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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 0-768
GARMENT CAPITOL ASSOCIATES
(Exact name of registrant as specified in its charter)
New York 13-6083208
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
60 East 42nd Street, New York, New York 10165
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 687-8700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered pursuant to section 12(g) of the Act:
$10,470,000 of Participations in Partnership Interests
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
An Exhibit Index is located on pages 34 through 36 of this Report.
Number of Pages (including exhibits) in this filing: 36
PART I
Item 1. Business.
(a) General
Registrant, a partnership, was organized on January 10,
1957. On May 1, 1957, Registrant acquired fee title to the
Garment Capitol Building (the "Building") and the land thereunder,
located at 498 Seventh Avenue, New York, New York (the
"Property"). Registrant's partners are Peter L. Malkin, Thomas N.
Keltner, Jr. and Richard A. Shapiro (individually, a "Partner"
and, collectively, the "Partners"), each of whom also acts as
agent for holders of participations in their respective
partnership interests in Registrant (each holder of a
participation, individually, a "Participant" and, collectively,
the "Participants"). As described below, the Property has been
sold and distributions from sale proceeds has been made to the
Participants.
Registrant did not operate the Property. Registrant
leased the Property to 498 Seventh Avenue Associates (the
"Original Lessee") under a net operating lease (the "Operating
Lease") which commenced as of May 1, 1957 and was scheduled to
expire on April 30, 2007.
In 1994 and 1995 the Original Lessee made capital calls
on its partners in the aggregate amount of $1,300,000 to defray
certain operating expenses and improvement costs at the Property.
Despite these new capital infusions, however, the Original Lessee
concluded that to return the Property to profitability would
require a very large additional capital investment, estimated by
the Original Lessee to be as high as $16,000,000. Therefore, on
December 29, 1995, in accordance with the terms of the Operating
Lease, the Original Lessee assigned the Operating Lease to 4987
Corporation (the "New Lessee"), thereby effectively terminating
the liability of the Original Lessee and its partners under the
Operating Lease. The shares in the New Lessee are owned by the
partners in the Original Lessee except that a substantial portion
of the shares originally owned by Peter L. Malkin is held for the
benefit of members of his family but he retains voting control.
The New Lessee had paid basic rent under the Operating
Lease through March 27, 1997, (NSP) the date of the sale of the
Property, as hereinafter described. Registrant applied these
rents to cover (1) its monthly mortgage payments to the Apple Bank
for Savings ("Apple Bank") on Registrants' fee mortgage on the
Property (the "Mortgage Loan"), (2) its monthly fee for
supervisory services and (3) its distributions to the Participants
in Registrant. The New Lessee did not pay the New York City real
estate taxes and Business Improvement District ("BID") assessments
in the amounts of $936,180.00 and $29,695.14, respectively, and
certain other minor assessments and charges aggregating less than
$1,500, all of which were due on January 1, 1996 or shortly
thereafter. The New Lessee also failed to pay the New York City
real estate taxes and BID assessments in the amounts of
$1,053,254.50 and $28,529.26, respectively, which were due on July
1, 1996 and $740,845.50 and $28,529.26, respectively, which were
due on January 1, 1997. As a result, although payment of the
January 1, 1996 and July 1, 1996 and January 1, 1997 real estate
taxes and BID assessments has been made as described below, the
New Lessee was in default of the Operating Lease as of January 1,
1996.
The New Lessee requested that Registrant forbear from
exercising its rights and remedies under the Operating Lease,
including termination of the Operating Lease, by reason of the
failure to pay the January 1, 1996 and July 1, 1996 real estate
taxes and BID assessments, while management of Registrant
solicited the consent of the Participants to a sale of the
Property (the "Solicitation"). On July 26, 1996, the Partners
mailed to the Participants a STATEMENT ISSUED BY THE AGENTS IN
CONNECTION WITH THE SOLICITATION OF CONSENTS OF THE PARTICIPANTS
(the "Statement") requesting their authorization for a sale of the
Property and forbearance in favor of the New Lessee. The details
of the Partners' proposal are provided in the Definitive Proxy
Statement which was filed with the Securities and Exchange
Commission as Schedule 14-A on July 25, 1996, and is incorporated
herein by reference. If Registrant did forbear, the New Lessee
agreed to cooperate fully with Registrant in connection with the
sale of the Property and to continue to perform its other
obligations under the Operating Lease, including payment of Basic
Rent, to enable Registrant to continue its monthly distributions
to the Participants, pay its supervisory fee and pay its monthly
mortgage obligation. The continuation of the Operating Lease was
also to serve to insulate Registrant from third party liabilities
attendant on property operations. Because the consent
solicitation program included the continuation of the Operating
Lease with the New Lessee, Registrant did not send a notice of
default under the Operating Lease based on the failure of the New
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Lessee to pay the January 1, 1996 and July 1, 1996 real estate
taxes and BID assessments.
Although the failure to pay the January 1, 1996, July 1,
1996 and January 1, 1997 real estate taxes and BID assessments
also constituted a breach of Registrant's obligations under the
Mortgage Loan, Apple Bank had agreed to forbear from exercising
its rights and remedies during the period of the solicitation of
consents through a sale of the Property based on arrangements
consummated in March 1996 between the shareholders of the New
Lessee (or designees on their behalf) and Apple Bank to fund the
January 1, 1996 real estate taxes and BID assessments and certain
future real estate taxes and BID assessments on the Property
(together with the January 1, 1996 real estate taxes, the "Real
Estate Taxes") through protective advances under the Mortgage
Loan. The shareholders of the New Lessee (or designees on their
behalf) had personally borrowed from Apple Bank (a) on April 2,
1996, the sum of $1,012,274.18, equal to the January 1, 1996 real
estate taxes and BID assessments and interest thereon to the date
of the borrowing, and certain other minor city charges and
interest aggregating less than $1,500 and (b) on June 28, 1996,
the sum of $1,081,783.76 equal to the July 1, 1996 real estate
taxes and BID assessment and (c) on December 31, 1996, the sum of
$769,374.76 equal to the January 1, 1997 real estate taxes and BID
assessment. The April 2, 1996 borrowing was used to fund a
protective advance by Apple Bank to pay the January 1, 1996 real
estate taxes and BID assessments, interest thereon and such minor
charges, through the purchase of a subordinate participating
interest in the Mortgage Loan in such amount. The June 28, 1996
and December 31, 1996 borrowings were used to fund protective
advances by Apple Bank to pay, respectively, the July 1, 1996 and
January 1, 1997 Real Estate Taxes and BID assessments through the
purchase of additional subordinate participating interests in the
Mortgage Loan in such amounts. Interest and principal required to
be paid on the protective advances and on any future protective
advances have been paid by the New Lessee.
On January 29, 1997, Registrant received the consent of
the Participants for the sale and forbearance program and for the
liquidation of Registrant, as described in the Statement. See
Items 10, 11 12 and 13 hereof for a description of the services
rendered by, and compensation paid to, Supervisor and for a
discussion of certain relationships which may pose actual or
potential conflicts of interest among Registrant, Original Lessee,
New Lessee and certain of their respective affiliates.
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Registrant, together with the New Lessee, entered into a
contract with George Comfort & Sons, Inc., as Agent, and Tirrem
Management Company, Inc., collectively as Purchasers, to sell the
Property to the Purchasers for $42,000,000, subject to adjustments
(the "Contract of Sale"). The sale closed as of March 27, 1997.
After priority allocation for certain payments, as more
particularly described in the Statement, net sale proceeds of
$34,885,810 were allocated between Registrant and the New Lessee
pursuant to the formula described in the Statement, as approved by
the Participants. From its share of the proceeds, Registrant had
made an initial distribution on March 31, 1997 of $27,000,000 to
the Participants, and each holder of an original $10,000
Participation, as reduced to $5,000, received an initial
distribution of sale proceeds of $25,714, which included the
return of the Participant's remaining original capital investment.
On July 23, 1997, an additional distribution of $800,000 ($761.90
per $5,000 participation unit) was made to the Participants out of
the proceeds of sale.
Based on advice from legal counsel, the partnership was
terminated on November 30, 1997. At the time of termination,
Registrant was still involved in litigation. In order to provide
for the anticipated costs of the litigation, an escrow account, in
the amount of $165,357 is being held by Supervisor as of December
31, 2000. See Item 3 hereto.
(b) The Operating Lease
Under the Operating Lease, the New Lessee paid (i) annual
basic rent of $1,090,000 (the "Basic Rent") to Registrant and (ii)
additional rent equal to 50% of New Lessee's net operating profit
in excess of $200,000 for each Operating Lease year (the
"Additional Rent").
Additional Rent income was recognized when earned from
the New Lessee, at the close of the lease year ending April 30.
Such income, if any, was not determined until the New Lessee,
pursuant to the Operating Lease, rendered to Registrant a
certified report on the operation of the Property. The Operating
Lease required that this report be delivered to Registrant
annually within 60 days after the end of each such lease year.
All Additional Rent income and certain supervisory service expense
could only be determined after the receipt of such report. The
Operating Lease did not provide for the New Lessee to render
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interim reports to Registrant, so no Additional Rent income was
reflected for the period between the end of the Operating Lease
year and the end of Registrant's fiscal year. There was no
additional rent for the eleven months ended November 30, 1997 and
for the fiscal year ended December 31, 1996. See Note 4 of Notes.
(c) The First Mortgage Loan
On March 23, 1995, Registrant entered into a Modification
and Extension Agreement (the "Modification"), as of December 1,
1992, with Apple Bank concerning the Mortgage Loan, which was
originally made on November 30, 1987 in the principal amount of
$3,485,000. The Mortgage Loan was secured by a first mortgage on
the Property.
The principal terms of the Modification were as follows:
Date: As of December 1, 1992.
Amount as of the
effective date of
the Modification: $3,376,340.61.
Term: Five years, maturing on December 1, 1997.
Interest Rates: 10.0% per annum from December 1, 1992
through October 31, 1993;
10.50% per annum from November 1, 1993
through November 30, 1994; and
10.60% per annum from December 1, 1994
through December 1, 1997.
Monthly
Payments: $36,282.33 from January 1, 1993 through
November 1, 1993;
$37,276.35 from December 1, 1993 through
December 1, 1994; and
$37,465.52 from January 1, 1995 through
December 1, 1997.
Prepayment
Privilege: The Mortgage Loan was prepayable at any time
in whole only, without penalty, on 60 days'
prior written notice.
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The following provisions from the Mortgage Loan before
the Modification continued to be applicable during the extended
term:
Liability: No Partner had personal liability for the
obligation under the Mortgage Loan to pay
principal and interest;
Due on Sale: Upon a sale or further encumbrance of the
Property without Apple Bank's consent, the
Mortgage Loan would have become immediately
due and payable; and
Operating Lease: No modification or cancellation of the
Operating Lease was permitted without Apple
Bank's consent.
The Mortgage Loan was repaid in full in connection with
the sale of the Property.
The total amount paid to Apple Bank in respect of the
Mortgage Loan was $5,809,686. This amount consisted of the
following elements: (a) principal - $2,886,125 (b) accrued
interest on the principal balance to the date of sale - $22,945;
(c) prepayment charges to expiration of 60 day notice period (as
reduced based on discussions between Apple Bank and Supervisor -
$14,419; (d) real estate tax advances - $2,863,433 (of which
amount $333,181 was paid by the New Lessee from its share of sale
proceeds, as contemplated by the statement; and (e) accrued
interest on the real estate tax advances - $22,764 (paid by the
New Lessee).
(d) Competition
Since the sale of the Building in March, 1997, no
operations have been conducted at the Building directly or
indirectly for the account of Registrant or the New Lessee.
(e) Tenant Operating Leases
The New Lessee operated the Building free from any
federal, state or local government restrictions involving rent
control or other similar rent regulations which may be imposed
upon residential real estate in Manhattan. Any increase or
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decrease in the amount of rent payable by a tenant was governed by
the provisions of the tenant's lease.
Item 2. Property.
Registrant owned the Building located at 498 Seventh
Avenue, New York, New York, known as the "Garment Capitol
Building," and the land thereunder. See Item 1 hereof. The
Building, erected in 1921 and containing 24 floors, stands on the
southwest corner of Seventh Avenue and 37th Street in New York
City's Garment District. The Building contains office, showroom
and loft space. The Building is equipped with individual air-
conditioning units and has 11 passenger elevators and 10 freight
elevators. The Building was leased to the New Lessee under the
Operating Lease, the initial term of which expired on April 30,
1982 and which contained two 25-year renewal options, the first of
which was exercised on January 7, 1981. See Item 1 hereof for
additional information concerning the Operating Lease. The
Property was sold on March 27, 1997 pursuant to the Contract of
Sale. See Item 1.
Item 3. Legal Proceedings.
The Property of Registrant is the subject of the
following pending litigation:
On October 4, 1996, the alleged holder of three
participation interests in Registrant brought suit in the U.S.
District Court for the Southern District of New York against the
New Lessee, the Original Lessee, the partners in Registrant, and
Supervisor. Registrant was a nominal defendant. The suit claims
that defendants violated the anti-fraud provisions of the federal
securities laws and committed breaches of fiduciary duty and fraud
in relation to the Solicitation. The suit is a class action. The
suit seeks to enjoin the allocation of sale proceeds to the New
Lessee approved by the Participants, money damages and related
relief. Defendants responded to the complaint with a motion
seeking dismissal of the action in its entirety. The Court
granted that motion and dismissed the action by order and decision
dated December 8, 1997.
Upon plaintiff's appeal of that order, the U.S. Court of
Appeals affirmed in part and reversed in part the dismissal of the
action. By Order dated August 11, 1999, plaintiff's derivative
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claims were dismissed. The case was certified as a class action by
order dated February 1, 2000 and was tried to the court (Baer, J.)
and a trial jury beginning on September 18, 2000. On September 27,
2000, the trial jury returned a verdict for all defendants on all
claims.
Plaintiff made a motion for judgment notwithstanding the
verdict and for a new trial. By opinion and order dated January
17, 2001, the court denied plaintiff's motion for judgment
notwithstanding the verdict and for a new trial, and plaintiff has
filed appeals from the jury verdict and the denial of those
motions. The complaint does not seek any relief against
Registrant, and, accordingly, Registrant's litigation counsel is
of the opinion that no material loss or other unfavorable outcome
of the action against Registrant is anticipated. In accordance
with the Solicitation, sale proceeds were allocated to repay the
Fee Mortgagee protective advances as well as all other sums then
outstanding on the Fee Mortgage. Pursuant to an agreement between
counsel for the plaintiff in the 1996 proceeding and counsel for
the defendants, net sale proceeds allocated to the New Lessee in
accordance with the formula set forth in the Solicitation would
not be distributed to the New Lessee, except upon 30 days' notice
to counsel for the plaintiff. Such allocated funds currently are
being held by Supervisor. The required 30-day notice was given to
counsel for the plaintiff on October 2, 2000.
On March 13, 1997, the alleged holder of a fractional
participation interest in Registrant brought suit in the U.S.
District Court for the Southern District of New York against New
Lessee, Original Lessee, Registrant's Partners and Supervisor.
Registrant was a defendant. The suit is essentially similar to
the legal action described in the preceding paragraph, alleging
that defendants violated the Federal proxy rules, committed
breaches of fiduciary duty and fraud in relation to the
Solicitation for the sale and forbearance program and for
liquidation of Registrant. The suit seeks to enjoin the
allocation of sale proceeds to New Lessee approved by the
Participants, money damages and related relief. Defendants
responded to the complaint with a motion seeking dismissal of the
action in its entirety. The Court granted the motion and
dismissed the action by the same order and decision dated December
8, 1997 and referred to in the preceding paragraph. Upon
plaintiff's appeal of the order, the U.S. Court of Appeals
affirmed in part and reversed in part the dismissal of the action.
By Order dated August 11, 1999, plaintiff's derivative claims were
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dismissed. The case was certified as a class action by order dated
February 1, 2000 and was tried to the Court (Baer, J.) and a trial
jury returned a verdict for all defendants on all claims.
Plaintiff made a motion for judgement notwithstanding the verdict
and for a new trial. By opinion and order dated January 17, 2001,
the court denied plaintiff's motion for judgement notwithstanding
the verdict and for a new trial, and plaintiff has filed appeals
from the jury verdict and the denial of those motions.
Registrant's litigation counsel is of the opinion that no loss or
other unfavorable outcome of the action against Registrant is
anticipated.
On July 24, 1997, a former holder of a 1.66% partnership
interest in the Original Lessee filed a complaint in New York
Supreme Court against Registrant, Original Lessee, New Lessee and
Peter L. Malkin, individually and as a partner or shareholder in
those entities. As against Registrant, the complaint alleges a
claim for damages or other relief based on the sale of the
Property and the allocation of sale proceeds to Registrant. An
answer for Registrant denying all allegations of liability and
damages asserted by plaintiff was filed. The claim against
Registrant in this action has been discontinued.
Item 4. Submission of Matters to a Vote of
Participants.
On July 26, 1996, the consent of Participants was sought
to the sale and forbearance program, and, following a sale, to the
liquidation of Registrant, as described in the Statement. The
consent of Participants was received by the Partners, and the
Property was sold on March 27, 1997. Registrant was terminated on
November 30, 1997. See Item 1(a).
PART II
Item 5. Market for Registrant's Common Equity
and Related Security Holder Matters.
Registrant was a partnership organized pursuant to a
partnership agreement dated January 10, 1957.
Registrant did not issue any common stock. The
securities registered by it under the Securities Exchange Act of
1934, as amended, consisted of participations in the partnership
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interests of the Partners in Registrant (the "Participations") and
are not shares of common stock or their equivalent. The
Participations represented each Participant's fractional share in
a Partner's undivided interest in Registrant and are divided
approximately equally among the Partners. A full unit of the
Participations was originally offered at a purchase price of
$10,000; fractional units were also offered at proportionate
purchase prices. In November 1957, one-half of the original
purchase price was returned to the Participants from the proceeds
of a first mortgage on the Property leaving a remaining unreturned
cash investment of $5,000 (a "$5,000 Participation"). On March
31, 1997 and July 23, 1997 distributions of sale proceeds from the
sale of the Property were made to the Participants. Each holder
of a $5,000 Participation received a total of $26,475.90, which
included a return of remaining original capital. Registrant has
not repurchased Participations in the past.
(a) The Participations were not traded on an
established securities market, nor were they readily tradable on a
secondary market or the substantial equivalent thereof. Based on
Registrant's transfer records, Participations were sold by the
holders thereof from time to time in privately negotiated
transactions and, in many instances, Registrant was not aware of
the prices at which such transactions occurred.
(b) Registrant did not pay dividends. No Additional
Rent was paid by the Original Lessee for the lease year ended
April 30, 1997. See Item 1 hereof. There were no restrictions on
Registrant's present or future ability to make distributions;
however, the amount of such distributions, particularly
distributions of Additional Rent, depended solely on the New
Lessee's payments of Basic Rent and Additional Rent to Registrant.
See Item 1 hereof and Note 9 of the Notes.
By reason of the sale of the Property, the Operating
Lease has expired and the Registrant was liquidated. There was no
additional regular monthly distributions following the
distribution on April 1, 1997 in respect of March, 1997 rent under
the Operating Lease.
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Item 6.
