FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
[] 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 L.L.C.
(Exact name of registrant as specified in its charter)
New York 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)
Registrant's telephone number, including area code (212) 687-8700
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
$7,000,000 of Participations in Partnership Interests
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
The aggregate market of the voting stock held by non-affiliates of
the Registrant: Not applicable, but see Items 5 and 10 of this
report.
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
An Exhibit Index is located on pages 33 through 35 of this Report.
Number of pages (including exhibits) in this filing: 35
PART I
Item 1. Business.
(a) General
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") On November 28, 2001, Registrant converted to a limited
liability company under New York law and is now known as 60 East
42nd St. Associates L.L.C. The conversion does not change any
aspect of the assets and operations of Registrant other than to
protect its participants from any future liability to a third
party. Registrant's partners are Peter L. Malkin, Anthony E.
Malkin, Scott D. Malkin, Jack K. Feirman, Mark Labell, Thomas N.
Keltner, Jr.,and Fred C. Posniak (individually, a "Partner" and,
collectively, the "Partners"), each of whom also acts as an agent
for holders of participations in the Registrant (each holder of a
participation, individually, a "Participant" and, collectively, the
"Participants"). Registrant leases the Property to Lincoln
Building Associates (the "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 renewal term which, if
exercised, will extend the Lease until September 30, 2033. See Item
2 below in connection with the granting of additional lease
extensions.
Lessee is a partnership whose members consist of, among
others, trusts for the benefit of members of Peter Malkin's family.
Four 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 Items 10, 11, 12 and 13 hereof for a
description of the ongoing 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, Lessee and certain of their respective affiliates.
As of December 31, 2001, the Building was approximately
95% occupied by approximately 503 tenants who engage principally in
the practice of law, accounting, real estate, engineering and
advertising. Registrant does not maintain a full-time staff. See
Item 2 hereof for additional information concerning the Property.
(b) The Mortgages
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A first mortgage loan on the Property was closed on
October 6, 1994 (the "Mortgage Loan"). The material terms of the
Mortgage Loan are as follows:
(i) A principal amount of $12,020,814;
(ii) Annual charges of $1,063,842, payable in equal
monthly installments of $88,654, representing interest only at the
rate of 8.85% per annum;
(iii) A term of ten years; and
(iv) A maturity date of October 31, 2004. The Mortgage
Loan is prepayable in whole after October 6, 1995, with a penalty
providing certain interest protection to the mortgagee. The
Mortgage Loan 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.
(v) A second mortgage loan with Emigrant Savings
Bank in the amount of $27,979,186 was closed on March 9, 2000 and
advances of $13,000,000 have been taken as of December 31, 2001.
Monthly payments of interest only at the rate of 8.21% per annum
apply to the advances made through September 30, 2000. Amounts
advanced from October 1, 2000 through September 30, 2002 and
amounts in excess of $13,000,000 are at interest only at the 30 day
LIBOR rate. Amounts advanced after October 1, 2002 require
interest only payments at 1.65 points in excess of the yield on
U.S. Treasury Securities. Maturity is October 31, 2004.
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.
(c) The Lease
The Lease, as modified March 1, 2000, provides that
Lessee 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
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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 re-
quired 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, 2001 was $8,057,690. After the payment of
$805,769 to Supervisor as an additional payment for supervisory
services, the balance of $7,251,921 was distributed to the
Participants on November 30, 2001.
If the Mortgage is modified, the Basic Rent shall be
equal to the Wien & Malkin LLP annual supervisory fee of $24,000
plus an amount equal to the annual debt service payments under the
refinanced mortgage ( not including any balloon principal payment
due at maturity).
(d) Competition
Pursuant to tenant space leases at the Building, the
average base rent payable to Lessee is approximately $35.40 per
square foot (exclusive of electricity charges and escalation) and
current deals range from $38 to $48.
(e) Tenant Leases
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Lessee operates 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 New York City. Any increase or decrease in the amount of
rent payable by a tenant is governed by the provisions of the
tenant's lease, or, if a new tenant, by then existing trends in the
rental market for office space.
Item 2. Property.
Registrant owns the Building located at 60 East 42nd
Street, New York, New York, known as the "Lincoln Building," and
the land thereunder. See Item 1. Registrant's fee title to the
Property is encumbered by Mortgage Loans with an unpaid principal
balances of $25,020,814 at December 31, 2001. For a description of
the terms of the Mortgage Loans, see Item 1 of Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001 and
Note 3 of the Notes thereto. The Building, erected in 1930, has 55
floors, a concourse and a lower lobby. It is located diagonally
opposite Grand Central Terminal, on 42nd Street between Park Avenue
and Madison Avenue. The Building is net leased to Lessee. See
Item 1 hereof and Note 4 of the Notes for additional information
concerning the Lease.
In 1999, the participants of Associates and the Lessee
consented to a building improvements program (the "Program")
estimated to cost approximately $22,800,000 and expected to take
two to three years to complete.
The Lessee is currently financing the Program and billing
Associates for the costs incurred. The Program (1) grants the
ownership of the improvements to Associates and acknowledges its
intention to finance them through a fee mortgage increase, and (2)
allows for the increased mortgage charges to be paid by Associates
from an equivalent increase in the basic rent paid by the Lessee to
Associates. Since any overage rent will be decreased by one-half
of that amount, the net effect of the lease modification is to have
Associates and the Lessee share the costs of the Program equally,
assuming overage rent continues to be earned.
To induce the Lessee to approve the Program, Associates
agreed to grant to the Lessee, upon the completion of the Program,
an extension of the lease for an additional 50 years to 2083.
In January 2000, the participants of the Lessee were
asked to approve an increase to the Program from $22,800,000 to
approximately $28,000,000 under substantially the same conditions
as had previously been approved. The increased amount has been
previously authorized by the participants of Associates. Such
increase would extend the lease beyond 2083, based on the net
present benefit to Associates of the improvements made.
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Item 3. Legal Proceedings.
The property of Registrant is the subject of the
following material pending litigation:
Wien & Malkin LLP, et. al. v. Helmsley-Spear, Inc., et.
al. On June 19, 1997 Wien & Malkin LLP and Peter L. Malkin filed
an action in the Supreme Court of the State of New York, against
Helmsley-Spear, Inc. and Leona Helmsley concerning various
partnerships which own, lease or operate buildings managed by
Helmsley-Spear, Inc., including Registrant's property. In their
complaint, plaintiffs sought the removal of Helmsley-Spear, Inc. as
managing and leasing agent for all of the buildings. Plaintiffs
also sought an order precluding Leona Helmsley from exercising any
partner management powers in the partnerships. In August, 1997,
the Supreme Court directed that the foregoing claims proceed to
arbitration. As a result, Mr. Malkin and Wien & Malkin LLP filed
an arbitration complaint against Helmsley-Spear, Inc. and Mrs.
Helmsley before the American Arbitration Association. Helmsley-
Spear, Inc. and Mrs. Helmsley served answers denying liability and
asserting various affirmative defenses and counterclaims; and Mr.
Malkin and Wien & Malkin LLP filed a reply denying the
counterclaims. By agreement dated December 16, 1997, Mr. Malkin
and Wien & Malkin LLP (each for their own account and not in any
representative capacity) reached a settlement with Mrs. Helmsley of
the claims and counterclaims in the arbitration and litigation
between them. Mr. Malkin and Wien & Malkin LLP then continued
their prosecution of claims in the arbitration for relief against
Helmsley-Spear, Inc., including its termination as the leasing and
managing agent for various entities and properties, including the
Registrant's Lessee. The arbitration hearings were concluded in
June 2000, and the arbitrators issued their decision on March 30,
2001, ordering that the termination of Helmsley-Spear, Inc. would
require a new vote by the partners in the Lessee, setting forth
procedures for such a vote, and denying the other claims of all
parties. Following the decision, Helmsley-Spear, Inc. applied to
the court for confirmation of the decision, and Mr. Malkin and Wien
& Malkin LLP applied to the court for an order setting aside that
part of the decision regarding the procedure for partnership voting
to terminate Helmsley-Spear, Inc. and various other parts of the
decision on legal grounds. The court granted the motion to confirm
the arbitrators' decision and denied the application to set aside
part of the arbitrators' decision. Mr. Malkin and Wien & Malkin
LLP have served notice of appeal of the court's determination.
Item 4. Submission of Matters to a Vote of Participants.
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No matters were submitted to the Participants during the
last quarter of the period covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Security Holder Matters.
Registrant, a limited liability company, was organized on
September 25, 1958.
The securities registered by it under the Securities
Exchange Act of 1934, as amended, consist of participations in the
partnership interests of the Partners in Registrant (the
"Participations") and are not shares of common stock or the
equivalent. The Participations represent each Participant's
fractional share in a Partner's undivided interest in Registrant.
One full unit of the Participations was offered at an original
purchase price of $10,000; fractional units were also offered for
proportionate purchase prices. Registrant has not repurchased
Participations in the past and is not likely to change its policy
in the future.
(a) The Participations neither are traded on an
established securities market nor are readily tradable on a
secondary market or the equivalent thereof. Based on Registrant's
transfer records, Participations are sold by the holders thereof
from time to time in privately negotiated transactions and, in many
instances, Registrant is not aware of the prices at which such
transactions occur. During 2001, Registrant was advised of 32
transfers of Participations. In four instances, the indicated
purchase price was equal to 3.5 times the face amount of the
Participation transferred, i.e., $17,500 for a $5,000
participation. In all other cases, no consideration was indicated.
(b) As of December 31, 2001, there were 757 holders of
Participations of record.
(c) Registrant does not pay dividends. During each of
the years ended December 31, 2001 and 2000, Registrant made regular
monthly distributions of $124.57 for each $10,000 Participation.
On November 30, 2001 and November 30, 2000, Registrant made
additional distributions for each $10,000 Participation of
$10,359.89 and $7,937.20, respectively. Such distributions repre-
sented primarily Additional Rent and Further Additional Rent
payable by Lessee in accordance with the terms of the Lease. See
Item 1 hereof. There are no restrictions on Registrant's present
or future ability to make distributions; however, the amount of
such distributions, particularly distributions of Additional Rent
and Further Additional Rent, depends solely on Lessee's ability to
make payments of Basic Rent, Additional Rent and Further Additional
Rent to Registrant. See Item 1 hereof. Registrant expects to make
distributions so long as it receives the payments provided for
under the Lease. See Item 7 hereof.
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[SELECTED FINANCIAL DATA]
Item 6.
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
SELECTED FINANCIAL DATA
Year ended December 31,
2001 2000 1999 1998 1997
Basic rent income $ 6,018,750 $ 6,018,750 $ 6,018,750 $ 6,018,750 $6,018,750
Overage rent income 26,072,502 14,583,762 7,582,109 4,109,852 2,401,300
Dividend income 248,948 256,963 144,690 84,615 10,377
Miscellaneous income 1,660,904 - 0 - - 0 - - 0 - - 0 -
Total revenues $34,001,104 $20,859,475 $13,745,549 $10,213,217 $8,430,427
Net income $29,512,491 $17,315,601 $10,901,065 $ 7,507,228 $4,752,560
Earnings per $10,000
participation unit,
based on 3,300
participation units
outstanding during
the year $ 8,943 $ 5,247 $ 3,303 $ 2,275 $ 1,440
Total assets $32,347,669 $20,842,972 $13,253,481 $ 8,787,638 $5,930,702
Long-term obligations $ - 0 - $ - 0 - $ - 0- $ - 0 - $ -0-
Distributions per $10,000
participation unit, based
on 3,300 participation
units outstanding
during the year:
Income $ 5,182 $ 3,185 $ 2,033 $ 1,500 $ 1,179
Return of capital - 0 - - 0 - - 0 - - 0 - -0-
Total distributions $ 5,182 $ 3,185 $ 2,033 $ 1,500 $ 1,179
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Item 7.
