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all of the proceeds from such sale will be required to be used to partially
satisfy the Modified Loan.
Deferred Purchase Price
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In connection with the acquisition of the Properties, the Operating
Partnership agreed to make deferred payments to the seller in future years
equal to 6% of the gross proceeds of certain refinancings, sales or transfers
of any of the Properties or equal to the fair market value of any Properties
not disposed of by January 18, 2006. At the time of the acquisition of the
Properties, the Operating Partnership estimated this liability at $25,296,177
based on the cash portion of the purchase price paid at that time. In
connection with the various refinancings and sales which have occurred in 1990,
as well as the payments of $22,705,703 already made to the seller as a Deferred
Purchase Price, the total liability is now estimated to be $1,497,612.
Winthrop Funding
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In 1985, the Partnership obtained a 99.99% interest in Winthrop Funding
for $99.99 and also contributed to Winthrop Funding the final installment of
the Investor Notes in the aggregate amount of $42,998,592. Winthrop Funding
issued zero coupon bonds in the face amount of $40,850,000 at a discount of
$21,367,818 with the final installment of the Investor Notes pledged as
collateral. As of March 1992, Winthrop Funding collected the entire amount of
the last installment of the Investor Notes except for $68,542 which remains
outstanding as of December 31, 1996. As of May 1992, Winthrop Funding paid the
entire face amount of the zero coupon bonds to the bondholders.
Employees
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As of December 31, 1996, the Partnership did not have any employees.
Services are generally performed for the Partnership by the General Partners
and their affiliates and agents retained by them. Other services are performed
for the Operating Partnership by affiliates and agents retained by the
Operating Partnership.
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Property Management
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From 1985 until March 1996, Winthrop Management (a Massachusetts general
partnership and an affiliate of WFA) or its affiliates performed the day to day
management services for the Properties, including preparation of operating
budgets, collection of rents, repairs and maintenance, advertising,
maintenance of records, maintenance of insurance and financial reporting. See
Item 13, "Certain Relationships and Related Transactions."
As part of the sale and restructuring of the Fuji loan, the Operating
Partnership agreed to retain new management and leasing agents for all of its
properties. On March 1, 1996, the Operating Partnership's properties began
being managed by Axiom Real Estate Management, Inc. (an affiliate of Grubb &
Ellis Company) and leasing activity will be performed by the Galbreath
Company, Newmark & Co. and Koll Company. These firms are neither affiliated
with WFA nor Apollo, Emmes or Zeus, except that Apollo is a minority
stockholder of Koll. The terms of these contracts are at market rates. The
Operating Partnership is not permitted to change the management agent or
leasing agents unless these parties are in default of their obligations under
their respective agreements and the Operating Partnership shall have submitted
to Zeus a suitable replacement candidate(s), acceptable to Zeus. One effect of
this is to terminate the payment of all management or leasing fees to the
General Partners and their affiliates by the Operating Partnership, the
Partnership or the properties. The Partnership will receive from the
Properties up to $240,000 as reimbursement for Partnership expenses.
Insurance
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The Partnership maintains property and liability insurance on the
Properties which it believes to be adequate.
Change in Control
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Until December 22, 1994, the sole general partner of Linnaeus Associates
Limited Partnership ("Linnaeus"), which was the sole general partner of WFA,
was Arthur J. Halleran, Jr. On December 22, 1994, the general partnership
interest in Linnaeus was transferred to W.L. Realty, L.P. ("W.L. Realty")
pursuant to an Investment Agreement entered into among Nomura Asset Capital
Corporation ("NACC"), Mr. Halleran and certain other individuals
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who comprised the then senior management of WFA. W.L. Realty is a Delaware
limited partnership, the general partner of which was, until July 18, 1995,
A.I. Realty Company, LLC ("Realtyco"), an entity owned by certain employees of
NACC. On July 18, 1995 Londonderry Acquisition II Limited Partnership
("Londonderry II"), a Delaware limited partnership, and affiliate of Apollo
Real Estate Advisors, L.P. ("Apollo"), acquired, among other things, Realtyco's
general partner interest in W.L. Realty and a sixty four percent (64%) limited
partnership interest in W.L. Realty and WFA acquired the general partner
interest in Linneaus-Lexigton.
As a result of the foregoing acquisitions, Londonderry II is the sole
general partner of W.L. Realty, which is the sole general partner of Linnaeus
and, which in turn is the sole general partner of WFA. As a result of the
foregoing, effective July 18, 1995,
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Londonderry II, an affiliate of Apollo, became the controlling entity of Two
Winthrop and WIPI. In connection with the transfer of control, the officers
and directors of Two Winthrop and WIPI resigned and Londonderry II appointed
new officers and directors. See Item 10, "Directors and Executive Officers of
Registrant."
Item 2. Properties.
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The Partnership does not own any interest in real property other than its
general partnership interest in the Operating Partnership. The Operating
Partnership does not own any interests in real property other than the
Properties, which are described under the caption "The Properties" in Item 1
above and below.
757 Third Avenue. The property consists of a 27-story office building
containing approximately 468,327 rentable square feet of space and
approximately 24,567 square feet of land. The property is located at the
northeast corner of Third Avenue and East Forty-Seventh Street in midtown
Manhattan and is used principally by telecommunications, law, financial and
retail firms. Planned capital improvements at the property include cooling
tower upgrade and tenant improvements.
MCI Telecommunications, a telecommunications company, leases
approximately 71,064 square feet (15% of the total space). The
lease expires on March 31, 1997 and the total annualized rent
payable by MCI was $2,379,416, for the year ended December 31,
1996. The tenant has two individual 5-year options to renew.
The Partnership has been informed that MCI will be vacating its
space upon expiration of its initial lease term.
Instinet, a computer trading firm, leased approximately
48,311 square feet (10% of total space) in 1996. Instinet has
extended the lease as to 31,000 square feet for a period to
expire July 31, 1998. The total annualized rent paid by Instinet
for the year ended December 31, 1996 was $1,532,341.
At present, leases are currently being negotiated that, if entered into,
would cover all of the space vacated by MCI and Instinet. There can be no
assurance, however, that such leases will be entered into.
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The following table sets forth the occupancy rates for the last five years
and the associated gross rental per square foot amount, as footnoted.
Percentage Average Annual Total
Occupancy Gross Rental Per SF
Year Rate(l) of Occupied Space (2)
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1992 92% 46.59
1993 94% 42.52
1994 95% 42.93
1995 98% 38.34
1996 87% 34.66
(1) Occupancy rates are based on December 31 of indicated year and are not
yearly averages.
(2) Calculated using operating revenues, including rent escalations and
other revenues, for the entire year divided by the total square footage
of occupied space (based on the occupancy rates reported in this table).
The following table sets forth certain information concerning lease
expirations (assuming no renewals for this property for the period from January
1, 1997 through December 31, 2006).
Number of Aggregate SF Annualized Percentage
Tenants Whose Covered by Rental for of Total
Leases Expiring Leases Annualized
Expire Leases Expiring Rental (1)
------ ------ -------- ----------
1997 4 111,172 $ 3,944,575 31%
1998 6 40,607 1,364,510 11%
1999 4 41,411 1,782,382 14%
2000 3 12,395 359,742 3%
2001 4 12,499 461,406 4%
2002 4 51,760 2,217,749 17%
2003 5 22,716 952,376 7%
2004 0 0 0 0%
2005 1 11,740 359,332 3%
2006 2 76,994 1,184,472 9%
(1) Based on actual base rent plus increase from various escalation provisions
as of December 31, 1996.
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535 Fifth Avenue. The property consists of a 36-story multi-
tenant building containing approximately 292,266 rentable square
feet of space and approximately 16,545 square feet of land. The
property is located on the northeast corner of Fifth Avenue and
East 44th Street. The space is principally leased by personnel,
law, banking, retail and accounting firms. Planned capital
improvements at the property include base building work and
facade upgrade.
The Chase Manhattan Bank, a financial institution, has a
lease for 31,300 square feet (10.7% of the total space). This
lease expires on January 31, 2005, and the total annualized rent
payable by Chase was $1,000,000, for the year ended December 31,
1996. The tenant does not have an option to renew.
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The following table sets forth the occupancy rates for the
last five years and the associated gross rental per square foot
amount, as footnoted.
Percentage Average Annual Total
Occupancy Gross Rental Per SF
Year Rate(1) of Occupied Space (2)
---- --------- ---------------------
1992 66% 36.30
1993 66% 31.75
1994 73% 29.14
1995 79% 28.87
1996 89% 25.60
(1) Occupancy rates are based on December 31 of indicated year and are not
yearly averages.
(2) Calculated using operating revenues, including rent escalations and
other revenues, for the entire year divided by the total square footage
of occupied space (based on the occupancy rates reported in this
table).
The following table sets forth certain information concerning lease
expirations (assuming no renewals for this property for the period from January
1, 1997 through December 31, 2006).
Number of Aggregate SF Annualized Percentage
Tenants Whose Covered by Rental for of Total
Leases Expiring Leases Annualized
Expire Leases Expiring (1) Rental (1)
------ ------ ------------ ----------
1997 5 15,521 $ 496,220 7%
1998 3 2,304 59,157 1%
1999 7 11,163 303,176 4%
2000 4 33,193 939,720 13%
2001 2 2,427 63,096 1%
2002 3 7,775 187,699 3%
2003 3 23,227 648,762 9%
2004 3 8,035 182,690 3%
2005 7 47,204 1,572,664 22%
2006 2 8,094 201,100 3%
(1) Based on actual base rent plus increases from various
escalation provisions as of December 31, 1996.
17
<PAGE>
1372 Broadway. The property consists of 12- and 21-story sections in a
multi-tenant building containing approximately 542,364 rentable square feet of
space and 29,040 square feet of land. The property is located on the northeast
corner of Broadway and 37th Street is in the New York City garment district
and is principally leased by garment, banking, and retail firms. Planned
capital improvements at the property include base building work and elevator
modernization.
Capital-Mercury Shirt Corporation, an apparel manufacturer, leases 64,122
square feet (11.8% of total space). The lease expires on July 31, 2005 and the
total annualized rent payable by Capital-Mercury was $1,173,700 for the year
ended December 31, 1996. The tenant does not have an option to renew.