GARMENT CAPITOL ASSOCIATES
SELECTED FINANCIAL DATA
Years ended December 31,
2000 1999 1998 1997 1996
Basic rent income.. ... $ - $ - $ - $ 257,850 $1,090,000
Additional rent income. - - - - -
Interest income........ - - - 87,951 140,266
Dividend income......... 9,827 8,541 11,829 17,533 43
-------- -------- --------- ----------- ----------
Total revenue....... $ 9,827 $ 8,541 $ 11,829 $ 363,334 $1,230,309
======== ======== ========= =========== ==========
Gain on sale of real
estate............ $ - $ - $ - $28,164,634 $ -
======== ======== ========= =========== ==========
Net income.......... $ - $ - $ - $28,334,587 $ 693,299
======== ======== ========= =========== ==========
Earnings per $5,000 participation
unit, based on 1,050 participa-
tion units outstanding during
the year:
Income from
operations...... $ - $ - $ - $ 162 $ 660
Gain on sale of
real estate... - - - 26,823 -
-------- -------- --------- ----------- ----------
Net income.... $ - $ - $ - $ 26,985 $ 660
======== ======== ========= =========== ==========
Total assets....... $165,357 $173,327 $ 207,983 $ 206,894 $5,496,454
======== ======== ========= =========== ==========
Long-term obligations.. $ - $ - $ - $ - $ -
======== ======== ========= =========== ==========
Distributions per $5,000 par-
ticipation unit, based on 1,050
participation units outstanding
during the year:
Income.............. $ - $ - $ - $ 26,666 $ 569
Return of capital.. - - - - -
-------- -------- --------- ----------- ----------
Total distributions. $ - $ - $ - $ 26,666 $ 569
======== ======== ========= =========== ==========
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Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Registrant was organized solely for the purposes of
acquiring the Property subject to the Operating Lease. Registrant
was required to pay from Basic Rent the mortgage charges and
supervisory services and to distribute the balance of such Basic
Rent to the Participants. Pursuant to the Operating Lease, the
holder of the leasehold interest thereunder had sole responsibil-
ity for the condition, operation, repair, maintenance and manage-
ment of the Property. Registrant did not maintain substantial
reserves or otherwise maintain liquid assets to defray any
operating expenses of the Property. Registrant's results of
operations were affected primarily by the amount of rent payable
to it under the Operating Lease.
As a result of the Sale, on July 23, 1997, Registrant
made a final distribution to the Participants of the remaining
sales proceeds. At the closing of the sale pursuant to the
Contract of Sale, the interests of Registrant, as lessor, and the
New Lessee, as lessee, under the Operating Lease were assigned to
the purchaser and the Operating Lease was terminated. There were
no additional regular monthly distributions following the distri-
bution on April 1, 1997 in respect of March 1997 rent under the
Operating Lease. See Item 1.
Liquidity and Capital Resources
N/A
Inflation
Inflationary trends in the economy did not directly
affect Registrant's operations, since as noted above, Registrant
did not actively engage in the operation of the Property.
Inflation may have affected the operations of the New Lessee. The
New Lessee was required to pay Basic Rent, regardless of the
results of its operations. Inflation and other operating factors
affected the amount of Additional Rent payable by the New Lessee,
which was based on the New Lessee's net operating profit.
Item 8. Financial Statements and Supplementary Data.
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The financial statements are being filed in response to
this item.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Registrant had no directors or officers or any other
centralization of management. There is no specific term of office
for any Partner. The table below sets forth as to each individual
who was serving as a Partner the following: name, age, nature of
any family relationship with any other Partner, business
experience during the past five years and principal occupation and
employment during such period, including the name and principal
business of any corporation or any organization in which such
occupation and employment was carried on and the date such
individual became a Partner:
Principal Date
Nature of Occupation Individual
Family Business and became
Name Age Relationship Experience Employment Partner
Peter L. Malkin 67 None Real Estate Senior Partner 1983
Supervision and Chairman
and Law Wien & Malkin
LLP
Thomas N. Keltner,
Jr. 54 None Real Estate Partner 1998
Supervision Wien & Malkin
and Law LLP
Richard A. Shapiro 55 None Real Estate Partner 1998
Supervision Wien & Malkin
and Law LLP
As stated above, the Partners are also members of
Supervisor. See Items 11, 12 and 13 hereof for a description of
the services rendered by, and the compensation paid to, Supervisor
and for a discussion of certain relationships which may have posed
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actual or potential conflicts of interest among Registrant,
Original Lessee, New Lessee and certain of their respective
affiliates.
The names of entities which have a class of securities
registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or are subject to the requirements of Section 15(d) of
that Act, and in which the Partners are either a director, joint
venturer or general partner are as follows:
Peter L. Malkin is a joint venturer in 250 West 57th St.
Associates and Navarre-500 Building Associates; and a
general partner in Empire State Building Associates and
60 East 42nd St. Associates.
Thomas N. Keltner, Jr. is a joint venturer in Navarre-
500 Building Associates; and a general partner in Empire
State Building Associates and 60 East 42nd St.
Associates; and
Richard A. Shapiro is a general partner in Empire State
Building Associates and 60 East 42nd St. Associates; and
Supervisor was responsible for overseeing the
liquidation of Registrant.
Item 11.Executive Compensation
As stated in Item 10 hereof, Registrant had no directors
or officers or any other centralization of management.
No remuneration was paid during the current fiscal year
by Registrant to any of the Partners as such. Registrant's
supervisory fee arrangement with Supervisor provided for (i) the
basic payment of $42,500 per annum; (ii) an additional payment of
the first $37,500 of Additional Rent paid by the lessee under the
Operating Lease in any lease year; and (iii) the payment of 10% of
all distributions to Participants in any year from Basic Rent and
Additional Rent in excess of the amount representing a return at
the rate of 18% per annum on their remaining cash investment in
any year. Pursuant to such fee arrangements described herein,
Registrant paid Supervisor $21,360 during the eleven month period
ended November 30, 1997. The supervisory services provided to
Registrant by Supervisor included legal, administrative and
financial services. The legal and administrative services
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included acting as Supervisor to Registrant, maintaining all of
its partnership and Participant records, performing physical
inspections of the Building, reviewing insurance coverage,
providing or overseeing certain legal services and conducting
annual partnership meetings. Financial services included monthly
receipt of rent from the New Lessee, payment of monthly and
additional distributions to the Participants, payment of all other
disbursements, confirmation of the payment of real estate taxes,
active review of financial statements submitted to Registrant by
the New Lessee and financial statements audited by and tax
information prepared by Registrant's independent certified public
accountant, and distribution of such materials to the
Participants. Supervisor also prepares quarterly, annual and
other periodic filings with the Securities and Exchange Commission
and applicable state authorities.
Supervisor did not receive a supervisory fee based on
sale proceeds allocated to Registrant but has been paid for its
legal services in connection with the Statement, the sale, and
various legal and other services rendered to Registrant since the
date of sale. Supervisor has also been paid legal fees by the New
Lessee for various work in 1996 and 1997.
Item 12. Security Ownership of Certain
Beneficial Owners and Management.
(a) Registrant had no voting securities (see Item 5
hereof).
(b) The Partners (see Item 10 hereof) beneficially
owned, directly or indirectly, the following Participations:
Name & Address Amount of
of Beneficial Beneficial Percent
Title of Class Owners Ownership of Class
Participations Thomas N. Keltner, Jr. $ 2,500 .0476%
in Partnership 60 East 42nd Street
Interests New York, NY 10165
Peter L. Malkin $42,500 .8095%
60 East 42nd Street
New York, NY 10165
-15-
At the date of sale, March 27, 1997, certain of the
Partners (or their respective spouses) held additional
Participations as follows:
Peter L. Malkin owned of record as trustee, but not
beneficially, a $5,000 Participation. Mr. Malkin
disclaims any beneficial ownership in such
Participation.
