FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2000

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 0-2670

60 EAST 42ND ST. ASSOCIATES

(Exact name of registrant as specified in its charter)

A New York Partnership 13-6077181

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

60 East 42nd Street, New York, New York 10165

(Address of principal executive offices)

(Zip Code)

(212) 687-8700

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ]. No [ ].

An Exhibit Index is located on Page 13 of this Report.

Number of pages (including exhibits) in this filing: 13

60 East 42nd St. Associates

Condensed Balance Sheet

(Unaudited)

Assets June 30, 2000 December 31, 1999

Current assets:

Cash $ 96,122 $ 87,879

----------- -----------

Total current assets 96,122 87,879

----------- -----------

Real estate

Land 7,240,000 7,240,000

---------- ----------

Buildings and building improvements 18,534,135 18,534,135

Less, allowance for depreciation 18,534,135 18,534,135

----------- -----------

-0- -0-

----------- ----------

Building improvements, construction

in progress 2,140,607 1,062,568

---------- ----------

Second mortgage costs 946,574 -0-

Less, allowance for amortization 63,511 -0-

----------- ---------

883,063 -0-

----------- ----------

Mortgage refinancing costs 249,522 249,522

Less, allowance for amortization 142,173 129,785

----------- -----------

107,349 119,737

----------- -----------

Total assets $10,467,141 $ 8,510,184

=========== ===========

Liabilities and Capital (Deficit):

Current Liabilities:

Due to Lessee $ 2,140,607 1,062,568

Accrued interest payable 6,842 -0-

Accrued expenses 80,125 45,253

----------- -----------

Total Current Liabilities 2,227,574 1,107,821

----------- -----------

Long-term debt $13,020,814 12,020,814

----------- -----------

Capital (deficit):

Capital (deficit), January 1, (4,618,451) (4,548,422)

Add, Net income:

January 1, 2000 through June 30, 2000 360,414 -0-

January 1, 1999 through December 31, 1999 -0- 3,758,620

----------- -----------

(4,258,037) (789,802)

----------- -----------

60 East 42nd St. Associates

Condensed Balance Sheet

(Unaudited)

(CONTINUED)

Less Distributions: June 30, 2000 December 31, 1999

Monthly distributions,

January 1, 2000 through June 30, 2000 523,210 -0-

January 1, 1999 through December 31, 1999 -0- 1,046,420

Distribution on November 30, 1999 of

Additional Rent for the lease year

ended September 30, 1999 -0- 2,782,229

----------- -----------

Total distributions 523,210 3,828,649

----------- -----------

Capital (deficit):

June 30, 2000 $(4,781,247) $ -0-

December 31, 1999 -0- (4,618,451)

----------- -----------

Total liabilities and capital (deficit):

June 30, 2000 $10,467,141 -0-

December 31, 1999 -0- $8,510,184

=========== ==========

60 East 42nd St. Associates

Condensed Statement of Cash Flows

(Unaudited)

January 1, 2000 January 1, 1999

through through

June 30, 2000 June 30, 1999

Cash flows from operating activities:

Net income $ 360,414 $ 510,822

Adjustments to reconcile net income

to cash provided by operating

activities:

Amortization of mortgage

refinancing costs 75,900 12,388

Accrued expenses 34,871 -0-

Accrued interest payable 6,842 -0-

--------- ---------

Net cash provided by operating

activities $ 478,027 $ 523,210

----------- ----------

Cash flows from financing activities:

Increase in Second Mortgage Costs $ (946,574) $ -0-

Proceeds from Second Mortgage 1,000,000 -0-

Cash distributions (523,210) (523,210)

----------- ----------

Net cash used in financing

activities $ (469,784) $(523,210)

----------- ----------

Net increase in cash $ 8,243 $ -0-

Cash, beginning of period 87,879 87,879

----------- ----------

Cash, end of period $ 96,122 $ 87,879

=========== ==========

January 1, 2000 January 1, 1999

through through

June 30, 2000 June 30, 1999

Cash paid for:

