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FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2002.
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: 0-5537
INVESTMENT PROPERTIES ASSOCIATES
--------------------------------
(Exact name of registrant as specified in its charter)
A New York Limited Partnership 13-2647723
------------------------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60 East 42nd Street, New York, New York 10165
---------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 687-6400
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
820,000 participations of Limited Partnership Interests
are outstanding as of the date hereof.
INVESTMENT PROPERTIES ASSOCIATES
FORM 10-Q
For the Fiscal Quarter Ended September 30, 2002
INDEX
Page
----
PART I. FINANCIAL INFORMATION...........................................1
Item 1. Financial Statements............................................1
Balance Sheets..................................................1
Statements of Operations........................................2
Statements of Cash Flows........................................3
Notes to Unaudited Financial Statements.........................4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations......................................................5
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.....................................................6
Item 4. Controls and Procedures.........................................6
PART II. OTHER INFORMATION...............................................7
Item 6. Exhibits and Reports on Form 8-K................................7
Signatures......................................................8
Certifications..................................................9
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
BALANCE SHEETS
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
SEPTEMBER 30, 2002 DECEMBER 31, 2001
------------------ -----------------
ASSETS (Unaudited) (Note)
Real estate, at cost $8,033,347 $8,033,347
Less: Accumulated depreciation and amortization 5,880,040 5,880,040
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2,153,307 2,153,307
Cash and cash equivalents 1,335,079 2,788,292
Due from managing agent (Helmsley-Spear, Inc.) 179,125 229,291
Receivables 3,553 3,553
Other assets 462,294 457,515
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$4,133,358 $5,631,958
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Accounts payable $ 14,405 $ 7,903
Distributions payable to General Partners,
Special Limited Partners and Limited Partners 7,213 698,179
Sundry liabilities and other accrued expenses 272,885 415,799
Deposits -- 1,500,000
---------- ----------
294,503 2,621,881
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Partners' Capital (Deficiency)
General Partners (2,490,648) (2,495,206)
Special Limited Partners 3,696,123 3,286,292
Limited Partners (represented by the equivalent
of 820,000 Participation Interests) 2,633,380 2,218,991
---------- ----------
3,838,855 3,010,077
---------- ----------
$4,133,358 $5,631,958
========== ==========
Note: The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date.
See accompanying notes to financial statements.
1
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
----------------------------- -----------------------------
SEPT 30, 2002 SEPT 30, 2001 SEPT 30, 2002 SEPT 30, 2001
------------- ------------- ------------- -------------
Revenues:
Gross revenues from real estate $ -- $ 62,788 $ -- $ 51,536
Real estate tax refund -- 1,245,541 -- 585,046
Other income 1,501,500 43,139 -- 43,139
Interest 24,682 212,988 6,164 16,897
---------- ---------- --------- ---------
1,526,182 1,564,456 6,164 696,618
---------- ---------- --------- ---------
Expenses:
Real estate taxes 231,714 187,258 77,772 68,693
Other expenses 378,315 641,554 104,172 242,044
---------- ---------- --------- ---------
610,029 828,812 181,944 310,737
---------- ---------- --------- ---------
Income (loss) before items shown below 916,153 735,644 (175,780) 385,881
Gain (loss) on sale of real estate -- 95,096 -- 95,096
---------- ---------- --------- ---------
916,153 830,740 (175,780) 480,977
---------- ---------- --------- ---------
Guaranteed payments required under the
Limited Partnership Agreement:
To the Limited Partners 11,250 11,250 3,750 3,750
To the General and Special Limited Partners 76,125 76,125 25,375 25,375
---------- ---------- --------- ---------
87,375 87,375 29,125 29,125
---------- ---------- --------- ---------
Net income (loss) transferred to partners'
capital accounts $ 828,778 $ 743,365 $(204,905) $(451,852)
========== ========== ========= =========
Net income (loss) allocable as follows (based
on terms of the Limited
Partnership Agreement):
General Partners $ 4,558 $ 4,088 $ (1,127) $ 2,485
Special Limited Partners 409,831 367,594 (101,325) 223,441
Limited Partners (represented by the
equivalent of 820,000 Participation
Interests - unchanged during the periods) 414,389 371,683 (102,453) 225,926
---------- ---------- --------- ---------
$ 828,778 $ 743,365 $(204,905) $ 451,852
========== ========== ========= =========
Per Participation Interest:
Net income (loss) $ 0.5054 $ 0.4533 $ (0.1249) $ 0.2755
========== ========== ========= =========
See accompanying notes to financial statements.
2
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001
2002 2001
----------- ----------
OPERATING ACTIVITIES:
Net income $ 828,778 $ 743,365
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Gain on sale of real estate -- (95,096)
Changes in operating assets and liabilities:
Decrease in due from managing agent 50,166 525,148
(Increase) Decrease in other assets (4,779) 42,209
Increase (decrease) in accounts payable 6,502 (69,906)
Increase in accrued real estate taxes -- 59,757
Decrease in sundry liabilities and other accrued expenses (142,914) (75,804)
Decrease in deposits (1,500,000) --
----------- -----------
Net cash (used in) provided by operating activities (762,247) 1,129,673
----------- -----------
INVESTING ACTIVITIES:
Net proceeds from sale of real estate -- 95,583
----------- -----------
FINANCING ACTIVITIES:
Distributions of net operating revenues and proceeds
from sale of real estate to General Partners, Special
Limited Partners and Limited Partners (690,966) (9,108,231)
----------- -----------
Decrease in cash and cash equivalents (1,453,213) (7,882,975)
Cash and cash equivalents at beginning of period 2,788,292 9,514,349
----------- -----------
Cash and cash equivalents at end of period $ 1,335,079 $ 1,631,374
=========== ===========
See accompanying notes to financial statements.
