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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 of organization) (I.R.S. Employer 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) 687-6400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Participations of Limited 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 such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) 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. |X|
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of December 31, 2002 is not applicable.
The number of Participations of Limited Partnership Interests outstanding
of the Registrant as of December 31, 2002 was 820,000.
APPLICABLE ONLY TO REGISTRANTS 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 |_|
DOCUMENTS INCORPORATED BY REFERENCE
None.
Investment Properties Associates
Form 10-K
For The Fiscal Year Ended December 31, 2002
INDEX
Page
----
Part I .....................................................................1
Item 1. Business.............................................................1
Item 2. Properties...........................................................3
Item 3. Legal Proceedings....................................................3
Item 4. Submission of Matters to a Vote of Security Holders..................3
Part II .....................................................................4
Item 5. Market for the Registrant's Participation Interests and
Related Security Holder Matters......................................4
Item 6. Selected Financial Data..............................................7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................7
Item 7A. Quantitative and Qualitative Disclosures about Market Risk...........10
Item 8. Financial Statements and Supplementary Data..........................10
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................10
Part III .....................................................................11
Item 10. General Partners of the Registrant...................................11
Item 11. Executive Compensation...............................................12
Item 12. Security Ownership of Certain Beneficial Owners and Management.......13
Item 13. Certain Relationships and Related Transactions.......................15
Item 14. Controls and Procedures..............................................15
Part IV .....................................................................16
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K......16
Signatures...........................................................17
Certifications.......................................................18
-i-
PART I
This report contains certain forward-looking statements. Actual results
could differ materially from those projected in the forward-looking statements
as a result of any number of factors discussed herein including, without
limitation, under the captions "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." When used in this
report, the words "anticipate," "estimate," "intend," "believe," "project," and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, expected, estimated, intended, believed or projected.
Item 1. Business.
(a) General Development of Business.
General.
Investment Properties Associates ("IPA" or "Registrant") is a limited
partnership formed in accordance with the New York Revised Limited Partnership
Act, and pursuant to a Limited Partnership Agreement, dated as of May 15, 1969,
and as amended on October 2, 1969, October 31, 1969, December 3, 1969 and May
30, 1997 (the "Partnership Agreement"). The Registrant's sole business is the
ownership and operation of commercial real estate.
Current Property.
The Registrant owns one vacant commercial office building located at 570
Broad Street, Newark, New Jersey. On October 22, 2001, Registrant signed a
contract, subject to certain closing conditions, to sell this property for a
purchase price of $11,500,000. In connection with the contract, Registrant
received non-refundable deposits from the buyer in the amount of $1,500,000. On
January 20, 2002, due to the buyer's inability to satisfy the closing
conditions, the contract expired and Registrant resumed marketing activities
with respect to the property. Registrant retained the non-refundable deposits
from the buyer in the amount of $1,500,000 and recognized such amount as income
in 2002.
Background.
Harry B. Helmsley, a General Partner of Registrant, died on January 4,
1997. Upon his death, Mr. Helmsley's general partnership interest in Registrant
was converted to a special limited partner interest, which was inherited by his
spouse, Leona M. Helmsley, from Mr. Helmsley's estate as of December 31, 1997
(the "Converted Special L.P. Interest"). Under the terms of the Partnership
Agreement as in effect on the date of Mr. Helmsley's death, the General Partners
were required to create a new limited
1
partnership with the same attributes as Registrant and to convey all of the
assets and liabilities of Registrant to such entity. Such action would have
involved substantial transfer tax, insurance premium costs and other related
expenses and no benefit to the partners of Registrant or to the holders of
Participations of Limited Partnership Interests ("PPIs") in the limited
partnership interest of the limited partner of Registrant. Accordingly,
Registrant obtained the approval of the holders of a majority of the PPIs to,
among other things, amend the Agreement to permit the remaining General Partners
to elect to continue the business of Registrant in the event of the death of a
General Partner and to make such election with respect to the death of Mr.
Helmsley. Such amendments were effective on May 30, 1997 (the "Amendments"). As
contemplated by the amended Partnership Agreement, effective July 3, 1997, H
Associates L.L.C. ("H Associates"), an entity owned by Leona M. Helmsley, was
admitted as a General Partner of Registrant. H Associates' economic interest in
Registrant was acquired from Helmsley-Noyes Company, Inc., also a General
Partner of Registrant.
On June 10, 1998, ScogBell Acquisition, L.L.C., a Delaware limited
liability company ("ScogBell"), purchased from Leona Helmsley all of her
interests in Registrant. The interests from this sale that were acquired by
ScogBell from Leona Helmsley included, among other things, general partnership
interests (0.05%), special limited partnership interests (33.29%) and an
aggregate of 282,377 PPIs. Also on June 10, 1998, ScogBell acquired 28,550 PPIs
in the over-the-counter market. As a result, ScogBell became a beneficial owner
of 310,927 PPIs in Registrant which represents 37.9% of the outstanding PPIs.
(b) Financial Information About Segments. Registrant's sole business is
the ownership and operation of commercial real estate. All of Registrant's
revenues, operating profit or loss and assets relate solely to such industry
segment.
(c) Narrative Description of Business. Registrant's only business is the
ownership and operation of commercial real properties. During 2000, Registrant
disposed of its remaining income producing properties and, at December 31, 2001,
Registrant's remaining real property consisted of one vacant commercial office
building, which was held under contract for sale, subject to certain closing
conditions. On January 20, 2002, due to the buyer's inability to satisfy the
closing conditions, the contract expired. Registrant resumed marketing
activities with respect to the Property and retained the prospective buyer's
non-refundable deposits in the amount of $1,500,000 which were recognized as
income in 2002. The primary cost associated with Registrant's remaining Property
is real estate taxes. All of the real property owned and operated by Registrant
is set forth in Item 2.
Registrant's needs for working capital are satisfied by existing cash
balances which were generated primarily from previous sales of properties and
the retention of the aforementioned non-refundable deposits in the amount of
$1,500,000 in 2002.
2
Registrant employs one person who handles maintenance of the remaining
Property. All of the Registrant's other operating functions, which consist
primarily of property management and administrative services, are performed by
Helmsley-Spear, Inc. ("HSI") or affiliates of HSI, which entities may be deemed
to be affiliates of Registrant. Management fees and leasing commissions charged
by HSI aggregated approximately $0, $0 and $393,000 during the fiscal years
ended December 31, 2002, 2001 and 2000, respectively. HSI also earned $0, $3,000
and $6,754,000 in brokerage commissions in 2002, 2001 and 2000, respectively, in
connection with the sale of two parcels of undeveloped land in Houston, Texas in
2001, the sale of its 50% undivided interest in the Marbridge Building and the
245 Fifth Avenue and 261 Fifth Avenue properties in 2000. Registrant believes
that such services are supplied at prices that approximate those that would be
available from non-affiliates. See Item 13.
Item 2. Properties.
General. At December 31, 2002, Registrant's Property included fee title to
one vacant commercial office building. The Property is located at 570 Broad
Street, Newark, New Jersey.
The table below sets forth a description of the Property owned by
Registrant on December 31, 2002, its location, type of ownership and rentable
area in square feet.
Total Rentable
Property Description Ownership Area (Sq. Ft.)
- -------- ----------- --------- --------------
570 Broad Street
Newark, New Jersey(1) 14-story office bldg. Fee 190,000
(1) The Property has been vacant since 1996, and was held under contract for
sale, subject to certain closing conditions. On January 20, 2002, due to the
buyer's inability to satisfy the closing conditions, the contract expired and
Registrant resumed marketing activities with respect to the Property.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which Registrant is a
party or of which any of Registrant's property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of holders of PPIs at a meeting or
otherwise during the fourth quarter of 2002.
3
PART II
Item 5. Market for the Registrant's Participation Interests and Related Security
Holder Matters.
Market Information.
As discussed above, Registrant is a limited partnership. PPIs represent
the beneficial interest of the Registrant's sole Limited Partner. On September
27, 2000, PPI's ceased to be traded in the over-the-counter ("OTC") market on
the National Association of Securities Dealers Automated Quotations System
("NASDAQ") under the symbol "IVPA." After such date, the PPI's have continued to
trade in the non-OTC market on the NASDAQ under the symbol "IVPA." During the
years of 2001 and 2002 and at December 31, 2002, there was no established public
trading market for these securities and quotations are limited and sporadic.
The following quotations represent prices between dealers, do not include
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions. The range of high and low closing bid quotations for PPIs for the
two most recent fiscal years was as follows:
2002(1) 2001(1)
----------------- -----------------
High Low High Low
---- --- ---- ---
First Qtr. 7 3 2.50 1
Second Qtr. 7 3.20 3.50 2.95
Third Qtr. 5 3.10 3.50 0.10
Fourth Qtr. 4 3.20 7 0.60
- ----------
(1) Trading volume for PPIs was low and quotations are limited and sporadic.
Holders.
As of December 31, 2002, there were 503 holders of record of PPIs.
4
Dividends.
Pursuant to the Partnership Agreement, Registrant is required to make
certain cash distributions to holders of PPIs. Net operating revenues for each
calendar year are distributable to the partners of Registrant approximately as
follows:
General Partners (as a group): .55%
Irving Schneider
Minlyn, Inc.
ScogBell AG, Inc. (formerly known as
Helmsley-Noyes Company, Inc.)
ScogBell
Converted Special L.P. Interest: .95%
ScogBell
Special Limited Partners (as a group): 48.50%
ScogBell
Irving Schneider
Limited Partner (nominee for holders of PPIs): 50.0%
The Limited Partner is the nominee for the holders of PPIs and all
distributions to the Limited Partner are distributed ratably to the holders of
820,000 PPIs. If with respect to any calendar year the Limited Partner's
distributive share (computed on the same basis as that used in preparing
Registrant's Federal income tax return) of income (loss), plus one-half of such
partner's distributive share of long-term capital gains, exceeds the net
operating revenue allocated to the Limited Partner as referred to in the
preceding paragraph, then Registrant must also distribute additional funds in an
amount equal to such excess to the holders of PPIs. If Registrant does not have
funds for such distribution (from cash on hand or borrowings), the Partnership
Agreement obligates the General Partners to lend or contribute funds to
Registrant for such purpose.
In 2002, Registrant had "net operating revenues" of $450,538, of which
$225,269 in the aggregate (or $0.2747 per PPI) will be distributed on March 31,
2003 to the holders of PPI's and $225,269 will be distributed to the Special
Limited Partners and the General Partners. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
In 2001, Registrant had "net operating revenues" of $280,965, of which
$140,483 in the aggregate (or $0.17132 per PPI) was distributed on March 31,
2002 to the holders of PPI's and $140,482 was distributed to the Special Limited
Partners and the General Partners. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
5
On July 18, 2001, Registrant paid a special dividend of $5,200,000 to its
General Partners and Special Limited Partners and holders of record as of the
close of business on July 6, 2001 of its PPIs from its available cash, of which
$2,600,000 was paid to the General Partners and Special Limited Partners and
$2,600,000 was paid to the holders of its PPIs.
On December 21, 2001, Registrant declared a special dividend of $410,000
to its General Partners and Special Limited Partners and holders of record of
its PPIs as of the close of business on December 31, 2001. In accordance with
the Registrant's Partnership Agreement, $205,000 was distributed to the General
Partners and Special Limited Partners and $205,000 was distributed to the
holders of its PPIs. Such distribution was paid on March 31, 2002, together with
the aforementioned 2001 net operating revenues.
"Net operating revenues" is defined in Registrant's Partnership Agreement
as follows: for any year, (i) net taxable income of the Registrant, plus (ii)
depreciation and amortization expenses allowable for income tax purposes during
such year (but only to the extent of mortgage repayments), (iii) plus
amortization of Bond issuance costs and Bond discount (which is not applicable
after 1994), (iv) plus amortization of financing costs, (v) less principal
repayments on mortgages and (vi) less any gain or loss realized on the sale or
other disposition of property. In recent years, cash distributions to
Registrant's partners have generally exceeded the amount defined as net
operating revenues as a result of the distribution of net proceeds from the sale
of Registrants properties. See Item 7 below.
Registrant does not anticipate generating net operating revenues in 2003
and does not anticipate making future cash dividends to its General Partners,
Special Limited Partners and holders of its PPI's until such time as it can
successfully conclude the sale of its remaining property.
6
Item 6. Selected Financial Data.
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Income Statement Data
Gross revenues from
real estate $ -- $ 143,887 $ 5,969,098 $ 31,640,834 $ 43,454,081
Net Income transferred to
Partner's capital accounts $ 458,410 $ 376,061 $153,829,678 $150,779,832 $112,747,733
Net operating revenues, as
defined $ 450,538 $ 280,965 $ 3,908,231 $ 12,606,987 $ 9,803,570
Net income per PPI: $ 0.2795 $ 0.1713 $ 65.3015 $ 87.8823 $ 60.4848
Balance Sheet Data
Total assets $3,733,978 $5,631,958 $ 12,959,799 $102,611,031 $ 49,762,234
Mortgages payable $ -- $ -- $ -- $ 4,000,000 $ 23,847,488
Affiliate Loans $ -- $ -- $ -- $ -- $ --
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
As of December 31, 2001, Registrant's remaining Property consisted of one
vacant commercial office building located in Newark, New Jersey, which was under
contract for sale, subject to certain closing conditions. In connection with
this contract, Registrant received non-refundable deposits aggregating
$1,500,000 from the prospective buyer in 2001. On January 20, 2002, due to the
inability of the buyer to satisfy the closing conditions, the contract expired
and Registrant retained the $1,500,000 deposits and resumed marketing activities
with respect to the Property. Registrant will seek to consummate a sale of this
property during 2003, after which the Registrant will initiate steps to wind up
its affairs, but there can be no assurance that such sale will be consummated.
In addition, Registrant is required to make certain cash distributions to
its partners for each year (see Item 5). Accordingly, Registrant has accrued
distributions in the amount of $450,538 in respect of 2002 net operating
revenues, of which $225,269 will be paid to the Special Limited Partners and the
General Partners, and $225,269 will be paid to the holders of record of its
PPIs.
7
Registrant anticipates satisfying its working capital requirements for
fiscal year 2003 generally through existing cash reserves. Registrant also seeks
to generate additional liquidity through the consummation of the sale of its
remaining property, however, there can be no assurances that such sale will be
consummated.
Net cash provided by (used in) operating activities was approximately
$(581,000) in 2002, as compared to $2.3 million in 2001. Such decrease was
primarily due to the receipt in 2001 of non-refundable deposits of $1,500,000
from a prospective purchaser of Registrant's 570 Broad Street property. Net cash
provided by investing activities was $0 in 2002, as compared to approximately
$95,000 in 2001. Such decrease was attributable to there being no sales of
properties during 2002. Net cash used in financing activities was approximately
$691,000 in 2002, as compared to $9.1 million in 2001. Such decrease was due to
decreased distributions.
Results of Operations
2002 Compared to 2001
Gross Revenues from real estate for 2002 decreased approximately $144,000
(100%) as compared to 2001, because Registrant's remaining property at 570 Broad
Street is vacant and generates no rental income, whereas in 2001, Registrant's
gross revenue from real estate resulted from the final settlement of certain
closing adjustments and prorations associated with sales of properties which
occurred in 2000. Interest and other income in 2002 increased approximately
$21,000 (approximately 1%). Interest income in 2002 decreased by approximately
$192,000 due to lower invested cash balances during 2002 as well as lower
interest rates. With respect to other income in 2001, Registrant received
approximately $1,293,000 in real estate tax refunds relating to the Marbridge
Building and 261 Fifth Avenue Building (which were sold in 2000), and the 6
North Michigan Avenue, 360 North Michigan Avenue and One LaSalle properties
(which were sold in 1998), while in 2002 Registrant recognized other income of
$1,500,000 relating to its retention of non-refundable deposits received from a
potential buyer of its 570 Broad Street property, due to the expiration of the
sales contract upon the buyer's inability to satisfy the specified closing
conditions.
Total expenses decreased by approximately $301,000 (approximately 22%) as
a result of decreased administrative expenses of approximately $417,000 related
principally to professional fees, offset by increases in real estate taxes of
approximately $50,000 and in other property expenses of approximately $71,000.
Net income for 2002 increased approximately $82,000.
2001 Compared to 2000
Gross Revenues from real estate for 2001 decreased approximately
$5,825,000 (approximately 98%) as compared to 2000, primarily due to the impact
of the sales of the 50% undivided interest in the Marbridge Building (sold in
January of 2000), and the 245 Fifth Avenue and 261 Fifth Avenue properties (sold
in May of 2000),
8
representing all of Registrant's remaining income producing properties. Total
expenses decreased by approximately $2,311,000 (approximately 63%) as a result
of the aforementioned property sales. Net income for 2001 decreased
approximately $153,454,000 primarily due to a decrease of approximately
$150,405,000 in the gain on sale of real estate offset by a decline in property
operating income of approximately $3,083,000 as a result of the aforementioned
property sales.
During 2001, gross revenue from real estate was generated primarily by the
final settlement of certain closing adjustments and prorations associated with
the sales of properties which occurred during 2000. During 2000, Registrant's
rental income was generated by the operations of its 50% undivided interest in
the Marbridge Building and the 245 and 261 Fifth Avenue properties, which were
sold during 2000.
Interest and other income in 2001 increased approximately $432,000
(approximately 37%) primarily due to the receipt in 2001 of $1,293,000 in real
estate tax refunds relating to the Marbridge Building and 261 Fifth Avenue
Building (which were sold in 2000), and the 6 North Michigan Avenue, 360 North
Michigan Avenue and One LaSalle properties (which were sold in 1998), offset by
decreased interest income of approximately $861,000 due to reduced investments
in commercial paper as a result of distributions in 2000 of the net proceeds of
sales of properties.
For 2001, Registrant incurred no interest expense due to the repayment in
2000 of Registrant's 50% share of the $8,000,000 mortgage loan on the Marbridge
Building in connection with the sale of Registrant's 50% undivided interest in
such property.
Registrant's real estate tax expense in 2001 decreased approximately
$290,000 (approximately 53%), due to the sale of its 50% undivided interest in
the Marbridge Building in January 2000 and the sale of the 261 and 245 Fifth
Avenue properties in May 2000.
Management fees decreased approximately $110,000 (100%), because
Registrant had no income producing properties during 2001, and as a result,
incurred no management fees. In 2000, management fees were incurred with respect
to Registrant's 50% undivided interest in the Marbridge Building, 245 Fifth
Avenue and 261 Fifth Avenue properties, all of which were sold in 2000.
Payroll and related expenses decreased approximately $303,000
(approximately 70%), due to the sale of the aforementioned properties in 2000.
Repairs and maintenance expenses decreased approximately $239,000 (100%),
due to the sale of the aforementioned properties in 2000.
Other property expenses decreased approximately $692,000 (approximately
84%), due to the sale of the aforementioned properties in 2000.
9
Administrative expenses increased approximately $196,000 (approximately
31%), primarily due to the payment in 2001 of a $250,000 settlement relating to
an escalation dispute with a former tenant.
Depreciation and amortization expenses decreased approximately $830,000
(100%), due to the sales of the aforementioned properties in 2000. Registrant's
remaining property, a vacant office building, is classified as property held for
sale and depreciation is not recorded.
Recent Accounting Pronouncements.
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (FAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a
segment of a business. FAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged.
The Registrant adopted FAS 144 as of January 1, 2002, which did not have a
significant impact on the Registrant's financial position or results of
operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
At December 31, 2002, Registrant 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 borrowing.
Item 8. Financial Statements and Supplementary Data.
The response to this Item 8 is submitted in a separate section of this
report.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
10
PART III
Item 10. General Partners of the Registrant.
Registrant is a limited partnership formed in accordance with the New York
Revised Limited Partnership Act. It does not have directors or executive
officers. The information set forth below is provided with respect to the
General Partners of the Registrant, who may be considered to occupy positions
equivalent to directors or executive officers. There is no specific term of
office for any General Partner of the Registrant. Each General Partner, with the
exception of ScogBell, has served in such capacity since December 4, 1969.
The names, ages, and business experience during the past five years of the
General Partners of the Registrant, including their principal occupations and
employment during that period and the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on, is as follows:
Irving Schneider - 82; Executive Vice President of Helmsley-Spear, Inc.
Mr. Schneider has been in the real estate business for over 50 years and owns
and operates, individually or through partnerships, numerous real estate
investments.
Minlyn, Inc. was formed in 1968. All of its stock is owned by Mr.
Schneider.
Registrant has been advised that ScogBell was created in June 1998 to
acquire, hold, finance and sell interests in Registrant. Control of ScogBell is
vested exclusively with ScogBell AG Manager, Inc. and ScogBell SB Manager, Inc.,
as managers.
ScogBell AG, Inc. (formerly known as Helmsley-Noyes Company, Inc.), was
incorporated in 1926 and it is a real estate management firm in New York City
which was acquired by ScogBell on June 10, 1998.
Harry B. Helmsley was a General Partner of Registrant until his death on
January 4, 1997. He was succeeded by H Associates on July 3, 1997. H Associates
acquired a nominal general partner interest from Helmsley-Noyes Corporation in
connection with its admission as a General Partner. On June 10, 1998, H
Associates ceased to be a General Partner of Registrant and was replaced by
ScogBell as a General Partner pursuant to a sale of its entire beneficial
ownership position. See Item 1, "Business."
11
Item 11. Executive Compensation.
Registrant is a limited partnership. It does not have officers, executive
officers or directors. The information set forth below is provided with respect
to the General Partners and the Special Limited Partners of the Registrant, who
may be considered to act in capacities similar to directors, or perform
policy-making functions similar to those of executive officers or officers in
charge of a principal business unit, division or function.
Paragraph 11A(3) of the Partnership Agreement provides for certain
guaranteed payments to be made to the General Partners and Special Limited
Partners of Registrant equal to 8-3/4% per annum of their "Remaining Original
Cash Contribution." The Remaining Original Cash Contribution is $1,500,000, less
the cumulative amounts distributed to the General Partners and Special Limited
Partners from time to time in respect of the net proceeds from the sale of
Registrant's properties. The Remaining Original Cash Contributions at December
31, 2002 was $1,160,000. For the year ended December 31, 2002, Registrant paid
or accrued, pursuant to such paragraph 11A(3), guaranteed payments to the
General Partners and Special Limited Partners in an aggregate amount of $101,500
follows: Irving Schneider - $33,732, ScogBell - $67,576, ScogBell AG, Inc.
(formerly known as Helmsley-Noyes Company, Inc.) - $91 and Minlyn, Inc. - $101.
Under the terms of the Partnership Agreement, since January 1, 1973, the
General Partners are entitled to receive an annual payment equal to 1/2% of the
gross revenue from real estate of the Registrant. During the year ended December
31, 2002, no payment was required as Registrant did not generate any gross
revenue from real estate during 2002. Mr. Schneider and ScogBell are entitled to
receive distributions of net operating revenues in each of their respective
capacities as General Partners and Special Limited Partners. See "Item 5" above.
The Registrant does not provide any compensation to the General Partners
or the other persons in the form of option or stock appreciation right grants,
long-term incentive plans, or a defined benefit or actuarial plans. The
Registrant has no standard arrangements for payment of fees to General Partners
(other than for their interest as General Partners, as described above), or
employment contracts or change-of-control agreements.
12
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Registrant is a limited partnership. Except to the extent set forth
below, it does not have voting securities. The right to control the business of
Registrant is vested in the General Partners of Registrant by virtue of
provisions of the Partnership Agreement and the New York Revised Limited
Partnership Act.
The Partnership Agreement provides for modification or amendments of the
Partnership Agreement upon obtaining the consents or affirmative votes of
specified percentages of the Special Limited Partners and the Limited Partners,
each voting as a class. The sole limited partner votes as directed by the
holders of PPIs.
To the extent that the Special Limited Partnership Interests and PPIs are
considered voting securities, the following information is provided as to
holders of 5% or more of each such class at December 31, 2002:
Amount and
Name and Address of Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Special Limited ScogBell Direct 66.66%
Partnership Interest 660 Madison Ave.
New York, NY 10021
Irving Schneider Direct 33.34%
880 Fifth Avenue
New York, NY
Converted Special Limited ScogBell Direct 100.00%
Partner Interest 660 Madison Ave.
New York, NY 10021
PPIs ScogBell 310,927(1) 37.92%
660 Madison Ave.
New York, NY 10021
Long Island Jewish Medical Center 90,095 10.99%
270-05 76th Avenue Direct
New Hyde Park, NY 11040
- ----------
(1) Includes PPIs purchased from the following: 258,877 PPIs owned directly by
Leona M. Helmsley; also 4,000 PPIs held by Helmsley-Noyes Company, Inc.
(0.5%), a company owned by Helmsley Enterprises, Inc., which in turn is
wholly-owned by the Harry B. Helmsley Revocable Trust, under agreement
dated December 13, 1989; 13,000 PPIs held by HBH Holdings Corp. (1.6%),
6,500 PPIs held by Park Lane Hotel, Inc. (0.8%) and 28,550 PPIs in the
over-the-counter market.
13
(b) Registrant is a limited partnership and, as such, its affairs are
managed by its General Partners. The following table sets forth the amount and
nature of the beneficial ownership at December 31, 2002 of each class of
partnership interests by its General Partners individually and as a group:
Amount and
Nature of
Name and Address of Beneficial Percent of
Title of Class Beneficial Owner Ownership Class
- -------------- ------------------- ----------- ----------
General Partnership Irving Schneider Direct(1) 90.91%
Interests 880 Fifth Avenue
New York, NY
ScogBell Indirect 9.09%
660 Madison Ave.
New York, NY 10021
As a group 100.00%
Special Limited ScogBell Direct(2) 66.66%
Partnership Interests 660 Madison Ave.
New York, NY 10021
Irving Schneider Direct(2) 33.34%
880 Fifth Avenue
New York, NY
As a group 100.00%
Converted Special Limited ScogBell Direct(2) 100.00%
Partner Interest 660 Madison Ave.
New York, NY 10021
Participation Interests ScogBell 310,927 37.92%
660 Madison Ave.
New York, NY 10021 Direct(3)
- ----------
(1) Mr. Irving Schneider owns approximately 90% of such interest directly and
10% indirectly through his ownership of Minlyn, Inc.; 60 East 42nd Street,
New York, New York, which is also a General Partner of Registrant.
(2) The Special Limited Partnership Interests have the rights set forth in the
Partnership Agreement and are not securities issued by Registrant. The
Converted Special L.P. Interest represents the economic interest in
Registrant formerly owned by Harry B. Helmsley in his capacity as a
General Partner. See "Business."
(3) Includes PPIs purchased from the following: 258,877 PPIs owned directly by
Leona M. Helmsley; also 4,000 PPIs held by Helmsley-Noyes Company, Inc.
(0.5%), a company owned by Helmsley Enterprises, Inc., which in turn is
wholly-owned by the Harry B. Helmsley Revocable Trust, under agreement
dated December 13, 1989; 13,000 PPIs held by HBH Holdings Corp. (1.6%),
6,500 PPIs held by Park Lane Hotel, Inc. (0.8%) and 28,550 PPIs in the
over-the-counter market.
14
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others.
None.
(b) Certain Business Relationships.
As set forth in Item 11 above, during the year ended December 31, 2002,
Registrant paid certain fees and certain guaranteed payments to each of its
corporate General Partners, ScogBell AG, Inc. (formerly known as Helmsley-Noyes
Company, Inc.) and Minlyn, Inc., pursuant to the Partnership Agreement. See Item
10 hereof as to the ownership of said corporations.
(c) Indebtedness of Management.
None.
Item 14. 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 Registrant's disclosure
controls and procedures was carried out under the supervision and with the
participation of the Registrant'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 Registrant's
disclosure controls and procedures are effective to bring to the attention of
the Registrant's management the relevant information necessary to permit an
assessment of the need to disclose material developments and risks pertaining to
the Registrant's business in its periodic filings with the Securities and
Exchange Commission. There have been no significant changes to the Registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation.
15
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. The response to this portion of Item 15 is submitted as a separate
section of this report.
2. The response to this portion of Item 15 is submitted as a Separate
Section of this report.
3. Exhibits. Subject to Rule 12b-32 of the Securities Exchange Act of 1934
regarding incorporation by reference, listed below are the exhibits which are
filed as part of this report and are hereby incorporated by reference (according
to the numbers assigned to them in Item 601 of Regulation S-K):
3(i) Registrant's Limited Partnership Agreement dated as of May 15,
1969, as amended on October 2, 1969, October 31, 1969, and
December 3, 1969 is hereby incorporated by reference to
Exhibits 3.1, 3.2, 3.3 and 3.4 to Registration Statement No.
2-33132 which was declared effective by the SEC on December 4,
1969.
3(ii) Amendment to Agreement of Limited Partnership, dated as of May
30, 1997.
10.1 Management Agreement dated May 20, 1969 between
Helmsley-Spear, Inc. and Registrant is hereby incorporated by
reference to Exhibit 12.1 to Registration Statement No.
2-33132. The leasing commissions and management fees currently
being charged to the Registrant are consistent with the rates
generally charged in the areas where the properties are
located.
99.1 Section 906 Sarbanes-Oxley Act of 2002 certification of Mr.
Irving Schneider as General and Special Limited Partner and
Chief Executive Officer
99.2 Section 906 Sarbanes-Oxley Act of 2002 certification of Mr.
Robert Hecht as Chief Financial Officer
(b) Reports on Form 8-K filed during the period covered by this Report:
No reports on Form 8-K have been filed during the period covered by
this report.
(c) None.
(d) None.
16
SIGNATURES
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, in the City of New York,
State of New York, on March 24, 2003.
INVESTMENT PROPERTIES ASSOCIATES
By: /s/ Irving Schneider
--------------------------------
Irving Schneider
General and Special Limited Partner
Chief Executive Officer
By: /s/ Robert Hecht
--------------------------------
Robert Hecht
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
Registrant and in the capacities indicated on March 24, 2003.
Signature Title
--------- -----
/s/ Irving Schneider General Partner, Principal Executive,
- -------------------------------------- Chief Executive Office, and Financial
Irving Schneider and Accounting Officer
/s/ Robert Hecht Chief Financial Officer
- --------------------------------------
Robert Hecht
MINLYN, INC. General Partner
By: /s/ Irving Schneider
----------------------------------
Irving Schneider
President
SCOGBELL AG, INC. General Partner
By: /s/ Craig Effron
----------------------------------
Craig Effron
President
SCOGBELL ACQUISITION, L.L.C. General Partner
By: /s/ Craig Effron
----------------------------------
Craig Effron
President
ScogBell AG Manager, Inc., Manager
17
Certifications
I, Irving Schneider, certify that:
1. I have reviewed this annual report on Form 10-K of Investment Properties
Associates;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual
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 annual
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 annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual 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: March 24, 2003
/s/ Irving Schneider
-----------------------------------
Irving Schneider
General and Special Limited Partner and
Chief Executive Officer
18
I, Robert Hecht, certify that:
1. I have reviewed this annual report on Form 10-K of Investment Properties
Associates;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual
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 annual
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 annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual 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: March 24, 2003
/s/ Robert Hecht
-----------------------------------
Robert Hecht
Chief Financial Officer
19