Interest $ 551,306 $ 531,921

=========== ==========

Notes to Condensed Financial Statements (Unaudited)

Note A Organization and basis of Presentation

In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of June 30, 2000, its results of operations for the six and three months ended June 30, 2000 and 1999, its cash flows for the six months ended June 30, 2000 and 1999 and its changes in Partners' capital for the six months ended June 30, 2000. Information included in the condensed balance sheet as of December 31, 1999 has been derived from the audited balance sheet included in Registrant's Form 10-K for the year ended December 31, 1999 (the "10-K") previously filed with the Securities and Exchange Commission (the "SEC"). Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed financial statements should be read in conjunction with the financial statements, notes to financial statements and the other information in the 10-K. The results of operations for the six months ended June 30, 2000 are not necessarily indicative of the results to be expected for the full year.

Registrant is a partnership which was organized on September 25, 1958. On October 1, 1958, Registrant acquired fee title to the Lincoln Building (the "Building") and the land thereunder, located at 60 East 42nd Street, New York, New York (the "Property"). Registrant's partners are Peter L. Malkin, Anthony E. Malkin, Scott D. Malkin, Thomas N. Keltner, Jr., Richard A. Shapiro, Jack Feirman and Mark Labell, (individually, a "Partner" and, collectively, the "Partners"), each of whom also acts as an agent for holders of participations in the Registrant (individually, a "Participant" and, collectively, "Participants").

Registrant leases the Property to Lincoln Building Associates ("Lessee") under a long-term net operating lease (the "Lease"), the current term of which expires on September 30, 2008. (There is one additional 25-year term which, if exercised, will extend the Lease until September 30, 2033.) Lessee is a partnership whose partners consist of, among others, trusts for the benefit of members of Peter L. Malkin's family. Five of the seven Partners in Registrant are current members of Wien & Malkin LLP, 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and to Lessee (the "Supervisor"). See Note C of this Item 1 ("Note C").

In 1999, the participants of Associates and the partners in Lessee consented to a building improvement program (the "Program") estimated to cost approximately $28,000,000 and expected to take two to three years to complete. To induce the Lessee to approve the Program, Associates agreed to grant to the Lessee, upon completion of the Program, an extension of the lease for an additional 50 years to 2083.

is required to pay Registrant:

(i) annual basic rent (the "Basic Rent") equal to the sum of $24,000 for supervisory services payable to Supervisor plus the constant installment payments of interest and amortization (excluding any balloon principal due at maturity) payable during such year under all mortgages to which the Lease is subordinate, provided that the aggregate principal balance of all mortgages now or hereafter placed on the Property does not exceed $ 40,000,000 plus refinancing costs.

(ii) (A) additional rent (the "Additional Rent") equal to the lesser of (x) Lessee's net operating income for the lease year or (y) $1,053,800 and (B) further additional rent ("Further Additional Rent") equal to 50% of any remaining balance of Lessee's net operating income for such lease year. (Lessee has no obligation to make any payment of Additional Rent or Further Additional Rent until after Lessee has recouped any cumulative operating loss accruing from and after September 30, 1977. There is currently no accumulated operating loss against which to offset payment of Additional Rent or Further Additional Rent.)

(iii) An advance against Additional Rent equal to the lesser of (x) Lessee's net operating income for the preceding lease year or (y) $1,053,800, which, in the latter amount, will permit basic distributions to Participants at an annual rate of approximately 14.95% per annum on their remaining cash investment in Registrant; provided, however, if such advances exceed Lessee's net operating income for any Lease year, advances otherwise required during the subsequent lease year shall be reduced by an amount equal to such excess until Lessee shall have recovered, through retention of net operating income, the full amount of such excess. After the participants have received distributions equal to a return of 14% per annum, $7,380 is paid to Supervisor from the advances against Additional Rent.