3
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1
As permitted by the Securities and Exchange Commission, the accompanying
unaudited financial statements and footnotes have been condensed and therefore,
do not contain all disclosures required by accounting principles generally
accepted in the United States. Reference should be made to the Company's Annual
Report Form 10-K for the year ended December 31, 2001, filed with the Securities
and Exchange Commission.
NOTE 2
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly its financial position as of September 30, 2002 and the
results of operations for the three and nine month periods ended September 30,
2002 and 2001.
NOTE 3
The results of operations for the three and nine month periods ended September
30, 2002 and 2001 are not necessarily indicative of the results to be expected
for the full year.
NOTE 4 - Taxes
The net income (loss) for Federal income tax purposes is $667,743 (nine months
ended September 30, 2002) and $(16,783) (nine months ended September 30, 2001)
as compared with net income of $828,778 and $743,365 respectively, as shown in
the statements of operations. The differences result principally from
differences in depreciation expense which continues to be recognized for tax
purposes.
NOTE 5 - Other Income
On October 22, 2001, the Company signed a contract, subject to certain closing
conditions, to sell its only remaining property, a vacant commercial office
building located at 570 Broad Street, Newark, New Jersey, for a purchase price
of $11,500,000. In connection with the contract, the Company received
non-refundable deposits from the buyer in the amount of $1,500,000. In January
2002, due to the buyer's inability to satisfy the closing conditions, the
contract expired and the Company resumed marketing activities with respect to
the Property. The Company retained the non-refundable deposits from the buyer in
the amount of $1,500,000.
4
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As a result of the sales of the Company's remaining income producing properties
in 2000, the Company no longer derives income from rental operations. The
activity of the Company consists of marketing for sale its remaining non-income
producing property, a vacant office property located at 570 Broad Street,
Newark, New Jersey.
The real estate tax refund in 2001 was attributable to the settlement of tax
certiorari appeals filed in a prior year relating to the Company's Chicago
properties which had been sold in 1998 and the 1328 Broadway and 261 Fifth
Avenue properties which had been sold in 2000.
The decrease in interest income was due to the reduction of investments in
commercial paper as a result of the distributions made to partners during 2001
and 2002 of the net proceeds from the sales of properties.
The increase in real estate taxes in 2002 as compared to 2001 is principally
attributable to a tax refund received in 2001 for the 570 Broad Street property.
The decrease in other expenses in 2002 as compared to 2001 is principally
attributable to a decrease in professional fees.
Other income in 2002 relates principally to the Company's retention of a
non-refundable deposit in the amount of $1,500,000 received in 2001 from a
prospective buyer of the 570 Broad Street property pursuant to a contract to
sell the 570 Broad Street property, which was subject to certain closing
conditions. As a result of the prospective buyer's inability to satisfy the
closing conditions of the sales contract, the contract expired in accordance
with its terms in January of 2002, and the buyer's deposit was forfeited to the
Company. See Note 5 of the accompanying notes to the financial statements.
As of December 31, 2001, the Company had accrued (i) a special dividend of
$410,000 to its General Partners and Special Limited Partners and holders of
record of the PPI's as of the close of business on December 31, 2001 from its
available cash and (ii) a distribution in the amount of $280,965 in respect of
2001 net operating revenues. These amounts were paid during 2002.
5
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 30, 2002, the Company had no interest bearing indebtedness and
accordingly was not exposed to market risk with respect to changes in interest
rates, and does not anticipate a need to seek additional borrowings.
ITEM 4.
CONTROLS AND PROCEDURES
Within the 90-day period preceding the date of this report, an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures was carried out under the supervision and with the participation
of the Company's management, including the Chief Executive Officer and the Chief
Financial Officer (the "Certifying Officers"). Based on that evaluation, the
Certifying Officers concluded that the Company's disclosure controls and
procedures are effective to bring to the attention of the Company's management
the relevant information necessary to permit an assessment of the need to
disclose material developments and risks pertaining to the Company's business in
its periodic filings with the Securities and Exchange Commission. There have
been no significant changes to the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the evaluation.
6
PART II. OTHER INFORMATION
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 99.1 Section 906 Sarbanes-Oxley Act of 2002 certification of
Mr. Irving Schneider as General and Special Limited
Partner and Chief Executive Officer
Exhibit 99.2 Section 906 Sarbanes-Oxley Act of 2002 certification of
Mr. Robert Hecht as Chief Financial Officer
(b) Reports on Form 8-K
None.
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
7
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVESTMENT PROPERTIES ASSOCIATES
By: /s/ Irving Schneider
---------------------------------------
Irving Schneider
General and Special Limited Partner and
Chief Executive Officer
By: /s/ Robert Hecht
---------------------------------------
Robert Hecht
Chief Financial Officer
Dated: November 13, 2002
8
Section 302 Certification
I, Irving Schneider, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investment
Properties Associates;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/s/ Irving Schneider
---------------------------------------
Irving Schneider
General and Special Limited Partner and
Chief Executive Officer
9
Section 302 Certification
I, Robert Hecht, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Investment
Properties Associates;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/s/ Robert Hecht
-------------------------------
Robert Hecht
Chief Financial Officer
10