<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File Number 0-13500
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1626 New York Associates Limited Partnership
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(Exact name of Registrant as specified in its charter)
Massachusetts 04-2808184
---------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142-1493
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
----------------
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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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
PART 1 - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
September 30, December 31,
1997 1996
------------- ------------
ASSETS
Real estate:
Land $ 24,440 $ 24,440
Buildings and improvements, net of accumulated
depreciation of $138,641 and $130,617 as of
September 30, 1997 and December 31, 1996,
respectively 108,661 110,878
--------- ---------
133,101 135,318
Other Assets:
Cash and cash equivalents 293 125
Restricted cash 12,392 8,935
Accounts receivable, net of reserves of $638
and $748 as of September 30, 1997 and
December 31, 1996, respectively 822 751
Prepaid expenses and other assets 4,044 5,267
Deferred rent receivable 10,673 8,424
Deferred costs, net of accumulated amortization
of $22,800 and $21,786 as of September 30, 1997
and December 31, 1996, respectively 6,971 4,827
--------- ---------
Total Assets $ 168,296 $ 163,647
========= =========
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
Consolidated Balance Sheets (Unaudited)
(In Thousands, Except Unit Data)
(Continued)
LIABILITIES AND PARTNERS' DEFICIT
September 30, December 31,
1997 1996
------------- ------------
Liabilities:
Mortgage notes payable to affiliates $ 128,162 $ 205,171
Other mortgage notes payable 100,461 19,171
Notes payable and accrued interest
to general partners and affiliates 20,106 13,695
Accounts payable, accrued expenses, security
deposits and other liabilities 9,163 8,826
Accrued interest on mortgage notes to affiliates 33,666 38,108
Accrued interest on other mortgage notes 15,742 960
Deferred purchase price obligation 1,498 1,498
----------- -----------
Total Liabilities 308,798 287,429
----------- -----------
Commitments and Contingencies
Partners' Deficit:
Limited Partners Deficit - Units of Investor
Limited Partnership Interest
$250,000 statedvalue per unit; authorized,
issued and outstanding - 1,340 as of
September 30, 1997 and December 31, 1996,
respectively (145,184) (129,148)
Less: investor notes (68) (68)
----------- -----------
(145,252) (129,216)
General Partners Equity 4,750 5,434
----------- -----------
Total Partners' Deficit (140,502) (123,782)
----------- -----------
Total Liabilities and Partners' Deficit $ 168,296 $ 163,647
=========== ===========
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Nine Months Ended
September 30, September 30,
1997 1996
------------- --------------
Revenues:
Rental and escalation income $ 31,432 $ 32,715
Interest and other income 1,026 312
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Total revenues 32,458 33,027
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Expenses:
Interest on obligations to affiliates 18,558 11,242
Interest 1,902 4,747
Depreciation and amortization 11,214 11,929
Real estate and other taxes 7,195 7,208
Utilities 3,491 3,640
Cleaning and security 3,011 2,853
Asset and property management fees 375 726
Repairs and maintenance 1,004 925
Payroll 984 1,050
General and administrative 981 1,062
Professional fees 413 588
Provision for doubtful accounts 50 --
------------- ------------
Total expenses 49,178 45,970
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Loss before extraordinary gain (16,720) (12,943)
Extraordinary gain on transfer of
227 East 45th Street -- 13,688
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Net (loss) income $ (16,720) $ 745
============= ============
Net (loss) income allocated to
general partners $ (684) $ 564
============= ============
Net loss before extraordinary item
allocated to investor limited partners $ (16,036) $ (12,557)
Extraordinary gain allocated to investor
limited partners -- 12,738
------------- ------------
Net (loss) income allocated to investor
limited partners $ (16,036) $ 181
============= ============
Net loss per unit of investor limited
partnership interest before extraordinary
gain $ (11,967.16) $ (9,370.90)
Extraordinary gain per unit of investor
limited partnership interest -- 9,505.97
------------- ------------
Net (loss) income per unit of investor
limited partnership interest $ (11,967.16) $ 135.07
============= ============
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
Consolidated Statements of Operations (Unaudited)
(In Thousands, Except Unit Data)
For the Three Months Ended
September 30, September 30,
1997 1996
------------- -------------
Revenues:
Rental and escalation income $ 12,713 $ 10,265
Interest and other income 348 143
------------ ------------
Total revenues 13,061 10,408
------------ ------------
Expenses:
Interest on obligations to affiliates 5,759 4,757
Interest 1,192 757
Depreciation and amortization 4,411 3,634
Real estate and other taxes 2,498 2,361
Utilities 1,425 1,484
Cleaning and security 1,011 951
Asset and property management fees 108 294
Repairs and maintenance 323 25
Payroll 339 319
General and administrative 342 348
Professional fees 111 336
------------ ------------
Total expenses 17,519 15,266
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Net loss $ (4,458) $ (4,858)
============ ============
Net loss allocated to general partners $ (147) $ (183)
============ ============
Net loss allocated to investor limited
partners $ (4,311) $ (4,675)
============ ============
Net loss per unit of investor limited
partnership interest $ (3,217.16) $ (3,488.81)
============ ============
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
Consolidated Statement of Partners' Deficit (Unaudited)
(In Thousands, Except Unit Data)
Units of
Investor Investor
Limited Limited General Total
Partnership Partners' Partners' Partners'
Interest (Deficit) Equity Deficit
------------ --------- ---------- ---------
Balance - December 31, 1996 1,340 $ (129,216) $ 5,434 $ (123,782)
Net loss -- (16,036) (684) (16,720)
----- ----------- -------- -----------
Balance - September 30, 1997 1,340 $ (145,252) $ 4,750 $ (140,502)
===== =========== ======== ===========
See notes to consolidated financial statements.
6 of 16
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands)
For the Nine Months Ended
September 30, September 30,
1997 1996
-------------- -------------
Cash Flows from Operating Activities:
Net (loss) income $ (16,720) $ 745
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating
activities:
Depreciation 8,024 8,743
Amortization 3,190 3,186
Deferred rent receivable (3,559) 25
Gain on transfer of 227 East 45th Street -- (13,688)
Provision for doubtful accounts (110) --
Changes in operating assets and liabilities:
Decrease in accounts receivable, prepaid
expenses and other assets 1,262 3,766
Increase (decrease) in accounts payable,
accrued expenses, security deposits and
other liabilities 337 (1,555)
---------- ----------
Net cash (used in) provided by operating
activities (7,576) 1,222
---------- ----------
Cash Flows from Investing Activities:
Additions to buildings and improvements (5,807) (6,230)
Increase in deferred leasing costs (3,080) (490)
---------- ----------
Cash used in investing activities (8,887) (6,720)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from other mortgage notes payable 24,000 --
Repayment of other mortgage notes payable (19,091) --
Increase in accrued mortgage interest 10,340 3,901
Principal payments on mortgage notes to
affiliates (548) --
Increase in mortgage payable, notes payable
and accrued interest to general partners
and affiliates 6,411 (1,095)
Principal payments on other mortgage notes (80) (82)
(Increase) decrease in restricted cash (3,457) 2,841
Increase in deferred refinancing costs (944) --
---------- ----------
Net cash provided by financing activities 16,631 5,565
---------- ----------
Net increase in cash and cash equivalents 168 67
Cash and cash equivalents, beginning of period 125 267
---------- ----------
Cash and cash equivalents, end of period $ 293 $ 334
========== ==========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 9,619 $ 11,376
========== ==========
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Deed in lieu of foreclosure in 1996 - See Note 4
Related party debt forgiveness and modification in 1996 - See Note 2
See notes to consolidated financial statements.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements, related footnotes and discussions contained in the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1996.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature except as discussed in Notes 2, 3, 4 and 5. Certain
amounts have been reclassified to conform to the September 30, 1997
presentation. The balance sheet at December 31, 1996 was derived from
audited financial statements at such date.
The results of operations for the three and nine months ended
September 30, 1997 and 1996 are not necessarily indicative of the
results to be expected for the full year.
2. Related Parties
The Partnership incurred approximately $329,000 of property and asset
management fees and approximately $135,000 of leasing and construction
fees through February 28, 1996, payable to an affiliate of the general
partner. As part of the sale of the Fuji Loan, (described in Note 3), the
Partnership agreed to retain new, unaffiliated management and leasing
agents for all of its properties.
In connection with the sale of the Fuji Loan, Winthrop Financial
Associates ("WFA") and certain of its affiliates entered into an agreement
with the Investor Partnership, the Operating Partnership and an affiliate
of Zeus Property LLC ("Zeus") with regard to amounts owed to WFA and its
affiliates by the Investor Partnership and the Operating Partnership (the
"Winthrop Debt Agreement"). Prior to this agreement, Winthrop and its
affiliates were owed, in the aggregate, $47,162,000 by the Investor
Partnership and the Operating Partnership. This amount was comprised of
cash advances made by Winthrop to the Operating Partnership, as well as
unpaid deferred fees related to the on-site management of the properties,
asset management and syndication. This amount also included accrued
interest on these outstanding balances.
Under the Winthrop Debt Agreement, Winthrop and its affiliates contributed
approximately $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") and is
payable from the excess cash flow, as defined, from 509 Fifth Avenue and
300 Park Avenue South. 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% and was scheduled to mature on July 31, 1997. 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 repayment of this Note. However, the holder of the
Receivables Note previously entered into a forbearance agreement which
prohibits it from exercising its remedies if the Receivables Note is not
satisfied at maturity. The Note was not satisfied on July 31, 1997. The
Partnership is currently negotiating to extend the Receivables Note.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Related Parties (Continued)
As of September 30, 1997, the outstanding balance against the Unsecured
Note was $8,577,000 and is included in notes payable and accrued interest
to general partners and affiliates.
3. Debt Modification
On February 28, 1996, Zeus purchased the existing debt held by The Fuji
Bank, Ltd. for $115 million. The Operating Partnership obtained a
reduction in the current interest required to be paid under the modified
loan which, based on current projections, will greatly reduce the
likelihood of monetary default under the loan prior to February 28, 1998,
the new maturity date for a portion of the loan. As part of the
restructuring of the Fuji loan, each of the Operating Partnership's 535
and 545 Fifth Avenue, 1372 Broadway and 757 Third Avenue properties (the
"Fuji Properties") were conveyed by the Operating Partnership to
newly-created limited liability companies which are wholly-owned,
indirectly, by the Operating Partnership and its partners.
The modified Fuji loan (the "Modified Loan") is comprised of several
component non-recourse loans, all held by Zeus and its affiliates. The
senior loan component consists of a series of secured notes in the
aggregate principal amount of $102,240,000 at September 30, 1997. These
notes have an annual interest rate of 295 basis points over 30-day LIBOR
(8.60% at September 30, 1997), 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%
through February 28, 1999 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.
The Partnership had maturing mortgage debt, totaling approximately
$29,000,000, plus accrued interest, due between July 31, 1997 and December
31, 1997, approximately $102,000,000 due February 28, 1998 and a
$25,000,000 mandatory principal payment due March 15, 1998. The
Partnership is currently negotiating to refinance or restructure
$10,000,000 of the 1997 liabilities. The remaining $19,000,000 of debt,
which was due in 1997, has been refinanced with a new lender (see Note 6).
The $10,000,000 Receivables Note, which was scheduled to mature July 31,
1997, was not satisfied at maturity. The holder of the Receivables Note
previously entered into a forbearance agreement which prohibits it from
exercising its remedies if the Receivables Note was not satisfied at
maturity. Based on the current value of the Properties it is highly
unlikely the Partnership 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.
9 of 16
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Deed in Lieu of Foreclosure
In early January 1996, a deed in lieu of foreclosure agreement was reached
between the Operating Partnership and Sanwa Business Credit Corporation
("Sanwa"). Pursuant to the deed in lieu of foreclosure agreement, the
Operating Partnership transferred title to the property located at 227
East 45th St. to Sanwa on January 24, 1996. In exchange, Sanwa released,
as of the closing date, the Operating Partnership from all claims,
demands, liabilities, obligations, actions and causes of any kind with
regard to Sanwa.
As of December 31, 1995, the related indebtedness to Sanwa was
approximately $24,409,000. As a result of the above described
transactions, the Operating Partnership has recognized an extraordinary
gain of approximately $13,688,000. The property was stated at its fair
value as of December 31, 1995 as a result of a recorded write-down.
5. Contract for Sale of Property and Debt Redesignation
In May 1997, the Partnership contracted to sell its 1372 Broadway property
to an unaffiliated third party for $52,000,000. The sale is expected to
close in January 1998. In August 1997, Zeus sold the portion of the
Modified Loan allocated to 1372 Broadway to the ultimate purchaser of the
property, thus eliminating the property from the cross-collateralization
provision of the Modified Loan. The terms of the loan remain unchanged.
All of the proceeds from such sale will be required to be used to satisfy
the $92,000,000 portion of the Modified Loan (including accrued and unpaid
interest) sold to the ultimate purchaser of the property.
6. Mortgage Notes Payable
On August 25, 1997, the Partnership refinanced its existing indebtedness
secured by its 300 Park Avenue South and 509 Fifth Avenue properties. The
existing loans, aggregating $19,091,000 (plus $824,000 of accrued and
unpaid interest) were refinanced with two new loans aggregating
$24,000,000. These loans have an annual interest rate of 265 basis points
over 30-day LIBOR (8.30% at September 30, 1997), maturing on the earlier
of two years or the time at which the Modified Loan matures or is
satisfied in full. In addition, a capital improvement escrow account was
established at closing with the excess proceeds from the loans. In
connection with the refinancings, the Operating Partnership's 300 Park
Avenue South and 509 Fifth Avenue properties were conveyed by the
Operating Partnership to newly created limited liability companies which
are wholly-owned, indirectly, by the Operating Partnership and its
partners. The Partnership incurred approximately $944,000 in financing
costs in connection with the refinancings.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q SEPTEMBER 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Item should be read in conjunction with the Consolidated
Financial Statements and other items contained elsewhere in this
Report.
Liquidity and Capital Resources
The Registrant serves as the general partner of Nineteen New York
Properties Limited Partnership (the "Operating Partnership"). All of
the Operating Partnership's six remaining properties (the "Properties")
are office buildings located in New York City. The Registrant's sole
source of revenue is from distributions from the Operating Partnership
and interest income on cash reserves. The Registrant is responsible for
its operating expenses. The Operating Partnership receives rental
revenue from tenants and is responsible for operating expenses,
administrative expenses, capital improvements and debt service
payments. As discussed below, based on the current value of the
Properties it is highly unlikely the Registrant will be able to meet
its 1998 maturing debt obligations. Accordingly, 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.
The Registrant and the Operating Partnership had $293,000 of cash and
cash equivalents and $12,392,000 of restricted cash at September 30,
1997, as compared to $125,000 and $8,935,000 respectively, at December
31, 1996. Restricted cash primarily includes amounts held in mortgage
collateral accounts. The $168,000 increase in cash and cash equivalents
at September 30, 1997, as compared to December 31, 1996, was due to
$16,631,000 of cash provided by financing activities, which was
substantially offset by $8,887,000 of cash used in investing activities
and $7,576,000 of cash used in operating activities. Cash used in
investing activities consisted primarily of $5,807,000 of improvements
to real estate, the majority of which were tenant improvements, and
$3,080,000 of cash expended on leasing activities. Cash provided by
financing activities consisted primarily of the accrual of $10,340,000
of interest on mortgage notes payable, $5,685,000 in borrowings against
the unsecured line of credit, and $533,000 of accrued and unpaid
interest on the Receivables Note. In addition, Registrant used $548,000
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 Operating Partnership's only other source of liquidity is a
$19,550,000 unsecured credit line provided by Zeus Property LLC
("Zeus"). This credit line can be used by the Operating Partnership to
fund capital improvements and tenant lease-up costs at the Fuji
Properties. However, any borrowings under this credit line are subject
to Zeus' discretion. Accordingly, it is possible that the Operating
Partnership may not be able to borrow against this credit line each
time it deems it necessary. As of September 30, 1997, the outstanding
borrowings against the unsecured credit line were $8,577,000.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (Continued)
The Registrant had maturing mortgage debt, totaling approximately
$29,000,000, plus accrued interest, due between July 31, 1997 and
December 31, 1997, approximately $102,000,000 due February 28, 1998 and
a $25,000,000 mandatory principal payment due March 15, 1998. The
Registrant is currently negotiating to refinance, extend, or
restructure $10,000,000 of the 1997 maturing liabilities. The remaining
$19,000,000 of debt, which was due in 1997, was refinanced with a new
lender (see below). The $10,000,000 Receivables Note, which was
scheduled to mature July 31, 1997, was not satisfied at maturity. The
holder of the Receivables Note previously entered into a forbearance
agreement which prohibits it from exercising its remedies if the
Receivables Note was not satisfied at maturity.
In May 1997, the Registrant entered into an agreement to sell its 1372
Broadway property for $52,000,000. All of the proceeds from such sale
will be required to be used to partially satisfy the Modified Loan. The
sale is expected to close in January 1998.
In August 1997, Zeus sold the portion of the Modified Loan allocated to
1372 Broadway to the ultimate purchaser of the property. This
transaction is not expected to have any effect on the Registrant.
On August 25, 1997, the Partnership refinanced its existing
indebtedness secured by its 300 Park Avenue South and 509 Fifth Avenue
properties. The existing loans, aggregating $19,091,000 (plus $824,000
of accrued and unpaid interest) were refinanced with two new loans
aggregating $24,000,000. These loans have an annual interest rate of
265 basis points over 30-day LIBOR (8.30% at September 30, 1997),
maturing on the earlier of two years or the time at which the Modified
Loan matures or is satisfied in full. In addition, a capital
improvement escrow account was established at closing with the excess
proceeds from the loans. In connection with the refinancings, the
Operating Partnership's 300 Park Avenue South and 509 Fifth Avenue
properties were conveyed by the Operating Partnership to newly created
limited liability companies which are wholly-owned, indirectly, by the
operating partnership and its partners. The Partnership incurred
approximately $944,000 in financing costs in connection with the
refinancings.
The Registrant's original objective of capital appreciation will not be
achieved and it is anticipated that the Registrant's partners will not
receive any future distributions. Accordingly, the Registrant's
partners will not receive a return of their original investment.
12 of 16
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (Continued)
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 Registrant 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 Registrant's liquidity and
capital resources.
Real Estate Market
The income and expenses of operating the Properties owned by the
Operating Partnership are subject to factors 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
Nine Months ended September 30, 1997 vs. September 30, 1996
The Partnership generated a net loss of approximately $16.7 million for
the nine months ended September 30, 1997, as compared to a net loss
before extraordinary gain of approximately $12.9 million for the nine
months ended September 30, 1996. The increase in net loss before the
extraordinary gain was due to a decrease in revenues and an increase in
expenses.
Base rent and rent escalations (collectively "rental and escalation
income") decreased to approximately $31.4 million for the nine months
ended September 30, 1997 as compared to approximately $32.7 million for
the nine months ended September 30, 1996. Rental and escalation income
declined due to a decrease in rental revenues at 757 Third Avenue, 1372
Broadway, 535 Fifth Avenue and 300 Park Avenue South for the nine
months ended September 30, 1997, as compared to 1996. The lower rental
revenues were primarily the result of lower effective rental rates.
Rental and escalation income at the other properties remained
relatively constant.
Expenses increased by $3.2 million for the nine months ended September
30, 1997, as compared to 1996. The increase in overall interest expense
was partially offset by decreases in asset and property management fees
and depreciation and amortization expense. In addition, overall
operating expenses (i.e., real estate and other taxes, payroll,
utilities, repairs and maintenance, and cleaning and security) and
other expenses remaining relatively constant.
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1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Results of Operations
Nine Months ended September 30, 1997 vs. September 30, 1996 (Continued)
Interest expense increased due to the Modified Loan incurring interest
at an overall higher interest rate than on the prior loan. Asset and
property management fees declined due to the elimination of the asset
management fee payable to a related party and the new management
agreement (which changed the previous fee of 2.5% of cash receipts to a
fixed fee). Depreciation and amortization expenses declined due to
fixed assets and intangible assets becoming fully amortized during
1996, which was only partially offset by the current years fixed asset
additions and deferred rent amortization.
On May 27, 1997, approximately 90,000 square feet of unoccupied space
at the Partnerships 757 Third Avenue Property was re-leased,
representing approximately 20% of the building. As of September 30,
1997 and 1996, the current portfolio's occupancy was 86% and 78%,
respectively. During the first nine months of 1997, the Operating
Partnership signed new, renewal, extension, and expansion leases
totaling 445,266 square feet at rental terms comparable to buildings of
similar quality in the market. The increase in occupancy and the
ability to retain tenants is a direct result of the improved economy.
Three Months ended September 30, 1997 vs. September 30, 1996
The Partnership generated a net loss of approximately $4.5 million for
the three months ended September 30, 1997, as compared to a net loss
before extraordinary gain of approximately $4.9 million for the three
months ended September 30, 1996. The decrease in net loss was due to
increases in revenues and expenses.
Rental and escalation income increased to approximately $12.7 million
for the three months ended September 30, 1997 as compared to
approximately $10.3 million for the three months ended September 30,
1996. Rental and escalation income increased due to an increase in
rental revenues at 757 Third Avenue, 1372 Broadway, 535 Fifth Avenue
and 300 Park Avenue South for the three months ended September 30,
1997, as compared to 1996. The higher rental revenues were primarily
the result of an increase in occupancy for the three months ended
September 30, 1997. Rental and escalation income at the other
properties remained relatively constant.
Expenses increased by $2.2 million for the three months ended September
30, 1997, as compared to 1996. The increase in overall interest
expense, depreciation and amortization expense and overall operating
expenses (i.e., real estate and other taxes, payroll, utilities,
repairs and maintenance, and cleaning and security) were only slightly
offset by a decline in professional fees and asset and property
management fees.
14 of 16
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1997
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8K:
No report on Form 8-K was filed during the period.
15 of 16
<PAGE>
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
FORM 10-Q-SEPTEMBER 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
BY: TWO WINTHROP PROPERTIES, INC.
MANAGING GENERAL PARTNER
BY: /s/ Michael L. Ashner
----------------------------
Michael L. Ashner
Chief Executive Officer
BY: /s/ Edward V. Williams
-----------------------------
Edward V. Williams
Chief Financial Officer
DATED: November 14, 1997
16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from 1626 New York
Associates Limited Partnership and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,685,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 1,460,000
<ALLOWANCES> (638,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 271,742,000
<DEPRECIATION> (138,641,000)
<TOTAL-ASSETS> 168,296,000
<CURRENT-LIABILITIES> 0
<BONDS> 298,137,000 <F2>
<COMMON> 0
0
0
<OTHER-SE> (140,502,000)
<TOTAL-LIABILITY-AND-EQUITY> 168,296,000
<SALES> 0
<TOTAL-REVENUES> 31,432,000
<CGS> 0
<TOTAL-COSTS> 27,737,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,460,000
<INCOME-PRETAX> (16,720,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,720,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,720,000)
<EPS-PRIMARY> (11,967.16)
<EPS-DILUTED> (11,967.16)
<FN>
<F1> Cash includes $12,392,000 of restricted cash.
<F2> Includes accrued interest of $50,937,000.
</FN>
</TABLE>