Further Additional Rent income is recognized when earned from the Lessee, at the close of the lease year ending September 30. Such income is not determinable until the Lessee, pursuant to the Lease, renders to Registrant a report on the operation of the Property. Further Additional Rent for the lease year ended September 30, 1999 was $3,091,366. After the payment of $309,137 to Supervisor as an additional payment for supervisory services, the balance of $2,782,229 was distributed to the Participants on November 30, 1999.

A refinancing of the existing first mortgage loan on the Property in the original principal amount of $12,020,814 was closed on October 6, 1994 (the "Mortgage"). Annual Mortgage charges are $1,063,842, payable in equal monthly installments of $88,654, representing interest only at the rate of 8.85% per annum. The Mortgage will mature on October 31, 2004 and is prepayable in whole after October 6, 1995 with a penalty providing interest protection to the mortgagee. The Mortgage is prepayable in whole without penalty during the 90-day period prior to its maturity date.

The refinancing costs were capitalized by Registrant and are being expensed ratably during the period of the mortgage extension from October 6, 1994 to October 31, 2004.

If the Mortgage is modified, upon the first refinancing which would result in an increase in the amount of the outstanding principal balance of the mortgage, the Basic Rent shall be equal to the Wien & Malkin LLP annual supervisory fee of $24,000 plus an amount equal to the product of the new debt service percentage rate under the refinanced mortgage multiplied by the principal balance of the mortgage immediately prior to such refinancing. If there are subsequent refinancings which result in an increase in the amount of the outstanding principal balance of the mortgage, the principal balance referred to above shall be reduced by the amount of the mortgage amortization payable from Basic Rent subsequent to the first refinancing.

A second mortgage loan with Emigrant Savings Bank in the amount of $27,979,186 was approved and an initial advance of $1,000,000 was taken on March 8, 2000. Monthly payments of interest only at the rate of 8.21% per annum apply to the initial advance and additional advances of up to $6,000,000 made through September 30, 2000. Amounts advanced from October 1, 2000 through September 30, 2002 and amounts in excess of $7,000,000 are at interest only at the 30 day LIBOR rate. Amounts advanced after October 1,

During the prepayment period, Borrower has the option to prepay the second mortgage note in whole only, on the first day of any month upon (i) prior written notice given by prepaid registered or certified mail at least sixty (60) days prior to the date fixed for prepayment and (ii) the payment of the prepayment premium plus accrued interest. There shall be no prepayment premium after October 1, 2004 to and including the Maturity Date.

Note C - Supervisory Services

Registrant pays Supervisor for supervisory services and disbursements $24,000 per annum (the "Basic Payment"), plus an additional payment of 10% of all distributions to Participants in Registrant in any year in excess of the amount representing a return at the rate of 14% per annum on their remaining cash investment (the "Additional Payment"). At June 30, 2000, such remaining cash investment was $7,000,000 representing the original cash investment of Participants in Registrant.

No remuneration was paid during the six month period ended June 30, 2000 by Registrant to any of the Partners as such. Pursuant to the fee arrangements described herein, Registrant paid Supervisor $12,000 of the Basic Payment and $3,690 on account of the Additional Payment, for supervisory services for the six month period ended June 30, 2000. The supervisory services included, among other things, the preparation of certain reports required by the Securities and Exchange Commission, the monitorin

Reference is made to Note B of Item 1 ("Note B") for a description of the terms of the Lease between Registrant and Lessee. As of June 30, 2000, Peter L. Malkin owned a partnership interest in Lessee. The respective interests, if any, of the Partners in Registrant and Lessee arise solely from ownership of their respective participations in Registrant and, in the case of Peter L. Malkin, his individual ownership of a partnership interest in Lessee. The Partners receive no extra or special benefit rship interests in Supervisor, is entitled to receive his share of any supervisory, service, legal or other remuneration paid to Supervisor for services rendered to Registrant and Lessee.

As of June 30, 2000, the Partners owned of record and beneficially an aggregate $61,667 of participations in Registrant, representing .88% of the currently outstanding participations therein.

In addition, as of June 30, 2000, certain of the Partners in Registrant (or their respective spouses) held additional Participations in Registrant as follows: