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 June 30, 2003.
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 June 30, 2003
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
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
BALANCE SHEETS
AS AT JUNE 30, 2003 AND DECEMBER 31, 2002
JUNE 30, 2003 DECEMBER 31, 2002
ASSETS (Unaudited) (Note)
- ------ ------------- -----------------
Real estate held for sale, at cost $ -- $ 8,033,347
Less: Accumulated depreciation and amortization -- 5,880,040
----------- -----------
-- 2,153,307
Cash and cash equivalents 7,339,405 1,516,410
Due from managing agent (Helmsley-Spear, Inc.) 38,395 47,380
Other assets 4,289 16,881
----------- -----------
$ 7,382,089 $ 3,733,978
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Accounts payable $ 18,512 $ 6,547
Distributions payable to General Partners,
Special Limited Partners and Limited Partners 5,500,000 457,752
Guaranteed Payments Due to General Partners,
Special Limited Partners and Limited Partners 88,250 146,500
Sundry liabilities and other accrued expenses 105,410 105,230
----------- -----------
5,712,172 716,029
----------- -----------
Partners' Capital (Deficiency)
General Partners 9,184 (2,495,163)
Special Limited Partners 825,774 3,290,185
Limited Partners (represented by the equivalent
of 820,000 Participation Interests) 834,959 2,222,927
----------- -----------
1,669,917 3,017,949
----------- -----------
$ 7,382,089 $ 3,733,978
=========== ===========
Note: The balance sheet at December 31, 2002 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 SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
------------------------ --------------------------
JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2003 JUNE 30, 2002
------------- ------------- ------------- -------------
Revenues:
Interest $ 8,291 $ 18,518 $ 3,960 $ 6,987
Other income 118,725 1,501,500 118,725 1,500
----------- ----------- ----------- -----------
127,016 1,520,018 122,685 8,487
----------- ----------- ----------- -----------
Expenses:
Real estate taxes 138,482 153,942 60,851 76,908
Other expenses 323,521 274,143 167,416 88,976
----------- ----------- ----------- -----------
462,003 428,085 228,267 165,884
----------- ----------- ----------- -----------
Income (loss) before items shown below (334,987) 1,091,933 (105,582) (157,397)
Gain on sale of real estate income before
guaranteed payments required under the
limited partnership agreement 4,545,205 -- 4,545,205 --
----------- ----------- ----------- -----------
4,210,218 1,091,933 4,439,623 (157,397)
Guaranteed payments required under the
Limited Partnership Agreement:
To the Limited Partners 7,500 7,500 3,750 3,750
To the General and Special Limited
Partners 50,750 50,750 25,375 25,375
----------- ----------- ----------- -----------
58,250 58,250 29,125 29,125
----------- ----------- ----------- -----------
Net income (loss) transferred to
Partners' capital accounts $ 4,151,968 $ 1,033,683 $ 4,410,498 $ (186,522)
=========== =========== =========== ===========
Net income allocable as follows (based on
terms of the Limited Partnership
Agreement):
General Partners $ 2,534,597 $ 5,685 $ 2,537,441 (1,026)
Special Limited Partners 255,339 511,156 511,025 (92,235)
Limited Partners (represented by the
equivalent of 820,000 Participation Interests - unchanged
during the periods)
1,362,032 516,842 1,362,032 (93,261)
----------- ----------- ----------- -----------
$ 4,151,968 $ 1,033,683 $ 4,410,498 $ (186,522)
=========== =========== =========== ===========
Per Participation Interest:
Net income $ 1.6610 $ 0.6303 $ 1.6610 $ (0.1137)
=========== =========== =========== ===========
See accompanying notes to financial statements.
2
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002
2003 2002
----------- -----------
OPERATING ACTIVITIES:
Net income $ 4,151,968 $ 1,033,683
Adjustments to reconcile net income to net cash used in
operating activities:
Changes in operating assets and liabilities:
Decrease (increase) in due from managing agent 8,985 (3,893)
Gain on sale of real estate (4,545,205) --
Decrease in other assets 12,592 14,527
Increase in accounts payable 11,965 9,182
Decrease in guaranteed payments due to General Partners,
Special Limited Partners and Limited Partners (58,250) --
Increase (decrease) in sundry liabilities and other accrued
expenses 180 (117,029)
Decrease in deposits -- (1,500,000)
----------- -----------
Net cash used in operating activities (417,765) (563,530)
----------- -----------
INVESTING ACTIVITIES:
Net proceeds from sale of real estate 6,698,512 --
----------- -----------
FINANCING ACTIVITIES:
Distributions to General Partners, Special Limited Partners and
Limited Partners (457,752) (690,966)
----------- -----------
Increase (decrease) in cash and cash equivalents 5,822,995 (1,254,496)
Cash and cash equivalents at beginning of year 1,516,410 2,788,292
----------- -----------
Cash and cash equivalents at June 30 $ 7,339,405 $ 1,533,796
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Accrued distributions $ 5,500,000 --
=========== ===========
See accompanying notes to financial statements.
3
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2003
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, 2002, filed with the Securities
and Exchange Commission.
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 June 30, 2003 and the results of
operations for the three and six month periods ended June 30, 2003 and 2002.
The results of operations for the six months ended June 30, 2003 and 2002 are
not necessarily indicative of the results to be expected for the full year.
NOTE 2 - Taxes
The net income for Federal income tax purposes is $4,669,503 (six months ended
June 30, 2003) and $926,327 (six months ended June 30, 2002) as compared with
net income of $4,151,968 and $1,033,683 respectively, as shown in the statements
of operations. The differences result principally from depreciation expense
which continued to be recognized for income tax purposes through the date of
sale of the property and differences in the gain on sale of the 570 Broad Street
property for income tax purposes.
NOTE 3 - 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. Other income in 2003 relates to the receipt of real
estate tax refunds pertaining to properties sold in prior years.
NOTE 4 - Sale of 570 Broad Street Property
On June 13, 2003, the Company sold its only remaining property, a vacant
commercial office building located at 570 Broad Street, Newark, New Jersey, for
a purchase price of $7,000,000. In connection with consummation of this sale
transaction, the Company recognized a gain on the sale of approximately
$4,540,000 for financial statement purposes as compared with a gain of
approximately $5,160,000 for Federal income tax purposes.
In connection with the sale of the 570 Broad Street property, on June 20, 2003,
the Company declared a special dividend in the amount of $5,500,000 from the
sales proceeds of the 570 Broad Street property. In accordance with the
Company's partnership agreement, $2,750,000 was paid to the General Partners and
Special Limited Partners, and $2,750,000 was paid to the holders of its
participations of limited partnership interests in July 2003.
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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. On April 24, 2003, the Company signed a contract to sell the
570 Broad Street property for a sales price of $7,000,000, and consummated such
sale on June 13, 2003. As a result of such sale, the Company has no remaining
real property. See Note 4 of the accompanying notes to the financial statements.
On June 20, 2003, the Company declared a special dividend in the amount of
$5,500,000 from the sales proceeds of the consummated sale of the 570 Broad
Street property. In accordance with the Company's partnership agreement,
$2,750,000 was paid to the General Partners and Special Limited Partners, and
$2,750,000 was paid to the holders of its participations of limited partnership
interests in July 2003.
The decrease in interest income was due to the reduction of investments in
commercial paper as a result of the payment of 2002 accrued distributions during
2003, as well as the impact of declining interest rates.
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 3 of the accompanying notes to the financial statements. Other
income in 2003 relates to the receipt of real estate tax refunds pertaining to
properties sold in prior years.
The increase in other expenses in 2003 as compared to 2002 is principally
attributable to an increase in insurance costs and repairs and maintenance
expenses at the 570 Broad Street property.
Gain on sale of real estate in 2003 relates to the sale of the 570 Broad Street
property.
As of December 31, 2002, the Company had accrued a distribution to its General
Partners, Special Limited Partners and holders of record of the PPI's as of the
close of business on December 31, 2001 in the amount of $450,538 in respect of
2002 net operating revenues. These amounts were paid prior to March 31, 2003.
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INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At June 30, 2003, 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
(a) Evaluation of disclosure controls and procedures. The Company's management
has evaluated, with the participation of the Company's principal executive
officer and principal financial officer, the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e), as of the end of the period covered by this report. Based on that
evaluation, the Company's principal executive officer and principal financial
officer have concluded that the Company's disclosure controls and procedures
were effective as of the end of the period covered by this report.
(b) Changes in internal control over financial reporting. There was no change in
the Company's internal control over financial reporting that occurred during the
fiscal quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
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PART II. OTHER INFORMATION
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 31.1 Section 302 Sarbanes-Oxley Act of 2002 certification of
Mr. Irving Schneider as General and Special Limited
Partner and Chief Executive Officer
Exhibit 31.2 Section 302 Sarbanes-Oxley Act of 2002 Certification of
Mr. Robert Hecht as Chief Financial Officer
Exhibit 32.1 Section 906 Sarbanes-Oxley Act of 2002 certification of
Mr. Irving Schneider as General and Special Limited
Partner and Chief Executive Officer
Exhibit 32.2 Section 906 Sarbanes-Oxley Act of 2002 certification of
Mr. Robert Hecht as Chief Financial Officer
(b) Reports on Form 8-K:
On April 29, 2003, the Company filed a Current Report on Form 8-K relating to
the sale of its 570 Broad Street, Newark, New Jersey property, which is subject
to certain closing conditions.
On June 24, 2003, the Company filed a Current Report on Form 8-K relating to the
consummation of the sale of the 570 Broad Street, Newark, New Jersey, property
and the dividend of approximately $5,500,000 paid to its general and special
limited partners and holders of record as of the close of business on July 8,
2003 of its participations of limited partnership interests from such sale
proceeds.
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
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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: August 14, 2003
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