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
QUARTERLY RESULTS OF OPERATIONS
The following table presents the Company's operating results for each of the
eight fiscal quarters in the period ended December 31, 2001. The information
for each of these quarters is unaudited and has been prepared on the same basis
as the audited financial statements included in this Annual Report on Form 10-K.
In the opinion of management, all necessary adjustments, which consist only of
normal and recurring accruals, have been included to present fairly the
unaudited quarterly results. This data should be read together with the
financial statements and the notes thereto included in this Annual Report on
Form 10-K.
Three Months Ended
March 31, June 30, September 30, December 31,
2000 2000 2000 2000
Statement of Income Data:
Minimum net, basic
rent income $1,504,687 $1,504,688 $1,504,688 $ 1,504,687
Additional rent
income - - - 14,583,762
Dividend income 95,211 48,471 52,024 61,257
Total revenues 1,599,898 1,553,159 1,556,712 16,149,706
Leasehold rent 492,500 492,500 492,500 492,500
Supervisory services 39,854 39,854 39,854 883,165
Amortization of
leasehold 52,117 52,117 52,117 52,117
Professional fees - - - 362,679
Total expenses 584,471 584,471 584,471 1,790,461
Net income $1,015,427 $ 968,688 $ 972,241 $14,359,245
Earnings per $10,000
participation unit, based
on 3,300 participation
units outstanding during
each period $ 307 $ 294 $ 295 $ 4,351
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Registrant was organized solely for the purpose of
acquiring the Property subject to a net operating lease held by
Lessee. Registrant is required to pay, from Basic Rent under the
Lease, mortgage charges and amounts for supervisory services.
Registrant is required to pay from Additional Rent and Further
Additional Rent additional amounts for supervisory services and
then to distribute the balance of such Additional Rent and Further
Additional Rent to the Participants. Under the Lease, Lessee has
assumed sole responsibility for the condition, operation, repair,
maintenance and management of the Property. Registrant is not
required to maintain substantial liquid assets to defray any
operating expenses of the Property.
The following summarizes the material factors affecting
Registrant's results of operations for the three years ended
December 31, 2001:
(a) Total income increased for the year ended December 31,
2001 as compared with the year ended December 31, 2000.
Such increase is mainly attributable to the payment of an
increased amount of Further Additional Rent received by
Registrant in 2001 and interest income. Total income
increased for the year ended December 31, 2000 as
compared with the year ended December 31, 1999. Such
increase is attributable to the payment of an increased
amount of Further Additional Rent to Registrant in 2000
and interest income. See Note 4 of the Notes.
(b) Total expenses increased for the year ended December 31,
2001 as compared with the year ended December 31, 2000.
Such increase resulted from an increase in mortgage
interest, the additional payment for supervisory services
payable with respect to an increased amount of Further
Additional Rent received by Registrant in 2001,
amortization of second mortgage refinancing costs and
depreciation of assets placed in service in 2001. Total
expenses increased for the year ended December 31, 2000
as compared with the year ended December 31, 1999. Such
increase resulted from an increase in mortgage interest,
additional payment for supervisory services payable with
respect to Further Additional Rent received by Registrant
in 2000, amortization of second mortgage refinancing
costs and professional fees.
Registrant's results of operations are affected primarily
by the amount of rent payable to it under the Lease. The amount of
Overage Rent, sometimes referred to as additional rent and further
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additional rent payable to Registrant, is affected by the New York
City economy and real estate rental market. It is difficult for
management to forecast the New York City real estate market,
Liquidity and Capital Resources
There has been no significant change in Registrant's
liquidity for the year ended December 31, 2001 as compared with the
year ended December 31, 2000, and Registrant may from time to time
establish a reserve for contingent or unforeseen liabilities.
No amortization payments are due under the Mortgages to
fully satisfy the outstanding principal balance at maturity, and
furthermore, Registrant does not maintain any reserve to cover the
payment of such Mortgage indebtedness at maturity. Therefore,
repayment of the Mortgage will depend on Registrant's ability to
arrange a refinancing. Assuming that the Property continues to
generate an annual net profit in future years comparable to that in
past years, and assuming further that current real estate trends
continue in the geographic area in which the Property is located,
Registrant anticipates that the value of the Property would be in
excess of the amount of the Mortgage balance at maturity.
Registrant anticipates that funds for working capital for
the Property will be provided by rental payments received from
Lessee and, to the extent necessary, from additional capital
investment by the partners in Lessee and/or external financing.
However, as noted above, Registrant has no requirement to maintain
substantial reserves to defray any operating expenses of the
Property.
Inflation
Inflationary trends in the economy do not directly affect
Registrant's operations since, as noted above, Registrant does not
actively engage in the operation of the Property. Inflation may
impact the operations of Lessee. Lessee is required to pay Basic
Rent, regardless of the results of its operations. Inflation and
other operating factors affect the amount of Additional Rent and
Further Additional Rent payable by Lessee, which is based on
Lessee's net operating profit.
Item 8. Financial Statements and Supplementary Data.
The financial statements, together with the accompanying
report by, and the consent to the use thereof, of J.H. Cohn LLP
immediately following, are being filed in response to this item.
Item 9. Disagreement on Accounting and Financial Disclosure.
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
Registrant has 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 Partner as
of December 31, 2001 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:
Nature Principal Date
of Family Occupation Individual
Relation- Business and became
Name Age ship Experience Employment Partner
Anthony E. Malkin 39 son of Real estate Senior Director 1997
Peter L. Supervision of Supervisory
Malkin, and Service of Wien
brother management & Malkin LLP
of and President
Scott D. of W&M Properties
Malkin L.L.C.
Scott D. Malkin 43 son of Chairman and CEO of 1997
Peter L. CEO of real S.D. Malkin
Malkin, estate Properties,
brother development Inc.
of company
Anthony E.
Malkin
Mark Labell 49 None Real Estate Partner 1998
Supervision Wien & Malkin
LLP,
Thomas N. Keltner,
Jr. 55 None Real Estate Partner 1996
Supervision Wien & Malkin
LLP,
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Nature Principal Date
of Family Occupation Individual
Relation- Business and became
Name Age ship Experience Employment Partner
Jack K. Feirman 56 None Real Estate Partner 1998
Supervision Wien & Malkin
LLP,
Peter L. Malkin 68 Father Real Estate Senior Partner 1970
of Supervision and Chairman
Anthony E. Wien & Malkin
and LLP,
Scott D.
Malkin
Fred C. Posniak 56 None Real Estate Director 2001
Supervision W & M Properties,
L.L.C.
As stated above, four of the Partners are current 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 pose actual
or potential conflicts of interest among Registrant, 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 member in 250 West 57th St.
Associates L.L.C. and a member in Empire State Building
Associates L.L.C.; and a general partner in Navarre-500
Building Associates and Garment Capitol Associates.
Thomas N. Keltner, Jr. is a member in Empire State
Building Associates L.L.C. and a general partner in
Navarre-500 Building Associates and Garment Capitol
Associates.
Anthony E. Malkin is a member in 250 West 57th Street
Associates L.L.C.
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Item 11. Executive Compensation.
As stated in Item 10 hereof, Registrant has no directors
or officers or any other centralization of management.
No remuneration was paid during the current fiscal year
ended December 31, 2001 by Registrant to any of the Partners as
such. Registrant pays Supervisor, for special services at hourly
rates and for supervisory services and disbursements. The
supervisory fees are $24,000 per annum plus an additional payment
of 10% of all distributions to Participants in Registrant in any
year in excess of the amount representing an annual return of 14%
on the Participants' remaining cash investment in Registrant (which
remaining cash investment, at December 31, 2001, was equal to the
Participant's original cash investment of $7,000,000). Pursuant to
such fee arrangements, Registrant paid Supervisor a total of
$837,149 (consisting of $24,000 as an annual basic payment for
supervisory services and $813,149 as an additional payment for
supervisory services) during the fiscal year ended December 31,
2001. The supervisory services provided to Registrant by Supervisor
include real estate supervisory, legal, administrative and
financial services. The services include, but are not limited to
providing or coordinating with counsel to Registrant, maintaining
all of its partnership and Participant records, performing physical
inspections of the Building, reviewing insurance coverage and
conducting annual supervisory review meetings, receipt of monthly
rent from Net Lessee, payment of monthly and additional
distributions to the Participants, payment of all other
disbursements, confirmation of the payment of real estate taxes,
and active review of financial statements submitted to Registrant
by Net 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. Out of its fees, Supervisor paid all
disbursements and costs of regular accounting services. As noted
in Items 1 and 10 of this report, four of the Partners are also
members of Supervisor.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
(a) Registrant has no voting securities. See Item 5
hereof. At December 31, 2001, no person owned of record or was
known by Registrant to own beneficially more than 5% of the
outstanding Participations.
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(b) At December 31, 2001, the Partners (see Item 10
hereof) beneficially owned, directly or indirectly, the following
Participations:
Name and Address Amount of Percent
of Beneficial Beneficial of
Title of Class Owners Ownership Class
Participations
Anthony E. Malkin $25,833 .369%
60 East 42nd Street
New York, NY 10165
Thomas N. Keltner, Jr. $ 2,500 .036%
60 East 42nd Street
New York, NY 10165
Scott D. Malkin $33,334 .476%
27 Hereford Square
SW7 4NB
London, England
At such date, certain of the Partners (or their
respective spouses) held additional Participations as follows:
Anthony E. Malkin owned of record as co-trustee an
aggregate of $25,000 of Participations. Mr. Anthony E.
Malkin disclaims any beneficial ownership of such
Participations.
Peter L. Malkin owned of record as trustee or co-trustee
an aggregate of $55,714 of Participations. Mr. Malkin
disclaims any beneficial ownership of such
Participations.
Entities for the benefit of members of Peter L. Malkin's
family owned of record and beneficially $107,500 of
Participations. Mr. Malkin disclaims any beneficial
ownership of such Participations, except that related
Trusts are required to complete scheduled payments to Mr.
Malkin.
(c) Not applicable.
-14-
Item 13. Certain Relationships and Related Transactions.
(a) As stated in Items 1 and 10 hereof, Messrs. Feirman,
Keltner, Labell, Anthony E. Malkin, Peter L. Malkin, Scott D.
Malkin and Posniak are the seven members in Registrant and also act
as agents for Participants in their respective membership interests
therein. Mr. Peter Malkin is also among the partners in Lessee.
As a consequence of one of the seven members being a partner in
Lessee and four of the seven members being members of Supervisor
(which supervises Registrant and Lessee), certain actual or
potential conflicts of interest may arise with respect to the
management and administration of the business of Registrant.
However, under the respective Participating Agreements pursuant to
which the members act as agents for the Participants, certain
transactions require the prior consent from Participants owning a
specified interest under the Agreements in order for the agents to
act on the Participants' behalf. Such transactions, among others,
include modification and extension of the Lease or the Mortgage
Loan, or a sale or other disposition of the Property or
substantially all of Registrant's other assets.
See Items 1 and 2 hereof for a description of the terms
of the Lease. As of December 31, 2001, Mr. Peter Malkin owned a
partnership interest in Lessee. The respective interests, if any,
of the members in Registrant and Lessee arise solely from ownership
of their respective Participations, and, in the case of Mr. Peter
Malkin, his individual ownership of a partnership interest in
Lessee. The members as such receive no extra or special benefit
not shared on a pro rata basis with all other Participants in
Registrant or partners in Lessee. However, each of the four
members who is a partner in Supervisor, by reason of his interests
in Supervisor, may receive income attributable to supervisory,
service, legal or other remuneration paid to Supervisor for
services rendered to Registrant and Lessee. See Item 11 hereof for
a description of the remuneration arrangements between Registrant
and Supervisor relating to supervisory services provided by
Supervisor.
Reference is also made to Items 1 and 10 hereof for a
description of the relationship between Registrant and Supervisor,
of which four of the members are among the partners in Supervisor.
The respective interests of each member in any remuneration paid or
given by Registrant to Supervisor arises solely from such member's
ownership of an interest in Supervisor. See Item 11 hereof for a
description of the remuneration arrangements between Registrant and
Supervisor relating to supervisory services provided by Supervisor.
(b) Reference is made to paragraph (a) above.
-15-
(c) Not applicable.
(d) Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 10-K.
(a)(1) Financial Statements:
Consent of J. H. Cohn LLP, Certified Public Accountants,
dated February 26, 2002.
Accountant's Report of J. H. Cohn LLP, Certified Public
Accountants, dated February 26, 2002.
Balance Sheets at December 31, 2001 and at December 31,
2000 (Exhibit A).
Statements of Income for the fiscal years ended December
31, 2001, 2000 and 1999. (Exhibit B).
Statement of Members' Capital Deficit for the fiscal year
ended December 31, 2001 (Exhibit C-1).
Statement of Members' Capital Deficit for the fiscal year
ended December 31, 2000 (Exhibit C-2).
Statement of Members' Capital Deficit for the fiscal year
ended December 31, 1999 (Exhibit C-3).
Statements of Cash Flows for the fiscal years ended
December 31, 2001, 2000 and 1999 (Exhibit D).
Notes to Financial Statements for the fiscal years ended
December 31, 2001, 2000 and 1999.
(2) Financial Statement Schedules:
List of Omitted Schedules.
Real Estate and Accumulated Depreciation - December 31,
2001 (Schedule III).
(3) Exhibits: See Exhibit Index.
(b) No report on Form 8-K was filed by Registrant during
the last quarter of the period covered by this
report.
-16-
[J.H. COHN LLP
ACCOUNTANTS & CONSULTANTS]
March 27,2002
Empire State Building Associates L.L.C.
New York, N. Y.
We consent to the use of our independent accountants' report dated March
27, 2002 covering our audits of the accompanying financial statements of
Empire State Building Associates L.L.C. in connection with and as part
of your December 31, 2001 annual report (Form 10-K) to the Securities
and Exchange Commission.
J.H. Cohn LLP
New York, N.Y.
-17-
[J.H. COHN LLP
ACCOUNTANTS & CONSULTANTS]
INDEPENDENT ACCOUNTANTS' REPORT
To the participants in Empire State Building Associates L.L.C.
(a Limited Liability Company)
New York, N. Y.
We have audited the accompanying balance sheets of Empire State Building
Associates L.L.C. ("Associates") as of December 31, 2001 and 2000, and
the related statements of income, members' equity and cash flows for
each of the three years in the period ended December 31, 2001, and the
supporting financial statement schedule as contained in Item 14(a)(2) of
this Form 10-K. These financial statements and schedule are the
responsibility of Associates' management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Empire State
Building Associates L.L.C. as of December 31, 2001 and 2000, and the
results of its operations and its cash flows for each of the three years
in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America, and the
related financial statement schedule, when considered in relation to the
basic financial statements, presents fairly, in all material respects,
the information set forth therein.
J.H. Cohn LLP
New York, N. Y.
March 27, 2002
-18-
EXHIBIT A
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
BALANCE SHEETS
A S S E T S
December 31,
2001 2000
Current assets:
Cash and cash equivalents (Note 14):
JPMorgan Chase Bank $ 3,739 $ 1,418
Distribution account held by
Wien & Malkin LLP 324,111 324,111
Fidelity U.S. Treasury Income Portfolio 29,520,266 15,408,212
29,848,116 15,733,741
Additional rent due from Empire State
Building Company L.L.C., a related party 72,502 2,583,762
Prepaid rent 23,831 23,831
TOTAL CURRENT ASSETS 29,944,449 18,341,334
Deferred charges 110,050 -
Real estate (Note 2):
Leasehold on Empire State Building,
350 Fifth Avenue, New York, N. Y 39,000,000 39,000,000
Less: Accumulated amortization 36,706,830 36,498,362
2,293,170 2,501,638
TOTAL ASSETS $32,347,669 $20,842,972
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accrued professional fees, including amounts due
to a related party (Note 11) $ 316,804 $ 1,854,565
Accrued supervisory services, to a
related party (Note 5) 1,474,468 843,310
TOTAL LIABILITIES 1,791,272 2,697,875
Contingencies (Notes 10 and 12)
Members' equity (Exhibit C) 30,556,397 18,145,097
TOTAL LIABILITIES AND MEMBERS' EQUITY $32,347,669 $20,842,972
See accompanying notes to financial statements.
-19-
EXHIBIT B
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
STATEMENTS OF INCOME
Year ended December 31,
2001 2000 1999
Revenues:
Rent income, from a related party (Note 3) $32,091,252 $20,602,512 $13,600,859
Miscellaneous income (Note 11) 1,660,904 - -
Dividend income 248,948 256,963 144,690
34,001,104 20,859,475 13,745,549
Expenses:
Leasehold rent (Note 4) 1,970,000 1,970,000 1,970,000
Supervisory services, to a related
party (Note 5) 1,633,885 1,002,727 581,983
Professional fees, including amounts due
to a related party (Note 11) 676,260 362,679 84,033
Amortization of leasehold (Note 2) 208,468 208,468 208,468
4,488,613 3,543,874 2,844,484
NET INCOME, CARRIED TO MEMBERS'
EQUITY (NOTE 8) $29,512,491 $17,315,601 $10,901,065
Earnings per $10,000 participation unit, based
on 3,300 participation units outstanding
during each year $ 8,943 $ 5,247 $ 3,303
See accompanying notes to financial statements.
-20-
EXHIBIT C-3
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
STATEMENT OF MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 1999
Members' Members'
Equity Equity
January 1, Share of December 31,
1999 net income Distributions 1999
Richard A. Shapiro Group $2,382,433 $ 3,633,688 $2,236,444 $ 3,779,677
Thomas N. Keltner, Jr. Group 2,382,432 3,633,689 2,236,445 3,779,676
Peter L. Malkin Group 2,382,432 3,633,688 2,236,444 3,779,676
$7,147,297 $10,901,065 $6,709,333 $11,339,029
See accompanying notes to financial statements.
-21-
EXHIBIT C-1
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
STATEMENT OF MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 2001
Members' Members'
Equity Equity
January 1, Share of December 31,
2001 net income Distributions 2001
Anthony E. Malkin Group
(formerly Richard A.
Shapiro Group) $ 6,048,366 $ 9,837,497 $ 5,700,397 $10,185,466
Thomas N. Keltner, Jr. Group 6,048,365 9,837,497 5,700,397 10,185,465
Peter L. Malkin Group 6,048,366 9,837,497 5,700,397 10,185,466
$18,145,097 $29,512,491 $17,101,191 $30,556,397
See accompanying notes to financial statements.
-22-
EXHIBIT C-2
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
STATEMENT OF MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 2000
Members' Members'
Equity Equity
January 1, Share of December 31,
2000 net income Distributions 2000
Richard A. Shapiro Group $ 3,779,677 $ 5,771,867 $3,503,178 $ 6,048,366
Thomas N. Keltner, Jr. Group 3,779,676 5,771,867 3,503,178 6,048,365
Peter L. Malkin Group 3,779,676 5,771,867 3,503,177 6,048,366
$11,339,029 $17,315,601 $10,509,533 $18,145,097
See accompanying notes to financial statements.
-23-
EXHIBIT D
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
STATEMENTS OF CASH FLOWS
Year ended December 31,
2001 2000 1999
Cash flows from operating activities:
Net income $ 29,512,491 $ 17,315,601 $10,901,065
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of leasehold 208,468 208,468 208,468
Changes in operating assets and liabilities:
Additional rent due from Empire State
Building Company L.L.C., a related party 2,511,260 (1,601,653) (372,257)
Deferred charges (110,050) - -
Accrued supervisory services,
to a related party 631,158 420,744 242,566
Accrued professional fees,
to a related party (1,537,761) 362,679 31,545
Net cash provided by
operating activities 31,215,566 16,705,839 11,011,387
Cash flows from financing activities:
Cash distributions (17,101,191) (10,509,533) (6,709,333)
Net cash used in financing
activities (17,101,191) (10,509,533) (6,709,333)
Net increase in cash
and cash equivalents 14,114,375 6,196,306 4,302,054
Cash and cash equivalents, beginning of year 15,733,741 9,537,435 5,235,381
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 29,848,116 $ 15,733,741 $ 9,537,435
See accompanying notes to financial statements.
-24-
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
1. Business Activity and Reorganization
Empire State Building Associates L.L.C. ("Associates") holds the tenant's
position in the master leasehold of the Empire State Building (the "Building"),
located at 350 Fifth Avenue, New York City. Associates subleases the property
to Empire State Building Company L.L.C.("Company").
Associates operated as a general partnership, Empire State Building Associates,
until October 1, 2001, when it converted to a limited liability company and
changed to its current name. Ownership percentages in Associates were
unchanged by the conversion. Associates continues to be treated as a
partnership for tax purposes, and the partnership's income tax basis of its
assets and liabilities carried over to the limited liability company.
2. Summary of Significant Accounting Policies
a. Cash and Cash Equivalents:
Cash and cash equivalents include investments in money market funds and all
highly liquid debt instruments purchased with a maturity of three months or
less.
b. Real Estate and Amortization of Leasehold:
Real estate, consisting of a leasehold, is stated at cost. Amortization of the
leasehold is being computed through its first renewal term by the straight-line
method over its estimated useful life of 25 years, from January 1, 1988 to
January 5, 2013.
c. Use of Estimates:
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, 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. Related Party Transactions - Rent Income
Rent income for the years ended December 31, 2001, 2000 and 1999 totaling
$32,091,252, $20,602,512 and $13,600,859, respectively, consists of the minimum
annual rent plus additional rent under an operating sublease dated December
27, 1961, as modified February 15, 1965, with Company (the "Sublessee"), as
follows:
Year ended December 31,
2001 2000 1999
Minimum net basic rent $ 6,018,750 $ 6,018,750 $ 6,018,750
Additional rent earned 26,072,502 14,583,762 7,582,109
$32,091,252 $20,602,512 $13,600,859
-25-
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. Related Party Transactions - Rent Income (continued)
The sublease provides for the same initial term and renewal options as the
leasehold (see Note 4), less one day. In January 1989, the Sublessee exercised
its option to renew the sublease for the first renewal period from January 4,
1992 to January 4, 2013. The annual minimum net basic rent during the first
renewal term was reduced to $6,018,750, and is to be further reduced to
$5,895,625 during each of three remaining renewal terms.
Additional rent earned is equal to fifty percent of the Sublessee's annual
net income (as defined in the sublease) in excess of $1,000,000.
A member in Associates is also a member in the Sublessee.
4. Leasehold Rent
Leasehold rent represents the net basic rent of $1,970,000 per annum under an
operating lease dated December 27, 1961, as modified February 15, 1965, with
The Prudential Insurance Company of America ("Prudential"). Associates exercised
its first renewal option in 1988, and the current leasehold rent remains
unchanged throughout the first renewal term of the lease, which ends on
January 5, 2013.
The lease contains options for Associates to renew the leasehold for an
additional 3 successive periods of 21 years each. The basic rent is to be
further reduced to $1,723,750 per annum during each of the remaining three
renewal terms.
On November 27, 1991, Prudential sold the property to E.G. Holding Co., Inc.
which, through merger and conveyance, transferred its interest as lessor to
Trump Empire State Partners. Associates' rights under the master leasehold
remain unchanged.
See Note 9.
5. Related Party Transactions - Supervisory Services
Supervisory services (including disbursements and cost of regular accounting
services) during the years ended December 31, 2001, 2000 and 1999, totaling
$1,633,885, $1,002,727 and $581,983, respectively, represent fees incurred
by the firm of Wien & Malkin LLP. Some members of that firm are members in
Associates.
Fees for supervisory services are paid pursuant to an agreement, which amount
is based on a rate of return of investment achieved by the participants in
Associates each year.
6. Number of Participants
There were approximately 2,640 participants in the participating groups at
December 31, 2001, 2000 and 1999.
-26-
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. Determination of Distributions to Participants
Distributions to participants in 2001, 2000 and 1999 of $17,101,191, $10,509,533
and $6,709,333, respectively, represented the following:
2001 2000 1999
Minimum annual rent $ 6,018,750 $ 6,018,750 $ 6,018,750
Additional rent,
earned in
previous year,
distributed in
current year 14,583,762 7,582,109 4,109,852
Dividend income
earned in previous
year, distributed
in current year 256,963 144,690 84,615
20,859,475 13,745,549 10,213,217
Less:
Leasehold rent
expense $1,970,000 $1,970,000 $1,970,000
Supervisory services
incurred in
previous year 1,002,727 581,983 339,417
Professional fees
incurred in
previous year 362,679 84,033 188,104
Amount held in
reserve to fund
payment of accrued
legal fees 422,878 600,000 1,006,363
3,758,284 3,236,016 3,503,884
Distributions
to participants $17,101,191 $10,509,533 $ 6,709,333
8. Distributions and Amount of Income per $10,000 Participation Unit
Distributions per $10,000 participation unit during the years 2001, 2000 and
1999 based on 3,300 participation units outstanding during each year, consisted
of the following:
Year ended December 31,
2001 2000 1999
Income $5,182 $3,185 $2,033
Return of capital - - -
TOTAL DISTRIBUTIONS $5,182 $3,185 $2,033
Net income is computed without regard to income tax expense since Associates
does not itself pay a tax on its income; instead, any such taxes are paid by
the participants in their individual capacities.
-27-
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. Proposal to Acquire Fee Title to Empire State Building and Subsequent Event
On September 14, 2001, Associates' Agents filed a proxy statment with the
Securities and Exchange Commission in connection with the Solicitation of
Consents of Associates' Participants for a program (a) to acquire the fee
title to the Empire State Building for a price not to exceed $57.5 million,
and for total acquisition and financing costs not to exceed $60.5 million;
(b) to mortgage the fee title and leasehold to finance such total costs; and
(c) to effect such acquisition and financing alone or with the operating
sublessee or any third party on terms the Agents believe beneficial for
Associates. The required consents for the program were obtained prior to
December 31, 2001. On March 18, 2002, Associates signed both a purchase
contract to acquire the fee title at a price of $57.5 million (with a deposit
of $1 million) and a $60.5 million mortgage commitment to finance the
acquisition and financing costs.
10. Litigation and Subsequent Events
On November 29, 2001, an action entitled Irving Schneider v. Peter L. Malkin et
al. was brought in New York State Supreme Court by the holder of a $10,000
original participation in Associates (representing 1/3300th of the interests
in Associates) against Associates' Agents, claiming that the Agents had
violated contractual and fiduciary duties and that the consent of the
Participants to Associates' program for acquisition and financing of the fee
title to the Empire State Building pursuant to the September 14, 2001
Solicitation (Note 9) is ineffective. On February 28, 2002, the Court granted
an order dismissing all of Mr. Schneider's claims. Mr. Schneider filed on
March 8, 2002 a notice of appeal of the order dismissing his claims.
Associates has paid the defense costs in this action for professional fees and
disbursements, of which $122,442 has been incurred through December 31, 2001.
Counsel for Associates' Agents has advised that Mr. Schneider's claims are
without merit. It is not possible at this time to determine the potential loss,
if any, which might result from this action. No provision for liability has
been made in the accompanying financial statements. Associates established a
reserve of $500,000 as of March 11, 2002 for future defense costs in any appeal
or other proceedings related to this matter.
11. Related Party Transactions - Professional Fees and Miscellaneous Income
The accompanying statements of income reflect legal fees paid or owed to Wien &
Malkin LLP, a related party (Note 5), as follows:
2001 2000 1999
Reimbursement owing to Agents
of their legal and accounting
expenses relating to suit
by Julien Studley $120,009 $219,386 $39,670
Other payments made or accrued 392,809 143,293 44,363
$512,818 $362,679 $84,033
-28-
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. Related Party Transactions - Professional Fees and Miscellaneous Income
(continued)
Accrued professional fees, at December 31, 2002 and 2001 include $220,749 and
$1,854,565, respectively, owed to Wien & Malkin LLP.
Miscellaneous income of $1,660,904 in 2001 consists of a reimbursement by
Company of litigation costs and disbursements expensed by Associates in 2001
and prior years. The litigation costs and disbursements had been incurred in
Associates' successful defense of dismissed claims by Julien Studley, a
holder of a $20,000 original participation in Associates, against Agents for
Associates.
12. Contingencies
Wien & Malkin LLP and Peter L. Malkin are engaged in a dispute with Company's
managing agent, Helmsley-Spear, Inc., concerning the management, leasing, and
supervision of the property that is subject to the net sublease to the
operating sublessee. In this connection, certain legal and professional fees
and other expenses have been paid and incurred by Wien & Malkin LLP and Mr.
Malkin, and additional costs are expected to be incurred. Wien & Malkin LLP
and Mr. Malkin have represented that such costs will be recovered only to the
extent that (a) competent tribunal authorizes payment by Associates or (b) a
participant voluntarily agrees that his or her proportionate share be paid.
Accordingly, Associates' allocable share of such costs is as yet undetermined,
and Associates has not provided for the expense and related liability with
respect to such costs in these financial statements.
The original action commenced in June 1997 and was referred to arbitration.
The March 30, 2001 decision of the arbitrators, which was confirmed by the
court, (i) reaffirms the right of the partners in the lessee to vote to
terminate Helmsley-Spear, Inc. without cause, (ii) dismisses Helmsley-Spear,
Inc.'s claims against Wien & Malkin LLP, and (iii) rejects the termination of
Helmsley-Spear, Inc. for cause. Parts of the decision of the court are under
appeal.
13. Receipt of Warrants and Stock in Telecommunications Companies
In 2000, Associates received shares of common stock and warrants from certain
unrelated companies in exchange for permission for those companies to provide
high-speed internet access and other telecommunication services to the Building.
The Sublessee received an equal number of shares and warrants. There are
restrictions as to the transfer of the stock, and neither the warrants nor
the stock has an ascertainable value since their issuance. Accordingly, the
accompanying financial statements do not reflect any value for these securities.
14. Concentration of Credit Risk
Associates maintains cash balances in a bank, money market funds (Fidelity U.S.
Treasury Income Portfolio) and a distribution account held by Wien & Malkin LLP.
The bank balance is insured by the Federal Deposit Insurance Corporation up to
$100,000, and at December 31, 2001 was completely insured. The cash in the money
market funds and the account held by Wien & Malkin LLP are not insured. The
funds held in the distribution account were paid to the participants on January
1, 2002.
15. Reclassifications
As a result of the reorganization in 2001 (Note 1), certain accounts in prior
year financial statements have been reclassified to conform with the
presentation in the financial statements for 2001.
-29-
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
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 IV - Mortgage loans on real estate.
-30-
SCHEDULE III
EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(A Limited Liability Company)
Real Estate and Accumulated Depreciation
December 31, 2001
Column
A Description Leasehold on Empire State Building
located at 350 Fifth Avenue,
New York, New York.
B Encumbrances............................................. None
C Initial cost to company
Leasehold.............................................. $39,000,000
D Cost capitalized subsequent to acquisition............... None
E Gross amount at which carried at
close of period
Leasehold............................................ $39,000,000(a)
F Accumulated amortization................................ $36,706,830(b)
G Date of construction 1931
H Date acquired December 27, 1961
I Life on which leasehold amortization in
latest income statements is computed 25 years from January 1, 1988
(see Note 2 of Notes to
Financial Statements).
(a) There have been no changes in the carrying values of real estate for the
years ended December 31, 2001, December 31, 2000 and December 31, 1999. The
costs for federal income tax purposes are the same as for financial statement
purposes.
(b) Accumulated amortization
Balance at January 1, 1999 $36,081,426
Amortization:
F/Y/E 12/31/99 $208,468
12/31/00 208,468
12/31/01 208,468 625,404
Balance at December 31, 2001 $36,706,830
-31-
-16-
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 Powers of Attorney, dated
March 18, 1998, March 20, 1998 and May 14, 1998 (the "Power").
60 EAST 42ND ST. ASSOCIATES L.L.C.
(Registrant)
By /s/ Stanley Katzman
Stanley Katzman, Attorney-in-Fact*
Date: April 15, 2002
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 15, 2002
________________________
* Mr. Katzman supervises accounting functions for Registrant.
-32-
Exhibit Index
Number Document Page*
3(a) Partnership Agreement, dated September
25, 1958, which was filed by letter
dated March 31, 1981 (Commission File
No. 0-2670) as Exhibit No. 3 to
Registrant's Form 10-K for the fiscal
year ended December 31, 1980, is
incorporated by reference as an exhibit
hereto.
3(b) Amended Business Certificate of
Registrant filed with the Clerk of New
York County on November 28, 1997,
reflecting a change in the Partners of
Registrant, which was filed as Exhibit
3(b) to Registrant's 10-Q for the period
ended March 31, 1998 and is incorporated
by reference as an exhibit hereto.
4 Form of Participating Agreement, which
was filed as Exhibit No. 4 to
Registrant's Form S-1 Registration
Statement, as amended (the "Registration
Statement") by letter dated June 28,
1954 and assigned file No. 2-10981, is
incorporated by reference as an exhibit
hereto.
10(a) Deed of Lincoln Building to WLKP Realty
Corp., which was filed as Exhibit No.
5 to Registrant's Registration
Statement by letter dated June 28,
1954 and assigned File No. 2-10981, is
incorporated by reference as an
exhibit hereto.
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Number Document Page*
10(b) First Mortgage evidenced by a
Modification, Extension & Consolidation
Agreement, dated March 31, 1954,
between WLKP Realty Corp. and The
Prudential Insurance Company of America
("Prudential"), which was filed as
Exhibit No. 6 to Registrant's
Registration Statement by letter dated
June 28, 1954 and assigned File No.
2-10981, is incorporated by reference
as an exhibit hereto.
10(c) Form of Net Lease between Registrant
and Lincoln Building Associates, which
was filed as Exhibit No. 9 to
Registrant's Registration Statement by
letter dated June 28, 1954 and assigned
File No. 2-10981, is incorporated by
reference as an exhibit hereto.
10(d) Deed from Lincoln Building Associates
to Registrant, dated October 1, 1958,
which was filed by letter dated March
31, 1981 (Commission File No. 0-2670)
as Exhibit No. 10(d) to Registrant's
Form 10-K for the fiscal year ended
December 31, 1980, is incorporated by
reference, as an exhibit hereto.
10(e) Second Modification of Lease Agreement,
dated January 1, 1977, which was filed
by letter dated March 28, 1980
(Commission File No. 0-2670) as Exhibit
II under Item 10(b) of Registrant's
Form 10-K for the fiscal year ended
December 31, 1979, is incorporated by
reference as an exhibit hereto.
10(f) Third Modification of Lease Agreement,
which was filed by letter dated March
28, 1980 (Commission File No. 0-2670)
as Exhibit II under Item 10(b) of
Registrant's Form 10-K for the fiscal
year ended December 31, 1979, is
incorporated by reference as an exhibit
hereto.
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Number Document Page*
13(b) Letter to Participants, dated November 30,
2001 and accompanying financial reports
for the lease year ended September 30,
2001. The foregoing material shall not
be deemed to be "filed" with the
Commission or otherwise subject to the
liabilities of Section 18 of the
Securities Exchange Act of 1934.
24 Powers of Attorney dated March 18,
1998, March 20, 1998 and May 14, 1998
between the Partners of Registrant and
Stanley Katzman and Richard A. Shapiro,
which was filed as Exhibit 24 to
Registrant's 10-Q for the period ended
March 31, 1998 and is incorporated by
reference as an exhibit hereto.
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