Isabel Malkin, the wife of Peter Malkin, owned of record
and beneficially, $21,250 of Participations. Mr. Malkin
disclaims any beneficial ownership of such
Participations.
Agency Holdings Associates, an affiliate of Supervisor,
owned a $5,000 Participation which was distributed in
liquidation to its members.
(c) Not applicable.
Item 13. Certain Relationships and Related Transactions.
(a) As stated in Item 1 hereof, Peter L. Malkin,
Thomas N. Keltner, Jr. and Richard A. Shapiro were the three
Partners in Registrant and also acted as agents for the Par-
ticipants in their respective partnership interests. Mr. and Mrs.
Malkin were also among the partners in the Original Lessee and
shareholders in the New Lessee. Because one of the three Partners
and his wife were partners in the Original Lessee and shareholders
in the New Lessee and all three Partners are members of Supervisor
(which supervises Registrant and Original Lessee), certain actual
or potential conflicts of interest may have arose with respect to
the management and administration of the business of Registrant.
Conflicts may have also existed in connection with the sale of the
Property. Under the respective Participating Agreements pursuant
to which the Partners acted as agents for the Participants,
certain transactions required the prior consent from Participants
owning a specified interest under the agreements in order for the
Agents to act on their behalf. Such transactions included
modifications and extensions of the Operating Lease or the
Mortgage Loan, or a sale or other disposition of the Property or
substantially all of Registrant's other assets. As noted in Item
1(a) above, the sale of the Property, as part of the Sale and
Forbearance Program described in the Statement, had been approved
by the Participants and the closing of the sale was on March 27,
1997.
-16-
Reference is made to Items 1 and 2 hereof for a
description of the terms of the Operating Lease between Registrant
and the New Lessee. The respective interests of Messrs. Shapiro,
Keltner and Malkin, if any, in Registrant arose solely from the
ownership of their respective participations in Registrant. The
respective interests of Mr. and Mrs. Malkin in Original Lessee and
New Lessee arose solely from the ownership of their respective
partnership interests in Original Lessee and shares in New Lessee.
The Partners (and Mrs. Malkin) received no extra or special
benefit not shared on a pro rata basis with all other Participants
in Registrant or partners in Original Lessee and shareholders in
New Lessee. However, each of the Partners, by reason of his
respective interest in Supervisor, was entitled to receive his
share of any supervisory, service, legal or other remuneration
paid to Supervisor for services rendered to Registrant and
Original Lessee. See Item 11 hereof for a description of the
renumeration arrangements between Registrant and Supervisor
relating to supervisory services provided by Supervisor. Super-
visor has also been paid fees for legal services rendered to the
New Lessee in connection with certain of its operations during
1996 and 1997.
Reference is also made to Items 1 and 10 hereof for a
description of the relationship between Registrant and Supervisor,
of which the Partners are among the members. The respective
interests of the Partners in any remuneration paid or given by
Registrant or New Lessee to Supervisor arose solely from the
ownership of their respective partnership interests in Supervisor.
See Item 11 hereof for a description of the remuneration
arrangements between Registrant and Supervisor.
(b) Reference is made to Paragraph (a) above.
(c) Not applicable.
(d) Not applicable.
-17-
PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K.
(a)(1) Financial Statements:
Balance Sheets at December 31, 2000 and at December 31,
1999 (Exhibit A).
Statements of Income for the years ended December 31,
2000, 1999 and 1998 (Exhibit B).
Statement of Partners' Capital for the fiscal year ended
December 31, 2000 (Exhibit C-1).
Statement of Partners' Capital for the fiscal year ended
December 31, 1999 (Exhibit C-2).
Statement of Partners' Capital for the fiscal year ended
December 31, 1998 (Exhibit C-3).
Statements of Cash Flows for fiscal year ended December
31, 2000, 1999 and 1998 (Exhibit D).
Notes to Financial Statements for the fiscal year ended
December 31, 2000.
(2) Financial Statement Schedules:
List of Omitted Schedules.
(3) Exhibits: See Exhibit Index.
-18-
EXHIBIT A
GARMENT CAPITOL ASSOCIATES
BALANCE SHEETS
(unaudited)
A S S E T S
December 31,
2000 1999
Current Assets:
Cash and cash equivalents:
Escrow account held by Wien
& Malkin LLP (Note 10).......... $165,357 $173,327
-------- --------
TOTAL CURRENT ASSETS....... 165,357 173,327
-------- --------
TOTAL ASSETS............... $165,357 $173,327
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accrued legal costs reserved re: pending
litigation concerning sale of real
estate (Notes 9 and 10).... ....... $165,357 $173,327
-------- --------
TOTAL LIABILITIES.......... 165,357 173,327
Partners' capital (Exhibit C)........ - -
-------- --------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL................... $165,357 $173,327
======== ========
See accompanying notes to financial statements.
-19-
EXHIBIT B
GARMENT CAPITOL ASSOCIATES
STATEMENTS OF INCOME
(unaudited)
Year ended December 31,
2000 1999 1998
Revenues:
Rent income, from a related
party (Note 4)............... $ - $ - $ -
Interest income............... - - -
Dividend income................ 9,827 8,541 11,829
------ ------ -------
Total Income 9,827 8,541 11,829
------ ------ -------
Expenses:
Interest on mortgage (Note 3)... - - -
Supervisory services, to a
related party (Note 5)........... - - -
Legal fees, to a related party
(Note 5)..................... 6,827 6,016 11,829
Accounting fees................ 3,000 2,525 -
Amortization of mortgage
refinancing costs (Note 2b)... - - -
------ ------ -------
Total Expenses 9,827 8,541 11,829
------ ------ -------
Income from operations.......... - - -
Gain on sale of real estate (Note 9). - - -
------ ------ -------
NET INCOME, CARRIED TO PARTNERS'
CAPITAL DEFICIT (NOTE 8)... .$ - $ - $ -
====== ======== ========
Earnings per $5,000 participation
unit, based on 1,050 participation
units outstanding during each year:
Income from operations......... $ - $ - $ -
Gain on sale of real estate..... - - -
------ ------- --------
NET INCOME.................. $ - $ - $ -
====== ======= ========
See accompanying notes to financial statements.
-20-
EXHIBIT C-1
GARMENT CAPITOL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 2000
(unaudited)
Partners'
capital Share of Partners' capital
January 1, 2000 net income Distributions December 31, 2000
Richard A. Shapiro
Group............. $ - $ - $ - $ -
Peter L. Malkin
Group.............. - - - -
Thomas N. Keltner,
Jr. Group.......... - - - -
------ ------ ------ ------
$ - $ - $ - $ -
====== ====== ====== ======
See accompanying notes to financial statements.
-21-
EXHIBIT C-2
GARMENT CAPITOL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31, 1999
(unaudited)
Partners'
capital Share of Partners' capital
January 1, 1999 net income Distributions December 31, 1999
Richard A. Shapiro
Group............. $ - $ - $ - $ -
Peter L. Malkin
Group.............. - - - -
Thomas N. Keltner, Jr.
Group.............. - - - -
------ ------ ------ ------
$ - $ - $ - $ -
====== ====== ====== ======
See accompanying notes to financial statements.
-22-
EXHIBIT C-3
GARMENT CAPITOL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
YEAR ENDED DECEMBER 31, 1998
(unaudited)
Partners'
capital (deficit) Share of Partners' capital
January 1, 1998 net income Distributions December 31, 1998
Richard A. Shapiro
Group (formerly John
L. Loehr Group)..... $ - $ - $ - $ -
Peter L. Malkin
Group (formerly Stanley
Katzman Group)..... - - - -
Thomas N. Keltner, Jr
Group (formerly Stanley
Katzman Group)..... - - - -
------ ------ ------ ------
$ - $ - $ - $ -
====== ====== ====== ======
See accompanying notes to financial statements.
-23-
EXHIBIT D
GARMENT CAPITOL ASSOCIATES
STATEMENTS OF CASH FLOWS
(unaudited)
Year ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net income.......................... $ - $ - $ -
Adjustments to reconcile net income
to net cash provided (used in) by
operating activities:
Amortization of mortgage
refinancing costs............ - - -
Gain on sale of real estate..... - - -
Changes in operating liabilities:
Accrued interest payable...... - - -
Accrued legal fees reserved
re: pending litigation....... (7,970) (34,656) 1,089
-------- ------- --------
Net cash provided by (used in)
operating activities.... (7,970) (34,656) 1,089
-------- ------- --------
Cash flows from investing activities:
Payments from lessee, net (Note 9).... - - -
Net proceeds from sale of real estate.. - - -
-------- ------- --------
Net cash provided by
investing activities....... - - -
-------- ------- --------
Cash flows from financing activities:
Cash distributions..................... - - -
Principal payments on first mortgage
payable............................ - - -
-------- ------- --------
Net cash used in financing activities - - -
-------- ------- --------
Net increase (decrease) in cash
and cash equivalents............. (7,970) (34,656) 1,089
Cash and cash equivalents,
beginning of year................... 173,327 207,983 206,894
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR.................. $165,357 $173,327 $207,983
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest.......................... $ - $ - $ -
======== ======== ========
See accompanying notes to financial statements
-24-
1. Business Activity
Garment Capitol Associates ("Associates") is a general partnership
which, until March 27, 1997, owned commercial property situated at
498 Seventh Avenue, New York, New York (the "Property"). Through
December 28, 1995 the Property was net leased to 498 Seventh
Avenue Associates (the "Original Lessee"). Effective December 29,
1995 the operating lease was assigned to 4987 Corporation (the
"New Lessee") (see Note 4). On March 27, 1997 Associates sold the
Property and discontinued operations (see Note 9). Associates does
not currently engage in a formal business activity except insofar
as it relates to the outcome of the litigation referred to in Note
10.
2. Summary of Significant Accounting Policies
a. Cash and Cash Equivalents:
Cash and cash equivalents include amounts held by Wien & Malkin
LLP (see Note 5) in escrow on December 31, 2000 and 1999 as a
reserve to cover possible legal costs for pending litigation in
which Associates is named as a defendant (see Note 10).
b. Mortgage Refinancing Costs and Amortization:
Mortgage refinancing costs were incurred in connection with the
December 1, 1992 refinancing of the first mortgage payable (see
Note 3), and were being charged to income ratably over the five
year term of the first mortgage. The unamortized balance was
written off in 1997, when the Property was sold (Note 1) and the
balance of the first mortgage was paid.
c. Use of Estimates:
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. First Mortgage Payable
On November 30, 1987, a first mortgage was placed on the Property
with Apple Bank for Savings in the amount of $3,485,000. Annual
mortgage charges were $348,500, payable in equal monthly
3. First Mortgage Payable (continued)
installments, applied first to interest at the rate of 9-l/2% per
annum and the balance to principal. The mortgage was scheduled to
mature on December 1, 1992 with a balance of $3,376,341 but was
-25-
extended until June 16, 1993, when the bank issued a commitment to
extend and modify the mortgage for a five-year period from
December 1, 1992 through December 1, 1997. The closing, which had
been delayed, occurred on March 23, 1995. The terms of the
extended mortgage included provision for constant monthly payments
totaling $447,316 per annum, including interest at the rate of 10
1/2% per annum from November 1, 1993 through November 30, 1994,
and constant payments totaling $449,586 per annum, including
interest at the rate of 10.6% per annum from December 1, 1994
through maturity. The constant payments were based on a fifteen
year amortization schedule. Payment of principal and interest made
subsequent to the original maturity date (December 1, 1992) were
reapplied according to these new repayment terms and, at the
closing, a retroactive payment of $218,081 was made to bring the
payments current with the new mortgage schedule. The balance of
the mortgage at December 31, 1996 was scheduled to be $2,912,936.
However, protective advances by the Fee Mortgagee in 1996 (see
Note 9) increased the mortgage payable balance to $5,785,947.
Interest only on the increased mortgage amounts were also payable
monthly at the rate of 10.6% per annum through maturity. In
accordance with the Solicitation referred to in Note 9, interest
on the protective advances payable by the New Lessee so long as
the lease continued in effect; the principal of the protective
advances was collectible from the proceeds of the sale of the
Property.
The Property was sold on March 27, 1997 and proceeds from the sale were
used to pay the first mortgage and the protective advances in full.
4. Related Party Transactions - Rent Income
Rent income for the period of ownership of the Property in 1997
(Note 1) was earned pursuant to the terms of a net operating lease
dated May 1, 1957 (the "Operating Lease") with the Original
Lessee.
For the period January 1, 1997 through March 27, 1997, no
additional rent was earned from the Original Lessee or the New
Lessee for its lease year ended April 30, 1997.
The current term of the Operating Lease was due to expire on April
30, 2007, with a renewal option of 25 years. Pursuant to the
Operating Lease, the lessee had the right to surrender its
leasehold interest at any time, upon 60 days' prior written
notice, without further liability after the date of surrender. The
-26-
4. Related Party Transactions - Rent Income (continued)
lessee also had the right to assign the Operating Lease. The
Original Lessee exercised such assignment right on December 29,
1995, and the New Lessee assumed all lessee obligations under the
Operating Lease as of that date; such assignment effectively
terminated the liability of the Original Lessee and its remaining
partners under the lease. On March 27, 1997, with the sale of the
Property, the Operating Lease was terminated.