NationsBank, a financial institution, leases 55,232 square feet (10.2% of
total space). The bank's lease expires on July 31, 2000 and the total rent
paid by the bank was $1,235,788, for the year ended December 31, 1996. The
tenant has a 10-year renewal option.
Ann Taylor, a women's clothing company, leases 58,983 square feet (10.9%
of the total space). Ann Taylor's lease expires July 31, 2010 and the total
rent paid by the clothing company for the year ended December 31, 1996 was
$1,169,124. There are no options to renew under this lease.
The following table sets forth the occupancy rates for the last five years
and the associated gross rental per square foot amount, as footnoted.
18
<PAGE>
Percentage Average Annual Total
Occupancy Gross Rental Per SF
Year Rate(1) of Occupied Space (2)
---- --------- ---------------------
1992 89% $21.27
1993 96% 20.85
1994 93% 21.32
1995 96% 23.83
1996 89% 19.76
(1) Occupancy rates are based on December 31 of indicated year and are not
yearly averages.
(2) Calculated using operating revenues, including rent escalations and
other revenues, for the entire year divided by the total square footage
of occupied space (based on the occupancy rates reported in this table).
The following table sets forth certain information concerning lease
expirations (assuming no renewals for this property for the period from January
1, 1997 through December 31, 2006).
Number of Aggregate SF Annualized Percentage
Tenants Whose Covered by Rental for of Total
Leases Expiring Leases Annualized
Expire Leases Expiring(1) Rental (1)
------ ------ ----------- ----------
1997 0 0 $ 0 0
1998 2 2,847 83,332 1%
1999 4 4,770 79,778 1%
2000 3 74,847 1,938,215 18%
2001 0 0 0 0%
2002 6 56,138 504,463 5%
2003 1 20,500 426,916 4%
2004 0 0 0 0%
2005 2 99,402 1,874,840 17%
2006 2 7,527 446,520 4%
(1) Based on actual base rent plus increase from various escalation
provisions as of December 31, 1996.
545 Fifth Avenue. The property consists of a 13-story multi-tenant building
containing 173,878 rentable square feet of space and approximately 12,575
square feet of land. The property is located on the southeast corner of Fifth
Avenue and East 45th Street. The space is principally leased by post
production, communication and retail firms. Planned capital improvements at
19
<PAGE>
the property include base building work. The property's book value and gross
revenues contribute less than 10 percent to the total assets and revenue of the
registrant and its consolidated subsidiaries.
509 Fifth Avenue. The property consists of a 12-story building containing
53,800 rentable square feet of space and 4,625 square feet of land. The
property is located between East 42nd and 43rd streets in midtown Manhattan.
The space is used by banking and retail businesses. The property's book value
and gross revenues contribute less than 10 percent to the total assets and
revenue of the registrant and its consolidated subsidiaries. Planned capital
improvements at the property include elevator cab rehabilitation.
300 Park Avenue South. The property consists of a 14-story multi-tenant office
building containing approximately 176,895 rentable square feet of space and
11,406 square feet of land. The property is located on the northeast corner of
Park Avenue South and East 22nd in the Gramercy Park area of Manhattan. The
space is used by a variety of businesses, including, publishing, personnel and
modeling agencies. The property's book value and gross revenues contribute
less than 10 percent to the total assets and revenue of the registrant and its
consolidated subsidiaries. Planned capital improvements at the property
include sidewalk restoration.
Item 3. Legal Proceedings.
To the best of the General Partners' knowledge, as of December 31, 1996,
there are no material pending legal proceedings to which the Partnership or the
Operating Partnership is a party or to which any of their properties are
subject.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period
covered by this report.
20
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
There is no public trading market for the Units of limited partnership
interest in the Partnership. Trading is infrequent and occurs only through
private transactions. Furthermore, transfers of Units are subject to
significant limitations contained in the Partnership's partnership agreement
including a requirement that the General Partners consent to the transfer,
which consent may be granted or withheld in the sole discretion of the General
Partners. A copy of the Partnership's partnership agreement (the "Partnership
Agreement") was filed as Exhibit 3 to the Registration Statement.
As of March 1, 1997, there were 1,181 holders of 1,339 Units.
The Partnership Agreement provides that Cash Flow (as defined therein)
will be distributed to the partners in specified proportions at reasonable
intervals during the fiscal year, but in any event no less often than 90 days
after the close of each fiscal year. There are no restrictions under the
Partnership Agreement on the Partnership's present or future ability to make
distributions of cash flow. The Partnership, at the sole discretion of the
General Partners, may retain all or any portion of the Partnership's net
distributable cash flow to the extent deemed necessary to cover anticipated
expenses and to provide reserves for unexpected future property and Partnership
financial needs. Cash flow distributed to partners will be net of any such
amounts so retained. The Partnership did not make any cash distributions in
1996, 1995 or 1994. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for information with respect to
the Partnership's ability to make distributions in the future.
21
<PAGE>
Item 6. Selected Financial Data.
The following represents selected financial data for Registrant for the
years ended December 31, 1996, 1995, 1994, 1993 and 1992. The data should be
read in conjunction with the financial statements included elsewhere herein.
This data is not covered by the independent auditors' report.
For the Year Ended December 31,
-------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands except per unit data)
Total Revenues $ 45,403 $ 49,525 $ 50,227 $ 53,373 $ 65,587
Total Expenses 64,531 88,733 63,858 68,436 94,781
Loss Before Gain(Loss)
on Sales (19,128) (39,208) (13,631) (15,063) (29,094)
Gain(Loss) on Sale of
Properties/Interest
in Joint Venture -- -- -- 1,403 (2,826)
Net Loss Before
Extraordinary Gain (19,128) (39,208) (13,631) (13,660) (31,920)
Extraordinary Gain 14,419 -- -- 40,091 --
Net Income (Loss) $ (4,709) $ (39,208) $ (13,631) $ 26,431 $ (31,920)
======== ========= ========= ========= =========
Net (Loss) Income
per Unit of
Limited Partnership
Outstanding $ (5,740) $ (27,747) $ (9,997) $ 17,731 $ (22,682)
Total Assets 163,647 178,713 214,670 223,715 283,083
Total Liabilities (1) 287,429 334,948 331,697 337,854 423,653
Investment in Joint
Ventures Total
Deficit (2) $123,782 $ 156,235 $(117,027) $(114,139) $(140,570)
- -------------
(1) Total Liabilities includes long-term debt net of unamortized discount of
$320,415,000, $252,658,000, $251,641,000, $250,681,000 and $224,342,000
for the years 1992, 1993, 1994, 1995 and 1996 respectively.
(2) Does not include receivables represented by Investor Note installments
totaling $68,542 at December 31, 1992, 1993, 1994, 1995 and 1996. Such
installments are credited to capital upon actual receipt.
22
<PAGE>
Item 7. 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 "Partnership"). All of the
Partnership's six remaining properties (the "Properties") are office
buildings located in New York City. The Registrant's sole source of
revenue is from distributions from the Partnership and interest income
on cash reserves. The Registrant is responsible for its operating
expenses. The Partnership receives rental revenue from tenants and is
responsible for operating expenses, administrative expenses, capital
improvements and debt service payments.
The Registrant and the Partnership had $125,000 of cash and cash
equivalents and $9,406,000 of restricted cash at December 31, 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 $142,000 decrease in cash
and cash equivalents at December 31, 1996, as compared to December 31,
1995, was due to $8,412,000 of cash used in investing activities and
$4,861,000 of cash used in operating activities, which were
substantially offset by $13,131,000 of cash provided by financing
activities. Cash used in investing activities consisted primarily of
$7,549,000 of improvements to real estate, the majority of which were
building improvements. Cash provided by financing activities consisted
of the accrual of $11,138,000 of interest on mortgage notes payable,
$2,892,000 in borrowings against the unsecured line of credit, and
$786,000 of accrued and unpaid interest on the Receivables Note. In
addition, Registrant used $1,829,000 of cash provided by financing
activities for principal payments on mortgage notes to affiliates. All
other increases (decreases) in certain assets and liabilities are the
result of the timing of receipt and payment of various activities.
The Partnership's only other source of liquidity is a $19,550,000
unsecured credit line provided by Zeus. This credit line can be used
by the 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 Partnership may not be able to borrow against this
credit line each time it deems it necessary. As of December 31, 1996,
the outstanding borrowings against the unsecured credit line were
$2,892,000.
On February 28, 1996, Zeus purchased the existing debt held by Fuji
for $115 million. See Item 1, AProperty Matters" and Item 8,
AConsolidated Financial Statements and Supplementary Data", Notes 3
and 4, for a description of the terms and conditions of the current
loans encumbering Registrant's Properties. The Registrant has maturing
mortgage debt, totaling approximately $29,000,000 plus accrued
interest due in 1997, approximately $103,000,000 due February 28, 1998
and a $25,000,000 mandatory principal payment due March 15, 1998. The
Registrant is attempting to refinance or restructure the 1997
liabilities. However, based on the current value of the Properties it
is highly unlikely the Registrant will be able to meet its 1998
obligations. Accordingly, it appears there is a substantial likelihood
that some or all of the Properties will be lost through foreclosure in
1998. This raises substantial doubt about the Partnerships' ability to
continue as a going concern.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
It appears that the Registrant's original objective of capital
appreciation will not be achieved and the Registrant's partners will
not receive a return of their original investment.
In January 1996, the Partnership transferred the title to the property
located at 227 East 45th Street to Sanwa Business Credit Corporation
("Sanwa") pursuant to a deed in lieu of foreclosure. In exchange,
Sanwa released, as of the closing date, the Partnership from all
claims, demands, liabilities, obligations, actions and causes of any
kind with regards to Sanwa. As a result of the above described
transactions, the Partnership recognized an extraordinary gain on the
transfer of 227 East 45th Street of $14,419,000 in 1996.
As part of the debt restructuring process, the Partnership reviewed
the Properties to determine 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
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 Registrant.
Results of Operations
1996 compared to 1995
The Registrant generated a net loss before extraordinary gain of
approximately $19.1 million for the year ended December 31, 1996, as
compared to a net loss of approximately $39.2 million for the year
ended December 31, 1995. The decrease in net loss was due to the loss
due to permanent impairment recorded in 1995.
Base rent and rent escalations (collectively "rental income")
decreased to approximately $44.8 million for the year ended December
31, 1996 as compared to approximately $48.6 million for the year ended
December 31, 1995. Rental income was negatively impacted by the loss
of the 227 East 45th property by $3,125,000, coupled with a decrease
in rental income at 757 Third Avenue and 1372 Broadway of $1,992,000
and $1,236,000, respectively, for the year ended December 31, 1996, as
compared to 1995.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
These decreases were partially offset by an increase in rental income
at 535 Fifth Avenue of $1,075,000. The lower rental revenues were
primarily the result of lower effective rental rates and decreased
occupancy. Rental income at the other properties remained relatively
constant.
Expenses, before loss for permanent impairment of 22.5 million, for
the year ended December 31, 1996, as compared to 1995, declined by
approximately $1,702,000 partially as a result of the loss of
Registrant's 227 East 45th Street property. The decreases in overall
operating expenses (i.e., real estate and other taxes, payroll,
utilities, repairs and maintenance, and cleaning and security) of
$2,019,000, asset and property management fees of $1,102,000 and
depreciation and amortization expense of approximately $1,680,000,
were only partially offset by an increase in interest expense of
$3,633,000.
Operating expenses declined as a result of Registrant's 227 East 45th
Street deed in lieu of foreclosure. Asset and property 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 Registrant's 227 East 45th Street property.
Depreciation and amortization expenses declined due to the recorded
loss on permanent impairment recorded on Registrant's properties.
The extraordinary gain was recognized on the transfer of Registrant's
227 East 45th Street property. The recorded amount of all of the
obligations associated with the property was $25,140,000, which
exceeded the net book value of assets and liabilities of the property
by $14,419,000.
As of December 31, 1996 and 1995, the current portfolio's occupancy
was 84% and 89%, respectively. For the year ended December 31, 1996,
the Partnership signed new, renewal, extension, and expansion leases
totaling 143,000 square feet at rental terms comparable to buildings
of similar quality in the market. This leasing activity only slightly
offset the decline in occupancy.
1995 compared to 1994
The Registrant's total revenues decreased $703,000 or 1.4% for the
period ended December 31, 1995 as compared to December 31, 1994 from
$50,227,000 in 1994 to $49,524,000 in 1995. Increases in base rental
income of $1,537,000 and rental escalations of $282,000 in 1995 as
compared to 1994 were more than offset by a decrease in other income
of $2,521,000 in 1995 as compared to 1994.
Total expenses of the Partnership increased $24,874,000 in 1995 as
compared to 1994 from $63,858,000 in 1994 to $88,732,000 in 1995. The
major component of the increase in total expenses was the
Partnership's writing down its investment in the Properties by
$22,500,000 as a result of management determining that future cash
flows would not enable the Partnership to recover its investment.
Management considered various factors, which included the recessionary
effects on commercial real estate markets, current and future expected
occupancy rates and prospects for leasing at rates sufficient to
support the existing carrying value of the properties.
Additionally, interest expense increased by $2,453,000 in 1995 as
compared to 1994, as a result of compounding of the interest on debt
balances. The remaining decrease in operating expenses was $79,000 or
.1% in 1995 as compared to 1994. Significant capital expenditures in
1995 included elevator rehabilitation, work chiller replacement and
tenant improvements.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Operating results at each of the properties were as follows:
1372 Broadway
Total revenues for the Property in 1995 increased by 11.7% or
$1,289,000 for the period ended December 31, 1995 as compared to
December 31, 1994. The increase in rental revenues resulted from
occupancy increasing from 84% at December 31, 1994 to 96% at December
31, 1995 while average rental rates moved from $21.32 per square foot
in 1994 to $23.83 per square foot in 1995.
Additional revenue increases of 13.2% were recognized in tenant
reimbursements which increased by $301,000 from $2,286,000 in 1994 to
$2,587,000 in 1995.
Total Operating expenses and real estate taxes increased by $407,000
from $5,358,000 in 1994 to $5,765,000 in 1995. Significant increases
were recognized in real estate tax expense ($427,000) while the
remaining expenditure changes related to a $20,000 savings in 1995.
Capital expenditures decreased from $3,332,000 in 1994 to $1,671,000
in 1995. The decrease was the result of the 1994 including significant
leasing activity and tenant improvement outlays.
757 Third Avenue
Total revenues for the Property in 1995 decreased by 5.2% or 985,000
as compared to 1994 from $18,849,000 to $17,864,000. The decrease in
revenues is the result of a decline in average rental rates. Average
rental rates decreased in 1995 to $38.34 per square foot from $42.93
per square foot in 1994. The decline in rental rates was partially
offset by increased occupancy which was 98% at December 31, 1995
compared to 95% at December 31, 1994. Additional revenue decreases
were recognized in interest and other income.
Operating expenses and real estate taxes increased by 1.5% to
$9,048,000 in 1995 from $8,916,000 in 1994. Increases in
most expense categories netted to cost of living adjustments.
Capital expenditures, including building improvements, tenant
improvements and leasing commission amounted to $2,325,000 in 1995
versus $1,484,000 in 1994. Significant expenditures in 1995 were
$1,300,000 for a chiller replacement and $152,000 for caulking of the
exterior facade.
535 Fifth Avenue
Total revenues for the Property in 1995 increased by 6.9% from
$6,200,000 in 1994 to $6,629,000 in 1995. Increased rental revenues of
approximately $452,000 resulted from occupancy increasing from 73% at
December 31, 1994 to 79% at December 31, 1995 while average rental
rates moved from $29.14 per square foot in 1994 to $28.87 per square
foot in 1995.
Total operating expenses and real estate taxes decreased by $31,000 or
.5% from $4,829,000 in 1994 to $4,798,000 in 1995. A decrease in real
estate tax expense of $220,000 was partially offset by an increase in
utility charges of $179,000.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Capital expenditures for 1994 and 1995 amounted to $4,162,000 and
$2,742,000, respectively, or a decrease of $1,420,000 primarily as a
result of decreased tenant-improvement costs in 1995. The buildout
costs in 1994 resulted in the increased 1995 occupancy.
545 Fifth Avenue
As a result of stable occupancy, total revenues for the Property in
1995 of $3,432,000 were almost identical to the 1994 total revenue
amount of $3,430,000.
Operating expenses and real estate taxes increased by $79,000 or 3%
from $2,865,000 in 1994 to $2,944,000 in 1995. The increase in
expenses were primarily in utilities of approximately $146,000 and
legal expenses of approximately $125,000. These increases were
partially offset by savings in administrative expenses of $32,000 and
real estate taxes of $134,000.
Capital expenditures decreased from $3,397,000 in 1994 to $1,719,000
in 1995 primarily as a result of decreased building common area
improvement expenditures.
300 Park Avenue South
Total revenues for the Property increased in 1995 by 14.2% from
$3,428,000 in 1994 to $3,927,000 in 1995. Rental revenues increased as
a result of increases in existing tenants rent and one new lease at
the end of 1994, with occupancy being 97% at December 31, 1994 and
December 31, 1995.
Operating expenses and real estate taxes increased by 5.4% in 1995 as
compared to 1994 from $2,220,000 in 1994 to $2,340,000 in 1995. The
increase is a result of higher repairs and maintenance expenses
primarily in plumbing repairs of $55,000, as well as utilities charges
increasing by approximately $99,000.
Capital expenditures decreased in 1995 from $1,559,000 in 1994 to
$599,000 in 1995 with the significant decrease coming from decreased
tenant buildout costs. The tenant buildout expenditures in 1994
benefited the property revenues in 1995.
227 East 45th Street
Total revenues at the property decreased by $587,000 or 15% in 1995 as
compared to 1994. The decrease in total revenues was the result of
lower base rental charges in 1995 of approximately $321,000 and
reduced porter wage escalation income in 1995 of $289,000.
Total operating expenses decreased from $2,348,000 in 1994 to
$2,240,000 in 1995 or 4.6%. Capital expenditures at the property
were minimal in both 1994 and 1995.
As a result of the declining operating results at the property the
Partnership reached a deed in lieu of foreclosure agreement with the
lender on January 4, 1996 (see "Item 1, Business-Sales/Dispositions"
for further details).
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
509 Fifth Avenue
Total revenue at the Property decreased by $46,000 or by 2.2% in 1995
as compared to 1994 from $2,118,000 in 1994 to $2,072,000 in 1995. The
decrease in revenues is attributed to lower retail rental income of
approximately $96,000 which was primarily offset by increased
escalation charges of approximately $52,000.
Total operating expenses increased from $932,000 in 1994 to
$982,000 in 1995 or a 5.4% increase. This increase is primarily the
result of higher real estate tax expense of $47,000 in 1995.
<PAGE>
Item 8. Financial Statements and Supplementary Data
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
INDEX
Page
----
Independent Auditors' Reports........................................ F - 2
Consolidated Financial Statements:
Balance Sheets as of December 31, 1996 and 1995...................... F - 4
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994................................... F - 6
Statements of Changes in Partners' Deficit for the Years Ended
December 31, 1996, 1995 and 1994................................... F - 7
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994................................... F - 8
Notes to Consolidated Financial Statements........................... F - 9
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation at December 31, 1996
Financial statement schedules not included have been omitted because of the
absence of conditions under which they are required or because the information
is included elsewhere in the consolidated financial statements.
F - 1
<PAGE>
Independent Auditors' Report
To the Partners
1626 New York Associates Limited Partnership:
We have audited the accompanying consolidated balance sheet of 1626 New York
Associates Limited Partnership, (a Massachusetts limited partnership) and
subsidiaries (the "Partnership") as of December 31, 1996, and the related
consolidated statements of operations, changes in partners' deficit and cash
flows for the year then ended. Our audit also included the consolidated
financial statement schedule supplied pursuant to Item 14(a)(2). These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Partnership has balloon payments
totaling in excess of $29,000,000 due during 1997 and approximately $128,000,000
due in early 1998. The inability of the Partnership to meet these obligations
raises substantial doubt about the Partnership's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of 1626
New York Associates Limited Partnership and subsidiaries as of December 31,
1996, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ Imowitz Koenig & Co., LLP
New York, N.Y.
March 13, 1997
F - 2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of 1626 New York Associates Limited Partnership:
We have audited the accompanying consolidated balance sheet of 1626 New York
Associates Limited Partnership (a Massachusetts limited partnership) and as of
December 31, 1995, and the statements of operations, changes in partners'
deficit and cash flows for each of the two years in the period ended December
31, 1995. These consolidated financial statements and the schedule referred to
below are the responsibility of the Partnership's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
schedule 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of 1626 New York
Associates Limited Partnership and subsidiaries as of December 31, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 15, 1996
F - 3
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Unit Data)
DECEMBER 31,
------------------------
1996 1995
--------- --------
ASSETS
Real estate:
Land $ 24,440 $ 26,477
Buildings and improvements, net of accumulated
depreciation of $130,617 and $129,020
in 1996 and 1995, respectively 110,878 119,260
-------- --------
135,318 145,737
Other Assets:
Cash and cash equivalents 125 267
Restricted cash 9,406 11,633
Accounts receivable, net of reserves of $748
and $411 in 1996 and 1995, respectively 751 756
Prepaid expenses and other assets 4,796 5,827
Deferred rent receivable 8,424 8,233
Deferred costs, net of accumulated amortization
of $21,786 and $21,435 in 1996 and 1995,
respectively 4,827 6,260
-------- --------
Total Assets $163,647 $178,713
======== ========
See notes to consolidated financial statements.
F-4
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Unit Data)
(Continued)
LIABILITIES AND PARTNERS' DEFICIT DECEMBER 31,
- --------------------------------- -----------------------------
1996 1995
---- ----
Liabilities:
Mortgage notes payable to affiliates $ 205,171 $ --
Other mortgage notes payable 19,171 250,681
Accounts payable, notes and loans payable,
and accrued interest to general partners
and affiliates 13,695 46,222
Accounts payable, accrued expenses, security
deposits and other liabilities 8,826 8,617
Accrued interest on mortgage notes to affiliates 38,108 --
Accrued interest on other mortgage notes 960 27,930
Deferred purchase price obligation 1,498 1,498
--------- ---------
Total Liabilities 287,429 334,948
--------- ---------
Commitments and Contingencies
Partners' Deficit:
Limited Partners Deficit - Units of Investor
Limited Partnership Interest $250,000
stated value per unit; authorized, issued
and outstanding -1,340 as of December 31, 1996
and 1995, respectively (129,148) (121,457)
Less: investor notes (68) (68)
--------- ---------
(129,216) (121,525)
General Partners Equity (Deficit) 5,434 (34,710)
--------- ---------
Total Partners' Deficit (123,782) (156,235)
--------- ---------
Total Liabilities and Partners' Deficit $ 163,647 $ 178,713
========= =========
See notes to consolidated financial statements.
F-5
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994
----------- ------------ -------------
<S> <C> <C> <C>
Revenues:
Base rent $ 36,435 $ 38,319 $ 36,782
Rent escalations 8,391 10,231 9,949
Other 577 975 3,496
------------ ------------ ------------
Total revenues 45,403 49,525 50,227
------------ ------------ ------------
Expenses (including $21,961, $6,547 and $5,910
paid or accrued to the general partners and affiliates
in 1996, 1995 and 1994) (see Notes 4 and 6):
Interest 25,756 22,123 19,670
Depreciation and amortization 13,625 15,305 15,408
Real estate and other taxes 9,626 10,339 10,139
Utilities 4,889 5,130 4,687
Cleaning and security 3,804 4,416 4,532
Asset and property management fees 1,460 2,562 2,544
Repairs and maintenance 1,563 1,774 1,816
Payroll 1,198 1,440 1,433
General and administrative 1,219 1,548 1,865
Professional fees 1,049 1,288 794
Provision for doubtful accounts 342 308 970
Loss due to permanent impairment -- 22,500 --
------------ ------------ ------------
Total expenses 64,531 88,733 63,858
------------ ------------ ------------
Loss before extraordinary gain (19,128) (39,208) (13,631)
Extraordinary gain on transfer of 227 East 45th Street 14,419 -- --
------------ ------------ ------------
Net loss $ (4,709) $ (39,208) $ (13,631)
============ ============ ============
Net income (loss) allocated to general partners $ 2,982 $ (2,027) $ (235)
============ ============ ============
Net loss before extraordinary item allocated to
investor limited partners $ (18,393) $ (37,181) $ (13,396)
Extraordinary gain allocated to investor limited partners 10,702 -- --
------------ ------------ ------------
Net loss allocated to investor limited partners $ (7,691) $ (37,181) $ (13,396)
============ ============ ============
Net loss per unit of investor limited partnership
interest before extraordinary gain $ (13,726.12) $ (27,747.01) $ (9,997.01)
Extraordinary gain per unit of investor limited
partnership interest 7,986.57 -- --
------------ ------------ ------------
Net loss per unit of investor limited
partnership interest $ (5,739.55) $ (27,747.01) $ (9,997.01)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In Thousands, Except Unit Data)
Units of
Investor Investor General
Limited Limited Partners' Total
Partnership Partners' (Deficit) Partners'
Interest (Deficit) Equity (Deficit)
----------- --------- --------- ---------
Balance - December 31, 1993 1,344 $ (70,948) $ (43,191) $(114,139)
Abandonments (4) -- -- --
Net Loss -- (13,396) (235) (13,631)
Capital Contributions -- -- 10,743 10,743
------- --------- --------- ---------
Balance - December 31, 1994 1,340 (84,344) (32,683) (117,027)
Net Loss -- (37,181) (2,027) (39,208)
------- --------- --------- ---------
Balance - December 31, 1995 1,340 (121,525) (34,710) (156,235)
Net (Loss) Income -- (7,691) 2,982 (4,709)
Capital Contributions -- -- 37,162 37,162
------- --------- --------- ---------
Balance - December 31, 1996 1,340 $(129,216) $ 5,434 $(123,782)
======= ========= ========= =========
See notes to consolidated financial statements.
F-7
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994
--------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (4,709) $ (39,208) $ (13,631)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 13,625 15,305 15,408
Interest expenses to related party 694 3,765 2,197
Deferred fees to related party 267 1,858 2,057
Change in deferred rent receivable (2,023) (1,032) (962)
Reduction in carrying value of
income producing properties - 22,500 -
Gain on transfer of 227 East 45th Street (14,419) - -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, prepaid
expenses and other assets 345 (618) 233
Increase (decrease) in accounts payable,
accrued expenses, security deposits
and other liabilities 1,359 (4,765) 1,830
Increase in accrued mortgage interest - 2,877 1,314
--------------- -------------- --------------
Net cash (used in) provided by
operating activities (4,861) 682 8,446
--------------- -------------- --------------
Cash Flows from Investing Activities:
Additions to buildings and improvements (7,549) (7,746) (12,153)
Increase in deferred costs (863) (1,510) (1,887)
--------------- -------------- --------------
Cash used in investing activities (8,412) (9,256) (14,040)
--------------- -------------- --------------
Cash Flows from Financing Activities:
Increase in accrued mortgage interest 11,138 - -
Principal payments on mortgage notes to affiliates (1,829) - -
Increase (decrease) in accounts payable, notes and
loans payable and accrued interest to
general partners and affiliates 3,694 475 (1,795)
Principal payments on other mortgage notes (101) (959) (1,017)
Decrease in restricted cash 229 9,217 7,250
--------------- -------------- --------------
Net cash provided by financing activities 13,131 8,733 4,438
--------------- -------------- --------------
Net (decrease) increase in cash
and cash equivalents (142) 159 (1,156)
Cash and cash equivalents, beginning of year 267 108 1,264
--------------- -------------- --------------
Cash and cash equivalents, end of year $ 125 $ 267 $ 108
=============== ============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 13,120 $ 16,368 $ 16,839
============== ============== ==============
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
</TABLE>
Deed in lieu of foreclosure - See Note 5
Related party debt forgiveness and modification - See Notes 2 and 6
See notes to consolidated financial statements.
F - 8
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 - ORGANIZATION
1626 New York Associates Limited Partnership (the "Investor
Partnership") was organized on December 6, 1983 under the
Massachusetts Uniform Limited Partnership Act to acquire and own
a 99% General Partnership interest in and serve as a General
Partner of Nineteen New York Properties Limited Partnership, a
Massachusetts Limited Partnership (the "Operating Partnership"),
which was also organized on December 6, 1983. The Investor
Partnership and the Operating Partnership are collectively
referred to as the "Partnerships."
As of December 31, 1996, the Operating Partnership owns six
commercial rental properties. These properties are referred to
herein individually as a "Property" and collectively as the
"Properties".
The Operating Partnership financed the purchase of the
Properties through a private offering by the Investor
Partnership of 1,344 units of Limited Partnership Interest at
$250,000 per Unit (the "Unit") for an approximate 94% interest
in operating profits and losses of the Investor Partnership (see
Note 6).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - Going Concern
The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course
of business. The Partnerships have maturing mortgage debt,
totaling approximately $29,000,000 plus accrued interest due in
1997, approximately $103,000,000 due February 28, 1998 and a
$25,000,000 mandatory principal payment due March 15, 1998 (see
Notes 3, 4 and 6). The Partnership is attempting to refinance or
restructure the 1997 liabilities. However, based on the current
value of the Properties it is highly unlikely the Partnerships
will be able to meet their 1998 obligations. This raises
substantial doubt about the Partnerships' ability to continue as
a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of
these uncertainties.
Consolidation
The accompanying consolidated financial statements of the
Investor Partnership have been prepared on a consolidated basis
with those of the Operating Partnership, its wholly-owned
subsidiaries and Winthrop Funding 1626 Limited Partnership. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
F - 9
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Such
estimates that are particularly susceptible to change relate to
the Partnership's estimate of the fair value of real estate.
Actual results could differ from those estimates.
Real Estate
Real estate is carried at cost, adjusted for depreciation and
impairment of value. Acquisition fees are capitalized as a cost
of real estate. 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 had no effect on the Partnership's financial statements.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an
original maturity of three months or less at the time of
purchase to be cash equivalents.
Depreciation
The Operating Partnership provides for depreciation of its
depreciable assets using the straight-line method over their
estimated useful lives of 14 to 30 years for building and
improvements and five to eight years for furnishings. Tenant
improvements are depreciated by the straight-line method over
the life of the respective tenant's lease. Depreciation expense
for the years ended December 31, 1996, 1995 and 1994 was
$9,969,000, $11,598,000 and $11,873,000, respectively.
F - 10
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Rent Receivable
The Operating Partnership records rental revenue on a
straight-line basis over the noncancellable term of the lease
irrespective of the actual payment terms. The difference is
classified as deferred rent receivable on the accompanying
consolidated balance sheets.
Deferred Costs
Financing costs and leasing costs are capitalized and amortized
using the straight-line method over the term of the related
agreements. Financing costs are amortized as interest expense.
Deferred costs at December 31 are as follows (in thousands):
Category 1996 1995
-------- ---- ----
Financing costs $ 5,252 $ 6,340
Leasing costs 21,361 21,355
-------- --------
26,613 27,695
Less: accumulated amortization (21,786) (21,435)
-------- --------
$ 4,827 $ 6,260
======== ========
Income Taxes
Taxable income or loss of the Partnership is reported in the
income tax returns of its partners. Accordingly, no provision
for income taxes is made in the consolidated financial
statements of the Partnership.
Restricted Cash
Restricted cash consists primarily of amounts restricted
pursuant to debt agreements. The balance of restricted cash is
comprised of tenant security deposits, deposits with utility
companies and real estate tax escrow accounts.
F - 11
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Disclosures About the Fair Value of Financial Instruments
In 1995, the Partnership adopted SFAS No. 107 "Disclosures About
the Fair Value of Financial Instruments", which requires that
disclosure be made of estimates of the fair value of each class
of financial instrument. Financial instruments held by the
Partnership as of December 31, 1996, consist primarily of cash
and cash equivalents, short-term trade receivables and payables,
for which the carrying amounts approximate fair values due to
the short-term maturity of these instruments, and mortgage notes
payable. Due to the reduced value of the Partnership's real
estate properties, which is the security for these mortgages and
the uncertainty of obtaining replacement financing, it is not
practicable to estimate the fair value of such debts.
Reclassifications
Certain amounts from 1995 and 1994 have been reclassified to conform
to the 1996 presentation.
Partnership Allocations
The net operating profits and losses and distributions of cash
flow, as defined in the Partnership agreement, of the Investor
Partnership, with the exception of the depreciation deductions,
which are allocated solely to the limited partners of the
Investor Partnership, are, in general, allocated as follows:
Partner Percentage
------- ----------
Investor Limited Partners 94.000%
Winthrop Interim Partners I, A Limited
Partnership ("WIPI") 5.200%
Linnaeus Lexington Associates Limited Partnership
("Linnaeus Lexington") .752%
Two Winthrop Properties, Inc. ("Two Winthrop") .048%
Any gains (losses) resulting from sales, dispositions or
refinancings of any of the properties are to be allocated first
to the Partners having negative (positive) capital account
balances, in proportion to and to the extent of such negative
(positive) balances, and thereafter according to the various
provisions of the Partnership agreement. Due to this provision,
$3,717,000 of the gain arising from the foreclosure of the
Partnership's 227 East 45th Street property, was allocated to
the General Partners. No cash distributions to the Partners have
been made as a result of these allocations.
In connection with a related party debt modification (the
"Related Party Debt") in 1996, the General Partners and certain
of their affiliates contributed $37,162,000 to the Operating
Partnership. In 1994, the General Partners contributed loan
balances totaling $10,000,000, plus interest accrued thereon of
$743,000. These transactions have been treated as capital
contributions by the General Partners.
F - 12
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - MORTGAGE NOTES PAYABLE
(a) Dime Mortgage Loans
The Dime Savings Bank loans (the "Dime Loan(s)") are secured by
the Partnerships' 300 Park Avenue South and 509 Fifth Avenue
properties. In 1992, the maturity date and payment terms with
respect to the mortgage encumbering 300 Park Avenue South were
modified.
The interest rate of 9.5% and pay rate of interest only plus
amortization payments (based on a 30-year amortization) were reduced
as follows:
Period Interest Rate Pay Rate
------ ------------- --------
5/01/92-12/31/92 0% 0%
1/01/93-12/31/95 8% 6%
1/01/96-12/31/97 8% 8%
The percentage shown are based on the $11,882,000 loan balance and the
difference between the pay rate and the interest rate is deferred
without interest. Due to the extension of the maturity date and the
deferral of principal and certain interest payments, this
restructuring constituted a troubled debt restructuring, as defined
in Statement of Financial Accounting Standards No. 15, Accounting by
Debtors and Creditors for Troubled Debt Restructurings ("SFAS 15").
Interest expense in the accompanying consolidated financial
statements is computed using the effective interest method. The
resulting effective interest rate was 6.15% per annum as of December
31, 1996 and 1995. As of December 31, 1996 and 1995, accrued and
unpaid interest related to the Dime Loan with respect to 300 Park
Avenue South, calculated in accordance with SFAS 15, was $903,000 and
$1,063,000, respectively. Reserves totaling $1,625,000 were
established upon restructuring. Through December 31, 1995, these
reserves could be used to fund capital improvements, tenant
improvements and leasing commissions to the extent net income after
debt service was insufficient. As of December 31, 1995, all of these
reserves had been spent.
(b) Fuji Mortgage Notes
The Fuji Bank, Ltd. Loan ("Fuji Loan" or "Fuji") with an outstanding
loan balance of $207,000,000, and secured by the Partnerships" 757
Third Avenue, 535 Fifth Avenue, 545 Fifth Avenue, and 1372 Broadway
properties ("Fuji Properties") was restructured on September 30, 1992.
The interest rate through January 17, 1997 was to remain at 9.69% and
was to adjust monthly thereafter at LIBOR plus .63%. The pay rates
were reduced to equal (as a percentage of $207,000,000) 6.5% from
January 1, 1992 through December 31, 1997, 7.5% from January 1, 1998
through December 31, 1999 and 8.25% from January 1, 2000 through
January 17, 2001, the new maturity date. Due to the extension of the
maturity date and the deferral of certain interest amounts, this
restructuring constituted a troubled debt restructuring as
defined by SFAS 15. In accordance with SFAS 15, interest expense
was computed using the effective interest rate method. The
resulting effective interest rate was approximately 7.0% and
6.5% per annum in 1995 and 1994, respectively. At February 28,
1996 and December 31, 1995, accrued and unpaid interest related
to the Fuji Loan, calculated in accordance with SFAS 15, was
$27,300,000 and $26,866,000, respectively. Reserves, totaling in excess
of $24,800,000 were established upon restructuring, of which
$4,935,000 was remaining and included in restricted cash at December
31, 1995.
On February 28, 1996, the Fuji Loan was sold to an affiliate of
the General Partner (see Note 4). In connection with the sale of
the Fuji Loan, the Related Party Debt was modified (see Note 6).
(c) Sanwa Mortgage Notes
The Operating Partnership had two non-recourse loans from Sanwa
Business Credit Corporation ("Sanwa"). The Sanwa loans had been
restructured in 1992. The interest rate on the restructured Sanwa
loans was to equal the prime rate plus 2%, effective September 1, 1991.
The pay rates required equaled 0% for the period from September 1,
1991 through August 31, 1992; 7% from September 1, 1992 through
August 31, 1995; 8% from September 1, 1995 through August 31, 1998;
and 9% from September 1, 1998 through December 31, 2001. The
difference between the pay rate and the interest rate was deferred
without interest. Interest expense in the accompanying consolidated
financial statements for 1995 was computed using the effective
interest method. The resulting effective interest rate was
approximately 2.5% per annum in 1995. The Operating Partnership had
contributed a total of $2,000,000 into a capital reserve fund, which
was supplemented by cash flows operations. The balance of the capital
reserve fund held by Sanwa was $1,920,000 at December 31, 1995. In
January 1996, a deed in lieu of foreclosure agreement was reached
between the Operating Partnership and Sanwa (see Note 5).
F - 13
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - MORTGAGE NOTES PAYABLE (Continued)
The following is a summary of the Mortgage Notes and the amounts
outstanding as of December 31 (in thousands):
December 31, December 31,
1996 1995
------------ ------------
DimeLoan - 300 Park Avenue South
First mortgage note. Modification calls
for an 8% interest rate. Interest
payments were made at a rate of 6% of the
outstanding principal through December,
1995. As of January, 1996, the pay rate
increased to 8% and will continue
until the maturity date at December
31, 1997. Unpaid principal balance is
due, in full, on December 31, 1997. $11,882 $ 11,882
DimeLoan - 509 Fifth Avenue
9.375% fixed rate first mortgage note
paid monthly in arrears. The principal
balance is amortized based on a
25-year period.
The unpaid principal balance is due,
in full, on August 24, 1997. 7,289 7,390
Fuji Properties
First mortgage note. Restructuring
called for an 9.69% interest rate.
Interest payments were to be made at
a rate of 6.5% - 207,000
Sanwa Mortgage Notes
Loans collateralized by first and
second mortgages on 227 East 45th
Street and a second mortgage on
509 Fifth Avenue. - 24,409
------- --------
$19,171 $250,681
======= ========
F - 14
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - MORTGAGE NOTES PAYABLE (Continued)
The General Partner is currently negotiating to refinance or
extend the maturity dates of the Dime Loans. The Partnership has
mortgage principal payments totaling $19,171,000, all which are
due in 1997.
NOTE 4 - MORTGAGE NOTES PAYABLE TO AFFILIATES
The Managing General Partner and Fuji both recognized that the
Partnership would not be able to comply with the terms of the Fuji
Loan and the Fuji Loan would go into default in early 1996. On
December 31, 1995, the loan had a principal balance of $207,000,000,
plus accrued interest of $26,866,000 (calculated utilizing the
effective interest method). A venture comprised of Apollo Real Estate
Advisors, L.P. ("Apollo"), an affiliate of the General Partners, and
Emmes Ventures, Inc. ("Emmes") submitted a proposal to purchase the
Fuji loan. Zeus Property LLC ("Zeus"), a newly-organized limited
liability company owned by affiliates of Apollo and Emmes,
purchased the loan from Fuji for $115 million on February 28,
1996.
Under the terms of the modified Fuji Loan (the "Modified Loan"),
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 component of the modification. As
part of the restructuring of the Fuji loan, each of the Fuji
Properties was conveyed by the Operating Partnership to
newly-created limited liability companies which are
wholly-owned, indirectly, by the Operating Partnership and its
partners.
The Modified Loan is comprised of several component non-recourse
loans, all held by Zeus and its affiliates. The senior component
consists of a series of secured notes in the aggregate principal
amount of $102,721,000 at December 31, 1996. These notes have an
annual interest rate of 295 basis points over 30-day LIBOR
(8.33% at December 31, 1996), 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 at December 31, 1996. These
notes have 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"). A mandatory prepayment of $25
million against the Secured B Notes is required to be made on
March 15, 1998.
The Secured A Notes and Secured B Notes are collectively
secured by first mortgages on the Fuji Properties.
F - 15
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 4 - MORTGAGE NOTES PAYABLE TO AFFILIATES (Continued)
The following is a summary of the scheduled principal maturities
by year under the Modified Loan (in thousands):
Year Amount
---- ------
1997 $ -
1998 127,721
1999 -
2000 -
2001 -
Thereafter 77,450
--------
$205,171
========
A third component of the Modified Loan is an unsecured
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. 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. As of December 31, 1996, the
outstanding balance against the Unsecured Note was $2,892,000,
and is included in accounts payable, notes and loans payable and
accrued interest to general partners and affiliates. 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.
Interest expense incurred during 1996, relating to the Modified
Loan was $19,659,000.
The principal benefit of the Modified Loan to the Partnership is
a substantial reduction in current debt service requirements
through February 1998. The only current debt service payments
that are required to be made under the Modified Loan for this
two-year period are the interest payments on the Secured A
Notes. Interest on all other components of the Modified Loan are
payable to the extent of available cash flow from the Fuji
Properties, and otherwise, accrue until sufficient cash flow is
available for payment. As a result of this modification, the
likelihood of a monetary default has been deferred from 1996 to
1998.
In connection with the Modified Loan, loans in the form of cash
advances and deferred fees that were made to the Partnership by
Affiliates of the General Partner were restructured.
F - 16
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 5 - DEED IN LIEU OF FORECLOSURE
In January 1996 a deed in lieu of foreclosure agreement was
reached between the Operating Partnership and Sanwa. Pursuant to
the deed in lieu of foreclosure agreement, the Operating
Partnership transferred title to the property located at 227
East 45th Street 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.
As of December 31, 1995, the related indebtedness to Sanwa was
$24,409,000. As a result of the above described transactions,
the Operating Partnership has recognized an extraordinary gain
on extinguishment of debt of $14,419,000 in 1996. The property
was stated at its fair value at December 31, 1995 as a result of
a recorded write-down (see Note 7).
NOTE 6 - CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The General Partners of the Investor Partnership are Linnaeus
Lexington, Two Winthrop and WIPI. Two Winthrop, the Managing
General Partner of the Investor Partnership is wholly owned by
First Winthrop Corporation ("First Winthrop") which in turn is
wholly owned by Winthrop Financial Associates ("WFA"). The
General Partners, who are all affiliates of WFA, own the
remaining 6% interest in the profits and losses of the Investor
Partnership. Additionally, WFA, First Winthrop and a subsidiary,
WFC Realty Co., Inc. ("WFC Realty"), collectively own a 1%
interest in the profits and losses of the Operating Partnership.
WIPI is a public real estate limited partnership whose general
partners are Two Winthrop and a limited partnership, some of
whose partners are affiliates of WFA. Linnaeus Lexington, the
other General Partner, is a limited partnership, some of whose
partners are affiliates of WFA. WFA and its affiliates manage or
advise a large number of partnerships organized to own or
operate real estate as well as other investments, or to invest
in other limited partnerships that own or operate real estate or
other investments. An affiliate of Apollo acquired control of
the general partner of WFA in July 1995. As a result, Apollo and
its affiliates control the Partnerships.
The following table sets forth the amount of fees, commissions
and other costs which the Partnerships paid or accrued to the
General Partners and their affiliates for the years ended
December 31, 1996, 1995 and 1994 (in thousands):
Type of Compensation 1996 1995 1994
-------------------- ---- ---- ----
Asset Management Fee $ - $1,377 $1,377
Property Management Fees 329 1,185 1,167
Leasing Commissions 63 476 548
(capitalized as deferred costs)
F - 17
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6 - CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (Continued)
- ------ -----------------------------------------------------------------------
Type of Compensation 1996 1995 1994
-------------------- ---- ---- ----
Cleaning Fees and Security Fees - 220 501
Construction Supervision Fee 72 609 406
(capitalized to the costs of Buildings
and Improvements)
As part of the sale of the Fuji Loan, the Partnership agreed to
retain new management and leasing agents for all of its properties.
WFA was entitled to nonrecurring fees for organizing the
Investor Partnership, providing services for tax consultation,
and acquisition and financing of the Properties. The total fees
for these services were $44,911,000, of which $9,020,000 was
outstanding at February 28, 1996 and December 31, 1995.
The Partnerships accrue interest on any unpaid fees or advances
due to First Winthrop and its affiliates at an interest rate of
prime plus .75%. The total interest incurred during 1996, 1995
and 1994 was $694,000, $3,765,000 and $2,865,000, respectively.
In connection with the sale of the Fuji Loan, WFA and certain of
its affiliates entered into an agreement with the Investor
Partnership, the Operating Partnership and an affiliate of Zeus
with regard to amounts owed to WFA and its affiliates by the
Partnerships (the "Winthrop Debt Agreement"). Prior to this
agreement, WFA and its affiliates were owed, in the aggregate,
$47,162,000 by the Partnerships. This amount is comprised of
cash advances made by WFA 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.
Under the Winthrop Debt Agreement, WFA and its affiliates
contributed $37,162,000 of the $47,162,000 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. WFA 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 Loans. Interest, to
the extent that it cannot be paid currently, accrues until the
maturity of this Note on July 31, 1997. Interest expense
incurred during 1996, relating to the Receivables Note was
$1,279,000.
F - 18
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 7 - IMPAIRMENT OF VALUE OF REAL ESTATE
During 1995, Management determined that the Properties suffered
an impairment in value which was considered to be other than
temporary. Management's assessment of impairment was primarily
related to the continued weak New York City commercial real
estate market. As a result, the Partnership wrote down its
investment in the Properties by $22,500,000 in 1995. As a result
of the transfer of the Partnership's 227 East 45th Street
property during 1996, the remaining impairment of value of real
estate is $20,523,000, and is allocated $11,124,000 to 757 Third
Avenue, $5,664,000 to 535 Fifth Avenue and $3,735,000 to 545
Fifth Avenue.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
(a) The Operating Partnership leases the properties to tenants
under a variety of terms, including escalation provisions,
renewal options and obligations of the tenants to
reimburse operating expenses.
The aggregate future minimum fixed lease payments receivable
under noncancellable leases at December 31, 1996 are as follows
(in thousands):
Year Amount
---- ------
1997 $ 31,087
1998 27,841
1999 25,706
2000 23,060
2001 21,338
Thereafter 99,614
--------
$228,646
========
(b) Deferred Purchase Price Obligations
As part of the original purchase price of the Properties,
the Operating Partnership agreed to make deferred purchase
price payments to the seller in future years, with respect
to each Property, equal to 6% of the gross proceeds of
certain refinancings, sales or transfers of the Property,
or, if a Property has not been sold or deemed disposed of
by January 18, 2006, the Operating Partnership must pay
the seller on that date an amount equal to the excess of
(i) 6% of the appraised fair market value of such Property
as encumbered by all liens, charges and other encumbrances
on such Property except mortgage loans or any other
mortgage encumbering such Property, over (ii) the amount
of any deferred purchase price payments previously made
with respect to such Property.
F - 19
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
(b) Deferred Purchase Price Obligations
At the Acquisition Date, the Operating Partnership recorded a
liability to the seller of $25,296,000, representing the
Operating Partnership's estimate of the amount due based on the
original purchase price of the Properties. The total liability
has been reduced to $1,498,000 due to sales and transfers of
various properties and management's estimate of fair market
value. No payments were required as a result of the Operating
Partnership transferring its 227 East 45th Street property to
Sanwa in satisfaction of all obligations under certain financing
arrangements.
(c) Litigation
The Operating Partnership has been named as a defendant in
various lawsuits. These actions are at varying stages within the
legal process, and the Operating Partnership has counterclaimed
on certain of the actions. The Partnership's management expects
that the outcome of these actions will not have a material
adverse impact on the accompanying consolidated financial
statements.
On December 5, 1994 the Partnership, First Winthrop and other
affiliates settled a breach of contract case whereby the
Partnership paid the plaintiff, Pritchard Services, Inc. $750,000
in exchange for a general release of the defendants from all
claims by the plaintiff.
NOTE 9 - RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The differences between the accrual method of accounting for
income tax reporting and the accrual method of accounting used in
the consolidated financial statements are as follows (in
thousands):
1996 1995 1994
---- ---- ----
Net loss - financial statements $(4,709) $(39,208) $(13,631)
Differences resulted from:
Depreciation (2,785) (1,891) (1,497)
Rent concessions (2,003) (2,693) (2,086)
Rental revenues 2,000 1,512 490
Loss due to permanent impairment - 22,500 -
Amortization (603) 152 55
Mortgage recording taxes 352 94 93
Bad debt expense 334 (684) 413
Interest expense 7,194 1,791 (1,582)
Discharge of indebtedness income - - 9,900
Gain on disposal 1,107 - -
Other timing differences 1,021 368 321
------- -------- --------
Net income (loss) - income tax method $ 1,908 $(18,059) $ (7,524)
======= ======== ========
The Partnership's taxable income (loss) per unit of limited partnership
interest for 1996, 1995 and 1994 was $678, $(12,551) and $(5,871),
respectively.
F - 20
<PAGE>
Schedule III
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
Real Estate and Accumulated Depreciation
December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
January 1984
Acquisition Costs Costs Capitalized/(Deducted)
Real Estate Assets Mortgage Subsequent to Acquisition
--------------------- Discount ---------------------------
Buildings Allocation Buildings
and ------------------------ and
Description Encumbrances Land Improvements Land Bldgs & Imp. Total Land Improvements
- ---------- ------------ ---- ------------ ------ ------------ ----- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
757 Third Avenue $ 78,106 $ 11,934 $ 66,872 $ (125) $ (397) $ 78,284 $ 130 $ 24,395
535 Fifth Avenue 32,271 6,034 29,991 (300) (1,222) 34,503 (10) 16,953
545 Fifth Avenue 16,135 3,152 18,013 (331) (1,351) 19,483 (5) 15,027
1372 Broadway 78,659 4,385 34,343 (155) (491) 38,082 68 29,496
509 Fifth Avenue 7,289 900 4,053 (88) (351) 4,514 (1) 216
300 Park Avenue 11,882 1,982 14,230 (46) (145) 16,021 (5) 9,307
--------- -------- --------- --------- --------- --------- ----- --------
TOTAL $ 224,342 $ 28,387 $ 167,502 $ (1,045) $ (3,957) $ 190,887 $ 177 $ 95,394
========= ======== ========= ========= ========= ========= ===== ========
<CAPTION>
Life
Gross Balances @ 12/31/96(1) on which
------------------------------------------------------ Depreciation
Impairments is computed
Buildings to Land Date in latest
and & Accumulated of statement of
Description Land Improvements Building Total(2) Depreciation Constr. operations
- ---------------- --------- ------------- --------- --------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
757 Third Avenue $ 11,939 $ 90,870 $ (11,124) $ 91,685 $ 44,361 1963 5 - 30 Years
535 Fifth Avenue 5,724 45,722 (5,664) 45,782 21,598 1926 5 - 30 Years
545 Fifth Avenue 2,816 31,689 (3,735) 30,770 12,748 1900 5 - 30 Years
1372 Broadway 4,298 63,348 - 67,646 36,619 1914 5 - 30 Years
509 Fifth Avenue 811 3,918 - 4,729 2,940 1915 5 - 30 Years
300 Park Avenue 1,931 23,392 - 25,323 12,351 1920 5 - 30 Years
-------- --------- --------- --------- ---------
TOTAL $ 27,519 $ 258,939 $ (20,523) $ 265,935 $ 130,617
======== ========= ========== ========= =========
</TABLE>
F-21
<PAGE>
SCHEDULE III
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(In Thousands)
NOTES:
(1) The aggregate cost federal income tax purpose is $286,894.
(2) Balance, January 1, 1994 $277,358
Improvements capitalized subsequent to acquisition 12,153
--------
Balance, December 31, 1994 289,511
Improvements capitalized subsequent to acquisition 7,746
Impairment of value (22,500)
--------
Balance, December 31, 1995 274,757
Improvements capitalized subsequent to acquisition 7,549
Cost of rental property disposed of (18,348)
Impairment of value of property disposed of 1,977
--------
Balance, December 31, 1996 $265,935
========
(3) Balance, January 1, 1994 $105,549
Additions charged to expense 11,873
--------
Balance, December 31, 1994 117,422
Additions charged to expense 11,598
--------
Balance, December 31, 1995 129,020
Additions charged to expense 9,969
Accumulated depreciation of rental property disposed of (8,372)
--------
Balance, December 31, 1996 $130,617
========
<PAGE>
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure.
Effective September 19, 1996, the Partnership dismissed its prior
Independent Auditors, Arthur Andersen LLP ("Arthur Andersen") and retained as
its new Independent Auditors, Imowitz Koenig & Co., LLP ("Imowitz Koenig").
Arthur Andersen's Independent Auditors' Report on the Partnership financial
statements for calendar year ended December 31, 1995, did not contain an
adverse opinion or a disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles. The decision to
change Independent Auditors was approved by the Partnership managing general
partner"s directors. During calendar year ended 1995 and through September 19,
1996, there were no disagreements between the Registrant and Arthur Andersen on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure which disagreements if not resolved
to the satisfaction of Arthur Andersen, would have caused it to make reference
to the subject matter of the disagreements in connection with its reports.
Effective September 19, 1996, the Partnership engaged Imowitz Koenig as
its Independent Auditors. The Partnership did not consult Imowitz Koenig
regarding any of the matters or events set forth in Item 304(a)(2) of
Regulation S-K prior to September 19, 1996.
23
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant.
The Partnership has no officers or directors. Two Winthrop manages and
controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters effective its business.
As of March 1, 1997, the names of the directors and executive officers of Two
Winthrop and the position held by each of them, are as follows:
Has Served as
Position Held with the a Director or
Name Managing General Partner Officer Since
- ---- ------------------------ -------------
Michael L. Ashner Chief Executive Officer 1-96
and Director
Richard J. McCready President and
Chief Operating Officer 7-95
Jeffrey Furber Executive Vice President 7-95
and Clerk
Edward Williams Chief Financial Officer 4-96
Vice President and
Treasurer
Peter Braverman Senior Vice President 1-96
Michael L. Ashner, age 45, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") since January 15,
1996. From June 1994 until January 1996, Mr. Ashner was a Director, President
and Co-chairman of National Property Investors, Inc., a real estate investment
company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until
January 1996. In addition, since 1981 Mr. Ashner has been President of Exeter
Capital Corporation, a firm which has organized and administered real estate
limited partnerships.
Richard J. McCready, age 38, is the President and Chief Operating Officer
of WFA and its subsidiaries. Mr. McCready previously served as a Managing
Director, Vice President and Clerk of WFA and a Director, Vice President and
Clerk of the
24
<PAGE>
Managing General Partner and all other subsidiaries of WFA. Mr. McCready
joined the Winthrop organization in 1990.
Jeffrey Furber, age 37, has been the Executive Vice President of WFA and
the President of Winthrop Management since January 1996. Mr. Furber served as
a Managing Director of WFA from January 1991 to December 1995 and as a Vice
President from June 1984 until December 1990.
Edward V. Williams, age 56, has been the Chief Financial Officer of WFA
since April 1996. From June 1991 through March 1996, Mr. Williams was
Controller of NPI and NPI Management. Prior to 1991, Mr. Williams held other
real estate related positions including Treasurer of Johnstown American
Companies and Senior Manager at Price Waterhouse.
Peter Braverman, age 45, has been a Senior Vice President of WFA since
January 1996. From June 1995 until January 1996, Mr. Braverman was a Vice
President of NPI and NPI Management. From June 1991 until March 1994, Mr.
Braverman was President of the Braverman Group, a firm specializing in
management consulting for the real estate and construction industries. From
1988 to 1991, Mr. Braverman was a Vice President and Assistant Secretary of
Fischbach Corporation, a publicly traded, international real estate and
construction firm.
One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered
pursuant to Section 12(g) of the Securities and Exchange Act of 1934, or are
subject to the reporting requirements of Section 15(d) of such Act: Winthrop
Partners 79 Limited Partnership; Winthrop Partners 80 Limited Partnership;
Winthrop Partners 81 Limited Partnership; Winthrop Residential Associates I, A
Limited Partnership; Winthrop Residential Associates II, A Limited Partnership;
Winthrop Residential Associates III, A Limited Partnership; 1999 Broadway
Associates Limited Partnership; Indian River Citrus Investors Limited
Partnership; Nantucket Island Associates Limited Partnership; One Financial
Place Limited Partnership; Presidential Associates I Limited Partnership;
Riverside Park Associates Limited Partnership; Springhill Lake Investors
Limited Partnership; Twelve AMH Associates Limited Partnership; Winthrop
California Investors Limited Partnership; Winthrop Growth Investors I Limited
Partnership; Winthrop Interim Partners I, A
25
<PAGE>
Limited Partnership; Southeastern Income Properties Limited Partnership;
Southeastern Income Properties II Limited Partnership; Winthrop Miami
Associates Limited Partnership; and Winthrop Apartment Investors Limited
Partnership.
Except as indicated above, neither the Partnership nor Two Winthrop has
any significant employees within the meaning of Item 401(b) of Regulation S-K.
There are no family relationships among the officers and directors of Two
Winthrop.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer or beneficial owner of more than ten percent of
the units of limited partnership interest in the Partnership that failed to
file on a timely basis, as disclosed in the above Forms, reports required by
section 16(a) of the Exchange Act during the most recent fiscal year or prior
fiscal years.
Item 11. Executive Compensation.
The Partnership is not required to and did not pay any compensation to the
officers or directors of Two Winthrop. Two Winthrop does not presently pay any
compensation to any of its officers or directors. (See Item 13, "Certain
Relationships and Related Transactions.")
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
Two Winthrop, WIPI and Linnaeus-Lexington own all the outstanding general
partnership interests in the Partnership. No other person or group is known by
the Partnership to be the beneficial owner of more than 5% of the outstanding
partnership interests as of December 31, 1996.
(b) Security Ownership of Management.
No officers, directors or partners of Linnaeus-Lexington and First
Winthrop and none of the other officers, directors or
26
<PAGE>
general partners of WIPI beneficially own any Units. Affiliates of First
Winthrop, however, own in the aggregate, 19 units which represents less than
one percent of the total outstanding units.
(c) Changes in Control.
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions.
The General Partners and their affiliates are entitled to receive certain
cash distributions and allocations of taxable income or loss. In addition, the
General Partners and their affiliates have earned various fees in connection
with the formation and operation of the Partnership and Operating Partnership.
Further, subsequent to the offering of units, the General Partners and their
affiliates entered into contracts to perform various services for the Operating
Partnership.
In February 1996, certain affiliates of the General Partners (the
"Affiliates") entered into an agreement with the Operating Partnership, the
Partnership and an affiliate of Zeus with regard to amounts owed to the
Affiliates by the Operating Partnership and the Partnership (the "Winthrop Debt
Agreement"). Prior to the entering into of this agreement, the Affiliates were
owed in the aggregate approximately $46.6 million by the Operating Partnership
and the Partnership. This amount was comprised of cash advances made to the
Partnership and the Operating Partnership in order to fund operating deficits
and also includes accrued interest on outstanding balances as well as unpaid
deferred fees related to the on-site management of the properties, asset
management and syndication. Under the Winthrop Debt Agreement, the Affiliates
contributed approximately $36.6 million of the $46.6 million to the Operating
Partnership. The remaining $10 million receivable has been evidenced by a
promissory note (the "Receivables Note") issued by the Operating Partnership
which is secured by a pledge of the 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
on these properties, the Affiliate Note is to be secured by a second mortgage
on 509 Fifth Avenue and 300 Park Avenue South. The Receivables Note was then
sold to an affiliated of Apollo Real Estate Advisors, L.P. ("Apollo"), an
affiliate of the Partnership,
27
<PAGE>
for a payment of $6,000,000. 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 Loan. Interest, to the extent it cannot be paid currently, accrues until
the maturity of the Receivables Note on July 31, 1997.
As a result of the sale of the Receivables Note and the purchase by Zeus
of the Fuji Loan, these loans are held by affiliates of the Partnership.