The shares in the New Lessee were owned by the partners in the
Original Lessee and a partner in Associates was also a partner in
the Original Lessee.
5. Related Party Transactions - Supervisory Services And Legal
Fees
Supervisory services (including disbursements and cost of regular
accounting services) for the period January 1, 1997 through March
27, 1997, totaling $21,360 were paid to the firm of Wien & Malkin
LLP. Fees for supervisory services were paid pursuant to an
agreement, which amount was based on a rate of return of invest-
ment achieved by the participants in Associates. Legal fees and
disbursements of $6,827 and $6,016, respectively, for the years
ended December 31, 2000 and 1999 were incurred for services
rendered by the firm of Wien & Malkin LLP. Some members of that
firm are also partners in Associates. See Notes 9 and 10 for
additional related party transactions in connection with the sale
of the Property and amounts held in escrow as a reserve against
possible legal costs.
6. Number of Participants
There were approximately 900 participants in the participating
groups at December 31, 2000, 1999 and 1998.
7. Determination of Distributions to Participants
Distributions to participants represent mainly proceeds from the
sale of the Property and the excess of rent income received over
the mortgage requirements, as anticipated, and expenses paid or
accrued.
8. Distributions and Amount of Income per $5,000 Participation Unit
Distributions per $5,000 participation unit during the year ended
December 31, 1997, based on 1,050 participation units outstanding,
totaled $26,666 and consisted of income only.
-27-
8. Distributions and Amount of Income per $5,000 Participation Unit
(continued)
Such distributions included $26,476 per $5,000 unit resulting from
proceeds on the sale of the Property (see Note 9). There were no
distributions made in 1998, 1999 or 2000.
Net income is computed without regard to income tax expense since
Associates does not pay a tax on its income; instead, any such
taxes are paid by the participants in their individual capacities.
For income tax purposes in 1997, the reserve for contingent future
legal costs in the amount of $206,894, deducted for financial
statement purposes in 1997 from the gain on sale of real estate,
($197 per $5,000 participation unit, based on 1,050 participant
units outstanding in 1997) was not deductible; the gain on the
sale of real estate in 1997 for income tax purposes was
$28,371,528.
For income tax purposes in 1998, the additional reserve for
contingent future legal costs taken for financial statement
purposes in the amount of $1,089 ($1 per $5,000 participation
unit), was not deductible.
For income tax purposes in 1999, the payment of prior years'
accrued expenses in excess of current year's net income in the
amount of $34,656 ($33, per $5,000 participation unit), is
deductible in the year paid.
For income tax purposes in 2000, the payment of prior years'
accrued expenses in excess of current year's net income in the
amount of $7,970 ($8, per $5,000 participation unit), is
deductible in the year paid.
9. Sale of the Property on March 27, 1997 and Preceding Events
Regarding Default by New Lessee of the Operating Lease and Breach
of Associates' Obligations Under the Fee Mortgage
Default by New Lessee of Operating Lease and Breach of Associates'
Obligations Under Fee Mortgage:
Since January l, 1996, the New Lessee paid Basic Rent under the
Operating Lease. Associates in turn continued to pay (1) the
monthly mortgage payments to Apple Bank for Savings (the "Fee
Mortgagee") on Associates' fee mortgage on the Property (the "Fee
Mortgage"); (2) its monthly fee for supervisory services; and (3)
monthly distributions to the participants in Associates.
However, from January 1, 1996 through the date of sale of the
Property, the New Lessee failed to pay the New York City real
-28-
estate and Business Improvement District ("BID") assessments,
which were due on January l, 1996 (collectively, the "1/1/96 Real
Estate Taxes"). As a result, the New Lessee was in default of the
Operating Lease as of that date. The New Lessee requested that
Associates forbear from exercising its rights and remedies under
the Operating Lease, including termination of the Operating Lease,
by reason of the failure to pay the 1/1/96 Real Estate Taxes,
while management of Associates solicited the consent of its
participants to a sale of the Property (the "Solicitation"). In
connection with Associates' forbearance, the New Lessee agreed to
cooperate fully with Associates in connection with the sale of the
Property and to continue to perform its other obligations under
the Operating Lease, including payment of the Basic Rent, to
enable Associates to continue its monthly distributions to the
participants, pay its supervisory fee and pay its monthly mortgage
obligation.
The failure to pay the 1/1/96 Real Estate Taxes also constituted a
breach of Associates' obligations under the Fee Mortgage. The
shareholders of the New Lessee (or designees on their behalf)
borrowed from the Fee Mortgagee a sum equal to the 1/1/96 Real
Estate Taxes and interest thereon to the date of the borrowing and
further sums equal to the subsequent semi-annual installments of
the New York City real estate taxes and BID assessments (together
with the 1/1/96 Real Estate Taxes, the "Real Estate Taxes") which
had since become due. These sums were used to fund protective
advances by the Fee Mortgagee to pay the Real Estate Taxes and
interest thereon through the purchase of subordinate participating
interests in the Fee Mortgage in such amounts. As a result, the
Fee Mortgagee agreed to forbear from exercising rights and
remedies under the Fee Mortgage based on Associates' failure to
pay (or cause to be paid by the New Lessee) the Real Estate Taxes.
On July 26, 1996 management completed its Solicitation, in which
it expressed its belief that the Property could not be operated on
a profitable basis without significant capital improvements; it
also opined that the program to sell the Property would permit
Associates to liquidate its investment in an orderly fashion and
avoid the necessity of raising additional capital from the
participants and others to support and renovate the Property while
avoiding litigation costs and the risk of loss of the Property
through a Fee Mortgage foreclosure.
-29-
On January 29, 1997 Associates, having received authorization from
its participants to sell the Property, entered into a contract of
sale of the Property at a selling price of $42,000,000. Such sale
was concluded on March 27, 1997, at which time the first mortgage
was paid in full and Associates discontinued operations. In accordance
with the Solicitation, the proceeds of sale were allocated between Associates
and the New Lessee, with Associates receiving $32,681,200 and the
New Lessee receiving $9,318,800.
The gain on sale of real estate was computed as follows:
Sales proceeds allocated to Associates $32,681,200
Less costs of sale:
Building, net of depreciation $ -
Land 2,500,000
Closing costs 1,809,672 4,309,672
---------- ----------
28,371,528
Less: accrued legal costs reserved
re: pending litigation (see Note 10) 206,894
-----------
Gain on sale of real estate $28,164,634
===========
Closing costs on the sale of the Property included $297,544 paid
to the firm of Wien & Malkin LLP, a related party (Note 5).
On March 31, 1997 a distribution of $27,000,000 ($25,714 per
$5,000 participation unit) was made to the participants out of the
proceeds of sale. On July 22, 1997 a final distribution of
$800,000 ($762 per $5,000 participation unit) was made to the
participants out of the proceeds of sale. Associates' receivable
from the New Lessee as of the date of the sale of the Property, in
the amount of $2,399,317 was satisfied on March 27, 1997 by the
payment of the protective advances from proceeds of the sale in
accordance with the Solicitation. However, the New Lessee's share
of such proceeds, which according to the Solicitation amounts to
$6,919,483, is being held by Wien & Malkin LLP, a related party
and counsel to Associates ("Counsel"), in connection with liti-
gation referred to in Note 10.
-30-
10. Litigation and Contingency Reserve Held in Escrow
On October 4, 1996, the alleged holder of three participation
interests in Associates brought suit in the U.S. District Court
for the Southern District of New York against the New Lessee, the
Original Lessee, the partners of Associates, and Counsel.
Associates is a nominal defendant. The suit claims that defendants
violated the anti-fraud provisions and federal proxy rules of the
federal securities laws and committed breaches of fiduciary duty
and fraud in relation to the Solicitation (Note 9). The suit is
styled as a class action, but the plaintiff has not applied for
class certification to date. The suit seeks to enjoin the alloca-
tion of sale proceeds to the New Lessee approved by the partici-
pants, money damages and related relief. Defendants responded to
the complaint with a motion seeking dismissal of the action in its
entirety. The Court granted that motion and dismissed the action
by order and decision dated December 8, 1997.
A similar suit was filed by another alleged holder of a fractional
interest in Associates on March 13, 1997. The defendants responded
to the complaint with a motion seeking dismissal of the action in
its entirety and the Court granted that motion by the same order
and decision referred to in the preceding paragraph. Although the
cases were initially dismissed in their entirety, in February 1999
the United States Court of Appeals for the Second Circuit reversed
that dismissal in part, reinstating two of plaintiffs' federal
securities law claims. In August 1999, some of the plaintiffs'
state law claims were dismissed in a ruling which held that the
plaintiffs could not proceed with their derivative claim for
breach of fiduciary duty. Based on this opinion and the Court's
reasoning therein, the defendants consistently have asserted that
Associates is no longer a defendant in either case. The
complaints do not seek any relief against Associates and,
accordingly, Associates' litigation counsel is of the opinion that
no loss or other unfavorable outcome of the action against
Associates is anticipated. No provision has been made in the
accompanying financial statements for any adjustments that might
result from the outcome of the litigation. To reserve against
possible legal costs associated with the aforementioned pending
litigation Associates has set aside $165,357 at December 31, 2000
in an escrow account held by Wien & Malkin LLP, a related party.
Such amount represents the unpaid balance of an amount which was
reserved and charged in the accompanying 1997 financial statements
against the gain on the sale of real estate (Note 9).
-31-
GARMENT CAPITOL ASSOCIATES
OMITTED SCHEDULES
The following schedules have been omitted as not applicable in the
present instance:
SCHEDULE I - Condensed financial information of registrant.
SCHEDULE II - Valuation and qualifying accounts.
SCHEDULE III - Real estate and accumulated depreciation.
SCHEDULE IV - Mortgage loans on real estate.
-32-
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
The individual signing this report on behalf of
Registrant is Attorney-in-Fact for Registrant and each of the
Partners in Registrant, pursuant to a Power of Attorney, dated
April 10, 1996 and May 14, 1998 (collectively the "Power").
GARMENT CAPITOL ASSOCIATES (Registrant)
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact
Date: April 16, 2001
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the undersigned as
Attorney-in-Fact for each of the Partners in Registrant, pursuant
to the Power, on behalf of Registrant and as a Partner in
Registrant on the date indicated.
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: April 16, 2001
_________________________________
* Mr. Katzman supervises accounting functions for Registrant
-33-
Exhibit Index
Number Document Page*
2 (a) Proxy Statement issued by Agents in
connection with the solicitation of
consents of the Participants, which
was filed by Registrant on July 25,
1996 on Schedule 14-A and is
incorporated herein by reference.
2 (b) Contract of Sale, among Registrant
and New Lessee, as Seller, and
George Comfort & Sons, Inc., as
Agent, and Tirrem Management
Company, Inc., as Purchasers, which
was filed as Exhibit 2(b) to
Registrant's Annual Report on Form
10-K for the year ended December 31,
1996 and is incorporated by
reference, but excluding exhibits,
which are available for inspection
at the offices of Supervisor.
3 (a) Registrant's Partnership Agreement,
dated January 10, 1957, which was
filed as Exhibit No. 1 to
Registrant's Registration Statement
on Form S-1 as amended (the
"Registration Statement") effective
February 13, 1957 and assigned File
No. 2-13034, is incorporated by
reference as an exhibit hereto.
3 (b) Amended Business Certificate of
Registrant, reflecting a change in
the partners of Registrant effective
as of April 15, 1998, which was
filed as Exhibit 3(b) to
Registrant's Amended 10-Q for the
quarter ended September 30, 1998 and
is incorporated by reference as an
exhibit hereto
-34-
Number Document Page*
4 Registrant's form of Participation
Agreement, which was filed as
Exhibit No. 5 to the Registration
Statement effective February 13,
1957 and assigned File No. 2-13034,
is incorporated by reference as an
exhibit hereto.
10 (a) Contract between Lawrence A. Wien
("Wien") and Garment Center Capitol
Inc. for the purchase of the
property 498 Seventh Avenue and
certain other property, dated
January 7, 1957, which was filed as
Exhibit No. 2 to the Registration
Statement effective February 13,
1957 and assigned File No. 2-1304,
is hereby incorporated by reference
as an exhibit hereto.
10 (b) Assignment by Wien to Registrant of
his rights under the contract
assignment, dated January 11, 1957,
insofar as they pertain to 498
Seventh Avenue and agreement of
assignment, dated January 11, 1957,
which was filed as Exhibit No. 3 to
the Registration Statement effective
February 13, 1957 and assigned File
No. 2-13034, is hereby incorporated
by reference as an exhibit hereto.
10 (c) Modification and Extension
Agreement, dated as of December 1,
1992, between Apple Savings Bank and
Garment Capitol Associates, which
was filed as Exhibit 10(c) to
Registrant's Annual Report on Form
10K for the year ended 1994, is
incorporated herein by reference.
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Number Document Page*
24 Power of Attorney dated April 10,
1996 and May 14, 1998, between
Partners of Registrant and Stanley
Katzman and Richard A. Shapiro,
attached as Exhibit 24 to
Registrant's 10-Q for the Quarter
ended March 31, 1998 and is
incorporated by reference as an
exhibit hereto.
____________________________________
* Page references are based on sequential numbering
system.
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