Prior to the consummation of the transactions contemplated by the Winthrop
Debt Agreement, the Affiliates performed management, cleaning, construction and
leasing services for the properties and advanced certain amounts to the
Partnership or the Operating Partnership to fund operating deficits and loan
guarantees. All of these amounts were either contributed to the Partnership or
included in the Receivables Note. Accordingly, subsequent to the closing of
the transactions contemplated by the Winthrop Debt Agreement and the sale of
the Receivables Note, the Partnership and the Operating Partnership had no
amounts due to the Affiliates and the property management, cleaning, leasing
and construction services are being performed by unaffiliated third parties.
The following table sets forth the amounts of fees, commissions and cash
distributions which the Partnership and the Operating Partnership accrued for
the account of the General Partners and their affiliates for the years ended
December 31, 1996, 1995 and 1994. As described above, these fees have either
been contributed to the Partnership or are evidenced by the Receivables Note.
Receiving
Entity Type of Compensation 1996 1995 1994
- --------- -------------------- ---- ---- ----
Winthrop Asset Management Fee - $1,377,000 $1,377,000
Management
Winthrop Property Management $329,000 $1,184,662 $1,166,836
Management
Winthrop Leasing Commissions $ 63,000 $ 475,868 $ 547,726
Management
The Cleaning Cleaning Fees -- $ 220,491 $ 442,938
Force
Winthrop Construction $ 72,000 $ 609,205 $ 516,186
Financial Supervision Fee
28
<PAGE>
WFA was entitled to nonrecurring fees for organizing the Operating
Partnership, providing services for tax consultation, and acquisition and
financing of the Properties. The total fees for these services were
$44,911,000, of which $9,020,000 was outstanding at February 28, 1996 and
December 31, 1995.
The Operating Partnership accrues on any unpaid fees or advances due to
First Winthrop and its affiliates at an interest rate of prime plus .75%. The
total interest incurred during 1996, 1995 and 1994 was $694,000, $3,765,000 and
$2,865,000, respectively.
For the years ended December 31, 1994, 1995 and 1996, the Partnership
allocated $2,742, $2,172 and $10,478, respectively, of taxable income (losses)
to Two Winthrop in accordance with its interest in the Partnership. For the
years ended December 31, 1994, 1995, and 1996 the Partnership allocated
$42,955, $34,023 and $232,300, respectively, of taxable income (losses) to
Linnaeus-Lexington in accordance with its interest in the Partnership. For the
years ended December 31, 1994, 1995 and 1996, the Partnership allocated
$297,031, $235,268 and $1,887,389, respectively, of taxable income (losses) to
WIPI in accordance with its interest in the Partnership.
The directors, officers and partners of First Winthrop and
Linnaeus-Lexington and the directors, officers and general partners of WIPI
receive no remuneration or other compensation from the Partnership, the
Operating Partnership or the Joint Ventures.
29
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements - The Consolidated Financial Statements
listed on the accompanying Index to Consolidated Financial Statements are
filed as a part of this Annual Report.
2. Financial Statement Schedules - The Consolidated Financial
Statement Schedules listed on the accompanying Index to Consolidated Financial
Statements are filed as a part of this Annual Report.
3. Exhibits - The Exhibits listed on the accompanying Exhibit Index
are filed as a part of this Annual Report.
(b) Reports on Form 8-K - None
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
1626 NEW YORK ASSOCIATES LIMITED
PARTNERSHIP
By: TWO WINTHROP PROPERTIES, INC.
Managing General Partner
By: /s/ Michael L. Ashner
-----------------------
Michael Ashner
Chief Executive Officer
Date: March 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature/Name Title Date
- ------------------ -------------------- --------------
/s/ Michael Ashner Chief Executive March 31, 1997
- ------------------ Officer and Director
Michael Ashner
/s/ Edward V. Williams Chief Financial March 31, 1997
- ---------------------- Officer
Edward V. Williams
31
<PAGE>
EXHIBITS INDEX
Exhibit Page
------- ----
3,4 Amended and Restated Limited Partnership Agreement (1)
of 1626 New York Associates Limited Partnership
(the "Partnership")
3(a) Amendment to Amended and Restated Limited (2)
Partnership Agreement dated August 23, 1995
10(a) Third Amended and Restated Limited Partnership (3)
Agreement of Nineteen New York Properties Limited
Partnership ("19 NY") dated as of September 20,
1990
10(b) Commercial Brokerage Agreements between 19 NY and (3)
First Winthrop Realty Co., Inc., as amended
10(c) Commercial Management Agreements between 19 NY and (3)
Winthrop Management, as amended
10(d) Agreements for building cleaning services between (3)
19 NY and Venture Services, as amended
10(e) Pledge and Security Agreement by Winthrop Interim (1)
Partners I, A Limited Partnership ("WIPI") and
Winthrop Financial Co., Inc. ("WFC") in favor of
Chemical Bank
10(f) Investor Note Loan Agreement dated September 17, (1)
1984 between the Partnership and Chemical Bank as
agent of The First National Bank of Boston,
Citibank, N.A., Bank of Montreal, Bankers Trust
Company and Manufacturers Hanover Trust Company
10(g) Intercreditor Agreement dated as of September 17, (1)
1984 by and between Continental Casualty Company
and Chemical Bank acting on behalf of itself and
The First National Bank of Boston, Bankers Trust
Company, Citibank, N.A., Bank of Montreal and
Manufacturers Hanover Trust Company
32
<PAGE>
10(h) Form of Investor Bond issued to the Investor (1)
Partnership by Continental Casualty Company
10(i) Restated Promissory Note, dated August 25, 1987, (4)
between 19 NY and The Dime Savings Bank of New
York, FSB (for 300 Park Avenue South)
10(j) Mortgage and Consolidation Agreement, dated August (4)
25, 1987 between 19 NY and The Dime Savings Bank
of New York, FSB (for 300 Park Avenue South)
10(k) First Modification of Mortgage Note and Mortgage, (5)
dated January 20, 1993 between 19 NY and The Dime
Savings Bank of New York (for 300 Park Avenue South)
10(l) Restated Promissory Note, dated August 25, 1987 (4)
between 19 NY and The Dime Savings Bank of New
York, FSB (for 509 Fifth Avenue)
10(m) Mortgage and Consolidation Agreement dated August (4)
25, 1987 between 19 NY and The Dime Savings Bank
of New York, FSB (for 509 Fifth Avenue)
10(n) Mortgage made by 19 NY Limited Partnership to The (3)
Fuji Bank ("Fuji") relating to a $250 million
Mortgage Loan on 757 Third Avenue, 410 Park
Avenue, 535 Fifth Avenue, 545 Fifth Avenue and
1372 Broadway, dated as of January 18, 1990, and
related Mortgage Note Consolidation, Modification
and Restatement Agreement
10(o) Fuji Loan Mortgage Modification and Restatement (3)
Agreement between Fuji and 19 NY, dated as of
September 18, 1990, and related Mortgage Note
Modification and Restatement Agreement, dated
September 18, 1990
10(p) Second Amended and Restated Mortgage Note, Second (3)
Amended and Restated Mortgage, and Renovation
Agreement between Fuji and 19 NY, relating to The
Fuji Bank Loan Restructuring, dated as of
September 30, 1992
33
<PAGE>
10(q) Restructuring Agreement, dated February 28, 1996 (6)
among Fuji, 19 NY and 535 Fifth Avenue LLC, 545
Fifth Avenue LLC, 757 Third Avenue LLC and 1372
Broadway LLC (collectively, the "LLCs"), Four New
York Properties Holdings LLC ("Holdings") and Zeus
Property LLC ("Zeus") and Westhill Equities LLC
10(r) Debt Modification and Purchase Agreement dated (6)
February 28, 1996 among 19 NY, the Partnership,
Isaac Asset LLC, WFC, First Winthrop Corporation,
Winthrop Financial Associates, A Limited
Partnership, Winthrop Management, The Cleaning
Force, A Limited Partnership and First Winthrop
Properties, Inc.
10(s) Second Amended and Restated Deposit, Disbursement (6)
and Security Agreement dated February 28, 1996,
between the LLCs and Fuji
10(t) Splitter Note A1, dated as of February 28, 1996, (6)
between Fuji and the LLCs
10(u) Form of Splitter Note A2-A29, dated as of February (6)
28, 1996, between Fuji and the LLCs
10(v) Form of Splitter Note B1 and B2, dated as of (6)
February 28, 1996, between Fuji and the LLCs
10(w) Unsecured Promissory Note, dated as February 28, (6)
1996, between Zeus and the LLCs
10(x) Unsecured Loan Agreement, dated February 28, 1996 (6)
between the LLCs and Zeus.
16. Letter dated September 19, 1996 from Arthur (7)
Andersen LLP.
27. Financial Date Schedule (6)
(1) Incorporated by reference the Partnership's Registration Statement on
Form 10, File No. 0-13500 as filed on April 30, 1985 and thereafter amended
(2) Incorporated by reference to the Partnership's Current Report on Form
8-K filed on September 6, 1995
34
<PAGE>
(3) Incorporated by reference to the Partnership's Annual Report filed on
Form 10-K for the year ended December 31, 1991.
(4) Incorporated by reference to the Partnership's Annual Report filed on
Form 10-K for the year ended December 31, 1987
(5) Incorporated by reference to the Partnership's Annual Report filed on
Form 10-K for the year ended December 31, 1992
(6) Incorporated by reference to the Partnership's Annual Report filed on
Form 10-K for the year ended December 31, 1995
(7) Incorporated by reference to the Partnership's Current Report on Form
8-K dated September 19, 1996.
35
<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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,531,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 1,499,000
<ALLOWANCES> (748,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 265,935,000
<DEPRECIATION> (130,617,000)
<TOTAL-ASSETS> 163,647,000
<CURRENT-LIABILITIES> 0
<BONDS> 276,302,000 <F2>
<COMMON> 0
0
0
<OTHER-SE> (123,782,000)
<TOTAL-LIABILITY-AND-EQUITY> 163,647,000
<SALES> 0
<TOTAL-REVENUES> 44,826,000
<CGS> 0
<TOTAL-COSTS> 37,556,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,756,000
<INCOME-PRETAX> (19,128,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,128,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 14,419,000
<CHANGES> 0
<NET-INCOME> (4,709,000)
<EPS-PRIMARY> (5,739.55)
<EPS-DILUTED> (5,739.55)
<FN>
<F1> Cash includes $9,406,000 of restricted cash.
<F2> Includes $256,171,000 to a related party.
</FN>
</TABLE>
